Will The Fed Act Again?

Well, the Federal Reserve Committee will meet once again on Wednesday October 31st. What will they do; keep rates unchanged, 1/4 point reduction, 1/2 point reduction? Time will tell but most analyst (80%) are predicting at least a .25% reduction and some think perhaps another half .50% will be taken and needed.

For the first time in a long time the continued housing slump and credit crunch is really making an adverse impact on our overall economic market. Just today Merrill Lynch announced that it would be forced to "write-down" over $7.9B; most of which was due to the housing crisis and the delinquency attached to it. Also, announced today was the "national" existing home sales report which reflected the lowest level in almost 8 years.

Add to the above the dilemma concerning record gas prices, increased unemployment, higher utility costs and this does not make for a healthy economy. It seems even the market is expecting further Federal help has today's 30 year mortgage rates are 6.125% down over .25% from a week ago. However, the problem is not mortgage rates or our nationally high inventory of homes. Rates could be at 3.0% but if buyer's cannot access the money to utilize the rate, what difference does it make! The credit crunch needs to be addressed, loans that could be done 1-2 years ago are now no longer available. Now with that being said, I am not a proponent of opening the flood gates of Sub-Prime and Alt-A products like we saw toward the late 90's. However, there are "tweaks" we can do to our product offerings that I believe will help "qualified" borrowers. For example; stated income loans with some verified assets, good scores and some reserves should be made available again. Also, some sub-prime (i.e. 600+ fico's, full-doc, 95% ltv) there is a need and market for this product. The problem with the above is that investors of these types of loans have gotten burned and pulled out of the market. What is needed to get them back?

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Columbia Apartment Association

A couple of weeks ago I was asked to speak at the Columbia Apartment Association, with a resounding yes I accepted their invitation. It seems recently I have been asked to give several interviews/opinions on the current state of the housing and mortgage market both from a national and local perspective. Below is an outline of what will be addressed or commented on at this meeting.



Since late 2006' over 161 lenders are out of business including 5 out of the top ten. Below is a small list on some of the larger players no longer originating or funding loans.

1) Wells Fargo (Wholesale sub-prime division)

2) New Century Mortgage

3) First Magnus

4) Decision One (A division of HSBC)

5) American Home Mortgage

6) NovaStar Mortgage

7) Ameriquest Mortgage

8) H&R Block Mortgage



Foreclosures & Delinquency:

- .65% of 1-4 unit properties have entered into foreclosure according

to MBA that is a record high since it started keeping track 55 years ago.

- Foreclosures for August are up 115% from a year ago 244,947 v. 113,300

- WAMU reported an income reduction approaching 75%

- HELOC delinquency is at a 5 1/2 year high

- The delinquency rate is currently at 5.12% as of the second quarter 2007'

up 73 basis points from last year



Home Sales:

- Existing home sales are down 12.8% nationally from a year ago

- Inventory is up 14% over last year and 77% from August of 2004'

- Inventory of new homes is at 8.2 months or 180,000 down from

182,000 seen as a record in May of 2007'

- Sales of new homes are down 21.2% from a year ago.

- National Association of Realtors was expecting a 2.1% decrease and

received a decline of 6.5%





Home Prices:

- Just 2.6% appreciation nationally

- California, Nevada, New York, Florida, New England and the Mid-west

showed price declines

- Median price of new homes fell 7.4% to $225,700



Key Rates:

- Federal Funds Rate: 5.25% 1 Year ago, 5.25% 1 Mos ago, 4.75% this week

- Discount Rate: 6.25% 1 Year ago, 5.75% 1 Mos ago, 5.25% this week

- 10 Yr T-Bill: 4.638 (close of business Monday 10/8/2007)

- Prime Rate: 8.25% 1 Year ago, 8.25% 1 Mos ago, 7.75% this week



Miscellaneous:

- 2007' will see anywhere from 400-500 Billion ARM resets

- 2008' could potentially see over 1.5 Trillion Arm resets

- In 1994' $35B in sub-prime origination's took place vs. $640 Billion in

2006' a ridiculous 185% increase

- Sub-prime mortgages make up anywhere from 10-14% of mortgage

origination's

- Mortgage Brokers make up 50% of all mortgage ordinations and 70% of

all sub-prime loans

- The peak ARM resets will be seen between March and June

2008'



WHAT DOES ALL OF THIS MEAN FOR A LANDLORD / MANAGEMENT COMPANY?



- More people will rent and for a longer period of time!!!!!



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Your Columbia Missouri Mortgage Broker