Mortgage Industry Updates

The so-called mortgage crisis - does it really exist?

info@trusted-mortgage-advice.com — Fri, 26 Sep 2008 22:35:03 GMT

So what's the real story? Does a crisis really exist?

Clearly there is a "cleansing" going on in the industry. For many years now the lure of low interest rates brought in more people to the mortgage industry than it can sustain long term. So is there a need to downsize the business and regain control of guidelines and quality standards? Absolutely.

But back to the question - is there a crisis? We believe the the media and politicians have taken advantage of this situation for their own gain. With the number of 24 hour news outlets needing stories and politicians needing a reason to look good to voters - the mortgage industry has been an easy target.

What are the facts?

Fact - At this posting time mortgage money is readily available. The main difference is that credit qualification has really tightened up. There are still options available for 100% financing and low down payment options.

Fact - Credit worthy borrowers are being rewarded. Borrower’s should focus on their credit being paid on time and save some money for reserves as well as a down payment option.

Fact - The downturn in real estate is a natural cycle. When you look at the big picture the real estate industry went through a historic growth cycle created by low interest rates. As with any business cycle what goes up ultimately must come down. And what we are seeing right now is the other side of the swing.

Fact - The mortgage industry needed to be downsized. Estimates are that the number of mortgage professionals more than tripled since 2000. Anytime an industry sees such an influx of new people you can expect the sort of issues we've seen in our business:

lower levels of training and accountability
less emphasis on long term relationships
shrinking margins due to increased competition
lower levels of professional standards

Fact - Mortgage guidelines had reached a risk level never seen before in history. Some tightening of credit standards was inevitiable given where we were 2 years ago.

The sub-prime market has taken alot of beating over loose guidelines but the facts are that the issue was industry wide. Sub prime in particular was never a "bad" thing. If credit or income standards were not up to conventional levels it makes sense that you should get a higher rate or lower loan to value than the conventional market. The problem comes when the non-standard rates and LTVs are just as competitive as conforming products.

And don't think that the conforming lenders weren't pushing the limit. In order to keep up with competition guidelines loosened for them just as quickly as everyone else and the mortgage insurance losses we are seeing today prove it.

So with all of these trends the downsizing of the mortgage industry should be seen as a good thing. Those professionals staying in the mortgage business should be wiser and more professional than ever before.

All of these changes in the industry is what caused us to create this company. With so much uncertainty, so many changes, and so many "bad faith" stories out there we believe there is a need for borrowers to get independent, third party mortgage advice.

Let us help you make sense of your next loan. We can help you decide if you are getting a good rate or fair closing cots. We will never try to steal your loan from a lender - so count on us to be your Trusted Mortgage Advisors.

Our Take on the Mortgage and Financial Bailout

info@trusted-mortgage-advice.com — Fri, 26 Sep 2008 22:33:55 GMT

Our Take on the Mortgage and Financial Bailout

Most of the country woke up to headlines of outrage to the $700B rescue plan. After Bush went live last night, now after a year America was slapped in the face and the outrage based on most newspaper headlines is at extremes.

Once again the media played to the mass hysteria and bad news reporting. Can't say it enough, the media is not helping here. Most articles this morning brought in those that have other ideas and are not only opposed to the Treasury's plan but don't have their facts straight. Media has made this a taxpayer bailout of the banks, Wall Street and the rich and powerful at the expense of the little people.

It's Ok to be Angry

The public has good reason to be angry; no one is as angry and frustrated than I am. Wall Street and greedy investors caused this, aided in no small part by the rating agencies (S&P, Moody's, Fitch). We saw the train roaring down the tracks three years ago as mortgage loans were made to millions that should not have been done.

Wall Street asked for the junk and they got it, deals with mortgage lenders to increase the volume of sub prime loans were common; and contrary to what some believe most of the paper was securitized by The Street and not by Fannie and Freddie.

The rating agencies stepped up to do their part by issuing AAA ratings on those securities; banks and other investors didn't hesitate to look any farther than AAA ratings although the rates of return were so much higher compared to "normal" investments with the same ratings---a red flag ignored. The overwhelming desire to make bigger profits supplanted logic.

Anger and outrage! Every citizen should be upset!

That said, the rescue plan has to be done. If we don't get it and very quickly, the banking system will come to a halt in terms of lending and the US and global economies will tank, making in hind sight this plan a good deal.

