[tags]Mortgage, market, Loans, Home Loans, Wharton, Subprime[/tags]

Everyone is waiting for the Fed announcement tomorrow and is hoping a Fed rate cut will rescue the housing and mortgage markets. As I stated once before, a rate cut may create liquidity in the financial markets, however, investors still need to believe mortgage lenders are making quality loans.

People need to understand that increased liquidity at this point merely helps people who have credit and the ability to support it, to borrow at cheaper rates. Lending guidelines are still extremely tight and that is not likely to change until the fat is trimmed from the housing market.

[tags]FED, Bernanke, FOMC, Interest Rates, Housing Market, Bubble, Foreclosure[/tags]

The story here is, that credit is tightening in the mortgage markets.  This is not something that is simply affecting people with crappy credit scores.  Tightening credit is affecting all borrowers of all credit profiles.  Loan programs that were available 9 months ago, are no longer available today to the vast majority of borrowers.

What I find most intriguing at this point is that many of the non-performing sub-prime and other residential mortgages are owned by hedge funds.  In the late 80′s and early 90′s when the S&L crisis was in full effect, the RTC (Resolution Trust Corporation) was tasked with disposing of all of the non-performing loan assets.  The laws in effect at the time prevented banks from holding REO on their books for more than a certain amount of time. I am not aware of any regulation that would prevent hedge funds and non-banks from disposing of their REO.  What does this mean? Nothing other than it is different….and quite interesting.

[tags]Mortgage, Sub-Prime, Subprime, Home Loan[/tags]

Other interesting news this morning is a statement by Home Depot that earnings are going to be way off this year (by 15% to 18%) due to the slowdown in the housing market.  Of course, HD is trading higher right now, probably due to the announced stock by back by Home Depot.

[tags]FOMC, Ben Bernanke, The Fed, Inflation, Home Depot, Economy[/tags]

[tags]subprime, sub-prime, mortgage, loan, bear stearns[/tags]

The bond market has been relatively quiet the past day or two. Recent auctions have seen tepid demand from foreign central banks, which is another cause of the recent spike in U.S. interest rates. The Fed begins a two day meeting Wednesday, with their rate decision and policy announcement scheduled for Thursday, at the conclusion of the deliberations.

[tags]Interest Rates, Bonds, Mortgage Rates, Economy, Economics[/tags]

But, access to money has changed dramatically over the past few months. What many people know is that there is something called the sub-prime market and it has been greatly affected by something. Basically, sub-prime lending focuses on borrowers with less than ideal credit. Typically, this means anyone with a sub 620-660 FICO score. Rates and terms are obviously worse for these types of loans. But, over the past few years, there has been so much liquidity, aka money available to lend, that the rates on sub-prime mortgages were quite low and the terms available were really unheard of. 100% LTV loans were available or very high LTV loans were available to just about anyone with a heartbeat. In short, that is no longer the case today and that is part of what is causing so many problems for many people today. My advice to anyone who is not able to refinance out of one of these loans right now because of lack of credit/equity…sell your property(s) now while you still can get out with what is left of your credit intact and maybe even some cash. Most of these people are scared out of their minds but, for whatever reason, will not entertain the idea of selling their house. It is a house, sell it, move on. Get your financial house in order, fix your credit and plan out your financial future.

Now for everyone else, it is time to re-evaluate where you are at in your financial timeline. You do know where you are planning on being in the next year, two years, five years and ten years down the road right? You have a plan for your children’s college and education, your retirement and living day to day, right? The bottom line is that a mortgage on a house is probably the biggest financial decision that most people will make in their lifetimes and most treat it like buying an apple in the store. The myriad of loan programs that are available today is pretty incredible and the only ones that can really be compared apples to apples is a conventional 30 year fixed-rate mortgage. Most people understand that this is probably not the loan they should be using to get the most out of a debt instrument as large as their home mortgage, but many do not.

If you have been floating for the past few years, refinancing in and out of short-term fixed rate loans or even using some kind of ARM or pay-option hybrid, now may be the right time to lock into something a little more permanent. The bond markets have been selling off a bit in the past couple of days and the outlook from the FOMC is not looking good with regards to inflation. Look, you have to be crazy if you don’t think the price of everything from chicken to beef to gas to homes has gone up dramatically in recent years, yet inflation has not been a front page news story for reasons unknown to me. At this point, my advice woulud be to re-evaluate your financial situation and goals and see how the tax-deductable debt you have on your home or investment property(s) is structured. Maybe you want a little more cash right now to pay for an addition, education, taxes or more importantly to pay off consumer debt (not tax deductable interest). Maybe you have a short term fixed rate loan that is going to come due in the next year and you would like to lock in for 3 to 10 years at today’s rates (good idea in my book). Whatever the case may be, you need to be mindful to what is going on in your financial world and how to best take advantage of the tools that are available to you today.

[tags]Loans, Mortgages, Financing, Debt, Interest Rates[/tags]