OC Mortgage Planning

Seven Steps to Inhibit Spending

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Wed, 28 May 2008 18:23:50 -0500

Freeze credit cards and ATM cards in a glass of water in your refrigerator freezer. Get spending on a cash basis and make notes/keep receipts on all purchases to help raise your awareness of where your money is going, day in and day out.

Take some financial pictures of yourself. The big picture is your net worth, listing the things you own versus the things you owe. But don't stop there, Take a close-up picture of your net worth, that is your cash-flow, which is money moving in and out of your life on a monthly basis. It is a list of all income received in a month and also a list of all expenses during the same month. The difference in the two amounts equals your cash flow, be it positive (more income than expenses), or be it negative (more expenses than income), or be it zero (monthly income and expenses are equal). The close-up picture will help in prioritizing monthly spending. The cash-flow will also help identify spending that may be hurtful to getting out of debt. Try to get as much extra cash going to debt pay-down as possible.

Create a written spending-plan and implement it with the next paycheck or the first of the month, whichever comes first. The cash-flow exercise is the basis for the spending-plan; all the leg-work is done. The monthly spending-plans then become your financial roadmap. The key is to follow it closely, because within that spending plan will be the Christmas debt reduction and, eventually overall debt elimination.

Look for ways to get a better value for your dollar. It may mean doing things for yourself that you may have paid others to do for you, such as lawn care, car washes, laundry, and so forth. Comparison shopping is another way to save money and get more value. Coupons and rebates add value to your dollar, especially at the grocery store where the average American family spends 30 cents of every take-home dollar.

Make it a family affair. Everyone can contribute to energy savings, avoiding food waste, clipping coupons and watching out for sales on things regularly purchased. Everyone can become a comparison shopper and look for better values. An over-spender is not just someone who spends more than they earn, an over-spender is also someone who pays too much for things and the latter group is the majority.

Add to your income at the same time you are spending smarter. This can be done by taking part-time employment, selling things on the internet with eBay, for instance, perhaps generating additional income from a hobby, craft, music or language instruction, and tutoring, to mention a few.

Get some visual reminders around your home and office about improving spending. If ATM and some credit cards must be unfrozen, place a note on your refrigerator.

Twelve tips for Grocery and Household Shopping

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Wed, 28 May 2008 17:53:51 -0500

1. Create a list to take shopping. Put anything you want on the list, but don't add to the list once you get to the store. Using a list will help plan for your needs in advance, so take advantage of sale prices and avoid impulse purchases. "Go alone after a meal". If you go shopping hungry or with another, you're shopping for more than one appetite and the result is always increased spending.

2. Watch for coupons in your mail box and flyers distributed at the stores, watch for store ads in the newspapers and coupons on Sundays. Check for sale prices on the items you regularly purchase. Compare prices with other stores, especially those you don't normally visit. Pay special attention to the days of the week the sale prices are in effect. For example some stores have no sale prices in effect on Mondays, traditionally a busy shopping day. Carefully plan purchases, noting on the list which items are sale priced and items where a coupon can be used.

3. Spend cash. Take time to get cash before going to the store. Nothing impacts our mind like taking cash from our wallet or purse. Many people who use credit cards rarely know how much was actually spent - until the statement comes. Many people who write checks simply do not take the time to calculate the balance and have no idea what is left over. Paying cash causes us to think ahead.

4. Take advantage of coupons and rebates, they do add up. Shop at stores that double coupons and take the time to watch the papers for grocery coupons. Look for items on the shelf which also have coupons included inside the packages, called a double play by couponers.

5. Always shop by the unit price at the stores. In most states it's the law that retailers post the unit cost on the shelves. It used to be the larger the pack the better the price, but not always so these days. For example a 50 cent coupon, doubled on any size of soap detergent could make the smallest size the most economical in terms of least cash spent.

6. Avoid buying plastic bags for food storage or garbage disposal. The stores give plastic bags away free and there are plastic bags available in the produce and meat sections. Separately bag each item and save them for reuse. When asked if you want either a paper or plastic bags, ask for paper inside of a plastic bag and you will then have an ample supply of ready-made garbage bags.

