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Schizo Market – UK Raises Mortgage Rates – US Drops them

March 30th, 2008 | Author: admin

If you thought the mortgage industry was crazy well you are probably right. You need look no further than a comparison between the United States and United Kingdom mortgage industry markets. In the United States mortgage rates dropped slightly on 30 year fixed-rate mortgages last week coming up after several drops in interest rates by the Federal Reserve to the bank that actually make the mortgages happen for consumers. After the feds dropped a total of about two points, borrowers are benefiting with about a half point mortgage rate dropped so far.

In the United Kingdom things are much different. Thanks there do not have the support of the central bank, and the credit crisis there is forcing banks to raise their mortgage interest rates to borrowers in order to deter people from taking mortgages out at all. If you are shopping for a new home in the United Kingdom and you have 10% or less to put down of the home, you will be looking at an interest rate above 7%. The banks don’t want to take any risk at all the United Kingdom right now especially as the number of banks face the potential of bankruptcy.

In the United States the Federal Reserve is loaning money directly to the investment houses that secure mortgages and it helped to bail out and raise caps for Fannie Mae. It remains to be seen which method will stand the test of time. The bail out method of the United States or the free-market method of United Kingdom. In some ways this is kind of like watching a schizophrenic on a diet, one minute eating cheeseburgers and the next minute they’re popping weight loss pills.

Great Time to Sell in Charlotte NC

March 30th, 2008 | Author: admin

I happen to be moving to the one area in the country that saw rising home prices in January, Charlotte, NC.

That is not exactly a good thing for me is I’m looking to buy a home in the area. Charlotte, North Carolina did not benefit from the rapid escalation in home prices during the housing boom but the prices there have gone up. I do see a number of houses on the market in Charlotte, North Carolina that seem to have inflated prices. And as the correction continues to go around the country, I’m going to wait and see a prices cracked in Charlotte before I buy. The last thing I want to do is buy a home in Charlotte only to see 10 to 20% of the value knocked off of it after the fact.

If you read any of the news reports coming out of Charlotte and you believe the realtors Association (which I do not) then you would believe that people are snapping up houses in Charlotte, North Carolina. That could be, but I’m not exactly sure where they’re doing that because I see a lot of houses on the market there that have been sitting there for months. Normally it would be a benefit to have your house sales price holds steady, but given the uncertainty in the market I suspect that there may be many other buyers looking at the Charlotte area and waiting for the correction to actually hit and so the January numbers could actually hurt Charlotte over the next few months as it possibly experiences a delayed curve in the housing correction.

If I am wrong, then this could be an excellent time to sell your house and Charlotte because you may not see that value for a decade.

These may be crazy times in the real estate market, but that doesn’t mean that you have to make crazy decisions. Take your time, figure out what is going on with your own eyes and information, question what you read in the media and look at the sources for those articles and then act when appropriate.

In the meantime, this weekend I’m working on my own house in the Atlanta area. This was another one of those fabled areas it was not supposed to experience any downturn when the real estate correction came. I didn’t trust that either, and I think I was right to not trust that sentiment as I have seen a number of corrections in the Atlanta area. I’ve been sitting on my house all winter and I’ll probably continue to sit on it through the summer before actually list it. If the market doesn’t correct, in interest rates go through the roof because of inflation, then I’ll just rent the house out. The meantime I’m putting some Baldwin knobs on the cabinets to make them look little fancier in case I do sell it.

Sources and Related Stories about Charlotte, NC home price hold out in Real Estate

Real estate in record freefall
London Free Press, Canada – Mar 26, 2008
Only Charlotte, NC, squeaked by as a gainer in the Case-Shiller index, with a 1.8 per cent rise in January compared to a year earlier. …

Pro Step Marketing strategy results in new custom website
TransWorldNews (press release), GA – Mar 28, 2008
Pro Step Marketing, a real estate-focused marketing strategy, design and implementation firm, worked with Paul and Karen McPherson of Charlotte, NC to …

Singing honors for 2 students
Charlotte Observer, NC – 11 hours ago
Catawba Valley Community College will offer two classes designed to meet annual continuing education requirements for real estate agents. …

Forsite Development, Inc., closes on buildings in Gastonia, NC …
Carolina Newswire (press release), NC – Mar 27, 2008
Forsite Development, Inc. (www.forsiteinc.com), based in Charlotte, develops commercial real estate space, both office and industrial, throughout the …

