George's Blog

House Passes Housing Stimulus Bill HR3221 CONFORMING LOAN LIMITS GO DOWN

BAD NEWS FOR CALIFORNIANS AND OTHER HIGH COST AREAS!

This bill is over 700 pages, very comprehensive and very complex. I won’t go into all the details now, except the most important one, that is the current temporary conforming loan limit of $729,750 which is due to expire on Dec. 30, 2008, will be replaced with a LOWER limit of $625,500. That’s great, huh? The conforming loan limit is the maximum loan amount that Fannie Mae and Freddie Mac will buy, and FHA will insure, and is very important because even with all the recent financial turmoil that they have had, they are still the most dependable source of mortgage loan funds available right now.

The temporary loan limit increase to $729,750 occurred earlier this year in emergency economic stimulus package. Because it was only temporary, it is actually a two tiered pricing system- the regular conforming loans up to $417,000 (the old conforming limit), and "conforming jumbo” loans from $417,001-729,750. A whole new secondary market had to be established for the new confumbo loans, with new mbs (mortgage backed securities) instruments created, and whole new set of underwriting guidelines, as well, resulting in a lot of confusion and limited utility to the consumers it was meant to help.

The new loan limit was the result of intense negotiation between the House and Senate. Representative Barney Frank, the Chairman of the House Financial Services Committee, was a very strong advocate for making the temporary limits permanent, but ultimately lost to powerful Republican members of the Senate Banking Committee, who originally wanted only a $550,000 limit, but settled on $625,500. The California Congressional Delegation, lead by Senators Boxer and Feinstein, and Members Gary Miller, Ellen Tauscher, Maxine Waters and Brad Sherman fought valiantly on behalf of California consumers, with Representatives from other high cost areas, but lost out to powerful conservatives from the Midwest on this issue.

WHAT THIS MEANS TO CALIFORNIANS-

If you currently have a loan over $625,500, and have been considering refinancing it, then DO IT NOW. You have until Dec. 30^th to get the loan closed at the lower rates, then you are in Jumbo territory, and the rates are in the high 7’s range, with much stricter underwriting guidelines, and less choices. Also, all the rates have been going up in the last 2 weeks, under fears of inflation, the longer you wait, the worse the rates could get.

If you are thinking about purchasing a home, now is a great time because values have dropped, but that benefit could be negated by the higher rates. Like Bobby Weir said “can’t win for losin”.

The window is closing!!

George Duarte

The “Real Deal Guy” (sm)

Current State of Mortgage Financing...What's Going On?

Anyone watching or reading the financial news over the last few weeks has seen a lot of angst and consternation over the state of the mortgage industry. In fact, one of the larger lenders in the US, American Home Mortgage, was forced to shut down operations recently. But why? What is happening, what does all this mean to you and most importantly... what should you be doing do right now to make sure you are protected?

Here's the scoop.

Over the past several years, many loans were made to homeowners with somewhat nontraditional or "nonconforming" situations, be it a poor credit history, inability to document income, or any number of factors that do not fit within the traditional "box" for home loans. These loans are often called "Sub-Prime", or "Alt-A", meaning that they were somewhat riskier in nature than A credit, prime, or traditional loans. Another type of "nonconforming" home loan is one where the credit and income might be perfectly fine, but the loan amount is higher than $417K, which is the current maximum loan that can be done using pools of money from mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC). If the loan amount is higher, it can certainly be done - it's called a "jumbo loan" - but the end money comes from private institutions, not from the large government sponsored entities of Fannie and Freddie.

Most nonconforming loan product rates popped significantly higher recently. Here's what happened.

The end investor for Subprime or Alt-A loans will charge a premium for taking on a pool of these loans, because they know that traditionally, they might have a higher rate of default and delinquent payments within that risky pool. But lately, default and foreclosure has been on the rise - partly due to the fact that with credit tightening and a soft real estate market, many troubled homeowners are unable to refinance or sell in order to get out of trouble. So now, these end institutions are demanding a much higher "risk premium" for taking on these pools of loans, as they see the rates of default are climbing higher.