7. Cleaning aids, cleansers etc. are very costly and prices vary greatly with the brands. Some companies market a cleanser (and now specialty wipes - what a waste) for virtually every type of household project. The best cleanser in the kitchen, aside from powder is ammonia. No need to buy a brand name, ammonia is ammonia, if you want it soapy, then add some detergent. Another valueless item is dish soap promoted to be more gentle to hands or cuts grease better. If your hands are that sensitive, use the longer lasting rubber gloves and save money on detergent by using generic brands. Hot water and any detergent will cut grease.

8. Plan meals in advance. Keep in mind wise use of leftovers or freezing for later use when purchasing meats, etc. and making pasta dishes for example. Consider buying meat items you use regularly in bigger quantity, freezing for later use the portions not needed the week you buy them. This can save you up to 20 percent.

9. Avoid prepackaged items. Cereals, breads, desserts, juices, beverages etc., mixed and prepared at home are always a better value than prepackaged items. The same is true for pet foods and many experts agree dry pet food mixed with water is better than canned food.

10. Be cautious about adding non-food items to the grocery list. These include health and beauty items, paper and plastics, utensils, brooms, brushes, film, etc. These items have the highest profit margin for most grocers, which is exactly why they are prominently displayed in the stores. Usually a better value can be obtained at discount drug stores.

11. When shopping stick to the list and plan in advance all purchases to take full advantage of sale items and 2 for 1 deals (if the price isn't inflated to compensate). When possible shop the outside walls and stay out of the aisles. Most food stores situate the four basics (produce, meats, dairy and breads) on the walls. They most often place all the cookies, cereals, beverages, canned goods and the nice-to-haves on the aisles.

12. Finally, check the checker. Note the prices as you select items and then make sure the same price is posted at the check-out. Check the register tape again after leaving the store, often unintentional mistakes are uncovered, especially with large purchases. Many times a sale price is listed in the store, but not reflected at the check-out. Also, the shorter the time spent in the store, the less money spent.

Initial Jobless Claims Increase, What is this telling you?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Thu, 03 Apr 2008 18:12:10 -0500

Mortgage bonds advanced 34bp following larger than expected weekly initial jobless claims. With layoffs in the service and construction industry it was no surprise that reports jumped by 38,000 to 407,000 reaching a two year high. The more widely watched four-week moving average for initial jobless claims increased by 15,750 to 374,500, also a two year high reading. The consensus estimate was for 365,000 new claims. This data suggests a weakening trend in the labor market and may also signal a weak monthly Jobs Report for tomorrow.

Bonds gave up some of their gains as the day wore on following a better than anticipated ISM Services Index for March. The Index measures activity in the service sector of the economy and although the reading came in below 50% at 49.6% indicating a slight economic contraction, analysts were expecting a lower level of 48.5% or worse. The news allowed the major stock indexes to pick up off of their lows while pushing bond prices off of their intraday high prices. The Dow Jones Industrial Average edged 20 points higher to close at 12,626; the NASDAQ Composite Index picked up a point to close at 2,363; and the broader S&P 500 Index also added a point to close at 1,369. What is this telling us? If you're prospecting first time buyers, how do you profit on a market like this?

The Mortgage market has been volatile, do you agree?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Fri, 22 Feb 2008 16:34:24 -0600

There were no economic reports scheduled for release today, however at 1:30pm ET, Dallas Fed President and voting Fed member Richard Fisher was scheduled to speak. I kept an eye on him, because the last time he made comments concerning inflation, he shook the markets sending mortgage Bonds to a -200bp decline.

I have included a couple of quotes that will give you an idea of today's event.

"The 12-month number for the CPI is running at a very high level ... and the components of that (rise) are worrisome," Fisher said, referring to the U.S. Consumer Price Index.

"There are some risks that we're seeking to manage but it may be that economic growth will be even slower than we envision," he added in regards to the current economic environment. It was interesting to see the markets reaction prior to Fisher's comment... Currently the Mortgage Bonds dropped to lows for the day.

If you buy, sell or refinance real estate I just want to tell you that, now is the time to join efforts, we ought to be strategic in order to come up with financial solutions to secure deals ahead of potential changes in the market place. Real estate veterans would agree with me when I say that lately prices have been very volatile in the mortgage market. Do you agree?

