Dennis C. Smith : CA mortgages : CA mortgage rates and home loans and mortgages and home equity: Orange County Los Angeles Long Beach Huntington Beach

Dennis' Mortgage Blog

Monthly Financial Wire and Rate Update

December 6th, 2007 7:10 AM

My apologies for getting this out late this month, technological glitch delayed the sending!

Please go to www.onehourforeducation.com and donate one hour of your pay to help school children in need, thank you!

If you wish to be removed from my email list for this monthly newsletter please reply to this email indicating you wish to be removed and I will do so. Please forward this to any family member, co-worker, friend or acquaintance you feel may benefit from the information--as well they can contact me and be added to the mailing list.

Check out my Mortgage Blog where I update market and rate news every Friday and provide my views on the industry, credit, trends, etc on a regular basis.

Click on Financial Wire to read this month's wire and articles:

A lot of news this week with the "teaser freezer" agreement between the government and several lenders. I have very mixed feelings about the move, mostly negative. It certainly helps those whose rates will be adjusting after January 1, 2008, but what about those whose loans have already adjusted? Those who have already gone through foreclosure? They have paid the price of the mortgages on their homes and the markets where they live, but now their neighbors are getting relief. For many people the gamble on the low rate and high leverage will pay off, for many more it did not. Once again government steps in and relieves accountability and responsibility. We will see the impact this has on the markets.

The one article in this month's Financial Wire I wish to comment on is the one on Identity Theft. This time of year there is increased theft as retailers higher more part-time workers, there are more credit card receipts in the trash, and people are signing up for "free" or "no interest" credit cards in department stores--often from part-time workers. I have three main items of advice to minimize opportunity for identity theft (notice I said minimize not "eliminate"!): 1) Shred your financial trash. Do not put it in the trash can, put it in a shredder. 2) Try not to put anything with financial information in the trash at your home. If your neighborhood is like mine you have several trash pickers a week going through the recycle bins and trash looking for items they can recycle. Besides the fact this is theft and illegal in most cities, it is also an opportunity for them to paw through your trash looking for any financial records. 3) Minimize the number of credit cards you have and use and check balances on-line regularly between statements. Do not maintain department store cards, I have seen people at the point of sale registers say they forgot their card and can it be looked up--many stores still have this feature and it is not hard for part-time, or full time, employees on payroll for the holiday rush to do so after you leave the register. Do not sign up for new cards for an enticing 10% discount on anything you buy that day--the math is not in your favor compared to possible identity theft, on $200 purchase you only save $10. There is a fine line between vigilance and paranoia, be vigilant!

Here is the link to the Financial Wire for the month and here is the link to my Mortgage Blog that I try to update a few times a week.

Let me know how I can assist you, a family member, friend or co-worker with their mortgage or debt management needs please do not hesitate to contact me.

If you have a subject you would like me to opine about on my mortgage blog let me know and I will see if I can oblige your request!

As we begin the month here is a look at 30 year fixed rates for purchase transactions with at least 10% down and a cost of 1 point:

Conforming has dropped to 5.625% and we are flat on Jumbo 6.625% Note I have included rates to January of 2006 so you can get a 2 year view:

RATES ON DECEMBER 1ST 2007

Check out my Mortgage Blog where I will address the Fed rate cut yesterday and other issues that impact mortgages and real estate.

We are in the midst of Hannukah and Christmas is on the way, during this busy season take a moment to reflect on your accomplishments and high points of the past year and thank those who assisted and supported you in achieving them. In that note I thank all the professionals I am fortunate to work with in a wonderful industry, all my terrific clients who have entrusted me with their business, and my beautiful family who reminds me what fun life is!

Dennis

Thursday, December 06, 2007

Posted by Dennis C. Smith on December 6th, 2007 7:10 AMPost a Comment (0)

Weekly Rate update to agents: Last of 2007!

