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The Future of Mortgage Rates: Where do you think rates will go?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 10 Jun 2009 11:11:14 -0500

I am working on some research to do my next post regarding the "Mortgage Rate Bubble" and would like as much input as possible. I am running a poll on Florida Mortgage Report to see how many and what percentage of real estate professionals think rates will continue to increase and where will mortgage rates be at the end of 2009.

Unfortunately, I could not get this poll scripted properly for adding to AR, so please send everyone you know over to http://www.flmortgagereport.com and select their answer.

Mortgage Rate Bubble: Has it Burst?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Mon, 08 Jun 2009 15:37:31 -0500

Most of you reading this have already heard me voicing my opinion and analysis on the subject of term I coined over 6 months ago, the "mortgage rate bubble". Now that we have been seeing mortgage rates spiking higher, I decided it was time to poll the community and see what everyone else is thinking. I have set up a poll on Florida Mortgage Report in the middle sidebar if you would like to help me.

Please take a moment to visit Florida Mortgage Report and take the poll and if it doesn't allow you to input additional comments, feel free to email anything else you would like to say on the subject. The poll closes at 5pm (market close) tomorrow and I will have a new post on the subject with some of everyone's comments (and of course links) posted most likely on Wednesday.

Here is a Great Example of the Current Mortgage Backed Securities Market…

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Thu, 04 Jun 2009 18:07:27 -0500

If you have wondered why mortgage rates have been climbing, falling, and climbing again, here is a great view into the current mortgage backed securities market…

Mortgage backed securities have done three virtual freefalls in the last week and a half, only 8 trading days. Since MBS pricing is what drives mortgage rates, those freefalls resulted in spikes higher in mortgage rates and the subsequent climbs in MBS prices have brought rates down a bit and set up the next “dive”.

While Sheikra, which I think still boasts the largest freefall of a dive coaster (205 feet), only has two freefalls built into it, the rollercoaster ride in the mortgage backed securities market has already had three and the ride is likely far from over. If you would like to read more of my analyses of the markets and what may lie ahead, check out these posts…

Is the Mortgage Rate Bubble About to Pop?

Is the Air Being Let Out of the “Mortgage Rate Bubble”

Is the Air Being Let Out of the “Mortgage Rate Bubble”?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Sun, 31 May 2009 20:00:10 -0500

To begin with, let’s analyze what has been happening to mortgage rates since my last post on the subject, just below and dated May 22, 2009. Since then, mortgage backed securities have plummeted after breaking below their recent trading range on May 23. While they have made back some ground, their virtual freefall has changed the overall outlook for mortgage rates, and may very well signal the beginning of climbing mortgage rates. The question in my mind these days is how high will they go and just how fast. Taking a look at the charts below will show just how fast they got worse and the potential speed at which they could rise in the coming months, if not years.

To read the remainder of the story, please visit Florida Mortgage Report

PS - I do not like writing excerpts, but I typically do not have time to rewrite the whole post. In about an hour, I am heading to the airport to fly home from Bolivia, so all I could do is add this excerpt and send you to the real post.

Is the Mortgage Rate Bubble About to Pop?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Fri, 22 May 2009 19:40:25 -0500

If any of you have been following my work, especially over at Florida Mortgage Daily where I post regular mortgage market commentary, you knew I coined the next bubble the “Mortgage Rate Bubble” a long time ago. Others are now using the “Bond Bubble”, focusing on Treasuries and not mortgage backed securities and mortgage rates, but it is essentially going to happen the same to MBS as it is to Treasuries. So, just what is it and when is it going to happen?

Sorry to do this, but if you want to read more, please visit Florida Mortgage Report

Money Merge Accounts: More Misleading Information

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 20 May 2009 10:12:51 -0500

It is hard to believe that I have been talking about these programs for more than two years now, bringing to light the misleading, even false, information presented by the Money Merge Account sellers. Don’t get me wrong, these bits of misinformation spread out on occasion to other mortgage acceleration product sellers, but the United First Financial (UFF) agents are the worst offenders from what I have seen thus far. The company even encouraged the presentation of skewed realities at the beginning, and I suspect they still do in a “non-public” fashion as they allow agents to continue spreading the crap, such as that from the Asher Institute report including claims that a 30-year fixed rate is really an adjustable rate mortgage (ARM).

One of the more subtle and persuasive statements is that paying off your mortgage is the same as investing at the same interest rate. This comparison is very successful for them as they can show that an investment account with the same interest rate will have accrued the amount needed to pay off one’s mortgage at the same time as if one was paying monthly toward their mortgage. What’s even more powerful for their persuading clients into buying the Money Merge Account (MMA) is the phrase “where are you going to get that kind of return, especially in a savings account.” The problem is that they again leave out a lot of facts, facts that could very well change your mind.

