The Mortgage Archives

This video is a great visual explanation of the current situation we are in and how we got into it…

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Greenspan, Alan Greenspan.  Unfortunately, he’s no Bond.  What short memories we all have.  The current events happening today are a direct reflection of a foolish Fed holding rates too low for too long.  This mistake helped fuel the bubble, first in housing, then credit, then commodities and oil.  Russian markets are not functioning, the Japanese are not impressed with the Government bailout of Fannie and Freddie and a terrorist attack in Yemen, these, indeed are trying times.  No one knows what the future brings, but at this point, I think it’s safe to say we’re not out of the woods.  Just how deep we’re in, that is the $64,000 dollar question.

W.K. Halick

As I’m sure you are aware the current mortgage market is experiencing what most lenders are calling, “unprecedented disruptions”–what this means is that the business is going through some necessary corrections. The secondary market, where loans are pooled and sold to large institutional investors (hedge funds, mutual funds, annuities etc.) has dried up, meaning that there is no demand and no one is buying these bundled mortgage pools. Although I believe the market has overreacted a bit, the reality is that without liquidity the ability to fund loans has contracted and would be buyers are no longer able to buy.

I am writing this to you today because as a financial professional and sponsoring member of the North Central Jersey Association of Realtors I want you to know that we will continue to close deals for our clients. As other mortgage banks and net branches go out of business (First Magnus, Starwin, ABC, American Home Mortgage, Apex Financial) our position as an independently owned brokerage gives us the ability to access funds from a wide array of sources, which we can shuffle as market conditions require.

Years of experience in this field has taught us that the market will ebb and flow like the tides, yet sound business practice requires stability, strength, and consistency in the face of adversity. We will continue to broker loans in this market, we will continue to persevere and we look forward to working through these challenging times with you and your clients.

W. K. Halick

Caribbean Realty Investment Group has teamed up with the Aceltis Financial Group, located in the USA, to offer residential mortgage loans at US rates for American Borrowers. The loans can be used to finance the purchase of your house, apartment and/or vacation or retirement home in the Dominican Republic. The loan is offered up to 70% of the appraisal value or purchase price, whichever is lower, up to $1,250,000 USD. The financing is offered in two variations. The first product comes with a 5 year fixed period and a 15 year amortization. The second product has a 10 fixed period with a 20 year amortization. Typically, rates on these products run from 8.5% to 9.5%, depending on many factors in each specific deal.

To give an example, take the following hypothetical case - a condominium with a purchase price of $250,000. Depending of the financial strength and credit profile of the borrower we could arrange financing for up to $175,000, with the borrower putting $75,000 down. The monthly carrying costs using the 10 year fixed / 20 year amortization schedule would be $1,616, calculated at an interest rate of 9.37%. This hypothetical case illustrates an actual deal and can be used as a guide to show you how to accomplish your goal and live your dream.

W. K. Halick

Ooh, that got your attention, didn’t it? Well, unfortunately it’s not true. The only thing destroying America is ignorance. The people who took out “exotic” mortgages and didn’t read the paperwork deserve their ever rising payments. When they heard they could get a “1%” rate, didn’t that sound too good to be true? Shouldn’t you have done a little homework on what you were doing? It’s still buyer beware, when has that ever changed? Granted, if people were lied to by their banker or not told all the facts, which unfortunately happens, that is a horrible situation that no one deserves. Again, don’t believe the hype, it’s advertising silly. Read the rest of this entry »

By Bob Ivry

April 25 (Bloomberg) — Cheating on mortgage applications is so widespread and so seldom punished that it’s fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans.

Borrowers and brokers commit fraud when they exaggerate the applicant’s income, qualifying the borrower for a home he otherwise couldn’t afford. Such fraud robbed lenders of an estimated $1 billion last year, according to data collected by the Washington-based Mortgage Bankers Association and the Federal Bureau of Investigation. Read the rest of this entry »

By Mark Pittman

April 24 (Bloomberg) — Bond investors who financed the U.S. housing boom are starting to pay the price for slumping home values and record delinquencies in subprime loans.

They will lose as much as $75 billion on securities made up of millions of mortgages to people with poor credit, says Pacific Investment Management Co., manager of the world’s biggest bond fund. Some of the $450 billion in subprime mortgage-backed debt sold last year has lost 37 percent, according to Merrill Lynch & Co.