But since these institutions are purchasing these pools of loans sometimes months after the borrower has actually closed at a given rate, this increase to the risk premium means that instead of paying $101K for a $100K loan that will bear interest, they may only be willing to pay $95K for that $100K mortgage to account for the risk. Multiply that times thousands upon thousands of loans...and you have millions upon millions of dollars in loss for the company trying to sell the pool at a much lower price than they were expecting. This is called a "liquidity crisis", and is exactly what happened to American Home Mortgage - there was no mismanagement, but they simply got caught holding too many "hot potato" loans, forced to sell them at massive losses...and eventually they had to make the decision to close the doors and stop the bleeding.

Further, even when a lender is able to take some losses, they may be subject to a "margin call". This means that as their losses and risk premiums increase, the value of their loan portfolio decreases. As the value decreases, the credit lines that are secured by those portfolios begin to issue margin calls as the value of the asset that they are secured on is now diminished. This is exactly like margin calls in the Stock market. If you have a loan against a Stock that is losing value, you will get a "margin call" and need to pay down the loan, as the underlying Stock is losing too much value to be considered adequate collateral any longer. So for the big lenders, as their portfolio is losing value due to increased risk premiums and losses...the margin calls start coming in, and they are required to pay down their balances. In turn, this means that they have less availability to fund their new loans, which then exacerbates the problem.

In response to seeing this situation play out in the demise of American Home Mortgage, lenders of other nonconforming loan products increased their interest rates dramatically almost overnight to be better prepared - and likely over-prepared - for increased risk premiums down the road. Even though loans above $417K are not presently suffering from increased delinquencies like the Subprime and Alt-A loans are, these rates popped higher as well, because they are being purchased by smaller private entities that can't afford to take on any margin of risk.

What happens next? The major damage is probably already done, and the present situation will likely settle out over the coming year. Lenders will stop pulling products off the shelf, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize.

But here are a few important things you should DO RIGHT NOW:

ONE: Even if you are not presently in the market for a home loan of any type, make sure that your credit standing is as solid as possible. Many people in the market for a home loan didn't expect they would have a need, and didn't plan in advance to ensure their credit would qualify them for the best possible financing. With no immediate need for a home loan, time is on your side... why don't we take a few minutes together and just make sure you are prepared, should a need arise down the road? Call or email me right away.

TWO: If you are in the market for a home loan, or know someone who is - understand that now is the time to be working with a real qualified professional who can keep you informed of changes in the market and get your loan funded quickly. Now is NOT the time to be playing the risky game of trying to scour the entire nation to find someone who promises to save you a paltry amount on costs, or deliver a rate that seems too good to be true.

Your home and your financing are just too important, and times have changed. I am here to help and advise during these volatile times - and would welcome calls from you, your friends, family, neighbors or coworkers.

George Duarte

the "Real Deal" Guy (sm)

Blog13.doc

Foreclosures/Short Sales affecting Neighborhood Property Values & a Radical Solution Idea

By George L. Duarte MBA, CMC

“The Real Deal Guy” sm

May 15, 2008

One of the most unfair and disturbing things about the foreclosure situation that is not necessarily readily apparent is the knock-on effect on the other neighbors who may be having no problems making their mortgage payments, but who may, for their own reasons, want to sell or refinance their homes in the normal course of their lives.

I recently have had several situations with previous clients who are in that exact position. The problem is with the property valuation process- most of us know that the primary valuation method of residential properties is the “comparative sales” method, meaning that the value of a subject property is primarily derived from a comparative analysis of houses that have sold and closed in the neighborhood, preferably within a half-mile radius. There are 2 other methods of property valuation, but they are used primarily for commercial properties, and not very relevant to residential properties.

