Archive for March, 2009

The Unveiling of a Long-Awaited Plan

March 23, 2009

We’ve been hearing the rumors for months. Somewhere out there lurked a plan to buy “toxic assets” from banks. Once this happens, banks will lend money, the credit crunch will ease, the economy will strengthen, and wolves will dwell with lambs. Well, maybe not the last part, but nonetheless, it seems the long-awaited plan has arrived.

The “Public-Private Investment Program” is designed to work alongside the previous bailout/economy-helping bills to stabilize the financial institution and get the economy back on track.

Before I get to the recently released details, here is a quick FAQ for background information:

What are “toxic assets”? Basically, these are bad loans that banks have created and loaned out that are now defaulting – think subprime mortgages.

Why do they need to be purchased from banks? These loans are holding the banks hostage from issuing more loans. Since they can’t unload these loans from their books, banks do not have any available capital to lend.

Why shouldn’t banks be left to deal with their problem? That is a really good question and a fine point, but “their” problem has become “everyone’s” problem. Even though this bailout will assist those who helped get the economy into this mess, its goal is to everyone.

Will this work? That is the million (or trillion) dollar question. No one knows for sure if this will work, but history shows it might. Sweden and Japan suffered similar economic meltdowns in the 1990s. The method that turned things around was the same – buy the toxic assets. Sweden acted swiftly and recovered in a few years. Japan tried letting the system work itself out and unknowingly ushered in “The Lost Decade.” After 10 years, the government finally bought the toxic assets and Japan’s economy began its recovery.

That brings us to the details of the Public-Private Investment Program. The initial details include?

– The government will use up to $100 billion in taxpayer funds to begin an initiative to purchase our own toxic assets.

– The idea is to create a market for these loans allowing the private investment sector to get involved looking to buy these toxic assets at a true market value that will in turn create a profit for the investor.

– Once the ball gets rolling, toxic assets would come off the banks books, capital will become more readily available, and the economy can start back up.

The idea is that “everyone” will work together to solve “everyone’s” problem. The initial reaction on Wall Street has been favorable as the Dow jumped 300+ points. What will Main Street think? Well, that remains to be seen. At least on paper, the plan looks good. The anxiety comes from knowing that just because it looks good on paper doesn’t mean it will work in the real world.

The idea of a sure thing on paper not panning out reminds me of something happening (or no longer happening as the case may be) at your local theater…

Watchmen made its debut as a limited series comic book in the mid 1980s and was a commercial success. It seemed only a matter of time before it became a movie. There were many attempts to bring it to a theater near you and after 20 years of development, the film was finally released. Much to the chagrin of the execs at Warner Brothers, the film is not performing well at the box office. While the hype and excitement was great, it fizzled out a few days after its theatrical release.

Hopefully Obama and Geithner’s plan to buy toxic assets won’t suffer a similar fate… anticipation… delays… release… initial success… then everything falls apart… If it works, it may just give us all something to smile about.

watchmen-cover

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

 

The Times They Are a-Changin’

March 17, 2009

The Spring season brings many changes… daylight savings… temperatures rise… flowers bloom… allergic reactions… and thankfully, rain!

As we enter this new season, The Times are a-Changin’ for me in regards to the mortgage industry and my employment.  My time with Hillside Lending came to an end in mid March.  I thoroughly enjoyed working for Hillside, and was sad to leave. 

That said, the current market and changes in the industry forced this decision.  I need to work with a company that can provide loan programs with minimal down payments and lower credit score requirements.  In other words, government secured loans (FHA and VA).

 

So, say hello to Dunwoody Mortgage Services.  Working with Dunwoody Mortgage, I am able to use loan programs that meet my clients lending needs in this difficult environment.  Some of these programs include:

 

         FHA and VA loans with as little as a 3.5% down payment

         $100 down HUD homes:  Any foreclosed home with an FHA loan can be eligible for purchase with only $100 down.

         Stated Income/Verified Asset loans targeted to self employed borrowers

         100% financing for rural development homes

         Of course conventional loans are always available with a 5% down payment

 

As one door closes, I am excited about the new opportunity to work with Dunwoody Mortgage.  If you have any questions about the loan programs, the move, or anything else, don’t hesitate to contact me.