CPI increasing, is it good or bad?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Wed, 20 Feb 2008 16:28:11 -0600

Today is Wednesday, the 20th of February 2008, and there are several economic events due, nevertheless I will focus on the ones that (according to my personal opinion) have greater influence on mortgage rates.

First of all, last month's Consumer Price Index (CPI) was higher than expected with the overall rate of 0.4%, and the Core rate amassing up to 0.3% (excluding the increase in prices of food and energy) being the biggest monthly increase since June, 2006.

If we analyze the annual CPI numbers, we'll see that 2.5 % is considerably above the Fed's level of tolerance. Many experts were 'right on the money' when they predicted that inflation was going to be one of the Federal Reserve Commetee's biggest concerns for 2008.

Second, the minutes of the two-day meeting that concluded on Jan. 30 are now available. On their statement, "The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully," the Fed said. While Fed policymakers are still discussing what further steps might be needed due to growing risks to the U.S. economy, the markets are trying to find hints that will indicate if more fed rate cuts are on the way.

I will stop right here, because I just got a notification that mortgage bonds finished the day on another wild roller coaster ride by first plunging -34bp lower on a CPI report showing higher than forecast consumer inflation and then reversing course and soar 97bp higher intraday for a net change of +56bp in reaction to negative economic and credit crunch data.

Fed Cuts = lower mortgage rates, right?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 19 Feb 2008 18:40:13 -0600

Is a Fed rate cut really good news for mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years while a rate set by the Fed can change from one day to another. On the graph see how the interest rate on the 30-Year Fixed FNMA have been on the rise since the last couple of Fed Rate Cuts. It is often said history repeats itself, right?

Today, the mortgage bonds dipped -135bp, which is the biggest dent in the last two years, as a result of worries of inflationary signs that experts have seen in the economy, especially with the weak U.S. dollar and the high commodity prices. Both the oil price and the gold have risen highly against the weak U.S. dollar. Keep in mind that high commodities prices often lead to inflation, which is hostile towards mortgage bonds.

Any comments?

What's all this?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Fri, 15 Feb 2008 16:29:20 -0600

I usually don't do weekly reports, however as I was getting organized after a busy week, I've noticed some things that I'll like to share.

On February 13, the highlight was last month's Retail Sales report with an unexpected +0.3% The surprise was due to the fact that traders were almost counting on a -0.3%. Excluding the automobile sales, we get 0.3% that also turned out to be better than the expected 0.2%. It just makes sense that February could have been a slow month, because as we go through changes in the economy we become more cautious about spending and some times before making additional purchase decisions we wait for income tax refunds to pay off credit card debt incurred during the holidays.

On Valentine's day a report showed 348,000 Jobless Claims (Initial) for February 9, 2008, which in spite of the loss of employment in different sectors was below expectations of 360,000.

Right after the most romantic day of the year here we started with the often volatile NY Empire State index, which is a regional manufacturing report showing a surprise reading of -11.7 versus forecasts for a positive reading of 7. Please not that any negative reading suggests contraction in the sector.

Another report, the University of Michigan's February consumer sentiment index, showed a bigger-than-forecast dip to 69.6 from 78.4 in the previous month. Economists thought it would fall to 76.5.

A third report showed a slight tick up in industrial production and flat capacity utilization in January. The experts are saying,"the combination of rising utilization and a falling unemployment rate pose issues for the Fed's outlook for inflation pressures,"

The last, but not least Consumer Sentiment Index (UoM) report for the month of Feb dropped at 69.6. It is necessary to notice this mid-February level, because represents the lowest since February 1992 while the expectations were 76.5.

The main feature was the investors'reaction after the Congressional testimony of the Federal Reserve Chairman Ben Bernanke, who underlined that the economic conditions are likely to get worse before they get better.

What's all this?

Many families see and feel inflation on the rise as housing problems, coupled with higher energy and food prices are tamping consumers' outlook, according to results from recent surveys. I hope you're getting used to this roller coaster ride, because volatility in the market place has been incredible, especially with mortgage bonds trading sharply lower because of the fear of inflation. While the general public still believes that mortgage rates will continue to go down thanks to the Fed cuts, we need to tell them that interest rates change sometimes hourly. I don't know if you have online access to rate sheets, but I have been getting re-prices for the worse on a daily basis for the past couple of weeks.

