Many of my clients are experiencing an important life event--buying their first home, vacation home, or investment property, or downsizing to a condo after adult children have moved on. I don't know how many times I've heard a client say, "I just don't know how I'm ever going to get all my stuff organized for this move!"
Fortunately there is help available! Whether you are moving or just need some advice on how to best organize your kitchen, office, basement or garage, I suggest you check out Organized Transformations. They even offer a FREE 30 minute consultation. Take a look at their web site and give them a call. You will be glad you did!
Tuesday, August 28, 2007
Wednesday, August 15, 2007
Emergency Mortgage Market Update
Current State of Mortgage Financing...What's Going On?
Anyone watching or reading the financial news over the last few weeks has seen a lot of angst over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations recently. But why? What is happening, what does all this mean to you and most importantly... what should you be doing do right now to make sure you are protected?
Here's the scoop.
Over the past several years, many loans were made to homeowners with somewhat non-traditional or "non-conforming" situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional "box" for home loans. These loans are often called "Sub-Prime", or "Alt-A", meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of "non-conforming" home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417K, which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC). If the loan amount is more than $417k, it can certainly be done - it's called a "jumbo loan" - but the end money comes from private institutions, not from the large government sponsored entities of Fannie and Freddie.
Most non-conforming loan product rates popped significantly higher recently. Here's what happened.
Companies making Subprime or Alt-A loans will charge a premium for taking on these loans, because they know that traditionally, they might have a higher rate of default and delinquent payments within that risky pool. But lately, default and foreclosure has been on the rise - partly due to the fact that with credit tightening and a soft real estate market, many troubled homeowners are unable to refinance or sell in order to get out of trouble. So now, these lenders are demanding a much higher "risk premium" for taking on these pools of loans, as they see the rates of default are climbing higher.
But since institutions are purchasing pools of these loans from the lenders, sometimes months after the borrower has actually closed at a given rate, the increase to the risk premium means that the institutions buying these pools of loans are willing to pay less, and in this case less than the principle amount of the loans. Multiply that times thousands upon thousands of loans...and you have millions upon millions of dollars in loss for the company trying to sell the pool at a much lower price than they were expecting. This is called a "liquidity crisis", and is exactly what happened to American Home Mortgage, they simply got caught holding too many "hot potato" loans, forced to sell them at massive losses...and eventually they had to make the decision to close the doors and stop the bleeding.
Further, even when a lender is able to take some losses, they may be subject to a "margin call". This means that as their losses and risk premiums increase, the value of their loan portfolio decreases. As the value decreases, the credit lines that are secured by those portfolios begin to issue margin calls as the value of the asset that they are secured on is now diminished. This is exactly like margin calls in the Stock market. If you have a loan against a Stock that is losing value, you will get a "margin call" and need to pay down the loan, as the underlying Stock is losing too much value to be considered adequate collateral any longer. So for the big lenders, as their portfolio is losing value due to increased risk premiums and losses...the margin calls start coming in, and they are required to pay down their balances. In turn, this means that they have less availability to fund their new loans, which then exacerbates the problem.
In response to seeing this situation play out in the demise of American Home Mortgage, lenders of other non-conforming loan products increased their interest rates dramatically almost overnight to be better prepared - and likely over-prepared - for increased risk premiums down the road. Even though loans above $417K are not presently suffering from increased delinquencies like the Subprime and Alt-A loans are, these rates popped higher as well, because they are being purchased by smaller private entities that can't afford to take on any margin of risk.
What happens next? The major damage is probably already done, and the present situation will likely settle out over the coming year. Lenders will stop pulling products off the shelf, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize.
But here are a few important things YOU should do right now:
ONE: Even if you are not presently in the market for a home loan of any type, make sure that your credit standing is as solid as possible. Many people in the market for a home loan didn't expect they would have a need, and didn't plan in advance to ensure their credit would qualify them for the best possible financing. With no immediate need for a home loan, time is on your side... why don't we take a few minutes together and just make sure you are prepared, should a need arise down the road? Call or email me right away.
TWO: If you are in the market for a home loan, or know someone who is - understand that now is the time to be working with a real qualified professional who can keep you informed of changes in the market and get your loan funded quickly. Now is NOT the time to be playing the risky game of trying to scour the entire nation to find someone who promises to save you a paltry amount on costs, or deliver a rate that seems too good to be true.
Your home and your financing are just too important, and times have changed. I am here to help and advise during these volatile times - and would welcome calls from you, your friends, family, neighbors or coworkers.
Regards,Peter
Anyone watching or reading the financial news over the last few weeks has seen a lot of angst over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations recently. But why? What is happening, what does all this mean to you and most importantly... what should you be doing do right now to make sure you are protected?
Here's the scoop.
