https://activerain.com/blogs/willamette en-us https://activerain.com/blogsview/1628395/can-portland-market-survive-the-end-of-the-first-time-buyer-tax-credit- By just about any statistical measure, real estate sales in the Portland real estate market are way up. Here are the numbers… 1,799 homes sold in Portland during the month of March, a 52% increase from March of 2009. Pending sales are up 46%, and new listings are up 35%. The numbers are eye popping. But is this surge a result of an improving economy. or was it just buyers scrambling to get it under the April 30 expiration of the $8,000 home buyer tax credit put in place last fall? To qualify for the tax credit, buyers had to be “in contract” by April 30, and close on their purchase by June 30. Nishu Sood, an analyst at Deutsche Bank, told the Associated Press that after the credits are gone, “the most likely scenario is that, starting in May, sales will fall off again,” said “You will see a letdown.” There’s little doubt that the lure of the tax credit is spurring a lot of this activity. I have one client already under contract, and two trying desperately to get there, and all of them have the tax credit on their minds. Portland real estate agent Jeff Bale of redfin.com is having a similar experience, “the tax incentive seems to be driving a significant amount of the increased traffic. I am personally working with 3 buyers all scrambling to find the right house before the end of the month, and another client that sold their property and are in contract on another all thanks to the tax credit. ” Some sellers have apparently gotten wind of the tax credit gold rush. There is anecdotal evidence from some areas that sellers are playing hardball while negotiating everything from price to repairs, thinking that the credit’s expiration gives them more leverage. I personally think they’re playing with fire, and may get burned if this wave of buyers washes back out to sea after May 1st. But we do see a lot of activity in Portland, and suburbs like Lake Oswego, Wilsonville and West Linn. One of my buyers recently relocated from the bay area, and he and his wife knew they wanted to buy in Portland. The existence of the tax credit sped them up a little, but they would have been making an offer at some point this spring or summer anyway. So maybe the Portland real estate rally will have some staying power. I think Bale has it right, “What will May bring? Let me check my crystal ball.” Paul Gowen (Willamette Falls Financial) Tue, 04 May 2010 02:52:29 -0700 https://activerain.com/blogsview/1628395/can-portland-market-survive-the-end-of-the-first-time-buyer-tax-credit- https://activerain.com/blogsview/1351623/cra-and-acorn-caused-housing-crisis- If I told you that the floods that destroyed New Orleans in 2005 were the result of a solitary homeowner who left his lawn sprinkler on too long, you'd laugh out loud. Well, that's essentially the argument some are making about the housing crisis. They are laying the blame for it on the Community Reinvestment Act of 1977. The fact this urban myth is still around is further testimony that we Americans rely way too much on ideologically driven media for our news. The people pushing this fantasy have an agenda, and it's damn the facts, full speed ahead. Facts? Here are the facts... "I would like to dispel the notion that these problems were caused in any way by Community Reinvestment Act (CRA) lending. The CRA is designed to promote lending in low- to moderate-income areas; it is not designed to encourage high-risk lending or poor underwriting. Our analysis of the data finds no evidence, in fact, that CRA lending is in any way responsible for the current crisis." Whose words are those? Some far lefty blogger? A tie dye shirt wearing, Volkswagen van driving radical college prof? No and no. Those are comments from Federal Reserve Governor Elizabeth Duke in a speech to bankers from February of this year. Duke, in case you were not aware, was appointed to the Fed's Board of Governors in 2008 by then president George H.W. Bush. As a Fed Governor, Ms. Duke knows that the overwhelming majority of bad, risky loans made during the real estate boom were originated by non-bank mortgage companies. That's right students. Entities not subject in any way, shape or form, to the requirements of the CRA. The problem loans, and the securities attached to them, that fueled the housing crisis, and it's spillover into the economy as a whole, were traded by...wait for it...Merrill Lynch, Bear Stearns, and Lehman Brothers. Any of those names ring a bell? If you want to, you can read