IndyMac; A failure for the ages!

I was really wanting to talk about something positive for the housing community today however, in light of the IndyMac collapse and just how rare this phenomenon is I thought it better served to talk about just that, a failure for the ages!

It's official starting today the former bank called IndyMac Bancorp will now be operating as IndyMac Federal Bank. Why? Because the FDIC (Federal Deposit Insurance Corporation) took the bank over effective today Monday July 14, 2008. This was the fifth U.S. Bank to fail so far this year and had assets of $32 billion as of March 31st. It will rank as the third largest bank failure ever in the U.S. and the biggest in two decades; following those of Continental Illinois National Bank & Trust Company, which went down in 1984 and the collapse of American Savings & Loan Association in 1988.

Behind much discretionary talk are the reasons for the failure and a letter addressed to the FDIC and the OTS (Office of Thrift Supervision) by U.S. Senator Charles Schumer was made public on June 26th concerning the banks viability given today's economic woes. By July 10th the bank had lost $1.3 billion in deposits. This "run on deposits" put a HUGE financial strain on the bank that was already in financial distress due to the credit crunch, rising delinquencies and foreclosures, and liquidity crisis! However the letter by Senator Schumer was received by much criticism both by the general public and those in power. Director of the OTS John Reich was quoted as saying "the institution failed today due to a liquidity crisis. Although the institution was already in distress. I am troubled by any interference in the regulatory process." Senator Charles Schumer then countered by saying "had the OTS done its job as a regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today." Instead of "pointing fingers of blame, OTS should start doing its job to prevent future IndyMac's." Another prominent professional stated that "Schumer's letter did have an impact, IndyMac's collapse was only a matter of time. What Schumer did was wrong and irresponsible and I'm not sure what he was trying to accomplish but IndyMac was already well-known to be a forthcoming failure."

It's projected that this banking failure will result between $4-8 billion or more than 1/10th of the FDIC's insurance deposit fund. IndyMac's shares were trading at 11 cents this morning compared to $29.91 one year ago.

Like I stated earlier in the post this is truly bad news for the mortgage community as IndyMac was a prominent U.S. "wholesaler" of mortgages for broker's however like everything else we have been faced with we will "roll with the punches" and move forward.

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

Newsletter Feedback!

As most of you know we rolled out our E-Newsletter yesterday. This is titled "Mortgage Market Update" and we will do our best to issue this once a week; normally on Wednesdays. We received quite a bit of positive feedback and we want to thank all of you who responded. We really try to provide a service to the real estate and mortgage community. If any of you have any additional feedback, please email us directly or comment on this blog. This is for good and bad feedback, we want it all. This is the only way we can customize it to cater to our readers. If you are reading this and would like to be added to the distribution list, please send your email address. We will gladly add anyone who is interested!
We also wanted to mention that we realize the overall theme and news links were a bit negative. This is not our goal. We don't want to put out a Newsletter that highlights the bad each and every week. However, as all of you know the economy is a mess right now. When it came time to distribute this weeks newsletter it seemed like all the relevant news that day was bad. We also didn't want to ignore the 1st Quarter stats for Boone County. There are positives out there and we will do our best to highlight those as well. Lets all keep our fingers crossed that in the future there will only be good things to make note of. Wouldn't that be nice!!!!!

Thanks again to everyone that took time to read the newsletter and an even bigger thanks to those who commented. Please let us know of ways to improve.

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

Boone County Missouri 1st Quarter 2008

Monday of this week I decided to analyze our housing figures for the first quarter of 08'. To my dismay I was a little shocked, disappointed, and very surprised at what the actual numbers told me about our great community. It seems at times we get so tied up in our day to day work and career that we sometimes forget about what is actually happening out there. This post is a little hard to type as there is so much negativity surrounding the national housing market and the Columbia market for that matter that the numbers did not help matters. I will point out both the negative aspects of the first quarter for Boone County Missouri and the positive factors; yes there were some positive attributes we can take from the first quarter. Please keep an open mind and don't kill the messenger as some of the figures are little disturbing.

NOT SO GOOD NEWS!

- January 08' was the worst first month in over 6 years; down 7.9% from 2007 numbers and 11 units.
- March 08' was the worst 3rd month in over 6 years; down 14.8% from 2007 numbers and 37 units.
- The first quarter as a whole was down 9.7% and 86 units and was the worst quarter since 2003 by volume and was the worst quarter in over 6 years by units with only 323 units sold as compared to 404 1st Q 07', 467 1st Q 06', 377 1st Q 05', 361 1st Q 04', and 378 1st Q 03'..
- Overall we are down over $12M compared to 2007 and we all know what a great year that was!
- New construction continues to take a beating with only 58 units sold through the first 3 months down from 97 units in 2007's first quarter.
- The first quarter for new construction was by far the worst over the last 6 years with only $12.9M in volume compared to $19M in 07', $28M in 06', $22.6M in 05', $17.7M in 04', and $17.3M in 03'.

