Our sincerest thoughts go out to you and your families that may be affected by Hurricane Ike. We are here for any questions you may have about your current mortgage, or remodeling loan options as you navigate this complicated road to recovery.
Last Friday, I was all geared up to inform you about the details of the Fannie/Freddie bailout. Then the ‘evacuation’ news came. So although stale at this point, I will still recap, and move on to this weeks’ news, making last week look like baby steps. We all know by now that the government (now affectionately called Sugar Daddy) came to Fannie/Freddie’s rescue by placing them into conservatorship. The US Treasury bought their stock, fired the executives (and did not award them in 24 million in bonus’ due- boo hoo!) , assumed control of the Board and management, and then resumed the company to normal operations. It is thought that this ‘rescue’ will be great for emerging markets abroad (it renews confidence in the markets, and frees up their balance sheets to loan more money in their domestic countries), and kill us here at home, where we have yet to even conceptualize the tax burden all tax payers will have to pay at some future point in time.
The deal has added $5 TRILLION in debt to an already stressed balance sheet, therefore doubling the national debt. The US government will have to sell more US Treasury bonds in order to cover its new debt. This new debt will lead to higher yields (affecting rates on mortgages to go HIGHER). True, after the Fannie /Freddie news, we did see an immediate drop in rates. Then the honeymoon sizzled, and rates rose again. Now a new drama has hit the news line- the Bankruptcy filing of Lehman Bros this week, the failing of AIG, and the sale of Merrill Lynch to Bank of America. Wow……can it get any better than this? This is even better than Judge Judy or the OJ Simpson Trial. The news rooms are just beside themselves with excitement.
This Monday, after all this new news (Lehman, AIG, Merrill), the rates did go down. The past 2 days we have seen them inch up as the stock market has recovered from rebuilt confidence in the market. Will they go down again? We hope so. We think so. Does anyone really know? Not a chance. There is so much uncertainty out there, the slightest news could change the course of rates in an instant. If you are waiting to refinance it, lock it, and get with a lender that will float you down if rates drop (Patriot Bank Mortgage will!). If you are purchasing, do the same.
In Summary:
Lehman Brothers, one of the top brokerage firms in the nation, was DENIED a government rescue this week. The Fed said they finally have had enough. The banking industry needs to come up with its own solutions to its problems. They owe more than $157 billion to their 10 largest creditors, and no way of paying up anytime soon. They declared bankruptcy on Saturday, while we were suffering 110 mile /hr winds in Houston.
AIG – Their credit was downgraded this week from AAA status to almost the lowest possible level. This forces them to raise billions in new capital to cover its debt exposure, which they could not do. AIG is the worlds’ largest insurance company. They insure everything from trips, to cars, to bonds. They cover every sector of the economy. The traders and stocks/bonds that are sold/bought every day rely on them to insure. The government is on the verge of placing them in conservatorship as well. Why would they bail them out and not Lehman, is my question? The affect of AIG failing is far more widespread than Lehman. AIG probably insures Lehman. They cannot fail. No way. That would be beyond words.
Merrill Lynch sold to Bank of America for $50 billion. B of A stated that ML was attractive because its wealth management is the best in the world and would complement their existing operations.
Washington Mutual is rumored of a potential acquisition by JP Morgan Chase
So, let me get this straight, the banks take massive risks in credit and equity deals, pay themselves like kings, and then rely on the US government to bail them out when they have had enough? What kind of legacy are we leaving for future generations? Is this how we want to be remembered? The US politicians talk about family, and core values, and then we do the opposite. Our children are learning that there is no sense of responsibility or consequence. The culprits seem to always get away somehow with a slap on the hand. So the Fannie CEO got fired, big deal! He will make thousands by writing a book that will be gobbled up by the Americans dying to know how he did it. BUT……We have to maintain the façade of the most powerful country in the nation. Are we really that good? That smart? That savvy? Does anyone know what they are doing? It seems to me like one large ‘puff’ of smoke. Except when the taxpayers have to foot the bill, will it seem like play money then?
Thursday, September 25, 2008
September 5, 2008
Just when I thought the week would go by with no program changes ……….
