JohnsBlog (articles, news, thoughts, advice)

On what's being deemed "Black Wednesday", we saw a mortgage bond plummet like we've not seen in years, and the low interest rate market you've become accustomed to was turned upside down.

Rates have been in the 5's (still remarkably low) but now appear to be in the decent into the 4's again.  This has been a great week for bonds, and if the rally holds, we'll be into the high 4's again soon on low-fee mortgage.  Great news to all those folks that have been held up in underwriting...if you've hung in there kudos to your patience.  Fortunately many of my clients were locked or are in long-term situations where they didn't need to lock and/or close immediately....good news, there.  For the few that have waited on extended UW, a great big thank you!

On other news fronts, it looks like Obamas healthcare plan is getting some very negative feedback, and his ABC infomercial got horrible ratings....all good news in my opinion.
     It's not that Im not for healthcare reform (heck, I just took a trip to the ER to get stitched up after a hockey wound without insurance....those bills are painful!!!), however I dont think there's been a proper analysis of the costs and how things will be paid for.
    So far, everything that's cost a lot and been approved with little oversight has done very little, if anything, for the economy.  I think the bill must be scrutinized and drastically changed from it's current form.  Hopefully the people and their representatives will make sure this happens!

Onto the HVCC front....this little, horrible idea of reform looks to be hitting a wall....with consumer complaints mounting and lobbying for a moratorium increasing, it looks like some changes will come to this bill very soon....THANK GOODNESS!  I myself have phoned and e-mailed the housing finance agencies and the NY Attorney General Andrew Cuomo (who started the HVCC bill) voicing my opposition in its' current form, and it looks like actions such as this are paying off.

Housing isn't at the bottom yet, but we're seeing some encouraging signs.  Rates should be wonderful for a short while longer, but not forever, so if you're a fencesitter waiting for the "lowest rate", get in there immediately and put an application in with your mortgage professional (or if you're really, really smart and appreciate wonderful service, with me!---there's my shameful plug) and get the process started so you can lock in once they are at or near the bottom.

More updates to come soon, including a site makeover within the next week or so, STAY TUNED!

On May 1, the Home Valuation Code of Conduct, implemented by New York Attorney General Andrew Cuomo amongst others, was initiated onto the mortgage market. It requires appraisals to be ordered through management companies instead of directly through appraisers.  What this action brought about was a system in which mortgage brokers, bankers, realtors, and homeowners could have no contact with their appraiser, nor any choice in which appraiser did the appraisal on their home.  The supposed goal of act was to eliminate inflated values or any coercion on appraisers brought about my real estate agents or mortgage originators.  However, there are a pile of negative attributes which are a mountain high, and cast a shadow completely over the original intent of this act.  The things that are negatively effecting loan transactions and consumers I've listed below.  Please feel free to contact me if you can speak of others.

1)These new AMC's (appraisal management companies) are a new industry brought about overnight, and are having their pockets lined by legislation.  Is it no wonder that AG Andrew Cuomo holds and ownership stake in an AMC?  His pockets are being stuffed by his own bill.  These companies in most cases charge MORE than the appraisers used to charge, and all they are doing is simply taking appraisal orders and sending them to appraisers.  This is resulting in HIGHER costs to borrowers.

2)Appraisers are being paid less for their work.  I've been told by appraiser friends that one AMC offers to pay him $175 yet charges borrowers more than $400.  That means the AMC is making more than the appraiser, simply for sending an order, not doing any actual work.  The general AMC response to this is "appraisers will make it up in volume".  However, if an appraiser is in a rural area, they may not.  This may completely destroy some appraisers' livelihoods.  To the same effect, why should an appraiser who has spent years building their business be forced to work twice as hard for the same amount of money?

3)Many AMC's are run by former sub-prime mortgage company executives.  Still chasing easy money, they've gotten into the next fad of "dont work hard, but make money by ripping folks off".  These people in many cases started this mess, why should they now profit from the fallout?

4)Appraisal process is now held up.  In the past, as a broker I could work with appraisers I knew charged a fair amount, did a great job for my clients, and could get an appraisal report back to me in a timely manner with an open line of communication if things were held up for any reason.  Now the loan process is at the complete mercy of the AMC.  They're going to get their same fee, and have no incentive toward work quality.

