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?

Brought to you by Professional Mortgage Group
Your Columbia Missouri Mortgage Broker

Professional Mortgage Group, Inc.

Times are tough for the Columbia, Missouri real estate community, every where I turn I stumble across staggering statistics which indicate to me that a different approach to marketing real estate must be taken. Our local realtors are critical to helping this fine and dedicated community emerge from the housing bubble that seems to have submerged us into record lows of housing sales. I have spoken to many “seasoned” realtor professionals and they have all stated that this market is the worst they have encountered in their tenure of selling real estate in Columbia, Missouri. We are not your ordinary lender who simply “milks the cow” we want to give back and help you develop your business, service your clients, and move your inventory. With this in mind I wanted to remind you of what Professional Mortgage Group (PMG) has done and will continue to do to help you and others move listings and help improve market conditions.


· Yard Signs w/ flyer box & flyers: This truly helps the buyer understand what programs the property qualifies for and the corresponding payments attached to those programs. “Can the payment really be that low?” YES.
· Educational Daily Blogs: This was originally intended to educate local real estate individuals (i.e. realtors, buyers, sellers, title co’s, appraisers, etc.) about changes emerging in the real estate market. However, it has really taken off and now receives hits throughout the country and is broadcasted to over 400 relevant sites. This is real and useful information to anyone involved in real estate.
· Buyer’s Guides: These were developed to help educate home buyers about the loan process and the “in’s & out’s” of purchasing real estate. Buyer’s guides are handed out to any of our/your buyers to help reduce myths about purchasing real estate and closing fall-outs.
· Featured Realtor Page: We highlight one realtor a month on our site by dedicating an entire page of information on them. We just launched this and so far have had over 378 hits on this page. Hopefully this will be a way to “give back” to our referral partners by linking qualified buyers to them.
· On-line Loan Status: This was developed to “streamline” the process for the listing agent, buyer’s agent, and the client. This tool is updated “real time” and has really been met with good response. This feature helps eliminate the time it takes to place phone calls regarding loan status!
· Service Guarantee: This completely sets the stage for both the buyer and realtor as to what can be expected of PMG. Should they fail to receive our guaranteed service, it lists who to contact. This legitimizes our dedication to providing a quality product and service as well as makes everyone aware of what to expect.
· Current Columbia, Missouri Climate: We have and will continue to provide the Columbia Missouri real estate community with pertinent and timely market statistics as seen recently in our daily blogs. We believe it is critical for a lender to know what is going on in their marketplace and how to adapt. By keeping up on this information, we are poised to help our referral partners succeed!!!


Again, we are a dedicated and highly knowledgeable staff here to help you! Our entire business model revolves around the realtor. The manner in which we deliver our products sets us apart from our competition and our surveys and testimonials prove it!

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

Columbia Missouri Market Statistics Part III

Part II of this post isolated July of 2007' against July of 2006'. The following information will expand a little bit and encompass the first half of 2007 vs. the first half of 2006' in Columbia, Missouri and more specifically Boone County. Like past posts the targeting of this subject will include an abundance of statistics followed by some commentary.

EXISTING HOME SALES (First half of 2007' vs. 2006')

• Volume: Down $1,931,275 or (.6%)
• Units Sold: Down 24 units or (1.3%)
• Average Price: Up $2,087 or (.6%)

NEW HOME SALES (First half of 2007' vs. 2006')

Volume: Down $23,755,300 or (20.3%)

Units Sold: Down 118 units or (20.4%)

Average Price: Up $1,116 or (.3%)

TOTAL COMBINED SEGMENTS (First half of 2007' vs. 2006')

Volume: Down $25,686,574 or (5.2%)

Units Sold: Down 142 units or (5.7%)

Average Price: Up $2,087 or (.6%)

Just as I stated in the previous post, existing home sales are at least steady and holding their own. However, just the opposite can be said of the new home market. All three areas (volume, units sold, and average price) have been hit hard. This is especially true for the amount of homes being sold (down 118) over last year. The total picture is less bleak than I originally thought, however we are still down over $25M in volume and 142 homes which is a lot for this market!

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

How ARM resets are calculated

With all the news out there of the coming deluge of ARM (Adjustable Rate Mortgage) resets on both conforming and non-conforming loans, I thought it might be a good time to explain how a lender comes up with a new payment when an interest rate adjusts.

First, some terms that you should become familiar with:

Index: This is the base rate to which the new adjusted rate will be based upon.

Some common indexes to base rates on are the U.S. Treasury's and the LIBOR. These indexes change as the markets go up and down.