 

Clay Jeffreys
Dunwoody Mortgage Services, Inc.
770-614-1157, ext 153 (o)
clay@dunwoodymortgage.net

 

 

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

 

 

A new strategy to refinance

March 12, 2009

Yesterday I blogged about a typical refinance scenario – figure out when it makes sense to refinance, and when that rate is available, move forward with the loan. This plan works well in a typical market. When rates go down, customers are notified automatically via email by myRateTrack.com OR we touch base on the phone. The desired rate is locked on for 30 or 45 days and everything closes on time…

However, we are not in a normal market!

While mortgage rates aren’t getting dramatically higher, they are jumping around day to day and hour to hour. In a normal market, one can sometimes tell which way rates are heading, but not in this market. Sometimes good news for rates makes them worse and vice versa. The market is more volatile and probably more fragile than it has ever been in history.  The US Treasury is pumping billions into mortgage backed security (mbs) bonds to keep rates lower, but as we get closer to June/July 2009, the chances of rates moving back to 5.75%-6.25% will increase.

Another problem in this volatile market is timing.  Most investors are taking 8 to 10 business days (some 15 to 20 to 25 business days) to underwrite a loan (this doesn’t even include days to clear any conditions from underwriting, closing docs prepared and sent to the closing attorney, etc.), so a lock-in of 30 or 45 days likely isn’t enough time to get everything done. Borrowers and brokers are forced to extend rate locks, which can be done, but for a fee.

So, even though “when” is typically the best course of action for refinancing, I will propose a new strategy… if it makes sense for you to refinance your mortgage somewhere between 5.25% and 4.625% for a 30 year loan and 4.75% to 4.375% for a 15 year loan, you should start the process now.

This strategy allows you to start the loan application process (order the appraisal, title, sign documents, etc.), and get in line for your loan to be underwritten and approved.  During this process we can “float” your interest rate, meaning that you are choosing not to lock-in and protect your rate, but rather wait it out — for clearer skies, greener pastures, or even the mystical 4.5%. Once the loan is approved and out of underwriting, you are in a position to take advantage of a shorter lock-in period and therefore a lower interest rate.

The only risk in this strategy would be the cost of the application fee and appraisal fee.  But if you know you are going to refinance, the appraisal is usually good for 90 days and 90 days from now puts us into June. Since markets often move in anticipation of events, my opinion is that the Treasury pulling out of the mbs market in July 2009 will start to move rates move up as early as June 2009. So, if you plan to refinance in the next 90 days, this plan may be fore you!

If you fit the description above (you know you need to refinance, just not sure you are ready to lock-in), gather together your last 2 paycheck stubs, your last 2 years’ W2’s, your last 2 bank statements, the most recent retirement account statements, a copy of your mortgage NOTE, a copy of your photo ID, a copy of your most recent mortgage statement(s) and give me a call.

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit www.hillsidelending.com.

 

WHEN instead of WHERE

March 11, 2009

It’s human nature. We want what is best ourselves and family. If you look out for yourself and family, that doesn’t mean you are selfish, but it does mean you are, well, human. This trend is evident every time I receive a phone call about refinancing. People want the best rate at the best terms and have the whole process completed as quickly as possible. What people don’t realize is that “when is the best rate available” is a better question than “where can I get the best rate today.”

The time for the best rate is today. Why? The US Treasury is pouring (literally) billions of dollars in to the mortgage backed security (mbs) bond market each week. This is keeping rates low and makes now the time to lock-in on a great rate.  Currently, mortgage rates are at or within a 0.25% to 0.5% of the lowest rates in the history of the country . . . in the history of forever.

If you are needing to refinance your mortgage — and are able to refinance based on your credit, appraised value, etc. — you need to start the process soon.  With the US Treasury planning on staying in the mbs bond market through June, eventually (and probably sooner than the average consumer will expect), mortgage rates will go up.

Some refinance advice to consider:

–Once you know that you are able to refinance, be ready to make a quick decision when your target rate is available.  The market can change within minutes and waiting an extra hour or two to make a decision could cost you a 0.25% in rate.

–Make sure that you are working with a professional that watches the mortgage-backed securities market.  Monitoring this market gives the mortgage professional insight on exactly what lenders are watching to price rate sheets each day.

–If your mortgage professional does NOT have access to this information, or is watching something other than the mbs bond market to give you advice, you might as well be asking your magic eight-ball for advice.

To find out WHEN you should refinance, give me a call or send me an email and I’ll set you up with a great tool to monitor your mortgage so you can keep an eye on daily mortgage rates and even to be alerted when your target rate is available.

The question isn’t IF you should look in to refinancing your mortgage, it’s a matter of WHEN.  And the answer . . . you should look in to refinancing right now.

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit www.hillsidelending.com.