A Sacramento mortgage lender's vision

Although the government has committed more than $8.5 trillion to energizing the economy, and the Fed cut a key lending rate almost to zero, banks haven’t made it easier to borrow. The public is furious- you should be too. While mortgage rates have declined, they haven’t fallen as fast as bank borrowing rates, meaning financial institutions are demanding more profit for every dollar they lend. Sec Treas Paulson and other government heads have flipped flopped on the issue. Since the American taxpayer essentially owns the banks who took TARP money, some believe that consumers are owed a return on their investment. Sec Treas Paulson and other government heads have flip flopped on the issue.

Concerns over a budget deficit and massive issuance of Treasury securities had bumped yields over the last few days. However, the deep cuts of key interest rates have diverted investment dollars to "next least risky debt", namely, Fannie Mae/Freddie Mac/Ginne Mae securities. Not only did this mitigate any negative affect on mortgage rates, but improved them slightly. This was also helped by the release of a Pending Home Sales report this morning which was significantly worse than the consensus. The only other news of importance this week is the employment numbers due friday.

Yes, the housing market is bad, but the current tune of optimism is that the lowered rates of november/december and the resulting spike in mortgage applications will drive up sales.  While rates are certainly helping us out(Sunrise Vista Mortgage is having it's highest volume month in the past 12 months due to refinances), it can take time for those applications to filter into the very spastic and difficult purchase market we have now. In fact, if rates were to rise sharply today (and they have been nothing if not volatile these past months), almost nobody who had applied in November/December could benefit. Why? Well, as almost anyone looking for a house can tell you it is really difficult to get your offer accepted, at least under the $300,000 limit in Sacramento. On average, it takes my purchase clients 2.5 months to actually enter a contract. It remains a market which is very difficult to predict.

The commodities markets are still taking a beating. Oil- still around $50/barrel.

Website Update: Our navigation has changed slightly. Please note that all loan modification/hope for homeowners/FHA secure programs have been grouped together at the top of our left hand menu. In particular we have designed a new application for our clients seeking to apply for these types of programs. You may visit our new dedicated page for the Hope for Homeowners program here.

A busy two weeks this has been indeed. We've seen the inauguration of our new president(and the first ever botch of the oath of office), Bank of America take bailout money, and the structuring of another bailout bill.

In up to the minute news, Fannie Mae and Freddie Mac are undercapitalized again and are requesting a few more billions from the governmental piggy bank. This strikes me as odd- aren't these players already owned and operated by the Gov? That's a little like adding your kid onto your bank account and then he hits you up for your cash....

Mortgage rates are up across the board. As always, this indicates trouble in the MBS and thus the bonds. Yields are up across the board...flying in the face of extreme pressure, the latest force being mass purchase of MBS by the US Treasury. You read that correctly- the Government is now guaranteeing some loans(FHA), owns the markets where most others are sold(Fannie/Freddie) and is now mass purchasing the loans themselves. Um, what? Even in the face of a near 0% fed funds rate, investors worldwide are becoming wary of the US mammoth national debt

Which is increasing at a rate of 3.34 billion per day. So no wonder China is starting to have second thoughts about US paper. They need to fund their own stimulus package, and while yes, they are manipulating the value of their currency on a wide scale(they are communists, remember?), they had been spending as much a 1/7 of their entire GDP on foreign debt investments and currently own over 1.0 trillion dollars of US debt. While international financial relationships are extraordinarily complex, suffice it to say that it's not in China's best interests to let us drown, nor vise versa. Everyone is in this together, at least till the full extent of the damage is assessed.

In any case, US debt is still the #1 place to park your cash(from a global investment standpoint). My prediction is for rates to recover and continue the downward trend in coming weeks.

Promo Update: According to Google, sunrisevista.com is now ranked the #4 mortgage broker in Sacramento.

In closing, my time has been very short of late. From here on out, I intend to update this blog about once a week.

First order of business is the massively negative unemployment report that was released yesterday.

US industry lost the most jobs in a single calendar year since 1945, the end of WW2. The figure was 2.589 million lost jobs. Unemployment has jumped to 7.2%, a 16 year high (I believe, can't find original article). The market is alternating between believing Obama will save everything, or belief that it will all unravel anyway.

Bonds and interest rates remain volatile. A mild rise in rates last week and earlier this has returned us to the bottom of the previous dip. A dip, I might add that is now very close to the 40 year low of mortgage rates seen in 2003-2004. Remember though the only thing keeping investor money in Treasuries and MBS at the moment is the "Flight to Quality"- this fixed rate debt is seen as "safe"- Corporate debt and the stock market are seen as too risky. However, the DIJA has been trading in the 8000-9000 range(excluding 11/20 where it broke through the 8K floor to 7995) for over a month now. While it hasn't broke through that critical support level of 8000 decisively, neither has it managed to stay above the 9000 one either.

I'd say the market is collectively waiting for the other shoe to drop- namely the Obama administration's entry. Although, if some more major bad news surfaced, ( al la the automaker meltdown) it would mix up things as well.

Website Update: Take a look at our redesigned FHA Streamline Refinance Program page and also our VA Streamline Refinance program(IRRL) page.

Shameless Plug: I've ran this blog over 3 months now and I have to say I really enjoy it, I think it brings out my inner author. I don't post quite as frequently maybe as I'd hoped, but that has worked out for both of us see: I don't have to reach to find material, and you as the reader get a quality post every time.

I wear a few different hats here...I'm a loan officer but also the webmaster. I am also a full time college student, and operate a business by the name of SearcherMagnet designing and optimizing websites. The last one is the one I wanted to mention.

• When I undertook this website several months ago, it was averaging 300 unique visitors/ month.
• Checking a few minutes ago, we're near 1600/month now.

How did this happen? For one, the number of pages on this site have about doubled. Those that aren't new, were all rewritten. And the whole thing was search engine optimized. In fact, if you type into google: Sacramento FHA mortgage this site is ranked #1. We are #1 or on front page for many other key searches...for example Sacramento Mortgage Blog brings you right here.

How does this happen? Ancient chinese secret. Kidding. Kind of. Call it "modern Google secret". Anyhow, SearcherMagnet can make this happen for your website. More information and my portfolio is available on my site... www.searchermag.net.

To be clear, this is still a real estate and mortgage blog and will continue to be. Back to the grind next week, just wanted to get on the record.

In closing;

If you haven't heard the story of Bernard Madoff, one time chairman of the NASDAQ and [formerly] respected and prestigious Wall Street financier who ensnared over 50 Billion dollars in a bizarre high roller Ponzi scheme, it's an entertaining read. Further developments continue to unfold. Wreckage of Bernard L. Madoff Investments Securities LLC may be found on the remains of their home page: http://www.madoff.com/.

GM/Chrysler continue to receive bailout funds amid industry wide sales declines : year over year 48 percent down at Chrysler, 41 percent at GM and 33 percent at Ford. Stocks ticked up on industry analyst reports that funds will increase lending to consumers and thus sales.

Front and center: The ISM Manufacturing Index, a key measure of industry health, is a survey of over 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. Released at 10:00am EST this morning, it showed a reading of 32.4, the lowest since 1949.

One would expect this by itself to affect Treasury bonds, but no, yields are up across the board. This has triggered price increases in Fannie Mae, Freddie Mac and Ginne Mae Mortgage Backed Securities (MBS) and a small deterioration in certain mortgage product rates. Good news: Next week a wealth of economic news is set to be released, with most of it looking to be pretty negative. Our forecast is one of lowered rates based on this expected news.

Want to know who's responsible for the Subprime mortgage crisis? Here's a few public faces you can point a finger at. (Watch out for that last one though.)

A final word...long ally and friend Randy Britt of Credit Financial Planing has finally joined us in the blogosphere. Check out his credit repair blog.