So the problem is when a bank owned property (REO) goes on the market, the bank only wants to get paid back what it is owed or close to it. If there was a lot of equity in the property, or if there was a second loan on the property, the bank doesn’t care and will price the property low enough to get their loan back, (wiping out the second loan, by the way, more on this later). If the bank loan was a high LTV, with little equity to begin with, the bank will decide how much of the loan it is willing to eat and price the house accordingly, which could be a substantial discount of 25-30-40%. This could represent a great a opportunity for a speculator investor, or someone who has been priced out of the market in past years, but is terrible for the rest of the neighbors who may wish to sell their homes legitimately, or refinance.

Another side effect of this situation is that now it is also very difficult to get a second loan or equity line of credit, most of these lenders have fled the market completely, primarily for the reason mentioned above.  There are some lenders who are servicing these loans, Countrywide and GMAC in particular, who have notified their customers that the customers would no longer be able to take any additional draws on their lines of credit, particularly in areas of “declining market value”, which California is.

Is there anything that can be done about this situation? As long as this process keeps occurring, it will just prolong the recovery time of the residential property values.

I have an idea that has no chance of being adopted- what if the appraisal and valuation process were temporarily altered to allow the REO’s and short sales infection of a neighborhood to be ignored in valuation of “legitimate” transactions of people who are not in trouble on their loans? In effect, creating a two-tier system of valuation along the lines of a statistical bell curve- the REO’s and short sales would be at the low end of the scale, or better yet, ignored completely. I think this valuation method would be completely fair to everyone, and in fact, would help to hasten the property values recovery by A. limiting the valuation damage exposure to “good” homes”, B. recognizing that low property values are an anomaly relative to a statistically insignificant number of “bad” properties, and C. creating incentive to purchase and therefore creating inherent higher value in foreclosed properties, because as soon as they sold, they would then have instant equity created by being valued as a “good property” again.

I think we have to look at this foreclosure situation like a virulent epidemic- it is unfortunate for the people whose loans went bad and “caught” the disease, but like a plague, those properties should be “quarantined”, and not allowed to “infect” the good properties, whose loans are being serviced and in good standing.

Wow, I thought of that all by myself! It’s amazing what can happen when you have a chance just to sit down and think for awhile.

What do you think? Let’s go to Congress with this, I’ll bet Barney Frank would love this—

Till next time- won’t be so long, I promise

George Duarte, MBA, CMC

“The Real Deal Guy” sm

Blog12.doc

Manage Your Credit and Credit Scores, Pt 2

By

George Duarte

The “Real Deal Guy” (SM)

In our last installment I discussed what a credit score is, some of the inputs that affect your scores, and the great importance of strong scores (over 700). In this part, I will give you some tips to help manage and increase your score, and keep it high.

1. Be very careful about applying for new credit- resist those offers in the stores that say “sign up for a card today, and get an additional 20% off” Whenever a consumer applies for credit an inquiry hits your report, and can deduct anywhere from 5-25 points off your score, depending on how many recent inquiries you have. Many people play the “credit card shuffle” game, paying off credit cards with lower interest rate credit cards, and transferring the balances. While this may seem like a good idea, it is in fact very bad for your credit scores for 2 reasons- you will have a continual number of inquiries, and you will also lose points because you will not have a long history of credit with the same creditors- one of the best ways to boost your score.
2. If you are in the loan process, do not pay off collections and charge offs, negotiate with the creditors, come to a payoff agreement, then pay them off in escrow, which a lender would require anyway. If you are not in the loan process, and do not expect to be applying for a loan for some time, then now is the good time to get those debts cleared up. Feel free to consult with me on the best methodologies for negotiating with creditors-that can be a whole column by itself- I don’t have a credit repair service, just help to advise consumers on how to go about it, and I don’t charge a fee for this advice.
3. Do not close credit card accounts, this is related to item no. 1 above, especially if you have had them a long time. Just pay them down to zero, but leave them open.
4. Do not consolidate your debts into one or two cards, this will hurt you in a couple of ways. The first way will be that you would probably have a balance higher than 30% of your approved loan limit on that card, and will lose points that way. Secondly, you would lose points by closing the accounts that are being consolidated, as mentioned above.
5. Make all your payments on time, even if they are the minimums! If your minimum payment is only $10 or $20, don’t skip it and pay double next time, pay it!
6. Do NOT co-sign for loans for anyone, friends, relatives, kids. More people have had their credit ruined through auto repossessions and other credit problems they have co-signed for, it is a cryin’ shame. If your friends, relatives have bad credit, that is their problem, don’t let them drag you down, too.