the rest of Duke's speech here. She has some very interesting ideas on what we, as a nation, can do to lessen the severity of the crisis in the housing market. Here in the Portland area, we are still fortunate. Our foreclosure rate is significantly lower than the national average. The best thing for those of us in the Portland area, and elsewhere, to cure what ails the housing market is to get people back to work. With the unemployment rate still over 10%, Americans are reluctant to purchase first homes, or to move up. Once Americans are working again, this crisis, like those before it, too shall pass. Paul Gowen (Willamette Falls Financial) Mon, 23 Nov 2009 03:34:01 -0800 https://activerain.com/blogsview/1351623/cra-and-acorn-caused-housing-crisis- https://activerain.com/blogsview/917890/bailouts-make-for-strange-bedfellows So the latest thing out of the nation's capital is a proposal that would limit the salary of bank head honchos...if the bank they work for is taking Federal bailout money. And you might be surprised where newly elected President Obama is finding support for this plan. More on that later. The cap is $500,000 in cash salary, but, execs can earn a nearly unlimited amount in restricted stock. How is it restricted? It doesn't fully vest until the bank pays back you and I and the rest of the American taxpayers, for the so-called TARP money. So in order to make a pile of money, these guys would have to make smart decisions, turn a profit, and return value to their shareholders. It makes perfect sense to me. Which is why I find it all the more surprising that you have all kinds of folks beating a path on to CNBC to complain about it. "Communism! It's the end of the free market as we know it!" they scream. Look, I didn't pay attention THAT closely in college. But rewarding someone, handsomely, if the company they work for gets out of trouble and becomes profitable sounds like the free market at its finest. Here at little old Willamette Falls Financial in Lake Oswego, Oregon, we're about 2,900 miles from Wall Street. But the principles should be the same. If we don't do a good job giving people sound mortgage planning advice, we don't make money. If we DO a good job, offering learned counsel and sound advice, we DO make money. Why should you and I be on the hook for a bunch of guys making a bunch of dumb decisions. No less a conservative stalwart than Larry Kudlow agrees with me... Watch last night's show on CNBC here... Paul Gowen (Willamette Falls Financial) Thu, 05 Feb 2009 02:41:52 -0800 https://activerain.com/blogsview/917890/bailouts-make-for-strange-bedfellows https://activerain.com/blogsview/901502/the-most-important-things Spending all day pouring through client's income, assets, credit and the other items that make up a mortgage application can be pretty dry. We are all defined, at times, in this business by numbers. Credit scores, interest rates, home value, income, mortgage amount, mortgage payment. And it is easy sometimes to lose sight of the fact that we are not defined...despite what the banks may think...by our credit score, our job or the size of our bank accounts. I had a perfect reminder of that today. This was in an email forwarded to me from a client. He had asked his wife, as many of us do, to lay out the details of the family books for the purposes of this new transaction we are working on. It was so touching, and funny, that I asked him for permission to share it here. What follows is the first part of the rundown, from wife to husband..."Assets
        Villa Verde--houseCash in Bank accountIrene--'84 300D MercedesRed Robin --'95 Geo PrismVacation International Time Share5 Chickens--laying about 3-5 eggs a dayCat named HenryInvestments:Daughter, India, 7 yrs old.   Our biggest investment for the future.  Value:  priceless; Disclaimer:  Public perception weak during whining spells and tantrums but long-term value has steadily increased."Reading this reminds me of that great quotation on parents and kids from an unknown author... "A hundred years from now, it will not matter what kind of house we lived in, what kind of car we drove, or what our bank account balance was.  