Would You Like Roast Beef With Your Mortgage?

HAPPY HOLIDAYS EVERYONE!!! I can't believe 2007 has whisked by so quickly and that once again we are counting down the end of another year. First Halloween, now Thanksgiving. It's just a hop skip and a jump away from Hannukah, Christmas and the New Year.

You will either be doing a lot of entertaining or will be the entertained, which brings me to the subject of this post. You will probably be doing a lot of food shopping during the next few weeks. Since I was having company at my home for Thanksgiving I had made several trips to the grocery store to get eveything that would be needed. While standing in the check-out line I saw a number of brochures for service that the store was offering, from car insurance to home mortgages. Home Mortgages??? The same company that sells me my produce wants to finance my home? I barely trust them to bag my groceries and now they want to finance my house. Maybe they think they are giving added value to their customers, or maybe their just looking for a way to make a quick buck without using highly trained professionals.

I don't think I trust my food store to handle my finances. Maybe I'm just old-fashioned that way. However this just might be a sign of things to come, so maybe I better start practicing myself. Next time you call for a rate quote please don't get upset if I give you a price for roast beef as well, you know just for added value.

Time to go shopping?

There is an article in the October 13th edition of the Los Angeles Times in the real estate section. It tackles the subject of in-house mortgage brokers that work either for builders or real estate companies. According to the article, broker owned mortgage companies offer very competitive interest rates. Many builders offer "incentives" to buy homes, especially in this market, but in order to qualify for the the above mentioned incentives and discounts, you must use the brokers mortgage company. Hmmm. That's interesting, isn't it?

Real estate owned mortgage companies also state they are competitively priced and offer one stop shopping for the "benefit" of their clients. At one time, during a recent survey I found many in-house mortgage companies to be over 1% higher on a jumbo loan than what I was offering. So a higher interest rate is a "benefit?"

Real estate owned mortage companies have been around for several years now, so this is nothing new. The pressure that is being placed on Realtors to use these services, however, is unsurpassed. At some point you have to ask, who's interests (so to speak) are being served?

The article suggests you shop around. If you are considering using an in-house mortgage company, get at least two other quotes from other companies, and compare their fees as well as the rate.

Pretty sound advice. If you find yourself being pressured to use an in-house mortgage broker, remember you cannot be forced to. Your transaction is not dependent on using any in-house service. If you feel your Realtor is being too pushy then politely inform him or her that you plan to shop for a mortgage professional...the same way you plan to shop for a real estate professional.

Cramer rants, but are you listening?

Happy October everyone!

A few days ago I saw Jim Cramer, the host of CNBC's Mad Money tell a national audience not to buy a house for at least a year, or you will lose money. Many thoughts crossed my mind. First what makes Mr. Cramer think that his revelations are so brilliant? Business colleges and talking heads have been forecasting the fall of the real estate market every year for the past 5 years. You knew at some point they were going to get it right!

Second, people don't buy homes just for the purpose of investments. People move up, have children, get promoted, downsize, they buy homes for any number of reasons! There are plenty of people out there gushing with delight in the bad news concerning the housing market. Maybe these people think it brings them headlines or makes them controversial. But what if Mr. Cramer is wrong? What if interest rates drop and all of the sudden homes are more affordable than they have been in years? What if someone finds the home of their dreams and it's 30% lower in price today than it was a year ago, should they hold off buying because Jim Cramer says so? In my mind here's a better question, is Mr. Cramer prepared to reimburse everyone who listens to him and passes up a great deal, and then ends up spending more if prices go up??

So the next time Jim Cramer tells you to don't do something, I hope you will consider a few "dont's" of your own: don't watch his show and don't buy his books and then let's see what he has to say.

The Fed's cut interest rates; now what?

The long awaited news finally arrived a few days ago, The Federal Reserve cut the discount rate by 1/2 percent. Now what? Or maybe a better question is, so what? Wall Street was looking for this and had factored it into their trading, but the fact of the matter is, when the Fed's cut interest rates, it does not always translate into lower mortgage rates. This is one of the biggest misunderstandings there is.
The action that was taken by the Fed's, lowers the interest rates for member banks that borrow from the Federal Reserve. It adds liquidity to the system but there is no guarantee that it will lower mortgage rates. At best consumers with equity line second mortgages may see slightly lower rates if banks lower the prime rate which is what most equity lines are ties to.

So what happened when rates dropped a few days ago? Mortgage rates actually increased due to a fear that the rate cut would reawaken concerns of inflation. I wish I could explain that to you, but I can't.

Vic & Sammy

The Mortgage Meltdown

I'm asked daily about what's happening in the mortgage mess we keep hearing about and how it happened. Here's the story; Most lenders do not keep the real estate loans they make and sell them to various secondary lenders or markets. It is common practice for companies to purchase and then sell $millions of home loans at a time, and sell them as mortgage backed securities on Wall Street.

Many of the loans produced by Sub-Prime lenders (lenders who require little or no financial or asset documentation or require no down-payment and lend to borrowers with poor credit histories) were beginning to adjust and consumers could not affort the new higher payments. At the same time, loans funded by Alt-A lenders (lenders who have higher credit standards but may not require income documentation) had a similar problems with mortgage defaults.

Over $2 trillion have been lost in global markets recently, some countries have their own sub-prime problems and others have invested in our mortgage backed securities. These loans accounted for somewhere between 40% to 70% of all mortgages made in the past few years. Hundred of mortgage companies have been forced out of business and thousands of people have already lost their jobs.

Many loan programs have been discontinued and underwriting standards have been stiffened. Sounds pretty bad, doesn't it?

Okay, enough of the gloom and doom, here is the good news:

*There is still no shortgage or money.

*Rates for Conforming 30 year fixed rate mortgages (those under $417,000) are currently

under 5.99% with 1 point (A.P.R. 6.25%)

*Rates for Jumbo 30 year fixed rate mortgages (those over $417,000) are currently at

6.50% with 1 point (A.P.R. 6.83%)

*O point loans, stated income programs and interest only loans still exist.

The bottom line is that lenders that are going to continue in business must make real estate mortgages to be profitable. If you are considering purchasing a home then you are in luck. Price have dropped more than 20% and more in some areas. An opportunity exists to purchase your next home and save some money in the process. When you include the fact that interest rates are still at record lows, you quickly see there is a silver lining.

If you are thinking about refinancing then take a look at the many programs that are still in play. If you have an adjustable rate mortage and it has increased lately see what your options are and if this is a good time to convert it to someother instrument.

As with anything, don't just jump in, do your due diligence, your homework and see what works best for you. Start collecting your paperwork, tax returns, bank statments and pay check stubs and have everything ready when you. Being organized and taking the initiative will help you get the best rate and terms possible when you are ready to move forward.