Washington Mortgage Planner-straight up mortgage advice and commentary

Good morning!  It's an absolutely gorgeous day up here in the Pacific Northwest and I was thinking yesterday what a wonderful opportunity it is for consumers to buy a home right now.

In Seattle, we've been largely immune from the real estate ills affecting other parts of our nation.  Still, we currently have a 9 month supply of inventory on our hands.  That compares to a 3 month supply a year ago.  It's a buyer's market out there folks, take advantage of it.

If you have good credit and money in the bank, you'll find plenty to choose from at often lowered prices.  Home sellers often need to sell quicker than homes are turning now.  Therefore, they're reducing prices or offering buyer incentives toward closing costs, for example.

Interest rates are currently near 6% on a 30 year fixed mortgage if you have good credit.  Why not take advantage of this unprecedented opportunity and move up, downsize, or purchase that investment property you've always wanted.  You could even buy for the very first time.  There are wonderful first-time homebuyer programs available.

I think that a lot of what's going on in the real estate market is psychological.  Sure, there are parts of our nation that are in a severe real estate slowdown.  But I've also noticed that borrowers are taking their own sweet time about doing anything.  Although I always caution about moving too quickly, you need to be ready to pounce if you see a great opportunity. The smart, savvy borrowers recognize a great and growing opportunity; you should too!

In closing, take advantage of this buyer's market. It may last a little longer (my prediction is into next year) but you have the opportunity to get in now and then wait for the next real estate boom.  I guarantee you the market will recover and I wouldn't want you sitting on the sidelines saying to yourself "I should of".  Have a great day!

Paul  

Just so all of you don't think I'm a downer I thought I'd share with you all the great reasons we do what we do.

1) We get to work with great borrowers, realtors, title companies, appraisers, and escrow agents.

2) We're allowed to build our business the way we see fit.  Where else can we inject our own personality into our business?

3) We get to market, market, market, market.  I don't know about you but this keeps me motivated.

4) We get to be part of a great peer group.  One of the best things I discovered was Active Rain.  Thank you!

5) Things are never dull.  No loan is ever the same, rates change daily, the market goes up and down. We definitely need to be on our toes.

6) The opportunities for learning are endless.  This morning I was having coffee with a realtor who just returned from a 3 week trip to South Africa.  Her pictures were absolutely amazing!  I know this has nothing to do with business, but sometimes it's important to appreciate all that life has to offer.

7) When we do well, everyone wins. Not only can we do well financially but the borrower truly appreciates what we have done for them.  A transaction done correctly is appreciated by all parties.

8) Everyone is a prospect at some point in time.  What other industry can say that?  I know there are other vocations that can, but are they as rewarding as ours?

Can you think of any more? Times are different now, but we know what we need to do.  And if you're a borrower with good credit and money in the bank, the world is your oyster.  Take advantage of it!  Call your favorite loan officer and start investing your hard earned money.  Have a great weekend!

Paul

Hello all:  I read today that Countrywide has 19% of its loan portfolio in Pay Option ARM's set to adjust until 2011.  This is in addition to the billions it owes, the thousands of real estate owned properties it owns, and the prospect of up to $2 billion in losses in the most recent reporting period (they report this Friday).  I'm not singling out Countrywide.  I'm just trying to point out how grave this crisis is.  We've got banks declaring loan loss reserves of billions and lenders failing everyday.  Yet some positive spinmeisters with mortgage companies state that the worst is over and the mortgage crisis is a media spawned event.

Let's get real, folks.  Those of us who are realizing the true impact of what's going on are either getting back to the basics  or trying new things.  I went to a great seminar today in which the presenters talked about Loan Toolbox,  building your own website, and 800 calling numbers.  The room was almost full and I was encouraged.  Obviously, everyone there was searching for answers.  And this was in Seattle!  It just goes to show you that things are challenging here as well.

I'm not sure, unfortunately, that things will improve as soon as we would like.  Perhaps by 2009 which means we've got another year to go.  It doesn't mean we can't keep plugging. There are always opportunities out there.  One of the presenters at our seminar today talked about how his team was going to close 62 loans this month.  They obviously have it dialed in. Our first step is to admit (just like if you're in a group) that it's tough right now and then decide what we're going to do about it.  Action=Results. 

I was talking to a friend of mine from Edward Jones (financial planners) today and he said they cold-call in person businesses and individuals to introduce themselves. What a novel idea!  Sorry for the sarcasm but a little intestinal fortitude by us goes a long way.  In short, I know we can all survive and thrive in any market.  It just means we need to work a little harder and smarter and quit believing that things in our world are actually o.k.  It's different and we need to get real!  Have a nice evening.

Paul 

Good morning:  I was reading my local paper the Seattle Times (www.seattletimes.com) this morning and saw a national release that stated that mortgage originations would fall by 18% in 2008.  The prediction was that the market wouldn't start to correct until 2009 at the earliest.  I think they're right.  Yes, I know, it's important for us to all stay positive and I, for one, love my job and have not let the negatives impact my business.  I also believe that we need to be realistic.  Obviously, times have changed and we need to adapt with them.

It's a funny world out there right now.  I have borrowers who can't quite seem to get off the dime.  Whereas, before, it was a loan frenzy where everyone felt they needed to refinance right now.  Today, borrowers can't seem to pull the trigger or make up their minds.  Understand that I always urge caution when a person needs to borrow money but too much hemming and hawing is a waste of everyone's time.

Last night, a friend of mine (he's a real estate agent with John L. Scott-www.johnlscott.com) got a call from a borrower who is in distress.  At least two months ago, we sent him a postcard because he was in pre-foreclosure.  Last night, he called and said he had one week left.  He's trying to negotiate with the lender at this point because we may have run out time to help him.  My message is this.  Borrowers, if you're in a loan that is set to adjust or you're behind on your payments, don't wait until the last minute.  With the tougher lender standards these days, there may not be help for you. 

Obviously, there are a number of reasons loan originations are off.  Tighter lending standards is a big one.  A lot of it has to do with our own attitudes about how tough the business is these days.  Well, get used to it!  I know loan originators who are doing just fine because they're rolling up their sleeves and getting back to work.  It's a tough business anyway; now we really have to earn our money.

In closing, good luck to all of you out there.  Things will turn and there are bright spots out there, especially for those of us who are willing to get after it.  Have a great day!

Paul   

A colleague and I recently were invited to my Church to give a presentation to twenty five seniors on the benefits of a reverse mortgage.  The last statistics I saw indicated this is a $7 billion dollar business and, in my opinion, the numbers will greatly increase as our population continues to age.

So what is a reverse mortgage?  Basically, it's a loan against the equity in your home that you can do whatever you like with it.  There are obviously rules, though.  First, you must be 62 or older and the loan is based on the younger of the couple if you're married.  Second, you must visit with an approved financial counselor so they can explain the features of a reverse mortgage and also have you consider other alternatives (annuities, for example).  The counselor will be able to tell you how much you're eligible to borrow.  Reverse morgages are an FHA (government) approved product so you're capped on how much you can borrow based on the equity in your home and your age.

When might a reverse mortgage make sense?  Perhaps you're on a fixed income and your medication costs have increased.  Or you bought your home 40 years ago, it has appreciated tremendously, and your property taxes are no longer affordable.  With a reverse mortgage, you have the option of taking a lump sum payment or payments over time. In my mind, a reverse mortgage could solve a problem you may have. 

There are many misconceptions about reverse mortgages.  One, the owner loses title to their home.  This is false.  You're allowed to stay in your home which, if you think about it, is probably what you want to do anyway.  No one likes to move.  If you sell, move, or the last surviving spouse passes away, the balance due on the reverse mortgage will be paid from the proceeds of the sale of your house. The second falsehood is that people could end up upside down in their home.  Since the amount you borrow is capped by the FHA, this cannot happen.  The worst thing that could happen is you or your heirs might not realize as much from the sale of your home.

Again, in sum, I believe reverse mortgages will be increasingly popular for the over 62 set.  Yes, they can be expensive (points, fees are typically higher plus you need to have mortgage insurance) but, again, they may solve a problem and, ultimately, allow you to stay in your home. If you're interested in a reverse mortgage, contact an FHA approved lender so they can walk you through the steps.  I hope this helps.  Have a great day!

Paul

A friend of mine today told me about the "mortgage accelerator program" where a homeowner has a large line of credit to pay their bills as opposed to carrying a traditional mortgage.  He asked me what I thought of this concept and my first thought was it sounded fishy.  I commented to my friend, who is a financial planner, that mortgage products are usually created with the sole intention of making the mortgage company more money.  Not that this is wrong; it's just not always in the best interest of the consumer.

I also thought that since this is a line of credit, the rate would be close to prime or 7.75% currently.  I'm curious what any of you know about the "mortgage accelerator" program.  If it's a good deal, I'd like to pass it along to my friend and he can share it with his clients. If it isn't a good deal for the consumer, we need to let our clients know.  Thanks much and I'll talk to you soon!

Paul

Hello everyone:  Last Friday, the newspapers in the Seattle, WA. area reported that the median sale price of a home decreased for the first time in years.  Granted it was only $500 but this is significant in an area where we've generally been immune to what's going on around the rest of the nation.

The median sale price of a home in Seattle decreased from $400,000 to $399,950.  Yes, homes are expensive here and they've been selling well until now.  It appears there is a softening of the market with homes taking longer to sell and, thus, more inventory on the market. I'm not sure the trend will change until 2009 at the earliest.  I believe we tend to lag the national market by at least a year.  Job growth and migration is still  strong here although Boeing and Microsoft won't continue hiring forever.

Compared to other parts of the country, I know we've been blessed.  But if you're a homeowner wanting to sell, I encourage you to be realistic with your price and, if your home isn't selling, consider alternatives with your realtor.  If you're an investor, good times might be right around the corner.  There's lots to choose from and prices are moderating.  I'll keep you posted on what's going on in our beautiful neck of the woods.  Have a great day!

Paul

Good morning:  The September jobs report showed a gain of 110,000 jobs nationally.  That's great news coming on the heels of August's job report where there was a net 4,000 job loss. This means that mortgage rates may stay the same until the Federal Reserve decides what they want to do with the borrowing rate.  As you may remember, the Fed. decided to cut its rate by 1/2% at its last meeting.  Predictions are that they will continue with a 1/4% rate cut at their next meeting in a couple of weeks followed by one final 1/4% cut before the end of the year. 

Understand that mortage rates usually fall before an anticipated Fed. rate cut and often rise when the rate is cut.  In other words, it works in inverse proportions.  More importantly, mortgage rates tend to trend down in the winter and up in the summer.  I would expect mortage rates (currently at 6.25% on a 30 year fixed O.A.C.) to fall slightly by the end of the year.  But not too much.  Perhaps to 6% on a 30 year fixed mortgage.

Does this mean we're headed into a refinance period?  I don't think so.  Credit is still tight and will probably remain that way until mid-year next year at the earliest.  If you're looking to refinance, have your financial house in order (good credit, savings, etc.).  This will make it easier for you.  If you don't, you're either going to have to wait or sell. 

Eventually, we'll see brighter days again.  Real estate is a cyclical business and those that understand this will prosper.  Have a great day!

Paul