Loren's Blog

Mortgage Rate "movers" for the week ahead- 03/02/09

Loren Johnson, CMPS (Mortgages Unlimited) — Fri, 27 Feb 2009 12:47:15 -0600

The important Employment report will come out next Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for a loss of over 600K jobs in February.

Before the Employment Data, the ISM national manufacturing index and Personal Income will come out on Monday.

Pending Home Sales, a leading indicator for the housing market, is scheduled for Tuesday.

Productivity, Factory Orders, and Construction Spending reports will be released on Thursday.

The amount of money the US Treasury will need to borrow to fund government spending seems to rise every week. Two weeks ago, it was the $787 billion Economic Stimulus Plan. Last week, the government announced the $275 billion Financial Stability Plan. This week, the Obama administration proposed a $3.6 trillion budget plan, with an estimated deficit of $1.75 trillion, which is enormous by historical standards. The Treasury will need to issue debt to borrow money to fund all of this. As the government issues more debt, the interest rate offered generally must rise to attract additional investors. Interest rates on similar investments such as MBS then move higher as well to compete for funds from investors.

Mortgage Rate "movers" for the week- 2/23/09

Loren Johnson, CMPS (Mortgages Unlimited) — Mon, 23 Feb 2009 12:45:28 -0600

This final week of February will reveal a number of important indicators of economic growth.

Existing Home Sales and New Home Sales will be released on Wednesday and Thursday, respectively. Durable Orders will also come out on Thursday.

Revisions to fourth quarter 2008 Gross Domestic Product (GDP) will be released on Friday, along with the Chicago PMI national manufacturing index.

Consumer Sentiment and Consumer Confidence are on the schedule as well.

Fed speakers, the scheduled Treasury auction on Thursday, and new information about government programs also may have a significant impact on mortgage markets this week. Call or e-mail me before you want to lock a rate....and have a great week!

It's all in the 'attitude'!

Loren Johnson, CMPS (Mortgages Unlimited) — Mon, 16 Feb 2009 13:30:51 -0600

After years of being the "grumpy" one, the cynic, the glass is half empty person, I have finally arrived. Last week someone who met me last year and has spent just a small bit of time with me said "You are such an inspiration, you are always so upbeat and looking at the bright side of things". Whew. That was a goal of mine, and I might have achieved it!

So what is your attitude like? Are you as sick and tired of hearing complaints as I am? Last week the manager of the local gas station was sweeping the sand off her sidewalk, and commented to me how she didn't even sand her parking lot but look at all of this dirt! She felt the village should come and clean it up, since it's their sand! My approach? I pointed out that all that sand was a sign that she had lots and lots of customers, and wasn't that nicer than the alternative? She stopped, smiled, and agreed that was a better way to look at it, and off she went sweeping and smiling.

How about you? Are you walking about like a grump? Are you complaining all the time about how business is slow, customers aren't buying, and isn't he economic news just awful? Well, given a choice, I will choose to buy from, associate with, and REFER business to someone with a brighter attitude. I have dozens of stories from my connections about how this is their best year yet, how they are working toward their goals with gusto, and how many opportunities there are out in the world right now. It's all in the perspective.

So what's your attitude like? Check the grumpy at the door please, leave it at home, in your car, anywhere but within hearing distance of the people who will refer business to you. Be someone who people want to spend time with, and they will refer business to you.

Have a GREAT week!

Mortgage Rate "movers" for the week ahead- 2/16/09

Loren Johnson, CMPS (Mortgages Unlimited) — Fri, 13 Feb 2009 13:16:17 -0600

Inflation data will highlight a full Economic Calendar next week.

Industrial Production, an important indicator of economic activity, and Housing Starts will be released on Wednesday.

The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Thursday.

The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Friday. CPI looks at the price change for those finished goods which are sold to consumers.

In addition, investors will continue to wait for details from the Treasury on the Financial Stability Plan.

Mortgage markets will be closed on Monday in observance of Presidents Day.

Mortgage Rate "movers" today- 2/12/09

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 12 Feb 2009 10:35:26 -0600

Mortgage-Backed Securities markets have showed little reaction to the economic data released this morning. January Retail Sales rose 1.0% from December, well above the consensus for a decline of -0.3%. It was the first increase in six months. Economists believe that more consumers postponed their purchases until after Christmas this year, and they don't see the strong data as the start of a new trend. Jobless Claims came in a little higher than expected. Continuing Jobless Claims rose to a new record high. No more economic data will be released today. A 30-yr Treasury auction will take place at 1:00 et.

