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For anyone following the financial news lately, these are nervous times. Last week the government stepped in and bailed out mortgage giants Fannie Mae and Freddie Mac. This weekend there was a new list of companies standing at the payout window looking for a helping hand from the Feds. And the government said no.

Over the weekend Bank of America bought Wall Street titan Merrill Lynch, and Lehman brothers was forced into bankruptcy. This is sending tremors across the financial system. We all knew that the government couldn’t continue to back up all the bad decisions that Wall Street made and that in order for the economy to get past this period some companies would have to fail.

The stock market is in for a bad day today, and money is now flowing into Treasury notes and mortgage bonds. Some are even calling for the Fed to cut rates at their meeting tomorrow. As I write this T bills are up 159 points and mortgage backed securities are up 72 basis points. This is a flight to quality and interest rates should drop again this morning. If you have clients who were on the fence about refinancing their mortgages, start working the phones. They’ve just gotten another chance.

In the immortal words of the recently late Jerry Reed, “When you’re hot, you’re hot. When you’re not, you’re not.” Life is about streaks. Living in the Chicago area, I’m a life-long Cubs fan. To anyone who doesn’t follow baseball, the Cubs last won the World Series 100 years ago, and I can count on one hand the number of times they’ve been in the playoffs in my life time. But this year has been different. They’ve had that winning swagger and they go into games expecting to win. At this point in the season they’ve compiled the best record in baseball. Only now, as we head into the home stretch, they’ve lost four games in a row. I’m not sure what the players are thinking, but as a fan I’m fighting that ‘here we go again’ vibe - get our hopes up only to dash them on the hard rocks of reality. I think it’s going to turn out differently this time, though. It’s hard to be up all the time. Over the course of a long season there are going to be low points. What matters is how they respond under pressure, and if they keep on doing the things that got them here, they’ll be fine and we’ll be celebrating in October.

The same thinking applies in the mortgage business. When things are going well you feel unbeatable. Business comes in easily and it seems like you can do no wrong. When business is good we get that same winning swagger. We expect things to go well, because they have been going well. But again, when your hot you’re hot, when you’re not you’re not. What happens when you hit those inevitable down streaks? The whole industry has been in one over the last year. Loan originations are down and it looks like it’s going to be a while before we turn the corner. The loans we get are harder to do now with tighter underwriting guidelines, low appraisals and road blocks at every turn. In times like this, the right attitude makes all the difference. Make that the right attitude and a commitment to do what’s necessary to turn the bad streak around.

Are you still keeping in regular contact with your past clients and referral sources?

Are you becoming the expert and letting everyone know about how the changes in the mortgage market affect them?

Are you budgeting extra money for marketing, or are you cutting back?

Are you keeping up with all the changes in the industry and adapting to what you can do in the current market?

Are you trying anything new?

When business is down it is too easy to pull back. It’s easy to rationalize that the market is bad and there is nothing you can do about it, so you might as well do nothing. But the true winners keep the winning attitude and know they will be around for the long run. And I do expect to celebrate in October.

Illinois Mortgage Broker

If you are one of those people who read the tea leaves trying to predict which direction interest rates are moving, today was an interesting day.

The PPI (Producer Price Index) jumped 1.2% in July, the largest increase in 27 years.

Oil prices, which have been going down sharply lately, touched down at just over $111 per barrel, but closed up for the day at $115.

The Dollar, which has also been on a roll, was off today, too.

Inflation hawk and Dallas Fed Chairman Richard Fisher in a speech today warned that though the economy was slowing, the uptick in inflation could lead to a “lingering inflationary fever”.

Over the last month any of these items would have been enough to spark a huge selloff in mortgage bonds. Today mortgage bonds managed to end the day flat (actually up 3 tics), parked right at a stubborn level of resistance. There was plenty of news showing the economy is still slowing, and some of the inflation is obviously seen through the rear view mirror. But in the past month it hasn’t mattered. Bond traders have been wearing their inflation blinders and they would take any excuse to sell.

If mortgage bonds can break through this resistance, there is a good amount of room for them to run. If mortgage bonds go up, mortgage interest rates come down. The market is fickle, and tomorrow and bonds could easily get worse. But the fact that the market took this news in without flinching makes me think this won’t happen. My tea leaves say rates are about to get better.

Illinois Mortgage Banker

I’m glad to be the newest addition here at Lenderama, and I want to thank Todd for the great introduction. I also have a confession to make. I still use my HP12C to figure payments. Don’t get me wrong, I do rely on that new fangled computer thingee, but I think better with a calculator in my hands.

Anyways, for my first post here I need to vent. We, like a lot of companies, send out a survey to the borrower after every loan closes. The idea of the survey is to see what we did right, what we did wrong, and find ways we can improve our loan process. I look forward to getting these surveys back because I pride myself on doing a good job and I like the pats on the back that the surveys usually provide. But I’m dreading the survey results on one loan I now have in process. The thing is, it’s a slam dunk loan with well qualified buyers – 40% LTV, 800+ Ficos, low ratios and plenty of reserves. They are getting a great rate on the program they wanted and I’ve kept them informed of every step of the loan process. So what’s the problem? The problem is that I asked them for documentation, which they didn’t want to provide.

Here’s the thing. I did the loan for the borrowers on a previous home and everything went as smooth as silk. When they bought a new home I expected this to be a low stress transaction. But right from the start they were offended that I needed so much personal information. They saw this as an invasion of their privacy and insisted that I didn’t need to see their tax returns and that the first page of there bank accounts (showing several large deposits) was more than enough proof that they had plenty of money to close. The last time they did a loan the documentation was minimal. But as we all know, things have changed.

My borrowers finally did get me what I needed and the loan is approved and ready to close. But they are still not happy that I made them jump through flaming hoops in order to get approved and they blame me personally. In a way I totally understand how they feel. Some loans are so common sense that you know there is no risk involved – not that that argument will play with the underwriter. We’ve gone through a period where documentation was almost an afterthought and now we are back to the old days where everything has to be accounted for. Most borrowers read the paper, know that lenders are tighter with their money than they used to be and expect to provide whatever their loan officer asks for. Others, not so much. And I know I’m going to hear all about it when I get that survey back.