2009 Economic Forecast

Over a week ago, I was able to make it to the Ted Jones 2009 Economic Forecast. Ted is the Cheif Economist for Stewart Title. There are many great points he made, and in this Blog, I want to just touch one that made the most since to me as I have been thinking similarly throughout the past year. If you would like to read more about Ted's forecasting and thoughts, you can go to Ted's Blog.

The title of the portion I wanted to share is, "Loan Modifications Do Not Work".

In the forecast Ted revealed the statistics, "Data from banks show that more than half of loans modified during the first three months of the year were delinquent by 30 days just six months after the terms of the loans were changed, John C. Dugan, the comptroller of the currency, said at a conference in Washington. After eight months, 58 percent were delinquent again."
Ted went on to explain that our country spent money in an area of the economy that has a proven track record of failure and lack of responsibility. The sub prime break down and alternative lending catagories made loans available to people that had less than perfect credit history. Drug abusers are fare game in this illustration. Yeah, spending money above your means is not quite like sticking a needle in your arm and going to rehab for months to just come out and begin sticking needles in your arm again. On the other hand, these comparisons are congruent with the fact that history proves that humans are creatures of habit, and a person's character develops life's habits. In the end, changing one's own character is a very hefty goal to take on and few are able to take on such a challenge. Changing is hard.

Now, Ted didn't use the above to illustrate his points...they are all mine and I own these thoughts myself. In conclusion, is it right to put the major focus and control of getting our country out of this holewe are in into the hands of the same people who got us here in the first place? They have a track record of not planning and budgeting, and making rash emotional decisions when making purchases that eventually bring their lives and families into bankruptcy and foreclosure. Within the list of failed families and foreclosures, there is a large number that had little to no roll in the doom that they encountered because their jobs were lost and the income they had went away. I know that all families within this foreclosure group weren't led by an undisciplined person and some were a product of the economic environment. Lets not on the other hand, focus our efforts and put the control in the hands of the folks who previously failed. The above statistics show that this is exactly what has begun to happen. The failed mortgages that were modified are failing again.

What should we have done? Sometimes the experts and leaders of our country have to make decisions that don't necessarily feel right to the masses like a father does to his child. I'm not an economist, so I can't very well reflect on this subject in a concluding statement and offer the answer to our economic wows. It just doesn't sound right though to continue "putting the ball in the quarterback's hands that has a history of fumbling the ball".

What Are Mortgage Rates Going to do In the Short Term

In a report yesterday, mortgage guru at Mortgagerate.com wrote the following.
The recent bond rally has driven bond prices higher and mortgage rates lower, however, I am concerned that we may see an increase in rates before they fall much further. The rally creates a situation where bond traders may sell holdings to capture profits from it. If there is a concern in the market whether bonds can improve much more, that move may happen sooner than later and can lead to a spike in mortgage rates. Therefore, I strongly recommend that you maintain contact with your mortgage professional if still floating an interest rate because rate usually move higher much quicker than they improve.

If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days...
Lock if my closing were taking place between 8 and 20 days...
Lock if my closing were taking place between 21 and 60 days...
Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Land America Financial Group, Inc Purposes to Be Acquired by Fiedelity National Financial

One day after postponing its third quarter earnings report, title insurer LandAmerica Financial Group, Inc. (LFG: 8.70 +83.16%) said Friday morning it would be acquired by competitor Fidelity National Financial Inc. (FNF: 11.23 +34.49%), the first major merger/acquisition to hit the title insurance side of the business as a result of the nation’s housing crisis. The all-stock deal is valued at about $128.4 million, according to a statement by the firms ahead of market open on Friday; LandAm shareholders will receive 0.993 shares of Fidelity National stock.
The combination will create a behemoth title insurer, controlling roughly half of the entire market, and allowing Fidelity National to finally leapfrog past The First American Corp. (FAF: 23.05 +18.14%) in market share. Together, LandAm and Fidelity National represented 46.3 percent of the market during 2007.
The deal comes amid speculation that LandAmerica may have been in trouble, and the particulars of the announced deal make it clear that the rumors were true: FNF subsidiary Chicago Title Insurance Co. will provide a $30 million credit facility to LandAm “as a means of potential additional liquidity,” according to a press statement. Advances under the facility are secured by $155 million in par value of auction-rate securities held by LandAm, Fidelity National said.
“The unprecedented credit freeze and depressed real estate market have negatively impacted our business to the point that it has become increasingly difficult for LandAmerica to remain an independent public company,” said LandAmerica chairman and CEO Theodore Chandler, Jr. Fidelity National chairman William Foley, II said in a statement that the merger should bring at least $150 million in operational costs savings between the two firms, but did not specify how many jobs would be lost through the merger. LandAm’s Chandler will join Fidelity National’s board of directors as a vice chairman when the deal is complete, both companies said.
No expected date was provided for the merger to be completed.