The stimulus package is here, now what?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Thu, 14 Feb 2008 18:40:42 -0600

I've read mixed comments about the highly anticipated "rebate." For example, on a January 31, 2008 press release, the Financial Planning Association advice consumers to be carefull how they will spend their rebate checks.

One of the strongest observations from the personal finance perspective is that "spending the rebate may not be in the best interest of many Americans. Not setting up a household budget is how many Americans got into financial trouble in the first place." according to Mark Johannessen, CFP®, president of the Financial Planning Association® (FPA®)

The FPA made a point if we consider that the national savings rate is minus 1/2 percent, bankruptcies are increasing, and the average American household credit card debt is $8,400.

"The economic stimulus carries the wrong message, because it is anti-savings and anti debt-reduction," said Johannessen.

In a few weeks the checks will be in the mail, and Johannessen is urging people to carefully consider using the money to pay down their credit card debt or add it to their savings for an emergency fund or retirement.

Another item to consider on this package is HR 5140, which will increased home loan limits in metropolitan areas. This means that HUD will have 30 days or less to come up with the median prices for areas throughout the country, which may then cause an increase to the conforming limit in those markets. Ironically enough, the NAR just publish this data today under the title "Metropolitan Area Existing-Home Prices and State Existing-Home Sales."

Last Friday's New Record

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 12 Feb 2008 01:51:04 -0600

The existing dynamics between the financial market, and the solutions that mortgage professionals cater to borrowers to help them navigate on this volatile environment, is one of the reasons I love my career.

Every day I look forward to see how economic reports influence the traders' investment decisions in the mortate bond and stock market...

Last Friday's Initial Jobless Claims were reported at 356,000, that was above expectations of 340,000. It is important to notice that in the review of the previous week claims increased from 375,000 to 378,000.

The most significant average movement was on the last four weeks where Initial Claims increased to 335,000, following an increment in unemployment claims from 75,000 to 2.78 millions, representing the highest level recorded since October 2005.

David's mortgage update:

Mortgage bonds had their monthly coupon rollover after the close of trading. How did that affect homeloan pricing? The effect of this rollover was minus 19 basis points adjustment.

The Loan Limit Increase is Almost Here!

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 12 Feb 2008 01:26:33 -0600

The big day is almost here! President George W.Bush is set to sign the Economic Stimulus Plan on Wednesday. Here is the nitty-gritty of the Increased Loan Limits on Bill HR 5140.

One of my trusted sources tells me that we'll be able to finance residential loans that were considered "Jumbo loans" (real estate financing above the industry-standard definition of conventional conforming loan limits) which is great news. But the question is, will this reform help the majority of homeowners? In the real world, this update will work for a drastically limited number of borrowers.

It is nevertheless, good news for homeowners living in in expensive metropolitan areas such as Southern California, where median home prices now exceed the $417,000 limit. Borrowers with these programs were subject to higher interest rates due to the slightly higher risk to the lender. To qualify for lower interest rates these mortgages will be eligible if they are granted between July 2007 and Dec. 31, 2008. This bill would also allow the Federal Housing Administration to insure loans up to the same $729,750 limit.

David's mortgage update:

We're floating today due to no economic reports scheduled for release and mortgage bonds remaining unchanged.

It is not what you say, but how you say it!

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 05 Feb 2008 13:51:21 -0600

The early release of the ISM Report caught traders by surprise. How problematic is that?

First, the 44.6 reading was waaay below expectations, considering that Economists were expecting a 53.0. This data indicates that the service sector is shrinking for the first time in almost five years, implying economic slow down.

Second,the markets are trying to figure out if the slowing in the manufacturing and the service sector is a clear indication that we are indeed heading towards recession. By now this is no surprise, however the cause of uncertainty this morning was a combination of bad news and how they were delivered.

David's mortgage update:

This afternoon Bonds continue to trade higher as weak economic news weighs on stock markets, so I will recommend to float for now, but say tune!

Experience the difference... try mortgage planning

Steps to Responsible Lending - How to figure them out

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Mon, 04 Feb 2008 01:09:57 -0600

In slower markets, some loan officers may feel pressured to close deals that aren't in the homeowner's best interest. In order to avoid getting into difficult and financially compromised positions with their mortgages, borrowers are well advised to be acutely aware of the signs of a responsible loan officer when selecting a mortgage professional.

