Mortgage Financing Options

Market Concerns -- Robbing Peter to pay Paul???

Fears in the market.... ?? Are you hiding because of such fears in today's market place? I think many of us were scared 6 months to a year ago. The media was talking about how bad it was out there. We had the so-called mortgage meltdown.  But was it really that bad? I think it all comes down to how sure of yourself, that you feel comfortable in buying, when it comes to purchasing a new home. May you be a first time hombuyer, someone moving up, or an investor.  I have said this many of times, but you need to speak to a mortgage professional and a real estate professional, those that are looking out for your best interests. If these people don't take the time in understanding your needs and wants,  actually help you make a plan, and walk you through that plan, then seek someone else.


Rich Sweum wrote this post the other day titled, At What Cost another 50 basis point Rate Cut? I truly believe that we can't keep cutting the Fed Rates. There will be some people that will disagree with this. Rich received an e-mail from a realtor talking about the economy, that it could hurt her commissions, and that we need to help and make it work now. (you can read this in Rich's comments) Basically, robbing Peter now to pay Paul later. Better yet, robbing from our own selves now, and pay us back later..... if that theory truly would work, life would be a bed of roses. It's a huge gamble and not a gamble that I am willing to take now. Why?  Too many unknowns still out there, that if we keep digging deeper, how long will it take us to dig out of this mess. The biggest concern that could set us back, foreclosures.   Another fear, jobless claims. Just today,  the jobless figures came out and the stock market responded negatively at first, but is positive now. This will continue for the next several months. The investors are just not sure and pull money from here and dump it there. Basically a sea saw effect.

Summary : I gave a brief description in regards to the difference between the mortgage interest rates and the Fed rate. This is what I stated.... "When the Fed rates adjust, it basically increases or decreases the amount of money circulating within the economy. The Fed is acting as the throttle and the break for economic growth and inflationary control. If the Fed can keep interest rates low, there will be more money in the economy. This type of control allows banks to either lend more money when rates are low because credit is cheaper or lend less money because the cost of credit is high."  In my honest opinion, this can act as a band aide for now. The media and Wall Street are trying to curb fears in the market place now, because of fear of a recession, another post in itself. We need to allow the market to work itself out. There are still plenty of people out there that can buy and want to by. But because of the media sometimes, they get scared. Hence why speaking to a mortgage professional that is knowledgeable not only with mortgage products, with the market, but understands your goals and understands how to help you plan, is the key in being successful.

Overall, rates are low and home values are low. People, rates were even low the last 2 months. A very good mortgage planner can help you curb your fears if you lay it all on the table. Giving you more insight than sometimes found on the internet or even from someone local that just wants your business. Don't forget, the lowest rate offered on paper when shopping doesn't always exist. And you won't always get good service from someone that just offers that piece of paper without properly explaining it.                      

Mortgage Interest Rates - Up or Down?

Okay, so what have you heard on the street in the last several days? I am sure many of you have heard that interest_rates were lowered. Now, I don't want to confuse you, because I want to keep this very simple and educate you from my past experiences in the mortgage industry.I want to make one bold statement before we move forward. We all get our money from the same place. Meaning, if your loan officer works for a bank, a correspondent lender, or as a broker, we all deal with the same money at the same price. I need to make this statement because I see to many lenders or loan officers advertise that they have the best rates, no matter if the market was up or down. So many people confuse best rates with great service. Meaning, there is a higher god per se that sets the pricing on Wall Street, no matter if you are Countrywide, Wells Fargo, Bank of America, or x,y,z mortgage company (mom & pop shop), it's all the same.


Confused yet?  I hope not, because that should have been easy to understand. Too many consumers focus on the best of something, easily forgetting the importance of what they are trying to accomplish, their goals, and that buying or refinancing a home is and can be emotional. And the sad part is that many of the loan officers out there know this. Sometimes willing to tell you what you want to hear and backing you into a corner, until it's too late. That you are now desperate to refinance, needing that money or lower rate. Or that you fell in love with that home and that you must have it now, at any expense. And that you will worry about the consequences of your actions later. How do I know all of this?  I deal with it weekly. I could give you real and live examples that aren't staged.  Just be careful not to shop yourself out of the market !!!



But I want to get back to the discussion at hand. Mortgage rates, rates, and interest rates....  the percentage that is charged for you to borrow on the open market per se to obtain financing for a particular property.

When rates adjust, it basically increases or decreases the amount of money circulating within the economy. The Fed is acting as the throttle and the break for economic growth and inflationary control. If the Fed can keep interest rates low, there will be more money in the economy. This type of control allows banks to either lend more money when rates are low because credit is cheaper or lend less money because the cost of credit is high.

A MUST READ.... DON'T STOP NOW !!!

 

Conclusion : Rates were lowered a week before the Fed's regularly scheduled meetings because of the foreign market's decline of more than 9%, which influences the U.S. market. There was fear and speculation that the US market would open up, down over 500 points the next morning. This did happen and at one point, rebounded. The market was correcting itself for several reasons. My concerns aren't why it happened, just because the news reported that the interest rate dropped, but because lenders are now advertising it all over the place. My fear is that they will use this news to get you into the door. Do you know what happened the day after this great news?  Rates went right back to where they were the day before and in some cases, higher. I locked 7 clients into yesterdays rate, because I know better and because I have been through these quirky markets before. I know many lenders didn't lock their clients in and might now be playing roulette with your rates. Some will honor your rate locks, others won't. And if you were quoted great rates just the other day, check again. If they tell you that nothing has changed, they are lying to you. The market doesn't lie, so check it out yourself.