The House and the Senate agreed yesterday on a compromise $789 billion fiscal stimulus plan. It is expected to pass before the end of the week. The Obama administration estimates that 3.5 million jobs will be added or saved by the plan. The Senate version contained a provision for a $15,000 homebuyer tax credit, but that was dropped in the final version. Instead, the $7,500 first time homebuyer tax credit will no longer need to be repaid.

Reader's Ideas for "Homemade" Valentines Day Gifts

Loren Johnson, CMPS (Mortgages Unlimited) — Wed, 11 Feb 2009 17:28:31 -0600

After I had posted "10 Debt-Free Ideas for Valentines Day" on Monday, I was suprised by the feedback I recieved. ideas Your budget is probably already tight this year as you are paying down debt, adding to savings and trying to survive with current economic conditions. But if you still want to give your loved one something special, here are some gift ideas that say ‘I love you' without making your piggy bank squeal.

Frugal Valentine's Day Gifts

1. Homemade card: Get creative and make a card yourself instead of spending money on a generic store bought one. Cut out heart shapes and add a loving note.

2. Sweet tooth: Make something yummy for him or her. Pull out the cookie cutters and make heart shaped cookies or brownies. Another idea is chocolate covered pretzels or cupcakes.

3. Flowers: Instead of buying an expensive bouquet from a florist, make it yourself. Check out your local big box retailer or even local grocer for great deals. Try and get creative as well. Roses are classic, but there are cheaper options that may be even more impressive. Even a single flower shows you care if you can't afford a full bouquet.

4. Express yourself: Write a poem or sentimental love note. This is something they will keep forever. Buy a sheet of scrapbook paper or parchment to write on to add a little something extra.

5. Coupons: Create coupons or vouchers for him or her to do something special at a later date and time. Some ideas include a massage, a car wash, a day with the kids, or something else that best fits them.

6. Pictures: There are lots of ways to make photos special. Make a photo album online at sites like myphotoalbum or shutterfly. Create a scrapbook of the special moments together from the year. You can also add things to the scrapbook like ticket stubs, program covers, etc.

7. Music: Create a CD full of romantic music or make a CD of your loved one's favorite music.

8. Book: If your sweetie loves to read, buy a book they have been wanting or one from a favorite author, and add a special note.

9. Spa Day: Look for discount deals on spa packages. You can probably find lots of discounts this year. Do a couple's massage or purchase a day of pampering for your loved one.

10. Wrap it all up: Create a basket or box full of great items. Add the CD, the book, a framed photo, scented candles, gourmet coffee/tea and some bubble bath.

Good Luck to you...and a Happy Valentine's Day to all!!

Debt-Free Date Ideas for Valentine's Day

Loren Johnson, CMPS (Mortgages Unlimited) — Mon, 09 Feb 2009 17:36:09 -0600

The hype surrounding Valentine's Day has long made us dig deep into our pockets for the traditional roses, chocolates, and jewelry. According to a 2008 report from the National Retail Federation, consumers expected to spend $122 on Valentine's gifts last year. But this February, in the midst of a roller-coaster economy, the flutter many Americans are feeling has more to do with financial worries than a quickened heartbeat caused by love. Remember that there are plenty of ways to show how you feel without spending a fortune. Inspired by the "Debt Diva", Clarky Davis, here are some ideas for 'debt-free dates'.

1. Romantic Dinner: Have a nice candlelit dinner at home. Cooking at home costs much less than going to fancy restaurant. Dress up in something nice and make something new.

2. Treasure Hunt: Create a map and go to all your special places or favorite spots. Hide a little gift at the end to wrap it all up.

3. Day of Fun: Since Valentine's falls on a Saturday this year, you can plan a whole day of activities, which could include breakfast in bed, a day at the park, a movie marathon and a romantic dinner.

4. Movie Marathon: Movies are a great way to spend time together cuddled up on the couch. Pick movies that are special to you both or find something you each like and want to share with one another. Another idea is to watch home videos to bring back memories from your wedding or kid's younger years.

5. Live Music: Check out a concert in your town that you both enjoy. There are also local cover bands that play music of a favorite artist at an inexpensive venue or even for free.

6. Wine Tasting: Many vineyards offer a tasting for around $10. This is a romantic fun way to spend the day. If you make a purchase at the end, many vineyards will even apply the tasting fee to the product.

7. Relax: Take the day to spend relaxing together at a bookstore, a coffee shop or even at home. Sometimes you just need to rest and know you are there for each other.

