Loan Arranger

SHOULD WE STIMULATE EVERYONE?

We, the taxpayers have given hundreds of billions to banks to save the country’s financial system and free up credit. Now Cities, States and corporations all want money from us to save them from their past decisions.

Should we bailout the big three auto makers for another $25 Billion  — we have already committed $25 Billion to help them make more fuel efficient cars. There appears to be more reasons not to do it verse reasons to give Billions more to an industry that is burning through $5 Billion in cash per month.

Some of the reasons to do nothing and let the companies fix there own problems are:

 1) It’s unlikely that the Big Three automakers would suddenly STOP making vehicles placing millions of workers out of jobs. In fact, several airlines have emerged from Bankruptcy and emerge as a better company.

2) Have you noticed there have been no auto strikes for decades as management has given Union bosses what they want to ensure their bonuses. The Big Three average hourly wage is now $73.20, compared to $48 for a Toyota worker or $31.75 for other workers in manufacturing industries.

3) Foreign automakers are no longer foreign at all. They employ over 112,000 workers in many US cities. These companies prove that you can make a profit making vehicles people want. Why reward an industry that has continually fought fuel economy standards?  Also, current Big Three management says they will not leave as a condition of a bailout.

It appears the current mix of Republican and Democrat conservatives will stop another auto bailout for now, but will the next Congress will spend whatever money it takes to “save Jobs”.

 

GLOBAL WARMING MISTAKE?

A surreal scientific blunder last week raised a huge question mark about the temperature records that underpin the worldwide alarm over global warming. On Monday, Nasa’s Goddard Institute for Space Studies (GISS), which is run by Al Gore’s chief scientific ally, Dr James Hansen, and is one of four bodies responsible for monitoring global temperatures, announced that last month was the hottest October on record.  The reason for the freak figures was that scores of temperature records from Russia and elsewhere were not based on October readings at all. Figures from the previous month had simply been carried over and repeated two months running.  READ BELOW for startling revelations.

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/11/16/do1610.xml

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IF anyone claims they know which direction mortgage rates are headed  —-  they are now officially exposed! First we had inverted interest rates, where the 30 yr fixed mortgage rate was less than the 3, 5 or 10 yr ARM. The we had a disconnect several months ago, when the 10 yr Treasury bond rate no longer allowed us to predict the direction of movement for mortgage rates.  Now we have a situation where today  — we have the 2 yr, 10 yr and 30 yr bond rates the lowest IN HISTORY!!!  BUT some lenders actually had a price INCREASE in mortgage rates.  Granted 30 yr rates are around 5.75% today, but they should be 4.75%.

What’s the problem  —  quite simply, the markets have NO CONFIDENCE in the mortgage market.

One banker said that some banks are calling customers with old 100% loans, that have no payment problems, and offering to reduce the balance by thousands and give them a very low 30 yr fixed mortgage. That is fine, until you find out they are just using these new artificial new good loans to mix with other loans to better their balance sheets.

Until we quit playing games with mortgages, the market will not buy mortgage backed securities — because you can’t trust them.  We need banks to come clean with their loans, because we need lower rates to help dig out of this mess!

With the new Congress, new taxes needed, State taxes down, budgets in State and local budgets down — is it finally time to tax all WEB purchases.  Looks like 2009 will be the year that Congress finally Taxes the WEB. Check out this article for more information.  

http://www.forbes.com/ebusiness/2008/11/13/online-taxes-revenue-tech-internet-cx_ew_1113tax.html?partner=ecommerce_newsletter

Over the weekend, two more banks failed (Downey Savings and PFF Bank). US Bank bought their assets.

 Downey is the third largest bank to fail this year, and US Bancorp has agreed to change the terms of mortgages taken out by Downey and PFF customers, in a program similar to the one the Federal Deposit Insurance Corp is using for mortgages held by IndyMac. The FDIC agreed to share losses on the acquired loans with the bank’s U.S. Bank unit. U.S. Bank had 2,556 branches before this transaction, of which 353 were in California. Downey has 170 branches in California and five in Arizona while PFF Bank has 38 branches in California. So far this year, 22 banks have failed, the most since 1993 when 50 banks failed.

http://www.bloomberg.com/apps/news?pid=20601087&sid=arqqycIZzpZg&refer=home

 

We continually hear, “as bad as the great depression”, but during the depression over 10,000 banks failed and there was NO FDIC for depositors.

Just when thousands of homeowners are having problems meet bills including mortgages  —-  many companies are springing up to “HELP” the homeowner. The only problem is that if you pay someone (usually a lawyer) $3500 up front–you may only end up more in debt.

The correct way for help is to go to the HOPE NOW program first, and if that does not work, try a HUD approved counselor. To find one in your area go to www.hud.gov  

You will need to get to the loan servicer’s “loss mitigation department”. The burden will be on you to document the reasons why you cannot make future payments. You must also document that you can make the smaller payment.

There is also an FHA program called H4H which will refinance loans of borrowers that lenders will reduce the balance required. Information is also on the HUD site.

One week after the FED said that it would finally buy some $600 billion in Mortgage Backed Securities, we see stagnated mortgage rates. Last Tuesday, rates fell almost .5% in one day. The 10 year Treasury bond has since plunged to levels not seen since the 1950’s  ===  yet mortgage rates have actually gone up slightly.  Now granted, at 5.25% for a 30 year fixed loan, that is nothing to complain about!

It appears there is just no trust yet in the government, and investors are saying that they still don’t want to buy anything mortgage related. By the way, Investors are usually pretty smart.

The government is actually loosening mortgage requirements again , meaning the taxpayers are going to be on the hook now. Through FHA, HUD, and VA programs ==  you can still buy a house with zero down and have a mortgage several thousands of dollars above the value of the home.

I still think we will see rates dip below 5% one more time  ===  then we will have to pay for these mistakes with double digit rates in the near future.

HAVE THE TAXPAYERS BEEN BUYING MONKEYS?

 

Once upon a time a man appeared in a village and announced to the villagers that he would buy monkeys for $10 each.

The villagers, knowing there were many monkeys, went to the forest and started catching them.  The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort.

He then announced that he would buy monkeys at $20 each. This renewed the villager’s efforts and they started catching monkeys again.

Soon the supply diminished and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so scarce it was an effort to even find a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50 each! However, since he had to go to the city on some business, his assistant would buy on his behalf.

The assistant told the villagers, “Look at all these monkeys in the big cage that my boss has already collected. I will sell them to you at $35 and when my boss returns, you can sell them to him for $50.”

The villagers rounded up all their savings and bought all the monkeys for 700 billion dollars.

They never saw the man or his assistant again, only lots and lots of monkeys!

 

Now you have a better understanding of how the Wall Street Bailout Plan works….

It only took one day after I wrote the last blog–wondering what will happen to mortgage rates when the FED quits buying in June, that the FED surprised everyone on wall street.

Some called it —  FED GONE WILD !  They spent another 1.15 TRILLION.

Speaking of 1.15 trillion, “To provide greater support to mortgage lending and housing markets, the (FOMC) decided to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.15 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.  Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.  The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.”

The 10 yr Bond dropped .5% in minutes—the largest drop since 1987. Mortgage rates for a 30 yr fixed dropped to 4.5 to 4.625% range, so this may be the last chance to refinance IF you have at least 20% equity and a job.

Finally, a bailout for the common guy!

We will worry about double digit inflation some other day.

On Feb 2nd, I wrote:

One scary development today—- Connecticut Sen. Chris Dodd, head of the BANKING Committee, says he’ll refinance two mortgages that he received through a VIP program from Countrywide Financial Corp. Seems he got a couple ”sweetheart” deals from Countrywide in 2003. Since he refused to say he got any special deals back in 2008–he is now changing his tune.

IF HE IS REFINANCING NOW —- Does that mean that rates will GO UP from here—-after all he is head of the Banking committee. What do you think?

Well, it has been almost 2 months now and even though the Federal Government has been buying about $20 billion in mortgage back securities, 30 yr fixed rates are still at 5% and have not moved. They will buy Mortgage backed securities until June, but I think the best to hope for is– no movement in rates.  Even the $8000 tax credit for first time homebuyers has not put a dent in the market. INVESTORS still do not trust Mortgage Backed securities, even though credit score requirements have been tightned.

So it looks as though Obama wanted 30 year rates in the 4.5% range, there is nothing that will happen to get them there.  The most popular program out there–I call it a SCAM on Taxpayers—is the FHA STREAMLINE REFI. You are able to refinance your current FHA loan with NO income verification, NO Appraisal, etc. I think the taxpayer will be stuck with billions when more people default on these loans as unemployment continues to climb. I think Too much money in the Stimulus went to everything but JOB CREATION. Only 17% went to infrastructure projects and most was strung out to 2010 and beyond.

I see mortgage rates headed UP after June, unless the administration does something to put confidence in the mortgage market. If the Obama administration does not spend Billions to buy Mortgage backed securities after June, rates will skyrocket. I hope I am wrong.

Watching the interviews this morning from China and the Far East on CNBC has me convinced my gut feeling will come true.
Last week, we had Hillary Clinton go to China and say she was glad they had “confidence” in the American economy. Well–China does not use that word confidence. China is the top holder of US Treasury bills, with 696.2 billion dollars worth of the securities in December followed by Japan with 578.3 billion dollars, according to the latest official data from Washington.

China’s economic growth is at its slowest rate in about two decades as foreign demand for its exports, including in the recession-hit United States, have dried up.  http://www.breitbart.com/article.php?id=CNG.42a44b0f5d9cf5c9762e80574e79a3d5.831&show_article=1

CNBC showed a chart that pointed out that China made 13% last year by investing in US Bonds—so they did very well. Forget about how much they love us.

Many in Government and Congress keep saying they believe China will continue to buy our debt as usual.  However, the real FACTS are alarming.

Because exports in China are down, they don’t have the dollars to buy as they did last year. Also, China announced they are spending their money on Stimulus programs for their own economy. Last year foreigners have increased their purchase of US debt from 30% to about 50%.

Even if everyone in the world buys as they did last year, which they can’t, it will not make a dent in the tremendous debt that we are spending in Bailouts, stimulus packages and domestic spending. How are we going to pay for this tremendous increase of debt and spending if the world no longer has the ability to buy it? Even though many think that China needs us, they will not have the capacity(nor will any other country) to buy our debt. Basic economics has to kick in.

Of course there is only one answer, we have to print money like crazy, the FED will buy its own debt, and inflation will approach double digits and higher.

 I guess the only thing the common guy can do is be prepared for the double digit interest rates of the early 80’s.  If you are in your 30’s , you have no concept of what to do because your parents were affected. So if you are young, call your parents.

If you own a home, be prepared to stay in it for another 10 years.  Make sure you save money and pay off debts. If you don’t have a fixed 30 yr mortgage–get one soon. See how your industry did during the early 80’s, switch jobs if it got affected by high interest rates and high inflation. BE PREPARED!

Many Americans are upset about the mortgage bailout plan announced by the Obama team yesterday. Details are still sketchy, but this looks close:

People who bought homes they couldn’t afford with a mortgage they couldn’t afford get:

 

·         A reduction in mortgage interest rates

·         A reduced loan payment to a maximum of 31% of their current income

·         A reduction of the principal balance on their mortgage

·         A $1000.00 per year cash bonus for the next 5 years for making their future mortgage payments on time

·         The One Catch – They have to attend a HUD certified debt counseling program

see: http://www.examiner.com/x-3398-Phoenix-Finance-Examiner~y2009m2d18-The-Federal-Governments-Mortgage-RipOff

As shown on ABC, NBC & CBS every night, we see people that Refinanced their homes, year after year to buy new cars, buy new appliances for kitchens and bathrooms, Remodel, and put in new swimming pools. What has people upset is that taxpayers (some who never bought a house) will pay for all these things —  and the irresponsible people keep the house, cars and everything else at taxpayer expense.

Those 91% of Americans that were responsible with there finances get nothing but the pleasure to pay more taxes for a long time in the future.

SEE:  http://online.wsj.com/article/SB123500329338917907.html?mod=djemRealEstate#articleTabs%3Dcomments

Many Americans that bought a home in the past few years, lost all there equity from years of home ownership and are not only not being helped, but they have to pay for the irresponsible.

“The Obama  White House says even those who don’t benefit directly could benefit indirectly if the effort boosts the housing market and lifts the economy.

Brenda Gilchrist said she feels like she is being punished twice, first by watching foreclosures depress the value of her three-bedroom condominium in Santa Rosa, Calif., and now by subsidizing borrowers who bought more than they could afford.” If you can afford your home, you just lose all your life savings.

Others are skeptical that the plan will work. “Twelve months down the road they’re going to say, ‘We’re going to need to throw another $50 billion at the problem,’ ” said Mr. Newton, the Atlanta property owner. “They should just foreclose on the properties, auction them off on the courthouse steps and see who buys them.”

Others believe that whenever you have a Gov giveaway program, at least 10% figure out how to rip-off the system.

I believe the Government should get the rates lowered to 4% or less to allow home prices to stabilize, allow homes to be affordable, get rid of the foreclosure backlog, and stimulate home buying again.  Did everyone forget that over 90% of the population is STILL EMPLOYED and living responsibly?

Is it too late and we have just created  a new class of “income redistributed” Americans, where it is rewarding to lie and cheat? Remember, almost every “subprime” loan was a liar’s loan ===  that’s why there are NO SUBPRIME loans today! ENOUGH of this talk by the President that SUBPRIME people were hurt through no fault of their own! Enough with these news stories of people who were too stupid to understand the paperwork or even read their application.

