Oct
3
Here’s a little history lesson for you, Czar is derived from the word Caesar. Here’s another history lesson for you, when Congress acts, they’re usually reactive not proactive:
Lawmakers called on Wednesday for a ‘mortgage czar’ to help cope with an expected wave of foreclosures from the U.S. housing slump but Alan Greenspan said the credit crunch was past the worst.
“We are beginning to see the frenzy calm down,” the former chairman of the Federal Reserve told a conference in Lisbon. “Unless we get secondary effects the worst is over.”
Fallout from a global credit squeeze, sparked by problems in the U.S. subprime mortgage market, have rattled markets in recent weeks, threatening economic growth and bank earnings.
Oct
2
According to this article from the Denver Post, it’s impact is quite severe on commercial real estate:
The mortgage meltdown and resulting credit crunch that have rocked the housing market nationwide are reaching their tentacles into commercial real estate.
In metro Denver, several office transactions have fallen through because of the tightened credit markets. The World Trade Center downtown is back on the market after a contract with Broadway Capital Partners fell through; and International Capital Partners pulled out of a deal to buy Plaza Quebec in Englewood, according to people in the commercial real-estate industry.
Read the full article: Credit crunch widens locally
Sep
19
Mortgage article from the Denver Post:
Consumers and businesses struggling with tight credit markets should find relief from the Federal Reserve’s cut in interest rates Tuesday.
Read the full article: Relief for U.S. credit crunch
Sep
17
It’s not Easy Being a Borrower
Filed Under rocky mountain news | Leave a Comment
Last December I had a subprime loan not go through underwriting with an approval. It was awkward for me since I pride myself on being thorough. The start reality is that it was the start of the meltdown of subprime mortgage companies.
The Denver Post explores this issue in depth:
Gone are the days of easy loans. Foreclosures and a subprime loan-market meltdown have left buyers scrambling to ante up.
The article is full of stories from buyers, sellers, investors, et.al. who have been impacted by the credit crunch.
Read the full article: BUYERS: Lenders tighten loan standards
The article is fairly accurate
Sep
12
Got $135 million?
Filed Under mortgage, real estate, rocky mountain news | 1 Comment
Mortgage article from the Rocky Mountain News:
It was the most expensive home on the market in the world when it was listed last year. And for $135 million, Prince Bandar bin Sultan’s 95-acre spread and 56,000-square foot mansion can be yours.
With the credit crunch lenders aren’t exactly lining up to mortgage this property.
Read the full story: For sale: Aspen ranch fit for a prince, only $135 million
Aug
28
Ben Stein’s take on the Market
Filed Under mortgage, rates, real estate | 1 Comment
I usually rely on Andy Rooney Ben Stein to make sense of whatever ails America. His self-effacing wit tends to overshadow his knowledge. He’s like the “very rich and very eccentric” grandfather we wished we had, the one who was wise beyond his years who spoke from the heart. My maternal grandfather fit this profile except there a distinct language barrier as he spoke Tagalog and I didn’t.
Earlier this month Ben Stein wrote a piece called How Speculators Exploit Market Fears. It discusses what hedge fund managers do to create action in the stock market. Rather than take snippets from the article, here’s the full article:
Here’s a fact: The speculators and hedge fund managers who run today’s stock market need market volatility in order to make money.
They can’t make enough money if the market stays flat or moves only a bit, so they like extreme and unexpected price movements. They especially like sudden, surprise movements down, when they can make money off stocks they borrow and sell — or, as they say, “sell short.”
Money Lust Satisfied
That’s what’s been happening the past couple of weeks. But it’s not interesting to say that the speculators are whipping the market around to satisfy their money lust. So the speculators themselves make up reasons for why the market is fluctuating, flog those reasons to the media, and then profit if some other speculators believe the jive reasons and jump in the way the manipulators want them to.
Supposedly, the market is “correcting” because of worries about the housing slowdown, and also because of fears that the debt markets that support mergers and acquisitions is drying up.
These are interesting theories, and people who don’t know a lot about the stock market or the economy might find them beguiling. What follows are a few truths that show how shallow these “reasons” for the stock market moves are.
Housing a Theory
Yes, the housing market has slowed from a spectacular bubble level to a simply pretty good level. Housing sales and starts are now about what they were in 2002, and no one thought we were in a housing depression then.
In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That’s not trivial, but it’s also not the stuff of which recessions are made.
The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.
