Do they go to a special school to ’speak FED’??? Good Lord, fellas… we gotta be able to understand this stuff to be able to respond appropriately… or is that not what you want? LMAO

Well, the Federal Open Market Committee voted to cut the Fed Funds Rate by .5% today. The benchmark rate now stands at 1.0%. THIS DOES NOT LOWER MORTGAGE RATES

In its press release [email it to me], the Fed got busy addressing the main issue at-hand, stating that economic activity has “slowed markedly”. Ha… ‘markedly’… have you ever used that word in your life? Well, my readers are notably smarter than I am, so you probably have! Anyway, they pointed to three main causes:

Consumer spending is falling - *what the heck… get out there and spend your money!

Business equipment spending is falling -*well if you would spend your money, they would spend theirs!

Slowing foreign economies are hurting U.S. business -*so now they can’t spend money either!?

* Comments no included in FED Speak… commentary courtesy of your Mortgage Chili Blogger

The voting FOMC members are wary of an “intensification” [how many syllables is that? I count 6.] of the current economic tummy ache.

The announcement’s 4th paragraph is worth pointing out, too. It lists the number of growth-stimulating steps that the Fed has taken and concludes that our credit conditions should improve over time. It does continue by saying that IF markets don’t improve in good time, they will “act as needed”.

In the wake of the announcement, stock markets rallied… and mortgage backed securities… those that are avid readers here, know what they typically do, right? Sure you do. They Tanked! Surprise! Investors liked what the Fed had to say and it drew funds into the stock market from all corners of Wall Street. Yes, that large sucking sound… was all that money flowing back into the DOW and the like. Unfortunately for Orlando mortgage rate shoppers, one of those corners happened to be the mortgage bond market. The mass-exodus from MBS caused Orlando mortgage rates to rise.

As I have said over and over again… almost to the point of sounding like a broken record… it’s a common misconception that the Federal Reserve controls mortgage rates. When they make moves, they don’t effect long-term mortgage rates but do influence things like car loans, credit cards, and Orlando home equity loans.

As the Fed Funds Rate falls back near a 50-year low, mortgage rates are pushing up. Find out if now is the right time to do an Orlando refinance before mortgage interest rates move to high. Get the Orlando Mortgage Pros $199 - Mortgage Planning Questionnaire for FREE, using this link.

Source
Parsing the Fed Statement
The Wall Street Journal Online
October 29, 2008
https://online.wsj.com/internal/mdc/info-fedparse0810.html

NEWS FLASH: THE MAINSTREAM MEDIA is not your friend. Okay, maybe the subject of this Orlando Mortgage Blog Post is a little extreme, but it does prove my point. Sensational sells. Unfortunately, truth doesn’t always carry the same punch if it is not. Despite turmoil on Wall Street, despite the drum beat of doom from the media…the real estate sector continues to deliver good news.

Last month, led by a 22% surge from the West Region, new home sales went UP by 2.7% from August’s numbers. Okay, so the “West region” isn’t exactly Orlando Real Estate news, but the trend is important. Waiting for the bottom? You just might miss it if you don’t perk up and get pre-qualified now.

[A "new home" is a newly-built residence, i.e. a brand-new house.]

The surge in New Home Sales volume is aligned with the other good news we’ve seen from in the real estate market.

Lets count down the good news for real estate that you HAVEN’T HEARD in the last two weeks.

#4: Oct. 8: Homes under contract to sell jumps 7.4%

#3: Oct. 23: Foreclosed homes fall, yeah, you read it right FALL 12% in September

#2: Oct. 24: The supply of “used homes” falls to an 8-mo. low

#1: Oct. 27: The supply of new homes fell by 7%

WHY is this happening?

1. Banks are getting better about selling foreclosed homes… we all saw that needed to change did we not?
2. and builders are wising up and are dumping their excess inventory

This isn’t necessarily good for property values, but it does encourage what the Orlando realty market needs… buyer infusion. Deals are abounding in our Seminole and Orange County markets. In fact as I looked into it, almost 70% of the homes for sale right now qualify for an Orlando FHA Loan.

In addition, because our Lake Mary buyer-to-seller ratio still favors buyers, today’s home seekers… even First-time Home Buyers [Get your 21 FAQ of the $7500 Tax Credit here] enjoy a tremendous amount of negotiation leverage if they are aligned with a local Realtor, making real estate even more attractive.

But, as with everything in business, markets seek balance.

As home supplies dwindle, buyers’ ability to negotiate sales prices and closing costs will fall.

It’s Supply and Demand — as supplies drop, relative demand rises, and prices rise with it.

In every Seminole County neighborhood, homes that are priced “right” [usually because of Realtors not afraid to be candid with their sellers] are selling quickly. And now that banks and builders have figured out… or at least finding out the formula, more homes are going under contract than at any time since 2007.

Much of the current economic climate is being blamed on housing. If the data is accurate, though, we can infer that the climate may not last much longer.

Written by Chris Brown, Orlando Correspondent Lender.

(Image courtesy: AP.org)

Mortgage markets bucked the curve last week and decided to be, well, volatile!  At least there was a change, huh?  Good Grief.

After opening with a solid performance that drove rates down, mid and late-week fears of a global recession reversed that path as Mortgage-backed securities broke back below the 200 day moving average…that is bad for rates.

This was an unexpected outcome for the week considering that:

1. The dollar advanced 5 percent, making bonds “worth more”
2. Oil dropped by 11%, helping to spur consumer spending
3. LIBOR dipped a bit, signaling a credit ‘thawing’ [does that even make sense?]

Each of the above factors would typically help generate new demand for mortgage bonds, pressuring mortgage rates lower.  But, Ta-daaaa… it didn’t happen as planned.

But, this market is anything but normal. While these are low Orlando interest rates, they should have tweaked a little lower based solely on economic data.  Well, here is the domino of what happened:

• Weak stock market showing last week
• Hedge funds were forced to liquidate their holdings and move into cash because of reserve requirements
• The rampant selling dumped an excess supply of mortgage bonds onto the market

This sequence of events completely offset the favorable bond market conditions, and caused mortgage rates to rise sharply since Wednesday.

Unsuspecting rate shoppers found this out the hard way.

This week, mortgage markets should be similarly unpredictable — there is a bevy of economic news and government news on which markets will chew, digest, and attempt to swallow.  If they can, the trick will be not to spew afterward! [Can you say that in a professional mortgage post!?] LOL

On the economic side, the two most influential data points are the Consumer Confidence survey, and Personal Consumption Expenditures. The former will be used to predict Holiday Season shopping — a weak reading should cause mortgage rates to rise — and the latter is the Federal Reserve’s measure of inflation.

If the Personal Consumption Expenditures [PCE] is low, expect calls for more ‘economic stimulus’ which would help mortgage rates to recede.

And, on the government side, the Federal Reserve will hold its scheduled two-day meeting on Tuesday and Wednesday. It’s widely expected that the Fed will lower the Fed Funds Rate by at least 0.250 percent, maybe more. [That is not good for long-term rates in most cases... call me with questions as to why.]

Often, when the Fed Funds Rate falls, mortgage rates rise in the immediate wake of the announcement. Be aware of this if you are currently floating a mortgage rate.

(Image courtesy: Wall Street Journal)

Okay, in an effort to keep my head from exploding in light of all the economic data over the recent x months, I am getting back to some basics, that hopefully some of you will appreciate.

Lets talk First-time home buyers and the questions they might have. A big one I get is:

What does amortization mean?

Basically, amortization (pronounced: am-ohr-tih-ZAY-shun) is the scheduled pathway by which a loan’s principal balance is paid down to $0. I think Amort is latin for “to bring death to”… I remember hearing that somewhere…

Contrast that to an interest only loan in which you are [Einstein here] only paying the interest and are in no way retiring the debt through required repayment of principal.

With respect to FHA mortgages and conventional mortgages alike, amortization is what determines how much of a monthly payment goes to principal, and how much goes to interest. I have found that even the formula in excel is kinda tough, but if you are looking for a mortgage calculator, I have one that will show you the whole amortization table so you can see month to month how much of your payment is going to principle… kinda scary actually. LOL
That being said, amortization schedules are the same for all fixed rate, non-interest only Orlando home loans including 15- and 30-year fixed rate mortgages, as well as all non-interest only ARMs.

Monthly principal and interest payments on a mortgage are based on the mathematical formula above, where:

• P = principal
• A = payment
• r = monthly interest rate
• n = number of payments

It is surprising to some that the relationship between principle repayment and interest is not a linear relationship each month… others are quite aware that payments are heavily weighted with interest on the front end.

In other words, in the early years of your Orlando home loan, the interest due on a mortgage is relatively high versus the principal due. Have you ever heard someone say, “You don’t pay down much of a loan in the first few years anyway…” this is why… it is just math.

This interest-heavy mortgage repayment schedule helps banks to collect as much loan interest as possible up-front, offsetting potential loan losses. [Huh, banks get loan defaults? Who saw that coming?] While the amortization schedule may not seem real fair, it is a backbone of our economy that banks can recoup this money this way and you are likely the benefactor of that in ways the neither you nor I could ever quantify… and yes, this is still the case even in light of the recent past! =0)

“But, can I stick it to the man?”

In a manner of speaking, yes. Just because the bank sets an amortization schedule doesn’t mean that a homeowner can’t change it. In any given month, a borrower can prepay extra principal to the lender, thereby changing the formula and accelerated the loan payoff date. This brings us to the exchange of:

Can I?

Yes.

Should I?

Well, that is a bit more complicated…

Is it a prudent way to allocate your hard earned dollars? I would make the argument that it is not… and NO, this isn’t to ‘protect the man’ LOL. Those that know me would understand what that is humorous. It becomes more a question of equity management… a topic for another post. but that is a whole other post on Equity Management. Briefly though, there are other ways to pad your own circumstances better than by pre-paying principle on a mortgage.

There are online calculators that do the prepayment math for you, but before making extra payments, talk with your loan officer or financial advisor first. Prepaying your mortgage could trigger a stiff penalty from your lender, or put your liquid assets at risk. Prepayment is not a bad plan, but it may be a bad plan for some.

(Image courtesy: Mortgage News Daily)

Not to be an alarmist, but with the new requirements… it may just be impossible for some to get conventional financing…

In an effort to limit risky borrower behavior, however, Fannie Mae announced a new round of mortgage guideline alterations last week.

Unlike the previous 20+ updates that:

• raised income requirements and
• raised minimum credit scores

Fannie’s latest guideline modifications focus on the value of the collateral itself… equity the homeowner would have in the prospective property — simply put; home equity.

Effective December 13, 2008, Fannie Mae will require larger equity positions on some of its insured Orlando purchases and Orlando refinances.

A few of the updates include:

• Limiting primary residence, cash out refinances to 85% loan-to-value
• Requiring 10% down payments on second/vacation homes
• Requiring a 25% equity to remain on all investment property refinances

These changes represent 5% equity increases over the existing mortgage guidelines. Other updates are calling for 20%!

As we head into the election [...thank God... sometimes it feels like it is never going to come] and Congress mulls over another economic stimulus package [Woo hoo...got a problem? Throw money! Because, you know, that has worked in the past!] , it’s unclear if mortgage rates will move higher or lower as we close out the year. We do know, however, that getting approved for an Orlando conforming mortgage will, in general, be harder come December 13, 2008.

If you’re finding yourself on the fence about your next move — whether it’s to buy or to refinance — consider taking the necessary steps before the guidelines change.

Killer mortgage rates don’t mean much if you don’t have enough down payment or equity to refinance to get loan approval.