December 28th, 2007 8:58 AM

Some not so positive economic news the past two day combined with the assassination of Benazir Bhutto in Pakistan have led to a surge in bond purchases the last two day--this is good news since rates were hammered earlier in the week. We have dropped back down to prior Friday pricing this morning, the way the market is moving we should be lower by the afternoon.

Monday is sort of an open day, sort of closed depending on the lender--basically today is the last full business day of the 2007. Thank you to everyone who helped and supported our business in 2007. I look forward to working with each of you and your clients in 2008 providing excellent service, competitive mortgage programs and solid information to assist in decision making.

Rates for the final Friday of 2007:

30 year conventional at 1 point 5.875%

30 year jumbo at 1 point 6.75%

Please feel free to forward this email to your co-workers and clients--or send them to my Mortgage Blog where it is posted weekly.

Have a great weekend,

Dennis

Friday, December 28, 2007

Posted by Dennis C. Smith on December 28th, 2007 8:58 AMPost a Comment (0)

December 21st Weekly Rate and Market Update

December 21st, 2007 10:32 AM

On a daily basis the bond charts have been getting whiplash. One day prices dropping like a stone (resulting in climbing rates), the next day climbing like a rocket (and rates dropping). Any sniff of news on the economy either slowing significantly (rates drop) or inflation/economic growth (rates climb) is causing big swings in the markets. Today we learned that in November consumers made more and spent more and a key inflation number was up higher than expectations and outside the Fed's comfort range--that whistling sound is the sound of dropping bond prices and higher yields, or rates. Yesterday was a very positive day in the markets and it looked like investors would drop some lower rates in our stockings, but today the Grinch came down the chimney and took the stockings. We continue to advise: LOCK! Lock everything as soon as you can as the market is very volatile.

We see a drop in Jumbo this week, not sure the reason except it could be Wall Street is beginning to increase investing in Jumbo fixed rate mortgages--we'll see if the trend continues., conforming stays the same:

30 year conventional at 1 point 5.875%

30 year jumbo at 1 point 6.625%

I hope Santa is kind to everyone! We will have our standard "pink" Christmas with pink dolls, and pink clothes, and pink everything for the girls---nothing in my size though!

Happy Birthday today to Leslie!

Have a great weekend,

Dennis

Friday, December 21, 2007

Posted by Dennis C. Smith on December 21st, 2007 10:32 AMPost a Comment (0)

Nest And Egg

December 11th, 2007 1:16 PM

My Front Porch

Dennis C. Smith

Post #53

December 11, 2007

“Nest And Egg”

“You are not allowed to use the words ‘nest’ and ‘egg’ again…from now on you will have things on toast.” Albert Brooks “Lost In America” to his wife played by Julie Haggerty after she has lost their nest egg at the Desert Inn.

Those who know this movie will remember that after his wife has lost their cashed in life savings, including the equity from their home, Brooks’ met with the casino manager (played by a very talented Gary Marshall) to see if he could get his money back. In a very funny scene, Brooks who had just “dropped out” as an advertising executive tries to convince Marshall of the positive promotions and increased business his casino would get if the casino would return the lost fortune Haggerty gambled away. The casino manager was not buying what Brooks was selling…too bad the casino manager was not President Bush; they may have gotten their money back.

Last week Bush announced an agreement with several major lenders that they would freeze the interest rates of a couple of million sub-prime mortgagors with adjustable rate mortgages effective January 1, 2008. The reasoning behind the move is to save these families’ nest eggs and reduce the chances they may go into foreclosure when their initial, or “teaser”, rates adjust to what is known as the fully indexed rate. At time of the announcement the interest rate freeze received most of the publicity and media attention, but he also announced efforts to reform FHA mortgages and encouraged those in my industry to work hard to refinance borrowers into fixed rate mortgages—something many of us have already been doing, with great difficulty in most instances due to home values, loan amounts and borrowers who are a bit skittish after their previous experience with other brokers or lenders.