Let’s go ahead and assume that your mortgage is 6% and you can get a 6% rate of return on your investments. That puts the mortgage payoff date at the exact same time, regardless of how much money you add monthly. However, the truth of the matter is that you are much better off investing than paying off your mortgage. You see, once you send money to the bank to payoff your mortgage, you will not be able to access it again, at least not without refinancing. Your investments, on the other hand, can be “tapped” if the situation arises. This is called liquidity, aka money readily available. When a financial crisis occurs, many whom have gone the mortgage acceleration route are finding themselves trapped and struggling to make ends meet, with no cash available. Some have even headed to foreclosure.

Another fact is that when the mortgage payoff time arrives, guess what? If you have sent all of your money to the bank, congratulations, you now have a free and clear home, but no cash in the bank. You cannot tap into your home’s equity without refinancing again. With the investment account, you have financial freedom in essence. You have options!!! You can choose to pay off the mortgage in its entirety, pay off part of it as you deem capable, or let the investments keep working for you and reap more rewards. Also, keeping the money in investments keeps that liquidity that we all need, and most lack. Remember that $100,000 readily available can pay a lot of bills during a financial crisis, such as job loss. Try getting a refinance done without a job.

Now, we haven’t even talked about the tax benefits that carrying a mortgage can provide. Even if you are taking the standard deduction, you may be able to gain tax advantages. Another point being argued these days is where can you get an interest rate that is greater than your mortgage interest rate? I do not think I can legally specify any one stock, bond, etc., but I can tell you that it is not hard to do with a little bit of research and education. One of my investments is yielding over 17% in dividends and that yield does not look to be in jeopardy any time for the foreseeable future. Since dividends are only taxed at 15% maximum, there is a greater ability to grow your wealth on the “spread”. Of course, Obama will probably destroy this 15% cap, but remember that he won’t “raise taxes”. Speaking of higher taxes, when they come, you will want every deduction you can get.

Another point I would like to mention that the “other side” won’t is that you do not need to earn the same interest rate as you pay on your mortgage in order to come out ahead in your investments. That’s right, you could earn less than your mortgage, even taking out the tax benefits, and still come out ahead in some cases. I show these type of facts in my presentations, which I may turn into videos to be released across the internet.

So, don’t buy into the simple facts or even listen to just one side of the story when trying to decide which mortgage strategy is best for your situation. I encourage you to research thoroughly and make sure you have seen genuine side-by-side comparisons of various strategies, as well as working with a mortgage professional whom understands and can teach both sides’ advantages and disadvantages. Of course, if you have any questions, feel free to contact me.

Will the Federal Reserve Pay You to Borrow Money?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 29 Apr 2009 06:05:54 -0500

As strange as that sounds, many moons ago I mentioned that the Fed, led by Ben Bernanke, would love nothing more than to pay people to borrow money and a study released yesterday proves I was right. The fact is that Big Ben wants inflation so bad that he would be willing to pay others to borrow money if he could actually do that.

The study that was released yesterday morning stated that the Federal Open Market Committee (FOMC) was presented with the suggestion that the optimal interest rate would be –5%. That’s right, supposedly the best interest rate would be to pay others 5% to borrow money, despite the fact inflation is near 2%, so the net loss on money lent would be around 7%. That’s OK though, they don’t have to take the loss, they just pass it on to every American with increased taxes down the road. Oh, and don’t be naive, those higher taxes will be coming, it is just a question of when.

Nevertheless, since the Feds know that they cannot go negative and they are already sitting near zero percent, they recommend keeping up, even stepping up, other unconventional policies that have the same effect as negative interest rates, such as the announcement of the stepping up of MBS (mortgage backed securities) purchases to $1.15 trillion. The research the Fed was acting upon actually suggested an even greater amount, but the Feds decided to play it “conservative” as one Fed governor defined it.

Why am I bringing this up right now?

Easy, the FOMC is meeting again as this is posted so be prepared for more of these "unconventional” policies to be released. What worries me is that Big Ben himself already stated that inflation will be an issue after the next FOMC meeting, so we are likely in for a shock as the Fed makes their announcement tomorrow. There is even talk that the Fed may up their MBS purchasing yet again. Remember that the Fed’s Policy Statement has a much greater impact on mortgage rates than their actual decision, so I will give you a rundown once it is released today at 2:15 over at Florida Mortgage Report.

Questions About $8,000 tax Credit? Get the Answers Straight from the IRS!!!

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 25 Feb 2009 11:05:21 -0600

I get tired of reading all the crap about the $8,000 tax credit, as everyone and their mother want to get you to buy from them. Many times, these so-called professionals are asking you to do what can best be described as tax fraud, so watch out. Here is a Press Release that the IRS just put out a few minutes ago, IR-2009-14...

WASHINGTON - The Internal Revenue Service announced today that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

"For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. "This important change gives qualifying homebuyers cash they do not have to pay back."

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

If you still have questions, I suggest talking with the IRS, not a "salesperson". Hopefully this information will keep you from paying a lot of extra money in tax penalties and interest, not to mention keep you out of jail.

"Would you like a side of hyper-inflation with your job loss and reduced-fat retirement?"

