Your Own Private Bailout? Part 3,

December 8, 2009

In previous posts, I dealt with the specifics of the Obama Refi.

The Obama Modification (HAMP)


How the Obama Modification is LIKE an Ordinary Refinance

1. There may be costs to modify, but it is usually less than a refi.

2. You should not do it unless you gain a reasonable benefit in lowered interest rate, reduced future risk of a reset (if you are in an adjustable or interest only now), or a reduction of capital.

3. Many can be done through your trusted mortgage professional, some cannot. Most applicants go directly to the servicer/bank, bypassing 3rd party assistance. More on that below.

4. It requires adequate income, employment, debt to income ratios. You must qualify for the modification.



How the Obama Modification is DIFFERENT From an Ordinary Refinance

1. To qualify, your existing loan must have gone thru Fannie Mae or Freddie Mac. Most conventional loans did. Most Jumbo loans (over $417,000) did not, most subprime loans (low credit scores, 80-20 zero down) did not, most Alt- A loans (Option Arms, No–Doc Loans) did not, and of course, an FHA or VA loan did not. It is fairly easy to determine if your loan is Fannie or Freddie.

You can get an instant response here from Fannie Mae and Freddie Mac:

http://loanlookup.fanniemae.com/loanlookup/

https://ww3.freddiemac.com/corporate/index.html

Or, you can ask me to look it up for you. Freddie Mac requires your social security number, Fannie Mae does not.

2. You MUST prove financial NEED to qualify. Simply wanting a lowered payment is not enough. You must prove that you cannot qualify for a regular refinance (I’d be happy to help you look into that).

3. Unlike a refinance, the bank does NOT want to do a modification. There is little incentive for them, and a lot of work. The investors on the loan lose money.

4. You cannot take cash out to pay other bills.

5. Modifications can include: lowered interest rates, lowered payments, deferred payments, converting from adjustable to fixed, and (rarely) lowered loan balances.



Overall, the report card for modifications has been dismal, falling FAR short of the stated goals.

http://www.housingwire.com/2009/12/08/chase-converts-2-of-offered-hamp-trials-into-permanency/

Clearly, banks do not WANT to do them, but are doing some. I assume this is mostly from pressure from the government, and in some cases it might be in their best interest to do so. I believe that they desperately want to APPEAR to be doing them.

I don’t think banks (or any rationally operating business) should intentionally take actions that harm themselves, and in this case, the surviving banks seem understandably reluctant to further weaken their balance sheets (and risk joining the swelling ranks of the imploded banks).


Should You Deal Directly with the Bank, or Hire Someone to Help You?

This is a hotly contested issue. The arguments continue to this day. Like many of my answers, it “depends”!


Here are the choices, with a brief discussion of merits and problems.

1. Go Directly to the Bank

This is what the banks want you to do (well, they prefer that to the alternatives of your defaulting, or hiring someone). Since they do not want to do them at all, they attain a greater control of the process. This method has the lowest cost to the borrower, as there are very few fees to be paid to anyone. Some people I know are having (hard fought) success this way, many are extremely frustrated. It requires good organizational skills, incredible patience, and time. It has been claimed that folks that go this route do not get as ”good a deal” as folks that hire someone, but there is no data that I know of to back that up (it does make some sense, though). Seriously ask yourself if you have the resources (time and patience mostly) to do this on your own.

2. Seek a HUD Counselor

There are “non-profit” organizations that will help you with this, for little to no money. You can certainly get good advice, but their incentive to complete the modification is low. If you don’t feel up to DIY, then this would be a good 2nd step.

3. Hire a Loan Modification Specialist

This is a fast growing field. There are opportunistic crooks, and there are sincere and competent specialists. Both seek to be paid, usually upfront. Fees are in the range of $1,500 to upwards of $5,000. The state of Washington (DFI) has ruled that loan modification specialists (LMS) need to be licensed loan originators in the state of WA. LMS compensation is usually tied to a successful outcome, so the incentive to continually pressure the bank to completion is built in.

While I am licensed to do loan modifications, and Axia has a department specifically to handle these, I have not chosen to enter this field. I may, at a later date. I’m happy to refer you to competent help.

4. Get an Attorney

Another fast growing field. Same issue of crooks and experts, except that attorneys are held to a higher standard of fiduciary duties than LMS. Fees vary widely, and may be a little higher. Compensation is also tied to outcomes, and there is usually some upfront payment (attorneys don’t like to work for free either). I’m happy to refer you to local attorneys as well.

The question of hiring someone vs dealing directly with the bank is kind of like choosing whether to hire an attorney for an insurance claim. It depends.