Already the delays and debates, which we agree are necessary, have brought the interbank lending to levels not seen since 1999. It is no more apparent than looking at Libor rates, the rates used for bank-to-bank lending and borrowing. On Monday 9/15 the 1 mo Libor rate was 2.49%, the 1 yr 2.99%; last Friday the 1 mo 3.19%; 1 yr 3.46%; today the 1 mo 3.71%, the 1 yr 3.98%. Rapid increase in Libor is clear evidence the financial system is teetering and lending is all but locked up.

The rescue plan is absolutely necessary; in the end taxpayers will benefit in two ways; the economy will not collapse into a prolonged recession, and in a few years when the sub primes are sold back into the markets they will generate a profit----we are confident of it as are most savvy investors. Buffett said yesterday if he could borrow money at the rate the Treasury can, he would do the rescue plan himself, ditto on comments from Bill Gross at PIMCO.

Mortgage Takeover of Fannie/Freddie: Good For Borrowers?

info@trusted-mortgage-advice.com — Thu, 25 Sep 2008 03:42:46 GMT

Mortgage Takeover of Fannie/Freddie: Good For Borrowers?

Government officials dropped a bombshell last week when they announced the seizure of mortgage giants Fannie Mae and Freddie Mac. Wall Street rallied, interest rates dropped and the politicians and pundits are claiming this will mark the end of the suffering brought on by the mortgage mess.

This is good news, right?

In the short term yes but everyone should stop and consider what the long term implications are of the government running the mortgage industry.

What’s Really Going On?

In a nutshell - Uncle Sam just co-signed for all of our loans.
Officials announced the move would involve placing these mortgage operations into a “government conservatorship” in hopes of stabilizing the housing / credit markets. In a conservatorship, like bankruptcy, common stockholders are expected to lose their investments.

Essentially this is the equivalent of a giant “bail out.” Investors have been scared to death of a worsening “meltdown” and this move basically puts the governments money (your and my money) behind the mortgage industry to make sure it doesn’t fall down.

With the housing and credit markets continuing to slump and with fears of the “meltdown” getting worse this move was the governments best bet to shore up markets.

Impact For Borrowers:

Good News:
1. Lower interest rates in the short haul. Who doesn’t like lower rates?
2. Investors get a shot of confidence. Now that Uncle Sam is the co-signer investors feel more confident that the mortgage backed debts will remain solvent.
3. The government owns your loan. How bad can that be?

Bad News:
1. The government owns our loan – uh, oh. Ever tried negotiating with the IRS? While the government has had FHA, VA and other programs it does not have experience managing the type of operations that Fannie and Freddie run.
2. Future uncertainty about management / guidelines. Our inside sources are telling us that the future of guidelines……
3. Long term implications…..

What Should Borrowers Do?

Borrowers should be looking to capitalize on the temporary drop in rates and stabilization of credit markets. In the week since the announcements rates have steadily declines as investors are feeling the relief of the government bailout.

Our suggestions:

1. Make sure your mortgage in process can drop down to the new rates
2. Make sure your loan officer is fully educated about the changes and how it might impact your loan.
3. Check your Good Faith Estimate (GFE) and Truth in Lending (TIL) to make sure your mortgage company is not “up selling” your loan to take advantage of the lower rates to make a higher commission.

What Does the Future Hold?

We believe that the housing market recovery will probably determine when the credit markets regain their health. Why? Because decreasing home values resulted in the inability of homeowners to sell or refinance their house to get out of financial trouble – which is how this mortgage issue all got started.

Here are some recent facts:

• Maybe the housing marketing isn’t so bad in many areas. The Office of Federal Housing Enterprise Oversight’s (OFHEO) House Price Index (HPI) reported in May that 35 states saw a positive home value price change in the first quarter of 2008. In addition, 164 MSAs showed positive first quarter appreciation when compared to the same quarter of 2007.

• California, Florida, Nevada, and Arizona are still the largest statistical problem areas for home prices. Industry experts acknowledge that these markets were the most speculative during the 2000 – 2005 mortgage mayhem. And because the values in these areas are very high relative to the rest of the country it has a larger impact on the overall numbers.

• Just because four states are still falling, and 11 other states continue to try and stabilize doesn’t mean the entire market will continue to take the plunge. According to PMI Mortgage Insurance Company’s “Economic & Real Estate Trends” recent report, almost 68% of the nation’s 322 remaining MSAs experienced positive appreciation everywhere other than California, Florida, Nevada, and Arizona.

So while no one has a crystal ball it appears things are not quite as bad as the media would have us believe. If the credit markets can begin to stabilize and home prices hold steady we may yet see the end of this “mortgage crisis.”

