Bryce's Blog

Can the Federal Government control long term rates?

Bryce Johnson (Cascadia Lending) — Mon, 01 Dec 2008 22:35:34 -0600

The Fed has already shown on a number of occasions that they can control short term interest rates. The Fed cut its key funds rate to an all-time low of 1% in October in response to deterioration in the global financial system. Rate cuts tend to drive up inflation, but falling prices have given the Federal Reserve more wiggle room to lower interest rates. Core inflation is now at its lowest point since October 2007, according to a recent Department of Labor report. People think that when the "Fed cuts rates" that long term mortgage rates are also cut. The federal funds rate is the interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. The rate may vary from depository institution to depository institution and from day to day. This is great for short term loans such as, home equity line of credit, car loans, student loans and credit cards.

I had someone call me and say "I heard the Fed cut mortgage rates to 1%, sign me up". I had to explain how the fed funds rate works and that actually has lead to an increase in mortgage rates in recent cuts.

So what is the answer for long term rates like a 30 YR fixed? For starters, we were able to offer 5% on for qualified borrowers as of this morning. What more are people waiting for? 5% is unbelievably good and only seen a few times in the past. Guess what? They still want lower. Bernanke has stated that he wants to start targeting long term rates, which in turn, would stimulate the real estate market. He stated the Fed, for instance, could buy longer-term Treasury or agency securities on the open market in substantial quantities, he said. This might lower rates on these securities, "thus helping to spur aggregate demand," Bernanke said.

Would this help?

Yes it would help Treasuries, but the problem is they are already very low. Interest rates should already be lower than what they currently are based on the 10 YR Treasury yield. This means that there is too much risk.

We are already at 5%, so if you can't qualify at 5%, you probably shouldn't be buying a home at 4.5% You'll end up being in the same position everyone else is in right now. On top of that, the economy is in such a down side, I think a lot of people are afraid of losing their jobs, so they just don't want to take the risk of buying a new home.

In my opinion, the federal goverment should be more focused on creating more jobs and creating confidence in the consumer sector. Again we are at 5%, what else are we waiting for?

Technology is changing...so is marketing

Bryce Johnson (Cascadia Lending) — Mon, 25 Aug 2008 15:20:12 -0500

The mortgage company I work for, partners with a local real estate office and we refer some business to each other. We wanted a way to help bring in more listings and buyers to that real estate office, so here's what we did.

Currently, real estate offices have static paper print outs of their listing taped to front window for passer by's to see. We just installed a product that blows the old way out of the water. We were able to partner with a company called InteractivityUSA (www.interactivityusa.com) to provide real estate office's with a state of the art interactive touch screen that displays listings 24/7 and has a lead capture system. People can walk by, search listings and request to be contacted for more information. The best thing about this is, this technology is thru glass. People can be on the outside of the window and interact with a screen that is on the inside of the building! This means even after the office is closed, people can still view office listings. The website has a great video that shows the screen in motion.

The numbers don't lie. The office is getting 93% capture of their listing appointments due to the interactive touch screen. Sellers find out that their listing will be digitally displayed in a high foot traffic area and they love it. On top of that, the program allows people who interact with the screen to leave their contact information. So, this becomes a 24/7 lead generator because it's available to use all day and night.

Lastly, this screen could essentially costs you nothing because there is room to add advertising on the screen. You could get a mortgage, title, and escrow company to pay small monthly fees to advertise their business and that pays for your screen!

It's been a great experience and very positive feedback so far. Let me know if anyone would like more information.

Interactive Touch Screens = More listings and more buyers!

Bryce Johnson (Cascadia Lending) — Mon, 25 Aug 2008 15:10:50 -0500

It's been a great experience and very positive feedback so far. Let me know if anyone would like more information.

Want to gain referrals from an entire real estate office?

Bryce Johnson (Cascadia Lending) — Fri, 22 Aug 2008 17:12:37 -0500

What do real estate agents want from their lender partners?

The obvious answers:

Someone they can trust, someone who offers the best rates, someone who is informative and communicates well...

The real answer:

Someone who is going send me business!

I recently found a way to gety an entire office on your side. This system has worked wonders for our office, so I just wanted to share it to everyone else. The office we partner with just recently had the first interactivce digital signage installed in the entire country for real estate office's.

Currently, real estate offices have static paper print outs of their listing taped to front window for passer by's to see. We just intsalled a product that blows the old way out of the water. We were able to partner with a company called Interactivityusa (www.interactivityusa.com) to provide real estate office's with a state of the art interactive touch screen that displays listings 24/7 and has a lead capture system. People can walk by, search listings and request to be contacted for more information. The best thing about this is, this technology is thru glass. People can be on the outside of the window and interact with a screen that is on the inside of the building! This means even after the office is closed, people can still view office listings. The website has a great video that shows the screen in motion.

So, by providing this for the real estate office we partner with, they jumped on the idea of sharing all leads with us and working with them going forward! Lastly, the fees associated with this program can all be paid for by 3rd party advertising on the screen which means this could essentially cost you nothing. Let me know if you'd like more information.