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Tue, 24 Feb 2009 09:59:43 -0600

That is the question our government would be asking you if they were your waiter. While I was doing this morning's mortgage market update, that thought came to mind as a great way to sarcastically explain the government's actions thus far.

With job losses mounting, the government claims they need to force through another stimulus package which creates more jobs, government jobs that is. And they did exactly that, well not exactly as the amount of jobs they actually will create versus what they claim will not equal each other, and it will be inversely proportional to how much the cost is. In simpler terms, they won't create the promised amount of jobs and it will ultimately cost more than what they said. Also, history shows that growing the government is exactly opposite of what the government should be doing, at least in a capitalistic society. maybe the dessert selection will be socialism?

I don't think there are many out there that didn't have money in the markets in one form or another, 401(k)s, IRAs, etc. With real estate prices already tanked, stocks and even bonds crashing (or about to), virtually everyone approaching retirement right now is facing a new reality. That reality is that they will be forced to work a lot longer than they expected. Those of us whom have more time on our hands, well, chances are you are freaking out about your losses right now, but you will recover in the long run, again based on history.

Don't think history repeats itself? Look again.

Please read the remainder of the post over at Florida Mortgage Report...

Inflation: Hidden Giant Waiting to Drive Mortgage Rates Higher?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Sat, 21 Feb 2009 19:13:27 -0600

On Friday, we saw the release of the CPI (Consumer Price Index) and it showed inflation to be tame overall, actually falling into Bernanke's concerns, deflation. Even when you look at the Core CPI, removing volatile food and energy from the equation, you still only see a small inflationary rate over the last year, just 1.7%. But is the inflation rate really that low, or is it that the CPI is not showing reality, at least not yet?

First off, CPI can be manipulated somewhat, so let's just look at what we buy in the supermarkets everyday. Everywhere you look, if you look closely enough, you can see "hidden inflation." You can see it in the packaging of the products we buy, as the prices have not changed while the packaging has actually shrunk. You may not even notice it, but look again and you will see that a half gallon of ice cream is no longer a half gallon. A jar of peanut butter may have a larger dome in the bottom to hide the fact it is smaller as well. Just take a look at a lot of the products you buy daily and you may very well see that inflation is being hidden right in front of your eyes.

Now, what is inflation in reality? In a post I did a while back, When Lethargic Rabbits Start Running, I discussed inflation in detail along with the real problem today, which is the velocity of money. Please read that post, or even re-read it, before you continue as its key points will be brought up again.

While Bernanke and his buddies keep bringing up deflation, etc. to justify their positions (and desires), reality lurks in the darkness. Bernanke stated in his 2002 speech that he wants nothing more than to debase the dollar in order to create inflation. Evidence shows that the broad money supply (M3) is back on the rise, including growth in the required reserves at depository institutions, hinting that the velocity of money is rising again (aka lethargic rabbits start running), with some believing that double digit inflation may be seen later this year.

Adding to the problem is the fact the Federal Reserve may begin monetizing Treasury debt due to the likely drop off of foreign demand in US Treasuries, which we are already seeing. With the Treasury needing to increase fundings to cover the stimulus package and the additional relief/bailout efforts, the Feds may be buying up Treasuries and will assist in reigniting inflationary pressures. Wonder the truth of that, just read the Fed's last FOMC statement where they outlined it...

"The Committee also is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets."

With the government printing presses running full-time around the clock, the debasing of the dollar as commanded by Bernanke is in full swing. The only saving grace we have right now is that the US dollar is still the best of the worst paper out there and that is keeping the dollar's value alive, which is keeping much of the commodity prices in check as well. Gold is not taking the bait, though, as it is back over $1,000, so gold traders are signaling inflation is alive and well.

What does this mean for mortgage rates? Mortgage bond traders, you know those mortgage backed securities that I told you are the driving force of mortgage rates, are already signaling their concerns about inflation by preventing mortgage rates from dropping further. As chart patterns solidify, all signs are indicating that mortgage rates will be climbing again and may very well do so even if the Feds buy all the MBS. Of course, that all makes sense since inflation is the arch enemy of bonds, mortgage bonds included, and as their prices drop, yields rise and that translates to higher mortgage rates.

Now, all of you sitting on your butts waiting for those government promised lower mortgage rates should stop laying your faith in our government and just buy that home or refinance before it costs you too much to do so. Those promised lower mortgage rates may very well never be seen!!!

The High Cost of Waiting for Lower Mortgage Rates

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Fri, 13 Feb 2009 15:33:11 -0600

Many of you reading this have been waiting for those government promised mortgage rates of 4.5%, or even lower. Do you realize those rates may never come in actuality? Can you comprehend how much money you are wasting by not refinancing or outright purchasing a property right now?