Margin: This is a fixed amount to be added to the index to calculate the new rate.

In your loan documents this is stated as a number (i.e. 3.00% or 2.50%)
to be added to a specific index. It will also state when the index will be examined for purposes of calculating your new rate, usually 30 to 45 days before the adjustment date.

Caps: These refer to the maximum amount a rate can adjust at any one adjustment and over the course of the loan.

Some common caps are 1/5 (change a maximum of 1% up or down from the current rate during any one change and a maximum of 5% from the original rate), and the 2/6 (change a maximum of 2% up or down from the current rate during any one change and a maximum of 6% up or down from the original rate).

Let me show you an example:

Original Terms of 3 Year ARM

Loan Rate = 7.00%
Margin = 3.00% over the current LIBOR 45 days prior to change date
Cap = 2/6

*Note: That means that at the time of the loan the LIBOR had to be 4.00%
(7.00%-3.00%=4.00%)

Now let's say three years are almost up. 45 days before the new rate will go into effect the LIBOR is at 5.50%

To calculate the new rate you must add the margin to the index
5.50%(LIBOR) + 3.00%(Margin) = 8.50%

But, what would happen if the index had gone up to 6.50% instead.

6.5%(LIBOR) + 3.00%(Margin) = 9.50%
But that is not the new rate.
The loan had a cap of 2/6 so the most the loan rate could increase would be to 9.00%
(7.00% + 2.00% = 9.00%)

What would the highest rate be that this loan can ever have?

7.00% (original rate) + 6.00% (maximum rate per cap) = 13.00%

The same applies when the index falls. What would the new rate be if the LIBOR fell to 1.50%?

1.50%(LIBOR) + 3.00%(Margin) = 4.50%
Again the caps apply. The most the rate can go down in any one adjustment is 2.00% from the previous rate. So the new rate could not be any less than 5.00%
(7.00%(Current rate) - 2.00%(Margin) = 5.00%).

As you can see the calculation is fairly easy addition or subtraction. Hopefully this has taken some of the mystery out of how your new rate is calculated when you have an ARM.

Any questions or comments are always welcome!

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

Columbia Missouri Market Statistics Part II

Well, I have done some research and would like to elaborate on some analysis of the July 2007' housing numbers for Columbia Missouri. As per part I of this commentary this blog will be mostly comprised of statistics.

Existing Home Sales July 2007' vs. July 2006'

• Volume: Up $2,992,554 or (4.2%)
• Units Sold: Up 32 units or (7.6%)
• Average Price: Down $11,258 or (3.4%)

New Home Sales July 2007' vs. July 2006'

• Volume: Down $5,033,238 or (23.4%)
• Units Sold: Down 18 units or (17%)
• Average Price: Down $26,872 or (6.7%)

Total Homes Sales July 2007' vs. July 2006'

• Volume: Down $2,040,684 or (2.2%)
• Units Sold: Up 14 units or (2.6%)
• Average Price: Down $16,993 or (4.9%)

What does all of this mean?

Well, to summarize the numbers, it seems existing home sales in Columbia Missouri are holding strong. However, the price of the homes selling is down an average of over $11,000 or 3.4% from a year ago. New construction sales are really suffering. Volume, units sold, and average price are all down an average of 15.7% over last year. This is especially true for the sales price. Can you believe these homes are selling almost $27,000 less than July of 2006'? This shows the eagerness of builders wanting to unload their inventory.

Overall the market is down, but this is somewhat skewed as the majority of our issues lie in the "new construction" area which has simply been over built for the community. With the majority of the homes being over $200,000, there seems to be no "quick fix" to rid us of these problems. Time is the answer. Over time the Columbia market should rebound nicely!

I am sure I speak for most of us in the real estate community, the sooner the better!!

Brought to you by Professional Mortgage Group, Inc.

