Mike's Blog

The 3 States That Accounted For 50% Of The March 2009 Foreclosures

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Thu, 16 Apr 2009 20:22:04 -0500

Since 2007, foreclosures have dominated real estate news. You can't turn on the news or open a paper without some foreclosure-related story.

But for all of the discussion, foreclosures continue to be geographically concentrated.

Adding up the latest stats from RealtyTrac.com, more than half of the country's foreclosure actions from March occurred in just 3 states -- California, Florida and Nevada.

Those 3 states represent just 19 percent of the nation's population.

Despite the local concentration of foreclosures, however, they remain a national problem. This is because mortgage lenders lend in all 50 states -- not just 3 of them -- so the impact of mortgage defaults in one region can quickly spread to others.

In part because of foreclosures are higher, the following has happened:

Mortgage guidelines have tightened
Downpayment requirements have increased
Private mortgage insurance has become more expensive

That's an important set of changes for a would-be borrower. In some cases, it can keep a person from qualifying.

A Few Reasons Why Now May Be The Least Expensive And Easiest Time To "Go FHA"

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Thu, 16 Apr 2009 01:49:44 -0500

A Few Reasons Why Now May Be The Least Expensive And Easiest Time To "Go FHA"

Shopping for low mortgage rates is a game of luck.

Some days, mortgage rates are favorable. Other days, they're not. And while you can sometimes make an educated guess about where rates might be headed, you're not always going to guess right.

Even the experts get it wrong more often than they'd like.

But some parts of the rate shopping process can be predicted and one of them is the future of mortgage guidelines.

In general, the more often homeowners default on their respective mortgages, the harder it is for future mortgage applicants to be approved.

This is why "now" may be the best time to apply for a FHA mortgage. Defaults are climbing, suggesting that FHA underwriting guidelines are about to tighten.

Indeed, the FHA has implemented two major changes since last summer:

The minimum downpayment requirement was raised by a half-percent to 3.5%
Cash out refinances are now limited to 85 percent, down from 95 percent.

These changes create barriers to entry for potential FHA borrowers, improving the overall quality of the FHA loan pool.

For a taxpayer-funded agency like FHA, loan performance is an important goal. Therefore, as the number of defaults grows, expect FHA guideline to get tighter.

The problem is, though, we can't predict just where the FHA will tighten. Maybe the FHA raises its minimum FICO score requirement, or maybe it gets tough on seller-paid closing costs. A hike in loan fees isn't out of the question, either -- that's the path Fannie Mae took, after all.

Whatever the FHA does, fewer people will qualify for FHA mortgages once it's done. So, if you're planning to buy a home and your downpayment is limited, or your credit scores are suspect, or there's some other "red flag" in your profile, consider moving up your timeframe to act.

Mortgage rates may rise or mortgage rates may fall, but neither is going to matter if you can't get qualified for a home loan. And, for FHA mortgage applicants, tougher mortgage guidelines are only a matter of time.

(Image courtesy: The Wall Street Journal Online)

A Few Reasons Why Now May Be The Least Expensive And Easiest Time To "Go FHA"

10 Oddball Tax Deductions That The IRS Actually Allows

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Thu, 16 Apr 2009 01:47:09 -0500

10 Oddball Tax Deductions That The IRS Actually Allows

It's Tax Day today and who among us doesn't love a legitimate tax deduction?

The IRS expects to process 138 million tax returns this year and accompanying those returns will be a melange of tax deduction requests.

Most will be run-of-the-mill including such staples as mortgage interest, vehicle mileage, and child care deductions. Others, however, will be less ordinary.

On its website, TurboTax pays homage to some of the most off-the-wall, offbeat tax deductions through the years permitted by the IRS.

Among the "weirdest deductions allowed":

A bodybuilder's body oil so his muscles would glisten in competition
A private airplane for owners of investment properties
Landscaping for a sole proprietor that meets clients at home
A swimming pool for a man with emphysema

Tax deductions are prized by U.S. taxpayers. Hopefully, your 2008 tax returns included some good ones, too.

Free Listing Website Tool

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Tue, 14 Apr 2009 14:38:50 -0500

This is a new tool we are providing for Real Estate agents. Increase your web presence with just a few clicks. Each property will have it's own website. Click below to learn more about it. Get more calls, make more money! FREE.

CLICK HERE

Mike Berrios

http://www.IWantToBorrowSmart.com

Great information! Financial Red Cross...

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Mon, 23 Mar 2009 21:37:51 -0500

As a founding Faculty Member of the National Institute of Financial Education, I am proud to be able to offer our clients, partners, associates and others a comprehensive overview of the tools the goverment is making available to address the current housing crisis for America's families. Please pass this information along!

This site has video training on a lot that is going on in todays world...

Click HERE for more information!

Yours to count on,

Mike Berrios

FREE Job Loss Insurance with Integrity Home Finance

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Mon, 23 Mar 2009 21:29:54 -0500

Close your Home Loan with Integrity Home Finance,.. if you lose your job...Your payment is covered for 6 Months! At NO ADDITIONAL COST*

We are proud to offer you our Homeowner Education and Loan Protection service (HELP).

There are many homeowners who during their first few years of home ownership encounter short-term financial difficulties. These challenges often lead to missed mortgage payments and maybe foreclosure. Suddenly the dream of homeownership is not as fulfilling as once thought.

This is where our HELP program comes in to play. This service is provided our Charitable Foundation and is a safety net for homeowners who need protection from the unexpected.

Mortgage Protection Program - (Job Loss Insurance) Program covers up to 6 months of mortgage payments; should the homeowner become involuntarily unemployed during the first 12 or 24 months of homeownership. (length of policy varies on eligibility of program)

Emergency Assistance Program - During the first year or so of homeownership, you may have available an emergency pool of funds to assist homebuyers in keeping current or making them current on their mortgage payments.

Post-closing Communication and Education - The program also includes 24 months of financial and educational resources in an effort to assist in maintaining timely mortgage payments and tools to maintain financial wellness.

Click HERE for More Information

Economic Stimulus Plan Benefits the Housing and Mortgage Industries

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Tue, 17 Feb 2009 20:02:40 -0600

Revised February 17, 2009

Just signed and sealed...a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II.

Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Here is what we know as of today...

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction - a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs - This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings - This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing-This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance-This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future

Another thing to keep an eye on in the coming weeks is President Obama's plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That's because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

www.IntegrityHomeFinance.com

Mike Berrios, CMPS, CMA, CLA

Fannie Mae to Loosen Refinancing Rules

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Fri, 06 Feb 2009 13:13:48 -0600

Fannie Mae to Loosen Refinancing Rules- We will wait to see what announcements our investors make in regards to this announcement from Fannie Mae.

Fannie Mae will loosen rules for homeowners seeking to lower their mortgage payments by refinancing. The District company, which accounts for more than 40 percent of the $12 trillion in U.S. residential mortgage debt, is seeking to break a "logjam" in refinancing and allow more homeowners to take advantage of near-record low interest rates, according to Brian Faith, a spokesman for Fannie Mae, which like its rival, Freddie Mac, is under government control. The increased flexibility for borrowers isn't enough to significantly harm mortgage-bond investors and mortgage insurers, analysts said.

"This is not yet the no-appraisal refi wave that many have feared," Matt Jozoff and Brian Ye, mortgage-bond analysts at J.P. Morgan Chase, wrote in note to clients yesterday. Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice to lenders it distributed this week. The changes apply to loans that the company owns or guarantees. Fannie Mae will probably use automated models to check home values listed on applications before offering to waive appraisals, analysts said. The changes will also include allowing borrowers seeking to take out a loan that is 80 percent of the value of the home or less to qualify for refinancing with credit scores below its 580 minimum.

FICO credit scores as measured by Fair Isaac Corp. range from 300 to 850. The program also will lower income-documentation requirements to one current pay stub. The program, DU Refi Plus, will start April 4.

Mortgage Rates Rise Despite the Fed's Efforts to Push Them Down
I have made several comments about the rise in rates. This article when you can read it will expand on some of the things I have tried to inform you about the market. http://www.latimes.com/business/investing/la-fi-mortgage6-2009feb06%2C0%2C1634016.story

Marke to Market

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Fri, 06 Feb 2009 09:32:35 -0600

B. Habib

The 'Mark to Market' Accounting Rule:
What it is and why it is important to you now!

The financial crisis we are in today was not caused by mortgages or housing, although they were both catalysts. The real reason was an accounting rule called "Mark to Market" (also known as FASB 157).

Few people have a strong grasp of this rule, and even those who do have a tough time explaining it on air due to time restrictions. So let's take a few minutes to break it down, so you can have the inside track on this very important concept and understand why it represents some great opportunities.

Why does 'Mark to Market' exist?

Let's go back to the stock market crash, which occurred between 2000 and 2002. With the S&P down 49% and the NASDAQ down 71%, many people lost much of their life savings and they were very angry.

Companies like Enron and Arthur Andersen were able to find ways to make their books look more attractive, which was reflected in an artificially inflated stock price.

Both the public and Congress had a call for more transparency in business and hastened the passage of "Mark to Market" accounting.

This is the notion that all assets should be valued as if they were sold on a daily basis. Under the letter of the law, failure to do this conservatively can now result in jail time.

So what's the problem?

Before we get into what this means for banks, let me make a quick analogy using a scenario that should make perfect sense to you and your clients.

Let's imagine that you own a house in a neighborhood where all of the houses are priced at around $300,000. Unfortunately, your neighbor, who owns his home free and clear, falls ill and needs emergency cash quickly. Because he is under duress, he must sell the home for $200,000 in order to get the cash he needs right away, even though the home is worth considerably more.

Now would this mean that your home is now worth the same $200,000 that your neighbor sold his for? Of course not, because you are not forced to sell under duress. It just means that your new neighbor got a great deal.

However, if you were a publicly traded company and had to abide by Mark to Market account rules, you and the rest of your neighbors would now have to say, by law, that your home was worth only $200,000 - not the $300,000 you would get for it if you actually sold. So what's the big deal? Read on.

So how does this principle apply to banks?

Let's say we decide to start a bank . . . call it XYZ Bank. We raise $2 Million to
open our doors. Remember that our capital account is $2 Million. Banks
make money by taking in deposits and paying low rates of interest to those depositors (maybe throw in a toaster too). We then take that money and make loans with it at higher rates. We keep the difference.

So, we turn the $2 Million worth of deposits into $30 Million worth of loans. This puts our ratio of loans to capital (our Capital Ratio) at 15:1 ($15 Million in Loans to $1 Million in Capital). This level is acceptable, as long as we can shoulder some losses and recover.

Because we are very conservative here at XYZ Bank, the loans we make require a minimum down payment of 30%, a credit score of 800 or better (that's nearly an 850 which is perfect), proof of income and assets, a reserve of at least two years of mortgage payments (normal is two months) and income requirements that only allow 10% of monthly income to cover all expenses (normal is 40%).

We do this and our loans perform perfectly. We make lots of money. Nobody is paying late and our clients are sending us holiday cards. They love us . . . it's a party. You and I are celebrating as we see our stock price soar.

But real estate values decline and, even though all of our loans are paying perfectly, we must re-assess the loan portfolio to account for the decline in real estate values, which leaves us with less of an equity cushion. We had a minimum 30% down payment, which means the loans were 70% of the value of our assets - until we account for the decline in the market. Now, our position goes from 70% to 90%. That's riskier and, therefore, worth less than when our loans had a 70% safety position.

Our accountants tell us that we must "Mark to Market" or risk jail. They say our value is now reduced by $1 Million. Whoa!

We must take or write down this loss against our capital account. It is a paper loss - we don't write a check, we have no late payers, no defaults, no bad business decisions. Still, we must reflect this $1 Million paper loss in our Capital Account, which drops from a $2 Million to $1 Million in value.

Here's where things get problematic.

At this level, with $30 Million in loans outstanding, we now have a capital ratio of 30:1. At this level of leverage, alarms begin to sound.

Our ratios are out of the safe zone; we could go under with just a few losses, deposits are in jeopardy. Hello FDIC examiner, we are on the watch list, the Securities and Exchange Commission (SEC) is asking questions and our stock starts to tumble. The business networks are showing negative coverage of our now troubled bank. We are in big trouble.