First, let's look at those of you waiting to refinance. Since rates are currently around 5% and it usually doesn't make sense to refinance with less than a 1% drop in rate, let's put together a scenario. You have a $200,000 loan at 6%, with monthly mortgage payments (not including taxes and insurance) of $1,199. You are now faced with the dilemma of refinancing since rates dropped lower, down into the 4's, but you didn't take advantage of them and they have now risen to 5%. You hear the media talk about lower mortgage rates, namely 4.5%, throughout the headlines and this causes you to wait longer in anticipation. As we near the passage of a new stimulus package, along with headlines from the federal Reserve stating they will keep buying mortgage backed securities, you think to yourself that mortgage rates must be heading lower, so I will wait.

But how much money are you wasting while you wait. Let's say that it takes 6 months to get rates that low (personally I don't think it will happen) and we will leave the tax benefits aside. If you refinanced that $200,000 right now, your monthly payment would drop to $1,074, giving you an extra $125 in cash flow. That $125 can go a long way to paying off high interest debt, or we can simply save it. That means that 6 months down the road, you would have saved $750, right? Actually it is more since when you have a lower interest rate, more money each month goes to the principal, so your savings actually are $1,000, even more if you invested the savings instead, which I highly recommend. It would take you over 15 months to recover those losses if you refinanced into a 4.5% mortgage at 6 months. And what if rates continue to go up? How much more will that cost you in the long run?

What about those of you whom continue to rent, say at $1,000 a month? If you were to buy a home with a $200,000 mortgage at 5% right now, your payment would go up, yes, to $1,074. But what about the tax savings you gain, not to mention the equity building? Let's take a look, of course I need an estimated tax bracket, so we will just use 25%.

If you were to buy the home now, your net after tax payments would go down to $865, yielding a savings of $135 each month. You can adjust your W-4 form with your employer and start reaping that savings immediately as well, instead of lending it to Uncle Sam interest free. So, in 6 months you would have paid down $1,457 in principal, plus had a net savings of $810, for a total savings of $2,267!! Again, what if mortgage rates don't go down or even continue their climb? Are you willing to risk those losses?

The reason I am writing this is not to get you to rush into taking on that new mortgage right now. rather, this is to ignite in you the realization that every decision you make, even not making one, has a profound effect on your finances, especially when it comes to your mortgage. Use your mortgage as a financial tool, and it can be the best investment you ever made. Enter into a mortgage without incorporating into your overall financial and investment plans, it could easily lead to financial disaster, and you could become another statistic or part of the next hews headline. I cannot stress the importance of seeking a genuine mortgage planner, and those are hard to come by as mortgage professionals across the country struggle to survive.

Could Foreclosures Actually be the Best Solution?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 04 Feb 2009 09:03:59 -0600

That could be one of the most intriguing, not to mention controversial, questions of the day. Congress and the rest of the government, especially president Barack Obama, believe that it is not the best solution and that everything, no matter the cost, should be done to minimize foreclosures. In other words, they are willing to sacrifice the many to save the few.

Don't get me wrong, it sucks that people have to go through foreclosure, just like it sucks that a large percentage of American homeowners are upside down, owing more than their home is worth. The problem is that most foreclosures these days are happening to those whom deserve it. You heard me right, they deserve it. They likely have bought more home than they should have, over-leveraged themselves to get into the home, or simply didn't plan for the worse. Creative financing is generally not the problem, nor mortgage professionals whom put them in those programs. Sure, there are some exceptions, but not the norm.

We can lay blame on a number of factors, much of which stemmed from our government to begin with. Other factors, and those which are more likely the causes of foreclosures, stem from the way Americans handle their debts, including using their home as an ATM machine and wasting away their equity instead of investing it. The bottom line is, no matter what got them to the point of facing foreclosure, allowing foreclosures versus the government "salvation" programs are likely the best solution and the quickest to get through the problem.

How can allowing a family to be kicked out of their home due to foreclosure be the best solution, even if undeserved?

To read the rest, please head over to Florida Mortgage Report...

Your Mortgage: Liability or Asset?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Fri, 30 Jan 2009 17:40:47 -0600

Most of you reading this would answer the above question quickly and label your mortgage as a liability. After all, it is a debt, isn't it? But if there was more to it than that, or even if your mortgage could become one of your greatest assets. You may think I am crazy, but think about the concept for a while, then read on.

Traditional thinking places the mortgage clearly as a liability, a debt that should be paid off. Some even think that financial freedom cannot occur with a mortgage looming overhead, possibly because of the monthly payment required to maintain it. Money Merge Account and other mortgage acceleration advocates, especially the agents that sell these products, will encourage this thought process. In fact, they will entice you to join their clan even though their product only works as advertised if you use all of your discretionary income to pay off your mortgage as fast as possible, a belief that could actually do the opposite of what is intended, potentially sending you into foreclosure or bankruptcy, even both.

I am not going to give you the rundown as to why what I just mentioned is accurate, but you can click on MMA in the sidebar and review my posts on the subject and read where I have explained it before. I want you to focus more on the reality of the benefits derived from using your mortgage as a financial tool, an asset that can prove extremely helpful in obtaining financial freedom even faster than any mortgage acceleration program can accomplish.

Money Merge Accounts: Abusing Einstein’s Quotes

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 28 Jan 2009 09:27:45 -0600

I have seen this repeatedly in marketing materials from United First Financial (UFirst Financial/UFF) and their agents, another example of the misleading material provided to sell their product, the Money Merge account (MMA). Throughout the history of this company, they have provided nothing but false and/or misleading statements into their advertisements, many of which I have already exposed here and in my previous ActiveRain blogging.

Now, let's look at another one, this time using a quote by one of the foremost figures of intelligence in history, Albert Einstein. The quote that they use is:

"Insanity means doing the same thing over and over again and expecting different result" (Albert Einstein(?) - It is believed that this quote was actually misattributed to Einstein and is actually a quote of Rita Mae Brown)

The truth is, by adding this quote to their advertising, they are even telling you that there product sucks in reality. While they will misuse the quote to bring justification to their product, by saying that carrying a mortgage is insane (in essence), reality is completely different. One could argue that the true insanity is believing that paying off your mortgage in the first place since that is what has been done over and over again and rarely brought wealth to those whom have done so.

In fact, now that boomers are hitting retirement, we can see the gruesome reality that many are failing to be in a position to retire since they had focused a lot on paying off their mortgages and pensions of old are no longer to be found, which is what our forefathers relied upon. So, the argument that paying off your mortgage, especially through mortgage acceleration programs is the really insane choice.

Now, since they are bringing Albert Einstein's quotes into their advertising, let's look at another applicable quote Mr. Einstein did as it explains why the Money Merge Account is still being sold, and the agents are making money selling a scam product...

“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.” (Albert Einstein)

If they doesn't explain it, the latter may certainly be applicable, sorry.

Where are Mortgage Rates Headed?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Mon, 26 Jan 2009 10:11:59 -0600

This can be a confusing time right now when it comes to determining whether to lock or float your mortgage rate to get the best deal. As I write this, there are many originators talking about both sides of the spectrum as to where mortgage rates are headed. While there is no real "crystal ball", there are many ways to forecast mortgage rates with a high degree of accuracy.

You have likely heard the phrase, a picture is worth a thousand words. Well, when it comes to investing, a picture is worth a thousand (or more) dollars, and that holds true to forecasting the direction of mortgage rates. Charts present a picture of prices over a given time from one day to many years. Add other indicators, such as stochastics, fibonnacci numbers, and moving averages, and, with practice, you can get a very clear "snapshot" of what lies ahead. The fact is that you can even predict what some economic reports outcome will be simply looking at a securities chart.

Now, why do I talk about charting as it applies to investing in a security, whether a stock, mutual fund, index, or even a commodity or currency? Quite simply, mortgage rates are based on mortgage backed securities (MBS), mortgage bonds if you will. Once you know what securities to watch and chart, you can learn the skills it takes to accurately forecast the direction of mortgage rates, which I am nearing completion of a book on how to do just that.

No one can be 100% accurate in this game, however. That is because at any given moment, news or some other event can swing the market sentiment and break through the barriers presented by charts. That is how many trend reversals take place, and one thing we cannot gaurantee at this exact moment, is the level of participation the Fed is playing in the markets. We can only find out each Thursday, when they announce how much they bought that week, and that throws some uncertainty into the mix.

Now, some of you already know I operate a blog called Florida Mortgage Daily which posts daily mortgage market updates, sometimes several times per day, and even shows my current locking stance. It can be very technical for those that are interested or you can simply get my curent locking stance or scroll down and get the summary of what I expect. Another place you can read what I feel the markets are doing is over at Lenderama, where I do a weekly mortgage market update. In that post, I recap the prior week's events and market reactions and forecast what lies ahead for the coming week, not to mention list most, if not all, of the major economic events that could affect mortgage rates that week.

I know there are several real estate agents that are using this information to pass on to their clients. There are even a fair number of mortgage professionals doing the same thing. The material is copyrighted, so you must have permission from em should you want to use it, by I am fairly open with whomever cares to do so, just let me know ahead of time. I will be starting up a new service very soon, so keep your eyes open for that as it will be like no other you have seen so far and will be 100% borrower focused.

IRS Offers Help for People Who Owe Taxes

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Wed, 07 Jan 2009 13:09:41 -0600

Apparently, the IRS isn't always the "bad guy", and you may want to take their advice if you owe taxes right now. The IRS Commissioner, Doug Shulman, encouraged taxpayers to take advantage of several new tax credits and deductions this filing season along with announcing a major enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and and get their refunds faster.

“With so many people facing financial difficulties, we want taxpayers to get all the tax credits they’re entitled to as quickly as they can,” Shulman said. “In addition, we are creating new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times.”

“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”

That's sounds like a far cry from what most people have pictured the IRS to be like. I, for one, am glad to see the IRS taking the intitiative to help those whom have fallen behind, though they also walk a fine line between doing what is right and creating moral hazard, a subject the Fed and Tresaury have brought to light with their disregard for it.