When the Commercial market tanks in a few months—will they get a BAILOUT??

There have been many promises by President Obama, Congressional leaders, and other politicians that they were working on a Plan to reduce mortgage rates. The FED has been purchasing Billions of Mortgage backed securities in the HOPE to reduce rates. 

However, rates have continued a steady march UP since December 2008 !

Why are investors and lenders raising rates? The spreads that investors are demanding for mortgage backed securities continues to grow—investors still do not trust the viability of loans, because home prices continue to FALL throughout the US. Even the Northwest, which resisted home price declines in 2007, has shown large declines in 2008 due to more layoffs. Unemployment rates in the NW have risen to over 7% in the past few months. Even Boeing has lost tremendous amounts of money because of their strike last year, with some people predicting that Boeing will go the way of the automakers due to increasing costs.

Supply and demand states that as we sell BILLIONS of treasury bills to pay for our increasing enormous deficit spending, RATES have to increase to entice more investors world-wide to buy our Bonds. Right now we are lucky, we have the rest of the world in severe turmoil and recession. The US is the only STABLE currency in the world, so demand stays artifically high. We just showed the world that we can make peaceful changes in government —  other nations are on the verge of collapse because of financial strains. Some say Mexico may collapse soon.

Even though we have 3.7 million out of work, China has 10 to 20 million on the street (with no welfare or unemployment). Russia is talking about letting half of its 1100 banks just fail —  no more government aid.

So as bad as things are here in the US, we have a stable government and plans to keep the unemployed happy with more unemployment benefits from the taxpayer.

However, what happens when we increase tax brackets on everyone in 2010, and the US is not out of the recession, we are spending a tremendous $850 TRILLION in stimulus taxpayer debt, and the rest of the world is coming out of recession without the burdon of a gigantic National debt?

Does anyone remember the 15% interest rates of the early 80’s? Mr Volker, who got us out of the last super inflation cycle in the 80’s, was appointed as an Obama advisor===but recently complained that no one is listening to him or taking his advice on the new Obama team! This is not a good sign to the markets.

I was disappointed to hear Obama say during his press conference that their is no PORK in the Stimuls Package, when even his own Democrats are squirming over all the social spending that was put in by Pelosi and Daschle(before he quit over tax issues). Obama is a great speaker, but he cannot pander to the American Public, because the TRUTH does eventually come out.

What is this talk about shutting down talk radio under the “fairness act”? We need to hear both sides of issues.

Camille Paglia points out: “One of the nuggets I’ve gleaned from several radio sources is that Michigan Sen. Debbie Stabenow, who has been in the aggressive forefront of the campaign to reinstate the Fairness Doctrine, is married to Tom Athans, who works extensively with left-wing radio organizations and was once the executive vice-president of Air America, the liberal radio syndicate that, despite massive publicity from major media, has failed miserably to win a national audience. Stabenow’s outrageous conflict of interest has of course been largely ignored by the prestige press, which should have been demanding that she recuse herself from all political involvement with this issue.”

http://www.salon.com/opinion/paglia/2009/02/11/stimulus/

What has this to do with interest rates?  We must have TRUST that everything Washington does, is presented to the American Taxpayer correctly. Investors world-wide must trust US to tell the truth, or they will quit buying our DEBT.  What happens when the rest of the world recovers without the tremendous DEBT that are heaping on ourselves? Will we try to spend our way out of recession and drag this on for DECADES , just like JAPAN? Please read my other Blog  http://bobstakeon.wordpress.com/2009/02/11/

Todays Treasury Bond sale came out OK today, but rates are NOT going down.  I have to REFI myself this year, I just hope that I did not wait too long. The more I read and hear, the more it looks like Government as usual. This is not what we hired Obama to do—I hope after he gets through this Stimulus MESS, that he really does get opportunity to fix things. I think we all realize that there is no way mortgage rates will get lower by anything the FED can do —  we need to restore confidence in our government. NO more days where Obama promised a detailed plan by Geithner during a press conference and then Geithner shows up the next day before Congress with NO PLAN  details and the stock market tanks by 381 points! We need to see that the new OBAMA administration knows what to do, besides spending us into national bankruptcy. Would you invest in Treasury Bonds at very low interest rates?

That seems to be the question of everyone’s mind. All the experts read the “tea leaves” daily to get a hint whether or not Congress will step in and try to reduce mortgage rates to 4.5% or less.

On the Sunday talk shows, Democrats were saying that is still a goal of the Obama administration.  However, when pressed by the news media, they just don’t know HOW they are going to do it.

