Blogging About Loans: Ruth Vogt, WR Starkey Mortgage (LMB#100023827)

A couple of weeks ago Mr. Barry Habib visited our office and gave us a number of "stories" which have prompted my writing of a couple of previous posts: What Would Rip Van Winkle Say About Homeownership, and Why Interest Rates Won't Get to 4%.

But there's another story Barry entertained us with which I can't seem to get out of my head, so I'm going to share it with you, also. It's the "Now you know the REST of the story" behind the Wizard of Oz. An explanation that some of you may have heard before, but quite honestly is my first exposure to the political interpretations and metaphors behind the story. All which I find quite intriguing.

The story was written during the period of time when Gold Standard debate which took place in 1900 and dealt with the value of gold vs silver. I had heard before the land of "Oz" was named based on the combination of the first letter and the last letter of the bottom drawer of a file cabinet: O-Z. Actually, it's suggested that Oz is used because of the abbreviation of ounces, a weight used for both precious metals (which makes more since when you think of it, as I doubt someone had a two drawer filing cabinet in the late 1890's!??).

Here are some of the other metaphors/interpretations:

Yellow brick road, was the gold bricks.

Dorothy's shoes were really silver. Hollywood changed them to ruby red for affect.

Dorothy was a real person, Leslie Kelsey, who actually lived in Kansas, and would travel on horse from one town to another educating the population on the value of using silver vs gold.

Scarecrow was the farmer.

Tin Man represented the manufacturers and labors.

Lion was the politician William Jennings Bryan, who was expected to support the silver value belief, but ended up embarrassing his political party in the end by turning tail and running from the controversy.

Wicked Witches were the bankers (of course. We're always the ones to blame!)

Wizard was McKinley.

And of course "the little people"? Well, they would be you and me!

Depending on what story you research on the Internet, there are slightly different variations or interpretations of the characters. However, it certainly does shed a different perspective on this "childrens story", doesn't it.

Would be interesting how those characters might be cast based on the events of today, wouldn't it?

 As we each have last minute "things to do" popping into our heads, and scramble in preparation of the biggest day of the year, let me not get so busy as to forget to mention how much I value being a member here at Active Rain.

Be safe, have fun, and don't forget to tell those you care about that you love them. 

I hate long posts, especially when it's about something like interest rates, but hang with me here because I think this is going to make sense, in simple terms (or as simple as you have heard on this subject).

First you must understand what goes into an interest rate. Let's say a borrower is paying 5% interest. Where does the 5% go?

Approximately 1% of that amount is split between 1) the servicer, 2)FNMA/Freddie Mac, and 3) Wall Street.

1) Servicer earns a portion of the income for maintaining an accounting for each payment made on the loan. Tax and Insurance escrows are managed by the servicer, and a record of principal and/or interest is maintained.

2) FNMA/Freddie are compensated for setting and asssuring minimum borrower and property standards for loans to acceptable for sale as Mortgage Backed Securities (referred to as MBS).

3) And Wall Street earns a portion of the first one percent for facilitating the sale of the MBS. To who? You guessed US! You and me: the public. And at what rate of return? Whatever is left over, or in our example, it would be a 4% return, what is called the "coupon rate".

Thus, to have a situation where interest rates are 4%, would mean we need investors that are willing to accept a THREE percent rate of return. Likely? NOT. Not even with the fed helping!

Speaking of the fed, let's look at what the coupon rates that have been purchased with the 1.25 TRILLION dollars that the fed was authorized to spend: (remember, these are the COUPON rates, not the interest rates! Interest rates would be approx 1% higher)

$42 million was at 3.5%

$151 BILLION at 4%

$268 BILLION at 4.5%

$331 BILLION at 5%

$215 BILLION at 5.5%

$49 BILLION at 6%

$21 BILLION at 6.5%

If you have been keeping a running total, that means the fed has spent just over $1.053 trillion of the $1.25 trillion authorized. Initially is was intended the entire $1.25 trillion would be used in 2009. However, in an attempt to "wean" ourselves off of the injection of the fed's contribution, the remaining $197 billion will be distributed over the first quarter in 2010.

So, what then? What will happen to the rates after the first quarter of 2010? Well.... what were rates PRIOR to fed's participation? 6% to 6.5%.

And will it happen overnight? Probably not.

They'll bounce up and down, just as they always do. But as the fed backs off, the floor / ceiling will go higher. Think of it as a yo-yo.

The yo-yo goes up and down, up and down. Now get on the elevator with that yo-yo still going up and down, up and down. See how the lows get higher, and the highs get even higher?

hmmm... still think 5% interest is too high?

This is my interpretation of a information provided at our office by Barry Habib.

Mortgage Rate Indicators for Denver

Although there is no true way to forecast with certainty what rates are going to do, mortgage rate indicators are something to keep an eye on if you are trying to decide when to lock your interest rate. Below are the mortgage rate indicators for the upcoming week.

Market Comment - Week of December 14th, 2009 Mortgage bond prices were near unchanged last week holding mortgage rates steady. Trade was extremely volatile with swings of 1/2% in discount points common. The Treasury auctions were not as well received by foreign accounts as traders were hoping. The US relies on foreign central banks such as China to fund our deficit spending. If China were to decrease or cease purchasing US bonds and notes, rates would rise. Interest rates finished the week near unchanged. The inflation data will be the most important releases this week. Inflation erodes the value of fixed income securities causing prices to fall and rates to rise. The Fed meeting will also take center stage. While no rates changes are expected the wording of the release will be very important. Economic Factors Economic Indicator Release Date Time Consensus Estimate Analysis Producer Price Index Tuesday, Dec. 15, 2009 Up 0.9%, Core up 0.2% Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates. Industrial Production Tuesday, Dec. 15, 2009 Up 0.6% Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. Capacity Utilization Tuesday, Dec. 15, 2009 71.1% Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates. Housing Starts Wednesday, Dec. 16, 2009 Up 8.6% Important. A measure of housing sector strength. Weakness may lead to lower rates. Consumer Price Index Wednesday, Dec. 16, 2009 Up 0.7%, Core up 0.1% Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates. Fed Meeting Adjourns Wednesday, Dec. 16, 2009 No rate change Important. Few expect the Fed to raise rates, but some volatility may surround the adjournment of this meeting. Leading Economic Indicators Thursday, Dec. 17, 2009 Up 0.7% Important. An indication of future economic activity. A smaller increase may lead to lower rates. Philadelphia Fed Survey Thursday, Dec. 17, 2009 16.5 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. Trading Conditions As we all know, mortgage interest rates change on a daily and intra-day basis. With so much volatility, it is often difficult to make the right decision regarding floating or locking. What is important to remember is the fact that there is a difference between gambling and taking a calculated risk when making mortgage interest rate decisions. Floating into an economic release such as the employment report is usually a gamble, as was evident with the rate spike the beginning of this month. In addition, floating over a span of more than a few days is also a gamble. Unforeseen events can cause instability in the financial markets that results in mortgage interest rate volatility. On the contrary, floating on a day of positive market movement with no economic data the following day, while such action is still vulnerable to market movements, can be considered a calculated risk. It is possible for interest rates to push lower due to the uncertain future of the economy. Unfortunately the recent focus has been towards rate increases, which generally don't bode well for lower mortgage interest rates. Taking advantage of rates at the current levels guarantees a historically favorable interest rate and protects against uncertainty surrounding future interest rate developments.

WR Starkey Mortgage - A different kind of company...where people come first!

Ruth Vogt Business Development Manager (LMB100023827) 6025 South Quebec, Suite 110 Englewood, CO 80111  Work: 720-489-0712 Fax: 720-489-0273 Other: http://www.dora.state.co.us/real-estate/index.htm  ruth@Lifetimelender.com  www.MyLenderOfChoice.com

Mortgage Rate Indicators for Denver

With the announcement that the FED will "scale back" it's purchases of Mortgage Backed Securities (MBS's) by early 2010, comes the question, what will happen to rates???

Real Estate markets across the country have benefited all year long from the artificially low rates available because of these mortgage backed securities being bought up by the FED, $1.25T worth. As this "rate intervention" is brought to a close, there is strong expectation that we will see interest rates start their upward trend.

Below are this week's mortgage rate indicators which may have an impact on interest rates.

Market Comment - Week of December 21st, 2009 Mortgage bond prices rose last week pushing mortgage interest rates lower. Rates initially spiked higher following higher than expected producer price index figures. Fortunately the consumer price index showed tame inflation on the consumer level and mortgage bonds were able to recover. The Fed kept rates unchanged, indicated they would try to keep rates low for some time, but also warned that long term security purchases would cease at the end of Q1 2010. For the week interest rates fell by about 3/8 of a discount point. The inflation data will be the most important release this week. The recent inflation reports were mixed. The PCE price index will be carefully watched for any signs of inflationary pressures. The bond market will close early Thursday in advance of the Christmas holiday Friday. The shortened trading week may result in some market volatility coupled with thin trading conditions likely. Economic Factors Economic Indicator Release Date Time Consensus Estimate Analysis Q3 GDP Tuesday, Dec. 22, 2009 Up 2.7% Important. The aggregate measure of US economic production. Weakness may lead to lower rates. Existing Home Sales Tuesday, Dec. 22, 2009 Up 3.3% Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates. Personal Income and Outlays Wednesday, Dec. 23, 2009 Up 0.5%, Up 0.7% Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates. PCE Price Index Wednesday, Dec. 23, 2009 Up 0.5%, Core up 0.1% Important. A measure of inflation. Weakness may lead to lower rates. U of Michigan Consumer Sentiment Wednesday, Dec. 23, 2009 73.9 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. New Home Sales Wednesday, Dec. 23, 2009 Up 2.3% Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. Durable Goods Orders Thursday, Dec. 24, 2009 Up 0.4% Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates. Mixed Message The Federal Reserve left interest rates unchanged last week as expected. The remarks were mixed and caused some mortgage market uncertainty. The Fed statement indicated, "subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets." The Fed's challenge will be stepping out of the mortgage market without causing mortgage interest rates to spike uncontrollably higher. The housing sector is a vital component of the economy. The last thing the Fed needs is for mortgage interest rates to escalate causing the housing sector to suffer. While the most recent data shows positive housing trends across most of the nation, analysts attribute the positive movements to artificially low mortgage interest rates tied to the Fed buying of mortgage bonds. How this will all play out is still very uncertain. Now is a great time to take advantage of rates at these historically favorable levels.

WR Starkey Mortgage - A different kind of company...where people come first!

Ruth Vogt Business Development Manager (LMB100023827) 6025 South Quebec, Suite 110 Englewood, CO 80111  Work: 720-489-0712 Fax: 720-489-0273 Other: http://www.dora.state.co.us/real-estate/index.htm  rvogt@wrstarkey.com  www.MyLenderOfChoice.com

Most of us are familiar with the tale of Rip Van Winkle who falls into a deep sleep after drinking a mysterious brew. Ever wonder what HE might say if he woke up today after a ninety-nine year nap about homeownership? It might go something like this:

What? I can buy a home for 30% less today than if I'd woke up 3 years sooner?

What? Inventory is much, much greater today than it was 3 years ago?

What? I can get these great savings, yet sellers are willing to negotiate with me because they WANT me to buy their home?

What? There are financing options allowing me to borrow, in some cases, 100% of the price of my home vs paying cash for it?

WHAT? The interest rates are witihin 1/8% of the lowest they've been for the past 315 years?

WHAT... YOU HAVE TO BE KIDDING ME???? On top of that, the government is going to give me $8,000 after I buy the home.

WHAT??? As my buyer's agent YOU are going to pay for the gas to drive me around to look at all these houses???

Last question: When can we get started?

(This was my interpretation of a story given to us at an office meeting by Barry Habib yesterday.)

Homes for sale in Lone Tree Colorado.

So you've decided with the number of homes for sale at great prices to consider buying. You know the area you want to live in is Lone Tree. Now what? What do you do next to decide which of the homes for sale to make your new personal residence. Whether looking at new or existing homes for sale, you must find a Realtor.

Why? The article below was written by a well known agent on the east coast. But the reasons to get a real estate agent before you start looking at homes for sale are the same whether buying there or here!

AND don't forget to ask about the government home buyers tax credit. Just one more reason to start looking at the great values for homes for sale TODAY!

If you would like to be prequalified before you start looking at homes for sale, you can apply on line at www.MyLenderOfChoice.com

Ruth Vogt Business Development Manager (LMB100023827
6025 South Quebec, Suite 110 Englewood, CO 80111
Work: 720-489-0712/ 592-0855 Fax: 720-489-0273 Other: http://www.dora.state.co.us/real-estate/index.htm
rvogt@wrstarkey.com
www.MyLenderOfChoice.com

FHA Changes.

Two FHA changes happening right now that aren't related... or are they?

There is a proposal (scheduled to go into effect Jan 1, 2010) that indicates one of the FHA changes is that brokers will no longer be approved by FHA to participate in FHA mortgages without going through an approved sponsoring lender. The responsibility and loan liability of mortgage brokers would fall squarely on the shoulders of the FHA sponsoring mortgage company. Net worth for FHA mortgage lenders is going from $250,000 to $2.5 million!

What does that mean? Long story made short: FHA is expecting sponsoring mortgage companies to create a sort of "Neighborhood Watch Program" for brokers.

How will these proposed FHA changes affect mortgage brokers? Dangerous position. Extremely volatile right now.

Secondly, we've all heard about FHA proposing HUGE changes with condo approvals. The desired outcome is to put the burden of proof on the shoulders of the lender. To be considered with the new FHA changes, the property would be subject to the following (as an example)

1. Due to noise concerns, FHA insurance will be unavailable for properties that are within 1000 feet from a highway, freeway or heavily traveled road, 3000 feet from a railroad, one mile from an airport, five miles from a military airport

2. FHA financing will not be available to properties located within 2,000 feet of any facility handling or storing explosive or fire prone materials like gas station, fire cracker sales or manufacturing operation, facility that stores or uses flammable or explosive chemicals.

3. FHA loans are not available if a property is located within 300 feet of dump, landfill, etc.

See the article for more information: FHA Changes (note: these changes have again been delayed, this time until January 1st).

How will these FHA changes affect condominiums? Dangerous position. Extremely volatile right now!

The FHA changesthat are being proposed would suggest that more responsibility is being placed on the shoulders of the remaining lenders still participating in FHA financing thus lessening the burden of FHA.

FHA was created in 1934 to provide adequate financing alternative and stabilize the mortgage/ housing marekt. Even with the proposed FHA changes today, it remains the best financing option available whether buying your first home or a move up home.

Rent or Buy in Colorado Springs?

If you are trying to decide whether you should rent or buy in Colorado Springs, this information here should help you with your decision.

I'd like to point out that per the charts below, sales prices have stabilized. Combine that with the interest rate info, and it should help you with your "rent or buy" question!

How long will the low interest rates last? Well, let me put it this way: We know the law of gravity is "What goes up will come down". The law of interest rates is, "What goes down WILL go UP!". For more information on interest rates, visit Mortgage Market Indicators to help you decide whether to buy or rent!

Ruth Vogt Business Development Manager (LMB100023827
6025 South Quebec, Suite 110 Englewood, CO 80111
Work: 720-489-0712/ 592-0855 Fax: 720-489-0273 Other: http://www.dora.state.co.us/real-estate/index.htm
rvogt@wrstarkey.com
www.MyLenderOfChoice.com

Mortgage Rate Indicators for Denver

When the time comes to buy a home, whether it's your first or your fifth, interest rates are always top of the list of items to be considered. Below are the mortgage rate indicators for the upcoming week.

Market Comment - Week of December 7th, 2009 Mortgage bond prices fell last week pushing mortgage interest rates significantly higher. We saw selling pressure almost the entire week as housing and factory orders data was stronger than expected, the Fed Chairman mentioned rate hikes, and weekly jobless claims beat estimates. To top the already negative week, the employment report came in stronger than expected causing rates to spike even higher Friday morning. Interest rates finished the week worse by about 1 and 1/2-discount points. The continued Treasury auctions will gain a lot of attention this week. If foreign demand for the debt is weak we could see rates head higher. The first portion of the week is light regarding economic releases but the trade data Thursday and retail sales data Friday have the potential to result in mortgage interest rate volatility. Be alert throughout the entire week. Economic Factors Economic Indicator Release Date Time Consensus Estimate Analysis Consumer Credit Monday, Dec. 7, 2009 Down $9.3 billion Low importance. A significantly large increase may lead to lower mortgage interest rates. 3-year Treasury Note Auction Tuesday, Dec. 8, 2009 None Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. 10-year Treasury Note Auction Wednesday, Dec. 9, 2009 None Important. $21 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. Trade Data Thursday, Dec. 10, 2009 $37.1 billion deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. 30-year Treasury Bond Auction Thursday, Dec. 10, 2009 None Important. $13 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates. Retail Sales Friday, Dec. 11, 2009 Up 0.5% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. U of Michigan Consumer Sentiment Friday, Dec. 11, 2009 68.5% Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates. Business Inventories Friday, Dec. 11, 2009 Down 0.2% Low importance. An indication of stored-up capacity. A significantly large increase may lead to lower rates. Are Rate Hikes Coming? The biggest fear of bondholders is inflation. Real or perceived, inflation erodes the value of fixed income securities causing prices fall and rates to rise. The last thing the struggling housing sector of the economy needs is escalating mortgage interest rates. Unfortunately comments from Fed Chairman Bernanke have many traders concerned that rate hikes are on the way. Bernanke indicated the Fed would follow a "rolling exit process" in which special programs run down and ultimately implement a tightening policy. He went on to mention raising rates and indicated the Fed will cut back and close emergency lending programs as the markets normalize. The reaction to these remarks was fast and furious as mortgage interest rates shot higher. While it is almost inevitable that the Fed will eventually raise rates, the question still remains when that process will actually start to occur. Many traders took Bernanke's remarks as a warning of things to come sooner rather than later. Despite the recent rate increases last week rates remain historically very favorable. Lower rates are not guaranteed and floating in this environment is very risky.

WR Starkey Mortgage - A different kind of company...where people come first!

Ruth Vogt Business Development Manager (LMB100023827) 6025 South Quebec, Suite 110 Englewood, CO 80111  Work: 720-489-0712 Fax: 720-489-0273 Other: http://www.dora.state.co.us/real-estate/index.htm  ruth@Lifetimelender.com  www.lifetimelender.com