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

Emergency Rate Cut by the FED - World Markets Crumble

This morning amid another Huge sell off in the markets the Fed announced an emergency rate cute to the Fed Funds Rate.  The Fed decided it was necessary to cut the lending rate by 1/2% to 1.5%.  This will affect most everyone that has a variable Home Equity Line of Credit as these lines are attached to the Wall Street Journal Prime rate which is directly affected by the Fed Fund Rate.

This will also affect credit cards and personal lines of credit associated with this index.  It will not however lower long term mortgage rates as they are Not associated with Prime or the Fed Fund Rate.  Long term mortgage rates will be affected by how Wall Street digests this information and if it causes the markets to rally then long term mortgage rates may feel a negative impact if traders ditch their heavy positions they have taken up in the past weeks in Government Treasuries. 

Treasuries or Bonds as they are widely known do directly affect long term mortgage rates.  As bond prices slide due to sell off's in the bond market yields increase and as yields increase so do mortgage rates right along side them.  Mortgage rates are much like gas prices in that the slightest increase in the bond yields sends rates soaring, just like gas prices do immediately when the price of oil increases.  Just like gas prices mortgage rates take their sweet time coming back down even when bond yields drop.

There is no question that the bear's are ruling the market and have traders running for cover.

Since my last post on Citi ingesting Wachovia there has been a new cowboy roll into town and they want part of the action.  The new cowboy is Wells Fargo, they literally overnight stepped on Citi banks head as they entered the ring to negotiate with Wachovia.  It was announced by Wachovia the very next morning that they had dumped Citi like a bad habit and were in exclusive negotiations with Wells Fargo now.  Keep in mind guys I had already received emails from Vertice (Wachovia) and Citi reps talking about the transition to Citi and how seamless they were going to make it as this was a done deal.  Then in an instant not only was it not a done deal but I was getting emails from that same Vertice (Wachovia) rep saying stay with us things are changing but Wells Fargo is great and its going to be a great marriage.

Now they are all tied up in a legal suit that was filed by Citi on the grounds that "hey you can't come in here and still my girl friend I saw her first."  Wells Fargo seems more then poised to have a draw with Citi if that's what it comes down to.  Wells still carries it's six shooter which is it's AAA rating with the ratings agencies, it is the only bank in the US to pack that power, it also boasts the Oracle of Omaha Sir Warren Buffett being a huge investor and backer of the bank.  Citi on the other hand is down to a BB Gun and is running out of BB's at that. 

My money is on Wells not only in this transaction but to come out on top after all of this is said and done.  The real standoff to see who will be King of the Hill is going to be between Wells Fargo and JP Morgan Chase. 

Go long on these two banks as they have what it takes to weather this storm, gobble up the competition for pennies on the dollar and become the World Powers in the Banking industry.

Rates are near 5 year low's right now so if you are the guy or gal who has had that brother in law that is always bringing up his 5.5% 30 year fixed rate that he got back in 2001 and your sick of hearing about it, call me and lets see if we can put an end to his rate dominance once and for all.  Act quick these bond prices can't last.

Keeping you Informed,

Stetson Lowe - Utah 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

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