Your Columbia, Missouri Mortgage Broker

Helpful Links

The whole purpose for Professional Mortgage Group, Inc. to publish this blog on www.pmg-inc.net is to provide useful information to visitors. Each day we provide valuable information and insight into the current market in Columbia, MO and sometimes Nationwide. It has been quite awhile since we did a refresher on some of the valuable websites out there that can be of assistance to you. I will just give a quick rundown of several sites that may be useful to you.

www.pmg-inc.net - Our website of course!
www.google.com - You can find anything on this powerful search engine.
www.gocolumbiamo.com - The City of Columbia website.
www.missouri.edu - The University of Missouri
www.zillow.com - Real Estate Valuations
www.bankrate.com - Rate and Lending comparison site.
www.realtor.com - Search for home for sale.
www.fanniemae.com - They are the largest buyer of securitized mortgage paper.
www.freddiemac.com - Another large buyer of mortgage paper.
www.bloomberg.com/markets/rates - Check Mortgage and Bond rates.
www.countrywide.com - Large Nationwide Lender
www.wellsfargo.com - Large Nationwide Lender
www.bankofamerica.com - Large Nationwide Lender and Bank with local branches.
www.realestatebook.com - Another site for home listings.
www.boonebank.com - Boone County National Bank Website. Largest local bank.
www.fnb-columbia.com - First National Bank. Another large local bank.
www.pisinspections.com - Local Respected Home Inspector.
www.myfico.com - Information about credit scores.
www.annualcreditreport.com - Obtain a free credit report once a year.


Here are some links to Local Real Estate Companies

Re-max Boone Realty
House of Brokers
Plaza Real Estate Services
Central Missouri Real Estate LLC
Weichert Realtors (First Tier)
3D Realty
Reece and Nichols
Gaslight Properties
Century 21 Advantage

These are several links to browse for information.
PMG hopes this information can be useful to you.

If you have a link that you think should be on this list, please post a comment and we can add it.

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

Selling Your Home

In today's market where the inventory of homes is at an all time high and buyer's are not in abundance what can you "the seller" do to help make your home "stand-out" and thus have the best possible chance for a quick and painless transaction.

There are several components to this discussion but I will mention just a few of the major items you will want to address. First, your home must be in the best possible shape in order for you to maximize both your profits and your sale time. By this I mean making any necessary repairs that potential buyers will find issues with. For example; repairing any leaky faucets, the drywall crack by the window sill that has bugged you for years, the garage door opener that only works half the time, or the kitchen cabinet by the dishwasher that has cracked. These are just a few examples, but you get my point. Also, a clean house obviously looks better than a filthy one. All things considered equal, the home that has been kept clean, looks orderly, and smells fresh will sell faster than it's opposite. If you follow this simple rule, you will be on the right track.

Second, choosing the right realtor is crucial for a professional and optimal sale. Realtors are valuable tools and they have access to the MLS (Multiple Listing System). This advertises your home to other realtor's and buyers who may be looking for a home like your property. They understand what potential buyers are looking for and how to reach them whether that be print advertising, radio, word of mouth, or a combination of the three . Also, you need a realtor that will put the time and effort it takes to market your home in the best possible scenario for "you" whether that's something they have used in the past (i.e. The Real Estate Book) or some new more expensive medium. Finding the right realtor is no art but using references and referrals is key!

Third, you need the right lender involved from the beginning. More times than not your realtor will know who to use but the lender is a vital part of closing a successful escrow transaction. The last thing you want is to get a contract and at closing find out the lender has "miss-represented" the transaction and now you cannot close. How much time, money, energy, and other potential buyers have you missed out on? The right lender can help ease the stress of the transaction by helping your realtor market your home (i.e. Internet links, flyer's, yard signs, potential buyers, etc.) while at the same time "pre-screen" any potential buyers for your home so you do not have the former scenario happen to you.

I hope this helps and should you have any questions or comments as usual they are welcomed!

Brought to you by Professional Mortgage Group
Your Columbia, Missouri mortgage broker

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!!!!!



Brought to you by Professional Mortgage Group

Your Columbia Missouri Mortgage Broker

Cash-Out Refinance

During the tough economic times of today many more Americans are tapping their home's equity, what's left of it, to try and obtain some sort of cash relief. Whether that is paying off credit cards, personal loans, auto loans or even cash to put in some sort of savings account. Americans are feeling the pinch of both the slumping housing market and rising commodity items like fuel, utilities and groceries. I thought I would shed some light on things you need to know should you be one of the thousands facing this dilemma.

First, conforming loans (those backed by Fannie and Freddie) typically only allow for a loan-to-value of 95% cash out. This means should you have a home that appraised for $100,000 the maximum loan you can receive, if you are taking cash out, is $95,000 or 95% of the homes value. This typically can be structured as one loan or two (80% first/15% second) for those of you who do not want to pay PMI (Private Mortgage Insurance).

Second, as a precautionary matter you need to make sure that the appraised value is "realistic". The last thing you want is to go and try to sell your residence in a couple of years and find out you owe more on your home than what you can sell it for; otherwise known as over-leveraged or negative equity. I have seen this way too many times over the years, mostly because of "shady" lending practices in connection with an over-valued appraisal. Be sure you deal with a lender who looks out for your best interests!