First, look for an Orange County Mortgage Planner whose values are focused on helping individuals to achieve their financial goals in both the fastest and the safest way possible. A reputable Mortgage Planner will show you the numbers associated with the proposed loan and provide you with concrete information that backs up his or her claims. Review all of the numbers. If they don't add up, ask for clarification. If your loan officer can't or won't answer your questions, move on--without the loan.

Secondly, a responsible Orange County Mortgage Planner will present you with financial information that goes beyond the point of the transaction, and will illustrate the total cost of the loan over time. If your loan officer is focusing only on rates and fees, you may be working with someone who's looking out for his or her own best interests, not yours.

Responsible Orange County Mortgage Planners will also tailor their strategies to fit your unique situation. In other words, they always take your personal financial goals into account. No one should try to place you into a loan without knowing the intricacies of your personal financial situation.

Finally, if your loan officer is advising you on issues other than mortgages, you could be working with someone who is compromising your best interests. Issues like investment rates of return and real estate appreciation aren't the areas of expertise for the vast majority of mortgage professionals and should be left to the professionals who have training and direct experience in those areas.

When seeking a loan officer, look for someone who specializes in mortgage planning, which is the process of evaluating a borrower's unique financial situation and advising the borrower on a loan that best suits his or her individual needs and goals. If your loan officer is trying to put you into a loan without evaluating how that loan will effect your entire financial situation--including debt management, tax benefits, investment goals and net worth--it's quite possible that you're only getting half of the picture.

The bottom line is that your mortgage representative should always be looking out for your best interests, regardless of market conditions.

HR 5140 Passed, Now what?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Thu, 31 Jan 2008 15:12:25 -0600

By now, we have all heard the good news of increased lending limits in high cost areas, and tax rebates to help stimulate the economy. On the surface, we all rejoice now that more loans and with less restriction will become available, right?

This is what's happening: The US House of Representatives overwhelmingly passed HR 5140 recently - an economic stimulus package that includes a temporary increase in the conforming loan limit and the upper threshold for FHA loan programs to as much as $729,750 in high-cost areas.

The temporary increase would last only until the end of 2008. This bill would also restrict Fannie Mae, Freddie Mac and the Federal Housing Administration from guaranteeing or purchasing loans above 125 percent of the median home price for a given area.

Plain English please...

That means that the existing $417,000 conforming loan limit for mortgages eligible for purchase by Fannie and Freddie would not increase in areas where the median home price is $333,600 or less. You might say, Hmmm! where are the reports? The answer is simple, as of right now we don't have access to that information because this data has never been published by HUD!

Therefore, it would be up to the Secretary of Housing and Urban Development to determine the median home price for different housing markets "as soon as practicable," but no later than 30 days after passage of the bill, relying on existing commercial data where needed.

In other words, if median home prices in your marketplace are $336,000 or less, this bill won't really affect you; and there's no way to tell if median home prices in your area are higher than $336,000 until HUD publishes this data. Nevertheless, jumbo relief is certainly on the way for places like California where median home prices are certain to be above $336,000.

Currently, the loan limit for FHA loan programs is between $200,160 and $362,790, depending on the county where the property is located (click on the graph for information about your area)

The proposed higher limits for FHA loan guarantees are also set to expire at the end of this year, unless Congress passes other legislation intended to modernize FHA programs by introducing risk-based pricing and lowering down-payment requirements.

In order to make higher limits a reality, the next step is for the Senate to pass the bill and for the President to sign it into law. The target date for final passage set by the White House and Congressional leaders is February 15. Stay tune for more ...

It's picture time!

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 29 Jan 2008 16:31:45 -0600

One of my clients called me last week after reading my latest posting, on our conversation I was explaining to him that most homeowners look at mortgages from the homeownership perspective instead of the personal finance point of view costing themselves a lot of money in lost opportunities to increase their bottom line (net worth.)

I shared with my client that a newsletter from Paul Richard, RFC., Executive Director of the Institute of Consumer Financial Education says, "the big picture is your net worth, listing the things you own versus the things you owe." Along with that he said, "you should determine how many years you have been working full-time and how much money you have earned during that time. Then you should ask yourself, what percentage of your lifetime income (to date) is reflected in your net worth? 10%? 20%? 50%? 150%?"