So those are the most important things to keep in mind in managing and defending your credit history. I cannot stress strongly enough how important it is to have strong credit-

Till next time

George Duarte, MBA, CMC, CMPS

The “Real Deal Guy” (SM)

Blog 11.doc

George Duarte, MBA, CMC

“The Real Deal Guy”(SM)

In today’s challenging mortgage lending environment, one factor that is more critical than ever is your credit score. This is the number that is determined by the 3 credit repositories- Trans Union has the Classic Score, Equifax has the Beacon Score, and Experian has the Fair, Isaac (FICO) score. A real estate credit report pulls all three databases, and all three give a score for each borrower. Therefore a husband will have 3 scores and a wife will have her own three scores as well. The middle score of the three is considered “the” credit score. A husband and wife credit scores may be very similar, or quite different.

The credit repositories are the huge databases that all creditors report payment and client histories to. Each repository has a proprietary mathematical algorithmic formula in reviewing someone’s credit history that ultimately spits out a number. The inputs of this number are based on the amount of credit, how long the credit history has been established, the debt balance relative to the credit limit, on time payment history, and many other factors that are in fact secret and obscure.

It is very important to understand that good credit scores are more important now than ever, in this very conservative lending environment. Historically, the minimum credit score necessary for a Fannie Mae “A” paper conforming loan was a 620, but now, if it is less than 680 for either party, husband or wife, then Fannie Mae has a significant points surcharge of as much as 1.75 points. The pricing and underwriting now is all about perceived risk, and lenders and their investors are very credit averse right now, and will be for some time.

Fannie Mae and Freddie Mac have lost billions in the last quarter of 2007, and are looking to make it up by surcharges being imposed. They are now charging a .25 point fee, just because they can, for no particular reason, called “adverse market” conditions. They are charging extra fees for cash out, usually .5 point, and a 1.75 point additional fee for a credit score under 680. These can add up to considerable amounts in determining the pricing of a loan in a purchase or refinance, and can even impact it is worthwhile to refinance or not.

For the best financing terms possible right now, you’ll want to have a 720 or higher credit score, 80% loan to value ratio (either 20% down or 20% equity in the property), and full documentation of your income, and at least 90 days worth of payments in cash reserves.

More on credit scores, tips and tricks in the next installment-

George Duarte, MBA, CMC

The Real Deal Guy (SM)

   Much ado had been made of the tax refund checks that will be going out to taxpayers after they file their taxes this year, with the intention that people will go out and spend these refunds and stimulate the economy. Polls do indicate however, that these refunds will go towards current debt service, or put back in the bank for a rainy day, thereby casting doubt on the results of this exercise.

   However, another benefit from the Package that has not been well publicized at all is that the Conforming Loan limit, currently $417,000, will be temporarily raised based upon the median home prices according to local metropolitan statistical areas (MSA’s).

Here in the San Francisco Bay Area, we will qualify for the maximum new conforming loan amount of $729,750. Conforming loans are underwritten and purchased by Fannie Mae (Federal National Mortgage Association), and Freddie Mac ( Federal Home Loan Mortgage Corp.), both of which are known as GSE’s ( Government Sponsored Enterprises). These corporations are hybrids that are partially owned by the US Government, but whose stock is publicly traded. They are designed to provide liquidity to the mortgage marketplace- what they do is buy loans from Banks, Mortgage Bankers, Credit Unions and other lenders, package them in securities, either stocks or bonds, and sell them on Wall St., which then generates more cash for them to buy more loans from lenders.  This ingenious system was created 60 years ago, and is responsible for consistent mortgage loan money being made available to home buyers and owners.

   Fannie and Freddie are more important than ever now, because the other investors in mortgages have fled the Market- the “Credit Crunch” you have heard so much about. Fannie and Freddie are left as the most reliable and consistent source of mortgage money to lend now. FHA loan limits will be raised also to match the conforming loans.

Why This Development is Huge For Us

  California, and other “high cost” areas should have had this higher loan limit formula long ago, but now until the end of December 2008, we have a window to take advantage of.

Who will benefit from this development?

1. People who have jumbo loans now that have adjusted, or will be adjusting.
2. People who have Jumbo fixed rate loans now with a rate over 6.00%
3. People who are looking for homes in the $417,000-$740,000. price range, who otherwise would have been stuck with a Jumbo loan rate.
4. People who have homes for sale in that price range that were Jumbo and now are conforming- greatly increasing the affordability to potential buyers, and marketability of the homes, just in time for the prime spring buying season!
5. People who have subprime loans that have adjusted or will be adjusting, and need some flexible underwriting guidelines can utilize the FHA as a replacement. There are essentially no more subprime lenders in business- those left are like hen’s teeth. If FHA loans limits were higher in the first place, we wouldn’t have had nearly as many subprime loans.  FHA is known and designed for more flexible underwriting guidelines than Fannie and Freddie, and will accommodate credit scores as low as 570.

This is all wonderful news folks! Things are looking up, as long as you or your friends are paying attention to this great opportunity. If you are in the above categories, or know someone who is, you should definitely check this out.

At this time, the conforming 30 year fixed rate are around 6.00% and the Jumbos are around 7.00%, so for a $650,000 loan, the difference is $427.47 per month! Could you use a $427.47 per month raise in your income, or reduction of your outflows? Of course you could-

Don’t wait—

The Real Deal Guy (SM)

George L. Duarte, MBA, CMC, CMPS

March 3, 2008

CONFORMING LOAN LIMITS PROPOSED TO RISE TO $729,750 AS PART OF THE ECONOMIC RELIEF PACKAGE FOR HIGH COST STATES!

    The White House and bipartisan Congressional Leadership has agreed to raise the FNMA/FHLMC (Fannie Mae and Freddie Mac) conforming loan limits from the current $417,000 to $729,750. The formula is the new “high cost” state loan limit is 125% of an area’s average median cost, which here in Alameda County is currently above $600,000. This is a huge development for California in particular, and will have a dramatic and immediate effect in helping to alleviate the real estate and mortgage crisis here. As I’ve mentioned before, there are severe problems currently with people who need to get jumbo loans refinanced, or to purchase a home – the jumbo investors have fled the market, and those that are still in it have tightened their underwriting guidelines, and raised their rates

    In the Bay Area, almost two-thirds of the homes were purchased using Jumbo mortgages last January-July 2007, but at the end of the year this percentage dropped dramatically, reflecting the lower sales activity.

    Now that the White House and both houses of Congress have agreed on the general terms of the stimulus package, a bill has to be introduced, first to the House, then the Senate. The legislators plan on fast-tracking the bill so it gets to the President for his signature by mid-February. At this time, this proposal has only a one-year window, then the loan limits revert back to the way they are now. There is speculation, however, that once this higher loan limit is in place, there will be great pressure to keep it permanently in the higher cost areas, simply because it makes sense to do so, and it helps consumers.