The problem, we are "over leveraged". The solution? We have to "de-lever" . . . and do so quickly. But there are only two ways to do that, and one of them isn't really an option.

The first way is to raise capital, but that's not going to happen when our ratios are out of whack and we are in serious trouble as well as on the FDIC watch list. It is unlikely that anyone will be willing to invest cash in XYZ Bank.

The other option is that we can sell assets, like the outstanding loans, which are increasing our capital ratio. Like your neighbor, who owned his home outright but needed cash for medical bills, we are now under duress. The paper we are holding has a lot of value, but we have to sell it quickly and, because of that, cheaply. So, we offload the loans at a loss, which exacerbates the problem because those losses further reduce our capital account.

Very quickly, like a flushing toilet, things start to spiral - we are going down.

The problem multiplies

The problem doesn't stop there. The fire sale we just had on our loans makes things worse - even for the banks that bought them up and thought they were getting a great deal.

Under Mark to Market, the loans we just sold must be included in the comparables that other financial institutions use to value their assets. This is how the problem spread and got so bad so fast. Other good institutions, with good loans, have to mark down. Just like us, they become over-leveraged. It's a chain reaction, all triggered by a well intentioned, but over-reaching accounting rule.

Financial institutions fold, sell, or freeze. Credit - the life blood of our economy - is cut off at the source. Because of a lack of available credit, home sales and refinances crawl, auto sales drop and jobs are lost. Additionally, the economy enters a recession.

During the last recession in 2001, the economy recovered relatively quickly thanks to $3 Trillion worth of home equity withdrawals. But, more restrictive programs, a lack of available credit, and lower home values will make it difficult for us to use home equity to help pull us out of a recession this time around.

Fixing the Problem

The Federal Reserve has passed a rescue plan, which, over time, will provide some level of help. Some banks will get money to infuse into their capital accounts. Others can sell some assets to the government in an effort to "de-lever".

But, the big thing that is not talked about, not well understood, is the part of the rescue plan that traces this financial crisis back to the source.

The US Congress has given the SEC its blessing to modify "Mark to Market" accounting. And by January 2, SEC Chairman, Chris Cox has to get back to Congress with ideas, if any, on how to fix Mark to Market accounting.

It won't be eliminated, as we will not want to go back to the Enron days. But he is likely to adjust the Mark to Market provisions.

Here's one potential solution - even rental or commercial real estate properties can be valued two ways:

The comparable sales method, which determines the value based on what other assets have sold for, which is the way Mark to Market work currently.
A cash flow method, which values the property based upon cash coming in.

If we see Mark to Market modified to use cash flow to value assets, without requiring a large percentage discounting mechanism - wow! What a shot in the arm that would be. We'd likely see the stock market rally, with financial stocks leading the uphill charge.

Consider that, in today's market, fund managers are holding 27% of their assets in cash, compared with just 3% they held in cash when the stock market peaked in October of 2007. That means there is a lot of money on the sidelines that can push stock prices higher. Additionally, think about the redemptions from hedge funds that eventually need to be put back to work. That's another reason to be optimistic about stocks in the first quarter of 2009 - provided that Chairman Cox modifies Mark to Market accounting in a meaningful way. And a good stock market helps individuals feel better about purchasing homes. Additionally, stronger balance sheets for financial institutions will allow them to lend more money.

The bottom line

With some potentially very good news around the corner, there might be reason for optimism as we head into 2009.

Feds buying Mortgage Bonds

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Wed, 04 Feb 2009 09:41:35 -0600

The Fed's been at it again, offering words that sound encouraging at first blush, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and offer their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? Not so.

Here's the truth.

Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.

So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.

Stay with me here...

With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

Here's the most important part.

Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.

The clincher is this:

Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.

I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.

Sell for more

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Wed, 04 Feb 2009 09:40:32 -0600

How To Sell Your Home For 40% More, 17% Faster This Spring

Super Bowl Weekend traditionally marks the start of the Spring Buying Season in real estate. Anecdotally, real estate agents will tell you that buyer activity tends to tick higher at this time of the year.

Meanwhile, with mortgage rates still trolling near all-time lows and Congress debating a first-time homebuyer tax credit, 2009 may bring out even more buyers than we've seen in the past.

Just having your home on the market may not be enough to attract an offer, though -- the home has to have appeal. That brings us to home staging -- the process by which a homeowner re-organizes and re-presents his home to appeal to as many potential buyers as possible.

Home staging is part-science, part-art, and part-psychology. Homebuyers tend to judge homes within the first 8 seconds of seeing them so making a quality first impression can mean the difference between getting multiple bids, and just getting a lot of foot traffic.

The 4-minute video gives some quick-and-easy tips, including:

Create more light in the home
Clean up the closets and thin them out
Remove the clutter from every room in the house

Even though home inventories are falling, supplies are still higher than in previous years. Home sellers wanting to stand out in a crowd may want to consider staging their homes to help them sell more quickly.

Staged homes sell for as much as 17% more money and as much as 40% faster than non-staged ones.

Mike Berrios, Move-Up Homebuyers Face New Lending Challenges This Spring

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Fri, 30 Jan 2009 09:54:15 -0600

Move-Up Homebuyers Face New Lending Challenges This Spring

When a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence -- sell it, keep it, or rent it.

Unfortunately, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past.

Mortgage guidelines are dramatically tighter for people "carrying two mortgages".

Among the changes this spring's buyers face:

Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home -- even if it's only by a day -- both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.

Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.

Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home. You must still count the mortgage payment + taxes + insurance as a monthly debt.

In other words, being a move-up buyer isn't as simple as it used to be. New lending rules make buying a new home an exercise in timing and financial planning. And the rules are expected to get tougher, too.

Therefore, if you expect to be a move-up buyer in the next 12 months, consider moving up your timeframe or -- at least -- planning ahead for it.

Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.

What's the Forecast for 2009?

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Mon, 05 Jan 2009 19:26:31 -0600

By Barry Habib

Last year's forecast had anticipated some very odd happenings...but nothing to the extent of how the actual story unfolded, in what became a year of making history.

How did we do on our forecast last year?