Richard explains that one of the best ways to monitor if your plans are in line with your long-term goals is to examine the close-up picture, that he calls cash-flow (income received versus all expenses during the same month.) The difference in the two amounts equals your cash flow, be it positive (more income than expenses), or be it negative (more expenses than income), or be it zero (monthly income and expenses are equal)." he adds.

After sharing some of these concepts with my client I wrapped up the conversation saying, the best way to approach cash flow improvement is by re-examining your habits and the way your monthly cash flow works. This doesn't necessarily mean that you need to spend less or earn more. It just means that you need to spend your monthly cash flow differently.

When is comes to long-term goals, some people know exactly what they want and they have figured out how to get it on their own. However, the great majority of us can use a little help from "financial coaches" to stay focus on the big picture, just like professional athletes need coaches to win championships. No matter how good the athletes are, the coach can help keep them accountable in identifying weak spots and improving their performance.

Housing – Deal or No Deal?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Mon, 28 Jan 2008 13:37:39 -0600

The new home sales for December 2007 were reported below expectations. The supply of new unsold homes rose to 9.6 months from November's reading of 9.3 months.

What 2008 will be like if you're looking for a real estate deal?

Last year home prices dropped between 5 - 10%, but there was no "bubble". This new year will be another down year for housing with similar declines in prices - but will also mark a bottoming out. The thing of it is...you can't see a bottom until you are already past it, much like how we always see refinance activity pick up when rates start rising from their lowest levels!

What makes 2008 such an attractive year to get a good deal?

Rising incomes and lower home prices will make real estate more affordable, as some of the excesses of housing inventory are washed out.

As far as Mortgage Rates is concern the only word to describe this year is "volatile." We expect to see sharp moves and intra-day repricing becoming commonplace. If you're looking for financing in this rocky market you need smart strategies. Experience the difference with mortgage planning!

The Federal Reserve Lowers Interest Rates by 0.75%... What Does This Mean For YOU?

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 22 Jan 2008 13:12:35 -0600

Dear reader,

The Federal Reserve surprised the market this morning with a 75 basis points rate cut... What Does This Mean For YOU? In order to answer this question, it is helpful to understand the four major interest rates that are affected by the Fed:

Discount Rate (currently 4%) - the interest rate that banks pay when they borrow money directly from the Fed. The rate has been largely symbolic in the past because hardly any banks take the Fed up on their offer these days!

You see, banks prefer to get short term financing by:

Issuing "commercial paper" - these are short term IOUs of typically one to ninety days that are sold on the open market to Wall Street investors. Interest rates on these short term loans are often better than the discount rate offered by the Fed Borrowing money from other financial institutions using the Fed Funds Rate as illustrated below. In most cases, this rate is also better than the discount rate offered by the Fed
Nonetheless, many banks in today's "credit crunch" environment have actually taken advantage of this opportunity to borrow from the Fed in recent weeks.

Fed Funds Rate (currently 3.5%) - the interest rate that banks pay when they borrow money from each other here in the US. This rate is also determined by the Fed because banks in the US are part of the Federal Reserve System. You see, the Fed's main role is to maintain "monetary stability" by keeping a close eye on the flow of money throughout the economy. One way they do this is by regulating the interest rates that banks charge each other for short term funds.

LIBOR Rate (One Month LIBOR is currently 3.71%)- the London Interbank Offered Rate (LIBOR) is the interest rate that banks pay when they borrow money from other banks anywhere in the world (primarily in the international wholesale money market based in London). There are various types of LIBOR rates including the 1 week LIBOR, 1 month LIBOR, 6 month LIBOR, and 1 year LIBOR; these are the rates banks would pay if they want to borrow funds for 1 week, 1 month, 6 months, etc. Although the LIBOR rates are determined by the financial markets at any given time, they are very closely related to the Fed in that LIBOR most often changes when the market anticipates that the Fed will change their Fed Funds Rate. LIBOR is the base rate that is used on most adjustable rate mortgages (ARMs) in the US and large corporate / commercial loans. The reason LIBOR is used most often for US adjustable rate mortgages is because LIBOR is really the most accurate measure of a bank's cost of borrowing funds since most banks do business internationally these days.

