The Mortgage Man

Get more out of your mortgage experience!

Archive for Today’s Financial Forecast

Monday October 6, 2008

Mortgage rates are down and so is the stock market.

Stocks are down today amidst continued concerns for global economic slow downs.  As of 9:24 A.M. (Central Time), the Dow has dipped below 10,000 for the first time since October 2004.  According to traders, this is due, in large part, to the increased uncertainty of the global economy and corporate earnings as we begin the 3rd quarter corporate earnings season.

As usual, when there is a selloff in stocks, people tend to move their money over to bonds, and today is no exception.  Mortgage bonds are up over 70 basis points leading to stronger monrtgage rates this morning.  If you were waiting to lock your loan, today would be a good day for it considering the major move of the index over levels of resistance.

You can see where today’s rates are currently at


Tuesday September 30, 2008

Mortgage Bonds continue to find their way in this uncertain market.

As the clouds lift after the largest single day point loss in Dow Jones history, the bond market is not showing a lot of movement.  The mortgage bonds have been trading in a sideways channel for over a week now with little movement in either direction.  This is significant since a sell off of yesterdays proportions would normally signal a strong buy into mortgage bonds.  But, because much of the uncertainty in the market revolves around mortgage backed securities, traders were putting their money in treasuries instead.  This uncertainty continues today as mortgage bonds are carefully creeping sideways looking for direction.

Keep an eye on any triggers that may signal movement in the market, but to be safe, it would probably be prudent to lock your loan in process if it has not been already.  The affect that news has had on the markets lately has been swift and dramatic.  If you wait for news to come out (and it turns out to be bad), you may not have time to recover and get your rate locked before prices freeze and await a market adjustment.

House Votes Down Bailout Bill

Much of the financial market expected the bailout bill to be passed, but the tides have changed.

After non-stop press coverage for almost 2 weeks, and a never ending jockeying for position in front of the camera by the talking heads in Washington, the wall street bailout bill has crashed and burned on the floor of the house of representatives.  With nearly a 2 to 1 vote against the bill by Republicans, and 94 Democrats voting against it, clearly the constituents negativity towards this has driven the House to vote down the bill.

Since most people on Main Street don’t understand the magnitude of the credit markets right now, perhaps they will get a better understanding after checking their portfolios at the end of trading today.  After expecting a bailout to be passed, the dow plunged down over 700 points after the vote went the wrong way.  Analysts are saying that without a bailout package from Washington, the Dow could drop as much as 2500 points before settling on a bottom, which will most certainly affect Main Street.  Even worse than the uncertainty in the stock market would be the affect that a freeze in credit would have on small businesses.

I think after seeing the aftermath, there will be another vote, and there will be some sort of bailout proposal passed.  The question remains, how long will that take?  And, have many casualties will be left on the battlefield before then?

Where Do You Keep Your Money Safe?

In these historical times in the financial markets, how do you know that your money is protected?

Everyday there is a new headline about some other “sky is falling” scenario.  It was only a week ago that history was made when the government stepped in and took over operations of Fannie Mae and Freddie Mac, but that is old news now.  This week it was the nations largest insurer AIG being given an $85 Billion loan from your tax dollars to help keep them out of bankruptcy.  But hidden in all of the negativity are shining pockets of positive news.

If you ever watch CNBC, you may know that Jim Cramer likes to say “there is always a bull market somewhere”, and he is right.  In the constant yin and yang of the financial markets, where there is a loser, there is also a winner somewhere, you just have to know what to look for and where to find it.  For instance, if you bought into gold earlier this week, you are no doubt celebrating as the gold market had the largest dollar gain in history this week.  Equally, as confidence fades in the stock market, investors must forge ahead and put their money somewhere, and guess what just started looking really good…..real estate.  Thats right, real estate.  The dirty word that people have been scouling at for months just became one of the best places to put your money.

Think about it, if you have $1 million in the stock market and you don’t know if you will wake up one day to find that your top holdings are out of business, your money may be better served in a tangible asset that you can see, touch, get a tax break, and live in (or rent out).  At a time when real estate is at historically low prices, you could be getting in at the very beginning of a new bull market.

I find it interesting what an affect the media has on the markets.  They seem to give you just enough information to instill a panic without regard to how people will react.  I know that the AIG issue is big news, but did you know that there are 1000’s of people without homes or jobs in Galveston, TX after Hurricane Ike virtually wiped the town off the map.  Chances are pretty good that you didn’t because no one in the news is saying a word about it.

So back to the topic at hand, is your money safe in the bank?  Yes, if it is less than $100,000 per depositor per institution.  Is it safe in stocks?  I guess it depends on the stock and your level of exposure.