8. Take a scenic drive: Drive to special place or get out of town for the day. Talk and reminisce about good times.

9. Do a second "first date": Ask all the get to know you questions. Give yourself a low budget and have some fun doing the things you did when you first met.

10. Dance: Take a slow dance at home after dinner or find somewhere free to dance the night away later in the evening.

Mortgage Rate "movers" today- 2/06/09

Loren Johnson, CMPS (Mortgages Unlimited) — Fri, 06 Feb 2009 09:08:26 -0600

The US economy lost -598K jobs in January, even worse than the consensus forecast for a loss of -500K jobs. The total losses for 2008 were revised higher to 3 million, up from 2.6 million. Adding in the January figures, the economy shed 3.6 million jobs over the past 13 months, with half of the losses taking place over the past 3 months. The Unemployment Rate jumped to 7.6% from 7.2%, to the highest level since 1992. The manufacturing and construction sectors continued to show weakness. The service sector, which held up relatively well for most of 2008, also posted large declines. Average Hourly Earnings, a proxy for wage growth, increased at a 3.9% annual rate.

Despite the weaker than expected economic data, the early reaction to the Employment report was a rally in the stock market and a decline in Mortgage-Backed Securities prices. After this report, investors feel that a large fiscal stimulus package is very likely to pass in the near future, which will benefit stocks. The added supply of debt needed to pay for the plan will be unfavorable for Mortgage-Backed Securities....and Mortgage Rates.

Explaining the 'potential' new Homebuyer Tax Credit

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 05 Feb 2009 14:51:28 -0600

I'm sorry I didn't post this IMPORTANT news earlier, but I've been very busy this morning. Last night, the Senate added a significant homebuyer tax credit to the housing stimulus plan. Here are the key elements of the credit:

* The tax credit is for the amount of $15,000 or 10% of the purchase price (whichever is less), with the option to utilize all in one year or spread out over two years. The credit does not have to be paid back.

* The tax credit is available to all purchases of any home from date of enactment for one full year - no longer just a first time homebuyer credit.

* Able to claim the credit against the 2008 tax return

* Buyers must occupy the home for two years as their principal residence

* Includes a two year recapture provision (if they leave the home in two years they lost the credit)

* Purchases of homes by investors are ineligible

* Sunsets the previous $7,500 Housing Tax credit on the date of enactment

* The credit is not refundable. (The $7500 credit was refundable, but had to be paid back).

The bill is still working its way through Congress - The House of Representatives must still negotiate with the Senate, and the House bill does not contain the credit. So there may be additional changes. But this is an important step forward.

Facebook? A dinosaur gives in...and loves it!

Loren Johnson, CMPS (Mortgages Unlimited) — Wed, 04 Feb 2009 14:39:01 -0600

I have to confess...I was a Facebook holdout. Not because of time....but because of loyalty. I'm an AR kind of guy. The kind that likes to post here, and meet RE types from all over the country.....

Until I was 'yelled at' during a seminar on how to effectively use 'social media' like AR & Facebook to augment (not be the sole driver of) my marketing efforts.

I've been signed up for 24 hours (like my favorite TV show!), and already have 21 'friends'......and 2 new potential clients. All for spending 1 hour yesterday learning the system.

Does this mean that everyone will have instant success by doing this??? No.....but I did....and I don't see why everyone wouldn't. Just use it as an extra tool...not as your sole marketing plan.

Did you know that Jeffry Gitnomer is on Facebook? ...and he is now a 'friend'.

If you are not already using Facebook, I would heartily recommend it!!

Save Energy....."Pull the Plug" on Electronics

Loren Johnson, CMPS (Mortgages Unlimited) — Tue, 03 Feb 2009 21:28:51 -0600

It's like leaving the closet light on all day and all night, all year. When 12 months are up, you will have spent between $50 and $70 to keep that light burning.

That's an undeniably wasteful way to blow 50 bucks, but that's how much energy is lost in an average household every year. The culprit: electronics sitting idle. But still, $50 in the grand scheme of things? But think of not just your home, but your neighbors.......and their neighbors......in town after town across America. The problem is more electricity being used, which leads to pollution. It forces the electrical grid to work a little harder than it needs to, all for energy that slowly seeps away.

Unlike a light bulb, which generally relies on a switch to provide power, most electronics and appliances are continually powered, even when they're off. Think of the clock on your coffeepot or VCR. It's off, but not all the way. In the last study I saw, the average home has 19 appliances that use standby power. Instead of one computer, you may have two. A TV in every room. It adds up.

And as it adds up, there goes your 50 bucks.

