As the article notes, “the general ‘up in the air’ condition of Fannie [Mae] and Freddie [Mac] combined with the loss of Federal Reserve MBS funding are expected to push mortgage rates higher.”

As our CEO, Greg Frost Sr., noted recently, trying to “time” the market simply doesn’t make sense. If you’re looking for financing, the time may never be better. Please call us today.

The jobs report showed 36,000 workers dropped from nonfarm payrolls last month — far less than expected but more than the 20,000 lost in January. The unemployment rate held at 9.7%, but many had expected an increase.

Because this report was better than predicted, selling in Treasuries was aggressive, sending prices down and yields to their highest levels in more than a month. Friday’s report could indicate that the employment picture is improving, which would reduce the need for risk-free investments. This, of course, would push yields up.

If you’re interested in reading the entire report, published every day and packed with valuable information you can use in your business from mortgage industry leader Greg Frost, please visit The Daily Communicator: http://www.thedailycommunicator.com/

After several months with the new protocols in place, we have some perspective on the changes. From the buyer’s point of view, the new rules mean a lot more paperwork for a relatively small amount of money, since differences in Good Faith Estimates are rarely significant. And from our perspective, RESPA looks like a Band-Aid solution that doesn’t give buyers credit for their intelligence.

We pride ourselves on following the strictest standards, and we ensure that our people are up on all the latest developments, but we see the chance that too much focus on minutia could make us lose sight of the forest for the trees. Buyers, the details do matter, and you need to get the facts from a reputable broker such as Frost. But fear about relatively small amounts like these shouldn’t keep you from getting on with your lives. And those in the mortgage industry, you need to maintain a focus on what really matters–helping people get the funds they need to make society run, just as our industry has done for most of the last 200 years, by providing sensible, reasonably priced products that fit the need.

If you have any questions at all about what all of this means to you, please contact us today. We’ll be happy to help.

1. On March 31^st, the Federal Reserve will discontinue purchasing Mortgage Backed Securities. Most economists believe we’ll see increased mortgage rates as a result.
2. Those wishing to take advantage of home-buyer tax incentives must have a binding purchase contract in place no later than April 30^th.

Today, I’d like to address a common mistake many home shoppers make – trying to ‘time the real estate market’. In other words, some shoppers try to make their purchase at or near the bottom. In theory, this seems like a good idea. However, the following illustration makes a powerful point:

Hypothetical Home-buying Situation A:

Alvin has his eyes on a home currently listed for $250,000. He’s pretty sure he can negotiate the seller down to $240,000, but right now, the seller’s stuck at $245,000. What if Alvin acts today and pays $245,000 for the home? Assuming he qualifies for a 30-year fixed mortgage with a 5.5% interest rate and puts 20% down*

1. Alvin ends up financing $196,000 ($245,000 x .8).
2. Alvin’s monthly payment (P+I) would be approximately $1,113.
3. Over the 30-year loan, Alvin will pay $204,631 in total interest.

Hypothetical Home-buying Situation B:

Alternatively, let’s assume that Alvin hangs in there for 60 days and gets his target price of $240,000. He feels great because he saved himself $5,000! However, let’s also assume that in the 60 days that passed, the rate on 30-year fixed mortgages increased from 5.5% to 6.5%*. (This type of rate increase can sometimes occur in a week, let alone a 60-day period.) Alvin’s still prepared to put 20% down, so

1. He’ll finance $192,000 ($240,000 x .8)
2. However, because interest rates rose from 5.5% to 6.5%, Alvin’s monthly mortgage payment is $100 higher ($1,213) than in Situation A when he’d paid $5,000 more for the home!
3. Furthermore, Alvin will pay over $40,000 more in interest ($244,885) in Situation B over the life of the loan!

As you can see, trying to time the market can be a risky proposition – and often backfires. If you or anyone you know is in the process of purchasing a home, please feel free to share this advice with them. As always, I’d be happy to conduct this analysis free of charge and am honored by the trust you’ve instilled in me as your mortgage advisor for life.

* By the way, for illustrative purposes I used hypothetical rates for the above scenarios. If you’d like to know what today’s mortgage rates are, please feel free to call me today!

Greg Frost

In his 17 years as a mortgage broker, Edward Kampf developed long-standing relationships with banks that would provide home loans to his customers.

But when the housing crisis hit, some lenders began turning their backs on brokers — the mortgage middlemen who originated the majority of loans during the boom.

When Kampf started having trouble finding financing for his customers, he converted his business to a mortgage banking operation, joining a growing number of mortgage professionals getting out of the brokerage business and into banking.

“It’s not that it’s a utopia, but you have more confidence in underwriting, longer lines of credit and peace of mind,” he said.

Over the next two years, mortgage bankers are going to gain a significantly larger share of the market, said Scott Norman, vice president of the Texas Mortgage Bankers Association.

He expects the 250-member association to grow another 10 percent over the next year as regulations governing brokers become tighter.

But even in his role representing bankers, Norman said taking brokers out of the equation does a disservice to the marketplace.

“They bring a good sense of competition,” he said. “There’s always going to be a mom and pop mortgage broker down the street who can provide you with excellent service with good rates and good fees. I don’t think that should go away.”

A mortgage broker is someone who matches a borrower with a lender.

The broker earns a commission on the transaction, but once the loan has closed, the broker’s involvement ends.

Alternatively, a mortgage banker typically provides its own funds and therefore assumes more risk.

The number of brokers multiplied during the housing boom when lenders were eager to loan to almost anyone.

Image problems

Their ranks began tapering off when the market cratered and they were painted as greedy and untrustworthy.

To distance themselves from brokers, some large financial institutions ended their wholesale lending divisions that funded loans brought in by third-party brokers.

They began to focus exclusively on retail customers.

Kampf said borrowers seeking second homes, construction loans and jumbo financing were considered high risk — even if they were doctors or lawyers with great credit and plenty of cash in the bank.

Brokers were getting fewer referrals from real estate agents, too.

“It’s easier to market yourself to Realtors as a banker versus broker because of the perception involved,” Kampf said. “From a marketing standpoint, it’s been a benefit.”

Kampf has set up a branch of the Frost Mortgage Lending Group, an Albuquerque, N.M.-based mortgage bank that has lines of credit with national wholesale lenders.

Faster service

“What’s benefited us is faster underwriting term times, faster closing term times, more lenders in which to chose and the confidence of knowing that the lender that approves the loan is actually going to fund the loan at closing,” he said.

Mortgage brokers are facing regulatory hurdles, too.

Come next spring, they’ll be required to be licensed with the state.

The process will include background checks and continuing education requirements.

The part-timers

“This is going to go a long way toward making the part-timers get out of the mortgage industry,” Norman said.

And in January, brokers will have to start disclosing their profits on loan transactions.

Stacy London, president of Houston Capital Mortgage and a member of the Finance Commission of Texas, compares it to a car dealer revealing on the invoice how much it stands to make.

“The reason why we’re seeing brokers become bankers is they’re very afraid of the new environment and this regulatory change,” she said. “We kind of feel like the target’s on our back.”

nancy.sarnoff@chron.com

By leveraging Web 2.0 social media tools, Frost Mortgage has a greater opportunity to reach our valuable clients, referral partners and branch partners online.

Our commitment is to provide updated daily information relevant to the needs of Homeowners, First-Time Home Buyers, Real Estate Agents, Financial Planners and our Branch Partners.

This site is designed to communicate with our viewers on their terms by including several interactive tools:

• Simple Contact Forms
• A Quick Mortgage Application / Questionnaire
• Google Maps  – to locate a branch near you
• Mortgage Calculator next to each article or page
• Content Categories – so you can easily find the information you need

We look forward to connecting with you on the web as our online presence evolves.

Please feel free to contact us today if you would like more information about working with Frost Mortgage Lending Group.

Thank you,

Greg Frost Sr.

For the third consecutive week, mortgage rates rose and average loan fees increased, too.