Mortgage/Economic news for the week of June 16th

Bryce Johnson (Cascadia Lending) — Mon, 16 Jun 2008 13:43:46 -0500

This week is moderately busy with four economic reports scheduled to be released. Only one of the four is considered to be of high importance to the markets and mortgage rates. The remaining three are of interest to the markets but likely will not cause a large change in mortgage rates unless they vary greatly from forecasts.

The first report of the week is also the most important. May's Producer Price Index (PPI) will be posted early Tuesday morning. It helps us measure inflationary pressures at the producer level of the economy and is the sister report to last week's Consumer Price Index (CPI). There are two readings of this index, the overall and the core data. The core data is considered to be the more important of the two because it excludes more volatile food and energy prices. A large increase could add fuel to the theory that inflation is a real threat to the economy because the higher prices will likely be passed on to the consumer in the near future. This would not be good news for bond prices or mortgage rates since inflation erodes the value of a bond's future fixed interest payments. Rising inflation causes investors to sell bonds, driving prices lower and mortgage rates higher. Analysts are expecting to see an increase of 1.0% in the overall index and a 0.2% rise in the core data.

The second of three reports being posted Tuesday is May's Housing Starts report. This report gives us a measurement of housing sector strength, but is the week's least important. It usually doesn't have a major impact on the bond market or mortgage rates and I see no reason for this month's results to be any different. Analysts are expecting to see a drop in starts of new homes between April and May.

The third and final piece of data scheduled for Tuesday is May's Industrial Production. This report will be released at 9:15 AM ET. It measures output at U.S. factories, mines and utilities, giving us an important measurement of manufacturing sector strength. If it reveals that produc tion is rising, concerns of manufacturing strength may come into play in the bond market. A decline would indicate that the manufacturing sector is weaker than expected and should help push mortgage rates lower. Current forecasts are calling for an increase of 0.1%.

May's Leading Economic Indicators (LEI) will be posted late Thursday morning. The Conference Board, who is a New York-based business research group, will post this data. It attempts to predict economic activity over the next three to six months. If it shows rapidly rising levels of activity, bond prices will probably drop, pushing mortgage rates higher Thursday morning. But, a weaker than expected reading could lead to lower mortgage pricing. It is expected to show no change from April to May.

Overall, look for Tuesday to be the big day of the week. Not just because it brings the release of three of four reports, but because it brings us the PPI that is considered to be a key inflation reading. I am expecting to see the least amount of movement in rates tomorrow and Friday, unless the major stock indexes stage a considerable sell off or rally. However, I am still not sure that we have seen the end of the recent bond selling. Therefore, I am holding the lock recommendations for the time being.

FHA Officials Seek to Ban Seller-Assisted Payments

Bryce Johnson (Cascadia Lending) — Tue, 10 Jun 2008 14:27:17 -0500

Wall Street Journal (06/10/08) P. A13; Corkery, Michael; Crittenden, Michael R.

A public comment period on a proposed ban of seller-assisted down payments has been reopened by the FHA, following a preliminary injunction against the ban proposed by HUD last year. This kind of down payment is fronted by a charity or another third party and repaid by the seller, and there are concerns because federally insured mortgages involving such down payments are three times more likely than conventional loans to end up in foreclosure, according to FHA Commissioner Brian Montgomery. Mortgages with seller-assisted down payments rose to 35 percent of FHA loans from 5 percent over the past seven years, and they likely will account for a substantial portion of the $4.6 billion in loan losses expected by the FHA. "We are concerned about this business, because the substantial losses affect FHA's bottom line and FHA's ability to serve American citizens who need access to prime-rate home loans," Montgomery stated during a June 9 speech at the National Press Club.

As of right now, this is only one of two $0 down options for buyers other than VA.

Does this sound like a system you would use?

Bryce Johnson (Cascadia Lending) — Tue, 13 May 2008 16:02:06 -0500

I just signed up for a system a few days back and have already gotten a great response from it. I am just curious what the feed back would be from local puget sound real estate agents.

I subscribe to a service that provides free online and offline marketing for real estate agents. In a nut shell, it's a system that provides an exclusive website to each listing an agent has with full capture and tracking capabilities. It's long, but here are all the perks it has.

What my marketing system offers you is:

1. highly effective marketing system for each of your listings; and as many as you want!

2. A complete feedback system to request, record, and chart the feedback from agents that have shown the property. (just this alone will save you hours of time) Even the homeowner can be involved and input showings... most homeowners love this because they are involved first hand with the feedback.

3. We can quickly and easily generate flyers and postcards, with multiple layouts of each to choose from. No more countless hours on the computer, or waiting days (or weeks) for someone else to do them for you.

4. My system will automatically feed the property to numerous popular real estate and classified ads websites to generate traffic and increase interest in that property. Sites like Google (base), Trulia, Oodle, Zillow, Craigslist, PropSmart...

