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Mortgage Market Update

by Robert D. Ashby on August 18, 2008

mortgage-market-update

It is bright and early Monday morning and most of you are likely still sleeping.  Nevertheless, this post is coming early since bonds may finally be ready to break the barriers of resistance.  But, let’s recap what has happened this past week.

Right now, the United States and China are in a battle for Olympic Medals.  Inflationary fears and recessionary fears are also battling in the mortgage bond pit, only mortgage backed securities don’t have Michael Phelps and his record setting performances to help them.  Nevertheless, mortgage bonds did manage to muster a late sprint which got them over their 25-day moving average finally.  But can they hold?

As the Olympics kicked off, Russia kicked off their own battle, taking on Georgia, Fannie Mae issues made headlines, and the 25-day moving average was too tough for bonds sending them crashing down as the week got started.  The strengthening of the dollar was not helping mortgage bonds either.  Bonds were down throughout the middle of the week, finally rallying Friday.

Data was not very helpful to mortgage rates overall, providing fuel to both sides of the battle.  But Fed Pres. Stern was there to calm inflation fears during a couple of speeches this past week, citing that lower oil prices were dropping inflationary expectations.  Apparently, the markets bought it because the mortgage bond market rallied, breaking through their 25-day moving average, despite the highest inflation (CPI) since January 1991.  Continued unemployment climbs are aiding the recessionary fear factor as well.

Now, the question going forward is whether or not bonds can hold their ground, or will they get beat back down again.  This week will see data from both sides of the battle again, with PPI and the Philadelphia Fed Index along with housing data.  With bonds still in an overall long term downtrend, this week could be extremely pivotal if they can hold, even make some more gains. 

Here is the fairly light schedule of data this week:

  • Monday:  None
  • Tuesday:  PPI (8:30), Building Permits (8:30), Housing Starts (8:30)
  • Wednesday:  No data
  • Thursday:  Initial Jobless Claims (8:30), LEI (10:00), Philadelphia Fed (10:00)
  • Friday:  Crude Inventories (10:30)

On the technical side, the rally looks a little questionable.  While short term indications are fairly good, stochastic indicators have a large spread and are entering overbought status, the long term downtrend remains in place, and mortgage bonds are up against their 50-day moving average.    Bonds will need to hold steady or gain more in order to paint a better picture of the future.  With no data today, news will again be the “guide”.

As the week begins, there may be a chance to float, but exercise extreme caution until the charts paint a better picture and keep that finger on the lock trigger, just in case.  

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Old School?

by Mike Mueller on August 16, 2008

old-school

REBlogWorld

TransBox envelopes?  That’s old school.

You can bet we won’t be discussing TransBox envelopes at Reblogworld.

Instead you can expect to learn all about the latest and greatest cutting edge technologies that you can employ right now to increase your business.  Information you can use!

Serious about your business?  You need to be in Las Vegas Sept 19th.

Watch the Video

ActiveRain Member?  Use the discount code and receive 20% off.

What’s the code?  “ACVIP“

But wait, there’s more.

Come to Reblogworld and stay for the BlogWorld & New Media Expo the next two days!

Hey, I heard Simon Cowell was going to be there!

Woo Hoo!

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let’s talk vehicle titles…..

by Diane Cipa on August 16, 2008

lets-talk-vehicle-titles

Yea, I know. I’m not in the car business, BUT, as a title agent I do have to work with and around mobile home titles and let’s face it, a mobile home title IS a vehicle title. So, with that in mind let me say this - loudly and clearly….

IF YOU ARE INVOLVED IN THE TRANSFER OF REAL ESTATE ON WHICH THERE SITS A MOBILE HOME OR DOUBLE-WIDE OR MANUFACTURED HOME - WHATEVER YOU WANT TO CALL IT, DO EVERYBODY A FAVOR AND FIND THE TITLE ASAP.

[FYI - This applies to refinancing, too.]

Okay, glad I got that one off my chest. LOL

Listen up, if the seller does not have the original - not a copy - mobile home title in their possession, you need lots of time to resolve your situation. It’s not gonna happen quickly and so you don’t want to be two days before closing and have your title agent ask you for the mobile home title and you say HUH? What title? This is especially serious when the buyer is getting a mortgage because the mortgage lender won’t close without controlling the destiny of the mobile home title.

These are the most common situations:

  1. Seller borrowed money using the mobile home as collateral, so just like a car loan, the lender has the original title in their file. They will not give it to anyone until they have been paid in full. This is especially tough if the new mortgage lender wants the title surrendered before you close. [I know that sounds hideously impossible because it is.]
  2. Seller lost the mobile home title. In this case, the seller must apply to the state department of motor vehicles for a duplicate title.
  3. Seller never got a mobile home title when they purchased the home. This one is tough. In PA, you can give the department of motor vehicles as much history as possible and wait while they research the title. If they can locate the records, they will issue a duplicate of the existing title -which is in the name of whoever sold it to your seller. You seller then has to go find those people and get them to transfer the title to the seller so the seller can transfer the title to the new buyer. Got it? Hope you can find the previous owner and they are nice.
  4. The property has gone through foreclosure and the lender just never thought about the mobile home title. The foreclosure attorney can go back to the judge and ask for a court order cancelling the mobile home title. This court order is just as good as evidence that the title was surrendered.

Speaking of title surrender, in most mortgage transactions, that’s the ultimate goal of the mortgage lender. They want you to produce evidence of surrender. Most people do not have it and so then you must find the mobile home title SO you can then surrender it.

