A Loan With Jennifer

Last week’s article caused a few dissenters from our recipient list. There were a few comments I made alluding to a particular party, and some found it distasteful. My sincere apologies, and we wish you well. For those of you that have stayed (and are reading now) thank you! It is important for all of us to be able to reach across party lines, regardless of our beliefs, and embrace opinions of others. Also, I would like to say that politics has EVERYTHING to do with interest rates. The markets. All of it is based on feeling, cause and effect, and predicting behavior. Now that the election has passed, I am happy to report that the mystery is over, and the mortgage rate markets settled DOWN .375% in a 24 hour period following the election.

As an optimist, I would like to comment that there seems to be a spirit of renewed hope in the air, and for that I am thankful. Although I did not vote for the Democratic Party, I am encouraged and hopeful that our new President will serve our country with best interests at heart. He has proven that he gave a majority of our country (37 million persons!) the prospect of change. If that is what my peers call for, then I am here to accept that. And it seems the market is too!

ARE WE IN A RECESSION?
Can we just call it a national recession already? The ONLY authority over making this call is the National Bureau Economic Research. Not the Prez, not the Fed Chairman. According to the NBER's Web site, a recession "is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." We lost a total of 1.2 million jobs (October to date), which puts unemployment at 6.5%. National home sales continue to decline. In 2008, hundreds of major banks, 5 of them being large household name banks, have gone capput. (Ex: Wachovia, WAMU, Indy Mac). When will this branch of government stop avoiding the inevitable?

IS MORTGAGE JUSTICE BLIND?
Why do mortgage lenders not rush to rework and renegotiate mortgages with homeowners? It is easier said than done. The world of securitization has changed dramatically. The loans are pooled together, and sold on the secondary market, with minimum rates of return guaranteed to investors. These pools are sold to a ‘master servicer’ which now holds the power to rework the loans. The bad news is, that the master servicers have an obligation to the investors. Should they rework the loans, the investors would suffer major losses on rates of return. Innocent bystanders that invested in these mortgage pools, much like your 401K fund or investment portfolio. Many of us are /were invested in these types of pools, and did not even know it! So my point of this commentary is: Easier said than done.

ARE BANKS LENDING MONEY?
Yes, they are. The mortgage market is running status quo. Tighter requirements, but money is flowing, and steadily. Rates are low (5.75% on a 30 fixed!) . If you have good credit, money for at least 3% down, and can prove your income, you are fine! The markets that have really tightened are commercial /business loans. Regional as well as national banks have severely tightened their guidelines, that has resulted in companies’ ability to do business and grow is drastically impaired.

The largest sector close to our hearts that I have seen affected is builders. Spec loans are becoming a thing of the past, or very difficult to obtain. Smaller spec builders I am not sure how they will survive. The larger ones, are cutting back tremendously. If you have current inventory on the ground, you must sell before starting new projects. There are some deals to be had I imagine, as the end of the year approaches, and builders need these loans off their books. As for Patriot Bank Mortgage, we are stronger than ever. Our conservative approach to lending over the past year has paid off. We do deals that make sense. We are awarded by our investors in the form of reduced rates and streamlined requirements. We are small enough to serve and know our customers each by name, but large enough to serve them with the most rapid, competitive and courteous service in the industry. We hope you will give us an opportunity to earn your business!