Over the past several years, many loans were made to homeowners with somewhat non-traditional or "non-conforming" situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional "box" for home loans. These loans are often called "Sub-Prime", or "Alt-A", meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of "non-conforming" home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417K, which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC). If the loan amount is more than $417k, it can certainly be done - it's called a "jumbo loan" - but the end money comes from private institutions, not from the large government sponsored entities of Fannie and Freddie.
Most non-conforming loan product rates popped significantly higher recently. Here's what happened.
Companies making Subprime or Alt-A loans will charge a premium for taking on these loans, because they know that traditionally, they might have a higher rate of default and delinquent payments within that risky pool. But lately, default and foreclosure has been on the rise - partly due to the fact that with credit tightening and a soft real estate market, many troubled homeowners are unable to refinance or sell in order to get out of trouble. So now, these lenders are demanding a much higher "risk premium" for taking on these pools of loans, as they see the rates of default are climbing higher.
But since institutions are purchasing pools of these loans from the lenders, sometimes months after the borrower has actually closed at a given rate, the increase to the risk premium means that the institutions buying these pools of loans are willing to pay less, and in this case less than the principle amount of the loans. Multiply that times thousands upon thousands of loans...and you have millions upon millions of dollars in loss for the company trying to sell the pool at a much lower price than they were expecting. This is called a "liquidity crisis", and is exactly what happened to American Home Mortgage, they simply got caught holding too many "hot potato" loans, forced to sell them at massive losses...and eventually they had to make the decision to close the doors and stop the bleeding.
Further, even when a lender is able to take some losses, they may be subject to a "margin call". This means that as their losses and risk premiums increase, the value of their loan portfolio decreases. As the value decreases, the credit lines that are secured by those portfolios begin to issue margin calls as the value of the asset that they are secured on is now diminished. This is exactly like margin calls in the Stock market. If you have a loan against a Stock that is losing value, you will get a "margin call" and need to pay down the loan, as the underlying Stock is losing too much value to be considered adequate collateral any longer. So for the big lenders, as their portfolio is losing value due to increased risk premiums and losses...the margin calls start coming in, and they are required to pay down their balances. In turn, this means that they have less availability to fund their new loans, which then exacerbates the problem.
In response to seeing this situation play out in the demise of American Home Mortgage, lenders of other non-conforming loan products increased their interest rates dramatically almost overnight to be better prepared - and likely over-prepared - for increased risk premiums down the road. Even though loans above $417K are not presently suffering from increased delinquencies like the Subprime and Alt-A loans are, these rates popped higher as well, because they are being purchased by smaller private entities that can't afford to take on any margin of risk.
What happens next? The major damage is probably already done, and the present situation will likely settle out over the coming year. Lenders will stop pulling products off the shelf, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize.
But here are a few important things YOU should do right now:
ONE: Even if you are not presently in the market for a home loan of any type, make sure that your credit standing is as solid as possible. Many people in the market for a home loan didn't expect they would have a need, and didn't plan in advance to ensure their credit would qualify them for the best possible financing. With no immediate need for a home loan, time is on your side... why don't we take a few minutes together and just make sure you are prepared, should a need arise down the road? Call or email me right away.
TWO: If you are in the market for a home loan, or know someone who is - understand that now is the time to be working with a real qualified professional who can keep you informed of changes in the market and get your loan funded quickly. Now is NOT the time to be playing the risky game of trying to scour the entire nation to find someone who promises to save you a paltry amount on costs, or deliver a rate that seems too good to be true.
Your home and your financing are just too important, and times have changed. I am here to help and advise during these volatile times - and would welcome calls from you, your friends, family, neighbors or coworkers.
Regards,Peter
Tuesday, August 14, 2007
What Is Going On?
The news seems to be dominated with stories about issues in the mortgage market these days. Foreclosures are up, subprime loans are more difficult to qualify for, and 100% financing requires more documentation and better credit.
What does this mean to you? It depends. In the last two weeks I have been working to stay on top of underwriting changes being announced by lenders. For home buyers with good credit and a down payment there is really no change in the mortgage products available. For clients with good credit and no down payment, we need to consider a single loan with mortgage insurance for two reasons--first, it may provide a lower monthly payment and income tax scenario, and second, if there is no accepted offer on a new home the loan products available may change between now and when you find your home. I try to cover all the possibilities early in the process so that there are no surprises.
Every borrower is different. If you would like to learn more about how the changing mortgage marketplace may affect you, call me today at 414.807.7277.
What does this mean to you? It depends. In the last two weeks I have been working to stay on top of underwriting changes being announced by lenders. For home buyers with good credit and a down payment there is really no change in the mortgage products available. For clients with good credit and no down payment, we need to consider a single loan with mortgage insurance for two reasons--first, it may provide a lower monthly payment and income tax scenario, and second, if there is no accepted offer on a new home the loan products available may change between now and when you find your home. I try to cover all the possibilities early in the process so that there are no surprises.
Every borrower is different. If you would like to learn more about how the changing mortgage marketplace may affect you, call me today at 414.807.7277.
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