Mortgage Financing Blog

I know that this site is a little off topic of this blog, but I can tell you that this is a real insider’s ironic memoir of the credit crunch.   The blog chronicles “The Spiral” and it’s thinly veiled references to fascism, in portrayal of the credit crisis as a historical.  The blog is written by a gentleman working for Sub-Rosa Capital, LLC and you can find his resume, but you may have trouble finding his real name . . .  Anyhow, I would say to anyone who works in a financial field, this is worth watching for black humor value.The most recent (possibly final??) installment in the series makes it quite clear who is being parodied. For those who don’t think that the first 8 episodes would be of interest, just watch this one.  It is the finale (so far) so it could be a spoiler, but if you know the real life story, I don’t think that this detracts from the entertainment value of seeing all 9 . . . 

On Tuesday, the United States goverment and the nation’s fourth largest lender, Citigroup, announced help for homeowners who are struggling in the nation’s mortgage crisis.  The Federal Housing Finance Agency, which controls Fannie Mae and Freddie Mac, is reaching out with a plan to keep people from losing their primary homes.  The plan, which goes into effect on Dec. 15, aims to help homeowners who are already in the foreclosure process, get fixed rates they can afford. The program offers either a reduction in principal or interest rates, or a loan extension to lower monthly payments.  Federal Housing Administration Commissioner Brian Montgomery said it’s still up to homeowners to pay what they owe.  “This is not loan forgiveness. These are terms that are affordable to borrowers,” Montgomery said.  Citigroup is also taking steps to help the half million of their clients who are current on their mortgage payments, but may face a future financial crisis.  The company is halting foreclosures and urging borrowers to call if they face job cuts or any other loss of income.  “We are reaching out to those homeowners before they run into trouble, before they become delinquent,” Citigroup’s Eric Eve told Local 10.

Miami mortgage broker Grant Stern said it’s a great move. Due to the housing market’s downturn, many of his clients, like homeowners throughout Florida, owe more on their homes than what they are worth.  “When I tell homeowners it’s not their fault, I can hear the relief in their voice. They realize they’re not in it by themselves,” Stern said.  Financial experts believe these plans will offer relief to some, but they won’t bail out everyone facing foreclosure.

It’s always nice to know that someone is interested in your opinions, and in my humble one, the direct aid to homeowners is long overdue.  However, there are some important measures that need to be introduced to prevent future bubbles like . . . (more…)

Yes, I think it may be.  For those who are casual traders, this type of market timing opportunity is worth taking a look at.  Why, even Warren Buffet recently bought back into the market!  He knows that you can never time the market outright, but certainly there are better times to buy than others.  Right now, there are 2 items of interest that are In My Humble Opinion about to take the market higher and move the pricing floor higher shortly.  The technical events are related to the movement of the VIX index and the fundamental event is the settlement of Washington Mutual’s Credit Default Swaps both of which interconnected events should move the markets 10% higher and probably keep them above that benchmark for some time to come (or at least a few months until early next year).

For those who don’t know what the VIX is, it is an index that the Chicago Board of Exchange (CBOE) publishes which tracks the options market’s Implied Volatility of the market’s option contracts on the price of the S&P 500 Stocks.  This is an indicator that explains the implied risks of holding a market index fund with the 500 largest stocks, which is a simple and managed way for individual investors to gain exposure to stock market returns, while limiting exposure to losses that indivudual stockholders may suffer in tough times (ie. a Bear Stearns stockholder got essentially wiped out, but a SPY investor only has lost 40% of value this year).  (more…)

Some intrepid InTrade.com predictions market user added a predictions category for the next Secretary of Treasury of the USA.  It’s a great way to see what the market thinks of who the most powerful member of the Cabinet.  A must check out for serious traders!Â

 

In the article Volatile Mortgage Rates to Persist Until Year-End, Analyst Says, Alexis Leondis discusses some of the effects of a rough month for mortgage interest rates, which has had up to 5% daily and 10% weekly changes in the cost of mortgage financing.  What does that really mean?  When the average mortgage interest rate rises from 5.875% to 6.625% the cost of borrowing increases by 10% in the monthly payments alone.  Generally, a 5% move usually happens in 7-14 days, not just from one day to the next, but lately, there have been enormous swings daily, and even intraday.        

As quoted, I noted several strategies to beat the volatility, foremost of which is contractual caps to the amount of your obligation.  The second is “having the loan originator not lock in a rate until the loan is nearer to closing, because borrowers may receive a better rate if rates decline.”   and needs some clarification.  A “Rate Lock-In” determines the loan price over a specified time to close.  There are different lock periods by lender, and the status of the loan.  When I take a loan application, I typically work with the borrower to select the rate and terms that fit their needs the best.  Unless specified by the client, or myself while settling the terms, the rate floats to market.  This means that while we talk, the rate can change, and from one day to the next, you are exposed to the movements of rate that are tied to the bond markets.  Once a rate is settled, there are multiple pricing systems of different lenders, each unique.  When it is specified between myself and the borrower, or if the offered rate is at “PAR” (0% pricing from bank to broker, 0% pricing from borrower to lender) and priced to lock in by date (30-45-50 days, are typical time periods), it is house policy for most mortgage brokerage businesses to request an immediate “Rate Lock” from the investor on that loan.    The 30 day rate lock is what lenders use in determining the current pricing because a typical loan process runs 28-30 days.  This is where the loan status comes into play, because only approved loans can take 15 day locks with better pricing!

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