Corporate profits set new records every day. Whatever’s happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in — and for no other reason.
A Minor Major Mess
Subprime is a mess. But it’s a small mess. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That’s 4 percent of mortgages.
Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market — a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it’s nothing.
And why should a crisis in subprime drive down stocks in Mexico and Thailand? Again, because the speculators seek to create panic to make money by selling short, and they sell short everything.
There’s simply no connection between subprime and developed or developing nations’ stocks. This by itself shows the thin context of the selling wave late last month.
Money’s Still Cheap
What about the supposed drying up of loans for mergers and acquisitions by private equity firms? Well, here’s a good, simple test of just how valid that explanation is for stock market moves: The majority of private equity takeovers are financed with junk debt.
If there really were a major shortage of funds for these deals, the interest rate on the junk would skyrocket. Instead, while the rate has risen by about 150 basis points in the past month, the spread between junk and investment grade is now about 290 basis points, according to leading junk analyst Martin Fridson.
This is a lot lower than the year-end average of the spread from 2002 to 2006, and far below the almost 800 basis point spread during a true interest-rate crunch like the one after the tech meltdown in 2000-2002.
So that’s phony, too. Interest rates have risen, but not anything like what they’ve done in real crises. And besides, the Dow fell by about 550 points the week before last, yet not one of the Dow stocks is involved as either acquiror or acquiree in a private equity deal.
In short, money is no longer virtually free the way it was for private equity deals in the past year. But it’s not expensive by historical standards, either.
Spreading the Fear
In other words, it’s all the speculators trying to panic us so their sell programs will make money. And they’ll make money as long as they can spread their panic. When they can’t do that any longer, they’ll work the long side — and make up reasons for that, too.
In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way. Don’t sell. With all the shrieking about the market, it only fell to what it was about five weeks ago — and we didn’t think we were poor then.
So let the speculators shout “fire.” As of right now, they’re not blowing anything but smoke.
Two quick points:
131+ mortgage companies have shut down. If you’re a consumer chances are you’ve never heard of these companies. If you’re in the mortgage business, you’ve probably heard of a fraction (i’d say 25%) of these companies. For the most part, those that bet on high risk loans (subprime, alt-a, non-owners, etc.) lost. The ones that bet on low risk loans (conforming) are still open for business.
However, one quick look at Google Trends and you’ll notice that countrywide, mortgage, credit, or liquidity don’t show up as “hot searches” in Google.
Sometimes you need Ben Stein to make sense of a nonsensical world.
Aug
10
Protect Us from the W
Filed Under mortgage | Leave a Comment
Here’s a transcript from today’s press conference with George W Bush. He answers a question on sub-prime mortgage.
Q Sir, getting back to the credit crunch caused by defaults in sub-prime mortgages, should Fannie Mae and Freddie Mac be allowed to buy mortgages beyond their current limits, or play any additional role that could help revive mortgage finance?
THE PRESIDENT: As you know, we put up a robust reform package for these two institutions, a reform package that will cause them to focus on their core mission, first and foremost; a reform package that says like other lending institutions, there ought to be regulatory oversight. And therefore, first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.
A simple YES or NO would’ve worked for me.
Jan
1
Zero Down Home Loans
Filed Under mortgage | Comments Off
Editors Note: Due to the mortgage and credit crunch, zero down home loans are no longer be available. If you’re in need of a Denver, CO mortgage contact us to discuss your mortgage options.
This is a loan where the borrower does not have to put any money down on the home. The borrower can then use their money for closing cost, title fees etc…
80/20 loans are sometimes referred to as Piggyback loans and have the added benefit of not requiring mortgage insurance.
Not all lenders will accept seller-paid closing costs. Some won’t, some will allow up to 3% of the purchase price, and some will allow 6%.
When the seller does agree to pay the closing costs of the loan, they aren’t actually paying for it themselves. They generally raise the purchase price an amount equal to the closing costs. The borrower is still paying it, but it is being added to the loan amount.
In many cases, a borrow can get a home loan with no out of pocket expenses when a seller agrees to pay closing costs. In this scenario, the sales agreement must be specific and state that the seller will pay borrowers closing costs up to a certain percentage or dollar amount. Some lenders only allow seller paid closing costs for non recurring items like one time lender fees. However some lenders allow non recurring and recurring closing costs to be paid by the seller, for example: the borrowers prepaid hazard insurance fees.