    This will help a lot of people who have jumbo loan amounts who need to refinance out of their ARM loans or their subprime loans that have adjusted or will be adjusting. However, these are still prime loans requiring good credit and equity, documentation of income and cash reserves. If these factors are not available, even these loans may not help some people. Fannie Mae and Freddie Mac have automated underwriting engines that make decisions on a borrower’s circumstances, and there are three different levels of pricing decisions that can occur depending upon how the risk factors are judged. This won’t help people of marginal credit who bought properties with no down payment in the last 2 years, with property values eroded in many places.

Stay tuned for more developments-

George L. Duarte, MBA, CMC

“The Real Deal Guy” (SM)

    The prognosis for the mortgage industry for 2008 pretty murky, but there are several things that are clearly going to occur, and are starting already. There is a lot of legislation on the Federal level, and in California that is already having a big impact on consumers’ ability to get home loans. Politicians have been under fire from constituents and consumer groups to “Do Something” about the mortgage meltdown, and all sorts of proposals are being written into new laws and regulations, that may very well have the effect of “overreacting” and chilling the mortgage market (and housing) recovery. After all, it stands to reason that if fewer people can get loans to buy or refinance homes, fewer new and resale homes will sell, dragging out the eventual housing prices recovery. It’s all about the financing.

    Like all legislation and regulations, there are some very good things occurring, and some things that are actually bad for the consumer and are not well thought out. One of the good things happening is the greater Federal control and regulation of who can be a mortgage loan originator (loan officer or mortgage broker). On January 1^st, there is a new federally based system being put into place a standardized and mandatory process to more thoroughly license and track mortgage brokers and loan officers. 7 states have joined this system immediately, and 42 are expected to be included by the end of 2008. The new system creates a uniform application for mortgage brokers and a database that banking regulators can use to track down loan officers who have been banned from one state from moving to another. This registration covers all loan officers(originators) for state chartered banks and financial institutions, independent mortgage brokerages, credit unions, but does not include those who work for federally chartered banks ( their lobby was too powerful). This system is being put into place and managed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators (CSBS/AARMR). The Anti-Predatory Lending Bill passed by the House of Representatives in November goes further by requiring that loan originators (except federal bank employees) pass a written test, take continuing education courses every year, pass an FBI criminal background check, have their personal credit reports checked, and declare the predominant color of their spouses underwear (just kidding on that last one). There will be even more restrictions developing in California as the year progresses. There is talk in Sacramento about the Dept of Real Estate (DRE) developing a new, separate license for mortgage loan origination from the current Broker or Salesperson license, for example.

    What this even means for the consumer and loan originators, is that far fewer loan agents will be able to get in the business, far fewer will be able to stay in the business and will have to go out of business. I’m ok with this, because I believe the net result will be far fewer competitors in the business, which always had a very low barrier of entry to it, allowing all sorts of amateurs and others who really shouldn’t have been in it. The survivors of the Mortgage Meltdown and these new regulations should be of a much higher caliber, and more professional, thereby being able to render a greater quality of mortgage loan service to consumers, rather the “rate hacks” who just sold the lowest rate and payment regardless of the consequences, as we have seen.

Other Big Changes that will affect consumers-

    There will be reduction and elimination of loan programs, especially “stated income” and “light doc” loans, that will seriously impact self employed borrowers, and others of unconventional or hard to document income.

    There will be much tighter underwriting guidelines- higher credit scores, more cash reserves required, qualifying at fully indexed rates on ARMs, higher down payments, restrictions on cash out amounts, lower debt ratios, etc.

    Pre purchase planning is more critical than ever-More on these subjects in the next installment.

George L. Duarte

“The Real Deal Guy”(SM)

End of the Year Housing Report for Alameda County, California

Report from the Bay East Assn. of Realtors®, Pleasanton, California

    For single family residences, the median price for an existing single family detached home increased slightly compared to the same period a year ago in Southern Alameda County, according to statistics compiled by the Bay East Assn. of REALTORS ®. The October 2007 median price was $645,750, an increase of $5,750. from the October 2006 median of $640,000. For Condos and townhouses, the October 2007 median price was $497,000 an increase of 2% over the $488,000 median of October 2006.