Investors have pulled back on FHA and Conventional on the use of ‘alternate credit’. This means that if a consumer does not have 12 months of established history in the US, to generate credit scores, then they potentially will not be able to get a loan. This is potentially huge for relocating employees from overseas. Mind you, there may be no problem if the employee goes through some of the larger relocation companies. Just be sure they are pre-approved before you get under contract. One of our larger 2nd lien lenders made a new guideline that borrowers have to have 1 year with the same company to get approved. That was a new one. I have not seen that in about 11 years. Usually, as long as you are in the same industry for 2 years, but employed , it shows you are employable. And finally, our biggest issue continues to be that our investors are implementing policies ‘retroactive’. Gone are the glorious days of 30 days notice. Time to absorb. Gone Gone Gone. Once again, sign of the times. Do I sound like a broken record yet?
Foreclosures. We are sick of hearing about them, I know. But lets talk about reality. 39% of the foreclosures in the US are in CA/FL. Whew! 6.4% of Americans are behind on their mortgage payments, and 2 million homes are currently in foreclosure. Lets just all agree that it is not over yet, and do whatever you can to make your payments on time.
Rates are lower this week. Trending downward. Why? Recession fears due to a 5 year low in the unemployment numbers. Oil prices are down. Merrill Lynch is expected to post a larger than expected 3rd and 4th quarter loss. This is making the stock market go nuts! Good news for bonds, who love bad news. Remember bonds are the safe haven for investors that pull out of the stock market when ‘uncertainty and doom/gloom’ exist.GMAC, one of the top 10 US mortgage lenders, announced that 5,000 layoffs will come by year end. They will continue to originate loans directly to the consumer, but will cease all operations to the wholesale /broker market. Mike Larson, a real estate analyst for Weiss Research quoted to CNN Money this week that “We’re not confronting a credit crisis anymore. We are dealing with broad economic problems that are contributing to delinquency rates”.
Positive News…..yes there really is some! Patriot Bank has one of the most competitive local high yield savings accounts- 4.0% for deposits over $50,000! Call our main branch for details! 713.400.7100
Investors have pulled back on FHA and Conventional on the use of ‘alternate credit’. This means that if a consumer does not have 12 months of established history in the US, to generate credit scores, then they potentially will not be able to get a loan. This is potentially huge for relocating employees from overseas. Mind you, there may be no problem if the employee goes through some of the larger relocation companies. Just be sure they are pre-approved before you get under contract. One of our larger 2nd lien lenders made a new guideline that borrowers have to have 1 year with the same company to get approved. That was a new one. I have not seen that in about 11 years. Usually, as long as you are in the same industry for 2 years, but employed , it shows you are employable. And finally, our biggest issue continues to be that our investors are implementing policies ‘retroactive’. Gone are the glorious days of 30 days notice. Time to absorb. Gone Gone Gone. Once again, sign of the times. Do I sound like a broken record yet?
Foreclosures. We are sick of hearing about them, I know. But lets talk about reality. 39% of the foreclosures in the US are in CA/FL. Whew! 6.4% of Americans are behind on their mortgage payments, and 2 million homes are currently in foreclosure. Lets just all agree that it is not over yet, and do whatever you can to make your payments on time.
Rates are lower this week. Trending downward. Why? Recession fears due to a 5 year low in the unemployment numbers. Oil prices are down. Merrill Lynch is expected to post a larger than expected 3rd and 4th quarter loss. This is making the stock market go nuts! Good news for bonds, who love bad news. Remember bonds are the safe haven for investors that pull out of the stock market when ‘uncertainty and doom/gloom’ exist.GMAC, one of the top 10 US mortgage lenders, announced that 5,000 layoffs will come by year end. They will continue to originate loans directly to the consumer, but will cease all operations to the wholesale /broker market. Mike Larson, a real estate analyst for Weiss Research quoted to CNN Money this week that “We’re not confronting a credit crisis anymore. We are dealing with broad economic problems that are contributing to delinquency rates”.
Positive News…..yes there really is some! Patriot Bank has one of the most competitive local high yield savings accounts- 4.0% for deposits over $50,000! Call our main branch for details! 713.400.7100
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