Among the areas where the IRS can provide assistance:

Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.
Added Flexibility for Missed Payments: The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.
Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay may not be accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new second review of the information to determine if accepting an offer is appropriate.
Prevention of Offer in Compromise Defaults: Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.
Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases for levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

So, those of you in dire straits may have some options. Keep in mind that if you had been foreclosed upon, or even sold your property in a short sale, there may be a huge tax burden awaiting you. Typically, as in the past (waived for 2007), the difference in what youe owed and what the home transferred for was considered imputed income and taxable as income. I may have overlooked it (or simply forgot), but I have not seen where the IRS has waived that type of taxable income for 2008. Visit www.irs.gov for more information.

Update: I did some more research and I apparently missed this somewhere. Eligible homeowners can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Not sure about short sales, but I imagine they fall under this ruling.

When Lethargic Rabbits Start Running

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Tue, 06 Jan 2009 21:40:15 -0600

Lately, my posts have become more about the warnings of government actions and their longer term effects on mortgage rates. Ultimately, I have been talking about increased inflation, the mortgage rate bubble, and mortgage rates breaking into double digits, all of which could very well happen in the not-so-distant future as a result of Paulson and Bernanke's actions, along with continued "economic stimulus" packages.

Many have questioned why I am talking about rampant inflation when the chief concern right now is deflation? I have eluded to the answers in my posts, however I have not been able to come up with a great analogy. Well, as much as I would like to say I came up with this one, I didn't and actually found it in a place most of you have not even heard of, the Taipan Publishing Group.

Yes, the best analogy I have seen to date was presented by Justice Little, where he used rabbits running around a tree to describe monetary velocity, which is quite stagnant right now and the reason the Treasury and Fed are printing money left and right. here is how he describes it...

To read more, head on over to Florida Mortgage Report...

Mortgage Rates Continue to Climb, Reach Double Digits

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Thu, 01 Jan 2009 16:43:18 -0600

Once again, I am publishing a headline that has not yet happened, but very well may be seen in the not-so-distant future. While we are currently experiencing some of the lowest mortgage rates in history, and may even see lower if the government gets their way, do not expect them to remain low for very long. In fact, low rates may be a thing of the past in 2009.

You may have already heard me talk about the “mortgage rate bubble”, a term I coined a while ago. Much of the reason for the bubble will be the fact the Fed will ultimately be the only buyer of mortgage backed securities in their efforts to drive mortgage rates down to 4.5% or less in another feeble attempt to stimulate the housing and mortgage markets. With rates this low, we have seen huge increases in demand for mortgages, but with tighter lending standards, even getting tighter right now, most of these applications will not close and we are not seeing a rush to buy up properties by anyone other than investors. Investors seem to amass the majority of buyers, but tighter lending standards have reduced their abilities drastically.

To read more, head over to the Florida Mortgage Report...

Merry Christmas, Feliz Navidad, Feliz Natal

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Thu, 25 Dec 2008 11:46:47 -0600

Greetings from Rio de Janeiro, Brazil. And yes, I am learning Portuguese as my third language.

As we all celebrate the birth of Christ this day (OK, maybe not everyone), it is a time for family gatherings. This year, as I do on many holidays, I get to play a variation of Santa by flying people to those families, along with the gifts, which is kinda cool. So, this post is to wish all of you a very Merry Christmas and safe travels throughout the holidays, no matter what part fo the world you are in or going to.

New HUD GFE Proves Government Has No Clue

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Sun, 21 Dec 2008 08:52:41 -0600

You all know that I am not a fan of government interventions, nor government regulations that are absolutely insane, such as the new HUD GFE. I am all for government regulations that actually do what they are supposed to do, which is to protect the consumer and give them good, solid guidance on how to shop for their mortgages. Unfortunately, the new GFE goes in the opposite direction.

HUD made the announcement last month, and stated the new GFE and HUD-1 Statements would save consumers nearly $700. I have no idea where they came up with the $700 savings, nor am I even going to dispute that. Instead I will point out that while they may save $700 because of the new GFE, they could lose thousands, or more, by doing what the HUD is encouraging consumers to do while shopping for their mortgage. Is that good legislation?

I know, you are wondering just what I am talking about, right? Well, you have all read and/or heard about rate shopping, comparing loan proposals from 4 or more lenders to get the best deal. If you have been reading my information for a while, you know this is a futile way to find the best value and can ultimately cost you much more over time. Well, the new GFE takes rate shopping to the ludicrous level, actually encouraging shopping by GFEs!!!!

"Use this chart to compare GFEs from different loan originators. Fill in the information by using a different column for each GFE you receive. By comparing loan offers, you can shop for the best loan."

By now, you should know that rates can change in an instant, especially in the current marketplace. That has been one of my points explaining why rate shopping is futile. Now, HUD wants you to shop by GFEs? This would be a great joke, except it isn't and will almost guarantee consumers more harm than good.

