Home Financing 101

Time to give back!

noreply@blogger.com (Chris Scheer) — Wed, 22 Jul 2009 21:36:00 +0000

For those of us in the mortgage industry last year was a challenge. This year we have gone from famine to feast. If you have not had a chance to share your good fortune or are one of the people that have been fortunate enough to benefit from refinancing to a lower rate, please take a look at this article and order a cake to help this woman keep her house.

Avoiding Foreclosure! It's a piece of cake.

msn.com

Or you can go straight to her website:

maccakes

July Interest Rate Update

noreply@blogger.com (Chris Scheer) — Mon, 06 Jul 2009 12:49:00 +0000

I hope everyone had a wonderful holiday weekend! If you have a minute, please take the time to watch this short video!

Help from a different source

noreply@blogger.com (Chris Scheer) — Tue, 23 Jun 2009 23:31:00 +0000

This article was on msn.com today. It featured comments in the last paragraphs from one of the other loan officers that works with me at Cornerstone Mortgage.

msn.com

I've been busy

noreply@blogger.com (Chris Scheer) — Tue, 16 Jun 2009 15:43:00 +0000

Much apologies to those who have tried to follow either the mortgage industry or my views on the mortgage industry over the past 3 months. With the volume in the industry I had neither the time or the energy to sit and write. Then I had the misfortune of tearing my Achilles tendon which made getting around that much more challenging. So to reduce stress and focus away from work when I could I took up on line poker. This past weekend I entered my first live tournament and here is a link to an article about how it went:

insidestl.com

Mortgage Cramdowns

noreply@blogger.com (Chris Scheer) — Tue, 10 Mar 2009 23:57:00 +0000

I was recently interviewed for my thoughts on the proposed legislation to allow bankruptcy judges to reduce the principal amount owed on mortgages and to change the borrowers payments. To read the complete article go to:

ibjonline.com

The article is on the first page.

Please let me know if you have any questions or comments!

We are getting farther away yet closer still

noreply@blogger.com (Chris Scheer) — Tue, 03 Feb 2009 19:26:00 +0000

As we watch the 30 year fixed rate mortgage hover around 5.75% today and still field phone calls from people who want 4.5% or lower, we need to be aware of that the government still has not stepped to the plate and followed through with their promise. Only today did they shed some light on where they are with the purchase of mortgage backed securities:

JP Morgan article

Until they begin purchasing these securities in bulk we will continue to see rates languish between 5.5% and 6%. Even then, if they wait too long to act, there may be other forces that will not allow the rates to go lower.

Stay tuned more interesting times!

MHDC Press Release

noreply@blogger.com (Chris Scheer) — Tue, 20 Jan 2009 23:52:00 +0000

MISSOURI HOUSING DEVELOPMENT COMMISSION

Strength, Dignity, Quality of Life

3435 Broadway, Kansas City, MO 64111

Kathryn Watts, Government Affairs, 816-759-6824; e-mail kwatts@mhdc.com

MHDC is the state's housing finance agency. The Commission is dedicated to strengthening communities and the lives of Missourians through the financing, development and preservation of affordable housing. MHDC was created by the General Assembly in 1969 and since that time it has invested $5 billion for the development of affordable rental housing and mortgages for first-time homebuyers in Missouri. MHDC functions much like a bank, providing financing directly to borrowers, developers or through a network of private lending institutions. MHDC is one of only three state housing agencies in the nation to receive an issuer credit rating of AA+ from Standard & Poor’s.

News Release/News Advisory/Request for Coverage – 01/16/09

MHDC Rolls Out Innovative New Program For First-Time Homebuyers

Starting January 14th, 2009, Missouri Housing Development Commission (MHDC) will have a new product to enable first-time homebuyers to take advantage of the $7,500 federal first-time homebuyer tax credit. This program is the first of its kind in the nation.

The federal first-time homebuyer tax credit was created by Congress this summer to encourage new homebuyers to purchase homes and thereby stimulate housing markets. However, the federal tax credit has been largely ineffective. One of the primary reasons the federal credit hasn’t worked is that the homebuyer doesn’t receive the money until he receives his federal income tax refund – which may be several months after the home is purchased.