Can we trust members of Congress or is it just words to make us feel better about spending over $850 Billion on a stimulus program that turned out to be very little stimulus, but high on entitlement programs which will never go away!

One scary development today—- Connecticut Sen. Chris Dodd, head of the BANKING Committee, says he’ll refinance two mortgages that he received through a VIP program from Countrywide Financial Corp. Seems he got a couple  ”sweetheart” deals from Countrywide in 2003. Since he refused to say he got any special deals back in 2008–he is now changing his tune.

IF HE IS REFINANCING NOW  —-  Does that mean that rates will GO UP from here—-after all he is head of the Banking committee.  What do you think?

http://www.breitbart.com/article.php?id=D963IFEG3&show_article=1

I warned earlier in November that I saw a tremendous amount of adds on how to make money in foreclosures and loan modification. I get spammed daily with offers as well as claims on radio and TV , day and night. I warned that people are moving from the no downpayment loans, to “pay off your house in 7 years”,to now prey on foreclosures and loan modifications.

Swindlers say they will stop foreclosure of modify your loan by taking MONEY UP FRONT.  A New York Times article said that several States are passing laws to BAN upfront payments due to these scammers.  In Washington State, more than 70 percent of people that signed up with a company ended up losing their homes. Several companies have been put out of business by several States, but more crop up every day as they prey on the vulnerable.

Many States, Like Washington, have web sites that tell a homeowner how to negotiate with the lender and stategies to save their home. See: www.dfi.wa.gov 

You can also contact HUD to learn about programs to sell your home before foreclosure, and ways for seniors or disabled people can postpone property taxes.

So Bottom line, the best way to stop foreclosure or modify your loan is for YOU to talk directly to the lender.  If you have a job, there is a way!

TAKE THE $7500 CREDIT !

Congress is on the verge of transforming the first time homebuyer credit into a real credit —-one you do not have to pay back! It is tucked away in pages of the new stimulus bill. You need to buy your house between April 8, 2008 and July 1, 2009. Go to www.IRS.gov and get the new Form 5405

It is a great time to buy a house. 

P.S. You are a first time homebuyer if you have not owned a home in the past 3 years!

 

Update:  Congress passed the stimulus bill so now the Tax Credit is $8000 and you don’t need to pay it back if you stay in the home for 3 years. Need to buy by Dec 1st, 2009.

A few weeks ago, I predicted that mortgage rates would continue lower because the Federal Gov was going to buy Mortgage backed securities (investors don’t want them). I also predicted that everyone in the media would be “goo-goo” over Obama as President and all future bad news would be spun as  ”improving or good” news.

I forgot about the upcoming spending spree. It was almost laughable watching “Meet the Press” yesterday when they were arguing that a $1 Billion spending package was “not enough”. Remember a few months ago, it was said,the little “War on Terror” was going to BANKRUPT the country, and it has only cost us $600 Billion so far. After all, ICELAND was declared “Bankrupt” in October after its bank losses. But now we are in a spending frenzy, Is the U.S. ” TOO BIG TO FAIL”??  And then today, Geitner, the new “I forgot to pay my taxes” nominee for Treasury Secretary, told the Chinese that they are “manipulating” their currency. Wall Street is nervous that he BIT the hand that Finances us!!

So what are the other disturbing trends?  Check out newspapers anywhere in the US or the world!  http://www.newseum.org/todaysfrontpages

You will see that most of the headlines ARE THE SAME  —  HOW are we going to spend the Billions of dollars on local projects from this new stimulus package? It seems everyone is getting new schools, light rail systems, solar panels on schools and gov buildings, etc, etc..   I don’t know—It just feels DIRTY!!!

“The New York Fed continues to buy mortgage-backed securities. Origination still appears to be in the $1-2 billion/day range. Certainly this has helped keep conventional mortgage rates somewhat low, although the market wonders if they government is the only buyer out there. Mortgage security prices are back to where they were two weeks ago, at best, but investors have changed margins to slow down lock volumes, or make up some profit ground for losses suffered in 2008. As one Wall Street firm put it, “The current MBS market is not about convexity or extension issues.  It’s about the Fed’s commitment to keep the 30yr mortgage rate as close to 4.50-5.00% as possible for as long as possible.”

Finally, the enormous stimulus package already has some on Wall Street worried about paying this money back and the threat of double digit inflation like the 70’s ! This worry has already driven bond prices up over 17% since the beginning of the year. What will happen when the FED stops buying Mortgage Backed securities???

So it looks like this may the time to REFI or Buy, not much room on the downside for rates and terrific home prices(not terrific if you bought in the last 4 years).

 Contact me at Bob@loan-consultant.com if you want more insight.