Prime Rate (currently 6.5%)- the Fed Funds Rate + 3; this is the base rate that is used for most consumer loans such as credit cards and home equity lines of credit, as well as most small business loans. Like the LIBOR, the Prime Rate is also tied to the Fed Funds Rate.

How does the Fed affect mortgage rates?

Well, if you have a home equity line of credit based on Prime or short term ARMs based on LIBOR, you should see an immediate reduction in your interest rate in the coming weeks. However, if you are considering a fixed rate loan or longer term ARM with a fixed period of 3, 5, 7 or 10 years, rates on those types of loans are not directly related to the Fed. Instead, these rates are closely tied to the Mortgage Backed Securities that trade on the bond market.

With all this in mind, it is more important than ever to work with a Certified Mortgage Planning Specialist^TM who can decipher market conditions and help you make informed decisions in today's volatile market. A CMPS® professional can look at Fed decisions and economic reports that are coming out and help you make the right mortgage choices. Whether you have or are considering an ARM or a fixed rate loan; whether you are buying, selling or refinancing a home; whether you are dealing with a primary, vacation or investment property; now is the time to be dealing with an expert.

I am a CMPS® professional committed, qualified and equipped to help you navigate today's turbulent mortgage marketplace. Don't delay in implementing the mortgage and real estate equity planning strategies that will make a positive impact in your life and the lives of your loved ones!

Another Fed Rate Cut Is On Its Way: Find Out Why

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Tue, 15 Jan 2008 15:16:33 -0600

Dear reader,

Mortgage Bonds were in rally mode this morning after Retail Sales, showed its weakest growth in five years with an overall annual growth rate of 4.2%.The NY State Manufacturing Index , and the Producer Price Index(PPI) were reported lower than expectations. When excluding volatile energy and food prices, the Core PPI matched the consensus forecast.

With this economic data, I don't see why the Fed should not have reasons to cut rates by .50%, and in fact it seems like traders are now hoping the Federal Reserve may slash rates before its next two-day session ending on Jan. 30.

Why do you need a Certified Mortgage Planning Specialist™?

Simply because we are...

COMMITTED:
to raising mortgage industry standards of practice, ethics and professionalism through individual membership, training and certification.

QUALIFIED:
to help clients achieve financial freedom, build wealth and experience their life dreams by implementing intelligent mortgage, cash flow and home equity strategies.

EQUIPPED:
to be a strategic resource to homeowners, first-time home buyers, move-up home buyers, senior citizens, real estate investors, Realtors, builders, attorneys, CPAs and financial advisors.

Good Reasons to Monitor Your Credit Score

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Fri, 11 Jan 2008 15:56:37 -0600

Do you know what's your credit score? If your answer is "no" this might be a perfect time to check it. The big majority of consumers are not concern with their credit worthiness until they have to fill out an application.

The amendment to the federal Fair Credit Reporting Act requires each of the nationwide consumer reporting companies - Equifax, Experian, and TransUnion - to provide you with a free copy of your credit report, at your request, once every 12 months. Each reporting agency will give you a credit score, if you pay a fee (this investment is relatively small compared to your savings over time.) Keep in mind that your credit rating is a factor in several other areas as well, such as auto insurance premiums, changing employment, renting a new apartment, etc.

Just about everyone has something in their past credit that is less than perfect. Here are four reasons to increase your credit scores.

Most creditors are willing to renegotiate the terms of your non-preferred debt (credit cards, personal loans, or department store cards) with high interest rates if you speak with the right person.
If you have an adjustable mortgage loan that is due to reset or you are planning to purchase real estate in the future, you need to have credit scores higher than 680 to avoid additional fees when refinancing or purchasing due to changes on how Fannie and Freddie evaluate risk effective March 1, 2008.
The current real estate market conditions (low interest rates, declining prices, and increasing inventory) has open a window of opportunity to invest if you have a financial plan.
Time and opportunities will pass whether you're ready or not.

Contact me if you have any questions about some items on your credit file or if you like to learn some strategies to improve your scores.