The “teaser freezer” issue though is the issue that has garnered the most press and commentary, and rightfully so as there are many aspects of the agreement with which I and many others in the industry disagree. To wit:

· What of the homeowners whose rates have already adjusted and they have already been foreclosed on or will be in the future? Because they adjusted before the January 1^st date their rates are not part of the agreement. I guess it is akin to the announcement of the cure of a fatal disease a few days after you have contracted it—great news! Too bad it is just a little too late to help you.

· What happens in five years when the agreement expires and the loans recalibrate to their original terms? Do we face another rash of foreclosures to what will by then, or should be, a healthy real estate market? What happens when one to two million mortgages all adjust on January 1, 2013?

· Does this forgiveness also apply to Jane and John Doe who refinanced and pulled cash out of their home in 2000 to pay off revolving debt…and again in 2002 when they rebuilt their kitchen with top of the line appliances and cabinetry…and again in 2005 when they pulled out more equity to pay off more revolving debt and bought a boat? Does it apply to them for the several hundred thousand dollars in equity they have pulled out of their home with adjustable rate mortgages with low rates starter rates?

· What can we expect for other credit sectors? Will the government step in and force banks and lenders to drop the rates on auto loans? Small business loans? Credit cards? What other markets will the Federal government mandate the price of the services ignoring the free market?

· What effect will this have for future mortgage products? How restrictive will the credit markets become if they have to look over their shoulder and worry about the government forcing them, well maybe not forcing but strongly encouraging them, to rewrite their notes. Will this not further constrain lending and therefore purchasing power of potential homeowners thereby further decreasing demand?

· How does this not reward those in the industry who knowingly put unwitting borrowers in sub-prime mortgages? How does it not create the “I got away with it once I can get away with it again” mentality?

· If in the ensuing five years the value of the property increases substantially will the borrower have to repay the lender what would have been owed? Or is it finders keepers losers weepers?

I will state again, and will continue to do so, I am very aware that our industry has some bad apples that lie and cheat and pursued any means to get mortgage applicants and to close them so they could get paid. There are those who steered borrowers towards mortgages that had tremendous profits for the lender or broker. These people exist in the industry—but they are a very small percentage of those in business; but they are the ones that make the great stories for the media and whose clients we read about. The vast majority of the mortgage industry consists of people working hard to help families buy homes, to manage their mortgages and debt and equity to obtain financial goals, who care about their clients. I bring this up because too much of the blame for the housing credit crisis and resulting difficulties in the housing markets is laid at the feet of the lender or broker—and now Bush has asked the lenders to freeze the rates on billions of dollars of mortgages at levels significantly below market rates. Those borrowers lucky enough to have funded their loans at the right time have won, they gambled and while many around them have lost their homes they keep theirs, do not have to pay the rate they agreed to and in fact are substantially below the market. Congratulations, I guess.

There are many different mortgage products and underwriting guidelines vary for those products. Despite the myriad of options there is one constant for every mortgage: The borrowers must sign a Note. The Note details the terms of the transaction, including any adjustments in rate that may be part of the loan. Regardless of whether the borrowers were steered into a mortgage, were the victims of bait and switch, or were flat out lied to by their lender when completing the application, the mortgage could not fund until the borrowers signed the Note.

Now the President has used the power of his office to allow borrowers to renege on their agreements, in doing so a very dangerous precedent has been established that will have repercussions for many years in the housing, mortgage and credit industries.

Rather than having lenders freeze their interest rates for those borrowers who have already funded mortgages, the President and other politicians who are so eager to get involved in an industry that is already incredibly regulated should add just a few more regulations. First, establish a national licensing requirement for anyone engaged in residential real estate sales or mortgages. The ability to obtain a real estate or mortgage license should be as difficult as that required for selling stocks or possibly practicing law. With this license should come strict penalties and repercussions for those who violate the law including loss of license. Second, individuals who transgress the laws should be listed on a national database so other potential employers, clients and lenders may see their record. Currently it is not uncommon for an individual fired from one lender for making bad loans or engaging in fraud to get hired by another lender; or for a broker who is dropped by one lender to start sending loans to another lender.

also have to leave in order to pay their own mortgages—I hope they are able to return in the future.