Overall, will rates come back down again when the Fed meet next week? Maybe, maybe not. It wasn't the chance that I was willing to take and I even told this to my clients that were shopping. Many companies are still promising lower rates, not to lose that consumer as a client. And because they can bascially state 1 to 5 excuses why your rate moved when you finally make your decision. It's just the facts of life. My advice, go with someone that can explain all of this to you. Go with someone that will call you or e-mail you when the good changes happen and when the bad changes happen. Why?  Because the news of rates changing for the worse won't hit the general public until next week. The market corrects itself when it wants, but many loan officers don't share the negative news in fear of the consumer running away. If you didn't lock in 24 hours after the news, you might not see anything positive for 2 to 3 weeks, and this is just an educated guess backed by 15 years of experience in the mortgage business. It's called, lenders hedging high to recoup previous losses. They adjust and readjust at a blink of an eye, keeping some of the profit that was lost in the last quarter.

 

 

And a little FYI.....  if you are putting less than 30% down and your credit score is less than 680, your best mortgage option might be a FHA mortgage. Don't let anyone else tell you differently. 

 

      

Countrywide & Mozilo - Should we go back to Western day hangings ???

I know many of us are probably sick of reading about Countrywide and Angelo Mozilo, but let's take a look behind the scenes. Many of us know that Bank of America will buy Countrywide for 4 Billion dollars, that's if everything goes through. Matt Heaton talks about a break up fee if Bank of America decides to pull out of the deal. But it gets more interesting. Let's take a peek behind the scenes that aren't widely talked about within the media.

Did you know :

• Mozilo is receiving compensation for his empire that he not only built, but allowed to crumble. Those are just my opinions, but if the BofA deal goes through, Mozilo will reportedly walk away with over $100 million for his troubles per se.

• Countrywide received $20 million in tax payers money in exchange for creating 7,500 new jobs in Texas by the end of 2010. Countrywide entered this agreement with Texas Enterprise Fund in 2004.

• Was the Bank of America deal more so to save their own hide? A must read article helps give insight to this mess. Greedy Bank of America Engineers "Fake Rescue" in Sub-Prime Fire Sale

• Brian Brady gets an excellent discussion going on in this blog, Buying Countrywide:  Why Bank of America is the WRONG Buyer, from industry wide leaders. Another must read....

As more news leaks out about Mozilo and Countrywide, more people are screaming for Angelo Mozilo's head. I try to stay away from politics as much as possible when discussing my opinions. But Senator Hillary Clinton, Senator Charles Schumer, and Congressman Barney Frank are saying that it's a disgrace that Mr. Mozilo is able to walk away from this. Some are saying that it should be goodwill that Mr. Mozilo use some of this money to help those troubled homeowners.

Can we honestly say, without knowing all the hard facts, why Angelo Mozilo sold his shares of stock less than a year ago? Was the writing on the wall and so many of us just buried our heads in the sands?  As it stands, the BofAEnron incident and if so, who truly picks up the pieces? Especially after CEO Angelo spoke on CNBC last February in 2007 telling viewers that "Countrywide is in a great position to take maket share away from other lenders". Do I hear smoke screen? deal will curb many fears in the real estate and mortgage world for now. But is it just a band aide ready to fall off?  What happens if BofA rejects the deal? Who then loses? How about the company shareholders that will royally get screwed. I spoke to a lawyer today talking about the law suits that are taking place on behalf of these shareholders. Are we heading for another

So, what might be behind this so-called smoke screen? Jason Sardi gives his perspective in regards to the relationship behind Countrywide and Bank of America : Bank of America, Countrywide, & A Mortgage Broker's Perspective.

 

Countrywide sold to BofA -- A Rumor closed

Were they rumors that were floating around that Bank of America was going to buy Countrywide? Matt Heaton gave a quick analysis of this yesterday. Bank of America buying Countrywide?  Well, it's been reported that it's official and was announced this morning that BofA to Buy Countrywide for $4B in Stock. The agreement has been approved by both companies' boards and is subject to regulatory and Countrywide's shareholders approval.


In my comment to Matt, I stated that I could see something happening by Spring. It was mentioned that this is a deal that was offered and expects to be completed by the 3rd quarter of 2008.

Is this good or bad?  I personally think it's a risk because of the so-called "bad" loans that Countrywide has on their books. But if anything, I see this as a long term investment. Not only is Bank of America getting a large company in a very down market, meaning that it's paying bottom dollar, but it also shows that B of A plans to be around for a long time to come. They are giving the housing market positive news and that it will rebound at some time. And B of A might be in a great position when this happens.

Conclusion :  There are mixed reviews about this on Wall Street and I am sure that we will see more of this on the news between today and Monday. Also, by buying Countrywide, it keeps the regulators the messy task of figuring out who would collect mortgage payments for the millions of home owners that Countrywide services.

Lastly, in my opinion, there will be more negative news before the good news. Many of us know about the subprime fallout that hurt Countrywide. Countrywide just reported Wednesday that foreclosures had doubled to 1.4% of unpaid principal. I believe that matters will be worse. So, did BofA get a good deal?  Could they have waited any longer? Will there be any actions against Countrywide's CEO, Angelo Mozilo? He's quoted in this article, stating that CHL is a very solid company. And this was quoted just 5 months ago. Me personally?  I hate liars that have access to behind the scenes information. Many of his statements were just to curb fears amongst investors and his employees. But I think the writing on the wall was to large and could be interpreted by even the simplest of business minds that CHL was in great danger. Why would Angelo Mozilo have sold his shares of stock then?  How do you feel about this?  I just don't see this as a good fit for BofA. The sales force for both are very different. What about BofA's customer service?

 

The end result?  This transaction will make BofA the largest lender now.