Stimulus to Aid Seniors with Reverse Mortgage Enhancements
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The 2008 stimulus package increased the reverse mortgage limit to $417,000 in effort to aid the many millions of seniors faced with the financial challenges brought on by a turbulent stock market and troubled economy. The losses have only become more dramatic so far this year leaving many seniors in search of ways to get by financially. Obama’s 2009 stimulus package addresses this concern for senior homeowners by increasing the limit further to match the Fannie/Freddie limit of $625K. Here is the news as announced by the National Reverse Mortgage Lender’s Association.
NRMLA is pleased to report that the compromise package approved by the House-Senate conference committee yesterday does indeed set the HECM loan limit at 150% of the Freddie Mac limit, which would put it at $625,500 — for the balance of 2009.
The House of Representatives approved the plan this afternoon and the Senate is expected to follow suit this evening.
Please remember that after President Obama signs the bill, HUD still must issue a Mortgagee Letter to implement the change. From our previous experience, we have learned that there is no telling exactly how long it will take for them to get this done, but with the temporary nature of this provision, we hope that they will act expeditiously.
Deals in Coronado Being Offered!
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David Iwashita, President of Iwashita Real Estate Development, joined me on the air on Monday to discuss his exciting project in Coronado. Here is a link to the units with more information.
Good News for Homeowners/Homebuyers
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Existing Home Sales came in a bit better than expected at 4.7M when estimates were for only 4.40M. Mortgage rates are low and with sales prices suffering it seems that many are taking advantage.
In an attempt to drive mortgage interest rates down, the Fed will buy $500 billion of mortgage-backed securities during the first 6 months of 2009. The plan (”Government Sponsored Entities Purchase Program”), originally announced on 11/25/08, will result in the government buying securities that have been guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae and Federal Home Loan Banks (source: USA Today).
The Big Score
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Linda Ferrari, author of The Big Score, will be on the show today. Don’t miss the interview and a chance to win a FREE copy her latest seller.
Not feeling so lucky? Purchase the book right here, right now.
Bogus Dollars = Bogus Returns, What is a Bogadollar?
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What we do know is over the recent economic boom which started with a great injection of luquidity in 2003 our economy has finally hit a wall. Easy loans meant easy money which injected nearly $2.3 trillion into our GDP from 2003 to 2006. This great creation of money was in large part funny money, recklessly lent, artificially distorting the actual cash value of our economy and its assets contained within. This means the value of our economy, stock market and homes were inflated to a level we may not see again for a very long time.
The hang over from this drunken spending has started to hit all Americans from the wealthiest to the least privileged. The effects of our credit crisis, economic meltdown, recession, depression, financial meltdown, foreclosure epidemic, sub-prime debacle, or whatever you like to call it will escape no one. We are all going to be effected by this financial storm we find ourselves in. The old saying “the bottom half manages the top half” couldn’t be more true.
Credit is being retracted, homes are dropping in value, the stock market is down more than 50% and the government is taking drastic steps to medicate the pain. But much like a pain killer that masks the true problem these measures may just delay the inevitable. There are countless foreclosures to still hit the market, and loan modifications are predictably defaulting at a greater than 50% clip.
What is the silver lining and why rehash all this bad news? Even with all this doom and gloom the Fed finally made a wise decision to start using TARP (Troubled Asset Relief Program) bail out money to buy mortgage backed securities from the “Agencies” (Fannie Mae and Freddie Mac). This means are mortgage rates have dropped and are going to remain at a lower level for the foreseeable future. More than likely you’ve made the right financial decisions as 90% of us have and are frustrated by all this. Instead of fighting the inevitable use this opportunity to reevaluate your investments and lower the interest rates on your long term mortgage debt.
As a market geek in order to form my opinions I spend a lot of time listening to the pros who also saw this problem coming. Please follow the below link to a conference call recording from TCW Chief Investment Officer Jeffrey Gundlach that is very enlightening. During the call Jeffrey lays out how the problem came to be with Bogadollars, what we can do to hedge our investments against it, and what the future may hold. There is also an accompanying presentation slides that illustrate the points Jeffrey covers. Happy listening, he has a great strategy that makes a lot of sense.
Presentation Audio
Slides
The Shoe “Bomber”
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The shoe bomb is back, this time via an Iraqi reporter who stripped himself of his shoes and chucked them at the head of President Bush. I must give GW some credit. He dodged both of them like the whole thing was staged and then popped back up to discuss the whole thing.
Loan Modification
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Lenders and loan-servicing companies have been modifying mortgages by lowering interest rates or creating repayment plans through the voluntary Hope Now Alliance. The group reported last month it helped 225,000 borrowers keep their homes in October. While this is just a small portion of those seeking financial forgiveness, there is an even larger number of people seeking loan modification with the help of an attorney. Here is what it is really interesing….
“Most U.S. mortgages modified by lenders to help keep struggling borrowers in their homes fell back into delinquency within six months, the chief regulator of national banks said. Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue, John Dugan, head of the Treasury Department’s Office of the Comptroller of the Currency, said today in remarks prepared for a housing conference in Washington. “ (Bloomberg)
The good news is that many ARE able to stay in their home after modification. The arguement that bailing people out of terms that they agreed leaves us all worse off in the long run is a whole nother story.
No Wonder U.S. Investors Doubt Wall Street. Booyah Jim Cramer!
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An article in the WSJ weekend edition this past Sunday said that investors blame Wall St. for their recent losses. According to the WSJ, Wall Street created the aggressive mortgage products, sold them to us, collected fees for doing so and ran up the stock market all while know the bubble would eventually burst. And we wonder why investors aren’t eager to buy back into the market even while stocks appear to be at a discount. Archived videos, like this one featuring Jim Cramer, don’t help build confidence either! Bartley passed this on to me and I had to post it for all of you! Happy trading!
Why Fed Rate Cuts Do Not Equal Lower Mortgage Rates…
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Nobody says it better than Barry Habib, regular guest on CNBC, FOX News and our very own radio show, Biz Fit. Read below and be sure to visit www.bizfit1700.com for acrhived Biz Fit shows including those with Barry Habib
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Why Fed Rate Cuts Do Not Equal Lower Mortgage Rates May 9, 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 six Fed rate cuts. This is difficult to explain to consumers who have watched a 3.0% 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. So far this year, 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. Within 13 days from that 50bp cut, mortgage bonds lost 269bp. On March 18, 2008 the Fed cut by 75bp and mortgage bonds lost 113bp in 6 days and 214bp in 22 days. Please refer to the Table below.
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Your Credit is Everything!
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I’ve got news for you…a bailout package it not being custom tailored for you and your family and you will need a strong credit profile in order to get through the remainder of the credit crisis. Be sure to check out Linda Ferrari’s FREE special report, Save Your Credit, Save Your Life, at www.lindaferrari.com. I know you’ll enjoy it and probably even want to pre-order her new book, The Big Score - Getting it and Keeping while.
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