5)Lets face it, in every profession there are the good guys and the bad guys.  You choose a bank based on their merits and offerings, a broker based on customer service, knowledge, price, and products, and (in the past) an appraiser based on the quality of their work, cost, and efficiency.  Now, there are some appraisers who may be new to the business, or are simply not very good, that will be doing work for consumers based on no merit or quality of work....simply because they are the lowest bidder (which the AMC likes of course, because it means more profit for them!).  You could have an appraiser that's not worth the paper it's printed on, and there's nothing you can do about it.

6)Lenders have approved AMC's, of which they'll only accept appraisals through.  Wells Fargo, for example, uses RELS.  Flagstar uses imortgage.  Cardinal Financial uses Streetlinks.  While every appraisal management service is supposed to do the same exact function, they all have different fees, different processes, etc, and the lenders will not allow the appraisals to be interchanged.  What this means is that if you're lender is delaying, or if you are not approved after you've paid a $400 appraisal fee as a consumer, if you want to move your loan to another lender you'll have to pay another fee with that other lender.  You still have no control over who does it, so if the new lenders appraisal comes in lower, you may be out of luck.....want to try again elsewhere?  Guess what, that's another appraisal fee....at $400/each, you're up to $1200 in a very possible scenario.  Now answer this question....how does this help consumers, who often refinance for the very reason of SAVING money?

I think the above are the major problems with the new HVCC policy, and I encourage everyone to petition for changes to this bill.  While I think dishonest brokers and appraisers alike should be forcefully removed from the market, I think HVCC was the wrong course of action.  Please do a google search for "HVCC petition" and let your voice be heard to have some major changes made to HVCC.  I would love to see a more honest mortgage industry, but certainly not at the expense of my clients.  Even simple changes, wherein ANY appraisal management company (they'd have to be regulated, licensed, and audited of course) could be used for ANY lender.  That's a simple fix, but they won't change anything without outrage and protest....I urge you to express outrage against the current form of HVCC and seek change by letting your voice be heard.

www.petitiononline.com/hvcc/petition.html

My oh my it's been awhile.  Life's busy with rates low and the purchase season in full swing!  Rates have gone up quite a bit over the past couple weeks, suddenly and drastically...never a good combination! 

In addition, it seems like credit requirements and underwriting guidelines are getting more and more stringent, making even the "easiest" loans seem difficult.  It's quite a frustrating time for me right now, with submitting loans and being forced to wait a month or more to get them done for my clients....I remember I used to be able to close a loan in 2 days...those times weren't that long ago!  Hopefully the market will shift soon and we'll see a little bit of light at the end of the tunnel....Im so frustrated but I can only imagine how clients feel!  It's good to know we're still better than our competition, but I want better!

Perhaps the biggest piece of news in the business comes in the form of the new HVCC legislation that took hold May 1...please be sure to read my separate HVCC blog, as this is a very disconcerting item which has the potential to be very, very harmful to my clients and the housing market as a whole...not a good thing!!!

For now, things are pretty difficult, but the summertime is nearly here, so at least we've got some warm weather, sunshine, and beach weather!  That usually makes things a-ok!

Recently there have been stress tests issued to 19 of the major US banks in order to obtain information on their stability and capital.  In an article released today on bloomberg.com, it was mentioned that the results of these tests are being delayed for release several days as they are "debated".  This comes after the initial results were not released for fear that the results could "sway the markets".  If this is not the writing on the wall that clearly says our banking system is in extreme turmoil, I'm not sure what is.

In other news, Chrysler and GM seem to be headed straight for bankruptcy.  My question is, so what happens to the taxpayer money that was infused and supposed to be paid back by these companies?  Do me and you as taxpayers now directly pay the UAW, supporting their near $100K/year assembly line jobs and massive benefits packages, all while many of us struggle to support our own families?  I'm not sure how there's not more outrage at the governments recent actions...my only guess is that people are so busy trying to make a buck to survive and put food on the table that they don't really know the whole truth concerning whats going on.

