The Fed lowered Rates by .5 bases points. Are mortgage rates lower?

There is some good news today.  Your credit card rates should drop dramatically. 

If you have a home equity loan, those rates should drop dramatically as well.  This will help those of you who need a break on the cost of carrying money.

The not so good news is that mortgage rates are trading upward.   Two weeks ago, for a day or two rates fell for a brief instance.  We called out to our clients and asked them to lock in their interest rates.  A majority of you did.  We should have another break in rates, my guess is in a week or two, but it will only be for a day, maybe two at the most.

I have been asked when we will have super low rates like Japan, 0%.  Based on what I’m seeing, I don’t suspect we will see that anytime soon in mortgage rates.  My prediction is the economy is going to get much worse before it gets better over the next couple of months.

I believe that retail numbers for the holidays are going to be very low.  People are just plain scared and I don’t blame them.  One shining light is the worst is over on home values in North County San Diego.  I have seen some stabilization.  I wouldn’t say this in the condo market or Los Angeles. 

One piece of unfortunate news is it seems like lenders are becoming tougher again.  Things that we did not have a problem getting through a few weeks ago have started to make transactions a little more challenging.  It feels like underwriters are scared for their jobs, for their companies, etc. 

Let’s put this into perspective. 

We, the tax payers, now own a part of your company that is making these loans so how about giving us a little break?  You really work for us!  I don’t think they have gotten the memo yet.

Trust me, it is coming.  Apparently members of the Bush Administration have been telling lenders to lend.  Cuomo from New York has said, “Lenders, I am watching you.” 

What does that mean?  It means that we have gone from one side of the pendulum to the other and I think the middle is coming. 

This would mean a lot to all of us a Samuel Scott.  It means our jobs will get easier.

For you realtors, it means not as many surprises during your escrow process.

You know the one that says the client is approved and you say, “I will believe it when loan documents are in escrow.” (FYI, during the craziness, we had clients that had signed loan documents and the lenders did not fund).  The best news at Samuel Scott Financial Group is we are still here and have survived, so we will be here for your refinances and your purchases.

Remember, the Jumbo Conforming loan limit is going away soon.  I suggest calling Mark and me

sooner rather than later.  I also suggest that if you are in a short term ARM 3, 5, 7, you should be filling out a package now to get locked into a 30 year fixed.  When your rate adjusts the world will be much different.   You may be looking at 8%, but today you are in the 6% range. 

We have taken low interest rates for granted for a long time just like the DOW remaining in the 12000’s.  Don’t be the person who I tell, “I told you so!” 

It’s better to pay a little more now than a lot more later. 

Please comment on my BlOG, I’d love to hear from my clients.  If there is a question post it.  I will answer it right away.

Why aren’t rates going down when the FEDS put money into the market?

Good question, simple answer. 

The money is not in the market but it will be soon.  This is at least what we are being told.  The bigger question now is, “Are banks going to lend once they receive the money?”  Things are becoming a little scarier my friends.  One of the many reasons why the stock market has been so volatile is that the banks have been highly leveraged.  What that means is that when you deposit $100 in your savings account at ABC Bank, they can borrow up to $3000 on that $100.  When the markets start to freefall like we have seen they have to sell assets to keep within their leveraged guidelines.  Big bets equal big losses! A bigger margin calls.  The banks are freaked out and want to get our money that the government is giving them and then their leverage amounts will drop.  Today I heard one banker say that they would like to get to a 17 times leverage.  We are going to bail out these banks to make them more profitable and then not lend us any money.  It’s like going to your local bank, giving them $1000 and then asking them to give you a loan for that same $1000 but they tell you “no and leave your money in the bank.”  Supposedly behind closed doors with Paulson and Bernanke, the banks agreed to lend if the government gives them money for their balance sheets.  How is the government going to confirm this?  I’m not quite sure myself.  Let me get back to our original question.   Why are rates still high?  A much simpler answer is, these lenders have taken it in the chin for so long they have to make some money back.  The advantage of working with us at Samuel Scott is that we have the ability to broker as well as bank.  It is the nature of supply and demand.  We have a lot of lending sources who are competing for business and you the consumer are able to take advantage of this.  The in-house lenders or the big banks do not have this flexibility.  They have one menu and either they are in the market or out of the market.  So remember, if you are not getting your loan from Samuel Scott Financial Group are you sure you are getting the right loan?

Our Congressmen did the right thing, but can you get a car loan or a home loan?

That seems to be the question I am getting a lot.  The answer to a home loan is, Yes!  If you have worked with us lately you know that we have been pulling off the impossible. 

For those of you who have not been my clients for that long, I have been doing this for over 16 years.  I remember doing loans in a full documentation environment and having to read tax returns to qualify people.  What is crazy to me now is that there are people working at the big banks who do not know how to qualify a client, yet people still continue to go to the big banks to get loans. 

Then they find out that their loan officer packaged their loan wrong.  Now they are scrambling or they think they can’t qualify for a mortgage when perhaps the person they are using to qualify them just does not know how to qualify them.

I can say that it has been great beating my competition time and time again.  Not just by rate but by skill.  The really cool thing is I believe we are gaining customers for life, which has always been my mantra.  Most of my competitors will be lucky to do 7-10 million dollars in funding this year.  I guess I had a great year last month. 

 Now it is time to get off my soap box and answer the question.  On home loans, Yes! 

But I am hearing that on car loans even people with an 800 FICO score are having a very tough time.  I would suggest that either you come to the table with cash for a car or you wait a couple of weeks until some of this liquidity starts to move through the system.  It will take at least three weeks before Main Street feels the effects. 

Today, we received more sad news that another major bank has left the wholesale market.  Citicorp has decided to leave and only do business on the correspondent side as well as the retail side.  What is cool about this is that we are a bank as well a broker which means that we still have Citibank while my competitors lose another lender. 

The landscape is changing and pretty soon the consumer may not have as many choices which I don’t think is good.  I think competition is great and helps keep banks honest, but it seems that pretty soon you will either have Wells Fargo or Bank of America to choose from.  My big concern is do you really want a teller doing your home loan?  One of my mentors once said to me “Todd, a home purchase is a life changing event for someone.  They need to be handheld through this tricky environment and you will be successful if you do that.”  I have always heeded his advice and I believe that’s why you, my clients, still support me today. 

I hope to hear from you soon.  Call me with any questions, post a comment or a testimonial here, on this site.  I am sure that with all this going on you must have some questions that I would love to answer.  I’m also being quoted in the November issue of Ranch & Coast as well.

Will it happen this week?

Will it happen this week? 

Will the government bailout go through the House of Representatives?  I hope so for a number of reasons:

1)       I think that it will free up some of the capital markets and get people off the fence.

2)      Psychologically it will give the American people a boost.

3)      Wall Street will like it and the stock market should rally

 

If it does not go through what does that mean?  Good question.

It could mean the 777 loss we saw after the vote did not go through could be just the beginning of a steep decline in the returns on Wall Street.  We could see our 401K’s and IRA’s go up in smoke.  We could see another major company go bankrupt. 

The main question people keep asking me is, is there money out there to lend?  My comment back if you are looking for money under 700k it is not extremely easy to come by, but it really is not that hard to get.  Especially through our bank which is doing jumbo agency, conforming and FHA loans.  FHA, for some of us originators, has been a life saver when it comes to low down payments or people who have challenging credit issues.  I also feel like now is the time to be buying real estate in certain parts of the country.  I feel like we will look back at this time as the bottom and hopefully by spring summer next year, we will be hearing that we had hit the bottom right around now. 

If you have any questions or comments please ask and I will try my best to answer.