(Image courtesy: The New York Times)

In today’s marketplace, most people don’t have a ton of money to put down on an Orlando home purchase. Orlando FHA loans allow [right now] as little as 3% down and conventional loans as little as 5-10% down.

Anytime we end up with a first mortgage amount over the 80% loan-to-value ‘mark’ we enter the fun world of Private Mortgage Insurance (PMI). PMI is a mortgage lender’s insurance policy against highly-leveraged houses.

With PMI defaults up almost 40% over last year, though, private mortgage insurers are taking big losses. [Great... them too now?!]

They’re also taking big aggressive steps to prevent additional claims going forward and that is bad news for low-equity homeowners and home buyers.

The changes:

• The first PMI change new, higher insurance rates. Like home insurers that adjust premiums after a worse-than-expected storm season [many of us can relate to that one, am I right?], PMI insurers are raising mortgage insurance rates for all homeowners, regardless of credit history. The higher premiums are meant to counter-balance the higher losses.
• The second change is that some PMI firms are discontinuing coverage for “high-risk” transaction types altogether. This includes purchases of non-primary residences, and cash out refinances above 85 percent loan-to-value.

Both changes, however, point to similar conclusion about home loans: Home equity is increasingly important for today’s homeowner.

PMI rates are higher than they were six months ago and the rising number of defaults makes it likely that rates will rise again soon. As PMI rates increase, so does the cost of homeownership for people whose lenders require it.

ARMs have been strained,

………………………….. ARMs have been twisted.

Since Lehman failed you may find that…

your ARM as around your own neck?.

Ugh… for current home owners with soon-to-adjust adjustable rate mortgages [ARM], the recent financial market upheaval worldwide may lead to a personal catch-22.

This is mainly because most conforming ARMs made after 2003 are based on an index called “LIBOR” [London Interbank Offered Rate... this is the rate that banks charge one another] and LIBOR is up an uncharacteristic 2 percent since September. Ooof.

Historically, LIBOR has tracked the U.S. treasury market, plus about 1/2-percent. This suggests that banks are only slightly less likely to default versus the U.S. government. That communicated that banks, at thte time were only fractionally less likely to default than the US Govt.

Well guess what?

Banks aren’t that confident in one another anymore. Oops. Now you have seen a diverging trend between the two indices. Wow, that makes me feel smart! [Breathe Chris, breathe....]

Today, that spread is around 4.500%.

The LIBOR spike is hurting homeowners with ARMs because adjusted rates on conforming mortgages are often calculated by adding a margin of between 2.250% and 2.750% to the current 12-mo. LIBOR rate.

The big group at risk? You guessed it…sub-prime mortgages, their margins are even more steeperer. [There's my awesome grammar again! Smart felling from before... it's gone now.]

In general, ARMs are not bad in and of themselves, so be weary of News anchors that try to pass off they know what they are talking about… they are just reading this 10 minutes before their broadcast and know likely less than you do if you have a good mortgage professional.

Your mortgage professional, the good ones at least, likely explained that ARMs are typically lower rates because you are taking some of the risk yourself. Unfortunately, current market conditions are worse than could have been imagined 3-5 years ago. If you still have 18 months or more on your ARM, you are in a better position than those with less than that, but to be sure, if you have any questions, call or email your loan officer, or a CMPS like me, to talk about how LIBOR may impact your adjusted mortgage rate and payment.

For many of us… I personally have an ARM as well, it’s less expensive to refinance into a new home loan that to just let the adjustment happen… especially if you can qualify for an FHA loan.

Orlando Short Refinances are a relatively new phenomenon and all the chips haven’t fallen yet as to how these are going to shake out… that being said, they may be an alternative to the ugly process of a short sale. [Which is anything BUT short!] It is important that you know that I am staying on the cutting edge along with a couple other high-profile loan officers from around the country. To get in on the front end of the wave, Apply for a FHA Short Refinance here.