Beware mortgage advice from the "desperate" originator

info@trusted-mortgage-advice.com — Thu, 25 Sep 2008 03:42:13 GMT

The age old problem of the "desperate originator" is reaching epic levels right now in the mortgage industry right.

Desperate Origniator; We're talking about the mortgage originator whose business has dwindled down to the level where they are considering getting out of the business. And because their business is so bad they will do almost ANYTHING to get your loan done - or at worst case try to make some extra money by upselling rates or fees.

Given the circumstances in the industry right now it's easy to sympathize with them. Guidelines are changing almost daily, pricing remains volatile, and business is slow overall. However - you want to be very careful before taking mortgage advice if you suspect one of them is processing your loan.

Signs to watch for:

1. "This is all you can get." Because of the credit tightening in the industry many less experienced originators are taking the first deal they can find. Don't settle for an offer you think can be better. Let us review your loan to make sure you get what you need.

2. "You had better act now." With changing guidelines some lenders continue to not honor their loan approvals - leaving some originators feeling rushed to close deals. Don't be rushed into a loan that doesn't make sense. Our staff can help you evaluate your loan.

3. "I'm not sure if this will work." A solid mortgage professional stays on top of thier lender guidelines so make sure you get answers to the questions you need.

Let our professionals review your loan to make sure you are getting the best deal possible. That's what we are here for - to help make sure you don't get a crummy loan from a desperate loan originator.

Practical Mortgage Advice for borrowers wondering about recent events

info@trusted-mortgage-advice.com — Thu, 25 Sep 2008 03:40:33 GMT

Practical Mortgage Advice for Borrowers Following Recent Events

After an extremely volatile week the financial markets are being capped with incredible events especially coming from government announcements and intervention. With the news coming so quickly here is a recap of the recent events and how they impact mortgage borrowers:

1. Fear about the safety of money on deposit with banks folding or going on brink of collapse. This loss of confidence has caused bonds to lose some or all of their value in certain cases. This news has resulted in money quickly pouring out of stocks and bonds and into U S treasuries.

Impact to borrowers: preventing “lockdown of the markets” with government involvement. Currently people are willing to pay money not to lose principal or basis in their investments…not even worrying about a return on their investment. With the government rushing to back investments and restore trust this means lower rates for borrowers.

2. Government guarantee of market funds. Treasury Secretary Hank Paulson announced the US Government will guarantee money market funds. This action is helping settle the markets and as a result stocks were up last yesterday and rallying again today.

Impact to borrowers: rate volatility from day to day based on current news.

3. Fed makes a decision to support currently unsellable mortgage debt. The mortgage mess has so much uncertainty that investors do not want to buy the investments regardless of the performance level. The government has stepped in as a buyer providing liquidity to investment groups that are holding these securities and keeping them afloat while they to recover.

Impact to borrowers: stabilizing long term impact on fixed rates.

Are these the last changes we will see in the mortgage market?

If the last few years have taught us anything it is that there are more changes to come. At Trusted Mortgage Advice we believe that ultimately the financial markets will determine their own outcome – and that common sense will ultimately prevail.

We see a return to mortgage basics – borrowers will need good credit, a bit of money saved and will need to invest in their own homes.

But at the end of the day government intervention is going to be a necessity here. Why?

Too much at stake. With the size of the financial institutions that are failing keeping them afloat may be worth the investment of taxpayer dollars.
Media coverage. With so much coverage of this financial turmoil politicians and regulators will be under tremendous pressure to do something about it.
Mortgage lending still makes sense. So much of today’s problems have been caused by a lack of good judgment shown by both lenders and borrowers over the last few years. At the end of the day American homeownership will survive and credit worthy, responsible borrowers will be able to obtain credit.
The possibility of a recession is still out there and regulators will do everything they can to avoid letting that happen on their watch.

Looking for Advice on Your Mortgage Situation?

With all of the turmoil we recommend making a thorough financial check up including:

1. Talk to your banker: check the rates on checking and savings accounts to ensure you get the best pricing.

2. Talk to your financial advisor: Make sure your investment strategy doesn’t need to change based on current events.

3. Talk to your insurance agent: It never hurts to ask if you can save money on home, auto or health insurance.

4. Talk to Trusted Mortgage Advice: Don’t let a mortgage company convince you to take a deal that doesn’t feel right. We will help you evaluate your loan and make sure you are getting the best deal possible.