Third, you may be able to work the timing of the transaction that will allow you the benefit of skipping two mortgage payments. Many clients really like this perk as it frees up "extra" cash flow that they would ordinarily be without. Imagine consolidating credit cards and other personal loans saving $900.00 a month and pocketing $2,000 cash while at the same time remaining in a financially stable position on your home. Believe or not it can and does happen everyday!

Fourth, and perhaps the most important, the entire process normally takes only approximately two weeks to complete. No long waiting period or constant questioning going back and forth. The entire refinance process has become very streamlined and efficient.

Brought to you by Professional Mortgage Group, Inc.

Your Columbia Missouri Mortgage Broker

New Home Sales News

First the bad news: New home sales have hit a 7 year low last month. This is not great but was not totally unexpected given the current state of real estate.

There is some good news out there that bodes well for the future of the market, however. First, the yield curve is steepening indicating less of a risk of a recession. Next, lenders are going through with some big mergers and acquisitions which is another positive sign for the economy in general. And finally, the Federal Reserve reported that there are no outstanding loans to lenders at the discount window.

These three things are positive because they show that the Fed's moves have helped the market finally start digesting the bad subprime situation, recession isn't as big a worry to increase the housing problem, and if people are still employed they will eventually get around to buying real estate again. So, today was a good day as far as news goes.

Your comments are always welcome!

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

Market News

I have had several discussions with people lately regarding the market and the recent rate cuts the FED made. Many thought rates would immediately drop when news hit the wire that the FED cut the Federal Funds rate and discount rate. Well this obviously that not happened and people are wondering why! Keep in mind the rates that were cut are ones that affect the mortgage market, but are not directly the rates offered to customers. It will take a little time to see what actually happens and we can only hope more will be done.

On another note, new reports came out today regarding the August market and in summary here is what was reported:

1. Existing home sales fell for the sixth month in a row and are now at a 5 year low!
2. Inventories rose to an 18 year high!
3. Home prices in 10 major cities are falling at the fastest rate in 16 years!
4. Sales of existing homes in the Mid-West fell 5.2%.

They did note that mortgages have become a little more affordable and available than they were in the worst days of August. This means that the coming months numbers could fair a little better. Apparently numerous sales contracts fell through in August due to the mortgage market turmoil and guideline changes.

On the local front an article ran in the Columbia Tribune covering local building permits.

According to county records, permits for single-family homes rose from 331 in 2002 to a peak of 378 in 2004. By 2006, however, the number had fallen to 232. Mid-year permit numbers are down in the county about 30 percent compared with last year.

City records reflect similar trends, with a peak of 1,239 single-family home permits in 2005 dipping to 675 last year

This shows that builders and lenders are pulling back, but as you can see the surplus of homes on the market must be taken care of before things return to normal.

You can read more about these 2 topics at
http://www.marketwatch.com/news/story/glut-unsold-homes-rises-18-year/story.aspx?guid=%7BC02E6F86%2D2D23%2D4D45%2DA83D%2DBF973D6432B9%7D

and

http://www.showmenews.com/2007/Sep/20070925News002.asp

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

Good News From The Fed!...(maybe)

Yesterday the Federal Reserve kept rates steady and indicated that they felt overall the economy is cooling enough to keep inflation in check. They still are concerned about a few areas, but overall seem to be in a wait-and-see mode rather than a tightening one. This is potentially good news not only for the stock market but also for borrowers.

The rates on mortgages do not necessarily move in lock step with the Fed funds rate. Most mortgages have their rates based on the U.S. Treasury or some other bond market index. The Federal Reserve can only affect the Fed funds rate (the rate charged to banks for borrowing overnight funds to meet reserve requirements) and the actual reserve requirements of the nation's banks. So, mortgage rates are not based directly on the rates set by the Federal Reserve.

The Fed funds rate does however affect the loan rates in an indirect way. Rates that a bank charges for its loans in the long term should be more than what it could make passing money through the Federal Reserve. Loaning money to people is "risky" where loaning it to the Government is not. As the Fed funds rate increases, so must bank loan rates...eventually.

What does all this mean for the consumer? It means that there will not be any pressure from the Federal Reserve on rates for now. However, since the Fed funds rate is only a part of what determines a mortgage rate, keep your eyes on the bond markets to see where rates are headed.

Of course, working with a professional mortgage lender allows you to use expertise on markets and rates to your advantage.