Every 13 Seconds....

Somewhere in America, a foreclosure is being filed every 13 Seconds. Many of the economist, politicians seem to be ignoring this fact. The lending world has become far more difficult as lenders still insist on tightening up on credit. As values continue to fall, many homeowners have mortgages that are greater than that of the value of their home. So Far, no relief has been created for this consumer that is underwater and typically they are just one month away from from falling behind.

Donald Trump makes it seem like bankruptcy and forclosure are just part of doing business, for someone that is so well diversified, he can come out alive over and over and over again.

For the rest of the population, the problem is getting worse! The next wave is on the horizon, more fall-out from the Sub-Prime mortgages which are about to expire and the higher unemployment rate that continues to rise.

The problem with Sub-Prime loans are the adjustment caps and the index they work off of. In today's market of low rates and indexes, Fannie and Freddie Adjustable Rates will adjust to the low 3's right now. A Subprime, because of how it works, will go up and will be in the range of 7.00% to 9.00%. Most consumers that entered into these loans, could not afford a traditional mortgage and of course they HAD to have the house and did not care what could happen after the 3 or 5 years of the fixed portion of the interest rate. The market was booming and everyone was going to be making more money in the future and there home would be worth double or triple...right? Give someone a mortgage at a rate they can barely afford, slowly wipe out everything they have over this 3 or 5 year period, then increase the rate by 3 to 4 points and see what happens. I blame the sleazy loan officer, but I also blame the consumer. When you see what you mortgage payment is going to be, how can you honestly say we can afford this?

We will get random calls from consumers shopping for someone to help them and I have actually told a client that even if I plug in an interest rate of 0.00%, that's right... 0, they still do not qualify for the mortgage payment! They are stunned and even after 3 or 4 years paying on there mortgage, it is like this is the first time they have heard this before.

I myself have an ARM, it is a 6 month adjustable. Yup, it will adjust every 6 months based on a margin of 2.25% plus the index, oh yeah, and it is interest only! My mortgage will adjust this holiday season...my current index is at .49%...add that to 2.25 margin and my new rate will be 2.75% for 6 months. I also know the risk and my rate has been as high as 6.25% at one point over the last 4 1/2 years. I plan for it and these low times will out weigh the high times. My average rate will be in the low 5's over a 10 year period. I am also self employed and have been commission only for over 15 years. It's a way of life and we plan for it and we can adjust accordingly. I will have lean months in the mortgage industry and in those times I take advantage of the low payments, the good months, I pay extra...a lot of extra. The only reason to EVER enter into an ARM with an Interest Only option is if you are Commission only or Self Employed and you know for a fact you are not going to be in your home for more than 8 plus years. It is a perfect loan for me and I understand the risks of this loan.

So here comes the next wave of consumers that cannot pay on the mortgage, the value of the home has dropped too much to even consider refinancing. Not sure why, but the banks that hold these notes will not renegotiate the terms of these bad mortgages. If the bank would renegotiate, it would place the consumer and the bank in a better financial situation. Everyone Wins!

With the latest report of 9.8% unemployment, up from 9.5%, another .3% of the population will run out of money in the coming months and will cause another wave of Foreclosures, Bankruptcy and many other financial problems. The 9.8% is a national average which is misleading. Parts of the country are booming and unemployment rates can be as low as 4.3% in North Dakota and 15.2% in Michigan. You don't hear these stats on the news. Click on this link to see the breakdown by State: Unemployment By State. As unemployment rises, we have to take into consideration the trickle down affect. Our family is a good example, we are not sure of the future so we have now cut back on many of the luxuries we were accustomed to. This could be a simple as not going to dinner as much, or skipping Dunkin Donuts. No matter how you look at this, it is keeping cash in my pocket but taking it out of the hands of so many others. Not only do I hurt the restaurant owner, bartender, waiter, but now I am hurting the Food Distributor who delivers the food. Since 2005, chain restaurant sales are down a little over 10% nationwide. (and not just because of me)

So, the next time you are going to buy that car or order that $32 Hamburger think of this. If you lost your job today, could you pay your bills for the next 12 months?

Bill Nickerson has been in the mortgage industry since 1991 and provides residential mortgages throughout New England.

Feel free to email Bill anytime by clicking on his email link or visit his website.

Appraisal Hell - Fannie and Freddie think they are helping?!?!

This article appeared in the Wall Street Journal on May 17th, it did not make the evening news! It is a reality of Fannie and Freddie trying to help, and once again this is hurting the consumer, the lender, the industry and will again bottleneck the process.

Please, read this article and then write to your congressman-congresswoman, Barney Frank, The President, Elizabeth Warren (harvard law professor) hell even write to the kid flipping burgers down the street. I can assure you that the kid flipping burgers will be able to get far more accomplished in the financial world then any politician can!

Fannie Mae and Freddie Mac's new rules are raising appraisal costs, critics say

The rules, intended to improve the accuracy of home valuations, push most large lenders to use third-party appraisal management companies.
By Kenneth R. Harney May 17, 2009

Reporting from Washington -- How about this scenario the next time you refinance or apply for a mortgage: The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.

Plus, your appraisal-related charges may now be subject to add-on fees that you'd never heard of before -- $50 to $100 extra in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser. Or an extra $50 to $150 tacked on if the property is worth more than $500,000.

On top of all this, your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. In some cases your card may be charged more than the anticipated cost of the appraisal, leaving debit cardholders in a potential overdraft situation.

Worse yet, the person conducting your appraisal may be new to the field -- willing to work for a cut-rate fee -- and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.

And if your mortgage application is denied by one lender, you could be forced to pay for a second appraisal because the new lender may not accept the first one.

That scenario is now reality, according to critics of the controversial new appraisal rules imposed nationwide May 1 by Fannie Mae and Freddie Mac. Advocates of the rules vigorously deny that the new system is flawed and say any increase in appraisal costs should be manageable for most consumers.

The rules, which go by the name Home Valuation Code of Conduct, are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party "appraisal management companies" that contract with networks of independent appraisers around the country who have no direct contact with retail loan officers or mortgage brokers.

Mortgage brokers, who formerly chose appraisers and kept a competitive eye on appraisal fees, say Fannie's and Freddie's rules are adding 20% to 30% to consumers' appraisal costs. Jeffrey T. Hawk, vice president of Maryland Mutual Mortgage in Forest Hill, Md., says a standard appraisal that previously went for $325 jumped to $400 or more May 1 when he was forced to use management company appraisers.

Some applicants also are balking at handing over credit card information upfront when they're not sure what the charge will be. "I lost three clients the first week" because of the credit card requirement, Hawk said.

Buddy McCombs, senior vice president of EverBank, a Jacksonville, Fla., lender that buys loans originated by Hawk's firm and now contracts with management companies for appraisals, concedes that "there's probably a little increased cost" with the new system, "but I don't think it's devastating.

Sacramento-based appraiser James Facchini of American Pacific Appraisal Co. says, "What's terrible is what's happening to [long-established] appraisers who won't work for the low fees" management companies pay.

"On May 1," Facchini said, "I lost almost my entire customer base" -- mortgage brokers who now can't pick up a phone and order an appraisal from him.Instead, Facchini and other appraisers either have to sign up with management companies or find other employment. What "really bothers me," he said, "is that the consumer has no idea what's going on."

After Facchini signed up with one management company, he said, two consumers commented to him after he finished his appraisal, "Wow, you really charge a lot.

They were each being hit with $550 appraisal fees, although Facchini was getting just $250 through the management company. As he sees it, that leaves $300 of "slush" somewhere in the process -- some going to the management company, but the rest probably "flowing to the lender for doing absolutely nothing."Rich Kuegler, a vice president at MDA Lending Services Inc., a national appraisal management company, says payments to firms like his are compensation for creating, managing and reviewing a network of thousands of individual appraisers -- MDA has 9,000 under contract across the country -- and for the "processing and administrative" costs that have been taken off the backs of brokers and lenders.

As to appraisers' complaints about fees, Kuegler said, his firm offers them "the ability to have a steady stream of work, training and support." In other words, appraisers can expect to make up in overall volume what they're sacrificing per assignment.mailto:assignment.kenharney@earthlink.net

Distributed by the Washington Post Writers Group.

Posted by Bill Nickerson

Vice President

Mortgage Network

Acton MA 01720

EMAIL WEBSITE

Please email with your questions or comments anytime. This new policy, "HVCC" has become one more piece of the lending world that has been taken away from us. This is hurting you and me in several ways.

And the Average Rate is???

And the Average Mortgage Rate in the United States is....

Who knows!?

One of the most complex answers these days is to tell a client what they can get for a mortgage rate. As I have spoken before about how Fannie Mae and Freddie Mac are broke, mortgage rates now take spreadsheet analysis to figure out the rate.

At the close of business Friday, the Freddie Mac average 30 year fixed rate was posted at 4.78%. Sounds good right...well their is more to the story. Before I say anything derogatory about the media today, this rate comes with .7 Points. Take your loan amount and multiply by .007 and you get the additional fee. On a $417,000 loan, this comes to $2919.00. You wanna write me a personal check for $3000.00? I will get you a better rate!

Oh yeah, you know this is based on closed mortgages, this has nothing to do with the mortgage rate of today, right. You knew this! Well, rates are way off since Wednesday, the mortgage back security market took a well deserved bath after weeks of rallying, mortgage rates finished in the low 5's Friday night. Mortgage rates can change by the hour and do change throughout the day.

If we back out the Points, this same average rate comes to 5.00% with 0 points. But wait, there's more! You must have a credit score of 740 or better, you must escrow your taxes with your lender, no cash out and have around 30% or better in equity in your home. That's pretty easy, right? The average homeowner in Massachusetts lost a little over 20% of there equity since 2005-2006, so in the case it may be hard to get the perfect sceanrio to work for you. In many cases, their are compensating factors, but without running your loan through the underwriting system of today, it's all just chatter of what the rate is.

One of the small problems, most banks, lenders and credit unions, cannot even close on a mortgage in under 30 days as we used to be able to. Why does this matter, rates are based on Lock Periods. 15, 30, 45, 60 and even 90 rate locks come into play. It used not matter because we could close on a refinance in under 30 days and quote a great rate. Some of our investors don't even let us lock a loan for less than 60 days unless we have the appraisal in or a complete application package, but that is a blog for another day. The difference, might be a 1/4 percent higher for that long term rate lock. Purchases always take priorority, so don't worry if you are buying a home.

Do you have a second mortgage or a line of credit and the combined loan to value (CLTV) exceeds 80% of your appraised value, you may not be able to get a mortgage depending upon what the second mortgage holder says. We are finding that many of the second mortgage holders will not subordinate these liens to the new first mortgage holder. This is very important and is causing a bottleneck in the industry. If the combined loans equal greater than 80% of the appraised value, you may not be able to get a mortgage at all. Many of the banks will not work with or assist their own clients. Very short sighted if you ask me.

I just happen to have a local bank in my back yard here in Acton, MA, I won't mention their name but they have been around since the 1800's and they have 2 branches in Acton. They currently have 16 mutual clients that I am trying to refinance there home, average savings is a little over $250 per month on the first mortgage. BUT, the CLTV (combined loan to value) exceeds 80% and therefore this little bank will not grant us permission to refinance the client.

"Uhmph...let's see, our client is going to save money, we keep the second mortgage open and continue to make money off them, they are in a better financial position and it will be easier for them to pay us back. Yup, it's final, DENY them the right to refinance their mortgage". said the little bank with the marble foyer!

Everyone is in a better position financially, the client is saving money, the Bank is in a better cash flow position with the client and I make people happy. Here is the funny thing, I referred many of these clients to the bank for there lines of credit, what a fool was I. Now, I am able to PULL all 16 loans from the little bank and I am going to place them with a competitor that is willing to out the customer as well as assist in jumpstarting this economy. What a novel idea!

So before you judge your Mortgage Lender on what they are quoting for a mortgage rate, find out the details of your situation. As I have been saying since Christmas, mortgage rates are at 5.00% and on any given day, they may swing a 1/4 percent in either direction. but we do have to know all the details, your credit score, your equity or down payment, is it a condo, the size of the loan amount, and I can go on and on.

Here a just a few things to be careful of:

• Do not use a free credit reporting agent to base your life on, most of us don't even charge for the $15 or so for what a REAL credit report costs and it will be far superior to something you are getting online.


• Do not go by the assessed value of your home, it means nothing to us or anyone else in the mortgage world, this is only a number for the local towns to base a tax rate on. Typically these values are set the previous year and are ow obsolete.


• Don't go by what your friend or neighbor got for a mortgage rate, that was a rate that was locked in on that day. And you have no idea what fees were paid to get that rate. In a lot of cases, that friend doesn't even know what he paid in fees because he was chasing the "Rate" and not a proper financial plan.


• If your credit scores are under 680, be prepared, this may costs in upwards of 2 points to get the same rate as someone with a score of 740.


• Do you own a multi family? Condo? Have a second mortgage or line of credit? Taking cash out? These are all very quick items that Fannie Mae and Freddie Mac charge extra for.

As always, buyer beware. In general, lenders get there mortgage rates from the same pool of funds. Rates should be very close to one another. Ask as many questions as you can! Rate is important, but if you don't know all the facts, that rate could cost you very dearly for what you didn't know. Always ask for a Good Faith Estimate of Closings costs, this is a breakdown of all the fees that are charged by the lender, attoreny, town and state. Great for comparison, and without this, you really cannot compare apples to apples.

That's all for today! The next installment will be about HVCC, never heard of it. If you are in the real estate business, you better know what this means. It is affecting us dearly!

Feel free to email me anytime with questions or comments, I love the feedback.

Bill Nickerson

email website
978-264-4803 bill@billnickerson.com

Providing Mortgages Since 1991

Fannie Mae is Broke!

When the news media boasts mortgage rates PLUMMET, it triggers a reaction. The phone rings and we become flooded with new applications. Great for us, but here is the real story!

The banking world has been turned upside down in the last 18 months. More rules more restrictions and more than half the operations departments have been let go or shut down across the nation so, something that used to take 3 to 4 days is now taking 3 to 4 weeks to get through underwriting. The process has become twice the work it used to be especially with many of the programs that have disappeared. No more second mortgages or lines of credit over 80% of the appraised value, the list goes on of the new crazy rules. But wait....there is more!!!!

Here are some of the reasons why: Fannie Mae and Freddie Mac are BROKE. If you did not know that by now you have been living in a cave. When companies like this are broke, they implement new policies to raise revenue. Some may call it better underwriting, I call it a drive by or just plain robbery, nothing more. When congress gets involved and dictates rules of why they think the mortgage world is in trouble or just plain broke, it leads to more problems.

Here are some examples, the obvious one first. We all know how important our credit report is as well as FICO scores. Well, if you score is under 720, you will get penalized a ¼ point in fee. This can be buried in the rate or just a flat fee. Now lets say this is a cash out refinance over 75% of your appraised value of your home, you guessed it, another hit to the rate or fee of 1/5 point. Say you want to wave your tax escrow and pay taxes on your own, yup that is a ¼ hit. We do the best we can to eat some of these fees or play the market and try to get better pricing on a rate to help the consumer. That is a service the client never even sees. So for what the client thought was an easy straight forward refinance and the client is going by what CNN reported that day rates are, you can imagine the surprise of the customer when they don’t get what they expected. In some cases this can equal a full .25% to .50% of an increase to your mortgage rate. You thought you were getting 4.875% and now you are 5.25% with all the hits. Not good, and your stuck, these are Fannie Mae rules, so they are just about with every lender out there. From the small bank to the large national investor.

These are the basic adjustments, as the credit scores, these adjustments get worse. Here are few more, have a 2, 3 of 4 family? That will cost you 1 point these days. What if you are buying a condo, it is a ¾ point adjustment, perhaps you are only putting down 5% on the purchase, that is a ¼ point. Tougher everyday and just one of the many more reasons clients need to approved before they look at a home. Other things to do is to be prepared, have you approval updated with each offer you make.

Buyer Beware: Have patience, I have been doing this since 1991 and I have never been at such a loss of what is going on or how frequent the rules change. If a rate or service seems to be to good be true, it probably is. Always ask for a Good Faith Estimate of Closing Costs upfront to see what the fees are going to be. If you cannot get one upfront…..move on to another lender, this takes us minutes to prepare and typically they are automated so they are not an extra work.

If you ever have any questions, please feel free to call or email me anytime. Even after all these years and the mortgage crisis, I still really enjoy what I do. I find myself biting my tongue a little more, but it is worth it.

Bill Nickerson
Vice President
Mortgage Network
bill@billnickerson.com

Apply Online Today

Greed.....for lack of better word is Good?

An iconic phrase from the 80's. It landed Ivan Boesky in jail after the 1980's investment guru let greed take him over, a part we all learned to love or hate through the eyes of Gordan Gekko. (click on Gordon, the classic Greed is Good Speech) An extreme example of what I am writing today, but none the less, something to consider. Greed, it is one of the seven deadly sins.

Fast forward to the struggling housing market, lay-offs, reduction in pay and the list goes on. A new culture has emerged, a thrifty, cost sensitive recycling consumer. Still infused with Greed! In my daily interviews with clients, I have to figure out what they want. What is the goal and why do you want to talk to me. In many cases it has been a warm referral, My Mother told me to call you, you took good care of her and gave her a good deal. We begin the dance of sales, what is your rate they say, I don't know, what is your FICO score. They say what are your closing costs, not sure how high is your debt ratio? After we get down to brass tacks, I tell them what the rate is based on there credit and loan to value ratio and this has been done reviewing rates from several of the top banks in the country. I then say, I am please to say you are approved and the rate is (today) 5.125% with 0 points. I think, hey, I am saving this person $281 per month....pretty good. When the response is. "Why is your rate so high?" they say. "Compared to what", I ask. I can do much better, I just saw a rate posted on Zillow for a full percentage point lower. ............ahhhhh, can you smell it? That's Greed!

The funny part, if the client was willing to work with a lender and understand the process, you will find that rates are pretty much the same from place to place. Closing may be a Little higher here but the rate is better, rate may be better here but there some additional fees. This is when the Greed sets in and consumers are blinded it. They must get what their neighbor has or else. Not knowing the neighbor has stellar credit and lots of equity might help or the neighbor was not greedy and acted on a good deal.

Since Thanksgiving, mortgage rates have been hovering around 5.00%, plus or minus a .25% depending on which way the wind was blowing or which way CNN's ratings were going might be a better analogy. Clients across the country have decided to hold off from refinancing because they feel rates are going to drop even more! I always ask "why do you think this?" The answer is because they read an article or they saw it on TV or a rate was posted on the Internet. I tell them, I do this for a living, I fully understand mortgage back securities and have all the live charts that tell me which way rates are going, I compare 20 or so lenders daily, price out mortgages taking into consideration the Fannie Mae and Freddie Mac Guidelines, read and analyze daily all the economic indicators. You know what, I can't tell you what rates are going to do, how the hell is the general consumer going to do this?

My point is, if you refinanced back in November or early December when rates first dipped to 5.00% to 5.25% (I speak in ranges, there is no time in life to nickel and dime anything, it gets you know where) and you were saving $300 or more on your payment, you are doing very well. BUT, here it comes......But there are clients that are still holding out because they know rates are going to drop more! That's right, we have consumers amongst ourselves that can predict mortgage rates....BRILLIANT, BLOODY BRILLIANT! Here is the math question of the day, pay attention: If you closed in November 2008 at a savings rate of $300 per month, you would be currently making your 5th payment on April first....you with me? You would save $1500 so far, almost paying for the closing cost outright. Now for the tricky Math, You the consumer wants to hold out for an 1/8 maybe a 1/4 percent more to save that extra $22 or $44 more a month and still have not refinanced yet. Ready.....by holding out for the extra $40 or so bucks, and not taking advantage of the rate a few months ago it will take you over 34 months to make up that savings you could of had in November. For those that are a little slow: I took the assumed extra savings of $44 you think you can get and divided it by the $1500 you could have saved. It comes out to 34.09 months to make up the last 5 months of savings. That is nearly 3 years to get back your savings potential!

Just in case, you will have this same test again when you turn 62, the Govt will give you the option of taking Social Security at a said amount, then they give you a teaser....If you wait until your are 65, we will give you a little more....hehehehehhe. Big Brother knows they win every time, its like thinking you can beat the tables at Foxwoods. Even at the lower amount at age 62, that revenue takes years to make up if you decide to be greedy and take the larger amount at 65. You know what, that was a bad example, we won't have Social Security 20 years from know....sorry, my bad. One more reason to refinance now.

Again, if you have the opportunity to save money and create a better cash flow on a monthly basis, take advantage of it. If rates do decide to plummet into the the low 4's or even 3's I heard somewhere, then refinance again! Too many consumers got caught in the refi greed of a few years ago. You did well, you did not increase your loan, but you refinance if the rate dropped by 1/2 percent. Savings is Savings, and if you save $100 or more a month then do it. Don't try to outsmart the markets or the economy. We have some of the top people in the world that can't figure this out.

Stop being so Short Sigthed, lock in a good rate today and begin saving. If rates drop that much again, refinance the mortgage again. Please don't lose this once in our lifetime opportunity to save hundreds of dollars a month!

If you would like to comment or email me, please do anytime. I truly love what I do and I have been writing mortgages since the early 90's. I can not say I know everything in lending, but I am very surprised of how many know more than me!

Bill Nickerson
Vice President of Hand Holding
978-264-4803
bill@billnickerson.com


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Adjustable Rate Mortgage

Did the Media tell you your rate was going to adjust into the 10's? Even the 9's....8's? We all know how the news media gets a hold of something and then wants to make sure they scare the bejesus out of you when you don't listen to them. Well, read on....this is about how your Adjustable Rate Mortgage is going to Adjust DOWN.


Do you have an adjustable rate mortgage? Did you obtain one through a conventional lender, bank or mortgage broker? Chances are your rate will drop when it goes to adjust.

The conventional lending world has many programs in the adjustable world and almost all come with a security blanket of some sort. "Caps", this is the limit your rate can adjust up or down from your existing mortgage rate. Typically this number is 2.00% for adjustments and then you will have a life time cap, this could be 4, 5 or even 6.00%. If your rate started at 5.5%, when it goes to adjust for the first time, it could not go lower than 3.5% or as high as 7.5% and over the life, it will not move more than the lifetime adjustment, we'll use 5 for the example and this would give you a rate of 10.5%. Chances are in the life of this loan, you will not reach this rate, ARM's have not been over 7.00% for 15 plus years.

Word of caution, I am speaking of Fannie Mae and Freddie Mac mortgages, these are the mortgages that are offered by mortgage and banking professionals. If you actually got a sub-prime mortgage, read your paperwork of how it will adjust.

Ready for the good news?!?!?!?!!!! IF your rate is going to adjust today or in the next few months, it will go DOWN. All banks and lenders use an Index and a Margin to figure out what your rate will be going forward and you signed paperwork on this. Typically the index can be a One Year T-Bill, Maybe the LIBOR or the COFI (click any of these for charts and definitions) these indexes run pretty close together and all are under 1.00% today. You will now add the Margin to this index. "Typically" the margin will be 2.75% and this could range on the lender or bank by a 1/4 percent. We are talking a few assumptions here but the norm will all lenders is 2.75. The language will say, Index plus margin rounded up to the nearest 1/8th. This will be your new rate for the next 12 months.

So, add the 1.00% and the 2.75 margin and what do you get? 3.75% is the average 1 year adjustable right now.

So before you run to the nearest bank or mortgage company to refinance out of your ARM, think of why you got it in the first place. I have one, it now adjusts every 6 months and has dropped the last 3 adjustment periods. My goal was to be in my house for about 5 plus years, but knowing full well I could be here for 8 years. A 5/1 ARM, no matter how the rate goes, will be cheaper than a 30 year fixed up to its 8th year. This is assuming it goes up every year and then the 8 year marks is the break even point.

If you thought you were selling in a few years, think this through. Your rate drops this year to somewhere in the high 3's even low 4 for the next 12 months. Worst case, in 12 months it goes up by 2.00%, now you are back to high 5's maybe low 6's. Your average monthly payment for 2 years will come out less than a 30 year fixed with the closing costs every time. Even if your rate goes up to 7.00%, it is still cheaper to keep this ARM into the 3rd year compared to the 30 year fixed. Remember, this is if you are still looking to sell your house in the coming 2 to 3 years.

You are probably reading this saying....this guy is nuts! He is actually talking us out of something that provides food for his family. This is true, this is how I make my living writing mortgages, but it is why I am still writing mortgages because of sound financial information like this. My career in mortgages is in consulting first and finding ways to help my clients. (so please do not tell my higher ups!)

Would you like more information on your adjustable rate mortgage? Even if I did not prepare your mortgage for you last time, send me an email or call me. A 5 minute phone call could save you thousands!

I look forward to hearing form you and your comments on these articles. The best way to get a hold of these days is via EMAIL.


Bill Nickerson
Vice President
Mortgage Network
email
website

4.00% Mortgage Rates?!

Ready...Remember this phrase: Mortgage rates are at 5.00% with 0 points on a perfect loan, and on any given day they can and will shift a Quarter Percent either way. Got that, No Miracles, No 4.00% No Rates are Plummeting!!!!

Once again, the news media gets a hold of a piece of information and runs with it. This past week it was mortgage rates will be at 4.00% for a 30 year fixed. This is part of a bill that was going to be reviewed this week in Government, just an idea from some crazy politician who does not understand the general dynamics of the economy. Why not just print more money and give it away, this would actually be cheaper!

Here is a fun little stat: Did you know if you were able to spend 1 million dollars per day, it would take over 2000 years in order for you to spend the amount of money set aside for the upcoming new stimulus plan?!

Do you know what this takes to accomplish lowering rates? How much money actually would have to be injected to the economy in order to stimulate it? Currently mortgage rates are at 4.875%, that's 87.5 basis points above 4.00%. The government would invest billions into mortgage back securities or Fannie Mae and Freddie Mac to push these rates down. Only to have a 5-7% increase in new home sales. This is not a wise investment for the government at this time, or I should say it will cause more harm than good.

Okay, a little more technical. In a previous blog I reported of the injection of funds into the mortgage back securities over the next 6 months and how this would drive or at least keep rates down for the moment. Well this is still true but the treasury shifted their policy a little, surprise surprise! Instead of purchasing the 4.00% and 4.5% Fannie Mae coupons (these are the coupons that set the rates for around 5.00% mortgage rate, coupon plus margin equals mortgage rate). The treasury has now found it to be profitable to buy the coupons that are at 5.5% and 6.00%. These would equal mortgage rates around 6.00% and higher, the anticipation that consumers that are in this mortgage rate range will be refinancing soon and this would create the opportunity to make a quick buck for the Government. Good for the government, bad for mortgage rates!

It is a good idea and will make money, it just will not bring down mortgage rates anytime soon!

The other issue at hand is the lenders and banks current portfolio of business. Lenders are overwhelmed with volume right now. Think of all the consumers that locked into 4.875% to 5.125% over the last 30 days, no bank in there right mind would offer a lower rate until all these loans have closed and have left the building, you hear me Elvis.

The cost to process, fund and service a loan takes months upon months for the lender to make back its money. If you come in January and then refi again in April, the "bank" will go broke. So for now, banks and lenders will keep rates up little until they can clear these enormous pipelines they are carrying. Then for about 5 minutes, we might see a rate in the 4's again.

Oh yeah, did I tell you the lenders are short staffed right now, so what used to take hours or even days, now takes days or even weeks. The masses that left the industry over a year ago are long gone and not many people want to come back for temporary job in the mortgage industry, especially when they are just going to get abused from loan officers and the higher ups.

My advice, find a loan officer who you trust, get your information in the system so you at least have a shot at these some low rates when they come down. Remember, they only come down for a moment. If only takes a few hours for a lender to take enough loans that will occupy their time for a month. If you are not in process, you will not even have a chance and you will be hearing about how the rate was at 4.75% on the 7:00 o'clock news or at 3:00am from CNN who are always a day late on the important news.

Please read some of the previous Blogs, you may find them helpful when sharing news with clients and friends. It will also help manage expectations of the markets and what is really going on.

Have a question, call or email anytime. After 18 years, I still actually love what I do and would love to chat!


Bill Nickerson
Providing Mortgages Since 1991
bill's email
bill's website

Mortgage Rates

Here we go again. This past week we some mortgage companies drop there rates as others went up. This is one a sign of the government driving rates down as the plan was designed to. The other is, Lenders, Banks and other sources of money are overwhelmed with business so they have to raise rates to slow down the mortgages from coming in. I try to watch as many banks, lenders and mortgage companies as possible on a daily basis, even with all the tools I have, it has been very difficult.

This week I happen to take 2 mortgages that are 2 families, they are both occupied by there owners and make a nice rental income. The loans are somewhat perfect, good credit, good equity, life is just grand! Until I have to lock them in via the Fannie Mae pricing tools. Because it is a 2 family (all properties from 2 to 4 family) the client received a 1.00% pricing adjustment and not in there favor. It brought the rate of 5.125% to 5.50% just like that for owning a 2 family. Just one more way that Fannie Mae has be accustomed to charging us for everything. They already charge if you take cash out of your home over 70% of the appraised value, if your credit score is below 720 and numerous other adjustments. Frustrating to say the least. It becomes harder and harder to even quote a mortgage rate without knowing all the details of the borrower, the home and anything else they can think of penalizing.

Don't even bother trying an investment property these days unless you have a minimum of 20% down and want to pay points. The Private Mortgage Insurance companies will no longer insure these properties and the lenders don't want them either.

The most important advice I can give these days is to get pre-approved long before you begin to look for a home. Get all your credit documents into he lender/broker and let them review it. All too often we have that client stroll through the door and say " I just bought a house and now I need a mortgage!" This never works out!


Just a another day in the life of a changing market place. The good news, mortgage rates are staying fairly low, we did see them at 4.875% for a few minutes. Careful when you hear or read the average mortgage rate, typically it will have an average amount of points or other costs. I have heard it so much, the rate is now 5.1% and in fine print the average points came to .8% in fees.

If you are shopping for rates, The RATE MUST BE THE SAME AS THE APR!!!!!

Rate: 5.125% The APR should be 5.13, it is always carried out to 2 decimals and if the cost of the mortgage is low or reasonable the APR will be the same. The division of banks requires when in print, the APR be the same size font as the RATE.

Buyer beware!


I hope all is well and always feel free to give me a call or email with questions!!!!!



Bill Nickerson
Vice President
Mortgage Network/Emerson Lending
179 Great Road
Acton MA 01720
bill@billnickerson.com
www.emersonlending.net

Fed aims to buy $500 billion in MBS by mid-year

WASHINGTON (Reuters) - The U.S. Federal Reserve on Tuesday moved forward aggressively with an effort to drive down mortgage costs, setting a goal of buying $500 billion in mortgage-backed securities by mid-2009.

The central bank said it would start buying the securities in early January under a program announced last month. When it announced the program, mortgage rates dropped in anticipation of the purchases.

Still, some analysts on Tuesday expressed surprise with how vigorously the Fed was pledging to act and the news propped up prices for MBS in very thin trade.

"When they are buying along the lines of $80 billion to $100 billion a month, if they're going to do it in six months, they have to buy everything they can get their hands on," said Kevin Cavin, a mortgage strategist at FTN Financial in Chicago.

"It will push up prices and tighten spreads and push down primary mortgage rates," he said.

The Fed selected investment managers BlackRock Inc (BLK.N), Goldman Sachs Asset Management (GS.N), PIMCO, and Wellington Management Co to implement the program.

The mortgage-buying program is part of a sustained government effort to help the United States withstand a severe credit crunch and deep housing downturn that have tipped the economy into recession and damaged activity around the globe.

Earlier this month, the Fed cut benchmark U.S. interest rates close to zero and signaled that it was turning more heavily to unconventional measures to spur the economy.

On Tuesday, it said it would increase the money supply to make the MBS purchases, effectively easing monetary policy further.

The program only covers securities issued by government-sponsored mortgage enterprises Fannie Mae and Freddie Mac and government loan financer Ginnie Mae.

When it announced the program on November 25, the Fed also said it would buy up to $100 billion in debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and after its meeting on interest rates on December 15-16 it said it could press even more heavily into mortgage markets.

"The goal of the program is to provide support to mortgage and housing markets and to foster improved conditions in the financial markets generally," the Fed said in a statement on Tuesday.

The central bank said it would adjust the pace of its purchases based on changing market conditions and the impact of the program. The initiative is aimed at reducing the cost of credit and increasing its availability, which authorities hope will support housing markets and foster improved financial conditions generally.

Investment managers are needed because of the size and complexity of the program, the Fed said.

Investor appetite for debt issued by Fannie Mae and Freddie Mac had dried up since the government seized control of both companies in September.

By Mark Felsenthal Mark Felsenthal – Tue Dec 30, 6:56 pm ET

Mortgage Rates, Up or Down

Today was another wild ride in the mortgage rate arena. The stock market had a great day pushing the Dow Jones over 9000 for the first time since early November. This type of rally causes investors to sell treasuries, bonds and other securities that are less risky and move them over to the Stock market. In doing so, the markets that govern interest rates suffer. Today we saw a few of the lenders re-pricing interest rate twice. It is hard to give an exact rate, but is safe to say that most lenders and banks are quoting over 5.5% today with 0 points.

Per Bloomberg.com today: "Yields rose as stocks climbed to a two-month high on speculation government spending will curtail the recession"

What does this mean, if the government injects enough money into whatever markets, mortgage backs, bonds, treasury, you name it, it will help the overall health of the economy. As the economy gets better, it is the natural progression for mortgage rates to rise. Consumers and investors will start pumping money back into the stock market which pushes the mortgage rates up.

The national average of Mortgage Rates is based on last weeks closing and if you didn't catch the fine print it is also with .8 points as a fee. That equals about a 1/4 in interest rate: Actual average rate from last week would be 5.375 if we are comparing apples to apples, but I am not the media. I am only a mortgage professional who is trying to be truthful and ethical.

On the flip side, Lenders are closing out loans that were locked on November 24th and 25th (30 day rate locks) this will free up a lot cash from the lenders that will allow them to lend more. In doing so, we will see many lenders next week with great rates, more as a teaser. They will come out with a great rate in the low 5's for a few hours until they "get there fill", or sell what is allotted for the day and then they will push up the rate to stop or slow down the volume.

There are so many different directions that mortgage rates move in, it is hard to give an accurate prediction or determine which way rates will go.

Remember, if you are saving money in the course of refinancing your home, go with it. We may not see this again for quite some time!


Bill Nickerson
bill@billnickerson.com
Mortgage Network/Emerson Lending Company
Acton Massachusetts