There are also purchase loans that will allow buyers to borrower as high as 107% of the value of the home (purchase price or appraisal value - whichever is lower). This will allow the buyer to use the 7% to pay for closing costs and debt consolidation.
If a home buyer has enough money to cover the necessary closing costs associated with the purchase, in other words, he needs only to take out a 100% loan rather than a 103%, 106% loan, he would have more lenders and loan programs to choose from, and better interest rate structure as a result.
There are different types of 100% loans. You can either get 1 loan for 100% or an “80/20″ loan. Speak to your mortgage professional to see which program is best for you!
Jan
1
Zero down home loan
Filed Under mortgage | Leave a Comment
Editors Note: Due to the mortgage and credit crunchy, zero down home loans are no longer available. If you’re in need Denver Home Mortgage, we can discuss your mortgage situation.]
Zero down mortgage financing is available to many people. It is very possible for a large number of consumers to qualify for a home purchase without putting any money down. This has become a very competitive market for lenders competing for this business and the number of homeowners who obtain loans with no money down is growing each year.
It is important to realize that while it may be the only way a borrower can purchase a home, a zero down mortgage does carry a higher interest rate. Ultimately the borrower’s goal should be to refinance when there is enough equity to achieve an 80% Loan to Value (LTV).
One option for high credit score borrowers who have minimal disposable cash is to use a 103% loan. This loan allows you to borrow up to 3% in addition to the purchase price to help with closing costs. Ask your preferred mortgage professional if you qualify for a 103 LTV program.
Some conforming zero down programs do require you to contribute at least $500 to the purchase. Your earnest money counts as money towards purchase. You may also be required to pay your hazard insurance out of closing so that will be another out of pocket cost. Ask your mortgage broker for details on the programs they offer.
The most common way mortgage brokers structure “Zero Down” financing is to break the loan amount into a first and a second mortgage, with the first mortgage consisting of 80% of the loan amount needed and the second mortgage being 20%.
Zero down mortgages are a great tool to use, even if you have saved up for a down payment. By choosing the zero down mortgage, your down payment money can now be used for closing costs associated with the loan, moving expenses, new furniture, or any other expenses that you may have when you move into your new home.
If you cannot afford a down payment for your home, there are many down payment assistance programs and grants that may be able to help you purchase your new home. Often these programs are limited to first time home buyers or those with low income. However, there are often no limitations. Call me at and I may be able to find a program that will work for you.
Obtaining a true zero down mortgage is when you will not have to come to closing with any funds of your own. In order to achieve this you will need to either have a no closing cost mortgage which can get expensive, or you can have the sellers pay closing costs. Traditional conforming lenders will generally let the sellers pay up to 3% of your closing costs, while most Alt A and subprime lenders will allow up to 6% in closing costs paid by the seller.
Often times zero down payment programs are available to first time homebuyers. If you need a stated income program you may be able to obtain a stated zero down program with an Alt A or subprime lender.
In 2005, 43% of first time home buyers used zero down programs. You may qualify for one of these programs. Call me now!
Jan
1
You Can Qualify to Buy a Second Home
Filed Under mortgage | Leave a Comment
Editors Note: Due to the mortgage and credit crunch, buying a second home may pose more challenges. If you’re in need of a mortgage in Denver, CO contact us to discuss your mortgage options or apply now for a loan.
Buying a second home may be easier than you think. The second home market is on of the fastest growing segments of the real estate market in the U.S. If you’ve ever thought about getting a second home, now might be a great time to speak with a mortgage professional to see if you would qualify.
There are many hot markets out there still which can not only provide for a great second home, but a great investment opportunity as well. A second home should be looked at as a place to enjoy yourself and to relax, and also as a fairly safe and possibly fast growing investment. Location is very important for a second home for investment purposes. With all of the financing options out there today you are able to finance a second home with interest rates and terms that are similar to financing a first home.
To qualify as a second home the house usually must be at 100 miles from your primary residence and located in a seaside, mountain, desert or other “resort type” of locale. The loan underwriter will want to be comfortable with the fact that the house is actually a second home, not an investment property.
Qualifying for a second home is not as hard as you might expect. Today there are many loan options including some that don’t require you to disclose income. Second home loans also have 100% financing options to further reduce the amount of money to bring at closing.
There are a variety of loan programs that work well for second homes, just as there is a large variety of loan programs for primary residences. Ask your mortgage professional what loan may work best for you, and see if it is something you are interested in.