Utah Mortgage Pro

Wachovia Ingested by Citi - Market Throws a Hissy Fit Over Bailout Rejection

 777

777 and NO I am not talking about a new Boeing luxury dream liner, I am talking about the number of points the Dow shed today while I was busy closing loans.  -6.98% to be exact, the largest single point loss in the Dow Jones history!  Let me clarify that it is not the largest loss by percentage, that still stands somewhere near 20%.  By the time I fired up the old lap top this morning at 8 am or so the Dow was already getting beat like a pi~nada at a fiesta and Bonds were being bought up as faster then the traders could hit buy on their trading domes. 

As the day progressed there came news that the proposed Bail Out hadbeen declined in its current form.  This sent the Markets into a giant hissy fit, temper tantrum that would have had my 2 year old running for cover.  He is the king of those types of fits and this one put him to shame.

The Dow was in a full scale avalanche and taking everything in its path with it.  I have been watching the markets closely for years now and have not seen a day like today, to be honest I would be fine not seeing another one like it, wouldn't hurt my feelings a bit.

Wachovia the nations 3rd largest bank by assets called it quits when the FDIC stepped in and helped broker "a deal" with former banking giant CITI.  There was a time when CITI was on top El Numero Uno, and with todays purchase  or virtual taking of Wachovia, CITI could be poised for another run at the big Kahuna #1 spot.  They will have a lot of work to do to catch JP Morgan and the solid acquisitions they have been making as of late (bear stearns, Washington Mutual).  It will be interesting to watch these 2 players and see what transpires over the next 5 years with them.  It was no surprise that Wachovia threw in the towel, it had been rumored for the last few months that they were on the brink of being down graded which can have nasty consequences in the banking world and severely affects one's borrowing power. 

It continues to amaze me that these big banks like the big oak tree's of their industry, have weathered all sorts of financial storms and have grown despite them, are now being chopped down and sold off as firewood probably never to be thought of again as the years go on.

There are many that are trying to use this bail out to further their political agenda's and for that shame on them.  This is serious business the likes not a single person in the White House, the TTreasury, the Federal Reserve Board, the Congress or the Senate have ever seen.  My prayer tonight is that there is a thread of inspiration left on Capital Hill.  That between the hundreds and even thousands of people involved in this legislation will know that we need to put aside any and all agenda's for a few weeks while this initial package, this literal crutch to the economy is put in place.  It's time to put our way of life, our dreams and our liberties first and go to work to figure out what is best for Our Country and not just Our Party.  I say this to both sides of the isle.

In the meantime we as Americans need to be wise and use good judgment each and every day.  Don't cancel your trip to Disney land and certainly don't stuff the mattress with what would become worthless money.  Be Smart.

Now will be a great time to lock in a LOW fixed rate mortgage and lower your interest rate by over a point for a lot of you.  When the markets suffer one of the silver linings for all of us is that long term fixed rates are low low low.

I heard someone say that if they increased the tax credit for first time home buyers to $25,000 from $7500 that it would spur on the housing sector like you wouldn't believe, and we all know what a stagnant, lifeless housing market which we are in right now can do to the economy.  On the other hand if we could get the fence sitters off the fence with a larger tax credit that may pay much larger dividends in the future and stop this economic spiral in its tracks.  Something to chew on....

Here are links to the proposed bailout legislation, abbreviated summaries, and Statements by Key Government Leaders.

Emergency Economic Stabilization Act

One Page Summary of the Act

Section by Section Summary of the Emergency Economic Stabilization Act

Treasury Secretary Paulson Statement on Emergency Economic Stabilization Act

FederalReserve Chairman Bernanke Statement on Emergency Economic Stabilization Act

We will see the Dow below 10,000 if not tomorrow it will be soon.  My prediction my be bold but it would not surprise me to see it hit 8,000 this year (next 12 months).

Keeping you informed,

Stetson Lowe - The Mortgage Insider - www.UtahLoanTips.com

P.S. BYU being voted into the top 10 in the AP poll helped a little to off set the sting of a day like today.  Go cougs keep giving us something to cheer about!

700 Billion Bail Out Package - What do you think?

This past weekend secretary Paulson and President Bush presented a 700 Billion bailout package that includes but is not limited to the government exchanging government debt (good debt) for troubled defaulting mortgage backed securities (bad debt).  This plan would allow banks to rid their balance sheets of this bad debt and allow them to free up capital or reserves set aside to compensate for this bad debt.  When rumors of this plan hit the press on Thursday or Friday (I cant remember what day) last week it sent the markets into orbit to the upside with traders gladly grabbing hold of this news and running with it.  They haven't had much to run with lately, that being said I was still surprised how much a rumor at that point could affect the markets.  It's actually a little bit scary.  We saw today after the official package had been announced traders are not so optimistic about the plan, if it has what it takes to make it through congress, and there is even some doubt as to what effect the package would have on our current situation. 

Why make our children pay?

The question I pose is why make our children and their children pay for mistakes that bankers and CEO's made over the last decade?  And why are we trying so hard to make sure none of these institutions fail?  I know there are going to be some of you morons out there that are screaming at your computer right now while you read this all hyped up on Diet Coke and No Doz because you haven't been able to stop watching the news and reading on-line message boards about how the market was mere ticks away from totally imploding, well I would say to you go put the tinfoil back on your head and keep looking for Elvis.  Tinfoil heads is our economy troubled? Yes!  Are there steps that should be taken to help ease the credit fears? Yes! Is the only answer to throw 700 Billion at the banks and say here's a free do over?  No do overs are for kick ball in elementary school when the pitcher throws the ball and you don't get the baby bouncies you called for.  Do overs should not be issued to Investment Banks and Traditional Banks who's CEO's were still pulling down 20+ million a year right up until they got their butts kicked out the door or they closed down the shop. 

I am not going to pretend to have all the answers, all I am saying is lets ease up on the dose of the main stream media who will say anything in their teaser to get you to keep your remote locked in on the next story, to suck the logical thought right out of very intelligent peoples brain's until they no longer have the ability to think with logic and understand that our country is in dire need of REFORM not free handouts.  It has been said that the democrats never have seen a tax they didn't like, well that may be true but in all fairness I might add that sometimes it seems that the republicans never have seen a debt they didn't like either.

I enjoyed this interview with Ron Paul immensly because even though CNN's Wolf Blitzer threw everything and the kitchen sink at Paul including stirring the emotional pot by saying "they are saying people could lose their life savings, their IRA's, their 401k's, it has been said this could be like the great depression" Ron Paul just shunned that aside and kept saying very calmly "No the real problem is what we are doing to our dollar by creating money and credit out of thin air."  "Inflation is what we really need to be worried about.  It wont matter if every one still has their savings and social security checks if they dont buy you anything."  I felt he did a great job.  CNN and others are going to continue to stir that pot because that is what gets the message boards blown up with conspiracy guy making comments all day long about the end of the world and his love for Art Bell.  Bottom line is we need to save more.  Spend less then you make!  Seems so simple yet our entire country seems to struggle with it. 

Interest rates are still amazing, home prices have dipped significantly, it's time to buy.  Call me guys, even you conspiracy guy give me a call but don't give me your social or date of birth over the phone "they are listening" HA enjoy the interview with Ron Paul.

Stetson Lowe - The Mortgage Insider - www.UtahLoanTips.com

A Dark Day on Wall Street

Lehman Brothers Bankrupt - Merrill Lynch sells out to avoid probable disaster

I found myself in awe through out the day today and into the night.  I was not surprised by what happened today on Wall Street but it was a feeling inside me, a feeling of "I cant believe this plague just keeps going" feeling.  The plague I am referring to is the Sub Prime Plague.  The one that has claimed so many banking lives this past year and the same one that just wont stop.  Today it claimed to more lives Lehman Brothers and Merrill Lynch.  These two institutions were not the type that I though would succumb to the Plague, they were not the New Century, Argent, Green Points.  These were 2 of the BIG BOYS.  Two of the rocks that have been perched over looking Wall Street for more then a century.  They have weathered the biggest recession and even The Great Depression, and now one could not secure the financing it needed to stay alive, and the other sold out before most any of us new it was for sale in an attempt to keep what value it had left.

I feel like we have crossed a line today.  Along the roadkill highway of what was mortgage death row there were the usual suspects those of which were mentioned above, but today we crossed the median and took out some of the Trophy animals that have avoided pitfalls, and traps of all shapes and sizes for decades.  For what some might ask?  To end up a name on some public Bankruptcy Papers filed in the state of New York today.  Amazing really.

A Little Perspective

I think its important after days like today and times like we are experiencing to sit back, take a deep breath and look at the Big Picture.  The markets are up over the last 5 years and the markets are really up over the last 20, 30 and 40 years.  And it is my opinion that the markets will be back up again in the very near future.  For those that have extra money to invest it is a virtual blue light special on every isle of the Stock Markets.  Everything is on sale Big Time.  You name the industry and you may be able to pick it up at 70% off.  Back when I had time to shop for clothes I liked to go to a store called TJ Max, I like the feeling of buying a $100 pair of pants for $25 or a $50 neck tie for $6.99.  Well the next few months might be the TJ Max or the Marshals (if your from the east coast) stock market clearance sale.  The thing I didn't like about the discount stores is that you had to wade through piles and racks of clothes to find the diamond in the rough.  I would plan on sifting through piles of less then desirable companies and earnings reports to find the diamonds in the Market that are at clearance prices right now.  Call your financial planner and put together a plan, a plan to continue investing in America and in our economy.  Call me if you need to review your mortgage and make sure you are in the best mortgage loan possible to help you accomplish your investment and retirement plans.  The silver lining about a day like today on Wall Street is that rates are unbelievable!  As stock traders flee to safer bond investments the yields drop like a lead balloon.

A Mortgage Brokers Perspective

It's all a little bit unsettling, what the Fed's reaction might be, how the markets will react, how this will affect Home Sales?  The bottom line is that the show must go on.  The Strong in some ways are getting stronger and the weak for the most part are systematically being thinned out.  Underwriting is reverting back to (what I've been told) how it used to be.  Much more thorough and complete.  I'm still closing loans purchases, refinances everything but I do have to set the borrowers expectations a little more up front.  Gone are the days of Fast & Easy's, here are the days of Make Me Queasies.  I may need to trademark that one.

Too Easy

It was just to easy there for a while, at the end of the day the average Joe isn't ready to own 5 homes with out ever proving his income.  A lot of people should rent for a year or two before jumping head first into a mortgage and not every guy with a general contractor license should be calling them self a home builder and building spec homes as fast as they can cash their draw checks.  It's just not good for the long term health of our economy.  We as a country showed up to the Thanksgiving Dinner of a housing boom with eyes far bigger then our stomachs.  We ate and we ate and we ate and when grandpa (greenspan) asked us if we wanted seconds we took him up on it and had 2nds, 3rds, and oh yes why not 4ths.  Well we are now paying the price and we are sick.  Stuffed to the brim and bursting at the seems we are yakking up the housing dinner getting back to where we can function and see clearly.  There are a few banks and lenders that took a small portion and chewed like their Mom taught them and they are doing just fine, Thank Goodness for them.

I prefer the couch watching football and just snacking the whole day through.

Stetson Lowe - Utah Mortgage Insider - UtahLoanTips.com

THE GREAT BAILOUT OF 2008

In this tumultuous year of 2008 that will undoubtedly go down in history as one of unprecedented government intervention in the private banking and business sector, Sunday September 7th may very well be the day they talk about in economics classes maybe even high school history classes. 

September 7, 2008 was the day I predicted would come in a blog post back on July 7, 2008(read it for yourself if you don't believe me).  It was on that day even in the midst of Henry Paulson the United States Treasury Secretary stating that Fannie Mae and Freddie Mac were well funded and had adequate liquidity and that the US Government would not need to step in or take action, it was on that day that I predicted that in fact there would be a Big Huge Government bailout as I called it.  Well as it turns out I was right on about one thing, that there would be a government bailout, but I have to admit that even I may have underestimated just how Huge this bailout would be.

September 7, 2008 Paulson announced the Governments plan to take over Mortgage Colossal Fannie Mae and Freddie Mac.  This is NOT just a plan to lend these Government Sponsored Entities more money at discounted rates which the FED had announced (1 week after my prediction) would be the case if it became necessary.  This is a full fledged take over of the companies, the kind where the government walks in to the CEO's offices and says thank you but your services are no longer needed please kindly show yourself to the door we'll take it from here.

