FOMC Chairman, Ben Bernanke, is scheduled to speak on the Fed’s new talking points in just over an hour and a half.  I would expect the Chairman to say something like inflation is their primary concern (duh) and that they are slightly concerned still with revelations in the credit markets. At some point we will have all of the information about the derivative action that the hedge funds have been involved in with relation to the MBS market. I don’t expect that will be the case for another couple of months.  However, the news this morning from Freddie Mac that they have suffered a $2B loss in Q3 of 2007 should make a lot of the people out there who have been saying we have all of the information and this problem is only a “sub prime” problem, take notice.  I would expect that many new “revelations” will take place after Thanksgiving and before Christmas when the markets are typically pretty quiet.

Housing start numbers were off this morning as well as the new home permit numbers were down and the only numbers that were up a bit were new multi-family starts in some areas.

tags: bernanke, fed, fomc, freddie mac, mortgage

This is the first item I have read that is written by someone (well two people actually) that knows what they are talking about.  Most people today think that lowering the discount rate or the fed funds rate is going to save the US real estate markets….guess again Beavis. The only thing that should do, and has already started to do, is put more money in the M&A people’s pockets because you just made their cost of funds a heck of a lot cheaper. Great job Bernanke, you puss.  Check out this paper by two Wharton School professors (yeah, I know, I don’t like professors either, but this is good) entitled, “The Housing Finance Revolution.”

tags: home loans, loans, mortgage, subprime, wharton, market

According to the TBWS.com daily update:

Washington Mutual is to stop providing warehouse lending lines (ouch)

Option One (Sub Prime) is to cut 575 jobs

First Horizon to cut 1,500 jobs in their secondary division

Countrywide funded ~$34Billion in loans in August of 2007, off 17% from August of 2006

tags: economy, loans, market, mortgage, residential

Rumors this morning that Citibank re-packager Lown Home (catchy name right?) is not funding loans anymore. This is just a rumor at this point, but I would suspect that their time in the market may be numbered based on what I have heard and read from a number of different sources.

tags: economy, financing, home loan, mortgage, sub prime

Just received this via email:

Due to continued uncertain market conditions, effective as of 1 pm EDT (10am PDT) today, August 21, 2007, 1st National Bank of Arizona (FNBA) will focus on Retail originations and has suspended Wholesale and Correspondent originations.
Wholesale and Correspondent locks received prior to 1 pm EDT (10am PDT) today, August 21, 2007 will be honored.
Requests for Edits or Extensions to locks after 1 pm EDT (10 am PDT) today, August 21, 2007 will NOT be accepted.

Looks like the credit crunch on Wall Street is taking its toll even with the emergency move by the FOMC to lower the FFR by 500 basis points last week.  While making money easier to access for banks, there is still the main issue of the drastic changes in underwriting guidelines by Wall Street MBS investors which translates into entire product lines being eliminated by all mortgage lenders. This will continue.

tags: closing, credit crunch, economy, first national bank of arizona, fnba, mortgage

It seems I get new emails every day from lenders that are either 1) offering what everyone else is no longer offering or 2) telling me that they no longer offer entire lines of product.  I received emails from a local lender about a month or so ago and they were much more aggressive in a certain are than other shops. The last few days I have received a number of emails from our rep stating that parts of their programs have been suspended or changed. Today, I get an email saying that they are basically suspending an entire line of products…which is basically the only thing we could offer of theirs.  If you are a potential borrower, get your financial house in order.

tags: finance, lender, loan, mortgage, news

Let’s just start naming these Sub-Prime mortgage related posts with the same naming convention, ok? I am pretty confident there will be more than two on this here blog.  So, let’s get down to the nitty gritty shall we?  A few weeks ago, we saw home mortgage interest rates jump anywhere from a half to three-quarters of a percentage point in a matter of two to three days.   This was something that went unnoticed by John Q. Public, but was probably the defining economic moment of 2007.  We saw yields on the 10-year Treasury note jump to 5.4% when it seemed that it would never break the 5% barrier for many moons. Today, the 10-year note is trading at a yield of 4.80%…but, we have not really seen a comparable drop in home mortgage interest rates of similar maturity/length.  So, what gives? Well, the short of it is that there are a lot of mortgages that are not performing and lending institutions and investors are taking back properties at near-record levels.  When we saw the mortgage interest rates jump a few weeks back, the big news was really that underwriting guidelines for ALL borrowers changed dramatically. What most people have not taken notice of is that in addition to sub-prime loan programs getting slashed and trimmed into a small image of what they used to be, Alt-A and A paper underwriting guidelines have followed suit.  So, while lenders can borrow money, in theory, at cheaper prices (competing with bonds of similar maturities), mortgage interest rates have not moved down.  The investors that buy the MBS (mortgage backed securities) as well as the lenders (who can’t seem to sell their loan portfolios like they once could) are increasing the spreads they require to cover their asses.