Recently I paid a credit card bill a day late.  Not because I didnt have the money, but because Ive been so slammed at work, playing for 2 hockey teams and trying to make time to actually sit down and enjoy a meal every once in a while that I truly had no idea what the date was.  I went online promptly to pay this bill, only to see my brand new, shiny 29.99% interest rate and $39 late fee.  Really?  With the fed funding rate at 0-.25% at the moment, and a given interest rate of 30%, that leaves roughly.....lets do the math....30% profit for the credit card companies, on top of the $40 late fee.  Residential mortgage profits are capped at 5%.  A little disparity?  I think its more like a TON of disparity. 

So as of now, it seems that this is the gist of whats going on....our government is robbing us when we've got nothing to give, credit card companies are robbing us blind with no repurcussion, and the federal government cannot even tell us how the banks that they've infused nearly $2 trillion of our dollars into are doing.  If that doesn't bring about a minute bit of rage and contempt, I dont know what would.

LETS GO FLYERS!  The chant will be heard throughout Philadelphia and the surroundnig counties this week as our Philadelphia Flyers go to battle w/their hated rivals, the Pittsburgh Penguins in the first round of the playoffs. 

The Penguins won the season series with a 4-2 record, however 2 of those wins came in overtime, and each team has tallied exactly 21 goals against eachother...talk about an even matchup.  Should be a heck of a series, possibly one of the best the playoffs has to offer.  If the Flyguys can slow down Sidney Crosby and Evgeni Malkin, they should have a good shot at victory.

Last season, the Penguins beat up on the Flyers in the Eastern Conference Finals to send a younger, Simon Gagne-missing Flyers team home just a few victories short of a Stanley Cup playoff.  This time around, the Pens are missing Marian Hossa, and other key players they had for last years playoff run, so hopefully we'll see the tables turn!

LETS GO FLYERS!!!!!!!!!

It's been a while since my last update, folks, but it appears one thing has not changed even the slightest bit...we're living in a world stuck in a very tumultous time on a global level.

Pirates are taking hostages for ransoms in Somalia, Navy SEALS are sniping pirates, Pirates are vowing revenge.  Could get interesting.  We haven't had an official "act of terror" since 9/11, however I think this latest run in would count for something....taking an American ship captain hostage and putting him in imminent danger would classify as terror to me.  This could all play out like an absolute mess as there are still many, many people being held hostage, and the world finally seems to be fed up with paying ransoms and taking action against these miscreants.  Could a Somali invasion be next?  We're already angry at N.Korea, at War with Iraq and Afghanistan, upset with Iran, what would a little Somali invasion on the side do?  Why not!?!?  This is all said tongue in cheek of course, just in acknowledgement of the mess the whole world seems to be in.

In the financial sector we see the stock market on life support but showing signs of life nonetheless as the DOW struggles to stay above 8000.  I think a lot of the recent rise in the market has come on the heels of naive investors who believe "we're almost at the end of the tunnel" though they clearly see no light.  With the unemployment rate rising and our total output of fake money growing by the billions into the trillions it seems to me that the only possible outcome of all this is hyperinflation and the devaluation of the USD. 

While conspiracy theorists unite in belief that this is all part of the worldwide conspiracy for a new world order (and heck, with all thats gone on recently w/the bank, the fed, war, and everything else, it doesnt seem that far off!), most try to hold their head up and think everything will be OK.  Im not too sure.  When top economists and financial experts disagree on nearly everything, its frightening....the people that are supposed to KNOW what's going to happen, really dont.  But, we shall see!

In much brighter news, the Flyers have clinched the 5th seed in the NHL playoffs and will play our cross-state rivals the Penguins.  Hopefully we destroy them this time around, and meet the San Jose Sharks in the Stanley Cup Finals (my dream matchup...I'd be very, very torn).

On a final note, RIP Harry Kalis, the voice of the Phillies, who passed away today while in Washington DC for the Phils-Nates game.  Such a sad, sad day for Philadelphia sports fans, as a beloved icon is no longer with us.  Broadcasts for the Phillies will never sound the same, and never sound as good. 

Well the second major economic stimulus plan has been written, declined, rewritten, renegotiated, and finally passed in final form as a nearly $800 billion package.

Most of the items included in the package are supposed to be geared towards job creation and from keeping the unemployment rate from rising much higher. 

Unfortunately, there weren't many tools in the package that will directly stimulate the housing market, which is surprising due to the fact that this sector is what caused all of the mess we're in, and what will (in my opinion) ultimately pull us out of the mess as well (when peoples homes grow equity, they feel safer, spend more money, buy more homes, etc, and it's the same ripple effect as we saw when the housing market collapsed, only in reverse).