But the world may be different because we made a difference in the life of a child." All good things to remember when we're fretting about our IRAs being sawed in half, the cost of health insurance, and the 1,000 other material things we all worry about from time to time. Paul Gowen (Willamette Falls Financial) Mon, 26 Jan 2009 11:02:29 -0800 https://activerain.com/blogsview/901502/the-most-important-things https://activerain.com/blogsview/900860/beatniks--pyromaniacs-and-gangsters It's the Wall Street Journal's lead story this morning. "Lending Drops at Big U.S. Banks."That's right. As we've talked about here in this space, a lot of the recipients of bailout, the so called TARP, funds, have gathered the cash to their bosoms and don't plan to let go anytime soon. 10 of the 13 banks surveyed by the journal lent LESS money in the 4th quarter. Flying in the face of a federal program designed to have the opposite effect. And it's not just a problem here in the United States. Franz Muntefering, chairman of Germany's Social Democrats told a German newspaper, "...most of the bankers are competent and responsible, but there are also some beatniks, pyromaniacs and gangsters."If you have a WSJ online subscription, you can read the rest of it here.Folks, it's very simple. This whole TARP thing won't work if bankers around the world are hiding under the bed. According to the Journal article, 59% of businesses feel like they are being hampered by the lack of credit. That means otherwise credit worthy companies are delaying expansions and/or cutting jobs. Not exactly a recipe for recovery. We should give kudos to Suntrust, US Bank and BB&T Corp, the three banks that actually did lend more money in Q4. Paul Gowen (Willamette Falls Financial) Mon, 26 Jan 2009 04:58:32 -0800 https://activerain.com/blogsview/900860/beatniks--pyromaniacs-and-gangsters https://activerain.com/blogsview/873396/what-are-they-waiting-for- I've talked with a lot of consumers here in the Portland area who tell me they are waiting. Waiting to refinance or purchase property. What are the waiting for? A better economy? Lower real estate prices? A sign from a higher power?Turns out the answers are no, no and no. They are waiting for the 4.5% mortgage rates they've been hearing are right around the corner. So they are rolling the dice, some holding mortgages with rates over 6%, hoping for that magic 4 dot 5. And that means that they are saying, "No" to mortgage rates as low as 4.75%. Are they right to wait? No, say prominent economists... "The downward trend we have seen in mortgage rates will not last beyond the first half of this year," said Celia Chen, senior director of housing economics at Moody's Economy.com in West Chester, Pennsylvania. "By then, the Federal Reserve's program will have run its course and other issues will move to the forefront that could push mortgage rates higher," she said. Read more about it here... Paul Gowen (Willamette Falls Financial) Fri, 09 Jan 2009 02:53:17 -0800 https://activerain.com/blogsview/873396/what-are-they-waiting-for- https://activerain.com/blogsview/842895/low-rates-alone-are-not-enough So you read that the Federal Reserve Board cut rates, lowering their "target" rate to between 0 and .25%. Normally, a Fed cut can be bad for mortgage rates, because Fed rates are overnight and mortgages are, well, longer. But Mortgage Backed Securities (MBS) rallied. Why? Because in it's announcement, the Fed also signaled that it would buy even more MBS, particularly from newly government controlled Fannie Mae and Freddie Mac. That has sent fixed rate mortgages dropping to as low as 4.75%. But... Those rates, at least right now, are only available for borrowers willing to pay, or able to finance in, the thousands of dollars of costs involved in a refinance transaction, including a 1% loan fee. Trust me when I tell you this, because I look at dozens of rate sheets from our lender partners every day. They are completely uninterested in allowing borrowers to choose other cost structures. For years we have counseled our clients to look first at an option to lower their rate using a "No Cost" refinance. In these transactions, we use some of the money paid to us by the lender to pay all the associated costs (appraisal, title insurance, recording fees, escrow agent, etc.) on behalf of the borrower. In normal times, that typically meant that a borrower might forgo an extra .25% in interest rate, but would save upwards of $3000 in closing costs. These transactions were a wonderful deal for consumers. Maybe that's why the banks hate doing them. And honestly, even given that, mortgage rates aren't nearly as low as they should be. At historical norms, mortgages tend to trade approximately 1.5% higher than the yield on 10 year US Treasuries. The yield on the 10 year as I type this is 2.09%. Does anyone see any 3.5% mortgage rates out there? No. The other problem, and this is a big one, is that banks have tightened their guidelines SO much that it almost doesn't matter how low mortgage rates fall. Why? First of all, sliding values around the country mean there are a lot of consumers who now owe more on their home than it's worth. These low rates do them no good. But there's another class of borrowers that shouldn't be in trouble, but might be. Let's take a fairly typical mortgage customer. I have a client (will call him Bob) who purchased a first home last year here in Portland, for $250,000. Bob, a very conservative type, put a full 20% down and chose a 30 year fixed rate mortgage we obtained for him at 6.25% with no points. Yea, lower costs for the consumer! Shortly after closing, Bob took out a small $25,000 Home Equity Line of Credit (HELOC) to finance some improvements to the house. Right now he has an $25000 balance on that HELOC. He might be out of luck. It's all going to be on the bank holding his HELOC as to whether or not they'll be willing to re-subordinate. So Bob may be stuck on the sidelines, with what now looks like an exhorbitantly high interest rate, unable to avail himself of these historic low rates. So here, in my tiny corner of the internets, is my plea. Mr. Banker, it is time, PAST TIME, for you to relax these ridiculous stone age lending restrictions. Am I asking you to go back to the wild west days of 2006, when someone could buy an investment property using an Option ARM, with a tiny down payment, bad credit and no documentation? NO. A thousand times no. All I'm asking, on behalf of our clients, and millions more just like them, is to return to the sane and reasonable guidelines used in the mid 90s, when I started in the mortgage business. That's right, turn the clock back 10 years, not 50. Back then Fannie and Freddie required W2 forms, pay stubs and bank statements. Back then these fraudulent liar loans were NOT around. Yes, there were some stated income products, but they carried higher interest rates to protect the end investor from the additional risk. These new restrictions make no sense. If Bob's payment goes down by $200 a month, doesn't that make him more likely to repay both is new 1st and his HELOC in a timely manner than less? Of course it does. If creditworthy Americans are allowed in to this wonderful world, they'll use those savings. They will put more in to college funds, savings, and other investments. Bob might help out his wife by using that savings to replace their aging washer and dryer. EVERYONE WINS! That's right. The bank originates a new first mortgage, making money for their shareholders. The holder of the existing HELOC now finds itself in a safer position because Bob's debt load on a monthly basis is down. Yes, we make money putting Bob's new lower rate loan together. Bob improves his financial situation. The guy working at the appliance store makes a sale. His boss rings up a sale and lowers his inventory. And if the owner of the appliance store is suddenly ringing up sales from Bob and others like him, maybe he'll decide it's time to trade in his old car and buy a new Chevy. You see where I'm going with this? But it can't happen until Fannie, Freddie and their bank partners pull their collective heads out of the sand. I'd say they need to pull their heads out of something else, but this is a family blog. Paul Gowen (Willamette Falls Financial) Thu, 18 Dec 2008 04:38:35 -0800 https://activerain.com/blogsview/842895/low-rates-alone-are-not-enough https://activerain.com/blogsview/725790/don-t-blame-the-victims Folks, I try not to get strident. I try not to YELL! I try to remain calm. No more my friends. There is a move, among certain circles, to lay blame for the credit crunch and the $700 billion bailout at the feet of African Americans and other minorities who have been given home loans over the past few years. Most of it based on a program started more than 30 years ago called the Community Reinvestment Act (CRA). It's one of the most disgusting and reprehensible things I've ever heard coming out of Washington. And as we all know, there have been a lot of disgusting and reprehensible things coming out of Washington. So the bar is pretty high. But Congressperson Michele Bachmann of Minnesota managed to clear that bar last week with room to spare. "The Clinton administration turned Freddie and Fannie into a “semi-nationalized monopoly,” Bachmann argued. Specifically, that administration decided to make loans through the Community Reinvestment Act “on the basis of race and often on little else.” Bachmann also took the time to read into the congressional record an over the top screed written by Terry Jones of Investor's Business Daily that advances the notion that this whole thing is the fault of poor and minority home buyers. As the kids say, OMG. Look, I'm a mortgage guy. I think we should all be turning heaven and earth to make sure that everyone who can own a home owns a home. There I said it. Sue me. Expanding loan programs aimed at assisting low and moderate income home buyers is a good thing. Blaming the CRA for the current mess we're in is racist and dumb. Business Week's Aaron Pressman does a much better job than I explaining just how silly it is to lay this on the CRA. And with a lot less yelling. The fictional President Jed Bartlet of television's "The West Wing" used to say, "Show me numbers". Okay, here are some numbers. 