Federal Reserve Chairman Ben Bernanke was confident that we were not heading into a recession and a down market . . . and we correctly disagreed.
We saw Stocks heading lower . . . and they did, actually to a much larger extent than we had expected. But our one Stock selection for last year did quite well, more than doubling in a short period of time.
We saw 2008 as being a year of high volatility . . . and that turned out to be an understatement.
We said the Fed would cut . . . but we were wrong as to the extent of those cuts, brought on by the financial crisis, also something we did not foresee.
We saw $4/gallon gasoline over the summer, and while many disagreed, our target price was correct.
We did well with our forecast for the Dollar and Gold prices, as well as how we anticipated the housing market to fare.
Most importantly, and for more than 11 months during 2008, our rate forecast was right on target, with the last few weeks seeing mortgage rates decline further than we had predicted at this time last year.

What next? As we enter 2009, here's what our crystal ball is showing us.

The economy will have a tough go once again during the coming year. But we do see things as being better than during 2008, with more optimism in the air by this time next year.

The Fed and the Treasury have and will continue to add lots of stimulus to our economy. It will just take some time for the "medicine" to work its way through the system. After hogging the spotlight with many different moves, we expect the Fed to be on hold with their interest rate policy throughout the majority of 2009. After all, there's no room to cut further, and we don't see a hike until economic conditions show signs of improvement. When a hike comes, we may all take it as a welcome sign that things are getting better.

The job market will get worse before it gets better, and don't be surprised to see the unemployment rate rise to 8% from its present 6.7% level before things start to improve.

We can safely predict, without much disagreement from anybody, that volatility will continue for Stocks, but we do see hints that there will be a significant first quarter rally. By the end of 2009, we forecast that Stock prices will see some handsome gains. Our Stock picks for this year include UYG (Ultra Financials ProShares), currently trading around $5. This play on financials has a generous dividend yield, and stands to improve greatly should financials start to recover...and we think they will. We also like VZ (Verizon), currently trading around $30, as strength in cell phone usage and an exploding fiber optics business see them standing to gain. Additionally, there is a juicy 6% dividend yield. One more we like is DIG (ProShares Ultra Oil and Gas), presently priced close to $24. Keep reading on our oil forecast to understand why we like this play.

As I write this to you on 12/24, our stock picks for the year include UYG (Ultra Financials ProShares), which was trading around $5. This play on financials has a generous dividend yield, and stands to improve greatly should financials start to recover...and we think they will. We also liked VZ (Verizon), which currently is trading around $32, as strength in cell phone usage and an exploding fiber optics business see them standing to gain. Additionally, there is a juicy 6% dividend yield. One more we like is DIG (ProShares Ultra Oil and Gas), which was priced close to $25. Keep reading on our oil forecast to understand why we like this play.

As of mid-December, with oil around $36/barrel, we saw a great opportunity for the long term. Oil prices will rise over time, and have already started to climb, and patience will be greatly rewarded. The negative side effect from lower oil prices is that it has greatly diminished research and exploration into alternative energy sources, as well as investigating more costly extraction of fuel. For example, the oil-rich yet difficult to mine tar sands in Canada only make financial sense unless oil prices are over $70/barrel. And any other resources that are "boxed in" or require additional transportation costs may come offline at current oil prices. And once they are offline, there is a significant ramp up time to get them back. The irony in lower oil prices is that they may lead to much higher prices down the road.

Look for the Dollar to weaken a bit, but eventually strengthen as the US stabilizes while Europe declines a bit further.

On housing, we see 2009 as a period of price stabilization for most markets. One good gauge that home prices are stabilizing in your area is to figure a monthly payment with 20% down and compare that to rents for the same property. If it would actually be cheaper to purchase the home than to rent it - that's a good sign.

Home prices in some markets may still decline some during 2009, but those who make savvy purchases below market value should fare quite well, especially longer term. There's a lot of inventory on the market, which is viewed negatively, and needs to be sopped up before the housing market really turns. But...the inventory in the housing market does make this a fantastic time to be a buyer. Homebuyers will have a strong negotiating stance from the get-go, and are likely to make favorable deals, maybe even a once-in-lifetime deal. Those who buy a home and live in it for the long term will are likely to be rewarded handsomely. Let's face, people need homes. They are not going to start living in tents just because the economy is bad. We predict that consumers will start buying again in the coming year, particularly with attractive home loan rates and many homes to choose from.

Mortgage Rate Forecast ...How low can they go?

Early 2009 could very well mark the lowest rates that we will see for the rest of our lives. Think about that. More importantly, your customers should be thinking about that too. We expect interest rates to stay in a range of 4.5 - 5.5%, with the potential to see rates moving toward the higher part of the range later in the year.

The forecast for the beginning of the year is important of course, but count on us at Mortgage Market Guide to keep informing and advising you throughout the coming year. With so many of your competitors having dropped away, opportunities abound for those who are willing to stay positive and work hard. The question is not who is going to let you be successful . . . it's who is going to stop you. During these volatile and historic times, we're proud to be with you on this journey, and appreciate each of you being part of our Mortgage Market Guide family.

Early Christmas for Auto companies

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Fri, 19 Dec 2008 11:47:20 -0600

Christmas has arrived early for the U. S. Auto companies as their CEO's all express their gratitude this morning in their press conferences to the President for the Pre- Christmas cash cheer loan to keep them alive until March. How much has Santa given them - 13.4 Billion. The news has helped the stock market open in positive territory, however our bonds market is worsening on this news. Mortgage backed bonds are now down 11/32nds or about .375% for the 4.5% Ginny bond. No other economic releases will be made today.

The 10-year yield hit a record low of 2.066% Thursday morning, with the 30-year yield also approached the record low of 2.58%. Mortgage rates have lagged, of course, given the uncertainty about mortgage-backed securities. Yes, the government will buy them, but with foreclosures only temporarily on hold and the big drop in rates, with more expected, investors are unsure about where mortgages should actually trade. Historical relationships between home loans and mortgage bonds shows rates should be at least half a percentage point lower - but that was then and this is now. And remember that jumbo mortgages are one-step removed from the vanilla product being securitized, and at this point are being held by large investors. (Hence some of the great rates for jumbo loans at the branch level.) The title of one e-mail that I received yesterday from a Wall Street firm said, "MBS have completely disconnected from Treasuries."