Even if you take away my obvious bias towards real estate (because I am an active mortgage banker), do your own home work in your local market to see if I am right.  If you haven’t looked lately, you might be shocked at the deals available now.  I my area of the Florida Panhandle, there are gulf front condos that can be stolen for prices that compare to 4+ years ago.

Good luck to you, and tell me how things are in your local real estate market.

Why Is The Government Bailing Out Everyone?

In an unprecedented financial crisis it seems like the tax payer is the real loser.

Bear Sterns, Fannie Mae, Freddie Mac, Lehman Brothers, AIG…..what does all of this mean to you?  Why are some companies being bailed out while others are allowed to fall on their face?  It is a complex question being answered by your tax dollars, and the answers change from one day to the next.  Just 2 days ago, the official opinion of the Treasury was that there would be no bailout of AIG (the nation’s largest insurer).  Less than 48 hours later they are writing a check for $85 billion.  So how is it in the best interest of the country to bailout these corporate executives that made bad decisions?

For starters, every situation is different, and the government is not bailing out every company that steps up to the bread line.  Those that are allowed to fail without creating widespread devastation in the economy is, in my opinion, good for the over all health of the economy.  The ability to assume risk and fall flat on your face is actually what makes a free market economy work.  IndyMac Bank for example was a huge financial institution.  Yet, they were allowed to fail because there are dozens of other companies performing similar functions in the market, and therefore it is not the responsibility of the governemt to step in and help.  In that example, since most depositors were covered by FDIC insurance, there was little affect to the end consumers and account holders anyway.

The Fannie Mae and Freddie Mac takeover was different.  With over $5 Trillion in combined assets, the collapse of Fannie and or Freddie could have widespread implications in the credit markets and significantly hinder mortgage lending.  But, in the case of Fannie and Freddie, the government took over operations.  Their business was significantly less risky than the subprime lenders that have had so much trouble.  But because of their shear size, they have been affected by the current housing market.

AIG is a much different situation than any other that we have faced.  The significance of AIG is that more than 100,000 employees work for the company, and a collapse would affect so many sectors of the economy that it could create a ripple effect that is almost immeasurable.  The $85 Billion being provided to them by the FED is actually a short term loan, and the collateral for the loan is the entire $1 Trillion dollar asset portfolio of the company.  From a simple bottom line lending standpoint, it appears to be a no brainer, and for me to say that is really something.  I’m not in favor of the government bailing out anyone, but, an $85 Billion loan backed by $1 Trillion in assets that also saves over 100,000 jobs just makes sense.

Ultimately, we are in unchartered territory and no one knows what the long term affects will be.  But there is a light at the end of the tunnel.  For those who are even remotely in the market to buy a home, the events transpiring are creating unprecedented buying opportunities.  At the same time, for those in an adjustable rate mortgage, the market is ripe for a refinance with fixed rates as low as 5.25% (see for current pricing).  In every market, there are winners and losers.  Those who have the fortitude to seek out these buying opportunities will be in a position to build wealth like nothing we have seen in generations.

Tuesday September 2, 2008

So, what happened with mortgage rates while you were weathering Gustav?

Well, the long weekend is over.  Summer has officially ended.  And, we are back at work to see what gifts were left behind by our friend Gustav.  Those who made the mass exodus from New Orleans are probably mad and irritated that they left.  But, it is that kind of thinking that gets people killed when the storm is worse than expected rather than weaker than expected.

New Orleans survived the storm, and for the rest of us on either side, it definately could have been worse.  But the markets today are reacting to the lack of any affect on the offshore oil platforms.  As reports from all of the companies with assets in the Gulf begin to come in, we are seeing that the damage is mininal if at all, and the oil traders are running for the hills because of it.

So what does this have to do with mortgages and real estate?  Well, the sell off in oil is creating a run on the stock market.  A run on the stock market is causing bond traders to sell bonds and buy stocks.  As the bonds fall from a sell off, mortgage rates rise.  Because of this, today is a great day to lock in your rate ahead of losses that are sure to happen this afternoon or tomorrow in mortgage rates.

Thursday August 28, 2008

Here is how the market is shaking out today.

Today, the preliminary Gross Domestic Product report came in at 3.3% above expectations of 2.7%, and well over the previously reported 1.9%.  The final number for this report is not due out until next month, but the preliminary reading has people exiting bonds and buying stocks today.

Because of this, you might want to lock your rate if you have a loan in processing.  Additional pressure on bonds is being created by oil prices trading above $120 per barrel again on fears of Hurricane Gustav and how it will affect the 3500 oil drilling platforms in the Gulf of Mexico.  if there is significant damage done to oil drilling operations from Hurricane Gustav, we may see a greater spike in oil next week, creating even more pressure on the bond market.

Lots of uncertainty on the horizon, but prudence may be the word of the day in my advice to lock in and protect from potential loss.