How Long Will Rates Stay Low? Mortgage by Randy Newsletter - June 2012

Mortgage by Randy

monthly update to our clients, colleagues, family & friends

By: Randy Mitchelson, June 2012

====================================================================================

In Issue 51 We Touch On:

How Long Will Rates Stay Low?
Uncertainty Rules

Scholarship Winner Announced

In last month's newsletter I hinted at some big news and if you haven't already seen the announcement, we merged our company, National Web Leads, with Reach Media Group in Atlanta, Georgia. Learn more about the announcement in this video and press release. It is a very busy time as we merge two distributed teams together culturally and operationally. But it is exciting too and will allow us to not only grow our existing lines of business but also get involved with more consumer financial services including installment loans, credit cards, prepaid debit cards and more.
 

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family.  You can make your own comments and feedback as well.  Time for the news…

Mortgage Market: Long Term Interest Rates To Be Held Down By Fed
The Federal Reserve announced this past week that it will continue its efforts to hold down long-term interest rates artificially. This is due to the slow economic recovery which has not created enough new jobs to significantly impact the unemployment rate.

The Fed will keep rates low at least through the end of 2012 (we kind of already knew they would not do anything out of the ordinary until the election is over). This is good news for businesses and consumers who want to borrow and who have existing debt with an adjustable interest rate. Bad news for older folks trying to live off the interest earnings of their retirement savings.

Personal Credit: Even Good Credit Borrowers Struggle To Get Mortgages

In a span of about ten years, we have all witnessed the lending and credit pendulum swing from one extreme to another. The irrational exuberance that marked the housing boom and sub-prime mortgage craze last decade has been matched with equally irrational fright to lend at all in recent years.

Banks are sitting on piles of cash and have created a culture of finding a reason to say "no" to loan applicants. While it is rational to be cautious with lending to marginal credit borrowers, the fact that good credit applicants also face challenges with getting approved is unfortunate.

In fact, many prime borrowers are now subprime and do not even know it.  They are not subprime for missing payments or racking up too much debt. They have done nothing wrong. Learn why in my DailyDollar article about how Bank of America froze my credit line and impacted my credit score.

Enter the Federal Housing Administration which insures home mortgages. Orginally designed to help first time homebuyers with marginal credit scores (as low as 580) purchase homes with low down payments (as low as 3.5%), the FHA is now helping high income borrowers with good credit.  The tightness in the credit markets is prompting prime borrowers to turn to loan programs insured by the FHA.

FHA Acting Commissioner Carol Galante responded to a question about this trend, "The growth of borrowers with higher credit scores in FHA's portfolio is really about the broader constriction of credit. Because the private market has beens o reluctant to lend, combined with loan limits set by Congress that exceed those of the GSEs, FHA is still playing a critcal, countercyclical role." The loan limits to which she refers is that FHA allows up to $729,750 while Fannie Mae and Freddie Mac cap out at $625,500.

Have you been given credit score advice that you are not sure about or read an article that has conflicting credit score information from what you believe to be true?  I am here to help.  Submit your question and I will be happy to respond. For more free and easy to read credit score tips visit the DailyDollar and click on the Credit Score and Credit Monitoring sections.

Economy & Financial Insights: Uncertainty Controlling Hearts And Minds
The one thing that can disrupt an economy and the psyche of a people is uncertainty. Unfortunately there is surplus of uncertainty these days:

1. Europe: The economic crisis in Europe is worsening and what affects it will have on United States consumers and corporations is up for debate.
2. Health Care: The Supreme Court ruling is looming and American businesses have been purposely delaying hiring decisions pending this outcome.
3. Election: The tax environment is uncertain until the November elections.
4. Inflation vs. Deflation: We keep printing money but inflation remains low and commodity prices including oil are dropping.

This psyche will persist until the elections which is not good news for those seeking work.

Question of the Month: Why Is It So Hard To Get A Mortgage For A Condo?

One of the hardest hit property types from the housing crisis is condominiums. Whereas condo mortgages were handed out like candy during the boom, it is very difficult to be approved these days.

Lenders have been burned by condominium communities where there were a high percentage of renters versus primary residence owners. As a result, lenders are super cautious to find out the break down of units that are primary residences as opposed to second homes or investment units.

When you apply for a mortgage on a condominium, one unique element of the process is the Condo Questionnaire. This one page document is provided by the lender and given to the condo property manager to complete. The questionnaire gives the lender the total number of condo units and the percentage that are rented versus owner occupied. It also covers the commercial insurance coverage that the condo association is carrying.

Condos within communities that have a larger percentage of renters (typically 40-50%+) are deemed too risky by lenders. This is because when times get tough the first debts that people let go delinquent are their investment properties. When shopping for a condo if you intend on needing a mortgage, getting this information up front will save you time and headache later. Don't waste time trying to get approved for a loan that simply won't happen.

Giving Back: 2012 Larry Mitchelson Fine Arts Award Winner Announced
The Larry Mitchelson Scholarship Foundation announced its ninth winner at graduation ceremonies in Fulton, New York where Maggie Ryan, daughter of Patrick and Tracey Ryan, earned the 2012 Larry Mitchelson Fine Arts Award.

Maggie will attend State Univesity of New York at Oswego in the Fall where she will continue pursuing her dream of merging her art with marketing.

The $1,000 prize is made possible by tax deductible donations (click here for secure online donation) to the Foundation which is a registered 501(c)(3) non-profit organization. Your continued financial support is appreciated.
 

The Foundation was established in 2003 as a retirement gift for my Dad who taught art to three generations of kids over a 35 year career. Get updates, pictures and more by following the Foundation's Facebook page and share with your friends.

Need volunteers? Do you have a fundraising event upcoming?   Do you have a personal web site where you are raising donations for your cause?  Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
 

Looking forward to travel of a different type - vacation. Our trip will be especially exciting because we will be joining friends that we always enjoy spending time with. It will be nice to be unplugged for a few days and just read a book. Have a safe and happy Fourth of July holiday.
 

Randy
 

______________________________________________________________________________________________
Mortgage by Randy newsletter, Copyright 2008-2012 Randy Mitchelson.  All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson.  Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.

______________________________________________________________________________________________

You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson is an entrepreneur, author and community activist with almost 20 years experience in financial services.  Mitchelson has served in leadership roles for Fortune 500 firms Bank of America, KeyBank and CIBC.

As a licensed mortgage professional and member of National Association of Mortgage Brokers, Mitchelson educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy.

He founded of Estero, Florida based National Web Leads, LLC, (NWL) in 2005, an internet marketing and lead generation services company. NWL merged with Reach Media Group in 2012 where Mitchelson is co-owner and CMO. Reach drives new customer acquisition through email, web display, social media, keyword search strategies, mobile devices and more.

Reach distributes customers' marketing campaigns via it's network of publishing partners. Clients include payday lenders, auto loan lenders, educational institutions, legal services, health and beauty product distributors and more. Lead generation companies utilize end-to-end lead generation software solutions provided by Reach's technology affiliate company Applied Cognetics.

Mitchelson also writes the DailyDollar™ personal finance newsletter. U.S. News and World Report named DailyDollar to its list of 8 Savvy Personal Financial Podcasts.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY.  He is a founding member of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc.  He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.