Bloomberg yesterday had an article on the reasons mortgage rates have not kept pace with the falling treasuries. Here is the link if you would like further information.

http://www.bloomberg.com/apps/news?pid=20601213&sid=aA7j1HR.9wpM&refer=home

Obviously the downturn and recession will cause efforts towards conservation. One of those efforts is developing for conserving fresh drinking water, a number of conservation groups are now calling for an end to toilets that flush. To which gas station owners have said, "We are way ahead of you. We've been doing that for years."

We have had similar periods of duress and expanded government in our past history. Andrew Carnegie, the brilliant industrialist who lived through monumental change and still managed to make billions in steel on the upside of his career (giving most of it away to institutions and personal causes later in life, such as Carnegie libraries throughout the country and the Hague Peace Palace for leaders to meet to talk rather than wage war, etc.) usually had something interesting to say. Here are a few of his quotes:

All honor's wounds are self-inflicted.

And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department.

As I grow older, I pay less attention to what men say. I just watch what they do.

Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket.

Concentration is my motto - first honesty, then industry, then concentration.

Do not look for approval except for the consciousness of doing your best.

Do your duty and a little more and the future will take care of itself.

Every act you have ever performed since the day you were born was performed because you wanted something.

People who are unable to motivate themselves must be content with mediocrity, no matter how impressive their other talents.

Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.

The 'morality of compromise' sounds contradictory. Compromise usually is a sign of weakness, or an admission of defeat. Strong men don't compromise, it is said, and principles should never be compromised.

Interesting man who lived during very interesting times. As we are as well. Take advantage of these low rates and where you can, help out your borrowers to get low rates of lifetime. Once this is over, it will not happen for a very long time. Enjoy your weekend. Mike

Shock and Awe

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Tue, 16 Dec 2008 19:01:12 -0600

Article from Larry Kudlow.

In a monetary version of shock-and-awe, the Federal Reserve unleashed a massive easing move with its FOMC policy announcement Tuesday - one that represents a sea change in central-bank operations.

For starters, Bernanke & Co. established a new target range for the federal funds rate of zero-to-one-quarter percent. That's right: zero-to-one-quarter percent. In doing so, the Fed is abandoning its fed funds target and essentially following Treasury bill rates in the open market, which have been trading close to zero for many weeks. The Fed also signaled the near-zero funds rate could last for "some time."

However, the really big news is not the fed funds target. It's this sentence:

"The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level." (Italics mine.)

The Fed goes on to say it will purchase large quantities of agency debt - meaning Fannie and Freddie - and more mortgage-backed securities (quite possibly toxic assets). In other words, it wants to drive mortgage rates down. What's more, the Fed may buy long-term Treasury securities, also to drive bond yields lower. And it will purchase the Term Asset Backed Securities Loan Facility in order to finance consumer-related bonds and pump liquidity to consumer lenders.

The message here is that Bernanke & Co. is locked and loaded, ready to shoot every last bullet to help credit markets and the economy. In particular, the Fed is formally adopting a Milton Friedman-type approach that is directed at expanding its balance sheet and stimulating the economy.

The Fed's balance sheet already has more than doubled from roughly $900 billion to $2.2 trillion. For all we know it may soon double again. Money-supply measures are already growing at 7 to 8 percent.

And while some economists worry about higher future inflation from all this money-creation, Tuesday's consumer price report actually showed deflation of 10 percent annually over the past three months. That gives the central bank ammunition to ignore inflation and aim instead for a massive monetary easing.

Will it all work? In the short-run it may. But is a near-zero interest rate, and even more pump-priming, really the best longer-term solution? It's still troubling that Fed policy lacks a true anchor or compass. In the past, targeting the economy alone has resulted in higher inflation. That's why many conservatives wish the central bank would keep a sharp eye on the value of the dollar and commodity prices (including gold).

While energy and other commodity prices have experienced a wicked plunge since the summer, in recent days - ahead of the Fed's new policy decision - the dollar has fallen and commodities have rebounded. But the question is this: In the future, will the Fed be able to unwind its huge cash-liquidity injections? The same can be asked about government bailouts for banks and quite possibly Detroit. Yes, this is an emergency. But it's also unprecedented government intervention in the economy. How we restore traditional free-market capitalism remains unsaid and unknown. That is worrisome.

Stocks cheered the Fed's move by rallying nearly 400 points on Tuesday. Savvy investors Ken Heebner and Robert Doll - two financial and political conservatives - strongly endorsed the Fed moves on CNBC. This massive easing almost certainly underscores the likelihood that stocks bottomed on November 20. Both the monetary surge and the upturn in equities are pointing to economic recovery next spring or summer.

Meanwhile, on the fiscal policy front, everyone has been focusing on Obama's huge big-government-spending infrastructure play. But Team Obama is also drawing up plans for a massive purchase of mortgages in order to get long-term borrowing rates down to 4.5 percent - a full percentage-point drop. The specifics are sketchy, but there's no question the Obama Treasury, led by Tim Geithner, will be working hand-in-glove with Geithner's former Fed boss Ben Bernanke to drive down mortgage rates and stop the housing slump.

Perhaps Bernanke himself scored a few points with his historic shock-and-awe easing move. It's as though Bernanke is telling the new president: Hey, I'm on your team.

But I still believe the best economic stimulus would be a move to cut tax rates across-the-board for individuals and businesses. No matter how much money the Fed prints, or how many roads or mortgages Uncle Sam buys, none of it creates new incentives for private enterprise, risk-taking, and investment.

To complement the Fed's easy money, permanent tax cuts would increase the production and investment that would soak up the excess money and create non-inflationary growth. Alas, supply-side tax cuts are nowhere to be found right now.

News after the Holidays..

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Mon, 01 Dec 2008 12:45:24 -0600

Hope everyone enjoyed their Thanksgiving break and had a great time with family and friends. We certainly needed it with the bankruptcy of LandAmerica announced on Wednesday. Comments are below.