2 major pieces of the package that are directly geared towards housing are an $8000 tax credit ("credit" is the word the governments using, it's really an interest free loan to be paid back through taxes over 15 years) and legislation to assist struggling homeowners before they are delinquent.  Not sure how exactly they can do that without people fully taking advantage of the idea, but we shall see.

On a personal note, anyone who is tired of the political games being played in Washington, please speak out against House Speaker Nancy Pelosi who pathetically enough tried to put a ton of stuff in this bill that had nothing to do with our economy or building jobs....items concerning sex ed and contraception in the hundreds of millions of dollars?  at a time like this?  Absolutely pathetic, she should be removed from office and politics altogether.  How could a supposed "Leader" take advantage of a bill designed to help struggling Americans? 

I've spoken before about rates and how they fluctuate, generally based on 2 major factors.  1)What mortgage backed securities are selling for on the market and 2)What rate the banks are borrowing their money from the Fed.

Well, the rate at which banks borrow money is 5% lower than it was a year and a half ago, and mortgage backed securities are trading pretty darn high compared to historical levels.  However, rates are only reflecting a slight change, and are actually slightly higher right now than they were at their low in 2008.  Why could this be?  Several factors are at work here.

First and foremost, a lot of it has to do with greed.  The banking industry and their poor decision making over the past several years have caused billions in losses.  Rather than making necessary changes and building business back up, they're in a mentality where accruing capital is their primary concern, no matter what the cost to others.  That means where every 5.5% mortgage is written, last year there was about a .5-2% profit margin for the banks.  Now, there's a 5.25-5.5% profit margin, and the change in their profits are not being passed along to the consumer.  Just looking at market indicators, rates should technically be in the mid-high 3's. 

Another reason rates are so high are the inefficiencies within the banks employment ranks.  With unemployment mounting and hiring freezes being seen everywhere, banks are surely hesitant to take on new staff.  With rates being so low, loan applications soared in mid December, and we're still seeing the effects.  As underwriting turntimes increased, we saw a symmetrical increase on the rate sheets.  They're keeping rates artificially high to stem any new applications, rather than having their turntimes continue to increase, and rather than hiring new employees to handle the increased volume.  Why hire new employees if rates could potentially rise, causing loan applications to fall drastically, which would just result in more layoffs. 

A third factor deals with investor appetite.  Why would an investor want to hold onto paper with a 3.5% fixed return?  They could make more money elsewhere, so rates have to stay somewhat higher to increase investor appetite.  Currently, rates are in the low-mid 5's, but we're likely to see a drop into the high 4's. 

Anyone holding off on that government-cited dream of 4.5% fixed might be waiting their whole life, because with the state of the industry as a whole, it's going to surprise me and everyone else to see them get there even if only for a short while.

If this were a report card, the economy would get a big, fat F w/the unemployment rate being the latest reason.

With the addition of more than 520,000 job losses reported in December, 2008 turned out to be the worst year for job losses since 1945 (which was artificially high due to factory worker job losses due to the end of World War 2), with losses amounting to 2.589 million jobs.  Recent losses by Wal-Mart, Macys, and Alcoa will likely fuel the fire over the next several months as more losses are expected to take place.

With Obama coming into office, he inherits an unemployment rate of 7.2%, the highest since 7.3%, immediately before the inaugration of Bill Clinton.  Hopefully he can do something similar to Clinton.  During Mr. Bill "I did not have sexual relations with that woman" Clinton's presidency, more than 22 million jobs were created, compared w/about 3 million in George "Ya cant send mexed missages" Bush's time in office. 

With 2008 an utter failure, 2009 is off to a dismal start in the eyes of speculators.  There are historical events about the take place (again) with a supposed $795billion stimulus plan in the works and being vehemently pushed by its developers as a necessary step to recovery.  Although this time should be viewed historically as an utter catastrophe, I think it will be very, very interesting to see how what's broken will be fixed.  A ton of money will be lost, but certainly in the recovery a ton will be made, and the sincere hope of everyone is that we come out of this stronger than ever before, and for once maybe, just maybe, learn from the mistakes.