To combat the rise of wasted energy, I would advocate unplugging appliances and electronics that don't get used much. That includes cell phone chargers, radios and other small electronics that don't need to be constantly powered. The problem that comes into play is resetting the clock on some devices. If you don't mind doing that, it's a good way to save.

Devices like Kill A Watt can also help save money. Available for around $25 through a number of online retailers, the gadget measures power use in constant wattage and kilowatt hours. Many people are becoming more aware-more concerned-about how they're using energy.

Part of that concern involves replacing outdated technology. Older appliances suck down more power, mostly because of the way they were designed.

When purchasing new electronics or appliances, check for energy efficiency ratings. It's a given that some things are going to use a lot of power when they're in use, but that doesn't mean you need to keep paying for it after switching it off.

Foreclosure Moratorium Spurs New Interest In Short Sales

Loren Johnson, CMPS (Mortgages Unlimited) — Tue, 03 Feb 2009 11:41:24 -0600

The national foreclosure moratorium imposed by Fannie Mae and Freddie Mac, major banks such as Citibank and Bank of America, and a host of state governments has created a "breather" for homeowners in default. By working with loan servicers, some homeowners will be able to modify their loan terms and stay in their homes. But many won't.

Not all borrowers will qualify for modified loans. Lenders are keenly aware of this, as well as the fact that foreclosing on a home is an expensive proposition: It can cost a bank $30,000 to $50,000 to foreclose on a home, plus carrying costs that equate to 1.0% to 1.25% of the value of each home per month. There is little enthusiasm for increasing bank-owned (REO) inventory in markets already saturated with foreclosed homes and falling prices.

As an alternative, lenders have new enthusiasm to ramp up the volume of short sales.

Short sales, as most know, are when the lender allows a distressed property to be sold at a price lower than the homeowner's mortgage indebtedness, with the difference forgiven. This relieves the homeowner of their ownership and debt burden without marring their credit report the way a foreclosure would. It also typically allows the new purchaser to buy into the neighborhood at a substantial discount ... much more in line with the property's true, current market value. In other words, short sales facilitate efficient clearing of the market.

Historically, short sales have not been very appealing to lenders. The short sale is a complex process that requires an agreement by all the lien holders to accept the lesser amount owed by the original borrower. The paperwork and number of players involved in short-sale transactions can easily overburden a servicer who is already dealing with hundreds of thousands of loan modifications, REO dispositions, etc.

But now with over four million new loans in default in this cycle and six million more expected in early 2009 due to coming interest-rate resets, lenders such as Citibank, Bank of America and Wells Fargo are fired up for short sales.

As they see it, if just 25% of current loans in default could be sold through short sales it would stave off one million foreclosures (good for homeowners) and replace one million nonperforming borrowers with one million performing borrowers (good for lenders).

The industry's challenge to accomplish this is two-fold: Evaluating their portfolios to determine which homes are well suited for short sales, and processing the high volume of bulk sales.

So lenders are now assessing a distressed borrower's situation early in the loan modification process, calculating the sensibility of modifying the loan versus offering the property in a short sale or letting it likely roll into foreclosure. In cases where short sales are the best route, lenders are proactively assigning loans in bulk to be put through the short-sale process. (This phenomenon is strangely new to homeowners; in the past it was incumbent on them and their agents to initiate the short-sale process, not the other way around).

The second part of the challenge is how to process the actual sales, considering legacy technology solutions weren't built to handle either the volume or the complexity of today's short-sale transactions.

Mortgage Rate "movers" today- 1/29/09

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 29 Jan 2009 15:59:34 -0600

Stocks, Treasuries, and Mortgage-Backed Securities(MBS) all showed significant losses today. Weaker than expected economic data was consistent with the decline in stocks, but Treasuries and MBS usually benefit from weak economic news. Bond markets continued to suffer for a second day after the Fed did not announce a definite plan to purchase Treasuries. December New Home Sales fell far more than expected to a record low level of 331K annual units. New Home Sales for 2008 dropped to the lowest level since 1982. The 5-yr Treasury auction received weaker than expected domestic demand, but foreign investors purchased a stronger than average 35% of the total. The House passed its version of the fiscal stimulus plan, and the Senate is expected to consider a different version next week. The Dow fell 200 points.

Tomorrow, GDP, Chicago PMI, and Consumer Sentiment will be released.

The Fed purchased $16.8 billion in agency MBS during the weekly period ending January 28, down from $19.0 billion the prior week.