Our bond market is being helped ever so slightly this morning by the sell off we are seeing in the equity market. Dow Jones is currently off by 425 points. Mortgage backed Ginny Mae bonds are up slightly for the 5.5% coupon at 2/32nds. So pricing will be about the same as the close on Wednesday before the Thanksgiving break. Asian and European equities are off due to fears about the contracting global economy. Treasury yields are at record lows as there has been a continued flight to safety. Both Treasury Secretary Paulson and Fed Chairman Bernanke are scheduled to speak about the economy today. The futures market is pricing in a 26% chance of a 75bps cut and an 74% chance of a 50bps cut at or before the December 16^th FOMC meeting. Currently, the Ten Year yield is at 2.87% (2.97% on Friday) and the 2-10 yield spread is at 191bps, steepening 6bp since Friday morning.

Treasury rates continue to head lower this morning, with the 10-yr hitting 2.87%. (So if you tie up $1 million with the government for 10 years, you'll earn less than $29k per year.) Fortunately mortgage prices are tagging along for the ride somewhat, with prices better by roughly .250. This week we'll see the unemployment data on Friday. Before the Employment data, today we have the ISM national manufacturing index and Construction Spending (ISM is expected to drop slightly, and Construction Spending is expected to drop .9%). Productivity and ISM Services are scheduled for Wednesday. Finally, Factory Orders will be released on Thursday. There is little of note tomorrow, but on the 3^rd we have ISM Services, Productivity, the Beige Book, and an ADP employment report of questionable correlation to the government's employment report on Friday. We can look forward to the usual Jobless Claims on Thursday, along with Factory Orders. Friday we hit the jackpot with Nonfarm Payrolls (expected -300k), Hourly Earnings, the Average Workweek, and the Unemployment Rate. Current expectations for the headline grabbing number are running around 6.8%.

LandAmerica Financial Group Inc., one of the biggest title insurers in the U.S., filed for bankruptcy protection prior to Thanksgiving. They agreed to sell its two main title-underwriting subsidiaries, Lawyers Title Insurance Corp. and Commonwealth Land Title Insurance Co., as well as United Capital Title Insurance Co., to Fidelity National Financial Inc. This raised more than one eyebrow, as the bankruptcy comes less than a week after Fidelity National's plan to acquire LandAmerica fell apart. http://biz.yahoo.com/ap/081126/landamerica_fidelity_national.html?.v=1

The government-insured share of new mortgage applications continues to grow relative to conventional home loan applications, according to the weekly application survey of the Mortgage Bankers Association. During the month of October, 33% of home loan applications were for government-insured loans, the MBA said. That compares to 10% in October of 2007. The October high water mark for Federal Housing Administration and Veterans Affairs loans is the highest government-loan share of the market seen since 1991. The government share hit a low of 6% in August of 2005. Also reported last week; Seniors will be able to use Federal Housing Administration reverse mortgages in conjunction with the purchase of a new home under new guidelines issued by the Department of Housing and Urban Development

Integrity Home Finance - Rescue Plan 101

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Thu, 02 Oct 2008 19:32:26 -0500

The Chinese have a proverb: "May you live in interesting times." And we are living through interesting times indeed.

Whatever the political posturing regarding the current rescue plan, a plan needs to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market".

Each day lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.

Why is this so bad? Because as lenders mark down their assets, the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.

And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together, it isn't just A paper or B paper etc....it's everything. It's got some A paper, B paper, C paper...and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this, the opportunistic "shorting" done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.

This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on.

Once this is done it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.

As always - please keep in touch, especially during these volatile times. I am here to help you in any way that I can.

Yours to count on,

Mike Berrios

Integrity Home Finance

If My Mortgage Lender Fails, Are My Payments Still Due?

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Fri, 26 Sep 2008 19:35:26 -0500

If My Mortgage Lender Fails, Are My Payments Still Due?

Thursday, federal regulators seized mortgage lender Washington Mutual. The Seattle-based thrift became the third "big name" lender to close its doors since July, joining IndyMac and Lehman Brothers.

In 2007, these 3 lenders represented about 10 percent of the mortgage market and their subsequent failures are confusing American homeowners.

The most prevalent question:

If my mortgage lender fails, are my payments still due?

And the answer is an unequivocal "yes". If a mortgage lender is seized, goes bankrupt, or is otherwise closed, it doesn't change the terms of the bank's mortgages whatsoever -- just maybe the mailing address.

This is because a mortgage (and its corresponding note) is a legal contract between the lender and the lendee, signed on the date of closing. It is binding and cannot be altered by either party. The only way to "end" the contract is to pay the loan in full.

This can happen in one of 3 ways:

The home is sold and the mortgage is repaid
The home is refinanced and the mortgage is repaid
The home loan is paid down to $0 balance by the homeowners

So, if a mortgage company fails, its doesn't cause the loan to be paid-off and, therefore, the mortgage contracts is still valid. Payments are still due.

However, because its mortgages are an asset, the failed lender will usually transfer them to a new lender's servicing department. This means that homeowners will write the same check for the same mortgage but to a different company.

To reduce confusion around transactions like this, the government puts two safeguards in place. First, it requires the former lender to send a 15-day advance notice of the change to the homeowner. And second, it requires the new lender to do the same.

In situations like this, the onus is ultimately on the homeowner to open and read his mail, and make changes accordingly. It's especially important for people who pay their bills online as opposed by paying them manually; you likely won't get notified if you're sending payments to the wrong place.

WAMU In the News...Another One..

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Fri, 26 Sep 2008 19:29:06 -0500

We have a new number "one" that has joined the list of growing bank failures. Indy Mac was 32 Billion in Assets and WAMU is about 325 Billion in Assets. I wonder if a new website like "implode o meter" that kept track of mortgage lenders that failed will begin to keep track of banks that fail. The Federal Deposit Insurance Corp. seized Washington Mutual Inc., one of the country's biggest banks, and then sold the Seattle-based thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion. Because of WaMu's heavy mortgage-related losses and other risky debt, JPMorgan will write down the thrift's loan portfolio by roughly $31 billion--a figure that could change if the federal bailout plan is enacted and JPMorgan opts into it.