Buying a Home? Did You Know Interest Rates Spiked at Historial Measures

It's old news that are market is unpredictable at best. That being said, the few home buyers that are active have enjoyed the recent low interest rates and watched them inch lower for the past 3-4 months. This past week, we saw the mortgage rates spike on the grandest of scales. Rates move and expect to continue moving up, per the experts, nearly a whole 1% in recent weeks. It's important you know this if you have been expecting a certain monthly payment but have not yet locked in your rate. The monthly payment for example on a $200k home would be $70 a month more this week and 2 weeks ago with the spike in rates. Stay in touch with your loan guy or call me if you have questions.
As far as the affect that this could have on Real Estate here in Texas, for Frisco, Dallas and surrounding cities, maybe it forces the sellers to lower their listing prices, or maybe it inserts more fear in the already tentative buyers, and they stop shopping in hopes to see a better opportunity in mortgage rates in the coming months. Cross your fingers...I am!

Washington Mutual Bust, Todays Interest Rates

The Federal Deposit Insurance Corporation or FDIC seized Washington Mutual and sold the thrift's assets to to JP Morgan Chase. This is one of the largest bank falls in our history. Some said pitfalls that WAMU ran into that caused this issue was their involvement in the subprime world, and even more the "option ARM". In case you are not aware of what the option ARM is, I'll tell you. The Option ARM was a popular loan in the California area where appreciation was blasting upward so fast that you could stand to buy a home that negatively amortized because the appreciation "outran" the negatively amortizing costs of interest. In the Option ARM, you had the option to make a monthly payment that was less than an "interest only" payment. Let me dig in a little deeper to explain. In this lowest payment option they gave you, your monthly payment had $0 money going to principle, and only a portion of what you owed the lender in interest monthly was paid. This means that the remainder of what you owed the lender in your monthly interest went back on top of the loan...therefore increasing your loan amount every month. In other states where homes weren't appreciating so fast, and eventually California, buyers would get into a home with this loan, or refinance using this loan because they couldn't afford the monthly payment they were currently paying, and the loan amount would eventually get to an amount defined in the loan details that said they could no longer make the lowest payment anymore, and then they would be forced to pay the next lowest payment option in that program which was the interest only payment that they couldn't afford int he first place...so they eventually foreclose.
Today was one of the first interest rate "betterings" in over a week. The mortgage interest rate market today was a result more of the reaction of the bailout and economic news rather than the economic reports that were issued at any point this week. Scary news with such a large bank falling. What will our economy and banking look like in the coming year? Really scary!

Government Makes Ends (profit) AND Helps Banks With Toxic Mortgage Assets - Title Inspired by CNN Money

Ok, for the Layman's terms...that's how I "roll". I put it in terms YOU can understand.

Govie (Government, Washington, Uncle Sam, etc...) has got a plan. Treasury Secretary Henry Paulson (money organizer of Government) has suggested that Govie buys the "toxic" mortgage assets from American banks at a discount. This means that the banks can unload their risky mortgage assets to the government for less than what they are worth, but expectantly better than what those assets are worth after the next wave of defaults comes through...the bank can stand to loose a calculated amount, but possibly not an unforeseen/unexpected amount that might occur in foreclosure costs. This way, banks stand to have a higher probability to make it through this U-G-L-Y situation. Now, I like the idea of the plan for a simple reason. First, I'm not an economist and therefore it's my opinion. I like it because our government has taken on some major liabilities in the very recent past with the Fannie/Freddie help, bailing out big player lenders, war, etc... It's obvious that our government has the strength and money to help everyone when times call for it. A good example of a sign that might show that, is this; Me and you are not economists, so we have to look to signs of those people in our world that are, to see what confidence they have in our Govie for help. Well, when Henry suggested this option to help, stocks blew up like 400 points. If stocks are going up, that means the people who are economist and ARE in the "know", are momentarily confident. Back to why I like this. Since the government is buying these mortgage assets for "cents on the dollar", they stand to make a profit when the market turns around. You catch that? I'm ok with Govie making "ends" (ends=money or profit) on such a scenario so that they can reimburse themselves for the spending they have done to get our economy back to par, so that the next time our economy is against the ropes, they'll have the money power to dig America out again.

