The Mortgage Manifesto

30 Year Fixed Moves Under 6.0%

Just a short post on current rates this morning.

For the past two years, the 30 year fixed rate mortgage has been in the low to mid 6's.  Well, just this week is the first time you can pick up a 30 year fixed rate at 5.875% with low closing costs.

These are the lowest fixed rates of two years.  Will they go even lower?

Trying to forecast out more than a few months has never been more difficult in my ten years of originating home financing.  No one, and I mean no one, has a crystal ball to tell us WHEN the bottom in housing will occur and WHEN the end of the fallout of execessive credit and lax underwriting will be over.

So, from a technical analysis standpoint I think we might see fixed rates move lower in the coming weeks and months.  However, and that is one BIG however, if you decide to wait you must know that these rates can evaporate overnight if unexpected bad news hits.

All in all, this is not a time to be greedy, if the lowest rates of two years make sense to act for your situation, do it.  If you need a rate that is just a wee bit lower, stop by here from time to time.

www.BrettGrendahl.com

Mortgage Rates at Two Year Lows

Here's a quick good news alert for everyone.  What?  Good news related to mortgages? 

Oh yes, Monday of this week conforming, fixed mortgage rates hit the lowest levels they have been in two years!  This move pushed the 30 year fixed rate program down to 5.875% with no origination and no discount fees.

As many people have ARM programs adjusting from wickedly low rates back in 2002 and 2003 this is a great time to capture the lowest fixed rates we have seen in quite some time.

There is a lot of uncertainty in the real estate market as we look ahead for the next few years.  The prudent call is to be risk-averse and restructure your financing into long-term fixed rates if you have not already done so. 

While hybrid ARM programs, like the 3 year and 5 year, worked great from 1999 through 2005 we face a completely different market reality and risks just over the horizon.

www.BrettGrendahl.com

2008 Presidential Campaign, Time to Follow the Money

Did you notice the turn as we now have less than 12 months to go in the 2008 Presidential Election race?

With the two dominant parties ready to crown their candidates, this is a good time to dig in and count the beans for the war chests they have each raised to date.

I tracked down this website that shows more detail breaking down the total of $420 million raised for all the candidates, Race for the White House.

As stated on that site, this election race is on a pace to raise a record amount of $1 BILLION total  Whoa!  That is one big number.

With that money being spent and an electorate that in mass can be best described as apathetic, the candidates that can spend the most to build name awareness have a great edge.

Let's break down some of the figures that jumped out at me.

Senator Hillary Clinton has raised over $90 million so far, with Barack Obama not too far behind at $80.2 million.  A distant third is Senator John Edwards at $30.9 million.

Across the aisle, Mitt Romney has raised $53.6 million and Rudy Giuliani brought in $30.6 million.  An interesting note is that Romney's campaign finance has current debts that are double their cash on hand.  Looks like he needs some serious capital raising to last.   Strong primary results are crucial to this campaign's operation.

Hillary Clinton is sitting on more cash in the bank than total spent so far.  $50.4 million in cash ready to go to work.  Significant advantage for her campaign at this critical juncture in the campaign.

If you follow the money trails in greater detail you will find that the candidates of both of the dominant parties will receive contributions from the same contributors.  Huh?  Are those contributions ideas on governance or just to gain influence?  That is a good topic for a future post.

This election race will be quite interesting by March of next year as the foreshadowing of our two choices become clear.

Two choices.

Out of 300 million people can political views be best representated and debated by only two groups?

www.BrettGrendahl.com

Mortgage Rates in Sight of New 2007 Lows

Well, I hope you and your loved ones banked a few more great memories over the holiday.  My newborn son was a hit of our get together so that was kinda fun!

So, its Friday and we are all getting ready for our weekend plans.  One of those plans for me is some more rigorous analysis of mortgage bond trading as the bond market closed near the highs of the year.  What does this mean?  Is this significant?

Oh yes, this is a significant moment in time for mortgage rates.

If mortgage bonds can break past a technical resistance level that has turned back the market 6 times this year we will likely see a nice move lower in mortgage rates.

In a daily sea of bad news in real estate and mortgage finance this will be some welcome news.

In addition, we might just see 30 year fixed mortgage rates move under 6%.  The last time that rates under 6% with no origination fees were available was way back in January of 2006.

If such a dip in rates occurs it will be time to act and refinance into those lower, and more importantly, fixed rates while you can.  This dip will not be like the one from 2001 through 2003.  Oh, no.  The dynamics in the marketplace are very different.  Don't get greedy.  When a ray of light opens up in stormy clouds, enjoy it.

The financial storm is not over yet.

www.BrettGrendahl.com 

Do You Want to See Some Subprime Truth?

I've been covering some of the financial alchemy for some time and today I read a great piece by CBS Marketwatch writer, Herb Greenberg.

For some eye-opening commentary coming from a recent Freddie Mac conference call, catch what Herb covered yesterday right here Drilling Deeper into the Freddie Fiasco.

I wish you and all of your loved ones a memorable Thanksgiving!

Brett

The Creeping Crunch When Liquidity Evaporates

Okay, so we begin a short holiday week so, most importantly, I wish you and your families a holiday filled with joy and lasting memories.

Now, what's on my mind as we close in on Thanksgiving and the end of the month?

I was thinking about how so many of those who were supposedly "in the know" claimed that the massive and historic fallout in the subprime finance market would stay contained.  Yeah, right?  You picked up on the carefully selected words of massive and historic, didn't you?  Massive, historic, and easily contained; those three just don't go together.

So, it shouldn't come as any surprise to see this headline in the Wall Street Journal Online today, "Commercial Property Now Under Pressure."

Commercial property?  What does that have to do with subprime mortgages on residential real estate?

As the passage of time unveils the truth we see that our financial worlds are incredibly interconnected.  The massive liquidity (availability of cash) throughout our financial system was a major contributor to the boom in subprime lending that led homeowner and investor alike to not acknowledge the true risk of their actions.

What is the pressure commercial property owners face?

The same thing all property owners face when values begin to decline instead of appreciate.  In a world of appreciating property values new financing is easy to find.  Flip that upside down and what was once easy becomes difficult. 

Whenever financing is secured to an asset, be it a residential or commercial property, the associated market value of the asset dictates how much, what rate, and if a deal is possible?

This is Finance 101.  Unfortunately, as the cycle of human history continues to prove, what was once basic knowlege can be easily forgotten. 

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www.BrettGrendahl.com

Hard Proof on My "Two Worlds" Theory

Good morning gang,

A few posts back I wrote about the enormous severance package that the Merill Lynch CEO received as he was shown the door from the executive suite for non-performance.  On the way out the board was kind enough to soften the blow and his hardship with a $160 MILLION package!  Oh, I hope he can get by and lift up his bruised ego.

This morning, more news on this front.

The CEO of Citigroup, after being shown a similar exit for non-performance, picks up a package of stock options, grants, and other benefits estimated to be worth $29.5 million.  To help him in his job search, now that he is unemployed, Citigroup has given him use of an office and a driver.  Actually, he gets those for the next 5 years, or until he gets another job.

Huh?

If you had $29 million in the bank, a free office, and a free driver, how motivated are you going to be on that job search?

Let's dial this in to our personal lives.  Of any friends, family members, or work associates you now that have lost their job and had to be in search of new employment, what kind of treatment do they get from their former employer?  Nothing close to these sort of packages, that is for sure.

Maybe Citigroup has greater problems when their actions for their top executive's non-performance is to lavish him with money and some great comps.  It's like they are a casino, favoring their biggest gamblers and those that are losing big money at the tables.  Oh, you just lost $50,000, here is a free luxury suite for a night to soften the blow!

Two worlds.

Do you see them?

www.BrettGrendahl.com

Did You Catch the Latest Subprime Shockwave?

So, did you think it was the broker that was the source of all this financial ill?

Government actions and media attention has surely put the attention on the mortgage broker as Enemy #1 with the subprime fallout these past few months.  While I have seen personally, and heard of issues from trusted sources, of misconduct and completely unprofessional behavior by some brokers, you need to cast a wider net if you want to catch ALL of the culprits.

Just today, news broke that involves one of the biggest mortgage BANKERS.  Washington Mutual's business practices are under scrutinization from Fannie Mae and Freddie Mac, and part of a probe by New York's Attorney General.

What's up?

Oh, just plain-old appraisal fraud, that's what!

I'm not shocked to hear about an investigation uncovering evidence that Washington Mutual applied pressure to real estate appraisers to provide inflated property values.  The reason; to serve Washington Mutual's interest.

With this revelation Fannie Mae and Freddie Mac do not want to purchase new conforming mortgage loans originated by Washington Mutual unless they can validate the veracity of the appraisal in the file.

What's funny, and not so funny in a way, is that Fannie Mae was busted for overstating earnings back in 2004 by only $6.3 BILLION!  They were caught by the Feds and had to pay major fines.  Who is callling who black?

Let's get back to where to cast the blame?  As us true throughout history, blame should be shouldered by the individuals that did wrong.  There is no need to throw out classes of professionals for the misdeeds of the few.

It reminds me of a time in college when during the Halloween blizzard of 1991 when a small snowball fight between my fraternity and a neighboring one ended up with someone from my house shooting a BB gun and injuring someone from the other house.

What happened as a result?

Well, the news created a zinger of a headline at the University of Minnesota and my house ended up convening an all-weekend long "brotherhood" event, involving all 70 members!  Why did we need to come down on 70 people for the misconduct of one person I will never know.  Somtimes, in a zest for action it seems we lose sight of the real cause, the poor decisions of individuals.

Looks like Washington Mutual is the individual of the day that was making some poor decisions indeed.

www.BrettGrendahl.com

I Sell Money & Knowledge - Which Do You Need? 

How You Can Save on Gas

So, the government tells us inflation is under control but every time you stop at a gas station is that your experience?

I didn't think so.

Gas prices are already high but the real unsettling fact is that they are very likely to go even higher yet!  Just take glance at the financial news in the newspaper or on the TV and you'll be sure to catch the news that oil is nearing $100 a barrel.  Ouch!  That is not a record high that anyone besides an oil company CEO or stockholder is going to be excited about anytime soon.

No sirree.

Well, as the price you and I pay at the pump rises (huh, rising prices, sounds like a textbook definition of inflation to me!) it can pay to make sure you are finding the cheapest source for your gas that you can.

The good news is that there are some resources for us.  Here are a few to look into:

• www.GasBuddy.com - this website allows you to search local gas prices, right down to your favorite local gas station.
• www.GasPriceWatch.com - this website does the same as GasBuddy, helps you check on gas prices at your local gas station.

These two FREE resources to check current gas prices in your neighborhood will save you money on one of your most expensive, recurring expenses of the month.

www.BrettGrendahl.com