5. I have two flyer blast systems, One that can announce the home to thousands of agents, and one to contact all the agents that have previously shown that property.

6. A complete property website dedicated to informing and selling that one property. These property website include:

Unlimited pictures per listing with a pictorial slide show.
Unlimited documents per listing like inspection reports, appraisals, disclosures.
You can upload video clips, floor plans, pdf's... just about anything you need.
Property map with Ariel Views.
Financing page with calculator.
Community, demographics and schools links.
They can print flyers from the website too.
Of course contact forms where they can request a showing or request more information. The contacts are emailed directly to you!
And we can even create custom graphics so your property websites have that one-of-a-kind look.

7. I offer sign riders with that properties website address to promote that property, and to generate more listing calls from the neighborhood. The neighbors will also see these riders and see that you step up and beyond the ordinary agents.

8. I provide advertising that you can include in your listing presentations about your cutting edge property marketing system. I'll even provide listing presentation websites, so you can win more listings.

All this for free! The only thing I ask in return is, any business generated from my marketing, I get a chance to work with them on the loan. That's it.

Is this something agents would like? I've had it for about a week and I'm seeing about 30-80 hits per listing a week.

Pointing fingers at the wrong person

Bryce Johnson (Cascadia Lending) — Tue, 13 May 2008 13:53:57 -0500

I'm getting really tired of reading articles in the news about how some unfortunate person got screwed by a mortgage broker. Yes there are some lenders out there that have taken advantage of a system that got way too loose in their guidlines, but where do you draw the line? Where is the responsibility of the consumer? Why is everyone always looking to blame someone else and not take responsibility for their own decisions?

Would you give $600K to a financial advisor without doing a little bit of due diligence on the broker and what kinds of products they are going to invest your money in? Of course you would! Well, when you are buying a $600K home, why isn't the consumer doing their diligence and learning about the people they are working with and which programs are going to best benefit both the their short and long term financial needs? I don't get it.

Take responsibility for your own actions! If you are unsure about what you're getting into ask questions! Here is the latest article I read. This couple completely over leveraged themselves. They refinanced to get out of debt numerous times. Had they been responsible and not over leveraged and had good credit, they wouldn't have a problem. It's pretty much that simple.

http://online.wsj.com/article/SB120975119418663167.html?mod=residential_real_estate

Okay, I'm done venting now.

Thursday May 8th Mortgage Update

Bryce Johnson (Cascadia Lending) — Thu, 08 May 2008 14:36:55 -0500

Thursday's bond market has up sharply, continuing yesterday's late rally. The stock markets are also in positive territory with the Dow up 56 points and the Nasdaq up 11 points. The bond market is currently up 27/32, which should improve this morning's mortgage rates by approximately .250 of a discount point.

The only economic news posted this morning were the weekly unemployment figures from the Labor Department. They said that 365,000 new claims for benefits were filed last week. This was a smaller number than was expected, but fortunately has not affected bond prices or mortgage rates.

Yesterday's 10-year Note auction was not met with a very good demand. Despite this we saw bond prices rise during afternoon trading as the stock markets faltered. This is a sign that funds were being shifted from stocks into bonds, which may indicate an expectation of weakness in stocks. If the major stock indexes do begin to fall, we should see bonds benefi t and mortgage rates move lower.

Today's 30-year Bond sale could very well have the same result as yesterday's auction did. However, it appears that investors may not be so quick to react to its results. With no important economic data on tap tomorrow, we could see further gains in bonds, especially if stocks turn south.

March's Goods and Services Trade Balance report will be released early tomorrow morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $61.3 billion trade deficit.

Wednesday May 6th Mortgage Update

Bryce Johnson (Cascadia Lending) — Wed, 07 May 2008 12:55:37 -0500

Wednesday's bond market has opened flat despite favorable economic news. The stock markets are mixed with the Dow down 20 points and the Nasdaq up 8 points. The bond market is currently nearly unchanged form yesterday's closing level, but we will likely see a small increase in this morning's mortgage rates as a result of weakness in bonds late yesterday.

The Labor Department gave us today's only relevant economic news with the release of the 1st Quarter Productivity and Costs data. It showed a 2.2% increase in productivity, which exceeded forecasts by a fairly large margin. This is good news for bonds because higher levels of productivity allow the economy to expand with low levels of inflation.

The first of this week's two most important Treasury auctions will take place today. The Treasury Department will hold a 10-year Note sale today and a 30 Year Bond sale tomorrow. Results of the auctions will be posted at 1:30 PM ET. If they were met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding could lead to higher mortgage pricing this afternoon and/or possibly tomorrow.

There is no relevant economic data scheduled for release tomorrow except the weekly unemployment figures from the Labor Department. They are expected to report that 375,000 new claims for benefits were filed last week. A significantly larger number would be good news for bonds and mortgage rates, while a sizable decline could hurt rates. If they report a figure anywhere close to the 375,000, this data will likely have little impact on the markets or mortgage rates tomorrow.