How Inverted Yield Curves Defy “Normal” Financial Behavior - 04/29/07 10:31 PM
Interest rates remain inverted, a market condition in which the longer you commit to lending your money, the less that you earn on your investment.
Why is that a big deal? Imagine if a friend asked you to borrow money for two years you charged him interest on that money. We can list some of the risks in lending to your friend:
The risk of not getting paid back The risk that the money could have earned more for you somewhere else The risk that the value of the dollar will be lower when you get your money back The more risk you … (0 comments)

Principal Payback On Long Term Mortgages - 04/29/07 10:17 PM
Did you know:
After 30 years, a 30-year mortgage term is paid in full. After 30 years, a 40-year mortgage term has 57% of the original borrowed amount remaining. After 30 years, a 50-year mortgage term has 81% of the original borrowed amount remaining.Of course, it's not all bad for the holders of longer-term mortgages -- the mortgage interest tax deductions are higher of the holders of 40- and 50-year mortgage holders over the first 30 years.
… (3 comments)

Builders May Be Figuring Out The Market Faster Than Home Sellers - 04/29/07 10:11 PM
According to all of the headlines, existing home sales are down across the country.  Way down.  Check out this sampling:
Sales of Existing Homes Plunge Steeply (NY Times) Existing Home Sales Plunge In March (Houston Chronicle) Existing Home Sales Plunge, Biggest Retreat In 18 Years (Salt Lake Tribune)However, it's important to keep these statistics in perspective. 
Nationwide, housing may be showing softness, but real estate is a highly local phenomenon and different local markets across the county may be showing signs of strength.
As one example, New Home Sales posted an increase last month.  The biggest difference between Existing Home Sales and New … (6 comments)

What's All The Yellen About? - 04/29/07 10:05 PM
So much for market calm. 
The mortgage market tanked yesterday when, in response to conflicting data about growth and inflation, San Francisco Fed President Janet Yellen said "watchful waiting" is the Fed's likely next step. 
This surprised markets because most expect the Fed to lower the Fed Funds Rate within the next few months.
The Fed Funds Rate does not control mortgage rates, but it can have an impact. 
This is because the Fed Funds Rate is related to Prime Rate, the basis for most bank-to-business lending (i.e. business loans) and bank-to-consumer lending (i.e. credit cards, home equity lines of credit).
When the … (2 comments)

Builders Call On Congress To Pass FHA Reform - 04/29/07 09:56 PM
During testimony to the House Financial Services Committee, the National Association of of Home Builders (NAHB) called on Congress to enact legistlation the would revitalize the FHA and enable it to recapture a significant portion of market share again.
According to NAHB's Bill Killmer, group vice president for advocacy: "Statutory and regulatory constraints have limited the FHA's ability to respond to the needs of borrowers, resulting in many home buyers ending up with inappropriate mortgages. X "Had the FHA been in a better position to respond to changing market forces in the past few years, the subprime situation might not be as … (0 comments)

Realtors/NAR Endorse FHA Reform - 04/29/07 09:52 PM
The National Association of Realtors has also called upon Congress to enact legistlation that will conform to today's mortgage environment and enable the FHA to recapture significant market share.
"The FHA program makes it possible for higher-risk, yet credit-worthy borrowers to get prime financing. "By offering access to prime rate financing, FHA provides borrowers a means to achieve lower monthly payments, without relying on interest only or ‘optional' payment schemes,"
When the housing market was in turmoil during the 1980s, FHA continued to insure loans when others left the market. In the past, FHA's availability has helped to stabilize housing markets when … (0 comments)

My Cover Has Been Blown - 04/29/07 09:47 PM
After blogging for months and being able to hide behind my picture and posts, you can finally hear me via podcast. Actually, this week, Morgan Brown from one of my favorite blogs Blown Mortgage, interviewed me regarding FHA, current market conditions, originating and the subprime environment.
I was honored he thought of asking me and he truly is a gentleman. Whether you listen to my podcast, go to Blown Mortgage and read one of my favorites.
Podcast Interview
… (0 comments)

The Domino Effect of Sub-Prime Lending on Move-Up Home Buyers - 04/24/07 06:42 PM
Wondering how the dramatic change in sub-prime mortgage lending will impact you? 
Try this stat on for size: 
Since 1998, 1.4 million families have used sub-prime mortgages to buy their first home.
As sub-prime lending guidelines get tighter, there will be fewer first-time home buyers and that impacts every homeowner in the country.
The reason lies in "move up" buying.
When a sub-prime family buys their first home, the sellers of that home likely "move up" to a bigger home.  In turn, the sellers of the second home may move up, too.  And of the third home.  And fourth, and so on.
Somewhere in … (4 comments)

Can I Even Do This Loan Any More? - 04/24/07 05:56 PM
It's happened again! With the credit markets tightening, underwriting guidelines are going through a paradigm shift.
While Fannie, Freddie, FHA and VA (prime products) guidelines have not changed much (yet), Alt-A and subprime guidelines are going through a metamorphosis. It's gotten to the point even experienced mortgage professionals are not sure if a program is available anymore.
Morgan Brown at Blown Mortgage has posted an excellent article titled "It's Time For Mortgage 2.0" that addresses this issue. Take the time and read this very timely post.
Happens every time you have a handle on underwriting guidelines.
Remember, Shift Happens!
Embrace change, because it's … (4 comments)

Wealthy Americans Are 25% More Likely To Hold Mortgage Debt - 04/24/07 05:53 PM
Interesting fact of the day: 55.5% of "wealthy" Americans have mortgages on their primary homes vs. 44.6% of the overall population. 
This doesn't mean that the wealthy are more indebted than the rest of us; it means that the wealthy are maximizing the tax deductions that the IRS makes available to every homeowner in the country.
It's also possible that wealthy Americans may be more likely to work with financial planners and CPAs to devise short- and long-term financial plans that take advantage of mortgage interest. 
See, unlike every other type of consumer debt, interest paid on most home loans are tax-deductible and … (2 comments)

Most California Defaults Happen Inland, Not On Coast - 04/24/07 05:49 PM
According to Rueters, most defaults in California happen inland and not in the large coastal metro areas.
"According to DataQuick, mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties, three affluent coastal markets with a tight supply of housing that has helped prevent home prices from slipping.
The likelihood of default was highest in inland Sacramento, Riverside and San Joaquin counties, where prospective first-time home buyers rushed in during the housing boom in search of relatively affordable housing.
Squeezed from pricey coastal markets, many Californians moved to such interior areas and used adjustable-rate mortgages to … (4 comments)

Until Bonds Get More Press, You're Going To Have To Find An Advisor You Trust - 04/24/07 05:44 PM
Unlike the stock market, it's hard for the average person to know when the bond market is getting turned upside-down. 
So, looking back at last Friday, when mortgage rates jumped very, very quickly in a short period of time, a lot of people got surprised (and burned).
With stocks, we can all turn on CNBC, Bloomberg, or host of other channels when the Dow Jones Industrial Average heads into a tailspin.  That sort of "market event" usually the lead story on the evening news when it happens, too.
With the bond market, though, that almost never happens.  There is no clear "buy" or "sell" … (0 comments)

Do Illegals Skew Construction Employment Figures - 04/24/07 04:41 PM
Does the fact that government unemployment figures don't reflect illegal alien job loss explain why government statistics have recorded only a small decline in construction employment?
According to the New York Times:
"...another set of losers is less visible: the immigrant workers, mostly illegal, who rode the construction boom while it lasted and now find jobs on building sites few and far between.
The growing presence of illegal immigrants in home building, mostly working for small labor contractors, might help explain why government statistics have recorded only a small decline in construction employment, despite the collapse in residential investment.
"Technically they don't fire them," said … (2 comments)

Appraisers Seek "Firewall" from Lenders - 04/24/07 03:47 PM
Originators, this is going to be a big deal over the next few years! Appraisers are seeking an artificial mandated firewall separating loan originators and themselves. This will drastically change the way loans are manufactured.
The four biggest trade groups representing appraisers believe inflated property valuations have been one of the main driving factors behind the surge in foreclosures by financially strapped borrowers.
Led by the Appraisal Institute, the organizations also argue inflated appraisals are at the heart of most mortgage fraud schemes and have called on federal regulators to come down harder on lenders pressuring appraisers to boost values in.
In … (2 comments)

The Week In Review (April 23, 2007) : What To Watch For - 04/24/07 03:35 PM
The economy showed signs of pushing forward last week, but major pressure on the average American consumer surfaced in the form of rising gas prices. 
Overall, it was a mixed bag for mortgage markets.
The Consumer Price Index (CPI) jumped 0.6% last month.  This cost of living increase was much larger than expected and mostly the result of surging gas prices at the pump. 
If we negate the impact of energy and food, however, the CPI rose just 0.1%.  This shows that inflation may not be prevalent in all parts of our daily lives.
Mortgage rates will react to a number of data … (0 comments)

Do Your Own Research And Your Appraisal Process Can Be Worry-Free - 04/24/07 03:23 PM
The appraisal of a home can be a bit frightening.  After buyer and seller have agreed on a price and signed a contract, a mortgage lender will send an independent professional to verify that the price is "reasonable" and fair.
The appraisal process begins with a licensed appraiser making a thorough inspection of the home, its dimensions, and its fixtures.  Aside from measuring square footage and counting rooms, the appraiser also looks for structural integrity and home quality. 
He ignores the dirty dishes that may be in the sink, or the unmade bed -- they have no bearing on a home's value.
After … (5 comments)

Geez...Just Do It! - 04/24/07 02:52 PM
Came across an interesting and insightful blog post by Millionster about a hapless man who had two things in life he wanted more than anything. Problem is, the man had an excuse for every viable suggestion given to him. After reading the post, I thought how much it relates to our business. As a sales manager, I recall  countless times coaching low-producing LO's who came to me asking for advice on what they had to do to pick-up their business. Yet, many times they would point out reasons WHY they COULD NOT do what they needed to do to be successful.
Truth … (3 comments)

Overview of Proposed FHA Reform - FHA Is Making a Major Comeback - 04/23/07 11:59 PM
Both H.R. 1852 and H.R. 1752 take giant steps towards providing FHA the authority to make it a viable option for consumers. Both proposals provide for:
Flexible downpayments Flexible risk-based premiums Increased mortgage limitsExtension of mortgage termsreform of FHA's condominium program changes to the Reverse/Home Equity Conversion Mortgage (HECM) program Below is a brief review of the key provisions of both bills.
Raising Maximum Mortgage Limits for High Cost Areas
Both H.R. 1852 and H.R. 1752, if enacted, would raise FHA's maximum mortgage limits to 100 percent of an area's median home price (currently pegged at 95 percent) and raise the … (5 comments)

 
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Tony Gallegos

Marietta, GA

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Cognicorp Mortgage Banking Advisory

Address: Marietta, GA

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