    Single family dwelling sales year to date declined 26.3% from the same period as last year. Sales were down from 5,662 in 2006 to 4,167 for the same period in 2007.

    Days on Market (DOM) continues to increase for existing homes in comparison to last year. The average year to date DOM for a single family detached home was 58 days, an increase from 31 days in 2006.

    What, the average home price ROSE in 2007? That’s not what the pundits and doomsayers have told us! Property marketing times have increased, true, but the values have, on the average, gone up this year.

    In this type of market, in order for properties to sell, it is imperative that they are spotlessly clean, uncluttered and “staged” both inside and out, curb appeal is critical; priced very well and realistically for the market; available for open houses, have a lockbox for convenient showings; and some patience.

    A famous politician once said “all politics is local”, and the same is true for Real Estate. There are many places in the US that have strong housing markets that are appreciating, all due to the factors of their local economies, especially employment. Here in Alameda County, we are well located close to the major employment markets of the Silicon Valley in the South Bay, and San Francisco, both places having strong employment for some time now. High Tech in particular is expected to continue to do well, and be one of the bright spots in the economy for the foreseeable future. History has proven that strong employment almost always equals a strong housing market. Further good news is that we are coming soon into the prime Real Estate sales season- the Springtime. It is well known that buyers are very interested in the home buying process throughout the Spring, so that they can be settled in their new homes in the summer, with the kids all set for their new schools in the fall.

    What factors can cause the wheels to fall off this cart? There is much uncertainty in the economy right now- overreaction in the mortgage markets causing elimination of loan programs, and greatly increased restrictions on the loan programs that are left; possibility of a recession, caused by inflationary pressures on oil and other consumer prices; consumers just getting burned out and feeling overburdened with their debt loads.

Till next time,

George L. Duarte

The Real Deal Guy(sm)

The “mortgage meltdown” has certainly created a lot of chaos, uncertainty, inconvenience and pain for many people, but is it truly disastrous as many claim?

Some Facts to consider-

-Housing starts are at the same levels as in 2002

-Mortgage volumes are projected for 2007 to end up at around $2.5 trillion, either the fifth or sixth largest in US history

-Housing is only about 5% of the US economy

-Sub-prime mortgages account for about 15% of all mortgages, only about 25% are delinquent-about 3.8% of all mortgages. 50% of these expected to go into foreclosure-only 1.9% of all mortgages, 98.1% are good—

-There is no recession- the FED said so in their August and September meetings, and that the economy is suffering from a labor shortage, not a surplus of unemployment (except in the mortgage industry)

-Corporate profits are historically high, with strong balance sheets (except for some banks and most mortgage lenders)

-The Fed has pumped hundreds of billions of $$ into the economy to provide liquidity to the “frozen” secondary market, cutting the FED Funds rate and Discount Rate 3 times in the last 5 months. This translates into lower rates and payments for all types of consumer and corporate debt- car loans, credit cards, lines of credit, all debt that is based on the Prime Rate. The Fed lowering rates DOES NOT AFFECT FIRST MORTGAGE LOANS OR THE FIXED RATES. These are impacted by mortgage backed securities, the behavior of which is similar to the 10 year bonds.

There ar major changes, no doubt about it- the lending industry is turning the clock back to what it was like 10 years ago, with borrowers having to qualify for loans with good credit scores, verifiable income, down payments, cash reserves and an emphasis on fixed rate loan products.

So the vast amount of people are completely unaffected, and actually have good opportunities to get good deals on refinancing low rates, and purchasing reasonably priced housing, and having a lot of choices in doing so.

We feel the pain of people who have been hurt in this market correction, but it has happened recently in the “dot-com” crash, the stock market crashes, and other markets where there has been a speculative frenzy take place.

Remember, things are never as good, nor as bad as they seem. This too shall pass.

George L. Duarte

The Real Deal Guy