What can kill a bank. A run on the bank. If any of you have seen the movie classic, "It's A Wonderful Life" it depicts the situation that happened to WAMU. Customers withdrew $16.7 billion in a 10-day period following the bankruptcy of Lehman Brothers, leaving WaMu "with insufficient liquidity to meet its obligations," its regulators determined. If you want to see the article and the video, here is the link.

http://finance.yahoo.com/tech-ticker/article/73415/Run-on-Bank-Helped-Kill-WaMu-But-Your-Money-Is-Safe?tickers=WM,JPM,XLF,WB,%5EDJI,%5EGSPC

Our markets continue to tread water as we await the outcome of the bailout discussion occurring in Washington. Do we have a "deal or no deal". No deal means maybe no debate. You have to love our political process. An alternative to the $700 billion Wall Street bailout plan has been proposed by conservative Republicans; and the core of the new proposal is an insurance program for mortgage-backed securities that would require banks, financial firms and other investors holding such securities to pay a premium for government backing. Higher-risk assets would incur higher premiums, but Treasury Secretary Henry Paulson Jr. and others insist the plan is not feasible. Brookings Institution banking and finance expert Robert Litan says investors are not eager to purchase mortgage securities, and valuing them is a challenge; this means the goal of establishing a market for these securities would be difficult to achieve. So we await the outcome and hope people put party affiliations aside and make good decisions.

Our bond market has opened with slightly better pricing. As you can imagine, the markets are in a hold mode until a clear direction emerges with the bailout discussions in Washington. Two economic news items have been released, but next week economic releases may be more market movers dependent upon a bailout provisions worked out over the weekend. 30 year fixed rate loans are better by .125% in price. 10 year yield is 3.79, oil is down $3.00 to $105 and gold is up slightly to $890. The economic releases were GDP that shows a growth rate if 2.8% which was lower than expected. And Consumer sentiment came in 70.3 from the previous month of 73.1. A predictable drop given the events that are occurring in our financial markets.

For those branches operating in California, ten new real estate and mortgage finance laws were enacted. To keep yourself up to speed, here is two different articles. http://www.mercurynews.com/green/ci_10560313

http://www.marketwatch.com/news/story/california-association-realtorsr-praises-governor/story.aspx?guid=%7B12CA23C6-BE40-468B-AD98-8C0D0F637EFA%7D&dist=hppr

Let me leave you with this parting thought as you try to enjoy this weekend given all this market hand wringing. Always tell the truth. Always. White lies can always catch up to you eventually. Have a good weekend.

At Penn State University, there were four sophomores taking chemistry and all of them had an "A" so far. These four friends were so confident that, the weekend before finals, they decided to visit some friends and have a big party. They had a great time but, after all the hearty partying, they slept all day Sunday and didn't make it back to Penn State until early Monday morning.
Rather than taking the final then, they decided that after the final they would explain to their professor why they missed it. They said that they visited friends but on the way back they had a flat tire. As a result, they missed the final. The professor agreed they could make up the final the next day. The guys were excited and relieved. They studied that night for the exam.
The next day the Professor placed them in separate rooms and gave them a test booklet. They quickly answered the first problem worth 5 points. Cool, they thought! Each one in separate rooms, thinking this was going to be easy.... then they turned the page. On the second page was written....

For 95 points: Which tire? _________

Huge News - Lehman Brothers...

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Mon, 15 Sep 2008 11:49:42 -0500

I guess you can say we had our own hurricane blow through Wall street this weekend, given the news this morning about Lehman Brothers filing for bankruptcy and Merrill Lynch being acquired by BofA. Added to this we have AIG, a large insurance company asking for a federal loan in excess of 40 billion. AIG, is the world's largest insurer, does business in 130 countries and territories around the world, selling insurance to 74 million customers worldwide. It has also an aircraft leasing arm, an asset management business and a financial products unit. The latter holds a credit default swap portfolio that has triggered the large mortgage losses.

U.S. stocks declined, erasing more than $300 billion in market value, as Lehman Brothers Holdings Inc.'s bankruptcy and tumbling commodities prices showed the American economy is sinking. Lehman plunged 95 percent and American International Group Inc. retreated 60 percent after the companies loaded up on sub prime-related investments with borrowed money. Economic concerns pushed down oil, prompting a retreat in energy stocks, and sent General Electric Co. to a 6.6 percent slump. Dow Jones is currently off 250 points. 10 year yield is down to 3.54% and 30 year mortgage pricing has improved .75% from Friday's close. Oil has officially broken the $100 a barrel price.

The economic calendar for the week begins with today with Empire Manufacturing at 8:30 am, followed by U.S. Industrial Production (output tumbled a bigger-than-expected 1.1% in August due to a big drop in auto production, and was the largest drop in 3 years) and Capacity Utilization (which slipped to a smaller-than-expected 78.7%, the lowest in almost 4 years). Tomorrow, the FOMC meets for a one day meeting on interest rate policy. We also have the Consumer Price Index (CPI) tomorrow. Wednesday we'll see Housing Starts, Thursday Initial Jobless Claims and Leading Economic Indicators. (There is nothing on Friday.)

Pimco's Bill Gross told CNBC that the global credit crunch is worsening after Lehman Brothers' filed for bankruptcy protection stemming from mortgage-related losses. "It continues to get worse," Gross told CNBC.Gross is chief investment officer of Pacific Investment Management Co, which oversees more than $812 billion in assets. He said what is missing from a rescue plan for the banking system is capital rather than liquidity. If you want to take several minutes you can click on this link to view his interview.

http://www.cnbc.com/id/26719710
Experts originally expected the Federal Reserve to hold the federal-funds rate steady at 2 percent when it meets on Sept. 16, but Lehman Brothers' financial troubles and the belief that economic growth will brake by year's end has led some to anticipate calls for a rate cut. However, observers point out that the central bank must contend with improvements in inflation at a time when the labor, housing and financial markets remain weak. They predict the Fed will hold off on raising rates until the housing market shows signs of recovery and officials are confident that the credit sector will not be negatively impacted by tightening policy. Given how the treasury yield has fallen, and mortgage rates finally following as well, it is going to bring customers into a rate range for refinance opportunities, assuming they can qualify with the current guidelines. Start checking your customer lists for potential prospects.