Why? Anyone whom originates a loan has to take the time to prepare a GFE and, by law, has up to three (3) business days to deliver it to you. Even if you shopped all 4 lenders at the same time, it could still take 3 or 4 days to get your comparison to ensure you are getting the "best deal". Unless you can find 4 lenders that can lock in your rate at the same time and before you sign the documents, which is highly unlikely, the rates on the GFEs will likely not be valid anyway.

Since mortgage rates can change, even if only in pricing and not necessarily rate, in mere minutes, you can only begin to imagine just how much those rates can change while you are waiting to do your GFE comparison. In three days, rates could have swung higher by a full percentage or more!!! I would prefer people rate shopping over GFE shopping any day, even though that is a futile effort as well.

Why did HUD make the changes? It is their effort to cut down on foreclosures and to protect consumers from harmful loans or not being fully aware of what they are getting into. Hey, I am all for that, but is this new GFE doing that? NO!!!

So let's look at what HUD Secretary Steve Preston said and just how true his statements are...

"It has been a long road but today we can finally announce a better way to buy homes in America" (Is this really a better way to buy homes? What about refinances?)

"Consumers need and deserve to know what they're getting themselves into before they sign on the dotted line. (agreed) After carefully considering the concerns of consumers and the different businesses in the housing sector, we have developed an approach that empowers the average family to shop for the most appropriate loan to meet their needs." (This fails to accomplish this statement. It does not address a consumers needs, rather to try and get them the lowest rate and fees which may actually be contrary to their needs.)

And what about Brian Montgomery, HUD's Assistant Secretary of Housing...

"We have carefully considered the concerns expressed from every corner of the mortgage market in developing this rule. (Really? I rather doubt that.) I am convinced that we successfully balanced the needs of consumers with those in the business of homeownership. (I disagree as they do not address all of the needs of the consumer.) None of us can lose sight of the fact that millions of Americans simply don't understand all the fine print of their mortgages and this, in many respects, is at the heart of today's mortgage crisis." (Let's just discredit the fact that many Americans are facing foreclosure due to lack of financial discipline, which even the government encouraged. Yes, there were unscrupulous mortgage professionals. There were also homeowners whom knew the fine print and did it anyway.)

You can be the judge by reading the press release and reviewing the new GFE. My thoughts are that this is yet another case of the government doing more harm than good for the consumer.

IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Tue, 16 Dec 2008 16:21:12 -0600

What a relief this will be for many homeowners. This afternoon, the IRS sent out the following in the IRS Newswire...

"The Internal Revenue Service today announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.

“We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.” (IR-2008-141)

Hopefully, those of you that have Federal Tax Liens on your property will find it quicker to get your home closed so you can be free and clear of that property and debt and move on with your lives. For those refinancing, try and get the tax lien subordinated behind the primary mortgage and you stand a good chance of completing the refinance even if the lien remains.

Will Mortgage Rates be the Next Bubble?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Tue, 16 Dec 2008 11:30:03 -0600

There has been a lot of brew-ha surrounding the 4.5% mortgage rates Treasury Secretary Henry Paulson stated was his desire as another {senseless} effort to boost the housing market and ultimately the economy. Real estate and mortgage bloggers, hell any blog that wanted to get some action, was posting something with that 4.5% statement in it, and a wide variety of opinions can be read. My own take is located here...Florida Mortgage Rates Hit 4.5%.

Now, regardless of how you feel overall, one need be concerned only with how we get to mortgage rates this low, especially when fundamentals are not sound. Mortgage rates are derived from mortgage backed securities, nothing else, and those are traded on the open market like any stock, commodity, even currency. Since mortgage backed securities are basically bonds, they tend to respond to the same things as other bonds. That means data supporting a weak economy tends to drive mortgage bond prices higher and thus bring mortgage rates lower.

In essence, the fundamentals which should be driving mortgage rates are surrounding a poorly performing economy, which no doubt we have been seeing, especially now that the NBER declared we have been in a recession for the last year. However, the so-called archenemy of mortgage bonds, and thus mortgage rates, is inflation, which every effort that the government does during these attempted bailouts increases inflationary risks, including the inevitable cut in the Fed Funds Rate. I will be adding a post later tonight or tomorrow talking about how inflationary rates could reach 20%, so you may not want to miss that one.

To read the rest, please head over to the Florida Mortgage Report.

Telenovelas Killed the Mortgage Market

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Tue, 09 Dec 2008 15:38:12 -0600

As I was pondering what I could write about today, it dawned on me that it may very well be time to bring back my post on ActiveRain where I showed that the fact Telenovelas were being used to educate Hispanics on home ownership was forecasting the destruction of the mortgage market. I did that original post, Interesting Way to Forecast the Destruction of a Market, back on January 9, 2007. Shortly thereafter, the subprime market collapsed, followed by the entire mortgage market, along with the housing market's continued demise.

Since Hollywood is batting 1000 on forecasting market collapses, keep a close eye on which industry is being "broadcasted" next as it may be time to get out of that one. Heck, I would probably even start shorting stocks in the companies located in that sector of the economy.

