The Fed, and Record Rates (again)

from HSH Associates Financial News Blog by Tim Manni

According to the latest issue of HSH’s Market Trends Newsletter, “The Fed, and Record Rates (again),” the conclusion of the Fed’s two-day FOMC meeting sent conforming mortgage rates down once again to historically-low levels.

“Without usual policy tools at its disposal, the Fed again weighed heavily into mortgage and bond markets. At the close of its meeting Wednesday, The Fed announced an extension of its plan to buy up Fannie and Freddie-issued debt and mortgage-backed securities offered by the GSEs as well as Ginnie Mae (FHA-backed product) and detailed a long-rumored plan to start purchasing certain Treasury securities.”

“Conforming mortgage rates moved into record territory again this week. After falling to a new daily low average rate of 4.94% on Thursday, HSH’s weekly average for 30-year FRM conforming money also managed a 13-basis point dip to 5.07% + 0.28 points, while the overall average for fixed-rate mortgage money (expressed as HSH’s Fixed-Rate Mortgage Indicator) slipped back by seven basis points, landing at 5.62%. The FRMI’s 5/1 Hybrid counterpart moved backward by six basis points to 5.36%, while Federally-unsupported jumbo 30-year FRMs remained steady for the week.”

“The Fed originally announced a $600 billion mortgage support plan back in November 2008, with $100 billion available for GSE debt and $500 billion for MBS purchases. The plan kicked in in early January, and since then the Fed has been accumulating MBS at about $4 billion per day, with estimates that they have used up about $200 billion of the original $500 billion commitment. At such a pace, it’s easy to plot on a calendar just when that original commitment would come to a close — somewhere in May or June. At about $100 billion per month, and with an initial expiry in a month or two, we believe that the Fed’s new $750 billion represents an enduring commitment to this program at least until the end of the year and perhaps slightly beyond. The total of $1.25 trillion may very well mean that virtually all MBS originated this year will find a ready buyer, financial market stress or not.”

“While there was some anticipation that mortgage rates would fall sharply as a result of the program, we note that the Fed didn’t say that they were going to pick up the velocity of their purchases (although they well could). Rather, we think that they wished to signal to the bond market and consumers that rates would remain low and stable for the foreseeable future, and that there will be an entity that will support the good-credit quality mortgage markets.”

California Home Sales on the Rise

by Tim Manni
One of the country’s hardest-hit housing markets has shown significant signs of improvement so far this year. According to the California Association of Realtors (C.A.R.), single-family home sales increased 100.8% in January from a year ago. With home prices at extremely low levels, California has drastically begun reducing their unsold inventory.

The median price of a single-family home dropped 40.5% in January. The C.A.R.’s index of unsold homes depleted from 16.6 months in January of 2008, to just 6.7 months in 2009.

“The strength in California home sales in recent months signifies that the market is gradually working its way through the large numbers of distressed sales that have followed in the wake of the troubled mortgage problem. With favorable home prices and historically low mortgage rates, affordability in the California housing market is now at its highest since the start of the decade,” said C.A.R. President James Liptak.

Sales in Southern California’s six-county region continued to improve last month as well. The L.A. Times reported that homes sales increased 41% in February from 2008.

The recent uptick in housing reports hasn’t been limited to just the west coast. National housing starts rose 22% in January according to the Commerce Department. Indicators for new construction are also on the rise. Applications for building permits jumped 3% in February.

Economists are quick to warn against getting too excited over the news. However, if these statistics hold in the coming months, especially in foreclosure-ridden states like California, we may be witnessing a significant turnaround.

Watch for changes to lending guidelines!

It seems like just yesterday when I was emailing realtors regarding some of the changes that Fannie Mae had made limiting loans to individuals who have more than four financed properties.  Then I receive this update to which changes the guidelines (Announcement 09-02):

Multiple Mortgages to the Same Borrower
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

Stay tuned – more changes are I am sure on the way!

Attitude and Perseverance Will Help Sales People Survive

January 23, 2009  

By Brad Finkelstein

Telephone sales expert, Art Sobczak, in a recent TelE-Sales Tip, admits that the current business climate is bad. But, he continued, “The successes in life adapt to their environment. They make changes. They act.”

He spoke with an expert on peak performance and motivation, Alan Zimmerman, and asked him what salespeople need to do, right now, to keep their attitudes high and outsell the competition. “Here are his common-sense, on-target answers. First, on attitude:

1. Refuse to blame anyone or anything for sales problems. Blaming anything outside of yourself doesn’t change anything. All blame can do is keep you stuck or make you spiteful, neither of which will turn you into a winner. Ever wonder why one salesperson prospers while another suffers in the same situation? The answer is simple: The suffering salesperson will waste time on blame, while the prospering salesperson is investing time and learning how to get better. What are you doing, right now, to get better? 
2. Refuse to use a loser’s language. The most successful, and I might add, the happiest salespeople, refuse to use a loser’s language. They know that words precede results. They know if they talk like a loser, they’ll end up losing. George Schultz, the former U.S. secretary of state said, “The minute you start talking about what you’re going to do if you lose, you have lost.” The salesperson who will not acknowledge defeat cannot be defeated. That person is guaranteed to win in the long run. It’s a given. 
3. Choose to believe in yourself. Even though you may have some doubts about your sales abilities, even though the balance sheet of your life may show more liabilities than assets, you’ve got to believe in yourself. Sugar Ray Robinson, the boxing champ, said, “To be a champ, you have to believe in yourself when nobody else will.” If that sounds easier said than done, all you have to do is start affirming it. Tell yourself 20 times a day, 100 times a day, “I like myself. I believe in myself. And I am a great salesperson.” Eventually your subconscious mind will start to accept your affirmation, and you will believe in yourself. (By the way, the cynics laugh and make fun of this. Just ask them what their sales results are, though.) 

Mr. Sobczak also relayed Mr. Zimmerman’s advice about what salespeople need to do to keep selling in tough times.

1. Work hard. If someone were to follow you around for a week and painstakingly recorded everything you did to advance your sales career, would that person walk away with a long list of all the things doing to get ahead? Or would that person have a long list of the excuses you gave and the times you wasted? Sometimes people fool themselves into thinking they’re putting out 100% effort, when in reality, they’re not. 
2. Practice endurance. Most sales people want success the easy way, but in reality, success comes only after persistence. “Could the same be said of you? That you never give up? That you endure? Or do people, secretly behind your back, say you bail out when things get a little tough? Do they say you give up way too easily or throw in the towel too quickly? Do they point out the fact that you seldom finish what you start?” asked Mr. Sobczak. 
3. Stay committed. “Everything else being equal, commitment wins every time. So fight back any feelings of discouragement that might get in your way. Don’t allow yourself to hang it up when things get rough,” he said. 

His conclusion: “Most salespeople don’t fail. They just give up.”

In a separate tip, Mr. Sobczak commented on one sales woman who tended to preface everything she said to her prospects with a negative comment. And, he added, not surprisingly, she had negative results. But sales people can overcome this problem.

“First, be certain you’re not now in the habit of negatively preconditioning your listener. And with many people, it is a habit. “Listen to your calls from the perspective of the prospect/customer. Thoroughly analyze your language to determine if you use ‘conditioning’ phrases that frost listeners. Catch yourself before you use them. “Then, get in the habit of grooming an atmosphere in which your listeners will positively view your information. And it’s not that difficult,” he said.

Art Sobczak is the president of Business By Phone Inc., Omaha, Neb. More information about his tips is available at www.businessbyphone.com.

What We’re Hearing

January 2, 2009

By Paul Muolo

Capitalism is a wild and wacky game. And it’s not for those with weak guts, which brings me to the case of IndyMac whose long awaited sale was announced by the Federal Deposit Insurance Corp. Friday afternoon. The new “owners” of IndyMac are essentially a bunch of hedge funds that are well known for some of their contrarian bets in financial services. First and foremost among those private hedge funds is Paulson & Co., led by hedge fund guru John Paulson, who made a killing (a $15 billion killing) by shorting the ABX Index back in 2007 and early 2008. The ABX gauges the value of subprime bonds and we all know what happened there, don’t we? For some reason the FDIC didn’t mention Mr. Paulson’s $15 billion winning bet against the B&C market in its press release. The FDIC’s original investment banker on the sale of IndyMac was Lehman Brothers, which went bust a few months after getting the assignment. The advisor to the consortium? That would be Merrill Lynch & Co., which helped cause the subprime crisis by financing dozens of subprime lenders, buying their loans and packaging them into securities (CDOs) for sale to institutional investors in the U.S. and overseas. (Lehman did that too.) Like I said, capitalism is a wild and wacky game. But who knows any more, really? If John Paulson is putting his reputation (and a little bit of his money) on the line, maybe this actually signals a “bottom” in the mortgage and credit crisis. For the full story on the sale of IndyMac visit: http://www.nationalmortgagenews.com/…

How’s the refi boom looking these days? Answer: it depends on who you ask. On Friday I interviewed Brian F. Benjamin who runs Two River Mortgage & Investment of Red Bank, N.J. Last week, Brian said he received 15 calls for jumbo mortgages where the loan amount was north of $1.5 million. But of those 15 it looks like he will only be able to close two loans. Brian, who operates as a broker, said many lenders have tightened jumbo guidelines by so much that borrowers don’t have a chance. “Some will only do the loans if the LTV is 50% or better,” he said. He also complained about Fannie Mae “adders” where the GSE charges extra points and fees for low FICO score mortgages. He gave an example on a $275,000 mortgage where the borrower has a 659 FICO. The total “adders” (fees) came to 2.55 points. I asked him if the fees were going to the lender or Fannie. His reply: “It’s going to Fannie one way or the other — directly or indirectly,” he said. Meanwhile, one rank and file retail LO for a top ten ranked lender — who requested his name not be used — told us he’s getting “lots of calls” on refinancings via the company’s 800-number. But it’s not a slam dunk by any means. The biggest problem with the applicants who are looking to refinance is “not enough equity,” he said, “or poor credit.” Stay tuned…

3 Ways to Promote Your Products and Services

Here are some simple ways to promote your products and services in 2009 courtesy of Salesrep Radio (check out their excellent podcast here):

1. You talk about your product/services – face to face networking like BNI
2. You write about your product/services – start a blog
3. Other people talk about your product/services – testimonials

Testimonials – use them to fulfill this third type of marketing

• Holidays – we just came through the rounds of cards so send a note anytime you can add some value to your clients’ lives.
• Use social opportunities to build relationships – there really is something to those extra football tickets after all
• ASK for the testimonial using these questions:
  • Why was it a good experience?
  • Describe the experience with your salesperson
  • Describe your experience with the product/service
• Use an online assessment tool – like SurveyMonkey
• Methods:
  • Written – develop a scrapbook, use your website (think of Amazon user reviews)
  • Audio – carry a voice recorder or turn your phone into one
  • Video – next wave – by seeing that client, prospects can see the sincerity of the message.  Check out the Flip MinoHD

What We’re Hearing

December 26, 2008

By Paul Muolo

Want to Help a Struggling Mortgagor? Give Him a Job

Plenty of ink has been spilled in the trade press about loan modifications. And plenty more will be spilled throughout 2009 and then some. Do loan mods work? Should the government spend taxpayer money to restructure thousands, if not hundreds of thousands of delinquent mortgages? Good questions one and all.

The devil, as always, is in the details. Loan mods can be tricky and complicated because of the legal ramifications. First, off, what type of loan mod plan are we talking about? If a lender/servicer holds a troubled mortgage in portfolio and the note has not been securitized it’s then up to that lender/servicer to make a decision on a loan mod. But if a mortgage has been securitized and resides in a legal “trust” that’s where matters get complicated.

Some investors (fearing lost income) will not grant permission to modify a note. They fear that they will lose money on not only delinquent loans but that it sets a precedent. They worry that if they grant permission on nonperforming loans what’s next: subperforming and current mortgages that could go delinquent?

There’s an easy solution to getting around investor concerns. The Treasury Department can use some of the $700 billion of TARP money to purchase MBS backed by delinquent subprime loans. Once these securities and trusts are in the hands of Uncle Sam they can break apart the ABS/MBS into whole loans and do what they like with them. (That’s how one mortgage bottom fisher explained it to me.)

The “buy ‘em and break ‘em” concept sounds promising but then again, Treasury has nixed the idea of purchasing MBS and ABS as part of the $700 billion bailout. Of course, that was the Bush Treasury Department. By the time you read this the Obama team will be just about in place and they can do what they want with the remaining $350 billion, that is, if Henry Paulson doesn’t spend it all before Jan. 20.

It’s sort of funny. What started out as a mortgage crisis has now grown into a pan-business crisis affecting homebuilding, insurance, automobile companies and the list goes on and on. And it all started with the little old 30-year mortgage, the “subprime” of the species. The “virus” has infected the entire mortgage body and then some.

But getting back to loan modifications. I remember interviewing Faith Schwartz of the Hope Now alliance back in the summer. The alliance was marveling at what a wonderful job its members (lenders and servicers mostly) had been doing on helping hundreds of thousands avoid foreclosure. It all sounded wonderful but then I asked her if Hope Now knew how many of its two million in modified loans had gone south again? Her reply: we don’t know.

At press time, the Office of the Comptroller of the Currency had just released a study showing that modified loans restructured in 1Q 2008 had a 36% delinquency rate in the 30-plus-day category and 53% in the 60-plus-day category. The 2Q loan mod numbers were about the same: not good. These figures do not take into account the much ballyhooed IndyMac loan mod program which became operative late this summer when the FDIC took control of that once high flying alt-A lender. Who knows, maybe the IndyMac rewrites will be better. (Agency chief Sheila Bair is counting on it.)

For the mortgage industry and government loan modifications boil down to this: Does it make financial sense to rewrite thousands upon thousands of loans if they wind up going bad eventually? It’s a fair question. Consumers do not go belly-up just because their house becomes “under water.” The payments stop when they lose their jobs. One solution might be to get more Americans back to work, which is a tall task given that the unemployment rate is just shy of 7%.

Any veteran mortgage executive knows there are two basic ingredients driving loan demand (and delinquencies): employment and interest rates. Mortgage rates are starting to fall but without blue- and white-collar industries creating new jobs all the loan modification ideas in the world won’t save the industry, or the nation.

You Are the Message; Package Your Personal Brand

Image consultant Gloria Starr said “In every business and personal life situation, appearance counts! Packaging is all about appearance. Will someone like you, trust you, buy from you, hire you, date you or ask to marry you?

Your brand at a glance: The way you package yourself is not a mask to disguise yourself. It is exactly the opposite. