More Lending Changes

This Tuesday February 26th I received an e-mail with information regarding program changes concerning 100% financing. It seems the MI (Mortgage Insurance) Companies will know longer ensure borrowers below 680 needing 100% financing. In fact in order to get financing above 80% anymore you need a minimum of a 620 and that will take you to 97%. Why are these changes happening? The lenders are not the culprits in this, the MI companies such as, AIG, MGIC, and United Guaranty are not willing to ensure borrowers anymore over 80% unless they have a 680; therefore the banks/lenders cannot lend the money to the borrowers above and beyond that amount.

I do think as the "credit crunch" and "mortgage meltdown" become more isolated and "seasoned" the standards will relax again, however only time will tell when and for how long. Most of what we are seeing in today's market is overreaction to underlying problems. But just like any other dilemma just give it time and we will see things get back to normal. With all of this being said there are still a lot of programs out there specifically designed for "first time home buyers" that will allow for 100% financing below this guideline. For instance, MHDC (Missouri Housing Development Corp.), USDA financing or "rural development" financing and FHA (Federal Housing Administration) financing just to name a few.

Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker

New Media Player!

Professional Mortgage Group, Inc. has added yet another addition to www.pmg-inc.net.
This is the use of an online Media Player. We utilize this tool in 2 different ways.

1. We use this tool to update our visitors on current market conditions and what to expect. You can expect a quick synopsis of any daily news and how it has impacted the bond and rate market. From this info you can form your own opinion if you think floating or locking your rate is best for YOU! This also helps set expectations for clients and realtors!

2. We update you or your client's online loan status.
This allows us to give voice updates and the ability to touch on critical points pertinent to the loan. While we still encourage anyone to call and talk to us directly, this is just another way to provide you with easy information. No need to spend time playing phone tag if it isn't necessary. Realtors are no doubt busy dealing with other client's and working on closing new deals. We want to make the process as simple as possible! By referring your clients to PMG, you know all of the hard work is done. We will keep everyone up to speed right up until closing!

This is just another way PMG has chosen to go to new lengths to enhance the client, realtor, and lender relationship!

If you are in the market or have clients in need of fresh information, be sure to check back daily!

Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

Mark Your Calendars, Thursday March 6th!

With the volatility in the market place and the volume of phone calls and e-mails I have received concerning mortgage rates I thought it would be wise to hold a forum to address the current mortgage rate environment. The event will take place Thursday March 6th at The Columbia Board of Realtors from 11:30-1:00; lunch and refreshments will be provided!

As many of you know I follow the market as much if not more than any other mortgage professional. Why? Because I want my clients and referral partners aware of what is taking place in the market and how it impacts the real estate community and in particular mortgage rates. It is not a science I developed overnight. However, this is/was driven more by 10 years of experience in the lending industry, tracking MBS's, Bond's, Yield's, market sentiment, accessing information, interpreting information and correlating all of this into a "precise assumption" on the market and mortgage rates!

I will open my thoughts, knowledge and views on this subject to REALTORS ONLY during the forum on March 6th! I look forward to seeing you there.

Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker

Under Promise and Over Deliver!

I am sure we have all heard the expression "Under Promise and Over Deliver". It could never be more important that right now. With rates dropping recently and jumping back and forth, many people have come out of the woodwork to refinance or purchase a home. This is great news for the mortgage and real estate market, but borrowers need to be on their toes. If you have paid any attention you can see the market is extremely volatile. This means when you are quoted a rate you need to confirm the following:

1. Is the rate realistic with the current day's market?
2. What are your closing costs?
3. Is this rate locked or floating?
4. What is the current market projected to do leading up to your closing?

These are all very important details. We are finding that many lenders are quoting rates based on what they think they can get in the near future or telling the customer what they want to hear! This is setting yourself up for failure. Now it is common to start a refinance at a rate on a given day and then have the market turn before the loan can be locked. In this case the borrower just needs to be made aware that the market must be carefully monitored so any sudden rate drop can be capitalized on! Either way I think you get the point. If a lender is up front and quotes a rate, it is always best to set the appropriate expectations. By doing this you don't put yourself in an awkward position and the borrower is taken care of in the proper way! Why put yourself in a position where you do all the work and the deal blows up at closing as a result of you telling a borrower they will get x when they actually can only get y!

Brought to you by:

Professional Mortgage Group, Inc.

Your Columbia, MO Mortgage Broker

Beware, Worse Conditions May Come!

The Fed released it's minutes yesterday and true to many expectations they are very concerned about the inflation numbers being released; .3% of latest note. What impacts inflation? Well a host of items called "a bag of goods" sampled by the CPI index. Two of the main factors contributing to this index are Oil (closing at a record high 1 day ago above $100 a barrel) and Food costs (Wheat and Corn demand has really shot up lately) and Milk is approaching the ridiculous range! Why are these so closely monitored? Because these are the KEY ingredients to the "bag of goods".

Now with that being said traders have refused to put money into bonds until late yesterday and early this morning. What do they do with their money when in panic mode? One of two things happens; they either stash their money into Gold currently trading at an absolute ridiculous $948.00 an ounce or "put it under the mattress" (i.e. a money market account). Therefore bonds have really taken a hit the past week raising rates over a 7 day period faster than any other period over the last 10 years. Hopefully this trend has changed today as we are seeing traders put money back into bonds even though inflation is on the rise (inflation is VERY bad for any fixed asset avenue).

What does all of this mean? The Feds mentioned in their report that "if necessary and likely" they would continue their rate cuts. However, they also mentioned that once the economy got back on track they would raise them VERY fast to help curb the growing inflation problem. Why? Because we need a strong dollar to function in a "normal" economy and inflation simply put weakens the value of "our" dollar.

Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker

More News on Foreclosures

After blogging on the newly announced "Project Lifeline" and talking about "Hope Now", more data is being released. This data is very disturbing, but touches on the fears I mentioned in our earlier blog. This is that even though people are taking advantage of these programs and modifying their mortgages, they are still losing their homes. I am not going to bore you with stats, but it was reported that a very high % of homeowners that took advantage of these programs still cannot afford to stay in their homes. If they catch up now, it is a blown transmission away from falling behind again. This is because there are so many people "married" to their home. Selling isn't an option, what do they do? Foreclosure is the next option. Even though these lenders are participating in these programs, the options available are temporary fixes. Rolling you past due balance into the loan, freezing an interest rate, and giving you more time to catch up are options that are on the table. If this doesn't make sense, just look at the following examples.Conforming ExampleA family purchased a $400,000 home and took out a 100% mortgage. They took out an ARM at 4.5%. Their payment was $2026 (principal & interest). When their ARM is up their payment could jump to $2271. This still isn't too bad. Then next year it goes to $2528. Now it is getting out of hand. This is $500 more a month than the initial month! The reason so many are getting into trouble is because the initial payment was a bit tight for them. This new increase is too much to handle.Non Conforming ExampleThe same family buying a $400,000 home on the non-conforming side is way different. This is where the majority of the problems stem from. An ARM rate would look more like 6% for a good non conforming borrower. This payment would be $2398. Once the ARM is up this payment jumps to $3218! That is an $820 jump in the first adjustment year alone! From these 2 examples you can see the problem. In reality the only way to help people is to drastically drop rates, extend terms, or reduce balances. All of these are unlikely scenarios. In actuality it may not be a bad idea. They stand to lose alot of money on a foreclosure, not to mention the hassle of dealing with numerous homes. If they reduced balances and modified loans in this fashion, many people could benefit. While this sounds like an easy solution, it is much more complicated. There are investors involved and there is the likelihood they reduce the balance, cut the rate, and still run the risk of not being paid! Then they lose twice! Nevertheless some serious changes need to be made and made fast if they want to help fix this growing epidemic!Brought to you by:Professional Mortgage Group, Inc."Your Columbia, MO Mortgage Broker"

Market Mentality Gone Wrong

I thought I had seen it all until today. Traders (on the stock market that is) have taken a leap of faith into an entirely different area called psychological nightmare! News that Wal-Mart profits rose in the 4th quarter 2007' have made the traders delirious. It simply baffles me how this could be seen as a sign of economic strength? To me the rational is simple; Americans are "cashed strapped" and in turn chose to buy their merchandise at the world's largest discount retailer! The lowest prices at the largest discount retailer for cash savvy people, wow what a concept. The struggling specialty retailers posted VERY disappointing sales over the holidays and moving forward. Is this a coincidence? Not too mention that 25% of this increase was from Wal-Mart's overseas locations, a huge push for them in 2007'.

In turn this has turned out to be another nightmare day for mortgage rates with the 10 Year Treasury Yield approaching 3.9% (the highest in the last 2 months) and MBS (Mortgage Backed Securities) down 112 bps for the day! Hopefully the economic data being released starting tomorrow will greatly help mortgage rates; only time will tell.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker