Washington Mortgage Planner-straight up mortgage advice and commentary

Hi all: I just finished watching Barney Frank in an impromptu news conference talk about how the negotiations for the $700 billion government bailout had broken down. Frank claimed that conservative Republicans walked out after adding pieces to the President's bill that made it unacceptable.

It appears there's more work to do. The biggest holdup is who pays for this bailout? The bill as originally presented would have us (think taxpayers) footing the bill. Some lawmakers would rather have the banks pay for their follies since they're deemed to be at fault.

I still think a deal will be brokered but perhaps for less money (Chairman Paulson has already agreed in principle to a tiered payout based on need) and not all on our backs. In the mean time, expect Wall Street to fall precipitously tomorrow unless they can work something out before the market opens. The wild ride continues. I just read Wa. Mu. will be acquired by JP Morgan. Wow! What a year. And I thought last year for our business was interesting. Stay tuned. As always, I encourage your thoughts. Have a nice evening!

Paul

I'm curious if you feel the government bailout of Fannie Mae/Freddy Mac/ AIG, etc., etc. will really help. What do you think? I think something had to be done. But being a free-market guy, I just wonder how much it's going to cost you and me.

Granted. we may have been headed for panic in the streets and this wouldn't have been good. I'm glad someone is finally recognizing the seriousness of the situation. And with the stock market down almost 400 points again today, it's becoming increasingly clear we've got a way to go.

I still think we'll turn the corner sometime next year. It was always a matter of digesting all the "kool aid" (as some of my esteemed colleagues refer to it) we drank. Be sure to weigh in with your thoughts. This is definitely a live one that won't be going away antime soon.

Paul

Hey all: Last Thursday I had the opportunity to attend Zillow.com's first ever Open House for real estate professionals. It was held in Seattle at their corporate offices downtown and allowed them to showcase the services they offer to real estate professionals as well as the public at large.

I came away impressed. I knew some of the presenters personally as they had helped me with questions I had about Zillow Mortgage Marketplace. The one thing I took away from Zillow's Open House is their honest intent to help. I believe their customer service is top-notch and they're willing to learn. Initially I thought their home valuation tools were rudimentary. So what did they do? They listened and tweaked it. In the breakout classes they taught, I was impressed by the discussions that cropped up. Several of the attendees were seasoned real estate professionals who are seeing Zillow help them in their business.

Thanks Spencer, Sara, David, and Rich. I think you're doing a great job. I'm not sure any of you have a background in real estate but you do understand great customer service. I look forward to your next party too!

Good afternoon: I was just reading about Wa. Mu. and how they will either be allowed by the Feds. to  raise additional capital or be sold piecemeal to the other banks left. What a turn of events! Just a week ago Wa. Mu, along with AIG, claimed they were sufficiently capitalized. I understand why they would say that as no one wants a run and panic in the streets. My question is at the end of the day, will there be anyone left to turn the lights off?

I think there will be. There are some financial institutions out there that are strong (think Wells Fargo, for example) and will survive. The rest of the landscape will consist of mergers and failures at this point. I believe we're near the bottom. After all, what else could fail or go wrong? Now, the recovery can begin. It won't be swift and it won't be pain free, that's for sure. In our industry, the wreckage has been of titanic proportions. It stands to reason it's going to take a while to dig out.

I'm interested in your thoughts on this. I think a majority of people are scared right now. Scared about their jobs, scared about their money, just plain frightened. Our message should be that we will carry on and emerge on the other side better for it. All is not doom and gloom. Every day people prosper. We are a resilient lot and will endure. Have a great day!

After reading about the collapse of two of Wall Street's most venerable firms (Lehman Brothers bankruptcy and Merrill Lynch's takeover by Bank of America) followed by the Dow being instantly down over 300 points, you have to wonder what's next. It's becoming obvious to everyone that this economic meltdown that started in the housing industry is going to go on a while longer.

The first thought is that mortgage interest rates may improve as investors seek the safety of bonds. This, as we know, really hasn't happened as it should (lenders are building in risk in their pricing) and I'm not sure it will now. Mortgage interest rates came down to 5.5% on a 30 year fixed O.A.C. recently which is pretty good. And with the Presidential election a mere 7 weeks away, I don't expect much movement on rates. There is a tremendous amount of uncertainty these days and only time will correct it.

I expect some time next year for our market to start improving. There are pockets of the country right now that are starting to recover. The bottom line is the consumer needs to return to the marketplace. And he/she needs to feel better about the economy before buying homes, cars, boats, etc. I think once a person gets comfortable with their own situation (it's funny how Presidential elections are always based on the economy in the end), we'll see better times.

All is not doom and gloom. I just think everyone is running a little scared. With our financial institutions in so much trouble, expect the next year or so to have more turmoil. But after this, we'll have a nice recovery. For those of us in the real estate industry, hang in there and keep reminding yourself people are always buying real estate. Have a great day!

Paul

Good morning: I opened this morning's Seattle Times and saw that Washington Mutual ousted its CEO, Kerry Killinger. Killinger held on far longer than alot of people thought he would given Wa. Mu.'s abysmal performance over the past year.

Several people at Wa. Mu. didn't blame Killinger for the mess they're in. Rather, they said it was the President, Steven Rotella, who led them into subprime and option ARM lending that started Wa. Mu's precipitous slide. Either way, the person at the top usaully pays the heaviest price when things go wrong so Killinger had to go.

I'm wondering what took so long. All the other big financial institutions cut their CEO's much sooner (think Citigroup, Merrill Lynch, etc.). And Wa. Mu. had been having problems for over a year now. The stock went from over $40/share to $3 and loan losses were in the billions. Killinger was a company man (over 30 years of service) and built Wa. Mu. into a huge bank from a much smaller Savings and Loan.

The question going forward is what will happen to Wa. Mu? Their stock is still hovering around $3/share and there have been rumors of  a buyout by another financial institution. Their portfolio of risky mortgages (think pay option ARM's) is still very high as a percentage (some estimate as high as 20%) and these loans are part of the reason there have been so many defaults and foreclosures. Right now Wa. Mu. is pretty sick. Will they survive? I think so but it may be because of a merger or as a much smaller entity.

Although it's always saddening when a company and community involved person such as Killinger is ousted, life goes on. And Killinger is estimated to walk away with over $23 million in severance. This is on top of what he already had salted away. I've watched Wa. Mu. turn into a behemoth up here and believe they're a good bank. Perhaps now the healing can begin! Have a great week!

Paul

Good morning! This past Friday, 27.000 Boeing Machinists went on strike in our area. In the past, a strike or layoffs by Boeing really hurt our area. This time, we're much more diversified which makes it easier to weather the storm. The problem could be if the Machinists decide to stay out for a while.

Let's face it. Strikes are not really good for anyone. Boeing is projected to lose up to $100 million/day while the strike is going on. And the strikers get strike pay of $150/week after week 3. The problem I see is if the strike is prolonged, it could seriously put a damper on an already slowing real estate market.

Unlike other markets where there have been signs of life, we're stuck in a real estate slowdown and it doesn't appear it will be going away anytime soon. Combine that with this strike and it may continue to be slow the rest of this year. The unknown is how long the Boeing strike will last and how much money the Machinists have saved to pay their bills. Since most of America hasn't saved for a rainy day, I'll bet that if the strike goes on for more than a month, the workers are going to start missing house payments, etc. We've been relatively immune from foreclosures up here, but, if the strike continues for over 90 days, expect that to happen as well.

Boeing also has a ripple effect on the economy up here. There are a lot of companies that supply Boeing with services. if the workers are out on strike, look for other suppliers to pay the price as well. Up here we're all hopeful it will be a short strike. No one likes to see people get behind on their bills and pay the price. I'll keep you posted on this one. Again, we've been luckier than most on the real estate end of things here but this could rain on our parade! Have a great day!

Paul

Good morning! I picked up my local paper this morning and saw that Fannie Mae and Freddy Mac will probably be taken over by the government. It could be as soon as Monday. Although I'm not a big fan of government intervention (I'm a free market guy), I suppose this will help our world recover a little bit quicker. The bad news is you (think taxpayers) will be footing the bill for this bailout estimated at $25 billion dollars.

The other piece of the puzzle is what happens to all the banks who are so heavily invested in Fannie and Freddy's stock? They're in trouble. With the FDIC's current watch list (banks in trouble) at 117, I heard the list of bank failures could grow to 300 if the government had to rescue Fannie and Freddy. This, then, is the last shoe to drop. Before our market can recover, we will have to let the banks go through their challenges. And it's just beginning. So far there have been 11 bank failures this year. Expect over the next year or two for that figure to grow in multiples. Will it be as bad as the S&L crisis of the early '80's? Probably not but when you add everything else up that has happened, it's been called the most challenging period in real estate in the last 25 years.

Does this mean it's all doom and gloom out there? No. There are mixed signals. In parts of California and Nevada, home sales are picking up due to affordable pricing once again. Credit is still awfully tight and, chances are, will not be eased until the lenders feel safe to do so. My prediction? Look for the start of an upturn either in the Spring or Summer of next year. For those of us who can hang on, look forward to numerous opportunities as the buyers return to the market. It will be interesting to see how this all plays out. I plan on hanging in there and enjoying better times soon! Have a great weekend!

Paul

Hi there: I hope you're all enjoying your evening. I'm currently working on the most difficult loan I've encountered yet. I'm relatively new to the loan world (a little over 2 years tenure) and this is an FHA deal that we were given 21 days to close. My honest opinion is everyone wanted to get paid. This particular loan has been challenging due to multiple borrowers with several issues that needed to be resolved. I would be the first to admit that I missed a couple of things that delayed the loan by probably a day or two.

Combine that with an unrealistic closing time frame and you could say we have a recipe for disaster. Realtors: these days loans can take longer to close. Please heed this advice. Janet Guibault touched on this in her blog. I'm straying from my main point though. That is I will never run and hide. I have probably fielded in the neighborhood of 50 phone calls this week from all the parties involved. In short, it's been a long and trying week. But I will always respond and answer and provide information to whoever may need it.

I think we should all operate the same way. I hope you do in your business. I'm not really sure what this "late" loan means as far as future business. I have a feeling it will get done. If the parties are upset, so be it. Not everything runs perfectly all the time. I have an approval; there are just a ton of conditions. And, again, I will respond politely to all parties. I believe we all should. Yes, it's much easier to run and hide and not answer your phone, etc. But I would hope that the client will always remember our being available and communicating the good and the bad.

The good news is I believe most of you feel the same way. We pride ourselves on being different by being available and responsive. That alone helps us sleep well at night and garner future business from satisfied customers. Have a great night!

Paul