Mortgage Information and insight from a Utah Mortgage Lender.

The Lowe Down - by Stetson Lowe

Tonight as I sit here and unwind from yet another hectic day in the office I felt impressed to get out the laptop and share some insider mortgage insite.  There is so much going around out there about the mortgage industry and today's economy but I am going to hit you plain and as simple as I can, and I will not patty cake you.

I had a very candid conversation today with an executive from a national bank.  One of the biggest in the US today.  It was interesting to hear his point of view and to see what we agreed on and to see what we admittedly disagreed on as well.  One of the most interesting facts he brought to my attention today was in regards to the Fed's "setting the rate" so to speak in the bond market.

This is something that the government did in the student loan sector of the banking world some time ago and it has all but alienated all of the lenders from that industry so that now the government is the only player in the game.  They are standing there holding the bag on almost all student debt today which makes the industry far less competitive and all but impossible to navigate for borrowers.  You see it is not worth it for private investors and banks to play along with the government in a game that is rigged.  One where it is hard to turn a profit and the red tape and bureaucracy force the lenders to spend more then they earn just to stay compliant.

This fiscal policy has failed miserably and yet the talking heads in DC seem to think that this same policy should be adopted in the mortgage industry as well.  Yeah that usually works, if at first a policy doesn't succeed do it again in another industry?? Whatever...

Back to the Feds setting the rate.  This is where they are basically buying coupons (bonds) at a certain rate no matter what the market is dictating that day or no matter what supply and demand are bearing.  Essentially falsely inflating or deflating the rates for that day in an attempt to "set a target rate".  It has been proven that our market is much more effectivein setting its own rates from day to day and from week to week then the government falsely trying to replace supply and demand.  I'll take free and open markets any day of the week for a healthy economy.  I am not saying that there is not a need for the government to sure up a badly damaged credit market, I just think they may be going about it the wrong way.

What I am seeing in the wholesale and retail markets is Banks so unsure what the feds next move is that they are loosing interest in the game all together.  I believe that it was Chase that all but completely pulled out of the mortgage business at the end of January.  They are "over it" so tospeak in all the games and tricks that the government is trying to pull.  Basically saying "we are out" let us know when things get back to normal and then maybe if we feel like it we may jump back in at that point.  Until then we can more then replace our mortgage income by buying up troubled banks for pennies on the dollar and then selling off their assets piece by piece making billions of dollars, oh and by the way we will take a multi billion dollar line of credit from the government to help us do this if they are stupid enough to give it to us.

We now have 28 major players left in the Mortgage Market.  Just over 2 years ago there were over 200 lending institutions, private equity firms, insurance companies and more fighting over these bundles of loans....fast forward to today there are 28.  Less demand means over abundance of supply, couple this with Fannie and Freddie changing their guidelines almost every single month and mortgage insurance companies announcing at the drop of a hat that they will no longer insure mortgages with this credit score or that loan to value and you have what we are facing today, banks that are so gun shy that they are going to get stuck with loans that are unsellable on the secondary market, uninsurable thereby making them unsellable, or with rates that are far to low to attract any buyers in a market that has had less and less interest domestically and internationally.

I hope that this has shed some light on what is really going on in the mortgage market today.  Why yields are at or below all time lows yet the yield spreads are as large as they have been in a decade. And why underwriting times are longer and longer and why you hear it is harder to get approved today for a loan then even 2-3 months ago.

2003 was the largest mortgage origination year ever with over 4 trillion dollars in mortgages originated during that year alone.  It is predicted that if rates stay low there will be a demand for 15 trillion dollars in mortgages to be originated between refinances and purchases this year (2009) in the US.  That is 4 times the all time record and with only 1/10th of the banks actually funding loans compared to 2003.  The numbers don't add up and something has got to give or we will see 4-5 month turn times to close a loan...it feels like a train wreck waiting to happen.

If I were the one setting policies I would see how we could make the mortgage market more attractive to investors with incentives, warranties and tax cuts.  I certainly would not be competing with or falsely setting a market to the detriment of that market.  Hey but that's just me.

The key to obtaining financing this year is going to be working with someone that will help you navigate through these treturous waters that are the mortgage industry today.  I am here to help, so give me a call 801-318-4996 or email me at stetsonlowe@gmail.com and we can get the ball rolling right away.

Dedicated to giving you the inside scoop.

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

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