Mortgage Rate "movers" today- 1/28/09

Loren Johnson, CMPS (Mortgages Unlimited) — Wed, 28 Jan 2009 15:40:08 -0600

It was a volatile session in the Mortgage-Backed Securities market today. First favorable and later unfavorable repricing took place. MBS prices fell after the release of the Fed statement, and Treasuries dropped far more. Investors were hoping for more clarity on the circumstances which would cause the Fed to purchase Treasuries in addition to MBS. The Dow rose 200 points. Tomorrow, Durable Orders, Jobless Claims, and New Home Sales will be released. There will be a 5-yr Treasury auction at 1:00 et.

As expected, the target for the Fed Funds rate remained unchanged, close to a level of zero. Heading into the announcement, the biggest question for investors was whether the Fed would begin to purchase Treasuries in addition to MBS. According to the statement, the Fed is ready to purchase Treasuries if conditions warrant. The vote was 8 to 1, and the dissenter was in favor of immediate Fed purchases of Treasuries. The statement also reported that the Fed would expand the program to purchase MBS if needed. Overall, the Fed expects to keep rates extremely low for "some time" and will "employ all available tools" to boost the economy.

Stop the In"sue"anity!!

Loren Johnson, CMPS (Mortgages Unlimited) — Tue, 27 Jan 2009 09:16:27 -0600

Saw a news item in the morning paper that just made me cringe...and had nothing to do with the housing industry, for a change!!!

A Wisconsin State Supreme Court ruling yesterday says that a former Cheerleader cannot sue another cheerleader who had dropped he during a 'stunt' in 2004.

WHAT???

I have a daughter who dances, and sometimes she falls during practice, or strains something during a dance. Would I even think of suing the instructor?????NO.

In this case, a female cheerleader was dropped & injured her head during warmups for a High-School basketball game. She sued the boy who had dropped her, the school district, and the insurance company. (The story does not mention anything about any permanent injury...I'm assuming it would have if there were). The court ruled that she couldn't sue over an unintentional injury in a school-sponsored contact sport, of which they included competitive cheerleading.

Yes, I'm sorry that someone was hurt, and I hope she is well now. However, I've really had it with people who think it's always "someone else's fault" and want to sue. In my world, I see no clearer picture than, "I can't pay my mortgage, so I'm suing the bank!".

Things can happen that are accidents. I feel we need the courage to admit that some things just can't be 'blamed' on someone else. Just get up, brush off, and move on!

Mortgage Rate "movers" for the week ahead- 1/25/09

Loren Johnson, CMPS (Mortgages Unlimited) — Sun, 25 Jan 2009 16:14:54 -0600

The major highlight this week will be Wednesday's Fed meeting. With the fed funds rate close to zero, rate cuts may no longer be an option. The Fed has many other tools at its disposal, though, and the accompanying statement will be highly anticipated.

A wide range of other beconomic data will come out this week as well. Gross Domestic Product (GDP) for the fourth quarter will be released on Friday. GDP is the broadest measure of economic activity. Durable Orders, another important indicator of economic activity, is scheduled for Thursday. The Chicago PMI national manufacturing index will come out on Friday. Housing market activity will be revealed in the Existing Home Sales on Monday and New Home Sales report on Thursday. Consumer Confidence and Consumer Sentiment will round out a busy week.

Fed Chief Bernanke wrestling with Mortgage Rates

Loren Johnson, CMPS (Mortgages Unlimited) — Fri, 23 Jan 2009 10:10:06 -0600

This past week, Federal Reserve Chairman Ben Bernanke, publicly laid out an aggressive agenda for our central bank and suggested that he's hardly out of ammunition to fight the global financial crisis. He also gave explicit support to efforts by Congress and President-elect Barack Obama to create the largest short-term economic stimulus plan the nation's ever seen.

He cautioned, however, that any stimulus plan would be doomed if problems in the financial and credit markets aren't fixed. Bernanke outlined a number of steps that'll be taken this year to have the Fed purchase, as a buyer of last resort, the distressed assets that financial markets can't price or for which buyers can't be found.

The Fed last month dropped the federal funds rate-an overnight bank lending rate that serves as the benchmark for a wide range of consumer and business lending-to a range between zero and a quarter percent. That's the lowest it's ever been.

Interest rates are a prime tool used by the Fed to stimulate or slow the economy, depending on what's needed. A rate of effectively zero gives the impression that the Fed is now on the sidelines because it can't take rates any lower.

Not so, Bernanke said.

"Even if the overnight rate is close to zero, the committee should be able to influence longer-term interest rates by informing the public's expectations about the future course of monetary policy," he said. In other words, communicating the Fed's thinking is now more important than ever since expectations of future inflation-the rise in prices across the economy-influence investment decisions.