Well hopefully you get my point about the first quarter. There are many other areas I could point out but these are the most pertinent and "eye popping" numbers. Now on to the good news!

THE GOOD NEWS!

- The list price to sold price seems to be very strong somewhere between 97-98%. This is great news for the homes that do sell!
- Construction has REALLY slowed down so as the inventory of homes on the market diminishes hopefully the demand and a "sense of urgency" will rise.
- Existing homes sales are actually "holding there own" as we exceeded 05, 04, and 03 in volume and were really close if not exceeding in units sold.
- We has real estate professionals and a community have continued to address the issues that put our fine city in this position to begin with.

The bottom line, at least based what I see, hear and analyze is that we simply do not have enough buyers given our current supply of homes; especially "higher-end" buyers (buyers that are looking at $300K+). It also seems the buyers we do have, again especially high-end have something to sell before they can buy. As always your comments are welcomed and I hope you enjoyed the post.

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

PMG's Newsletter is on the way.

We at Professional Mortgage Group are rolling out an E-Newsletter. This could start as early as tomorrow. It will be distributed once a week via email and will include the following features:

• It will highlight our blog post for that day and link directly to our entire blog page.
• It will also provide links to the most pertinent industry news stories for that week.
• It will provide testimonials from Realtors and Clients.
• It will link directly to our website. (http://www.pmg-inc.net/)
• It will link directly to our loan status portal.
• It will highlight mortgage rates for that day.

We are excited to provide this useful tool. By combining some of these features, it will eliminate a few of the different emails you receive from us. We know email "inbox" management can be a pain at times and wanted to come up with a way to provide you with the same information with fewer emails.

Be on the lookout for this new tool!

Brought to you by:

Professional Mortgage Group, Inc.

"Your Columbia, MO Mortgage Broker"

What's On Tap?

Very light week on the forecast there are only two potential "market and rate movers"; weekly jobless claims on Thursday and University of Michigan Consumer Sentiment report on Friday (keep in mind this could not do much at all). So basically once again "headline" news will be moving the markets this week.

On the front already this morning are congressional efforts to curb speculative trading on the oil platform. I read an article last week that stated speculative buyers on the oil platform account for over 70% of the rising gas prices. I truly do not know if this is true however a representative from Exxon Mobil stated that given the current supply and demand parameters oil should be trading between $50-$55 a barrel less than half of what it is trading at this morning. I don't want to get into a big debate over this so early in the week but at least you get my point on "headline" news.

Another big piece of news that will hit "close to home" is InBev's proposal to try and "re-organize" Anhueser-Busch's board of director's to "push along" it's takeover/buyout of the company. Some of you may have missed this but about a week or so ago InBev, a belgian brewer offered to buy Anhueser Busch for cash even though it was not interested in being sold. Since then the belgian brew giant has been trying to "entice" Anhuser's executive management team to bite on the deal.

Hopefully things will turn positive for rates this week it seems we have been hovering around 6.25%-6.5% for the past two weeks as traders are more interested in putting their money else where in the market. With the DOW below 11,300 I must say that I am a little hesitant on this happening any time soon!

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

Mortgage Pre-qualifications

How many times as a realtor have you had the phone call stating "we cannot close" or "I'm sorry the loan was turned down"? All of a sudden you have upset buyer's, seller's and your pay check and lively hood are put in jeopardy. Let's not even bring up your reputation should you have recommended the lender that "botched" the deal! Why do I bring this up? Doesn't this happen to everyone? Can this be prevented?

The answer to the later is yes! We has mortgage lenders must do our due diligence when evaluating any file to ensure that there are no surprises. If there are going to be "unknowns" or possible "hiccups" then all parties need to know about them upfront. Every file is different and to our defense at times we get misinformation or a "unique" property and a wholesale list of other items that are involved in properly piecing together a mortgage loan. However, there are things we must do in order to ensure that when a pre-qualification is given the loan is 99%-100% going to close. I truly believe that's why PMG has been so successful in light of a "challenging" housing market. Now we're not perfect but I can only recall one file that was not able to close within the last 24 months and with that being said I was able to line up alternative financing for the client and the closing date was still met! How is that possible when there have been a wholesale list of changes in the real estate community?