First American CoreLogic Releases January 2008 LoanPerformance …
FOXBusiness – Mar 28, 2008
"Twenty-eight states now show year-over-year real estate declines according to this latest LoanPerformance HPI release," said Damien Weldon, vice president, …FAF – OTC:CMTX

SABEW Announces Additional Winners in its 13th Annual Best in …
FOXBusiness – Mar 28, 2008
News-Press: "Southwest Florida real estate sellers beware" — James L. Martin, Erie (Pa.) Times-News: "Made in Mexico" Weekly Publications — Bryant Ruiz …

Business Calendar
Winston-Salem Journal, NC – 12 hours ago
The Piedmont Club Real Estate Council meets the second Friday of each month at 11:30 am for lunch at the Piedmont Club, 19th floor of the BB&T Financial …

Real Estate Agent Puts Allen Tate on the Map in South Charlotte …
PR Web (press release), WA – Mar 19, 2008
Charlotte, NC (PRWEB) March 17, 2008 — The #1 real estate company in Charlotte finally has a top agent in Steele Creek. Realtor Brian Wade is establishing …

More glum housing data
Minneapolis Star Tribune (subscription), MN – Mar 25, 2008
Foreclosures affected about 0.3 percent of the mortgages in the Twin Cities area, said First American CoreLogic Inc., a real estate information and …

Local home-price drop 4th-worst in metro survey
San Diego Union Tribune, United States – Mar 26, 2008
Peter Dennehy, senior vice president of the San Diego-based Sullivan Group Real Estate Advisors, said the prices dropped the most in the lowest-priced …

Posted in Mortgage Industry, Renting v Buying |

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Student Loan Industry Shrinks by 3 Banks

March 22nd, 2008 | Author: admin

Three banks pulled out of the Student Loan industry this week citing higher risks and more difficulty in making profits from dropping interest rates. M&T, HSBC and TCF Financial group, which represented about half a percent of the 2006 100 billion dollar plus student loan market are packing it in.

M&T spokesman Phil Hosmer said two factors drove the Buffalo-based bank’s decision: difficulty in reselling the loans on the securities market, and reduction from $28 billion to $4 billion in the federal subsidy for the loans. Interest rates, set by the federal government, also are set to fall from 6.8 percent to 3.4 percent in 2011.
“It makes it more difficult to make a profit and reduce your risk,” Hosmer said.

3 banks give up on student loans — Page 1 — Times Union – Albany NY

The inability to securitize student loans definitely spells a problem for potential borrowers and students as well as people looking to refinance their existing student loans. Mix into this the problems with the mortgage industry and if people start defaulting on mortgages, their student loans may not be far behind. Many people will definitely watching this market for signs of another crisis the early exit of some banks may just be a mattress topper hiding a problems underneath.

Posted in financing, Mortgage Industry, refinancing, Student Loans |

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The Federal Reserves $200 Billion Non-Bailout

March 12th, 2008 | Author: admin

The Federal Reserve this week unleashed a $200 billion non bailout initiative. They are essentially allowing investors to take mortgage backed securities and swap them for US treasuries.

The Fed said in a statement in Washington it plans to make up to $200 billion available through weekly auctions. Officials told reporters on condition of anonymity that the program may be increased as needed. The Fed coordinated the effort with central banks in Europe and Canada, which plan to inject up to $45 billion into their banking systems.

Bloomberg.com: Worldwide

You might think of it like a collateral swap. Say your teenager has an old beater of a car. Maybe they bought it from a junk yard for $800 and fixed it up with $200 in labor and 2 months of elbow grease and amazingly the car runs and even passed inspection so that it can be licensed and insured.

Your teenager then comes to you and tells you that they need $4000 in cash for some un-related purpose. You agree to loan them the money and accept the title to their junker car as collateral. Now, unfortunately for you, you have 10 other teenagers in need of money too (maybe you adopted or something). You can’t keep making collateral loans on junker cars. So you take your loan document and you swap it out with the Feds for a loan document from the US government on US treasuries.

Your teenager now has to repay the government and the government has to repay you. Odds are (theoretically) that the government will be able to pay you back in dollars with less risk than your teenager.

Sound too good to be true?

Well, it is kind of. The risk here is that the when the US government pays you back, they pay you in dollars. If you are watching the currency market lately, the dollar is rapidly approaching the point where it will be worthless. Don’t believe me, then let me know how many gallons of gas you can buy with a dollar today and how many gallons you will be able to buy with a dollar paid back to you by the treasury when ever they actually pay you. I’m guessing that unless the government doesn’t fix its finances with something akin to a massive financial colon cleanseing process, you will be better off burning those dollars than trying to exchange them for gasoline to burn in your own car.

Posted in Mortgage Industry, mortgage system pitfalls, Sub Prime |

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3 Million New College Grads Facing Job Search During Recession

March 6th, 2008 | Author: admin

Below we’ve pulled together a series of video news articles. These are stories about potential of a coming recession and the impact of the recession could have on people just like you. As these things go, recessions cannot be determined until after they’ve happened. Many people did not start to feel the impact of a recession until it’s well under way. This particular recession that we may be facing a have been in part triggered by the subprime mortgage scandals. That combined with the bursting of the real estate bubble, the war in Iraq in general instability around the world are all fueling the fire.

It is been almost 20 years since the US went through the last recession, and many people are not experienced with dealing with times are troubled in this way. If we are headed into a recession, now is the time to make adjustments in your lifestyle, your finances and your priorities.

Many different people find different ways to handle the recession. This might come in the form of cost cutting or efforts to increase their income. Some people will lose their jobs, and some of those people have to find entirely new careers and skill sets to win those careers. When the Internet bubble broke a few years back, many salaried employees took their savings and went to school to get MBA’s and advanced degrees hoping to weather the storm and school. There’s no perfect solution are fit for everyone, and hopefully if this recession is mild we will have to resort to grilling up squirrels on billet grilles in a college dorm room somewhere like former presidential hopeful Mike Huckabee.

The important thing to consider is what you will do, how you will manage times when the dollar does not buy as much as it did whether that’s milk or gas or clothing or even your house payment.

Posted in Mortgage Industry, Sub Prime |

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Home Loan Companies to Face New Oversight on Home Appraisals

March 5th, 2008 | Author: admin

The two largest backers of home loans in the United States have agreed to new over site. New standards will be effected to increase the quality of home appraisals.

A long-term investigation by New York State Attorney General Andrew Cuomo’s office has led the two largest purchasers of home loans in the U.S. — Fannie Mae and Freddie Mac — to enter into cooperation agreements.
The pacts require the companies to only buy loans from banks that meet new standards designed to ensure independent and reliable appraisals. Cuomo’s office had been investigating fraud in the home appraisal process.
Deal reached with home loan companies – Business First of Buffalo

Home appraisals and fraud related to those appraisals were and are a significant part of the problem that has created the sub prime mortgage scandal. Many banks performed appraisals or hired appraisals that never took place. Many appraisers only viewed comparables and never set foot in the neighborhood of the home let alone the house. In extreme cases, some houses were not even confirmed to exist at all.

The loans that were made on these properties were very risky. Banks essentially sold mortgage backed securities that were more risky than taking a bet in a Las Vegas hotel. This is likely to be just one of many reforms that will continue to come and be developed.

Technorati tags: home loan appraisal, appraisal reform

Posted in Mortgage Industry, Mortgage Legislation, Solutions for Mortgage Crisis, Sub Prime |

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How Can You Benefit from a Lower of Cost or Market Mortgage Write Down

March 5th, 2008 | Author: admin

In many areas of investments and accounting when a company has an assets on the books and the market value of the asset drops below the original cost of that asset, the company must write down the value of the asset on their books. Writing down that asset requires taking an expense which can result in a loss for the company involved. Good accounting principles require this move as it does most companies and especially investors no good to keep a fictitious value on their books. Plus, the recognition of the loss can enable the company to save a little on taxes, a small condolence for losing asset value.

Fed Chairman Bernanke is essentially calling for something similar to help solve the mortgage crisis. He’s calling on Treasury Secretary Paulson of the Bush Administration to take action to push lenders to write down the value of the mortgages that you might hold.

Bernanke said “more can, and should, be done” to limit foreclosures. He added that principal reductions “may be a relatively more effective means of avoiding delinquency and foreclosure” than renegotiating interest rates. … “the current housing difficulties differ from those in the past, largely because of the pervasiveness of negative equity positions.” Bloomberg.com: U.S.