This comprehensive plan also includes sharply increasing the Fed's balance sheet, the listing of its financial obligations, which already has soared from $800 billion last August to more than $2.3 trillion currently.

The Fed's books already include short-term lending to banks and other financial institutions, as well as the purchase of promissory notes from U.S. corporations and mortgage bonds guaranteed by Fannie Mae and Freddie Mac.

Bernanke said that the Fed and Treasury Department next month will begin providing three-year loans to investors willing to purchase top-rated securities whose collateral is recently originated consumer and small-business loans. This move, he said, effectively substitutes a government balance sheet for private-sector balance sheets in the absence of private lending.

"If the program works as planned, it should lead to lower rates and greater availability of consumer and small-business credit," Bernanke said.

By expanding the Fed's balance sheet, he conceded, the Fed effectively is printing money, which history shows could sharply push up inflation. As the financial crisis subsides, the Fed's balance sheet will shrink, Bernanke said, and the Fed "will be able to return to its traditional means of making monetary policy _ namely, by setting a target for the federal funds rate."

When the Fed announced late last year it would purchase $600 billion of debt and mortgage bonds issued or backed by Fannie and Freddie, mortgage rates fell sharply. Now, Bernanke said, the Fed wants to purchase longer-term securities issued by the Treasury Department to lower 15-year and 30-year fixed mortgage rates, boosting the housing market.

"In determining whether to proceed with such purchases, the committee will focus on their potential to improve conditions in private credit markets, such as mortgage markets," he said.

Implicit in that statement, however, is that interest rates may have to increase more than many Americans are accustomed to, or inflation may be higher than the Fed is comfortable with.

Neither will be pleasant choices.

Low Rates Likely to Stay, But Cash-Out Refi's are still Elusive

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 22 Jan 2009 19:10:40 -0600

To get us through the early part of this new year, let's get some perspective on what could be driving real estate matters in the weeks to come.

First off, it looks as if low fixed interest rates for mortgages-now around 5%-will be with us awhile. But rates could begin to rise if the stock market recovers. Investors who have flocked to the relative safety of Treasury bonds will shift their money to Wall Street if it seems profitable.

Treasury bonds today offer little or no return to investors, who would at least get a somewhat thicker mattress if they put their money there. As we've seen, investors are really nervous people, and the slightest bit of good or bad news sends them into buying or selling frenzies and the rest of us to the unemployment office.

Which brings us to the less-than-frenzied state of home-buying. Not much of a mood to purchase right now. Refinancing, anyone? My typical refinance file looks like this: A homeowner who owes no more than 80% of the house's appraised value; has decent credit overall and has never been 30 days late on the mortgage in the last two or three years; is an employee who can readily document wages; needs a loan for $417,000 or less; and is refinancing for a better rate, not a cash-out.

Cash-out refis are what got a lot of people into mortgage delinquency and foreclosure. They pulled out wads of equity, then, as circumstances changed, ended up owing up much more than their houses were worth. Either they made small down payments, or got negative-amortization loans, or the property's value fell, or a combination of two or all three of those things. On top of that, people with little equity must get mortgage insurance, and the resulting payments could lower or eliminate the incentive to refi.

Back to buying and selling: Realtors continue to tell me that a lot of sellers still think they can demand high prices for as-is properties. Sellers complain that buyers are too picky. But if your place isn't ready for the market, prospective buyers will move on. If you must put your house on the market now, it makes sense to have it checked by a qualified home inspector first.

During the housing boom, pre-inspections seemed unnecessary. If a buyer balked at a new roof or furnace, another would be along soon.

Not anymore. To sell a house quickly and for a satisfactory price, a seller must make sure the house is close to perfect. If that means spending money to make money, spend it.

Feel the "change"...in Mortgage Rates??

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 22 Jan 2009 11:52:32 -0600

So, do you still feel 'change' coming today??? I ask that tongue-in-cheek because the only change that has been going on the past week is Mortgage Interest rates creeping upward about 3/8ths of a percent! I've gotten a lot of e-mails asking me "why", so I thought I would try and answer many of those questions in 1 blog entry!

In a nutshell, investors in Mortgage Bonds right now are scared. A few weeks ago, the Federal Reserve announced a plan to buy up Mortgage Bonds as a way to lower mortgage interest rates. Rates quickly did drop, as investors knew there would be a ready-made buyer for mortgage bonds in the near future....the Fed! The past 2 weeks, the Fed has announced that they have bought bonds, and rates have stayed in a good place. However, 2 things have happened to stop the 'good feelings' by bond buyers.

Number 1- Lower rates do not seem to be translating into more homes being started, built, OR sold. The Fed hoped that lower rates could help kick-start the housing industry. However, all it has seemed to help....so far....are people looking to refinance. We all know that these rates may have spurred 'tire-kickers' into actually writing offers, but those results will be seen months away. In the meantime, the Fed will continue buying bonds to keep rates low, but the 'euphoria' about those purchases helping quickly is now gone.

Number 2- We now have a new President that has vowed to tackle many problems....including a new 'Fiscal Stimulus" package. The only way to pay for that package....is to issue more bonds.....and to put them out into the marketplace competing with Mortgage bonds. We all knows what happens when there is an oversupply of an item, don't we? Well, mortgage bond buyers are now anxious about buying when a big new supply looks about ready to hit the market...so they cool off buying Mortgage Bonds. How does Fannie & Freddie get those bonds to move.....by raising the rate!!!

While it is NO time for gloom-and-doom regarding interest rates, knowing these 2 new forces in the market will help explain why last week's 4.5% interest rate is now suddenly 5%. It's STILL a great rate!! If you have any other questions, please feel free to contact me...and have a great rest of your week!

What's in store for the housing industry now??

Loren Johnson, CMPS (Mortgages Unlimited) — Wed, 21 Jan 2009 11:43:46 -0600

Now that we have begun a new Presedential era and will embark on what could be the most expensive economic stimulus package in history, Americans will soon discover how unfolding events will affect the housing market. Last year was the nastiest housing market on record. Economists and industry experts expect another dismal year, marked by lackluster sales and falling prices as demand remains weak because of slumping consumer confidence, tighter lending standards and rising unemployment.

Also likely to impact the market: between $60 billion to $100 billion of ALT-A and Option ARM loans which will probably reset early because of falling home prices, an existing inventory of nearly 1 million REOs not yet on the MLS, and more than 1 million homes now in the foreclosure process. Oversupply is a real problem. In November, 4.2 million existing homes (the latest figures available) were on the market from a year earlier, far above the 2 million to 2.5 million considered normal. Meanwhile, home prices dipped 13.2%-the most on record.

Despite the gloomy outlook, experts I've seen expectthe U.S. economy to emerge from recession in the second half of the year once the fiscal stimulus, Federal Reserve rate cuts and Treasury Department actions to strengthen the sluggish economy kick in. This should bode well for housing, as the long-awaited "bottom" materializes, setting the stage for a gradual recovery in 2010.

In the best-case scenario, home sales will rise to some extent and prices, which have dropped 20.3% since peaking in June 2006, will stabilize. Even then, the recovery is expected to be on a region-by-region basis, with some of the hardest hit states-Ohio, Michigan, Indiana, California, Florida, Nevada and Arizona-lagging behind much of the rest of the country.

The continually-growing stimulus package that President-elect Obama is promoting won't in and of itself do anything to correct the housing market, but it could provide a relatively high number of jobs, minimizing unemployment and having a ripple effect across a number of industries. That, in itself, could hasten the end of the recession. As unemployment stabilizes, and the economy starts to recover, low mortgage rates, much lower home prices and government incentives to encourage home buying should start to have a significant effect."

President-elect Barack Obama's massive economic recovery plan, which has a proposed $675 billion to $775 billion price tag, is designed to create or preserve 3 million new jobs through 2010. Nearly 2 million jobs were lost in the first 11 months of 2008, and the economy could lose as many as 3.5 million jobs this year. Unemployment, now at 6.7%, could climb above 9%, a figure not seen since the recession of the early 1980s, before the economy rebounds. Stemming joblessness could go a long way to help alleviate the housing slump. Let's all hope that can happen!

Good luck and Godspeed to our new President!!

Mortgage Rate "movers" today- 1/9/09

Loren Johnson, CMPS (Mortgages Unlimited) — Fri, 09 Jan 2009 10:41:12 -0600

Investors knew that the economy was in tough shape in December, and there was little reaction to today's Employment report. The economy lost -524K jobs in December, which was very close to the consensus forecast. The Unemployment Rate jumped to 7.2%, the highest level since 1993, from a revised 6.8% in November. 2.6 million jobs were lost in 2008, mostly during the final four months of the year. The manufacturing and construction sectors remained weak, while there were small gains in education and health care. Average hours worked fell to a record low, which may be a leading indicator for additional future layoffs. Surprisingly, Average Hourly Earnings, a proxy for wage growth, increased at a faster than expected 3.7% annual rate.