Oh by the way, rates terrible today because of all this. Remember, whats good for the economy isn't usually good for our mortgage interest rates. If you wonder why, search my archived blogs that explain that.

Brad

More Major Players in Banking World Troubled Still

The Mortgage Lender, Implode - O - Meter talked about Washington Mutuals troubles today in their blog and also mentioned the Lehman Brother's filing for bankruptcy. Those are two more very large financial establishments. Since May of 2006, 1 year and 4 months, there has been reported 283 failed mortgage lenders "close their doors".
Last week, a CBS news anchor said, "...is there hope for the housing market? Interest rates are down...etc". This is some of the first hope I've seen on national media in some time. Cross your fingers and say your prayers. We all hope for the best.

Free Bees for Delinquent Borrowers Thanks to the FDIC

In a blog report by Dan Caplinger he brought attention to more help that the FDIC/Federal Deposit Insurance Corporation would be bringing to current mortgage delinquent borrowers all over the nation. It appears in Dan's report that "thousands of IndyMac borrowers who are delinquent or in default on their mortgage loans could expect to see their loan terms modified in the near future." It appears that the target purpose of this mortgage modification is to make the mortgage payments affordable to these borrowers to help make these loans what are called "performing loans".
The cap rate on these modification loans will be 6.5%, and for those borrowers that can't afford the payments at even the 6.5% rate, there will be additional opportunities for them where the rate will start off even lower, but over the short future rise back to that 6.5%.
We'll see how this turns out. It always seems like the relief opportunities that come out come with strict guidelines that cut the majority of the needing population out on qualification points.

Interest Rates Moving This Week

This week could be a very volatile week in the interest rate market. It appears that there are several bits of economic news that will be revealed this week that are expected to have some sort of affect on the rates. The first will be Tuesday...Consumer Confidence Index for April comes out. This is an attempt at foreseeing future spending of consumers. There are 6 other pieces to hit this week too, so keep your eyes on the market and touch base with your preferred mortgage consultant if you think your refinancing rate threshold is hit.
It feels like the market in Collin County is starting to churn. Lots of new client looking for prequalifications for loans in the last couple weeks.
Have a great week!
Brad

Interest Rates Today and the Market Expectations

Have you ever taken a week or two and read the commentary from day to day about the economy and it's expectations? Have you ever noticed that every day seems to contradict the previous days expectations? Well, thats not necessarily the case, but it sometimes seems that way in the last year or so. I continue to say that the American Economy runs on placebo. All arrows continue to point to recession, poor economic market in reference to the 90's, and little hope for a housing market to pick up steam quickly. The "market watchers" at Wells Fargo, I think, see things similar as I do. They wrote in a News Letter this week about their views. Put like this, Wells Fargo writer said, we have seen some "irrational exuberance in our years of market watching, but nothing like what is currently going on in the stock markets." They go on to say how Friday's employment report mentioned 232k in first quarter losses and 80k in last month job losses alone. Remembering the supply and demand from economics 101. When the economy is doing well, people want a piece of it and the demand goes up..you want your money in the public stock that will also go up...WHEN THE MARKET IS GOOD. When the aforementioned employment losses were reported to the public, stock prices went up. Wells Fargo writer says similar to my belief, "it is absurd that the economy is showing every indication of recession and this will hurt the corporate profits, so stock prices should be falling and they are not." Being that the stock market made a positive move after such negative reports, DO THEY KNOW SOMETHING WE DON'T KNOW? In conclusion, rates have drizzle downward over the past couple weeks but nothing significant. When we see a day open with lower rates than the previous day, we usually follow that up in a day or so of a short up swing...lather, rinse, and repeat, and you get what has happened over the past couple weeks.
Experts still expect the Fed to lower prime again soon...I know it has helped on my home equity line of credit. Best of luck in your home buying, shopping, and refinancing!