For example, if you have a mortgage in San Francisco for $800,000 and the real value of your property is now $650,000. People are not companies and do not keep a lower of cost or market basis in their homes. Banks however, take those mortgages and sell them to investors in a process known as securitization. Banks would have to decrease the value of the mortgages they hold before the sale to investors and possibly after as well. Think of it like Wal-Mart providing you a credit on a receipt if the price of a TV goes on sale within 30 days of buying it at their store. Banks would essentially, have to give investors a credit on their investment, take a loss and let mortgage holders off the hook for the loss in home value and readjust the monthly mortgage payment downward.

That is definitely a tough pill to swallow for banks, but they may have no option. If they do not make such an adjustments, a homeowner that holds a property worth $650,000 with a mortgage of $800,000 might quite logically make the investment decision themselves to walk away from the house and allow a foreclosure to happen. Every day they stay in that over mortgaged house, they are essentially making the decision to over pay for their own house by $150k. That’s a bad financial move for a home owner thinking like an investor.

This same process could unfreeze credit from investors too. If they get a refund on their investment, they could conceivably invest in new mortgages at more appropriate values. Investors need to see that foreclosures are stopping, that people are buying houses, that the real estate market correction is over and most importantly that banks can be trusted again!

The Fed, the Treasury Secretary, banks, investors and home owners are all essentially trying to find a way to put some baby clothes back on the baby after throwing the baby out with the bath water. The downside to this proposal is that it essentially puts the blame and the cost on bankers. Except in the cases where banks created or contributed to fraud, homeowners are the ones that made the initial bad investment decision of buying a house that subsequently later devalued. The fraud of the banking industry does appear substantial, but buying into a bubble can not be ignored either. This will definitely be a difficult concept to pass through Washington DC during an election year.

Posted in foreclosure, Mortgage Industry, Mortgage Legislation, Solutions for Mortgage Crisis |

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Inflation is Back – Deep Breath – Now Lets Move Forward

February 27th, 2008 | Author: admin

Wall Street finally figured out what most Americans already know. Inflation is back. The Consumer Price Index rose in January and that hints at inflation being on the rise.

Its small wonder that inflation is hear as milk hits $4 a gallon, gas hits $3.10 and oil keeps hovering over $100 dollars a barrel. What is amazing is that the Fed has managed to keep its basket of goods that is used to calculate the CPI shielded from reality for so long!

This explains quite a few things, one of which is why home interest rates are still fairly high and even more so why all other loan rates are high. When inflation is present banks tack it on to their interest rates to cover . . . . the cost of inflation.

The Fed can lower rates all day long, but there is only so far down they can go, while inflation can keep going up, especially if the country keeps spending money on a war that we can no longer financially afford. Things have to change and they have to change for the better quick or they are going to get ugly for the long haul. If you can lock in a low interest rate loan, now is definitely the time to do it. If inflation hits the banks, you will not see a rate drop.

In the meantime, get out and gets some exercise, take a yoga class or something, if its too cold out, hit the elliptical machine (keep your knees safe) and burn off some of that stress. All of us are going to need to keep our disposition in check while we simultaneously keep our noses to the grindstone.

In the meantime, if you can not sell your house, start thinking about how you can rent it out. If double digit rates hit the country in the next few years, not too many people will be able to afford to buy and rental demand will increase. This could be an investment or it could be a necessity of financial survival depending on your situation.

Posted in financing, Mortgage Industry, mortgages, refinancing |

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Can You See the Bottom?

February 26th, 2008 | Author: admin

Investors around Wall Street were acting positive yesterday. Many of them rallied because they thought they could see the bottom in the housing market.

Investors have a unique perspective about things when they are at their worst that is a little refreshing. They see ‘the worst’ or ‘the bottom’ as the beginning of improving times. If we are at the bottom, there is no where to go but up!

Investors found a sliver of hope to line the dark clouds of the housing slump on Monday.
Investors latched onto the National Association of Realtors’ upbeat tone Monday, sending the U.S. stock market higher in direct contrast to the stark data in the report, which said that sales of single-family homes and condominiums dropped by 0.4% in January to a seasonally-adjusted annual rate of 4.89 million units, the slowest pace on record since 1999. Despite this dire news investors seemed optimistic that the housing market may be bottoming out and that the increase in loan limits could lead to a rally in home sales toward the end of 2008.
Surprise! Home Sales Spark Hope

I personally do not know if we have hit bottom yet, and I suspect that we have not. California, Florida and other places such as that may have found bottom, but I suspect that many places that were less inflated, have not yet begun to correct.

