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Tag: Tom Vanderwell (page 1 of 1)

December 1, 2009

The Next Step….

by

Mortgage Officer

Author website

I’ve had a lot of people ask me lately, “Tom, what do you see is coming next?   What’s the next step in this mess?”

A couple of thoughts at this point:

  • Anyone short of Nouriel Roubini, Paul Krugman, Meredith Whitney and maybe a few others who tell you that they KNOW how this is all going to end is lying.   (Did you notice how I didn’t include Treasury Secretary Geithner or anyone in Washington in that list?)
  • But there are some people who have the ability to peer a little farther out into the fog than most do.
  • Anyone who tells you this isn’t a confusing and potentially scary time is lying to you as well.   Never in our life times have we seen the kind of financial devastation and economic pain that is currently happening.   

The things that are going on are causing lots of people to question a lot of things that they weren’t questioning before.   Things like: 

  1. Will I be able to retire?  
  2. Can I ever trust a mortgage lender again?  
  3. Will real estate still be a good investment?  
  4. What’s happening in the stock market?  
  5. Is my financial advisor telling me the whole story?  
  6. What are mortgage rates going to do? 
  7. How does the actions of the Federal Reserve impact the financial markets? 
  8. What are the long and the short term ramifications of the deficits that the government is currently running?
  9. How does the value of the dollar impact real estate and mortgages?

Those are just a smattering of the types of questions that I’ve been hearing from people lately.   Okay, some of them aren’t quite in the format that I spelled them out but they have basically been asking that.  Frankly, I think the consumer’s desire to ask more questions is a good thing and a healthy thing in the long run.

So where am I going with this?   I’m getting to it…….

I’ve been fortunate to “hook up” with two of the experts in other areas of the financial spectrum (one of whom is our own Jeff Brown) and we’re setting up a new source for financial and real estate market insight and understanding.   As Read more

November 19, 2009

Another 25%? Ouch, that’s going to leave a mark…..

by

Mortgage Officer

Author website


Okay, a couple of things that this chart assumes:

  • That from 1975 to 1999 was “normal” enough to indicate a statistical trend.   I think the case could be made that it was.
  • That we’re going to eventually get back to that trend line.    I think a case could be made that we will.
  • If both of those assumptions are indeed correct, then we’re heading into a scenario where we have quite an adjustment to go through in terms of a drop in peak housing values until we are back into range with that statistical trend.

What do you think?   Tell me why you think he’s wrong……

Tom Vanderwell

Values Have Dropped Only 25% of the Fall Needed to Reach Trend «

PRICE TRENDS / WAR OF THE WORLDS (Part 4): Property owners nationwide have lost only one dollar for every four dollars they can ultimately expect to lose on their home.

The good news according to the leading data series issued by the United States government is that prices have only fallen 6 percent. If you are a homeowner, you are wealthier than you knew. The bad news is you still have three dollars to lose for every one dollar which has already been lost.

The total projected fall from the Federal Housing Finance Agency (FHFA) “All Transactions Index”, which begins in 1975, shows a peak-to-trend fall of 27%. Since prices are 6% lower by this measure, prices must still fall an additional 23% from today for prices to revert to trend.

The assumption built into these estimates is that prices in the years 1975 to 1999 advanced at a typical rate. A trend line was generated to the present based upon that 25-year period. The chart depicts the divergence of the trend established from 1975 to 1999 and the actual prices recorded from 2000 to 2009.

The FHFA prediction of a total fall of 27% is far less than the total fall of between 49% to 60% predicted by Case-Shiller. Based upon the four data sets reviewed in the last few weeks (see summary below), we can estimate a total fall of between 27% to 60% from the bubble top to Read more

August 4, 2009

Should Realtors “Interview” Lenders?

by

Mortgage Officer

Author website

I got what I thought was a very interesting and thoughtful e-mail last week from Jessica Horton, a Realtor down in Georgia, who I’ve gotten to know.   She and I have chatted a bit both online and over the phone about the markets, the dynamics of today’s lending rules and the ins and outs of structuring deals.   Oh, and we are both authors on the Bloodhound Blog.

I’ve taken Jessica’s e-mail and my response and turned them into a post.    I’ve eliminated a few minor conversational tidbits but I’ve left the majority of our e-mail conversation intact.

Why am I reposting this?

For three main reasons:

  1. I’ve been in the mortgage business for 21 years now and I have never seen as challenging of an environment as we have now.   Yeah, we’ve had ups and downs and economic slow times, but a combination of falling property values, rising unemployment and tightening underwriting guidelines have made this the most challenging market I’ve ever been in.
  2. The days of assuming that any lender can get a loan done and that anyone can get a mortgage are over and they aren’t coming back any time soon.
  3. I found it very refreshing that a Realtor is taking a good hard look at who they want to recommend to their clients and not looking at it only from the standpoint of “who’s going to buy me lunch.”

I found it very refreshing that Jessica was talking to a number (I don’t know how many) lenders and was attempting to understand better how they work and what their processes and procedures are for making sure that things go smoothly.    With the HVCC and the new MDIA and the pending changes from Fannie Mae and Freddie Mac, the rate a lender offers will always be important, but their ability to get things done is more important than it has ever been.

Take a few minutes and read through the exchange.   Jessica’s questions are in “normal” print and my answers are in bold and italics.

Tom

Jessica,

See below.   Thanks for giving me this opportunity.