Mortgage Rates: Where Are They Headed?

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Tue, 09 Dec 2008 12:01:25 -0600

I am glad to see that there are many more mortgage professionals taking a step out there and providing mortgage market commentary. While many are simply rehashing what they receive in scripts emailed to them, some have managed to truly demonstrate expertise and provide their own insights, something I have been doing for over two years now, though I bet most of you didn't know that because it was designed as a service for my clients, not other real estate and mortgage professionals.

Not to toot my own horn, but I think that a large part of the reason there are more mortgage professionals doing this is that they have seen what I have been writing on Lenderama, with my weekly Mortgage Market Updates there thanks to the invitation by Todd Carpenter. Todd had asked if I wanted to write the weekly update because he had been reading what I had been writing on Florida Mortgage Daily, my running mortgage market commentary. Some mortgage and real estate professionals also follow Florida Mortgage Daily on a regular basis, maybe even you have.

Whether or not you are following my mortgage blogging, you should know what is going on with mortgage rates on a regular basis, whether you are a real estate agent or any other related professional, and certainly if you are a mortgage professional. There are a multitude of factors that go into that whole "lock or float" question, but most times the direction of mortgage rates can be forecast with a high degree of accuracy. Nobody will ever get it right 100% of the time because of today's "information age", as news can change the picture in nanoseconds, but there are ways to be accurate 80-90% of the time, and you can certainly protect your clients quickly if news does change the picture.

So, just how much importance is there on working with a mortgage professional that understands the market, even puts out regular guidance on locking or floating rates?

That depends on the quality of the information, but it could save you thousands, or more. However, it could cost hundreds if not thousands as well if the information is bad. So, it really comes down to you and what you want to do, as with any other mortgage transaction. Do your research and find the mortgage professional that you think is best for you. Feel free to follow my market commentary as well, it is free of charge after all.

Florida Mortgage Rates Hit 4.5%

Robert D. Ashby, CMPS - Solid Rock Mortgage Corporation — Fri, 05 Dec 2008 09:07:30 -0600

Florida Mortgage Rates have reached the lowest they have ever been on a 30-year fixed rate mortgage, as mortgage rates have dipped to just 4.5%, falling below even the lowest rates seen in 2003. Now, more than ever, homeowners should be rushing to refinance or purchase homes as these rates may never be seen again.

OK, hopefully you have already realized that the above paragraph isn’t true, at least not yet. However, the lunacy of our Treasury Secretary (Henry Paulson) and Federal Reserve chief (Ben Bernanke) may yet make that paragraph a reality. Treasury Secretary Paulson openly admitted he wants mortgage rates to be as low as 4.5% in an effort to boost the real estate and mortgage industries, not to mention getting homeowners to start using their homes like ATM machines again since that is what was propping our economy up before.

Since mortgage rates are derived from mortgage backed securities (aka mortgage bonds or MBS), Paulson and Bernanke are willing to be the buyer of mortgage bonds in order to drive those prices up, which then drives mortgage rates lower. They publicly announced their intent last week, Tuesday to be exact, which is why mortgage rates are down to about 5.5% right now. Paulson then said yesterday that his goal was 4.5%. Make no mistake, they want to save the world no matter the cost.

Where does the money to buy mortgage backed securities come from?

You guessed it. Taxpayers like you and I. With the latest bailout bill successfully passed under the disguise of the “TARP” (Troubled Asset Relief Program), Bernanke and Paulson were given blank checks that could amount to $700 billion. Of course, Paulson came out and said he had no intent to use all of the money, like we were supposed to believe that. Paulson announced his intent to ask for the remainder of that $700 billion this week, and likely he will ask for more.

In the meantime, Bernanke and gang are playing their part by extending the term facilities. You know, all those acronyms that have amounts that keep growing almost daily, like the TAF, TSLF, etc. The combination just keeps flooding the economy with “new money”, begging the question as to where it comes from.

Have no fear, since the Treasury is in charge of our money supply, they can just print more. I know there are limits, but let’s get realistic. With the current state of the economy and the determination of Paulson and Bernanke, along with our current (and future) political spectrum, you can count on money being printed in their efforts to save America from economic ruin.

Now, let’s look at the history of government interventions. rather than go into great detail again about how they merely prolong the problems, if not exaggerate them, please go back and read this post…Should the Government Clean Up the Mortgage Mess?

Taking a look at the costs involved, one can only realize that it will be the taxpayers whom ultimately pay the price. Sure, the government has made those promises that they will make every effort to protect the taxpayer and make sure they get their money back, even saying the government is “investing” in companies that they are bailing out. One only needs to look at what Paulson is doing with the $700 billion TARP to realize that is a load of crap.

The good news is that mortgage rates may indeed go down to 4.5%. That is certainly good news because you will need to get all of the cash you can out of your home so you can pay the taxes required to fix the government’s “solutions.”