Amid all of the negative economic news, however, there were two bright spots worth identifying and discussing.  They show that country may be closer to economic recovery than expected.

First, the supply of “used” homes for sale fell from 11 months to 9 months nationwide.  This suggests that homebuyers are re-entering the housing market in force, a signal that home prices are nearing equilibrium.

And, second, the nation’s GDP — a measurement of the country’s complete economic footprint — didn’t fall by nearly as much as what the experts had predicted.  A positive surprise like this makes us wonder about what else the Doomsday Economists may be wrong.

We won’t have to wonder long.

With this week comes copious amounts of data, legislation and rhetoric to influence mortgage rates.  Some of the news-bites that mortgage markets will digest this week include:

• The Personal Consumption Expenditures Index report.  PCE is a preferred inflation measurement and inflation is the enemy of mortgage rates. A high reading will pressure mortgage rates up.
• Retail stores report on same-store sales.
• The Pending Home Sales report.  This notes the number of “homes under contract” and is a good gauge for buyer interest and the general health of housing.
• 20% of the S&P 500 firms will report earnings.
• Congress is expected to vote on the Stimulus package.

The biggest impact on rates, however, could come on Friday with the release of January’s jobs report.  Employment data is always market-mover and with the press giving so much attention to layoffs lately, expect Wall Street to be extra jittery it.

Markets expect the economy lose a half-million jobs in last month.

(Image courtesy: Wall Street Journal Online)

Super Bowl Weekend traditionally marks the start of the Spring Buying Season in real estate.  Anecdotally, real estate agents will tell you that buyer activity tends to tick higher at this time of the year.

Meanwhile, with mortgage rates still trolling near all-time lows and Congress debating a first-time homebuyer tax credit, 2009 may bring out even more buyers than we’ve seen in the past.

Just having your home on the market may not be enough to attract an offer, though — the home has to have appeal.  That brings us to home staging — the process by which a homeowner re-organizes and re-presents his home to appeal to as many potential buyers as possible.

Home staging is part-science, part-art, and part-psychology.  Homebuyers tend to judge homes within the first 8 seconds of seeing them so making a quality first impression can mean the difference between getting multiple bids, and just getting a lot of foot traffic.

The 4-minute video gives some quick-and-easy tips, including:

• Create more light in the home
• Clean up the closets and thin them out
• Remove the clutter from every room in the house

Even though home inventories are falling, supplies are still higher than in previous years.  Home sellers wanting to stand out in a crowd may want to consider staging their homes to help them sell more quickly.

Staged homes sell for as much as 17% more money and as much as 40% faster than non-staged ones.

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today.  It remains within a target range of 0.000-0.250 percent.

In its press release, the FOMC reiterated most of the key points from its December 2008 statement, including:

• The U.S. employment outlook continues to deteriorate
• Consumers and businesses continue to cut spending
• The housing sector is still showing weakness

In addition, the FOMC addressed the “extremely tight” credit conditions for U.S. households and business, even as it said some financial markets are showing signs of improvement.

To the Fed, the latter is a precursor for the former.  For Americans needing new mortgages or other forms of credit, it may mean that getting approved gets easier sometime late this year.

Most importantly, the Fed’s press release again mentioned the policy-setting group’s intention to “employ all available tools” to promote economic growth.  This includes the open-market purchasing of mortgage-backed debt that has helped fuel the current Refi Boom. The Fed indicated a willingness to extend the program beyond the initial $500 billion, if necessary.

For each of the Fed’s interventions, though, there is a trade-off.

Buying securities costs money and the Fed — literally — comes up with the cash by printing it.  The extra supplies devalue the U.S. dollar which, if left unchecked, can cause the Fed’s plan to backfire in the form of runaway money supply-led inflation.  The Fed is aware of this risk and is pledged to monitoring it closely.

Overall, mortgage rates worsened today after the Fed’s statement.

Source
Parsing the Fed Statement
The Wall Street Journal Online
January 28, 2009
http://online.wsj.com/internal/mdc/info-fedparse0928.html