Keep in mind there are always other options: Sell the home and get something less expensive, take in a roommate, hang on and hope for better days and more income. If you have NO equity to preserve, short sell (get help with that from an RE and/or short sale specialist…I know many of those too!). Take steps to preserve your credit score (I can provide some advice along those lines…future post?).

That’s it for now. I am SO glad to get this task completed, no matter how tardy it is. It doesn’t seem so hard, now that it is done.

Next: The current refi frenzy. Coming VERY soon.

Thank you for reading, please pass it on to those in need.

Your Appraised Value Could Fall 10% in Two Weeks

Your Appraised Value Could Fall 10% in Two WEEKS!!

Date April 15, 2009

OK, that was rather alarming, but I needed to get your attention on an urgent risk, and a limited opportunity. I will explain. Perhaps, too thoroughly.

No one, anywhere is talking about this in the mainstream media. I have, to people that have inquired about refinances lately.

Effective May 1st (two weeks), ALL lenders, loan originators mortgage brokers and loan officers will be prohibited from selecting an appraiser, or communicating with an appraiser in almost any fashion. Most lenders have already implemented the changes, and some are waiting until May 1st.

I will provide links for further reading below, so for now, just humor me.

So, why does that matter to the average borrower, and why will that lower appraised values?

1. Appraisals will be ordered blind, through an appraisal management company (AMC). They charge more, and pay the appraiser considerably less, keeping the remainder. Typically it will make an appraisal about $100 more expensive, and they typically pay the appraiser about 50% of the charge. The payment is ALWAYS taken upfront, usually by credit card, before it is even scheduled, and NEVER at the door.

2. On a refinance, Loan Originators (like me), will NOT be allowed to tell the AMC or appraiser what the borrower thinks the property is worth. We will not be able to discuss beforehand if the assumed value is reasonable, nor challenge/discuss the appraised value (the bank can…to lower it!). That means that your $500 appraisal is more of a gamble than it is now.

3. Since the banks select the AMC’s, the appraiser is now more beholden to the bank, than he was to the borrower or the loan originator. Previously, it was evenly balanced. Banks do not backlist appraisers that understate value, but they do penalize appraisers that overstate value (which is why I NEVER pressured an appraiser to change his value). That will cause appraisers to instinctively become more conservative in valuations, as a survival tactic.

4. Independent appraisers usually are paid about $400-$450 locally. That allows them sufficient time to do excellent work, and really study the subject property, and to research the best comparables. Going forward they will be paid about half that amount. It is reasonable to assume they will attempt to recover their loss by doubling their work load, and spend half the time on each appraisal.

OK, so I could be wrong. And I am sure not EVERY appraisal is going to be undervalued.

But I think I am right, at least on average, and so does most everyone in the industry I talk to.

The difference between hitting 80% loan to value and 90% loan to value on a refinance is pretty easy to quantify. It means about 0.7% mortgage insurance added to the payment, or about $145/mo on a $250K loan. There are other examples, and they are almost all bad.

So, IF you are sitting on the fence, hoping for better rates, or dealing with more urgent matters (like getting your taxes done!!), I beg you to consider taking action now, while we can still use independent appraisers with a few lenders.

Before your appraised value falls 10% in two weeks. Maybe.

Here are some links for further reading and comments.


http://www.raincityguide.com/2009/02/20/notes-from-wamps-meeting-on-home-valuation-code-of-conduct/

http://www.ofheo.gov/media/news%20releases/HVCCFinalCODE122308.pdf


Thanks for reading

Yes, I owe you a Loan Modification (Obama-fication?) post, but this was more urgent…now back to loans and taxes Oh JOY!!!

Part 2, Your Own Private Bailout

Your Own Private Bailout? Part 2,

Date: April 10, 2009


To understand the Obama Refinance (Making Home Affordable, Refi Plus, etc.), it is best to start with how it is like an ordinary refinance, and then how it is different. I will discuss the Obama Loan Modification in a separate message. Generally, you benefit most from doing a “regular” refinance if you qualify. The Obama Refinance plan is best applied for those circumstances where you don’t, mostly because of loan to value issues.


How the Obama Refinance is LIKE An Ordinary Refinance


There are costs to refinance. Origination, Title Insurance, Escrow, Underwriting, and sometimes appraisals, etc. Pricing varies.

You should not do it unless you gain a reasonable benefit in lowered interest rate or reduced future risk of a reset (you are in an adjustable or interest only now), and you should stay in the loan long enough to recover the costs.

Many can be done through your trusted mortgage professional (me, hopefully), some cannot.