80% of those loans that are going bad were originated by mortgage lenders not covered by the CRA. So I guess we can say that bad CRA loans make up a small fraction of the problem, but I even think that's a stretch. While we're at it, can we stop turning Fannie and Freddie in to the fall guys for all this? Yes they made mistakes. They reached above and beyond their original charter. But they aren't all bad. How about we do away with Fannie and Freddie, get rid of our mortgage backed securities (MBS) markets. Just don't come complaining to me when fixed rates go from their current levels of around 6% to 8%. And for the record, most of those loans that are going bad? They aren't the standard documentation, prime mortgages that make up the overwhelming bulk of Fannie and Freddie's portfolio. The loans that are going bad are Option ARMs and sub-prime deals that Fannie and Freddie are nowhere near. Just look at the write downs that JPMorgan Chase did when they bought Washington Mutual. WAMU's $60 Billion prime portfolio, tiny write downs. WAMU's $60 Billion Option ARM portfolio? Huge write downs. Rant over. Paul Gowen (Willamette Falls Financial) Mon, 06 Oct 2008 04:24:32 -0700 https://activerain.com/blogsview/725790/don-t-blame-the-victims https://activerain.com/blogsview/686621/fannie-and-freddie-takeover-triggers-opportunities Home buyers and holders of existing mortgages were the first beneficiaries of the Federal Government's decision to take over mortgage giants Fannie Mae and Freddie Mac this past weekend. To give you the details...Before the decision was announced the so called FNMA 5.50% coupon closed at $99.40. By Monday, the FNMA 5.50% OPENED at $100.50 and closed up over 100 basis points near $101.30. All that turned in to a .5% drop in fixed mortgage rates. For historical perspective, fixed rate mortgage rates have not been this low since February of 1995. So what does it all mean for buyers, and homeowners in Portland and elsewhere? For buyers it means payments on the average 30 year fixed rate loan will drop by nearly $85. Those holding existing loans, especially Adjustable Rate Mortgages (ARM) have an opportunity to lock in 30 year fixed rates as low as 5.500%. Why is this happening. McClatchy's Kevin Hall explains it best... "Since Fannie Mae and Freddie Mac own or back more than half of U.S. mortgage debt, anything to stabilize them helps the broader financial markets. In recent months, investors have demanded higher returns in exchange for buying Fannies and Freddies. That led to a widening spread, or gap, between these bonds and, say, a 10-year Treasury bond. Mortgage rates take their cues from long-term U.S. government bonds, so it has had the effect of driving up mortgage rates. Since a Fannie or Freddie will now effectively be government-issued debt, the gap should narrow and rates fall." More of Hall's rundown is here. Going forward, the best news may be that consumers will continue to have a wide variety of choice in their efforts to obtain favorable financing. Why? Until the takeover, we were headed toward a mortgage world that may have been dominated by just a handful of uber banks. That would have limited choices for consumers, and ultimately resulted in higher costs. Until this weekend, Fannie Mae and Freddie Mac, while chartered as Government Sponsored Entities (GSE), were still publicly traded companies. They had a profit motive. That led them to often times offer more favorable terms for high volume partners. Now that they have become fully governmental entities, that profit motive is gone. The result is that we should see more small and medium mortgage originators with access to the same perks the big boys have with Fannie and Freddie. That will level the playing field, and provide more choices for consumers. Paul Gowen (Willamette Falls Financial) Thu, 11 Sep 2008 11:08:00 -0700 https://activerain.com/blogsview/686621/fannie-and-freddie-takeover-triggers-opportunities