The old cliché is the only certainties in life are death and taxes, I would add to that, and the willingness of elected officials to bail out those who make bad decisions with laws that adversely affect those of us who have made good decisions. As long as the electorate continues to tolerate the Nanny State mentality of intrusion in our private lives and markets politicians will continue to pass legislation that protects people from themselves. As it continues we, as a society, get farther and farther from being accountable and personally responsible for our deeds and actions.

Dennis

Tuesday, December 11, 2007

The above was originally published on www.lbpost.com

Posted by Dennis C. Smith on December 11th, 2007 1:16 PMPost a Comment (0)

Weekly Rate Email to Agents 12-7-07

December 7th, 2007 12:15 PM

<<&dear>>:

I am hoping to be able to put down my thoughts on my Mortgage Blog later today on President Bush's brokered agreement to freeze subprime interest rates, check in later today or this weekend.

KABOOM! That was the sound of our mortgage rates yesterday and the echo today is even louder. As you are aware rates had been dropping in front of the Fed meeting next week with many anticipating a 0.50% cut in rates--as anticipations go on Wall Street so go expectations and money follows expectations. There was some sell off yesterday causing a slight bump in rates, nothing we would have made a big deal about but it led into today's markets where jump off replaced sell off.

Recapping one of our economic axioms: the Fed wants to control inflation and recession and keep the economy on as even a keel as possible, it does so with interest rates among other tools. When it feels stimulation is needed it lowers rates, when it feels like some brakes are needed it raises rates, on the Federal Funds and/or the Federal Discount Rate. Moves in these rates filter through other sectors and credit markets.

Because of the credit and housing scenario playing out since Spring the Fed has been engaged in cutting rates the last several meetings--keeping money flowing and trying to prevent or stave off a shut down of the economy. In doing so it has run the risk of fueling inflation which would as dangerous to the economy. As a result there have been many, myself included, who have felt the Fed rates cuts have been excessive and inflationary. Since I do not have a vote on the Fed Board of Governors my opinion matters not so much in policy making.

Wall Street investments, in stock and bonds mostly, are bets. Investors are betting that a company or sector will do better or worse in the future and bet by buying or selling. If Wall Street thinks inflation is on the way it will sell out of bonds as higher interest rates are on the way--and by selling they create a lowering of price and increase in rates. In a way creating their own self-fulfilling prophecy.

Today the employment and wage figures came out for November...and they were inflationary. Almost 100,000 new jobs were added to the economy last month, about 20,000 more than expected. Further, along with more people getting paid they are getting paid more money with wages increasing 0.5% in November. Now that may not seem like a big number, zero point five percent, but taken across all the payrolls in America it becomes a lot of money. Let's say you are Boeing with 20,000 workers and the average hourly rate is $15 per hour and now you have to pay $15.08 per hour--that amounts to $64,000 per week, or $3.3 million per year. For just 20,000 workers in the economy. Multiply that by say 147 million workers in the U.S. economy and that little one-half of one-percent becomes a huge number: $2.5 billion per year in additional wages just from that percentage entering our economy on the workers side. That is inflationary. (Not to mention the increase in payroll taxes for the government but I will get into that!).

So now the markets who have already priced in a cut of 0.50% by the Fed next week are screaming, "No way! Sell! Sell! Fed will only cut 0.25%!" and rates get slammed. Big readjustment to the anticipations and expections and therefore the bets or investments result in a big jump in rates today. We should see things calm down next week and by end of the year get back towards, or closer, to 5.5% for conforming, but until then we had a few days of rates of two year lows--at least for conforming.

Same advice as always for clients: LOCK! Lock as soon as you can and protect yourself.

We lose the big drop in conforming we had going into last Friday, and with the disconnect between Jumbo and conforming see a huge jump in Jumbo rates:

30 year conventional at 1 point 5.875%

30 year jumbo at 1 point 7.125%