Until they do correct or at least get real about home values the bottom of the pit may not quite be in site, but at least we can hear the pebbles hitting the bottom from our current perspective.

So who wants to invest in a tankless water heater first to raise the value of their home so that they can flip it?
That’s what I thought!

Posted in Home Sales Market News, Mortgage Industry, real estate |

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Dangerous Reverse Mortgage Offerings

January 8th, 2008 | Author: admin

As a financial writer, I know that there are times when it makes sense to consider a reverse mortgage as an option to help solve an issue or a problem in your finances. If you are cash poor and house rich, meaning you have very little money in the bank or available, yet you have a great deal of equity in your house, a reverse mortgage may be something that you might want to consider.

A reverse mortgage is a tool, and as a tool it can be used to good or to bad purposes. There are a few mortgage providers out there that probably provides safe reverse mortgage offerings. I do not know who they are, but I’m sure there’s an honest one out there somewhere.

Do not necessarily blindly trust the latest commercial you see on TV. Anyone can put a commercial on TV, and hire a semi-retired actor, Like Robert Wagner or James Garner(one of my favorite actors) that do not want to take out a reverse mortgage themselves to cover their snappy retirement expenses. Not all actors (that you might like) take work for ‘good’ or ‘nice’ companies. Plus, some companies that are possibly ‘good’ or ‘nice’ may have a few bad apples working for them that are working very hard in a particular month to make more in commissions and they may cut a corner right through your house on the way to their new swimming pool.

There are many more companies out there offering reverse mortgages that are dangerous and could hurt your finances significantly.

About seven years ago there was a fad and car sales, all of the major car companies started offering up their own financing to people that would buy cars. The financing that very creative and eventually people were buying cars with major balloon payments at the end of the car, they were not buying cars when they thought they were buying cars as the financing was structured as a lease and not a loan which enabled them to get the payment they wanted, but at the end of the lease term they didn’t have the car that they wanted and the car wasn’t worth half as much as they owed!

The car cubbies were providing a service that the customers seem to want, but the financing that so creative and so complex that ultimately consumers got ripped off. The car companies made at great deal of profits off of this, but ultimately it was like a paramedic scheme and most of the car companies suffered losses at the end of the program. They had to shut the programs down typically taking that loss in a particular quarter. For example they might take a loss for a half billion dollars, Mitsubishi, when they had received a great deal more profits in the years before they took that loss. Don’t feel too sorry for the car companies.

Mortgage companies offering reverse mortgages are doing some of the same tricks that the car companies did a few years ago, and they are doing some of the same tricks that they did was sub prime loans over the last few years. They are working the numbers behind the scenes to make them a great deal of money in fees and commissions and a number of other items that don’t necessarily help the consumer actually taking out the loan. You mortgage broker is not your Buddy, they’re not that your friend, they’re not your business partner or your financial advisor. A mortgage broker is a salesperson trying to sell you a house loan, treat them as a salesperson and protect yourself. You will need to work with them whether it’s on the phone or in person, but that doesn’t mean you shouldn’t check up on their work and make sure all their numbers make sense and that goes double if not triple for reverse mortgages.

With a reverse mortgage if you have $100,000 in equity in your house, you could essentially take out a $100,000 loan on your house. This is a home equity loan in essence and you have to pay closing costs and a number of other fees for this particular loan. Those fees could easily and legitimately add up to anywhere from $1000-$10000 depending on who you go with. If you go with an unscrupulous mortgage advisor, these fees could add up to $50,000 or $80,000 and at the end of the day you’ll end up with $50,000 or $20,000 in cash and the bank will own your house in a few years.

So make sure you shop around for a good deal on a reverse mortgage if this turns out to be its tool that you really need. If you do not shop around, then you are engaging in a very dangerous behavior that could cost you your home, your finances and maybe your health. The thing about a reverse mortgage is, it can impact your income. This can play a role in whether or not you qualify for Medicaid or Medicare if you’re retired. So don’t just go take out a reverse mortgage to get some cash to make your retirement easier, take a look year or entire financial situation and make sure that you’re not harming something else that could be more important than having an extra bit of cash to take a cruise or buy a car.

Posted in home loan, Mortgage Industry, mortgage system pitfalls, refinancing, reverse mortgages |

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Archive for the ‘Mortgage Industry’ Category

Related Stories to UK Rates Rising while US mortgage rates drop

Sources and Related Stories about Charlotte, NC home price hold out in Real Estate