BlackRock Inc., AllianceBernstein Holding LP and Franklin Templeton Investments are vulnerable because investors have replaced banks and thrifts as the primary source of money for U.S. mortgages. More than $6 trillion of mortgage bonds are outstanding, dwarfing the amount of U.S. government debt by about 50 percent. Read the rest of this entry »

By Nicholas von Hoffman, TheNation.com
Posted on July 10, 2006, Printed on April 10, 2007
http://www.alternet.org/story/38550/

Ask George Washington what he thinks about fighting a war on credit. Back in his day, Congress printed money to pay for the Revolutionary War but neglected to tax anybody to back up this funny money of theirs. The bills were called continentals and in due course they lost all their value, hence the once-popular expression, “not worth a continental.”

When your money is not worth a continental that means you are suffering from inflation big time. It happened 230 years ago in our War of Independence from the British. We are seeing it beginning to happen now in our war with, well, whoever it is we are fighting. We may not know the names, the whereabouts or the precise whys of the Iraq War but the costs are approaching a trillion dollars.

The Continental Congress was controlled by rich people and rich people do not like to pay taxes. Not then and not now, when we have another Congress controlled by rich people. Different war, same stupidity. Read the rest of this entry »

By Joe Richter and Alex Tanzi

April 10 (Bloomberg) — Prospects for a U.S. growth rebound in the second half of 2007 have dimmed as the housing recession deepens and businesses cut spending, according to economists surveyed this month by Bloomberg News.

The economy grew at an annual pace of 2 percent last quarter, compared with a 2.4 percent pace forecast last month, according to the median estimate of 29 economists surveyed. Growth estimates for the last half of the year were trimmed for the first time since November.

Subprime mortgage defaults and rising foreclosures raise the risk that the already wobbly housing market will contract even more. A decline in business investment and slower consumer spending will prompt the Federal Reserve to reduce interest rates sooner than previously anticipated, the survey showed.

The subprime problem “is a brand-new kind of shock,” said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. “The data we’ve seen lately is consistent with an economy that’s just not picking up.”

The forecast for second-quarter growth fell to 2.4 percent from last month’s 2.5 percent, according to the poll taken from April 4 through April 9. Third- and fourth-quarter estimates each dropped by two 10ths of a point, to 2.7 percent and 2.8 percent, respectively.

The reductions, which on the surface seem small, may reflect a lack of experience in estimating how a drop in subprime lending will affect the economy, Harris said. Subprime borrowers are those with poor or limited credit histories.

Subprime Uncertainty

“No one’s sure of the scope of the problems,” said Harris, whose first-quarter forecast matched the survey median. “We don’t have a lot of history to draw from in estimating the impact. It’s difficult to quantify.”

For all of 2007, the economy is projected to grow 2.4 percent, down a 10th from last month’s forecast and the smallest gain in five years.

Subprime borrowers’ inability to make mortgage payments has sparked concern that lenders will tighten credit standards, reducing the number of homebuyers who qualify for a loan. Home sales last year dropped 9.7 percent, the most since 1982, from a record in 2005. Residential construction in the fourth quarter declined the most since 1991.

Business investment is also falling. Corporate spending on new equipment dropped at an annual pace of 4.8 percent in the fourth quarter, the most in four years. Recent figures on sales of durable goods suggest spending decreased again last quarter, economists said.

Job Outlook

For Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta, the loss of business confidence raises concerns about the outlook for hiring. The economy created a better-than- forecast 180,000 jobs in March and the jobless rate unexpectedly dropped, the Labor Department reported last week.

“The labor market has been the one unassailable constant in this expansion,” said Miller. “But, when business investment slows, it may stop supporting the labor market.”

Advanced Micro Devices Inc., the world’s second-largest maker of personal-computer processors, said yesterday it would cut spending by $500 million this year, reduce discretionary expenses and limit hiring to “critical positions.” The reductions followed a decline in sales.

Fewer jobs and falling home prices may lead to less consumer spending, the survey showed. Spending may rise at an annual rate of 2.4 percent this quarter, compared with a 2.6 percent gain forecast last month. Spending will grow 2.6 percent in the third and fourth quarters.

Consumers Hesitate

The fourth-quarter estimate is two 10ths lower than in the March forecast and compares with an average quarterly increase of 3.7 percent during the past decade.

The Fed will hold its target interest rate at 5.25 percent through June and cut it to 5 percent in the third quarter, the survey showed. The reduction comes one quarter sooner than forecast last month.

Persistent inflation may be the reason a rate cut won’t come even earlier, the survey showed. A jump in fuel prices will boost prices in the first half of the year more than previously forecast, giving policy makers less leeway to cut rates should the economy need a lift, economists said. For all of 2007, consumer prices are forecast to rise 2.5 percent, the same as last year and unchanged from March’s estimate.