Economy `Slow' in Most of U.S., Fed Says in Beige

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Wed, 03 Sep 2008 16:42:50 -0500

Economy `Slow' in Most of U.S., Fed Says in Beige
Business across most of the U.S. was ``slow'' last month, while almost all Federal Reserve districts reported pressure to raise prices because of higher commodity costs, the central bank said in its regional economic survey. Consumer spending was ``slow'' in most of the 12 Fed districts as the housing market ``weakened or remained soft,'' the Fed said in its Beige Book report, published two weeks before policy makers meet to decide on interest rates. A ``general pullback in hiring'' helped keep wage increases ``moderate,'' the Fed said today. With the economy weakening under the impact of the yearlong financial crisis and housing recession, and consumer prices rising, most investors anticipate the Fed will keep interest rates unchanged through December. Policy makers have lowered the rate 3.25 percentage points over the past year. ``The pace of economic activity has been slow in most districts,'' the report said. ``Wage pressures were characterized as moderate by most districts amid a general pullback in hiring.'' While prices of energy and other commodities have declined recently, the Fed said companies in the San Francisco district, the largest region, reported that ``upward price pressure remained significant,'' while ``price levels remained high'' in three other districts. Philadelphia-area retailers saw ``rising wholesale costs,'' the Fed said.

Concerns About FHA Loan Quality for the HOPE program.

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Wed, 03 Sep 2008 16:42:02 -0500

Concerns About FHA Loan Quality for the HOPE program. - Remember every lender now is concerned about loan quality and the loan performing as agreed. The issue down the road is whether will be aggressive on indemnifications for loan losses. Quality is extremely important on every loan you originate.

Lenders and servicers choosing to participate in a special Federal Housing Administration refinancing program will have to worry about "second guessing" by FHA, which has a reputation for seeking indemnification for losses when loans go into default, according to mortgage banking attorney Laurence Platt. "Presumably, lenders that closely follow the new underwriting requirements developed by the [Hope for Homeowners Oversight] Board will be insulated from attack by FHA," the K&L Gates partner says in a Mortgage Banking Alert to clients. However, the Hope program loans are expected to have high default rates because lenders will be refinancing sub prime borrowers that have defaulted or are expected to default. "It will be interesting to see how 'squishy' the new underwriting guidelines are, because the risk of second-guessing is greater when the standards are more ambiguous," the Sept. 2 alert says. Meanwhile, the House Financial Services Committee is holding a hearing Sept. 17 to see if FHA and the oversight board will be ready to launch the Hope program by Oct. 1. Committee chairman Barney Frank, D-Mass., also wants to know if servicers are holding off on foreclosures for borrowers who might be refinanced through the Hope program.

GMAC Closes 200 Retail Loan Offices, and Wholesale Operation

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Wed, 03 Sep 2008 16:41:01 -0500

GMAC Closes 200 Retail Loan Offices, and Wholesale Operation
We mentioned this morning in the pricing email about this announcement from GMAC, but here is the actual article. Not good news if you are employed by this company. GMAC will stop originating through its wholesale lending subsidiary, shut down 200 retail offices and lay off 5,000 employees in the process. The restructuring was approved Tuesday, parent GMAC Financial Services announced today. The statement indicated that all 200 GMAC Mortgage retail offices will be closed. In addition, Homecomings Financial LLC wholesale broker channel originations will be halted. The initiatives also include the evaluation of strategic alternatives for the GMAC Home Services business and the non-core servicing business. The moves were made "to further optimize the mortgage business as the downturn in the credit and mortgage markets persists," the announcement said. As a result of the moves, approximately 5,000 jobs will be eliminated. The layoffs work out to around 60 percent of ResCap's total workforce and impact a range of administrative and managerial positions. Around 3,000 employees will be given notice this month, while the remaining 2,000 cuts will occur by yearend.

Integrity Home Finance - FHA Announces New FHA Mortgage Ins. Premiums

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Thu, 28 Aug 2008 10:06:45 -0500

In response to the passing of HR 3221, this update announces FHA's new Mortgage Insurance Premiums for the period of October 1st, 2008 through September 30th, 2009. FHA's Risk Based Premiums that went into effect on July 14th, 2008 will be on hold till October 1st, 2009. Here are the 6 things you need to know about these changes... 1. Upfront Mortgage Insurance Premiums:

A. Purchase Money Mortgages and Full-Credit Qualifying Refinances = 1.75 % B. Streamline Refinances (all types) = 1.50 % C. FHASecure (Delinquent Mortgagors) = 3.00 %

2. Monthly Mortgage Insurance Premiums:

A. For 30 year loans with LTV > 95 %, monthly will be .55% B. For 30 year loans with LTV < 95%, monthly will be .50% C. For 15 year loans with LTV > 90%, monthly will be .25% D. For 15 year loans with LTV < 90%, monthly will not be required E. For FHA Secure loans with LTV > 95%, monthly will be .55% F. For FHA Secure loans with LTV < 95%, monthly will be .50%

3. Mortgages with FHA case number assignments made on July 14,2008, through and including September 30,2008, shall maintain the risk-based premium structure for the life of the mortgage 4. FHA will issue another notice that will formally advise when the moratorium is concluded and the premium pricing structure that should be followed once the moratorium ends 5. Credit Scores

A. Borrowers with credit scores below 500 will require an LTV of 90% or less B. Borrowers with 3 scores, the middle score is used C. Borrowers with 2 scores, the lowest score is used

6. These premium changes apply to the folllowing FHA loan programs: 203b (standard 1-4 unit property), 203k (rehab loan), and 234c (condominiums) and do not apply to FHA reverse mortgages We are still awaiting more changes in response to HR 3221 so watch for future updates.

Mike Berrios

Rancho Cucamonga has funds again! $1.7 Million in funds for 1st Time Home Buyers

Mike Berrios CMPS, CMA, CLA (Integrity Home Finance) — Tue, 26 Aug 2008 12:12:35 -0500

Hello Everyone,

We received notice from the City of Rancho Cucamonga they have been awarded additional funding for this fiscal year July 08 to July 09. Please contact us if you have any questions. Please note that these funds are first come first serve. Homes must be in the attached area and must be REO or Foreclosed. I've also attached information on the $7500 credit they would receive in addition to this assistance. Please feel free to forward this to anyone who may have use.

Mike Berrios

Integrity Home Finance

(909) 945-8155