(Image courtesy: Wall Street Journal Online)

Undergoing MyBlogLog Verification

BUY BUY BUY!!!¬† Doooh… did you miss it?¬† Throughout the feverish activity on Wall Street last week, mortgage backed securities sold off with vengeance, driving mortgage rates to their highest levels since July.¬† It was the 4th consecutive week in which long-term rates got more badder. [Grammar police - I know that is not correct, breathe.]

But, with the mortgage markets taking a siesta celebrating Columbus Day on Monday, stocks had a little fiesta with the largest point gain LIKE….EVER! In fact the only reason it is #5 on the chart here is because the other days were back in the 30’s where a, no joke, 8 point gain was a 15% increase! Woooaahhhhh.

The Dow’s gains are expected to push mortgage rates down today, but as of right now, that is not the case.¬† Mortgage Backed Securities are up about +28bps but it is quite likely that they will reverse before days end.

Expect continued volatility until investor fears are somewhat squelched.  For now, keep those seltbelts fastened and all extremities in the vehicle at all times.

This week, look for key inflation info including the Producer Price Index [PPI] on Wed and the Consumer Price Index [CPI] on Thurs.

Both measure the “cost of living” and reflect on price pressures in the economy. If costs are rising, it’s considered inflationary and that tends to edge mortgage rates higher. [Again... the economic anti-Christ, remember?]

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As an Orlando mortgage broker that has weathered the storm of the mortgage meltdown, I have unique insight on the need for bad credit repair in today’s “New World” of Orlando real estate financing. As the mortgage ‘box’ has gotten smaller and smaller, something simply needs to be done to keep people in a position where they can get into homes.

Lenders have increased score requirements [at least for the time being], so how do these masses of people qualify for homes in the short term?

The answer, ethical Credit Repair! As a licensed mortgage broker, I had always distanced myself from credit repair because I felt that it was

• A rip-off and a waste [or even worse, illegal]

• Going to cost the consumer $3000!

Neither of these options were acceptable to me. The rip-off was out for obvious reasons, and the cost of $3000 wouldn’t work because in most cases, if they had $3000… they wouldn’t be in the scenario they were in! Hello…

That is where FLCreditFix.com came in. After doing some digging around, I found a place that is quite reasonable in their service offering and I have seen some pretty spectacular credit repair results.

Now, no one can guarantee that any one item will be taken off your credit report… but Florida Credit Fix, through their affiliation with Fix Credit Biz, does guarantee their service so if you do not see a significant improvement in your credit… you get your money back. 100% Refund if your Bad Credit isn’t improved upon.

As a Mortgage professional, it became somewhat of a no-brainer in order to be able to help people get back into the mix and get decent terms on a mortgage again.

When you couple Credit Repair with Orlando FHA Loans, people are simply able to get back into the housing market and buy a beautiful home again.

Chris

Orlando Mortgages | Orlando FHA Loans

Orlando Real Estate | Florida Reverse Mortgages

Florida Short Refinance | Mortgage Chili Blog

Written by Chris Brown, an Orlando Loan Officer. For more information about purchase loans or refinances on primary residences or investment properties, please contact me directly @ 407-377-0500 x 210.

Today marks the 4-month milestone in little-Brianna’s adventurous life. She has me completely around her finger already, but those of you that have daughters know that we wouldn’t want it any other way.

That said… we can learn things from just about anyone. Things we want to emulate… things we don’t. As a new father, I never imagined that I could learn so much from someone that drools so much!! Whodathunkit?

Without mixing it up too much here are the top 7 things I have learned from my doodle-bug, Brianna.

7. German Shepherds make good brothers and sisters… but their tongues are slippery.

6. Spit bubbles can make anyone smile. [This does not continue with age.]

5. When someone loves you unconditionally, they will put up with a lot of your c#@p!

4. Short naps can make a world of difference in how you get through the day.

3. Just because I am fussy doesn’t mean I am unhappy.

2. Mom’s shoulder is one of the most soothing places on earth.

1. Daughters have a special place in Daddy’s heart…

Chris “happy daddy” Brown