We have a professional responsibility to do what is best for the client and one of those "responsibilities" is "due diligence". This means collecting all income and asset documentation up front (i.e. pay stubs, taxes, W2's, bank statements, IRA information, 401k statements, and any other necessary financial documentation). Taking a complete application and by complete I mean never leaving a stone unturned. Do they pay child support, alimony, have they been divorced, how many children do they have and what are their ages, have you had periods of being laid off repeatedly, what is the employment situation like, what has the residence situation like, do they pay rent and if so how much and to whom, do they pay cash or check and lots of other "pertinent" information. By pertinent I mean; what type of home are they purchasing, is it on acreage or in a subdivision, will there be seller paid closing costs, does it need any repairs or are there foundation issues, etc. Not only is this beneficial for the sellers and real estate agents but it is also extremely beneficial for the buyers. This way they know what to expect upfront on exactly what they qualify for and the piece of mind that the "leg work" has already been completed in connection with the biggest purchase they will ever make. This also helps us determine what product is going to meet the buyers needs while at the same time being more effective and efficient in the manner in which we deliver our services!

I had a situation just this week where I met with an individual who thought they were in good shape to purchase a home and I agree their credit and housing information were fine. However, when I collected all the income and asset information and put everything together there was no way to make the deal work. A portion of the income she was including in her figures could not have been used in the application and she ended up not purchasing a home. However, I did not leave her empty handed and gave her a small list of items she needed to do in order to purchase a home in the coming months. Should she do the things I recommended the home buying process will go just fine when she is ready to pull the trigger again. The buyer's agent really appreciated my "due diligence" in not stringing this file out and I would like to think the listing agent and seller also appreciated their home not getting tied up on a deal that had no chance of closing.

Professional Mortgage Group is actually in the process of updating their Quality Control plan to more closely resemble our current lending environment and real estate market. Rest assured when PMG issues a "pre-qualification" or "loan commitment" that we have done our "due diligence" and that deal will close just fine.

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

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First Time Home Buyers Are The Key!

I read a good article today on the current housing crisis. While none of this information was particularly new news, I thought it would be worth mentioning. It was actually one of the few semi-positive articles I have read on this topic in awhile. The gist of the story circled around the idea that we are at the bottom or at least near it. It is now time for the rebound to start and the First Time Home Buyer holds the key! I know this is a bit obvious and simplistic, but after all the solution to this crisis isn't rocket science. There are just way too many homes out there and not enough buyers. Joe Blow can want to sell his home and buy a new one, but this just doesn't fix the housing surplus does it? A "New" buyer that doesn't have a home to sell needs to arise and save the day. In today's market, this needs to happen millions of times over! Every market is different and the story I read was no doubt talking about a large market like California instead of something comparable to Columbia, MO. Nevertheless it's worth discussing even if it all doesn't apply here.

A couple different factors are influencing First Time Home Buyers right now. These are the elimination of 100% loans (except USDA loans- read Monday's post) and slightly higher interest rates. What better to scare off a new buyer than telling them they must save even more money and their monthly payment will be a tad higher due to the interest rate! However, if they look a bit deeper things may not be so bad! Positive factors to help offset the negatives are the reduced sales prices these new buyers are enjoying and the fact interest rates are still pretty darn good. First Timer's are now able to get into nicer homes that at one time they couldn't afford!

I know I for one bought at the peak of the boom! I didn't get much bang for my buck and had I been in California I would be hurting pretty bad since I would be dealing with such rapid depreciation! Luckily Columbia, MO won't experience this as bad as California! Our Market has been fairly stable considering the mess that is out there! These super deals are not quite as prevalent here, but they are out there to find. I know first hand because we have loaned to several First Time Home Buyer's that have taken advantage of some sweet deals!

With all this being said, if rates do continue to creep higher I may want to re-visit this topic. Higher rates will definitely put a cramp in any deal you get!

In getting back to the article, the rebound being discussed had a few steps that will need to take place over several years.

First, the return of First Time Buyers must shrink a good deal of the new home surplus out there.

Second, these new buyers must turn to existing homes since the new home surplus has been reduced and very few new homes are being built. This is great news for the sellers who are wanting to upgrade to a new home. However, these sellers are taking a hit due to these new buyers needing a deal since there are no new homes to snatch up. The sellers saving grace is that they too should catch a break when they trade up!

Third, new housing starts should start to occur at a slightly higher rate. However, this should be very gradual. It will take a few years to gather steam because they will be competing more than ever with existing homes still selling at a bargain.

Lastly, the surplus of existing and new homes will eventually disappear. This will take several years, but it will eventually happen. Once this finally happens, prices can start to rise again.

As you can see this model sure makes more sense in a larger market that is experiencing larger sales price reductions, but it still makes sense.

I am just keeping my fingers crossed that mortgage product offerings and interest rates stay at reasonable levels. If they don't then this models concept will be the same, but it time frame will surely be adjusted for the worse!

I just wanted to pass this information on. After all it was a positive article instead of another piece of news to keep you down in the dumps!

Your Comments are welcomed.

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