`Deer In The Headlights’

“Since the risks to both economic growth and inflation are up, it makes the Fed even more uncertain,” Lehman’s Harris said. “The Fed is a deer in the headlights right now. They don’t know which problem to address.” In contrast to the survey median, Harris forecasts central bankers will be paralyzed to act until the middle of 2008.

John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, is among economists maintaining forecasts for stronger growth later this year. The drag from housing will dissipate and corporate spending will recover, leading to faster growth, he said. Still, the outlook is less than certain.

“It’s a tricky situation,” Silvia said. There is “a higher degree of risk” and less agreement than usual, he said.

To contact the reporters for this story: Joe Richter in Washington at jrichter1@bloomberg.net ; Alex Tanzi in Washington at atanzi@bloomberg.net

Last Updated: April 10, 2007 08:21 EDT

Canadian Press: ALISON GREGOR

NEW YORK (CP) - The troubles in the U.S. housing sector triggered by a plunge in the market for so-called subprime loans could delay recovery and have “huge consequences” for Canada’s economy, says Bank of Canada governor David Dodge. “Everybody else in the world looks at housing and says that doesn’t have much consequence for demand for us. But of course for Canada it’s exactly the opposite - it has huge consequences,” the central bank governor said Thursday after a speech to the Americas Society and the Council of Americas. David Dodge, Governor of the Bank of Canada, speaks to members and guests of the Americas Society and Council of the Americas. (AP Photo/Mary Altaffer) A slew of U.S. banks and firms that lend to subprime borrowers - consumers with higher credit risks - have run into trouble as rising interest rates and falling home prices increased the number of loan delinquencies and foreclosures. There are worries that it might spill over into the general housing market and lead to a further weakening of the U.S. homebuilding sector, a buyer of billions of dollars worth of Canadian lumber and other materials. In response to questions, Dodge said “the recovery of demand for new housing in the United States and construction of new housing . . . is going to take a bit longer than we might have thought last fall.” “We’ll have perhaps more repossessions coming back on the market in the next year or so, the credit markets for mortgages have tightened up a bit, so that means a little bit slower growth of demand, and we have an accumulation now of pretty close to nine months of newly built but unsold homes on the market.” Dodge said troubles in the U.S. housing market would affect Canadian producers of everything from two-by-fours, plywood and oriented strandboard to windows and doors, plumbing fixtures, copper pipe, steel beams and cement. “Those industries are located all across the country, but we have quite a concentration of those industries in Quebec and Ontario, selling into the Northeast and Midwest, although it’s not limited to that, right across the prairies and B.C. as well. The volumes are quite large.” Canadian financial companies have tried to calm fears that the troubles in the volatile U.S. mortgage market could spill over into their mortgage lending in Canada. They say Canada’s housing market is stronger than that in the United States and U.S. subprime borrowers are higher-risk customers, while Canadian debt-recovery laws are generally more lender-friendly than those in the U.S. In his speech, Dodge called for the creation of new economic policy institution for the Western Hemisphere as a way to help countries in Latin America that have been left behind by the economic successes of Asia. He said most Latin American countries have missed out on the benefits of globalization and require a jump-start to spur them on to greater trade liberalization and economic integration. Not only have many Latin American countries not kept pace with the expanding global economy, some are turning their backs on it, he said. He noted that a number of countries in the region “have chosen to adopt trade policies that impede growth and jeopardize improvements in living standards.” Current institutions in the region are inadequate to address the problems of Latin American countries, including high inflation, poor monetary policy and protectionism. “Unfortunately, there is no Organization for Economic Co-operation and Development for the Americas,” he said. “If there were an OECD for the Americas … it could serve the same function as the original OECD did for Western Europe.” It could be a forum where economic policy-makers discuss how to best promote strong economies. Countries like Canada and the U.S. must play a role in leading by example, he added, calling on the two governments to show a greater willingness to open markets and work to complete the Doha Round negotiations of the World Trade Organization. Dodge was also critical of the International Monetary Fund, which he said has “not evolved in step with the global economy.” He said this prevented the IMF from helping avert or mitigate the Asian crisis of 1997, or the Argentine monetary crisis of 2001. “More recently, the IMF has been perceived by some countries as being irrelevant, and its activities have sparked resentment and outright hostility in other countries, including some in Latin America,” Dodge said. The central bank governor called on Canada and the United States to lead international efforts to strengthen the IMF, so it can become a more effective body by strengthening its surveillance function, its governance and make it more representative of the new world economy. Modernizing the IMF would help some countries in Latin America support and engage with the institution, he said. “Not only would a stronger IMF be a more effective forum for dealing with the policy challenges now seen in Asia, it would also be more effective in encouraging the countries of Latin America to engage more fully in a liberalized financial trade order,” he said.

© The Canadian Press, 2007