Category — Mortgages-Financing

Doctor Gloom And Doom Housing Bubble has been running his series of posts on understanding the Great Depression. Read the whole post.  It is extraordinarily doubtful there will be a repeat of the Great Depression of the 1930s.  Ben (”Whac-A-Bear, Whac-A-Fannie”) Bernake is a student of the Depression.  What brought on the severity of the Depression was collapse of the money supply.  In the 1930 not enough currency existed to support a market economy.  Farmers dumped milk, eggs, and products.  No one could buy them because there was no money, no dollars.  Today we talk about “liquidity” and the money supply.  While I have agreed with the good Doctors analysis, I doubt “Whacky” Bernake and the Fed are going to make the same mistake again.

As of the passage of the housing bill, presumably tomorrow, about $1 trillion dollars, $345 billion for mortgage lender bailout, and $600+- billion Fed line of credit for Freddie & Fannie.  That’salota mortgages.  Freddie and Fannie will “own” the mortgage market again.  But there will be liquidity.

Because this bailout is funded by the taxpayer, there some negative consequences.

Up until recently there has been an economic perfect storm of declining home prices, financial markets crisis, a falling dollar crisis, and rising energy cost crisis.  These four, coming at the same time, is unique.  From a purely analytic view, Negative Dynamical Volatility was setting in.  Chaos.  Each crisis whacked was worse than the preceding crisis, and each crisis occurring at more and more frequent intervals.  Negative Dynamic Volatility is a condition that precedes chaos.

It is not over yet.  But doing a quick bit of math, the $1 trillion liquidity infusion will dampen the volatility and create some stability.  Real estate will probably not lead the nation into a depression.

OVER 1400 REAL ESTATE & MORTGAGE professionals were arrested today.  Bear Sterns hedge fund managers were taken away in handcuffs.  FBI special agents are the guys that carry guns.  They actually arrest people for mortgage and real estate fraud.

I used to remind mortgage agents that when their client (my clients too) sign a deed of  trust there is bold ten point print that points out that not occupying the property on a owner occupant loan, is a felony.  I’ve even had people (not my clients) actually ask me “do we really have to move in?”  Ya.  Otherwise the guys with the guns show up.  And now you know.  They do arrest borrowers.

There are a variety of mortgage scams, but the most common one is the investor who applies for and gets an owner occupied loan, and never intends to move in.  Bye Bye Puddin’ Pie.

McMurdie’s Real Estate Rule No. 26: Don’t be a Puddin’ Pie.  Tell the truth.

WHO’D A THUNK IT?  As you have already read it on Realestateblocks.com, mortgage interest rates are about to rise due to inflation cause by the shrinking value of the dollar.  Fed Chairman Bernacke announced today that the Feds low interest rate cuts were at an end, and inflation caused by the drop in the international value of the dollar my lead to higher interest rates.

Here I am, Cassandra, again.

I just got out of a meeting with Chase Mortgage regarding mortgage loans.  Online Chase’s mortgage interest rates are not available.  Wells Fargo was also nervous about mortgages rates.  Thirty year rates move before short term rates and it is likely borrowers will not see 5.85% fixed rate again for many years.  Any rate under 8.0% fixed is a good rate.  Traditionally mortgage rates run at least 3% over the rate of inflation.  Right now, it looks like fixed rates should be close to 10%.  ARMs and interest only are last year’s idea.

The primary cost of a home is the amount of the monthly payment.  Smart buyers and sellers will make their move now, and complete purchases and sales before November.

Borrowers will not be able to get low fixed rates again for love nor money in a few short months.

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THE SENATE FORECLOSURE RELIEF BILL will come to a vote in the Senate, but without giving bankruptcy judges the power to adjust downward the principal balance of mortgages.

I have not reviewed the wording of the bill the House has passed, but it sounds like bankruptcy judges will be able to dramatically reduce delinquent interest, but have limited authority to adjust downward the principal balances due on loans.

I agree with the Senate’s approach.  If bankruptcy judges were given authority to reduce the principal amount owed, especially on line of credit seconds, thousands of homeowners would file bankruptcy who could afford to make debt payments, with accompanying massive loss by lenders the financial system might not be able to sustain.

The Senate bill also contains legislation allowing states to issue $10 billion in tax free mortgage bonds to replace delinquent/defaulted loans.

GRACE KENG reports on the Santa Clara County Assessors speech.  Larry Smith, the county assessor is correct, Santa Clara County, excepting the far eastern and southern end of the County, do not have a foreclosure problems.  The problem for the market is mortgage underwriting criteria making it difficult for buyers to qualify for purchase money loans.