Tom Vanderwell

From: Jessica Wynn Horton [mailto:jessicahorton30292@gmail.com]
Sent: Wednesday, July 29, 2009 1:58 PM
To: Tom Vanderwell at Straight Read more

December 16, 2008

The Fed Translated…..

by

Mortgage Officer

Author website

Release Date: December 16, 2008

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

What’s up with the “range” of rates?   Well, they’d look pretty foolish if they said they wanted the rate to be at .25% and the market was already trading fed funds futures at .14% as of this morning.   Calling the rate at .25% would be sort of like predicting yesterday’s weather.

Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. No arguments there. Financial markets remain quite strained and credit conditions tight. I’m not sure that a lot of people are as aware of the strain on the financial markets as they should be. Overall, the outlook for economic activity has weakened further. Enough said there….

Meanwhile, inflationary pressures have diminished appreciably. Saying that inflationary pressures have diminished is being modest.   Inflation is dead for now. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters. For inflation to moderate any further, deflation will become a huge issue. Let me rephrase that, in light of the Consumer Price Index report this morning, it’s pretty apparent that deflation is an issue.

The Federal Reserve will employ all available tools (available tools – oh and since we’re running out of ammo in our normal tools, we’re going to come up with some new ones.   We hope that they work and we hope that they persuade people to start spending and borrowing money again) to promote the resumption of sustainable economic growth and to preserve price stability. Price stability – yeah, we are kind of concerned about that deflation thing and we’re afraid that all of the money we are printing is going to have a very negative effect on the value of the dollar and the value of our stock market investments, but we’ll worry about that some other time. In particular, the Read more

December 2, 2008

Investor Sues to Block Mortgage Modifications

by

Mortgage Officer

Author website

The battle over the mass modifications of troubled mortgages has begun in earnest. On Dec. 1, William Frey, a private investor in mortgage-backed securities, filed a lawsuit in New York State Supreme Court alleging that the proposed modification of some 400,000 home loans originally underwritten by the defunct lender Countrywide Financial is illegal.

Investor Sues to Block Mortgage Modifications – Yahoo! News.

At first glance, you’re probably thinking what I was (well, maybe not…) but seriously, why would some mean hearted investor want to prevent Bank of America from helping 400,000 home owners stay in their homes?

Let me attempt to explain:

  1. Countrywide wrote the loans and sold them on the secondary market.
  2. When they sold them, they didn’t sell them in 1 piece, they sold sections (called tranches) to a multitude of different investors and investment companies.   It’s actually possible that parts of one mortgage end up being owned by 30 different “parties.”
  3. The parties who bought these loans bought them as contracts that had a prepayment risk but didn’t buy them with a modification risk.
  4. When a loan gets modified, it changes that contract which inherently changes the value of the investment.
  5. The investors who are suing to stop it are saying that if you start changing the contracts, you are going to effectively ruin the secondary mortgage market because suddenly the value of the loans that are sold becomes an unknown.
  6. If the secondary mortgage market dies, then the housing market dies.   It’s just that simple, without mortgage money, the party is over.

Are the investors saying that the loans shouldn’t be modified?   No they aren’t.   What they are saying is, “I didn’t buy this investment with the thinking that it could be modified going forward.”   So if you, Mr. B of A, want to change the terms, that’s fine, buy it back and change the terms.

The investors are, it seems to me, hoping for one of two results:

  1. That Bank of America will buy the loans back (with our help of course).
  2. That they take their chances with foreclosures.  Given the report that the National Association of Realtors issued earlier on Mortgage Modification Defaul Rates of 50%, that’s not Read more
November 7, 2008

Why I think the Jobs report won’t be helpful for mortgage rates….

by

Mortgage Officer

Author website

Okay, let’s face the fact that the jobs reports and the reports from Ford and General Motors that came out today were ugly.   Not just ugly, downright nasty.

In normal economic times, that sort of bad economic news would send people fleeing stocks and going into the bond market.   That would in turn send bonds and Treasuries up and the rates down.

But that didn’t happen.   Just looking at one indicator – the 10 year Treasuries, the yield went up by .09% today.   What’s up with that?

A couple of things are keeping mortgage rates higher than what the economic fundamentals would justify:

  1. The amount of money the government is spending on bailouts.  The Federal deficit is truly skyrocketing because of all of the bailouts, buyins, rescues, TARPS, etc. that are happening.  That money needs to be financed somewhere because we don’t have the money sitting in the “bank.   When the markets get flooded with additional loan demand, the “buyers” of the debt can demand a higher rate on their money.   That pushes rates up.
  2. The concern that foreigners are not going to be able to continue to buy our debt.   This is not an economic downturn that is only happening in the United States, it’s truly an international downturn.  If, due to concerns about the amount of US debt or due to economic downturns in other areas, foreigners either stop or slow down the amount of US debt that they buy, that will reduce demand and push rates higher.
  3. The Bank of England cut rates by 1.5% this week (in their version of the Fed Funds rate).   We can’t do that.   Why?   Because we’re already at 1.0%.   So the options that the Fed has going forward are more limited than we’d like to see them.

I truly believe that if this was a “normal” economic downturn, we’d see mortgage rates at least .75% lower than we have them.   I also believe that short of a major Federal “buyout” of mortgage backed securities (a topic for another post), we aren’t going to see rates substantially lower than we have them now.   I also believe that it’s going to Read more

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