Rates on the Rise

I thought I would take a brief break from my oil rampage and talk about something that has really hit home this week; mortgage rates! We are on our 6th day in a row of rising mortgage rates and the whole time the DOW has really not moved all that much. We have gone from 5.875% on a 30 year fixed to 6.25% in less than a week! Why? Well I can think of a wholesale list of reasons but I can really isolate it to just two.

First, if you look at the numbers and read between the lines most analysts and traders think we may have "lucked out" and skirted a recession. What does this mean? Well I believe they are "hoping" the U.S. economy (at least most entities in it) will start to rebound from the economic woes of the past. Second, U.S. financial firms (i.e. banks, insurance companies, hedge fund enterprises etc.) are still experiencing continued losses due to the mortgage fall-out a point at which most analysts thought would be at least some what "contained" by now. However, the fact remains the "national" housing slump continues and most believe will continue for quite some time while at the same time losses continue to hit balance sheets, delinquencies are still rising, foreclosures are still rising and home prices continue to fall. Combine these two "thoughts" and what you have are the selling of MBS (Mortgage Backed Securities) because the risk has not "funneled" out as most had planned and an "upbeat" optimism in the stock market and rates are on the rise.

While I believe rates will rebound in the mid & long term future the fact still remains that our industry and therefore mortgage rates still and more than likely will remain extremely volatile. Only time will tell whether or not my educated guess will come true but I would like to think so.

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Your Columbia Missouri Mortgage Broker

More Program Changes

Once again more mortgage program changes are coming down the pipe. We have already seen the elimination of stated income loans, 100% loans, and many others. (except for a few instances) Now the guidelines for 97% loans are tightening! One prominent lender has done away with this program completely and only offers 95%. Others have changed the credit score requirements to 680 instead of 620. So anyone with a score less than 680 must put 5% down in order to buy a home. For example, Wells Fargo is putting the change into effect 5/23. Chase has made the change. Countrywide had already made this change some time ago. So it is pretty safe to assume all the others will follow suit in the near future. It will just be a matter of time. However, it hasn't happended with all lenders yet. This means that if you are in the process of putting a contract on a home, there is a chance we can lock you in to preserve the 3% down payment.
As always PMG will keep you up to speed on any new changes as they come down!

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Big Oil Part II; Oil Refineries

In case you were wondering Wikipedia's definition of an oil refinery is; An industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas.[1][2] Oil refineries are typically large sprawling industrial complexes with extensive piping running throughout, carrying streams of fluids between large chemical processing units.

Let me make it clear that I am NOT an oil expert nor have I ever claimed to have been. But the fact remains that the current price of oil and oil prices in general affect almost every part of the United States economy and yes that includes the buying and selling of homes. Gasoline prices are affecting where people buy homes, when they buy homes, how much they will buy and whether or not they will buy at all. To be robust on this issue is simply a fantasy as I would hope that we can all agree that this subject is a hot topic right now!

The following paragraphs are merely a "snapshot" of mostly U.S. oil refineries. It seems that in light of the ever increasing prices for a barrel of oil refineries are focused on more profitable sectors of refining. "Gasoline is less profitable than distillates for the refineries, and so refiners want to maximize their production of distillates" said Amanda Kurzendoerfer a commodity analyst at Summit Energy. What is a distillate? To summarize a distillates are used in general for heating oil and diesel fuel. So what does all of this mean? Basically oil refineries are less focused on refining oil for gasoline purposes and more so for "other" avenues.

Below is a summarized list of the top 5 United States Oil Refineries:

1) Exxon Mobil Texas $562,500 barrels per day
2) Exxon Mobil Louisiana $503,000 barrels per day
3) Citgo Corp Louisiana $429,500 barrels per day
4) BP Products Texas $417,000 barrels per day
5) BP Products Indiana $410,000 barrels per day

U.S. total refining capacity = $17,125,000 barrels of oil per day. Of this 19.5 gallons per barrel or about 44% (the most that can be made) becomes gasoline; 7,535,000 barrels of gasoline times 42 gallons per barrel = 316,470,000 gallons of gasoline capable of being refined each day. In 2004 US gasoline consumption was 382,400,000 gallons per day, meaning the United States imports almost 66 million gallons of gasoline each and every day in addition to imported crude oil.

The United States hasn't had a "new" refinery since 1976. Why? Because the cost of building a new oil refinery is at times 50% greater than simply "refurbishing" an already existing factory. Why? Extremely tight environmental restrictions, not-in-my-back-yard community opposition and high cost of building.

Last week refineries operated at 86.6% of capacity and that's up from 85% the previous week. It's projected that during the summer driving season production will increase to 90%.

I must admit this subject was far more detailed than I had previously thought. There is a lot of data to digest, differing opinions on almost every subject, conflicting statistics if you search long enough and the raw reality remains that this subject is very complicated. But the one consensus is refineries are really struggling keeping up with demand from the consumer, technological advances and profit considerations.

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Your Columbia Missouri Mortgage Broker

Big Oil Part I; Profits & Prices

I'm going to start a four part blogging subject concerning oil companies and all that this entails. Part I will consist of prices and profits; Part II will consist of a growing issue concerning the oil refineries; Part III will consist of the oil "cartel"; and Part IV will consist of supply and demand implications.

At the close of yesterday's market oil stood at $125.80 a barrel; up $1.57 on the day. Many attribute this to speculative buyers, the weakening greenback against other currencies, demand vs. supply, overseas issues concerning the producers and the list continues to grow every day. To think that just ten years ago 1998' we paid just under $1.00 for a gallon of gas baffles me! As of May 4th, 2008 the average price across the United States for a gallon of gas at our pumps was $3.62, an all-time high! This has hit so close to home that I actually bought a more efficient means of transportation (Hyundai Sonata) and laid my truck to rest (F250 Crew Cab Diesel). Even now it still costs over $60.00 to fill the Sonata at today's prices and to think that just ten years ago it would have cost under $18.00 is ridiculous! In fact oil has doubled in just one year and has been six fold since 2002!

I did quite a bit of research yesterday on this subject and found that in 2007 oil companies made over $1,300 a SECOND! Can you imagine pocketing that kind of money in today's economic environment? In fact in 2007 Exxon Mobile Corporation (the largest oil producer) reported a profit of over $39.5 BILLION; that's right folks a BILLION in one year; a United States record! And to carry over this fact they (Exxon) also reported a 1st quarter 2008 profit of $10.89 billion. It's counterpart BP (the 2nd largest oil producer) reported a 2007 profit of a modest (sarcastically stated) $31.3B. Through the first 3 months of 2008 they made $7.6B in profit. To cap things off Shell made $27.6B in 2007 and also reported a profit of $7.8B the first quarter 2008.

I'll leave these statistics to you to form your own opinion. However, do you think that these facts are related? Oil companies (Exxon, BP, Shell, Chevron and others) are making billions of dollars and all the while gas is skyrocketing across the world. Now there are numerous factors that are far more important in dictating issues concerning profit and I know there are much smarter people than me that can perhaps attribute this to "other" items. However, I personally believe these are intertwined and directly related and until someone convinces me otherwise (very hard to do) I will continue to believe this.

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Your Columbia Missouri Mortgage Broker

Your Credit

We all know that your credit score is vital to the home loan process. We have touched on this topic several times in our daily blog. I don't want to beat a dead horse, but with the tightening of program guidelines this has become even more important. Any credit issues are magnified. Lenders are on high alert for potential risks and the higher credit score requirements are making it tougher to qualify. I thought it would be a good idea to highlight the following once again!

How your credit score is computed is very complicated and nobody really knows the exact formula. Everyone's report is different and it is tough to predict how a given event will specifically impact your report. With this being the case, all we can do is give you a few pointers. By no means is this the gospel when it comes to credit reports, but it should get you on the right track. Aside from the items I am about to list, it is a good idea to go to www.myfico.com, www.annualcreditreport.com, and other valuable sites to read about credit and check your report free of charge once a year!

1. Make all your payments on time or within the given grace period. Always be aware when you are nearing a 30 day late. If you are getting close, don't risk it. Call and pay by phone, online, or FEDEX. Whatever it takes so that you don't have a 30 day late. It just isn't worth it!

2. Absolutely take all precautions when the above rule applies to your mortgage! DO NOT miss this payment. This will devastate your score and the products you will qualify for. 1 30 day late can really hurt!

3. If you receive a collection call, get on top of it. I'm sure everyone has had at least 1 medical bill slip through the cracks. Many people are stubborn thinking, insurance should have paid that and just ignore it. Don't do this. Get on the horn with insurance and the collector! Take the time to figure it out. If you owe it, just pay it because they will not let it go. It will eventually end up on your report as a collection and it is best to nip it in the bud early! Always make sure you get a paid receipt on company letterhead to show this is paid and has a zero balance. This can really come in handy if you find out down the road it never was updated on your credit report.

4. I never recommend co-signing for a loan, but if you do be careful. Always stay on top of this. If you get a divorce, make arrangements to get off any notes since it will be tough to monitor. I see these situation go bad all the time and it can really hurt!

5. Never go over limit on your credit cards! Even if you pay on time every month, an over the limit account hurts your score.

6. Try to stay at no more than 50% useage on your credit cards. This means if you have a $5000 limit, don't carry over $2500 on the card. This is a highly over looked part of the credit scoring process. They want to see that you are not maxed out or close to it!

7. Tax liens or judgments. Obviously you don't want these and if they come about, they are many times the result of a crisis. However, take the appropriate measures with the IRS or collector who placed the judgment to wipe them out as fast as possible. These must be paid off in many loan scenarios and of course damage your credit. Tax liens also come with hefty interest and penalties!

8. Try to avoid the credit counseling services that offer to reduce your monthly payments etc.. I have not seen where these help and they report on your credit report that you are working with a company like this. This is also not good.

9. If you do file bankruptcy, make sure you follow up with all your creditors afterwards and make sure your accounts are reporting properly. If it was included in your bankruptcy, make sure it shows as such. I always seem to see accounts linger on peoples reports that are inaccurate. By doing this, it is much harder to rebuild your score!These are just a few tips for the most common blips we see on credit reports every day! If you are trying to repair your credit right now, I know it is a painful process! Nobody seems to be willing to help and it can be grueling! Once you are in a hole, it is easier said than done to payoff these items! Just stay focused and follow up repeatedly with creditors to make sure they report your account properly!

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Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

What we do & Why we do it

To be blunt we have a process for everything we do. From our initial "Welcome Letter" to our "Follow-up" after the client has already closed on their loan. Our procedures, conversations with our clients and professionalism have really helped us become one of the most respected lenders in Mid-Missouri.

Recently on a drive back to my wife's hometown in Illinois I had some time to think about PMG's business and how far we have come in just under 2 years as a lending institution in Columbia, Missouri. Although we still have a lot of our goals to reach I am very proud of this company and our reputation in the lending community. I truly feel in my heart that we do things the right way. We tend to overkill the important details in our conversations with our clients and in the manner in which we deliver our disclosures. In a real estate and lending environment not seen in almost 4 decades, we have rolled with every punch given to us and are still alive and kicking. Flourishing in an environment non-conducive to lending is something we are very proud of.

There is now so much that goes on behind the scenes in our role as a professional mortgage broker that I am almost amazed I can keep sane through the week. Our investigations into lenders, our monitoring of mortgage rates, our knowledge of the economy and the factors that influence it, to our distinct and competitive advantage in delivering our products. It is for these reasons that I feel we stand out above the rest! I am very proud of what we have built and am not ashamed to show it off at times. Ask our business partners and clients about us. We under promise and over deliver. We are knowledgeable and professional about our business. We take our role very seriously! We simply do things right!

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Your Columbia Missouri Mortgage Broker

Monitoring Rates!

If you have read our blog before you probably have heard us refer to rate monitoring. While most lenders monitor rates is some form, everyone has their own method. In today's turbulent market, rate monitoring is more important than ever. Gone are the days of receiving a rate sheet in the morning and that is the rate. As the MBS (Mortgage Backed Securities) market bounces all over the place, so do mortgage rates. MBS prices are the key indicator what direction rates are going these days. If you are not following them then you are doing your clients an injustice. Lenders have been re-pricing numerous times during the day. This means if you quote someone a rate in the a.m. without locking, that rate will no doubt change before the day is up. While the market will probably stabilize again the next day resulting in the same quoted rate, this doesn't always happen. We monitor all the factors that influence rates and implement procedures to insure our clients are protected. If we quote someone 5.875%, we must protect this. Borrower's want the best of both worlds. This is a guarantee they will at least get what they were quoted, but an opportunity to go lower! While there is no sure thing, we can give them as close to this as there is possible. We give an accurate quote day one and it is our goal to get them this rate or something better. If we see trends that are beneficial to our client, then we will float. If we see a trend heading in the wrong direction we will lock if we feel we can't make this loss up prior to closing! We will never be 100% accurate all the time, but we are very close. It all comes down to the particular client and their risk tolerance. If they are conservative we can lock and not mess around. If they are more aggressive and want to shoot for a lower rate, we can put our tools to use to try and get them what they want!
Today was a prime example. We had a particular client that had told us his rate tolerance and his ideal rate. We almost locked last night, however we researched some data and thought the mornings opening for MBS prices would be favorable. We were correct and then we saw prices start to dip again. Since we were on top of it, we locked his loan. He received a better price than he would have last night. We also locked in the nick of time as the lenders re-priced and we would have been worse off than last night had we waited 30 more minutes! The client was ecstatic and so were we! This is a prime example of why we do this!
I would hope there aren't any lenders left that just wait for the rate sheet and just fly by the seat of their pants. I am sure they are still out there. You just may want to think twice about using someone like this! If you have any specific questions, please call. We would be glad to fill you in on how we operate in order to do what is best for your loan.

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Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

Credit Squeezing on Consumers & Businesses

Well this comes as no surprise but more than half of the banks surveyed by the Fed said they had tightened the screws on commercial and industrial loans, commercial real estate loans, residential mortgages and home-equity lines of credit.

This comes as no shocker. As stated in earlier posts, The Fed is trying everything possible to "free up" liquidity to lend. However, the banks are hoarding cash to improve their balance sheets in light of the current credit crisis and rising default rates. This will surely add to the already fragile economy as tighter credit could slow the economic growth, especially consumer spending economists say. Banks were also increasing interest-rate spreads, requiring more documentation, demanding more collateral, or requiring co-signers and or covenants before granting credit. Consumers in particular are being hit hardest the survey showed. A record 25% of banks said they were less willing to make consumer installment loans.

DETAILS

Commercial Real Estate: 79% tightened standards, while 52% said demand was weakening

Residential Mortgages: A record 62% of banks said they tightened standards for prime mortgages, while 49% said they saw demand reduced.

Consumer Credit: A record 25% of banks reported less willingness to extend consumer installment loans; only 2% were more willing.

Credit Cards: 32% tightened standards, mostly refusing loans to consumers without good credit.

Student Loans: 55% said they would provide fewer subsidized loans this fall than last fall.


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Your Columbia Missouri Mortgage Broker

More on Oil and our Blog!

Once again Oil has hit a new high today. At the moment it sits at $121.65 a barrel after reaching $122 earlier today. Who knows what it will end the day at, but projections of it reaching $200 sometime this year are very real! In an earlier post we were moaning and groaning a bit about gas prices and the enormous profits oil companies are making. This was no doubt a venting session, but they are emotions that many people are feeling right now! It is a much more complex issue than it looks on the surface and it really sparked some good feedback from our Blog readers. Some of which are way more educated in this field than I am. One example was a financial planner that pointed out that gas in the U.S. is the cheapest in the world. We also consume 1/4 of the worlds daily oil consumption. This shows how unlikely and hard it would be to cut costs because the other parts of the world as a whole consume more than we do. If they are willing to pay the higher prices, then why would anything change. I don't have time to go into depth on our conversation, but it was very interesting. This was just one excerpt. One point he did make was something we all can do. This is to invest more money in order to hedge against the higher gas prices you are having to pay! Invest your stimulus check, tax return, or other money you can set aside. If you can earn a good return and make (for example)$2000 a year on the investment, then you just made up for the extra you are paying in gas over the course of the year!

Another interesting article that discusses this topic can be read here.

This is just one example of the type of feedback we at PMG want to see on our blogs! Some of you may not have noticed, but there is a comment section where you can post your thoughts or questions to anything listed on this blog. We encourage it. This blog is for informational and educational purposes and any feedback helps! The more interactive the better. If you read yesterdays blog you know about our new "Guest" posting we will try on Wednesday's. This is for any Realtors, Financial Planners, Insurance Agents, Appraiser's, etc. If you have a topic or view that needs to be aired, then let us know.
Just prepare your post and email it to Shawn
(shawnvt@pmg-inc.net or eric.hemmer@pmg-inc.net).
Obviously keep it clean and professional. We will have the power to not post it if it is inappropriate. Not only will this be good to get another viewpoint on our blog, it also can be some free advertising. We direct most of our customers to our site to apply and they can read your blog. If they like what they see, they may even contact you directly! Your "Guest" post will look different than ours. You can include your picture and information at the top to distinguish yourself from PMG.
We hope this new feature helps and some people will choose to take advantage. We look forward to hearing from you. If you don't feel comfortable posting your own blog, then just comment as you see fit to the postings. The more people the better!

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Professional Mortgage Group,Inc.
"Your Columbia, MO Mortgage Broker"

An Opportunity

After much discussion and thought we (Professional Mortgage Group, Inc.) decided to open up our Blog forum to our business partners. What does this mean? Every Wednesday we will give our business partners the opportunity to talk about something of substance and post it to our site. There are many meaningful views and people who have something to say about the current economic environment, local market conditions, new or current law changes, etc. that we feel could really add to the substance and insight on this blog.

Our viewers; often times realtor's, title companies, appraisers and other industry professionals throughout the country who provide honest and pertinent feedback to many of our posts. What better way to enhance our blog than to get the opinions and personal views on topics than to have them "put it out there" for all to see, view, and comment on. Our hope is to have a multi way flow of information, business opportunities and content so that this blog can truly benefit the general public.

More often than not most blogs are the views and thoughts of one individual or company. Other industry professionals never have the opportunity to voice their opinion, simply because they lack the time, technical insight or forum to give honest, pertinent and candid views on key topics affecting the market place and in particular the current real estate enviornment. Hopefully our idea will help change this notion and really add to the knowledge and diversity of views seen on our blog posts.

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Your Columbia Missouri Mortgage Broker

Home Depot Feeling The Pain

Well this isn't that much of a surprise but the world's largest home-improvement retailer is still feeling the pressure from the continued national housing slump. Today Home Depot announced that it would fire workers, close 15 stores and put on the "back burner" plans to build 50 more.
These plans would reduce investments by $1B over the next 3 years.

Home Depot has come under continued scrutiny for it's customer service in relation to it's rival and competitor Lowe's Company. Many believe that this is a real reason why they have lost 33% of it's market value within the last year. The retailer employs approximately 331,000 people of which two-thirds are full-time employees. The job cuts are Home Depot's third this year and come after they already announced in January that it would reduce staff at its Atlanta headquarters by 500 people (10%). Today's announcement will cut approximately 1,000 jobs mostly in its human resources department in hopes of shifting more people to the sales floor.

In February Home Depot announced that 4th quarter profit from 2007' fell by 27% and earnings forecasts were going to be reduced as the housing slump continues to take its toll on "solid" companies.

As we all know Columbia, Missouri has both a Home Depot and a Lowe's and for a town recovering from it's own housing issues it will be interesting to see if there are any problems with our two local stores. I honestly think our home-improvement retailers have fared far better than other stores as Columbia residents really do patronize our retailers especially the likes of Lowe's and Home Depot.

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Your Columbia Missouri Mortgage Broker