All of the negative publicity on the current state of the mortgage industry has had at least one (potentially) favorable fall-out, the Federal Reserve's decision to lower rates. Another rate cut is set to happen this next week although there is debate about how big of a cut to expect.

30 year fixed rates are below 6% and could be cut even further, so for once in the past 7 years I am actually advising my current buyers to look to 30 year fixed loan products! For many of us (and most of us) on ARM's that are scheduled to tick up and up and UP, it could be a great time to consider refinancing to a 30 year fixed (assuming your savings to do so would more than make up for any costs to refinance), although I would wait until the end of the month in the event of another rate cut. Rates certainly won't rise at this point.

The impact of rate cuts are highly debated since the effect on the economy can be both positive and negative. Should the Fed cut rates ‘too' much, investors/consumers may balk and assume that move indicates our economy is in a precarious state. Without rate cuts, we could see a spike in foreclosures (although the news constantly reports of a surge in foreclosure rates, the W. coast tends to lag behind other markets and we may not experience foreclosures even near to the level that other markets are), and general consumer spending on credit could slow (as it has) causing real concern of a recession.

For the time being, much of anything in the financial sector is up in the air which in itself makes all of us hesitant to do ANYTHING with our money except to stuff it under our mattresses.
However, because rates are low and will probably be cut again, it is DEFINITELY a good time to buy. I believe that what drives our economy is consumer reaction, no matter to what degree or effect. So the Federal Reserve and the President alike are wise to carefully consider how to best react to the ‘mortgage crisis' we can't seem to stop hearing about. But while the government decides what to do, we can all take a cue about how to turn any of this into our favor and as a buyer/investor myself I know to BUY LOW, SELL HIGH, and buying low just got a lot more feasible with the rates where they are.

My sellers are in a better position too because while the market has definitely changed from a seller's market to a buyer's market - until recently - there were much fewer potential buyers for my listed properties. Now with rates being lower, mortgage payments are lower and that increases the potential buyer pool for my sellers.


On another note, my former revered and favorite lender, Countrywide, has fallen out of favor for me. I am currently closing on a new house and, as usual, went straight to my favorite lender, who also happens to be the "Lindsey Lohan" of the mortgage world right now - because they are the #1 home lender in the United States, it stands to reason that they are at the forefront of every mortgage story on the news nowadays.

For me, this time around was a dramatically different experience for a couple of reasons. While I used to do the ‘fast and easy loan' which essentially meant I could buy whatever I wanted without documentation of any kind (short of a credit score over 680 which most consumers have), this time around I found it MUCH more difficult to obtain a mortgage with Countrywide. Countless documents were required of me and I couldn't understand why. Their guidelines would change on a whim even though I had locked in my loan weeks before. One day I would be told my loan would go through no problem, and the next day there would inevitably be a snag of some sort. It was similar to my ex husbands mood transitions! Crazy to keep up with!

I ended up moving my mortgage application to another lender and here's ultimately why I did; Countrywide is the one lender that has all of it's eggs in ONE basket. They are not able to count on deposits like so many other banks are, instead they are completely dependent on being able to sell their loans via mortgage backed securities on Wall Street. SO, no matter how GREAT of a borrower you are, NO ONE wants to invest in mortgage backed securities at this point, and can you blame them? Therefore, Countrywide is loath to take any mortgage that isn't perfect, and by perfect, I mean God would have to co-sign.

I have significant doubts about the future solvency of Countrywide and I'm not alone. While the nation's #1 lender will not ‘go out of business' per se, I think it's telling that B of A recently bought a TON of shares. Hmmmmm.

After much debate, my dear friend and favorite mortgage associate, Monique Garces, cut ties with Countrywide and moved to Homestone Mortgage, and I for one, am ecstatic she did!

Until next time,
Keely