It requires adequate income, employment history, liquid assets, debt to income ratios, and credit scores. You must qualify for the new loan.

You must be current on your existing mortgage.


How the Obama Refinance is DIFFERENT From An Ordinary Refinance

1. To qualify, your existing loan must have gone thru Fannie Mae or Freddie Mac. Most conventional loans did. Most Jumbo loans (over $417,000) did not, most subprime loans (low credit scores, 80-20 zero down) did not, most Alt- A loans (Option Arms, No–Doc Loans) did not, and of course, an FHA or VA loan did not. It is fairly easy to determine if your loan is Fannie or Freddie.

You can get an instant response here from Fannie Mae and Freddie Mac:

http://loanlookup.fanniemae.com/loanlookup/


https://ww3.freddiemac.com/corporate/index.html


Or, you can ask me to look it up for you. Freddie Mac requires your social security number, Fannie Mae does not.

2. You cannot take cash out (but you may be able to roll in loan costs, and not have to bring cash to closing, depending if it’s Fannie or Freddie)

3. You cannot pay off or consolidate a 2nd mortgage (more on this later), but you can re-subordinate the existing 2nd.

4. You can refinance the first mortgage up to 105% of the value of your home.. Lower FICO scores, and 2nd mortgages, and other risk factors may affect the pricing. They do not consider the 2nd loan when calculating the LTV of the 1st, but the 2nd loan balance MAY affect the end pricing.

5. If your loan is currently securitized thru Fannie Mae, you can refinance it with any lender as long as it is run through Fannie Mae again (almost all lenders have a Fannie Mae programs). You can work with the mortgage professional of your choosing (again, hopefully me!). Most existing loans are Fannie Mae.

6. If your loan is securitized thru Freddie Mac, you must refinance it with the existing servicer, and in some instances you can use the mortgage professional of your choosing to handle the refinance. (Update...12-08-09...many lenders can now do Freddie loans just like Fannie loans above)

7. If your current loan does NOT have mortgage insurance, your new loan will NOT have mortgage insurance, even if it is above 80% loan to value.

8. If your current loan HAS mortgage insurance, your new loan will have mortgage insurance, at the same rate you currently pay. Mortgage insurance rates have gone up, and they get even more expensive (or become unavailable) at higher LTV’s, so this is a nice feature. (Update 12-08-09, this has proven to be far more difficult than anyone foresaw, another post, in the making).

9. Since the refinance cannot pay off a 2nd mortgage, it must be resubordinated (meaning, the 2nd lender has to agree to remain in 2nd position). The underwriting departments handling re-subordinations will be overwhelmed, so expect long delays in completing the refinance.

10. In King County the maximum loan size for the first is $567K, and there is no penalty generally for exceeding $417K.

So, why is this such a big deal?

Increasingly I am finding it harder to get great refinances for my clients because of loan to value issues. Housing prices have fallen from their local high point in July 2007 by about 10 to 20%, depending who you ask, and where you look.

If someone purchased at 90% LTV in July 2007, it is unlikely they could refinance today, but they could, with the Obama Refi.

Here is a real example, using today’s (April 10, 2009) rates, and typical rates from 2007.

Purchase $400,000

Loan

1st , 90% $360,000 Rate 6.5%, 30 yr fixed, with mortgage insurance

P&I payment $2,275.45, plus estimated MI of $141/mo=$2,416.45

Today’s value $340,000, estimated 15% less than purchase in July 2007

Est. balance on 1st $351,720 (estimated $8,280 has gone to principle reduction)

1st mortgage loan to value 103%

That is not a scenario that is possible to refinance in ordinary ways, because no lender would accept 103% CLTV, (the max for a no cash out conventional refi is usually 95%). But it will fly with the Obama Refi, since the criteria ONLY requires the 1st mortgage to be less than 105% LTV.

New rate 4.75%, APR 4.871%

(at par, 720 FICO, SFR, 30 day lock, $360,000 loan amount. Rates are representative as of 4-10-2009, and will certainly be different at the time you read this.

Payment $1,877.93, plus $141 MI= $2,018.93

Monthly savings $397.52

In short, the Obama Refinance, when applied correctly, is in fact a terrific bailout for borrowers that have decent credit, that have jobs, adequate income, and who have up to now, been prevented ONLY by falling home prices from being able to take advantage of the low interest rates supported by our tax dollars. In my opinion, it is not the worst way that tax payer dollars can be spent to improve the economy, and for some, it is likely to be nearly the best way, so you may as well come and get it!