With over 30 years experience funding mortgages for first-time homebuyers, MHDC knows that the biggest barrier faced by first-time homebuyers is acquiring money for down payment and closing costs. As a result, MHDC created a program that allows homebuyers to receive the value of the tax credit at the time of closing.

How the Federal First-Time Homebuyer Tax Credit Works:

• First-time homebuyers receive a tax credit worth 10% of their home purchase, up to $7,500. The credit is claimed on the homebuyer’s federal tax return. The credit is refundable, which means that the homebuyer receives a refund for the amount of the credit minus any federal tax liability. The credit is essentially an interest-free loan from the federal government and must be repaid through an increase in federal income taxes over a period of 15 years.

How the MHDC Tax Credit Advance Loan Program Works:

• MHDC makes a second mortgage to the homebuyer at the time of closing worth up to 6% of the home purchase price or a maximum of $6,750, which is used to cover down payment and closing costs. The tax credit advance loan is paired with MHDC financing for the first mortgage in the form of a safe 30 year, fixed rate mortgage. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the MHDC tax credit advance loan. If the tax credit advance loan is paid off by the designated deadline, the homeowner pays no interest other than a modest servicing fee. If the tax credit advance loan is not paid by the deadline, principal and interest payments to repay the loan over 10 years begin automatically.

All MHDC first-time homebuyer loans are made through a statewide network of certified

lenders, and serviced by U.S. Bank. The MHDC loan programs are available for households with incomes up to $85,500. Interested first-time homebuyers can find a list of participating lenders and other information about the program on the MHDC website (www.mhdc.com).

MISSOURI HOUSING DEVELOPMENT COMMISSION

Strength, Dignity, Quality of Life

3435 Broadway, Kansas City, MO 64111

Kathryn Watts, Government Affairs, 816-759-6824; e-mail kwatts@mhdc.com

The federal tax credit and the MHDC tax credit advance loan program are both currently set to expire June 30, 2009.

###

NOTE TO EDITORS: Media representative questions can be directed to Kathryn Watts,

Government Affairs Liaison, at 816-759-6824 or kwatts@mhdc.com. All other inquiries should be directed to Gregory Spurgeon, Single Family Homeownership Administrator, at 816-759-7228 or gspurgeon@mhdc.com. If you would like to receive this release by e-mail in rich-text format, please email kwatts@mhdc.com and provide us with the appropriate e-mail address.

Someone else is thinking what I am thinking!

noreply@blogger.com (Chris Scheer) — Tue, 20 Jan 2009 00:03:00 +0000

I hate to simply rely on other people to say what I am thinking, however this article on MSN is the perfect advice for those who are getting greedy and thinking that rates are going to continue their downward trend.

http://articles.moneycentral.msn.com/Banking/HomeFinancing/dont-wait-nows-time-to-refinance.aspx

Just because your neighbor got a certain rate does not mean you will get the same rate either better or worse. The days of a simple rate are long gone. Your FICO, loan amount, amount of equity in your home, type of loan, and many other factors will determine your rate. Take the time now to get a "Mortgage Fitness Checkup" to see what is the best plan for you and your financial future!

Time to get back at it!

noreply@blogger.com (Chris Scheer) — Tue, 30 Dec 2008 22:28:00 +0000

So I disappeared for a while as I tried to work through the holiday season. Just prior to Thanksgiving rates started falling we saw refinance activity begin to pick up. Then on December 15, 2008 we saw a huge rally on mortgage backed securities push the 30 year down to historic lows. Some were lucky enough to lock in at 4.75%. That lasted for all of 2 1/2 hours and then investors pulled pricing and rates went back above 5%. Since then we have seen little drops followed by upward pressure keeping the 30 year around 5.25%. Still lower than 2003 and now we have this news:
http://www.marketwatch.com/news/story/Banks-rise-Fed-details-planned/story.aspx?guid={EA305A84-90F7-44BF-8DF3-B0DD3687F789}&dist=hpts
Going into 2009 there will be more pressure to push the rates down to 5% or below. There is not a target number that the Fed is releasing for where they want rates, but you can be assured there will be more days like December 15, 2008 in the future.

For those wanting to take advantage of these rates I highly recommend talking to your mortgage professional and getting your application completed and all closing costs agreed upon ahead of time. Put a plan in place to lock at a rate that makes sense and then when the opportunity arrives for you to lock in to the rate it only takes a few minutes and you are locked in. Keep in mind when these opportunities arise, they don't last for days. The market or investors only want so much exposure and once they get their fill, they will pull that pricing. We never know how long it will last. Those that are prepared are the ones that benefit the most.

Have a safe and Happy New Year!

Blah, Blah, Blah

noreply@blogger.com (Chris Scheer) — Tue, 11 Nov 2008 18:57:00 +0000

Here is more rhetoric about how banks are going to help people in trouble. If they would quit talking about it and just do it the challenges would start to ease. Common sense says that keeping people in their houses will do more for neighborhoods than empty houses.

www.msnbc.msn.com/id/27660450

www.yourdebtfreecoach.com

An Open Letter to All Referral Sources

noreply@blogger.com (Chris Scheer) — Sat, 13 Sep 2008 20:30:00 +0000

Last weekend the Federal Government announced the takeover of Fannie Mae and Freddie Mac. This is the culmination of many months of stress and tremendous losses for these companies and many in the mortgage industry. Prior to this announcement, GMAC Mortgage announced it was closing over 200 retail mortgage offices, putting more loan officers and support people out of work. Many of the very talented people in the mortgage industry have left or are no longer working for companies that could provide them the programs and support that they need to be successful. Throughout all of this Cornerstone has continued to stay strong. In July of 2007 we had 17 loan officers. We now have 25 loan officers. We have added talent and with that talent we have added programs and tools to help you become a success or help your clients achieve their goals.

For the real estate community we are rolling out the Home Buyers Scouting Report. This is a tool to help you establish a relationship with buyers and incubate them until they are ready to purchase. For my professional partners we have one of the only second mortgage programs that goes to 95% combined loan to value. In addition to that we have the Equity Accelerator to help all of our clients save thousands of dollars in interest over the life of their loans.

I want to make sure that you know that I am here to help you and your clients achieve your goals. If you know anyone who has purchased or refinanced in last 3 years, please pass their information along to me so I can schedule a “Mortgage Fitness Checkup.” They may not need to do anything now, but it is beneficial to them that they begin to build a relationship with a trusted mortgage professional that can help them achieve their financial dreams!

Sincerely,

Christopher M. Scheer
Your Residential Lending Expert

p.s. For more information on the Equity Accelerator go to www.yourdebtfreecoach.com.

An Open Letter to All Referral Sources

noreply@blogger.com (Chris Scheer) — Sat, 13 Sep 2008 20:30:00 +0000

Sooner or Later I am Right!

noreply@blogger.com (Chris Scheer) — Mon, 08 Sep 2008 16:35:00 +0000

Some of you may recall that 45 days ago I predicted the 30 year note to get to 6%. Then 2 weeks after that I again reiterated the stance. Well after the Fed stepped in and took over Fannie Mae and Freddie Mac, we have now seen the rates drop to 6% on a 30 year fixed. That is the good news, here is the bad news.

By taking over these institutions the government has put there finger in the dam. Now they are stuck there with there “finger” in the problem that is our mortgage industry. It is going to cost the tax payers BILLIONS to rescue these two giants. Compared to what we are spending in Iraq, that is a drop in the bucket, but none the less, it is Billions in dollars that could be better used to lower our debt as opposed to raise it. If the gamble pays off, and the money the government invests in Fannie and Freddie has a return, then they have made money. But when was the last time you wanted to gamble Billions of your hard earned dollars and that of your children?

A more realistic scenario is that these two entities become part of HUD in the next 4 years and lending guidelines for the next 4-8 years are slow to loosen. Regional banks and local banks will become the place creative financing, but only for those people that have excellent credit and significant assets or equity.

