Dennis' Mortgage Blog

Question of the week: What happened to you last week? Answer:  I find it comforting that you care…seriously several people contacted me over the weekend wondering if I was okay as they did not get my weekly update last Friday, the first one I have missed in a very long time.  I am fine, unfortunately my computer was not having blown a hard drive last Thursday morning.  A new hard drive was installed late Thursday afternoon, it was configured on Friday, my data backup was reloaded on Friday and much of this week has been spent re-mapping programs to data and trying to catch up.  While it was a major pain in the neck to go through the process I was comforted knowing my data was entirely secure and would be recovered. 

Major recommendation:  I receive no benefit whatsoever from this (unless you wish to put me in as referring source and I am not asking you to) but I highly recommend that you use Carbonite.com for backing up your computer data.  I used to use an external hard drive that had an automatic backup schedule, provided I remembered to plug it in and/or I was in my office when it was scheduled to back up.  With Carbonite your files are backed up automatically every time you have an internet connection and there is no impact on your ability to work normally.  What is really great is you do not need to consciously do anything; every file is backed up when it is created and changed automatically!  Carbonite is safe, secure, easy and incredibly affordable—if you want the peace of mind I experienced this past week after losing my hard drive sign up with Carbonite.com.           

If you have a question you would like me to answer send it to me!

Big news this week with the Fed agreeing to buy more mortgage backed securities from Fannie Mae and Freddie Mac and also several hundred billion dollars of treasury bills (so as not to crash that market).  This had an immediate impact on rates on Wednesday as they dropped throughout the day.  There was a fair amount of give back yesterday and this morning as investors took profits from Wednesday investments and more importantly realized that the Fed actions are very inflationary—and we have covered before how much bond investors do not like inflation.  End result is for the week we have broken slightly through our lowest rate levels, whether we will stay at this level and begin a new range of movement will not be known for about two weeks.

On a more general economic issue, confidence I feel strongly that the move yesterday by the House of Representatives to single out one particular group of income earners for a specific tax rate will hurt any economic recovery.  While many politicians are feigning outrage (I say feigning because many of the most vocal have also been recipients of significant campaign contributions) over the AIG bonuses being paid, they are obscuring from the American people the whole picture; in doing so they have forced themselves into a position of having to make very bad legislation.  By taxing the bonuses, contractually agreed to in 2007 before TARP even existed, paid to some of the AIG workforce at 90%, Congress has created the slippery slope of using tax policy for retribution and public lynching of industries with low esteem in the public opinion.  What if Congress decided to increase the tax rate on all commissions earned by real estate agents in 2005 through 2007 because they were made on real estate sales for homes that have subsequently dropped in value?  What if Congress decided to increase the tax rate on all individuals who did not have health insurance in 2008 to forward fund Medicare?  What if Congress decided to retroactively impose a tax increase on all companies that signed contracts with the Federal government for work to be completed in 2009?  None of this seems fair but given the actions of the House yesterday these scenarios and more are now feasible. 

Congress has spent much of its current session writing legislation that allows contracts to be broken.  Contracts are the foundation of our economic system.  By allowing contracts to be broken or altered by Congressional decree at some later date confidence in the contract is non-existent. Why should a bank lend you money if later on a judge can completely re-write the terms of the agreement?  Why should an individual agree to a salary structure if later on Congress can change the payment of that salary—after the work was done to earn it according to the contract?  Without trust and confidence in contractual relationships business, and the economy, comes to a halt.  With its actions yesterday Congress applied a lot of pressure to the brakes.

Rates down across the board as the Fed has agreed to purchase almost $1 trillion of mortgage and government debt this week—since FHA mortgages were not part of the plan rates remained unchanged.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional at 1 point 4.75%                          Down 0.125%

30 year conforming-jumbo at 1 point 5.25%     Down 0.125%

30 year FHA at 1 point 5.00%                                     Flat

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

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Have a great weekend,

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.