Advice: Why You Should Get Updates From Your Loan Officer

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Fri, 11 Jan 2008 15:07:39 -0600

The trade deficit widened to -$63.1 Billion, its highest level in 14 months. Economists were expecting a -$59.5 Billion deficit. According to CCNMoney, "The growth in exports has been a major factor cushioning the blow to the economy from the slump in housing and a severe credit crunch. However, with oil pushing imports up sharply, analysts believe the help from trade in the final three months of last year will be shown to have been significantly smaller.

Given this 9.3% increase in trade deficit the next thing we have to ask ourselves is, what will be the impact on the economy? I agree that current market conditions will likely lower Fourth Quarter GDP growth from it's current estimates of 1.2%. Economists have been expecting slow economic growth in 2008 and traders expect another Fed rate cut on the next Federal Reserve meeting.

Big news for our industry...Rumors were confirmed that Bank of America, the largest consumer bank in the US , announced it will buy struggling Countrywide Financial for $4 Billion. There's another rumor going on about a possible JPMorgan buyout of troubled Washington Mutual.

It is more important than ever to work with a Mortgage professional that understands the market and has a repertory of loan programs and strategies to help you secure those hard earn deals. Make sure that your loan officer keeps you on the loop with your current transactions.

Mortgage Market Update

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Thu, 10 Jan 2008 15:09:13 -0600

Today's Initial Jobless Claims were reported at 322,000, which was below expectations of 337,000 and the lowest weekly total since November 3. The four-week moving average for claims dropped to its lowest level in a month by falling 3,000 claims to 341,000. Expectations of weaker economic performance is serving to drag down mortgage rates.

The highlight of the day was Chairman Ben Bernanke's speech. Lenders and the traders were looking for clues or hints about where the Fed will take interest rates when they next meet on January 30 to decide monetary policy.

In regards to the fear of recession Mr. Bernanke said on a Q & A session that, "downside risks to growth have become more pronounced. Notably, the demand for housing seems to have weakened further, in part reflecting the ongoing problems in mortgage markets." The Fed is not currently forecasting a recession in 2008. Instead, he said, "the Fed expects growth to slow."

Have you been to Six Flags Magic Mountain lately? Looking at today's market volatility kind of feels like a roller coaster ride, doesn't it?

Simple Strategies for 2008

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Thu, 27 Dec 2007 18:25:25 -0600

I'm glad that 2008 is almost here, because along with the new year comes unlimited new opportunities for us. Strengthening our position as a Trusted Advisors to our clientele is a strategy that works in any market. With this in mind I want to share an approach that has worked for many real estate professionals.

Consider helping your clients understand how to integrate their mortgage into a short and long term financial plan. If this is not your area of expertise establish a business relationship with a partner who comprehends these concepts and participates in wealth creation teams.

Another idea could be doing workshops for past clients about "How to manage their liabilities to increase their credit rating." This information is valuable for those planning to invest in real estate. Remember that credit scores higher than 680 will help them avoid substantial increases in interest rates when refinancing or purchasing due to changes in credit risk evaluation effective March 1, 2008.

Help your clients understand that credit ratings are factors in several other areas as well, such as auto insurance premiums, changing employment, renting a new apartment, etc.

Happy New Year!

Top 10 Things To Remember this Holiday Season

Joseph David, CMPS® (Clarion Mortgage Capital, Inc.) — Mon, 24 Dec 2007 20:14:36 -0600

1. Remember to start paying for Christmas a year in advance with deductions to a Christmas account instead of waiting until December to charge it all.

2. Remember credit cards represent debt, not money. Each time you use one it is like taking out a loan at the bank!

3. Remember that access to buy and ability to afford are not the same. Credit gives us access, money gives us ability.

4. Remember not to give in order to get.

5. Remember not to confuse giving with buying. The most appreciated gifts are ones involving an investment of time and talent, not just our treasure.

6. Remember that it is not necessary to match the value of every gift you give with every gift you receive.

7. Remember to pay off Christmas charges quickly. Paying off Christmas debt with minimum payments will prompt a visit by "the ghost of Christmas past". It takes 8 years to repay $1000 credit card debt if you pay only minimum payments (plus $900 extra for interest).

8. Remember to give to someone who has no ability to repay, or give to someone anonymously.

9. Remember to spend within your means.

10. Remember the reason for the season. Help your family and friends emphasize the real meaning of Christmas.