The story here is, that credit is tightening in the mortgage markets.  This is not something that is simply affecting people with crappy credit scores.  Tightening credit is affecting all borrowers of all credit profiles.  Loan programs that were available 9 months ago, are no longer available today to the vast majority of borrowers.

What I find most intriguing at this point is that many of the non-performing sub-prime and other residential mortgages are owned by hedge funds.  In the late 80’s and early 90’s when the S&L crisis was in full effect, the RTC (Resolution Trust Corporation) was tasked with disposing of all of the non-performing loan assets.  The laws in effect at the time prevented banks from holding REO on their books for more than a certain amount of time. I am not aware of any regulation that would prevent hedge funds and non-banks from disposing of their REO.  What does this mean? Nothing other than it is different….and quite interesting.

tags: home loan, mortgage, sub-prime, subprime

The yield on the 10 year note has steadily moved down this week as is trading under 5.1% this morning. This does not have any direct effect on mortgage interest rates, but it typically has acted as a good indicator. Hopefully, we will see lenders adjust their mortgage lending rates down on similar term products. The Securities and Exchange Commission confirmed it has launched several investigations into securities backed by subprime mortgage loans, and PIMCO Chief Investment Officer, Bill Gross, insists the turmoil in the funds managed by Bear Stearns is not an isolated event. This should be interesting, but I am sure that nothing big will come out of it in the end. Martha Stewart went to jail for making $200,000, sorry for purging herself…I am confident that nobody involved in any wrongdoing at these firms will do a day behind bars.

tags: bear stearns, loan, mortgage, sub-prime, subprime

I get a great market update from SCME bank every morning that gives me about a 5 sentence update on major market events and reports and how they affect interest rates on mortgage loans. At this point, there is a lot of uncertainty in the markets due to a number of factors. First, we have oil prices that are sky high compared to what we are accustomed to here in this great country. This affects every industry and every person that does not live in a 100 square foot shack in the hills on Montana. For a number of reasons, this giant increase in prices has not thrown the economy into a tailspin. We have started to see a pretty major shake-up with the big and small sub-prime mortgage lenders which have become the poster child for the media and Congress. Nobody seemed to care how people, who had no business getting loans, were able to buy houses with no money down when the real estate market was appreciating at high double-digit rates. Now that most markets have come back to reality, we are starting to see the effects of these insane lending practices. Each day, Wall Street investors (those who make the funds available for the vast majority of home loans in the US) have been shrinking their appetite for non-traditional loans. This has translated into less ability for people with not-so-great credit, questionable income, and little to no equity to find a loan. Since many of these people cannot afford the mortgages they put into place, they are now in a world of hurt. Trust me, I talk to them every day.

At the end of the day, people like to point the finger and blame someone. It seems that this has become the American way, find the blame and single the person responsible out. The bottom line is, when you borrow money from a bank or individual, YOU are the one that is responsible for making sure you understand all of the terms of the agreement between you and the lender on how the loan is to be re-paid. If you are so dense and incapable of understanding the terms of the loan, then you have no business entering into such an agreement. People need to take responsibility for the things they do and move on. It is not about Congress having people like Jessie Jackson testify in front of congress saying how the lenders and mortgage brokers of the world are to blame. I am pretty sure that the esteemed Reverend cannot find one person who was forced or coerced to sign the loan documents for their home.

I wish that everyone could own a home. That everyone could afford to make their payments. Unfortunately, things happen. People do things they shouldn’t. You live and you learn. It is up to each one of us to take responsibility for the things we do, good or bad, and not try and pass the buck.

tags: lending, loans, mortgage, sub-prime