For questions or comments on this please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Even before the government takeover, more changes at Fannie Mae

noreply@blogger.com (Chris Scheer) — Sat, 06 Sep 2008 21:48:00 +0000

As Fannie Mae and Freddie Mac await the government takeover, they both continue to tighten lending guidelines. The latest from Fannie Mae limit the combined loan to value for those who have an equity line on their home or are using an equity line to purchase a home. In addition, unless you are putting 25% down or more on investment properties the cost to acquire the loan has gone up. For investors there is even more bad news as the number of properties financed continues to shrink. For all of the changes, please go to this link;

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0822.pdf

For questions or comments on this post, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

A Quick Thought on Early Retirement

noreply@blogger.com (Chris Scheer) — Wed, 03 Sep 2008 12:53:00 +0000

For all my Anheuser-Busch friends, clients and those Financial Planners helping them make the decision on whether or not to take the early retirement offer that has been sent to them. If they are considering restructuring their debt or refinancing, they need to do that prior to accepting the early retirement. Once they have accepted the package, their probability of continued employment has ended, even if they are going to be employed at the time the loan closes. Any severance package that includes income, if the income is not going to continue for 3 or more years will not be used for qualification purposes when attempting to get approved for a loan. In the current underwriting climate, underwriters are getting better at doing their job and with all of the news coverage of the proposed merger, I would hate for some one to have a loan denied because they did not plan ahead.

For questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Mortgage Forgiveness Debt Relief Act of 2007

noreply@blogger.com (Chris Scheer) — Wed, 20 Aug 2008 12:23:00 +0000

Earlier this week I had a conversation with an accountant who was asking me about people who were selling their houses in short sales. We discussed the increase of this in the St. Louis area and he suggested that he put together some information that my clients might find helpful regarding the Mortgage Forgiveness Debt Relief Act of 2007. Here is the letter in its entirety.

August 15, 2008

Dear friend:

With the economy in its current challenged state, coupled with the real estate market and its issues, there has been a lot of activity regarding foreclosures, short sales, and debt restructuring. I continue to get a lot of questions regarding the tax consequences for home owners in these situations. The rules have changed in this area. Under the old rules, forgiveness of debt could trigger taxable income for the person being relieved of debt. The new rules drastically help taxpayers needing forgiveness of debt associated with their primary residences, but it only applies to debts discharged from January 1, 2007 to December 31, 2009. With the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on up to $2 million of debt forgiven for a loan secured by a qualified principal residence. More details are highlighted below.

Discharge of indebtedness income: background

For income tax purposes, a discharge of indebtedness (“forgiveness of debt”) is generally treated as taxable income. However, a discharge of indebtedness doesn’t trigger gross income if it: (1) occurs in a Title 11 bankruptcy case, (2) occurs when the taxpayer is insolvent, (3) is a discharge of qualified farm indebtedness, or (4) is a discharge of qualified real property business indebtedness.

Before the 2007 Mortgage Relief Act, there were no special rules applicable to discharges of acquisition debt on the taxpayer’s principal residence. For example, assume a taxpayer who isn’t in bankruptcy and isn’t insolvent owns a principal residence subject to a $200,000 mortgage debt for which the taxpayer has personal liability. The creditor forecloses and the home is sold for $180,000 in satisfaction of the debt. Under old rules, the debtor had $20,000 of debt discharge income.

Current law relief provision

The 2007 Mortgage Relief Act excludes from a taxpayer’s gross income any discharge of indebtedness income by reason of a discharge (in whole or in part) of qualified principal residence indebtedness before January 1, 2010. The exclusion applies where taxpayers restructure their acquisition debt on a principal residence or lose their principal residence in a foreclosure.

Here is some of the critical fine print in this new relief provision:

The tax relief applies to the original purchase price, plus improvements, of the taxpayer’s principal residence. It doesn’t apply to discharges of second mortgages or home equity loans unless the loan proceeds were used to acquire, construct, or substantially improve the taxpayer’s principal residence. Refinanced indebtedness qualifies only to the extent it does not exceed the amount of indebtedness being refinanced. (Cash out from refinancing will not qualify for the exclusion.)

The indebtedness must be incurred specifically in respect to the taxpayer’s principal residence. The exclusion rule does not apply to second homes, vacation homes, business property, or investment property since these properties are not the taxpayer’s principal residence.

The relief provision is not a permanent fixture of the tax code. It only applies to forgiveness during 2007, 2008, or 2009.

Nontaxable forgiven mortgage debt is capped at $2 million ($1 million for married individuals filing separately).

When the relief provision applies, the tax basis of the individual’s principal residence is reduced by the amount excluded from income. As a result of this basis reduction rule, the discharged indebtedness is technically subject to taxation at a later time. However, in many cases the reduction will not result in any additional tax because any gain on that sale or exchange will qualify for the $250,000 ($500,000 for married couples filing jointly) home-sale exclusion.

Please keep in mind that this is only a summary of this important tax relief provision. If you would like more details about this change, or any other aspect of the new law, please do not hesitate to call. Keep in mind that every taxpayer’s situation is different and should be analyzed with his or her tax advisor and counsel to determine what applies for the given circumstances.

Best regards,

HOFFMAN CLARK, LLC

Bryan Shaw, CPA

www.hoffmanclark.com

Miracles Never Cease!

noreply@blogger.com (Chris Scheer) — Thu, 07 Aug 2008 19:04:00 +0000

Back by popular demand, at least in my mind! I will be returning to the airwaves on Tuesday, August 12, 2008 on the mighty mox; that is KMOX for all of you who are not hip to the lingo of St. Louis and our toasted ravioli, hwy farty far, and pork steaks.

At 10:20 in the morning, please tune your radio to 1120 on your am dial or go to www.kmox.com to listen live over the internet. I will be on the air with Dave Simons of Merrill Lynch discussing the new legislation that was signed by the President on July 30, 2008.

Thanks for your support! By the way, if you know anyone who is looking to purchase or refinance please send me their information and I will be happy to keep you posted on how things go!

As always, for questions or comments please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

The Housing Act

noreply@blogger.com (Chris Scheer) — Tue, 05 Aug 2008 00:55:00 +0000

On July 30, 2008, President Bush signed into law the “Housing Assistance Tax Act of 2008” (the Housing Act). It includes a $15.1 billion package of housing tax incentives.

Here are the highlights of the bill for homeowners and first time home buyers.

Property Tax Deductions for Non-Itemizers

The Housing Act created a new, temporary property tax deduction for non-itemizers (i.e., for taxpayers who claim the standard deduction rather than itemizing their deductions).

Highlights include:

· The provision creates a new standard deduction for state and local real property taxes paid by non-itemizers. Since most homeowners who are paying on a mortgage have enough deductions (e.g., mortgage interest and property taxes) to justify itemizing them on their return, this new provision chiefly benefits homeowners who have paid off their homes.

· The deduction is currently only available for tax years that begin in 2008.

· The amount of deduction will be as much as $500 for single filers and $1,000 for joint filers. Since this is a deduction and not a credit (i.e., a dollar-for-dollar reduction in tax liability) the actual tax benefit will not be all that substantial. For example, it only proves a maximum of $100 to a couple in the ten percent tax bracket and $150 to a couple in the fifteen percent bracket (and only $50 and $75, respectively, to singles in those brackets). Granted, in this economy every little bit helps.

Credit for First-Time Homebuyers

The single largest provision in the Housing Act is a measure allowing taxpayers buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified homebuyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds their tax. However, they are then required to pay the credit back over fifteen years. The result is that the credit resembles an interest-free loan that must be repaid to the government.

Here are the details of the new credit:

· The home must be located in the United States and must be the taxpayer's principal residence. The taxpayer (and the taxpayer's spouse if married) must not have owned another principal residence in the United States in the three-year period before purchasing the new home. Accordingly, the home does not literally have to be the taxpayer's first home ever purchased in the United States.

· The home must be purchased between April 9, 2008 and June 30, 2009. Purchases from certain related persons and acquisitions by gift or inheritance do not qualify. A home constructed by the taxpayer does qualify if the taxpayer moves in between April 9, 2008 and June 30, 2009.

· There is also a special rule that allows taxpayers who purchase a qualifying principal residence in the first six months of 2009 to treat the purchase as if made on December 31, 2008. This allows the credit to be claimed on the taxpayer’s 2008 taxes rather than waiting to claim it on the taxpayer’s 2009 taxes.

· The credit is equal to ten percent of the price paid for the home, up to a maximum of $7,500. The $7,500 maximum credit applies both to individuals and married couples filing a joint return. A married individual filing separately can only claim a maximum credit of $3,750.

· The credit is phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase. Taxpayers with modified AGI over $95,000 ($170,000 for joint filers) can't claim the credit at all.

· The credit is refundable, which means that households with incomes too low to owe any income tax can still benefit as the excess credit available after applying to any income taxes will be refunded to the taxpayer.

· In the second year after purchase (note that the payback doesn’t immediately start in the subsequent tax year), taxpayers who took the credit must start paying back the credit in equal interest-free installments over fifteen years. For example, suppose a first-time homebuyer purchases a home for $100,000 in December 2008 and claims the maximum credit of $7,500 on his 2008 tax return. He would then be required to pay back $500 (one-fifteenth of the credit) on his tax return for 2010 and for each subsequent return for the following fourteen years, finishing in 2024.

· If the taxpayer sells the home (or the home ceases to be the principal residence of the taxpayer or the taxpayer's spouse) before the complete repayment of the credit, any remaining credit is due on the tax return for the year in which the home is sold (or ceases to be the principal residence). If the home was sold at a loss to an unrelated person, repayment of the remaining credit is forgiven to the extent of the loss.

· No credit is allowed if certain conditions exist: the taxpayer was ever entitled to a District of Columbia homebuyer credit, the home purchase was financed through tax-exempt mortgage revenue bonds, the taxpayer is a nonresident alien, or the taxpayer disposes of the residence (or it ceases to be a principal residence) in the same year as it was purchased.

For a chart of the tax credit information, click here:

http://www.realtor.org/GAPublic.nsf/files/chart_homebuyer_tax_credit_.pdf/$FILE/chart_homebuyer_tax_credit_.pdf

For the Mortgage Bankers of Americas' comments on the bill click here:

http://image.exct.net/lib/ff3611707560/d/1/MBAA_Housing_Bill_Summary_072508_Final.pdf

The majority of the information for this piece was provided by Bryan Shaw of Hoffman Clark LLC.

www.hoffmanclark.com

For Questions or Comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

New MHDC

noreply@blogger.com (Chris Scheer) — Sun, 03 Aug 2008 13:47:00 +0000

Here we go! It is actually going to happen! The new rates for the 2008B are as follows:

CAL for Government loans 6.9%

NON CAL for Government loans 6.45%

CAL for Conventional loans 7.3%

NON CAL for Conventional loans 6.85%

The window for reservations will open at 8 am on Monday August 4th. As soon as you have a confirmed reservation you may close loans. All loans in this bond issue will be sold to the new master servicer US Bank. Training with the master servicer will start on Tuesday August 5th in Columbia and on Wednesday August 6th in St. Louis. I will go over the changes to the program in depth at the training but I will state the changes briefly in this email.

Rates

As you can see we will have 4 rates instead of 2 due to the conventional market. Only Fannie Mae's My Community Mortgage or Freddie Macs Home Possible programs can be used with this bond issue. There will be no charge of 1.25% for LLP and adverse market fee in this issue only. However, there will have to be a $175 servicing fee charged to the borrower for the all CAL loans.

Down payment Assistance

As you can see I have changed the acronym from CAP to CAL. This stands for Cash Assistance Loan and will help differentiate between the two programs. The assistance will still be 3% of the loan amount but it will be in the form of a soft second mortgage that will be forgiven over a 5 year period. The loan will actually diminish 1/60 per month over the 5 year period. The borrower will then be given a 1099 every year for the amount that was forgiven that year and will have to claim that as income on the federal tax return. If the borrower sells or refinances the loan in the first five years the remainder of the amount will have to be paid back. We have been discussing the just-enacted housing stimulus bill with FHA staff and they told us today that the just-enacted housing bill does not impose a 100% CLTV cap on FHA loans. It imposes a 100% LTV cap on the FHA-insured first mortgage and requires the FHA mortgage insurance premium to be counted toward the LTV ratio for purposes of the 100% cap. HUD will continue to allow second liens from state housing agencies that result in CLTVs that exceed 100%.

For Questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

What was I thinking?

noreply@blogger.com (Chris Scheer) — Mon, 21 Jul 2008 14:02:00 +0000

The wonderful thing about interest rates is that you never can truly predict what direction they are heading in. For those of you that read my last post about rates going down, you at this point think I am a complete fool! At some level you might be right; however the same pressures that existed when I wrote that article are still there. They just have had some short term relief and the usual unpredictable influences that occur from time to time affect them. Let’s talk about where we were, where we went and where we are now?

Two weeks ago today our 30 year fixed on a conventional loan was about 6.75%. It was then that I started the article on rates dropping. Throughout that week the rates started to fall, so much that on Friday morning of that week I locked in a purchase at 6.125% on a 30 year loan. Around 1:00 that day it was announced that the Fed was stepping in and taking over Indy Mac bank. http://www.latimes.com/business/la-fi-indymac12-2008jul12,0,6071779.story At that point our rates jumped up to 6.375%.

The following Monday the market remained calm, and rates did not move. Then on Tuesday oil prices started to drop and over the next two days oil fell over $10 a barrel. All of a sudden Wall Street showed improvement in stock prices and the 6 week slide was halted. That meant that money was flowing back into stocks and out of bonds. Remember your economic lessons of previous posts, when the demand goes down the price goes down. On bonds when the price goes down the yield (interest rate) goes up. So by Friday of last week we were back to 6.75% on a 30 year loan.

As we start the week, we have oil starting to climb again and one of our two Presidential Candidates trying to move troops to Afghanistan to fight the War on Terror. As long as we are fighting Wars, we are going to have challenges controlling our markets. These wars are costing us BILLIONS and we are paying for that with borrowed money. Sooner or later that will have a negative effect on our economy and we will see rates come down.

For questions or comments about this please contact Chris Scheer at 314.223.9824 or cscheer@cornerstonestl.com.

Goodbye Countrywide and Goodbye to their step brother Indy Mac.

noreply@blogger.com (Chris Scheer) — Sun, 13 Jul 2008 22:55:00 +0000

The Federal Reserve stepped in and took over Indy Mac bank on Friday.

http://www.latimes.com/business/la-fi-indymac12-2008jul12,0,6071779.story

This comes as no shock to members of the mortgage industry as recently Indy Mac announced it was ceasing its retail mortgage operations.

http://theimbreport.com/?p=161

So why do I call Indy Mac Countrywide’s step brother? For years Indy Mac mirrored all the lending programs that Countrywide created, almost to the point where unless you looked at the login page when you were visiting their site, you could not tell the 2 companies apart. There were times when Countrywide would announce a change in a program or guideline and within hours the same change would be announced at Indy Mac. From an originators standpoint, it was comical how the two companies mirrored each other.

When Countrywide was hammered last year and the Fed stepped in to rescue them (see previous posts) Indy Mac started to take on a life of their own. They for the first time were the first of the two companies to change programs and products reducing their exposure and tightening their lending practices. It was because of these efforts that they managed to last as long as they did. If it were not for comments made by Senator Schumer http://blownmortgage.com/2008/07/08/indymac-bank-run-caused-by-senator-comments/ they may have managed to right their ship and avoid the Fed taking them over.

So why does the Fed rescue one company and take over another? Stock penetration and price. If Indy Mac would have had the numbers of shareholders that Countrywide had world wide or even Bear Stearns, they would have been rescued as opposed to taken over.

For Questions or comments, please contact Chris Scheer at 314.223.9824 or cscheer@cornerstonestl.com.

We are on the cusp!

noreply@blogger.com (Chris Scheer) — Tue, 08 Jul 2008 17:31:00 +0000

Undeniably the stock market has become a Bear market. That means that the Dow industrial average is down more than 20%. Sooner or later, those investors are going to start to move to safer investments. What are safer investments you ask? Well I am going to suggest that Mortgage Backed Securities are safer investments. For the last 12 months, this investment has been out of favor with everyone from institutional investors to foreign investors. As housing prices have fallen drastically on both coasts the middle of the country has done a good job of holding value. The Countrywide Mortgage debacle has turned a corner and is now Bank of America’s problem. The Fed has not had to rescue any more mortgage companies for the last 30 days. Second quarter earnings are being reported this week and by now all the major companies have figured out that they cannot hide the losses from the mortgage mess, so those will be dealt with in these reports.

That leaves us with mortgage backed securities in position to be an attractive investment again; especially the Ginnie Mae government loans. With over 70% of all loan applications that I am taking right now being for FHA or VA loans, I am confident that most other successful originators are doing the same. This will create a huge supply for these investments and the hawkers of these securities will have the product to sell and most of these properties will not be those that are going into foreclosure but being bought out of foreclosure by people who have the means and desire to make their mortgage payments. Sooner or later, Wall Street is going to start moving these securities and then the laws of economics will take over. As demand goes up so does price. On a bond, for those of you that don’t remember, when the price goes up the yield (see interest rate) goes down. Thus, even though there is discussion of the Fed raising short term interest rates, what they really are hoping for is that the lowering of short term rates that they did months ago will finally take hold on the long rates and we will see the 30 year fixed rate get below 6% again.

Now I realize that this is optimistic thinking on my part, but if you listen to the doom and gloom prognosticators out there saying that the economy and the stock market are still in for tougher times, someone has to be willing to bet on the bond market. Today I am that person!!!

What a difference a day makes!

noreply@blogger.com (Chris Scheer) — Wed, 02 Jul 2008 15:44:00 +0000

Over the past 11 months the mortgage industry has gone through one of the most tumultuous times in recent history. As mortgage companies went out of business, others were rescued by the Federal Reserve and program guidelines changed like your mother told you to change your underwear; DAILY. Many people, loan officers included were caught not being up to date on the ever changing landscape of guideline changes. I can admit I had challenges with 2 condo loans in particular.

In addition to the ever changing landscape of product and guideline changes we have also seen a rate climate that reminds me of a playground toy, the sliding teeter totter! Rates go up one day, down the next, up again then up and up and then a drastic drop followed by more upward movement. I continue to preach to my clients, that locking in is the best defense in the current market. We can always look to renegotiate if rates go down drastically but, once they go up you are screwed. As my old mentor told me, “pigs get fat, hogs get slaughtered.

Let’s hope that the reforms FHA has instituted effective July 14, 2008 and the merger of Countrywide and Bank of America signal a change to the whirlwind of changes and the rest of the year is filled with calm waters for borrowers to sail in.

For questions or comments on this post, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Does the Fed really have any control over inflation?

noreply@blogger.com (Chris Scheer) — Wed, 25 Jun 2008 18:26:00 +0000

As we sit here and watch a bunch of suits sit around and discuss theory, the rest of the nation is living reality. That reality is the fact that gas prices continue to rise, every other commodity is effected by the rising fuel prices and then to top that off, we have the real estate industry, the engine of the economy of the world continuing to crash or should I say foreclose in around us. To hear Gentle Ben Bernanke and his colleagues discuss the economy, you would think that they are living in a glass castle. Does anyone of them know what it is like to pump or pay for their own gas? When was the last time one of them went to the grocery store to by something to fix themselves?

These discussions about whether to raise or lower interest rates are simply wasted energy. We need to quit focusing on what the Fed is or isn’t going to do because what ever they do at this point is too little too late. They are now talking about raising interest rates to slow the economy. Are you kidding me? This economy is still going backwards. So called Fed experts will tell you that they are managing the economy six months in the future, but if that is they case, they really screwed up six months ago! I have an idea, let’s deal with the here and now. You know, like when they rescued Countrywide from going Bankrupt by getting Bank of America to be the lead bank in the buyout of Countrywide. Or more recently when Bear Sterns was crashing and they got J.P. Morgan Chase to purchase them. Both of these happened overnight and in theory were done to keep things from crashing around us.

Dear Ben, put pressure on the White House to solve the rising energy price challenge. That is your inflation monster. Until you figure out how to do that, everything else you are doing is just giving the talking heads on MSNBC something to talk about so they can keep their jobs.

For questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

FHA Lifts 90 Waiting Period

noreply@blogger.com (Chris Scheer) — Tue, 17 Jun 2008 01:03:00 +0000

In a move to help get foreclosures off the books of lenders quicker and help avoid deterioration of properties that have been foreclosed upon the Department of Housing and Urban Development has lifted their ban on writing a contract if the title has changed in the past 90 days. See the following article: http://www.cnbc.com/id/25146122

For further clarification you can visit HUD’s website at http://www.hud.gov/news/release.cfm?content=pr08-082.cfm

For questions or comments please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.