Lenders and loan originators will be swamped. I am receiving multiple calls and emails daily (this is a good thing, and THANK YOU for the referrals!!!). You need good advice, and competent execution to get this done. I will not be able to help everyone, but I will do my best to help everyone that asks.

Please, if you think this may benefit you, or someone you care about, do not delay calling or e-mailing me. I want to help. I have lenders that are ready to take submissions for the Obama refi right now.

Next installment…The Obama Modification Plan (for those who CANNOT qualify for a refinance).


Roger Ingalls, Your Loan Doctor

Axia Financial, LLC



14900 Interurban Ave S #295

Seattle WA 98168

Phone 425-894-8173

Fax 206-260-3491

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics." FDR

Is the Government Working on Your Bailout, Pt 1

“Is the Government Working on Your Bailout?”

Date: March 19, 2009


It seems like there is a plan to bailout everyone; The Banks, Detroit, AIG, Citibank, and now, Joe Average??? Will the Feds REALLY give everyone a 0% 30 yr fixed?

Of course, as rational grownups, we know that it cannot be true. Not everyone gets their own million dollar bonus, paid for by some benevolent future taxpayer.

But, it is true that there are rational and prudent steps to take in the current environment to benefit as much as possible from the government’s actions. I’d like to outline the general, for your benefit, while knowing the specifics for each individual will vary greatly, and the future remains unknown.

The Current Refi Boom

For the past 2 months, most of the government benefits for Joe Average have been in refinancing people from good loans into better loans. Fairly typically, that has been taking someone from a 5.75-6.75% fixed loan to a 4.5%-5.25% fixed loan, or converting someone’s good adjustable rate to a fixed rate, in anticipation of future higher fixed rates. Rates have stayed remarkably stable, until yesterday (3-18-09), when they made a move downward.

The current low rates for 15 and 30 yr fixed rate loans are almost entirely due to the US Treasury’s unprecedented move to begin buying Mortgage Backed Securities (MBS) in mid December 2008. Previously, the rates for a 30 yr fixed were set by the actions of thousands of investors, all buying MBS at different interest rates. The US government decided to take some of the TARP money, and directly affect the credit markets by buying presumably GOOD loans, at low interest rates. By the way, I'm not against the idea of the our government buying safe, fixed mortgages, and keeping those rates low. In fact, I can think of thousands of worse ways to spend the taxpayer’s money (many of which have been done already), and maybe a few better ways.

But you and I do not get to decide that. We can influence that a little, and do our best to take what is offered.

Most analysts believe that the Treasury will continue to prop up the MBS market for a least a few more months (some believe longer), keeping 30 yr fixed interest rates in the minus 5% range. In my opinion (for what little it matters), I think it will continue as long as they do not have a BETTER idea of how to keep the economy from worsening. They will be at these rates just as long as the US Government buys mortgage backed securities at these low rates.

When the government stops buying MBS, they will rise, and quickly, at least to where they were before the government began buying MBS, and probably higher, in the 6.25 to 7.00% range, and perhaps even higher in the following years as inflation kicks in.

To determine when that will happen, it helps to ask

"Why have they decided to spend money to reduce interest rates for 30 yr fixed mortgages?"

and

"When will the government decide they'd like to spend money elsewhere?";

Why IS the Government Buying 30 yr fixed mortgages (MBS)?

I believe the government's goals are, in order:

1. Get re-elected, so they get to continue deciding what the goals are.

2. Averting a deeper recession than we are already in store for.

3. Stop the decline in house prices, and other asset classes (stocks, bonds, commodities, etc).

4. Ensure adequate employment.

They currently believe that low rates for 30 yr fixed loans will create more home buyers, and more buyers means home prices stabilize.

So far, that has not worked as well as hoped, as pending home sales have declined more than expectations in January, and home prices have not stopped falling.

Realistically, it may take some time for the low interest rates to work. When people wake up from the worry, they may realize they still want to own homes, and plan for the future. I am hearing noticeably more interest in purchasing recently. If the low rates and the new nifty $8,000 tax credit for 1st time buyers, spur enough home buying (see below), look for them to continue subsidizing the low rates.

However, if the unemployment rate continues to climb, and the Feds begin to focus more on job creation, and preservation, it may mean diverting money away from buying MBS, and into investments that create jobs quickly. They could decide to spend it on public works, OR they could decide to subsidize and backstop corporate bonds. If that happens, we’ll have to rely on whatever private investors are willing to pay for MBS. What they will pay depends on a large variety of factors; rate of return, future inflation, and risk. Right now, private investors want to get paid a lot for any risk, or alternatively, hold on to their dwindling cash.

