Blog Series, Part 1

Over the next week, within this blog, I will be touching on different aspects of originating that sometimes make it difficult to complete the loan transaction. It will encompass everything from market conditions to debt ratios to consumer goals within each transaction. In the end, I hope that it is a week filled with some learning moments and if an "AH HA" moment occurs, then the job will be successful.

One of the most difficult aspects of originating loans is discovering the interest rate that will satisfy a customer. Often, consumers are a bit jaded when it comes to what their interest rate should be and they focus too much on that aspect and not on the aspect of housing affordability. True, an interest rate can price you out of the market, but an interest rate phobia can lead you to missing the right opportunity.

There are currently some difficulties within the lending business that may make it hard for first time home buyers and those in need of refinances to find a loan. Many underwriters and companies who buy loans on the secondary market have declared Maricopa County a distressed market. This distressed market rating automatically cuts the loan to value on maximum financing back by 5%. So, if the max LTV on a cash-out refinance is 95% on their guidelines, because of the current market conditions, the LTV can be no more than 90%. This, on a refinance, can kill the deal. The same goes for a purchase, if the max LTV on a specific purchase product is 100% (unlikely in this market but still available), the new LTV is 95%.

What does the above mean for you as a consumer. It means that you will be responsible for the cash necessary to close the deal. For example, on a $100,000 loan amount for 100% financing, with the cut, the loan is $95,000 and the consumer is responsible for the $5000, plus closing costs. A well informed originator will prep the customer for this change, however, it is always possible that unforseen changes occur of which the loan originator is not always at fault.

More about that tomorrow as we begin to break down the stigma against Loan Originator's and begin to educate people about how they can make the process work for them.

FED Rate Cuts

Last week was a week of mortgage rate volatility due to the market. There were more reposts and changes to rates than what has been seen in the recent past. The good news: the rate cuts from last year affected the current rates and so we have seen a trickle down in the long-term rates. The unique news: Fed may cut rates again by a quarter to a half percentage point which will hopefully further drive rates down over the coming months.

If you get a chance read this article on a different view of the past few rate cuts. http://money.cnn.com/2008/01/28/markets/morningbuzz/index.htm?postversion=2008012809

Keep your eye out for more information this upcoming Wednesday. Get ready for another wild week. None of the negative talk of recession changes the fact that rates are definitely better and if you need to refinance, now may be the best time. Have a great week.

New Year, Same Story

The talk is of recession. To be honest, I am interested to see what really shakes out in 2008 and 2009. The last recession found me too young and naive to even realize the economic impact that came about due to the recession. I was, however, fortunate enough to read an article this morning from the FDIC about a hearing of top executives who discussed the possibility of a recession. Though they believed it to be a few years off, the reasoning behind the cause for the next recession were spot on.
See http://www.fdic.gov/news/conferences/2006_Economic_Outlook/whitney.html for the full article.
So, the recession may happen earlier than they expected but they could see it coming. What does that mean for us in the mortgage and real estate business. It means we should stop thinking GREEN, as in money, and start thinking globally. In my opinion, it is important to be educated about all factors that affect any person's profession, so that when change happens (as it inevitably does)they can be ready.
With that said, let us move through 2008 with a steely resolve. Let us look toward the future with a positive perspective, knowing that our economy moves in cycles. This isn't the year to run, it is the year to BE PESISTENT, DISCIPLINED, and CONSISTENT, in our efforts to provide people with the best service imagineable, so that when the fear and negativity is gone, we are left standing ready to work even harder.

Rates have improved and the products to complete loans are still available.