The consensus outlook is that the economy will remain weak through at least the first half of 2009. The question is whether a pickup will be seen during the second half of the year or whether the weakness will extend into 2010.

No more economic data will be released today.

Mortgage Rate "movers" today- 1/8/09

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 08 Jan 2009 15:14:04 -0600

The Fed announced that it purchased $10.2 billion in agency MBS between January 5 and January 7. The Fed may purchase up to $500 billion by the end of June.

There was stronger than average demand for the 10-yr Treasury auction. The Dow fell 25 points.

Jobless Claims announced this morning were lower than expected, and tomorrow the Employment report will be released at 8:30 et, and the consensus is for a loss of 500K jobs in December.

President-elect Obama again warned about the negative impact of failing to pass an economic stimulus plan.

Are you aware of Credit Scoring changes coming soon?

Loren Johnson, CMPS (Mortgages Unlimited) — Thu, 08 Jan 2009 11:38:08 -0600

Changes are finally coming to the "art" of credit scoring, the mathematical modeling of assigning a number score to how a Consumer uses credit. Soon, two of the three credit reporting bureaus will use a new model. Fair Isaac, the developer of FICO scores, has made the biggest change to its mathematical credit score model since it was introduced in 1989. Scores will still be on a 300- to 850-point scale. But the company estimates that 40% to 50% of borrowers' scores could go up or down by more than 20 points because of how the new model fine-tunes the variables it uses to evaluate consumers' credit use behavior.

For creditors, the new FICO score promises to reduce the risk of defaults, improving the predictability of defaults by 5% to 15%. Delinquencies are at their highest rate since 1992, when the economy was also in a recession.

Equifax and TransUnion will be the first credit reporting bureaus to roll out the changes over the next year. As credit has tightened because of the financial crisis, FICO scores are becoming increasingly important for borrowers looking to qualify for favorable terms. That puts high scorers in even a better position for pricing on loans.

Piggybacking - upping a score on someone else's back - won't be ruled out in the new FICO score. But it will make using that route to establishing credit harder and lengthier. The authorized user provision allows young adults to create a credit history by using and paying off accounts held by their parents. But it has also been subject to abuse, with high credit scorers selling their names to borrowers looking to improve scores. Fair Isaac estimates that 30% of U.S. credit card holders, or 60-75 million people, are authorized users. Fair Isaac has increased the number of groups that customers fall into from 10 to 12, taking into more account the number and magnitude of credit problems. Infrequent problem borrowers will no longer be lumped in with habitual delinquents. The new FICO model also focuses less on how many accounts a borrower has and more on the amount of balances carried.

The bottom line- know what your credit report looks like now, and work on improving any areas you can over the next 6 months. Sounds like another good New Year's resoloution to me!

Mortgage Rate "movers" today- 1/6/09

Loren Johnson, CMPS (Mortgages Unlimited) — Tue, 06 Jan 2009 15:40:48 -0600

Today's economic data had little impact. November Pending Home Sales fell -4% to 82.3, below the consensus of 88.0, to a record low. December ISM Services came in a little higher than expected, while December Factory Orders fell short. The FOMC Minutes from the December 16 Fed meeting showed broad support for the rate cut to a 0.00% to 0.25% target rate and for the use of unconventional tools. Fed officials were concerned about the risk that the economic slowdown will last longer than expected.

Surprisingly, though, with MBS prices remaining near the highs for the day, some investors issued unfavorable repricing this afternoon. This was most likely due to capacity constraints. MBS markets gained for a second day following the Fed's announcement about MBS purchases, while Treasuries were mostly lower. The Dow gained 60 points. No economic data will be released tomorrow.

It's been 3 business days. Still Motivated?

Loren Johnson, CMPS (Mortgages Unlimited) — Tue, 06 Jan 2009 10:42:02 -0600

To me, it's always fun to notice how crowded my workout place is every January. I know that if I put up with the slight wait to do my 'work', that within a few weeks....it will all return to normal. Why? Because of human nature. It's HARD to change things long-term, and most of us are too busy, distracted, or tired to make the effort to break our normal cycles of life.

I wrote a big column yesterday on changing your mindset for the new year. I wrote that in part for self-help....because I need to do it also! I'm trying to change my work 'style', knowing that if I don't, i'll be like all those folks who don't show up to the Health Club in March...with no changes for the better.

So.....how are YOUR resoloutions for change going after 3 days? Making more phone calls? Going to network meetings? Finally getting that mailer out to your clients?

Whatever you need to do, I hope it's working for you. If we all just change a bit for the better, think how that will elevate all of us in the Real Estate Business!

Good Luck!