Sam's TEAM Blog

Over the past several weeks mortgage rates have improved.  Then reversed.  Then improved again and reversed again.

This pattern has taken place over and over again as economic news and forward looking expectations of rates continue to be clouded by a haze of uncertainty.

This past week, rates worsened somewhat, due to fears of deflation.  That's right, DEflation, and it is the opposite of INflation.

As inflation can be reduced to a definition of too much money chasing a limited about of goods or services, deflation is the reverse.  And just as deadly.

In a deflationary environment, demand for goods drops as too few dollars are circulating and the inherent monetary mulitplier effect of economic activity diminishes as well.  This can become a spiral of self-fulfillment, and lowering prices then infect the entire marketplace.  This results in lowered wages too.

Last week unemployment, manufacturing output were disappointing, even in the glow of improved consumer sentiment.

The roller coaster ride continues.  Mortgage bonds arch enemy is inflation, yet deflation can have a similar impact, but for a different reason.

Not only is the world and national financial world in chaos, now getting a latte at your neighborhood Starbucks can be one of confusion as well.

Today, in my local caffeine refueling station, the person behind me remarked to her friend that she was going to refinance her home using the government's new 4.5% mortgage to put her real and her financial house in order.

I felt the need to clarify lest she make life changing plans on the prospect of a low, low refinance market of the government's making and spoke with her briefly to bring her up to speed with the real story:

    there is no 4.5% government mandated loan, though there has been a proposal to put a low interest rate government mandated program in place to spur home sales, BUT it would not involve refinances.

Even at that, details of the 4.5% proposal are still sketchy and seem to this writer unlikely.  There are just too many hurdles - the major one is that the government doesn't set mortgage rates.

Mortgage rates are determined by the sale of mortgage backed securities, bonds made up of pools of mortgages and not government fiat.  In fact, even government insured loan rates such as FHA and VA programs are set in the very same manner - by the bond purchase market.

So the hopeful homeowner looking for a reduced mortgage rate mandated by the government will probably never have her day.

The marketplace may just meet her expectation however.

Mortgage rates this week have broken to the 5% level and below as the appetite for mortgage backed securities has increased and thus improved purchases of mortgage bonds.  This may just fuel increased sales of homes AND the refinance of existing mortgages as well.

Many are concerned about access to home financing, and rightly so.

Here we are, later October, 2008.  Despite what the media is reporting, and they seldom get anything right.  For example, if 4 TV stations and 2 news papers report about an accident, there are at least 6 versions of the incident.

The same is true for our own occupations, yours and mine.  Yet many people take what the media reports about our real estate affiliated industries as gospel without further investigation.

Evidently, those who are closing on purchases yesterday, even today and tomorrow, even refinances, must be doing so with nothing but sock money.

Here are the facts: today, October 22, loans are being made, buyers are securing financing, current homeowners are obtaining refinances....... if they are working with reputable, experienced mortgage professionals.

Are guidelines tighter than in the past?? Absolutely.

Adaptive professionals respond to the changing marketplace for their clients every day and get loans funded.  Purchases are completed. Refinances are closed and even renovation loans are applied for and secured.

The GSE's, government sponsored enterprises, Fannie Mae and Freddie Mac are the major source of conventional financing under the current loan limit of $417,000. Good credit and at least 5% will secure a loan.  But the ducks must all be in a row.  Mortgage insurance is required and PMI is another layer of guidelines which must be navigated, but it is being done everyday for loans exceeding 80% LTV.

The Homeownership and Economic Stabilization Act of 2008, passed by Congress only a few short weeks back provides a $7500 tax credit, yes a credit, for qualified buyers - first time buyers as defined, meaning haven't owned a primary residence in the past 3 years.  There are some nuances to the process, but the money is real.  The tax credit is in fact an interest free loan, but nonetheless, the money goes in your pocket or into your home purchase NOW.  Call me and I can cover the details specific to your circumstances.  As always, for consumers knowledge is power.

As you might have guessed, client loan files are more finely scrutinized for income, job stability and expenses.  An up front approval is even more important, again, from a lending professional, not just a shade tree broker with a calculator.  But again, loans are being closed daily by those who are diligent in their mortgage practice and properly paper their client's file.

In the past week to 10 days, rates have bumped up a half point or so, to 6.25% to 6.5% or so, depending on client's background and other pricing risk factors.

Jumbo loans, those exceeding $417,000 are tougher to place, but are being completed.  The sleuthing just needs to be done in advance, as spotty placement in the secondary market means jumbo loans can be a bit tricky to bet across the finish line if an originator hasn't done their homework properly. Good credit, stability and the usual risk factors are more closely scrutinized than in the past.  Again, know the home financing professional on whom you are depending, it makes all the difference in the world in getting your financing completed with minimum trouble.

FHA and VA programs are coming to the fore, especially FHA, which has become the majority of purchase financing of late. 3 - 3.5% down payment and FHA mortgage insurance are the major elements.

FHA is more user friendly than in the past, but again, a professional mortgage advisor knows how to get this loan done and completed properly without surprises or "Gotchas", so you've been warned. Sorry no mattress money as this is a full documentation product. Ducks or Beavers must all be in a row.

There are other low down payment programs out there as well, including a true zero down payment, but locality is a critical factor here and reasonable credit is needed.  Again, meeting with a practicing mortgage professional is the critical factor for buyer and a certainty for a seller prior to accepting an offer from a buyer.  I currently have a client preparing to utilize this program and will obtain an extremely attractive 30 year fixed rate for this 100% financing program.

For investors, there are lenders willing to finance properties, but the proper upfront work needs to done in advance, debt to income ratios need to be met, justified and verified to the satisfaction of underwriters.  There are attractive properties available and many shrewd investors are finding now is the time to get prepared to act on the bargains found in almost every community.

So if you're in doubt, perhaps confused or confounded by what you've heard, or fear, even been told by someone,even someone you trust, give me a call for a real dial in just to be on the safe side.  To be certain.

Above all, don't allow doubt or fear to rule your world.

The amazing thing about the blame game in the political arena is that the truth is the least of the rhetoric.

As the powerful, like Rep. Barney Frank, Sen. Chris Dodd and their ilk are eager to point the finger, they never seem to step up.  It is always someone else.  Frank and Dodd aren't the only ones, they're merely the latest to place saving face and power above honesty with the American people.

The current debacle holding US and world citizens attention is the mortgage meltdown is the fault of all in Washington, almost all on Wall Street and many across the country.

In Washington, too many are worried of losing position should the truth come out, fearful of recrimination if they "rat out" the responsible and banishment from the Halls of Power if they should lay the truth before the American people.

On Wall Street, the profit is the only motive.  The next deal the only focus.  Not getting caught chairless when the music stops.  The real thieves have already deposited their bonus check, transferred it off-shore and working the next deal.  This is where the FBI should start harvesting a bumper crop.

The American people by and large are unwitting, though willing participants while the music is playing.  Many are now "innocent" as children and whining to authority figures of their victimization.  They too were happy, pleased to be dancing while the music played.  Now without the sweet melody of ever increasing home values, the house as ATM Game has come to an end and the hangover is painful.

This entire debacle was started by good intentions - everyone deserves a home - to buy a constituency's support and vote, everyone qualifies for a loan - to please the Washington power brokers, everyone has a dream that deserves to be fulfilled - fill mine while you're at it for them.

As with any serious illness, the road to recover will be painful, perhaps very long unless the strongest medicine is taken NOW.

But for everyone pointing a finger of blame, there are 3 fingers of accountability pointing at themselves from their hand of accusation.

That familiar refrain from years past "Are we there yet?" is probably on the tongues of many as we navigate the financial waters in the continuing aftermath of the mortgage debacle.

The short answer is "No, we're not there yet".  There, would be the bottom of this deep sea dive searching for firm ground in unknown monetary territory.

As the gyrations of the oil and petroleum markets add to uncertainty in the markets, the financial world keeps waiting for the last shoe to drop.  We aren't there yet, but we are close, as mortgage rates scope through a fairly tight range in the mid 6% area.

We're not there yet, but many think we are close.  Even then, it will be several weeks, if not months, before we know we've risen off the bottom of the financial turmoil.

very good.  Yet buying share of mind isn't really difficult.  It's only marketing, using a sledgehammer to buy time and having a bank account large enough to pay the freight. 

So what's this about you ask.  This is about Paramount Equity Mortgage.

The state of Washington's DFI, the mortgage industry overseer in the Northwest's most populous state, served notice of their intention to eliminate household name Paramount Equity Mortgage from providing mortgage services.

Shocking?!?!???

Perhaps only in the absence of the question "What took regulators (the law) so long to take action?".

For reputable mortgage industry insider's jealousy was an element - but jealousy that some could behave in such a callous manner, essentially laughing in the face of the law, the rules, the regulations.  Envy existed too, but only for the voluminous Paramount Equity marketing budget and the share of mind notariety it generated.

Regulators are rightly suspicious of competitors complaining about one another.  Yet the tactics of Paramount Equity were pretty well known, as wary consumers have sought out comparisons from other lender options when something just didn't smell right in the Paramount transaction.

Washington DFI's filing ( Washington 12 pg statement of charges - the juicy allegations start on page 8!) sums up the allegations and provides the reasoning for the formal court filing revocation of Paramount's license in Washington.  The charges provide an unflattering and descriptive analysis of the company's behaviors.

The $500,000 minimum fine and complete restitution of injured borrowers losses only add to the severity of the dismissal of Paramount's ability to do business in Washington.

While the headline asserts deceptive advertising, persons with industry knowledge reading the 12 page court document should get a chin cushion for the anticipated gaping jaw drop.  Smelling salts advised, too. Gravity induced chin free fall can provide serious injury.

Unearned fees, charging discount points to lower the interest rate but not doing so or charging a fee which is not expensed out the other side is a serious violation of law, federal law.

So while the initial fireworks are sent skyward in Olympia, WA., the real show may be when HUD and the Feds, through the FBI and the US Attorney General's office investigate the reported violations of federal regulations.

This elongated Spring of 2008 has now stretched to Memorial Weekend. 

Today's high temperature didn't break 60 if the weather reports are to be believed....but believable weather forecasters are another oxymoron aren't they??  Imagine, if you were as inaccurate in your occupation as these electronic prognosticators.........

This year's inclement weather is the most daffy since my arrival in Portland in 1978.  Two years later, 1980, the eruption of Mount St Helens provided unusual weather, but that was tangible and understandable.  This Spring is just weird.  Well it is an election year, so maybe that's the answer.

Lawns seem longer than normal this year, the result of grass being too wet on weekends when mowing has been most appropriately accomplished.  That's my excuse anyway.

The Rufous hummingbirds are setting the aerial survey stakes.  This morning, two males were performing the acrobatic gymnastics in the front yard with a massive flowering cherry tree as the prize for the winner.  No word from the two birdhouse occupants on their judgement of the aerial combatants.

Today lunch with a new Realtor referral partner.  The chat??  Housing inventory, time on the market, price reductions, seller participation, credit score and loan guidelines tightening or at least in flux.

We covered other topics too, the news media pounding downer news - seldom if ever noting the positive items or reporting stories from all over the country but not locally originated, news developed on the cheap, but little expertise;  futile open house sitting over the weekend, potential buyers - but "we've got to sell our house first", "I'm not certain the market's bottomed out", "we're just looking right now".

We've become a society of sheep, no matter affiliation, creed, race, occupation, whatever, we're walking or running over the same ground, over and again.  Lots of knowledge, yet precious little wisdom.

Consumers are inundated by the news, snippets really, about this bad, that bad.  Heck, it's all bad.  Doesn't matter the subject.  It's just bad.  Bad, bad, bad.

In the Portland area, we're a comparative oasis in a vast sea of declining house values.  Yet we've declined, so little in comparison.  Portland area homes have "fallen" about 1/20 of the drop in the housing debacle's poster children of Las Vegas, Phoenix, Florida.  That's about 1% decline if there was a decline.

Yet we've the same emotional disorder - the sky is falling.  Well, it hasn't.  But more on that in another session.

It's a familiar story - a client for whom we just completed a refinance of her home has referred a friend to me for assistance.

The referral is gratifying, knowing that my TEAM's performance exceeded a client's expectations and now desire a dear friend to have a similar experience.

This new client will be a first time homebuyer having been a renter of many years, and understandably dubious of owning a home.  She'd convinced herself she was better off renting.  She was especially casehardened after years of renting and hearing numerous myths, and not just about homeownership, but of credit scoring, credit card use, and the list goes on.

Answering her questions one by one, it became apparent my new client wasn't aware of the tax benefits of homeownership - that mortgage interest and property taxes are deductible, for just a bit more than her rent, she could have been buying a home of her own.

One by one we're eliminating the falsehoods, even some downright lies.  We're also rectifying the twisted "rules", which border on gossip they've been so badly mangled on the street, by the media, by someone's misreading of a story.

The lesson, the know it at work spewing out credit advice isn't a professional and while they may be right, may in fact be wrong.... totally and completely.  Consult with a professional in credit or mortgage financing.

After all, don't avoid checking with a professional about a loan because of something you've heard.  If you do, then you have taken a NO, from someone who couldn't say "YES, your loan's approved!".

In the Northwest home values seem to be holding steady for the most part.

The Case-Schiller valuation model, which uses a proprietary comparison formula, indicates that Portland home values declined a paltry 2% year over year.  While any decline in home valuation is troublesome, Portland's home values are virtual stalwarts compared to Miami, Las Vegas, Phoenix and other areas where the declines were greater than 20%.

The Seattle statistic is a 2.7% decline year over year.