Here’s some advice for everybody. If you have in your possession evidence that a mobile home was surrendered, record it as an exhibit with the deed. Get it on record, PLEASE, because you know that piece of paper will fall into someone’s black hole and then the entire process will have to be repeated in the next transfer.

There’s alot more we could chat about on the subject of mobile home titles, but if I can get just that one message out there - please start working on it as soon as you can. Any fix will take time and time makes people nervous and time is rate risk and, well you know, time is just one thing most folks aren’t prepared for.

Take care, be diligent and have patience. ;)

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Real Numbers on the Credit Crunch

by Wade Young on August 15, 2008

real-numbers-on-the-credit-crunch

Every quarter, the Federal Reserve releases the “Senior Loan officer Opinion Survey.” The current survey data is based on the responses from 52 domestic banks and 21 U.S. branches and agencies of foreign banks. Essentially, the Federal Reserve does a sampling to estimate how many banks are “tightening or loosening” and on what types of loans. Banks are tightening credit across the board. Here is what the Fed found out:

Residential Real Estate Lending

  • 74% of respondents have tightened standards on prime mortgage lending (up from 60%)
  • 84.4% of respondents have tightened standards on nontraditional mortgage lending (up from 75%)
  • 85.7% are cracking down on subprime loans
  • 80% have tightened standards on HELOCs

Commercial Real Estate Lending

  • 80% of domestic banks have tightened their lending standards

Commercial & Industrial Lending

  • 60% of domestic banks have tightened standards on C&I loans to large and middle-market firms (up from 50% in April)

Consumer Lending

  • 65% have tightened standards on credit card loans (up from 30% in the April survey)
  • 67.4% have tightened standards on consumer loans other than credit card loans (up from 45%)

The report also said that 55% of domestic respondents planned to further tighten credit standards on commercial and industrial loans in the second half of this year. Regarding commercial real estate loans, 70% believed that they would tighten their lending standards on these loans in the second half of 2008. On the residential side, 45% of respondents expect their banks to tighten standards on prime mortgage loans in the second half of 2008. Concerning nonprime mortgage loans, 65% anticipate tightening lending standards in the second half of 2008. Another 60% expect to tighten standards on HELOCs through the end of 2008. 60% plan to tighten standards on credit card loans in the second half of 2008.

Banks are tightening the supply of credit across the board, and the trend is expected to continue for the remainder of the year and on into 2009. There is even talk on the street that automobile leasing may go away altogether for a while. Chrysler Financial is getting out of the leasing business, and other leasing giants may follow suit.

Wade Young is a Denver Mortgage Broker.

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Reverse Mortgages Versus the Cash-Out Loan

by Luke Helm on August 14, 2008

reverse-mortgages-versus-the-cash-out-loan

Now I’m not one to preach, but this is a topic that can get my blood boiling. I get at least 5 calls a week from seniors who did a cash out loan, often a option ARM, and can no longer afford the payments. Now they are calling me practically begging for a reverse mortgage because they think it can save their home from foreclosure, or at least keep them from being forced to sell their home. But, thanks to the loan that they have, they usually do not have enough equity remaining to qualify for a reverse mortgage. And I get to break the bad news to them. But, cash out loans are the right choice in some situations – just do your clients a favor and know when to recommend a reverse mortgage.

First, for those who are not familiar with the program, a reverse mortgage is a home loan for people over the age of 62 that allows them to pull out some of their home equity.  This money can be used for any purpose that they want. A defining element of this mortgage for seniors is it never requires any monthly mortgage payment whatsoever for the life of the loan. The loan may be kept until the homeowner(s) either sell the home or permanently move out. Essentially, a reverse mortgage is similar to a line of credit, in that it has a credit limit and the ability to take cash out and put it back in. The senior does not pay the monthly interest that accrues, but instead the interest gets added to the principal balance.  The lender actually cannot ask the homeowner for any payments for as long as they live in the home. At the end, the total amount borrowed- principal plus interest- is collected by the lender.

In evaluating the reverse mortgage versus a cash-out loan, it is essential to take into account the seniors’ individual situation. The cash out loan would be a poor choice if the senior does not have an abundance of income and wants to stay in their home for many years to come. If they are planning to use the cash out to afford the monthly payments (yikes), then you are handing them a ticking time bomb – it is only a matter of time before the money runs out. In this particular case, the reverse mortgage if preferable because it carries the guarantee of no mortgage payments for as long as the homeowner lives in the home.

For ease of qualifying, the reverse mortgage offers the advantage of not requiring any minimum credit score, income, or assets (other than home equity). Cash-out loans, of course, require those items.

Although the closing costs will probably be greater for the reverse mortgage, the cash out loan will probably cost far more than a reverse mortgage over the long run.  For starters, the interest rates on the FHA reverse mortgage (including FHA insurance) are currently in the low 4% range. That’s tough to beat with a traditional cash out loan. But far more costly is the fact that with traditional loan, you must take all the money at once from rather than being able to take it out of a reverse mortgage’s line of credit on an as-needed basis. By utilizing a credit line you keep the mortgage balance lower for a longer period of time, so you’re paying interest against a smaller balance as you go.

Loan officers should carefully evaluate the reverse mortgage before putting their senior clients into a cash-out loan.  These loans may be perfect for working people who need to finance a home remodeling project or pay for their kids’ college. But in most cases, a reverse mortgage is a far better choice for seniors.

Luke
Reverse Mortgage Pro

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