Those that can refinance profitably to the 4.25% to 5.5% range, should probably do so, soon. I did.

To obtain a good conventional refinance today, you need sufficient equity (Loan To Value = home value vs what you owe), adequate documentable income and employment, and average to good credit. The trends to stricter guidelines have generally continued, and there is no evidence of that trend changing. Pretty clearly, the trend is also continuing to declining home values from appraisals, which lessens ability to get optimal loan terms.

There are a few alternatives to a conventional refinance.

1. FHA is much less credit sensitive, allowing lower FICO scores, and higher LTV. They are more costly than the best conventional loans.

2. For those that qualify, Reverse Mortgages can be a good solution. Essentially, you need to be over 62 years old, and have about 65% loan to value.

3. Loan Modifications.

4. Streamline Refi

I will address each of these separately. The last 2 are relative to the Obama Stimulus plan announced last week, and I will write an article on those in the next week, as I continue to gather information on all of the details and look at analysis done elsewhere.

FHA Refinance and Purchases.

Between 2002 and 2007 the FHA loan became almost irrelevant, accounting for less than 5% of all loans originated in that period. Today, it has come roaring back, and is closer to 50% of all loans. There are many reasons for that change, but I’ll just deal with the CURRENT pros and cons of an FHA loan. Generally, if you qualify for a conventional loan, you are going to better off going that route in loan costs and maybe loan interest rate. It is when you cannot qualify for a conventional loan that FHA kicks in.

Main Uses for FHA loans (there are still exceptions, of course, to almost everything)
1. High loan to value on purchases and refinances. FHA will generally go to 96.5% LTV on a purchase and a no cash out refi, and to 95% on a cash out refinance. Conventional loans are trending to 90% for purchases and no cash out refinances and 80% for cash out refinances. Beginning April 1st FHA is limiting to 85% Cashout

2. Below average credit. While conventional lenders will still accept credit scores below the average (680 FICO score), they add substantial fees. FHA used to be able to nearly ignore the credit score, but now they are mostly limited to a 620 and above FICO. They do not generally charge much more for lower credit scores.

3. Less expensive monthly mortgage insurance, to higher LTV’s. Private mortgage insurance companies are taking a beating in losses, and have raised the amounts they charge, and tightened the guidelines. In many cases, higher LTV loans cannot be done at all, because there is no private mortgage insurer willing to accept the risk, and there are NO 2nd mortgages at high LTV’s (they generally cap out at 85%).

4. Manufactured Homes. Most FHA lenders will still do manufactured homes (somewhat different guidelines), while most conventional lenders will not.

Main downside to FHA.

1. Loan Costs. FHA loans MUST have FHA mortgage insurance, no matter what the LTV is. The monthly cost is based on 0.5% annual interest of the original loan amount. That stays in place for 5 years, minimum. Also, there is an Upfront Mortgage Insurance Premium, which is essentially non-refundable (used up quickly in the early stages of the loan). That premium is usually 1.75% of the loan amount, and goes directly to FHA to fund the mortgage insurance program.

2. Longer and more complex Underwriting. FHA loans have a few more hoops to jump, but the difference between FHA loans and conventional loans is narrowing, as conventional loans are now requiring much of the same documentation as FHA.

On the plus side, rates for FHA loans are competitive with conventional loans, and depending on the factors, MAY even be a better solution. Sometimes, FHA is the only solution.

I have been able to do FHA loans for close to 2 years, but most of the loans I do are conventional loans.

The Reverse Mortgage Solution.

Boy, it seems like the whole world is going in reverse. I know I’d like to back up a few years, and make a few changes!

A lot of people have seen their retirement nest egg shrink dramatically (me too!), and are justifiably concerned about meeting living expenses in the future.

For those that qualify (be over 62 years old, and have about 65% loan to value), a Reverse Mortgage may be a very wise decision now. Fixed rates are very low, adjustable rates ridiculously low, and property values are still higher than they probably will be a year from now. Additionally, the loan limits for Reverse Mortgages were just raised considerably, allowing far more people to qualify and benefit from a reverse mortgage.

I have been able to do Reverse Mortgages for close to 2 years as well, and I find them to be a great way to solve problems and ease worries for my clients.

Key Facts about Reverse Mortgages.

1. Depending on your situation, you may either eliminate your mortgage payment, take a cash lump sum out, or take an income stream from a reverse mortgage.

2. Every month the balance (what you owe) increases.

3. You do NOT lose your property to the bank. Any remaining equity (at your demise) goes to your estate, and named heirs, after the loan is paid off, usually a sale or a refinance by the heirs. You and your heirs can NEVER owe more than the property is worth (negative equity).

4. Your loan is NOT based on your credit, your income or your assets, but ONLY your age (all residents on title must be 62 or older), your occupancy (you must live there) and the Loan to Value.

5. You can end the Reverse Mortgage at any time.

6. Reverse mortgages are highly regulated and monitored.

7. They cost more than a conventional loan, and a bit more than an FHA loan. Most of the costs are FHA related.

It almost makes me wish I was 62! Lord knows I feel like it some days!

Is the $8,000 Tax Credit for 1st Time Purchases the Real Deal??


Yes, as a matter of fact it is the real deal. Unlike the $7,500 credit from last year, which was in the form of a tax credit that you had to pay back over the following 15 years, this is a flat out tax credit, that does NOT have to be paid back.


For those of you unfamiliar with tax credits, I will attempt a very elementary explanation (I AM NOT A TAX ADVISOR, CONSULT A CPA FOR TAX ADVICE).

Assume you buy a home in 2009, AND you are a qualifying 1st time home buyer. Assume you had $3,000 in income tax withheld, and the amount withheld was exactly what you owed. You would then claim the tax credit, and the IRS would send you a check for $8,000.

Or, assume you had $3,000 withheld, but only owed $1,500. You would be due a refund of $1,500 PLUS the $8,000, for a total of $9,500.

Or, assume you had $3,000 withheld, but owed $6,000 (: You would be STILL due a refund of $5,000 ($8,000 tax credit minus the $3,000 owed).

As the details of this program begin to sink in, I think we will see a growing interest in purchasing homes, and possibly a slower rate of house value declines. Whether it’s enough, well, I just don’t know.

But this is still a gift, no matter how you slice it. By itself, maybe not reason enough to purchase today, but combined with other factors (the general benefits of home ownership, more affordable prices, current low, low fixed interest rates, and large selection), maybe it is.

CURRENT RATES 30 yr fixed (Current as of March 19, 2009)

Current Best Rates, with the following parameters: No cash out refinance, 30 yr fixed $400K, conventional, FICO 740+, 60% LTV, owner occupied single family home (not condo), fully documented adequate income, assets and employment, 30 day lock.

RATES WILL CHANGE UNTIL LOCKED!!! Lower rates are available with higher costs, additional risk factors will increase costs and/or rates, not everyone will qualify for a loan. I promise complete transparency and honesty in your transaction. Rates and costs may vary with loan size.

5.375%, no cost, APR 5.375% (no cost rate will vary with loan size, excludes prepaid interest taxes and insurance)

5.00%, 3rd party costs only (less than $2,500), APR 5.06%

4.75% no discount points to lender, costs about $5,000 APR 4.86%

4.375%, 1 discount pts, APR 4.57%

You are going to see some pretty outrageous claims out there. Sadly, most of them will be bait and switch. Call or email me for the real deal.

The Obama “Making Home Affordable” Package

OK, I promise to work at getting the facts and analysis together about the recent “Making Home Affordable” stimulus package, and try and sort out exactly what that will mean, and where it might fit for you. At present, the best I can say is that it appears to be a narrow set of hoops to jump thru, and surprisingly difficult to qualify for.

I have been thankfully very busy the past 2 months, helping people refinance into some incredible rates, at low costs. Those bargains are largely still available (thanks to the Feds, and our tax dollars), but as usual, we never know how long it will last.

As always, you’ll get nothing but honest advice from me. I always welcome your phone calls, emails, etc., nothing quite makes my day like hearing from an old friend!

PS…

I am still at the same company as I have been for the past 2 years, but recent interpretations of FHA regulations require that I stop using the “Loan Doctors NW” logo.


Roger Ingalls, Your Loan Doctor

Axia Financial, LLC


14900 Interurban Ave S #295

Seattle WA 98168

Phone 425-894-8173

Fax 206-260-3491

In compliance with Washington State Law all rates quoted are subject to change without notice until the borrower enters into a written lock agreement with Axia Financial.

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics." FDR

The Angst Giving Weekend

The Angst-Giving Weekend

Date 12-24-2008

My whole life I’ve had a odd condition, but I never had a name for it!

Giving gifts makes me unbelievably anxious! Thus, Angst-Giving!

Yes, I know it’s irrational, and may even qualify as a phobia. My wife has been incredibly understanding about it, and has figured out any number of strategies to cope with it (here’s a list, Roger, stick to it!). I am truly blessed by her love.

My story begins last Thanksgiving. Once every 7 years, my wife Kate’s birthday falls on the day after Thanksgiving (Black Friday). Last year was one of those years. Of course, as usual, I fretted about what to give her, and procrastinated to do the shopping that I dread. She had mentioned maybe wanting one of those digital photo-frames. I had decided against it, as we have too many electronic gadgets already that seem to need constant attention to keep running.

However, Thanksgiving evening, Fry’s ever present newspaper ad sucked me in, and there it was…a digital photo frame, at a cost so low, I could not resist!

So, I resolved to get to Fry’s when the door’s opened Black Friday at 5AM, armed with a shopping list of other bargains too good to pass up! Up at 4:00 AM, out the door at 4:30, in line by 4:45, in the store by 5:10. I elbowed my way thru the melee only to find that the item was sold out.

But, determined not to let the effort go to waste, I proceeded to gather the other items on my list. Then, I waited in line for 2 hours to check out.

Thoroughly demoralized, I returned home, to lick my wounds, and gave my wife what small gifts I had previously bought for her birthday.

That Sunday, I was discussing my experience with the pastor at our church (David Tinney), and my coming anxiety over Christmas gift giving, when he exclaimed “You need to hear my White Envelope sermon!”

The White Envelope Sermon

http://tinyurl.com/white-envelope

The White Envelope story starts about the 10th paragraph.

Something in the message resonated with me. Christmas always seemed to me to be co-opted by commercialism, and I dreaded its arrival (well, the commercial part: I rather like the rest, especially the songs!). We are already blessed with enough things, and seemingly burdened with too many, judging by the difficulty of getting through our garage, crowded with things we seldom use.

So I made up my mind that my wife’s Christmas gift of 2007 would NOT be a “thing”! What would it be then?

I knew there were two items she has asked of me for a very long time: A trip to Hawaii, and for me to lose weight, and be healthier.

This time last year (and even more so this year), a trip to Hawaii was out of the question.

So, a few days before Christmas, I sat down with paper, scissors, tape, and of course the White Envelope. I began to cut out a paper doll chain, and taped several together until I had 12 of them. The first paper doll had a rather large middle, and each successive doll had a slightly smaller torso. Then, I labeled each doll with a weight and a date, and folded it into the envelope.

On Christmas morning, she opened the envelope, and stared at the unfolding contents in puzzlement. Slowly, as she took it in, she realized its meaning.

We set about making plans for the weight loss, and we both signed up for Weight Watchers in January. Now, here I am one year later, 40 pounds lighter (she has lost 20), and we are both feeling pretty darn good about that gift.

Oh, I won’t pretend it was easy…but it wasn’t as hard as I thought it would be, either. I still have a “weigh” to go, and of course, there is the life-long challenge of keeping it off. But every time I needed an inspiration, I looked at the paper-dolls that I had taped to the bathroom wall, and it reminded me that the effort wasn’t just for me, but a gift, and a commitment I had made to my wife. There was a weight I had to make by the end of the month, and a new, lower one by the end of the following month! I’m happy to report that I am right on target for the end of the month, and end of the year, and I am determined to make it through the dangerous holiday feasts without losing sight of the goal.

Our Thanksgiving meal this year was much smaller than usual, but we managed to make it more meaningful for all of us, by having each of us pick 1 dish that we absolutely had to have, and then we each made that dish with the master chef, Kate. When we all sat down and said what we were thankful for, my middle son even said he was thankful for us going to Weight Watchers!

I still have to figure out what will be in this year’s White Envelope, but I have to say that I feel SO much less stress during the Angst-giving weekend this year, and much more connected to the intended meaning of Christmas and Thanksgiving.

Give it a try. Your White Envelope need not be anything like mine (or like the examples in the sermon). Make it unique, make it fun, make it meaningful to the loved one you give it to. Maybe it is an act of charity, maybe it is an act of sacrifice, maybe it involves money, maybe it doesn’t.

You certainly don’t have to go cold turkey! I did buy a few presents for Kate, but I know that last year’s paper dolls will be the one she’ll remember the longest.

I wish you and your loved ones peace of heart this holiday season. As always, I enjoy hearing from you anytime. I’d love to hear if the White Envelope strategy makes a difference in your life. Feel free to pass this along, if you are so inclined, and think it will benefit your family and friends.

Post Script

If we have learned nothing else this year, we have learned that the value of things and assets are frightening impermanent and seemingly arbitrary. Even the gasoline we put in our tanks may have lost value this month (well, if you were to resell it, at least, and bought the gas a few months ago)!

The only thing that has retained its value this year, and every year, is time…

Nothing has changed about the value of time. No one has artificially created a surplus or a shortage. We are only granted a finite, and unknowable amount to count among our earthly treasures.

So, for this year, I will give to Kate the gift of time…, in small labors, and considerations, in attention, and in time for herself (of course, committed in writing).

Best of all, I don’t have to go to the mall today!

So, if you have put off that last minute gift, maybe this will help!

Will 30 Year Fixed Rates Follow the Fed Prime Rate Cuts?

Will 30 Year Fixed Rates Follow the Fed Prime Rate Cuts?

If I only had a dollar for every time I have been asked in the past month “Won’t rates go down with the Prime Rate cut”, I could probably book the trip to Hawaii my wife has always dreamed about! Maybe even for both of us!

If only it were as simple as that.

There have been some direct beneficiaries of the cuts: HELOCS are getting much better, since they are tied directly to Prime Rate, and suddenly shorter term ARMS are looking good again (though most borrowers have been seeking the extra security of the 30 yr fixed).

Here is an article by Barry Habib, of the Mortgage Market Guide, that explains it better than any other I have seen, with the inclusion of charts. To quickly summarize, he shows that with each cut, 30 yr fixed rates have subsequently increased, mostly because of the positive effect on the stock market, and the bond investor’s worries about inflation.


Why Fed Rate Cuts Do Not Equal Lower Mortgage RatesBy Barry Habib, Contributing Editor to CNBC.com

Last Updated: February 4, 2008

The Federal Reserve has been on a rate cutting spree once more. Many mortgage applicants are calling their mortgage representative and expecting a lower interest rate. Others who have been waiting to refinance are puzzled as to why mortgage rates have not moved lower during the recent five Fed rate cuts. This is difficult to explain to consumers who have watched a 2.25% reduction by the Fed with very little benefit in mortgage rates.

Is a Fed rate cut really good news for mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years while a rate set by the Fed can change from one day to another.

It is often said history repeats itself. And if history is any teacher, we can learn from what happened to mortgage rates the last time the Federal Reserve was in a rate-cutting cycle.

The last time the Fed was in a lengthy rate cutting cycle was back in 2001 from January 3, 2001 to December 11, 2001. In the span of 11 months, they cut the Fed Funds rate 11 times with eight of those cuts by 50bp. This resulted in a total of 475bp or 4.75% in short-term interest rate cuts taking the Fed Funds Rate from 6.00% down to 1.75%.

Now most uninformed people would naturally think because the Fed cut rates by so much during this time that mortgage rates would follow suit and trend lower as well. Not so. Mortgage rates actually moved higher during this time of significant rate cuts because inflation, the arch enemy of bonds, gradually rose.

Now let’s take a look at what happened with the Fed’s most recent cutting cycle, the first since 2001. On September 18, 2007 the Fed cut the Fed Funds Rate by 50bp. The mortgage bond market briefly enjoyed a “knee-jerk” reaction to the Fed move by closing higher that day, but lost 140bp over the following two sessions. Then on October 31, 2007 the Fed lowered the Fed Funds rate by 25bp. The mortgage bond market responded by losing 78bp over the following five trading days.

On December 11, 2007 the Fed once again lowered rates by 25bp and the mortgage bond market lost 88bp in the next three days. This past month, the Fed delivered a surprise 75bp rate cut on January 22, 2008 and mortgage bonds lost a whopping 144bp in just 2 days. Eight days later and as widely expected, the Fed cut rates by 50bp and mortgage bonds had little reaction – but, were unable to recover the enormous pricing loss seen back on Jan 23, the day after the surprise 75bp cut.

Please refer to the Table below.

Fed Rate Cut Date
Rate Cut Size
MBS Pricing Change
09/18/2007
50bp
-140bp in 2 days
10/31/2007
25bp
-78bp in 5 days
12/11/2007
25bp
-88bp in 3 days
01/22/2008
75bp
-144bp in 2 days
01/30/2008
50bp
little changed


I’d be delighted to discuss this phenomenon with you at any time, or discuss any aspect of home financing.

I have also attached an article from the Seattle PI about ethics in lending and the proposed legislation requiring mortgage brokers to have fiduciary responsibility. I was interviewed for over one hour, and got quoted a total of 2 sentences (about 2/3 into the story). I could probably learn a thing or two about brevity from the reporter!

http://seattlepi.nwsource.com/local/349905_mortgage04.asp

I support the legislation, as I only see benefits for all borrowers coming from the change. Certainly, it will make some lenders uncomfortable, but since I believe I have ALWAYS acted in my clients best interest, it won’t change much for me.

Cheers!