Many are outraged that the CEO's are being kindly shown the door when they feel that both have been involved in some of the biggest accounting scams in modern day history.  Accounting errors to the tune of around 6 billion dollars.  Just to give you an Idea of how massive an error that is I will compare it to a little company we all remember called ENRON.  The CEO of that company and accounting overstated earnings to the tune of $550,000,000, compare that with the $6,000,000,000 in earnings restatements that came after a government probe of the Fannie and Freddie.  We all know what happened to the Enron executives still in prison and dead.  What has happened to the Fannie and Freddie execs that were padding their earnings in a way that would have made the Enron execs proud?  From what I have heard so far they took early retirement and are probably sipping on pina coladas somewhere in  the Cayman Islands.  Oh it was not without punishment, one of the CEO's a former adviser under president Clinton was fined 24 million for his wrong doings. 15 million of that fine came in forfeiting stock options he still held which enabled him to buy stock at $71 per share.  When the order was made the stock was at $9 a share, Ooohhh you guys really showed him forcing him to give up $15,000,000 in options that you couldn't have forced him to exercise at gun point.  Abetter thing to do would have been to make him exercise those options and buy that stock at $71 per share don't you think?

Sorry about getting off on that tangent, I don't have a lot of patience for the individuals who are ultimately responsible for the whole mess that our industry, our market and our country are in right now that is directly affecting my own family and those of millions more.

The Take Over and What it Will Mean To Us

It was necessary lets just get that out of the way right now, it was necessary to ensure the stability of our lending market going forward.  Do I like it?  Absolutely not!  When was the last time that the government ran any for profit business and did a better job then the private sector?  Granted anyone could have done a better job then the scandalous bonus seeking greed filled execs that have been there over the last 8 years, but prior to that Fannie Mae and Freddie Mac and provided an absolutely necessary and vital role in our US Housing Market and thereby in our Economy as a whole, and they have done it pretty well.  What I would like to see is for there to be some accountability, some punishment handed down to the preferred share holders of Fannie and Freddie, a literal wake up slap for those that have continued to invest in these companies over the last 4 years that they have been under continued investigation and shown that they were at fault for some serious wrong doing.  As it stands right now the stock holders are not going to be wiped out.  Which means that they are not helping to offset the amount of money that the US Government and we as the tax payers are going to invest to stabilize and rebuild these firms. 

How Much Is This Going To Cost?

I laugh now as I think back to when the credit crisis first began and there were analysts who went out on a limb and said they thought the crisis might cost US Banks upwards of 200 billion.  We flew past that number in about 4 months and the limb those analysts went out on must have snapped like a twig under the weight of that mis guided estimate.  Oh what the banks would give now to have the bleeding stop at 200 billion.  Some of the latest reports are that we are nearing the Big T 1 Trillion for US Bank.  Fannie and Freddie alone could exceed that number and could be as high as 1.2 Trillion that the US Gov will need to pump into these deflated and defeated lenders over the next few months and years.  I would only hope that the government will turn them back over to the private sector as quickly as possible, it doesn't need to be a complete charity act the Fed's should make a profit on the deal where possible but I would implore them to sell them back to the private sector as quick as they can.  Give Mitt Romney a call as well, he would be up to the task of reshaping and reforming these companies and he happens to have 4 years on his hands before he will get the Nod from the GOP for president. 

Your comments are welcomed.

Keeping you informed,

The Mortgage Insider - Stetson Lowe - UtahLoanTips.com

I dont agree 100% with all of the views expressed in the video below but I do believe there are some valid points made and therefore have chosen to add it to my blog. Enjoy.

Another One Bites the Dust!

Home Comings Financial (GMAC) bit the dust this week.  They have said they plan to cut between 5000-6000 jobs and close over 200 offices nationwide.  They were a pretty good lender but their heavy heavy exposure to sub-prime mixed with the huge losses GM is reporting right now proved to be to much for them to over come.

Stay tuned for more insider information.

The Mortgage Insider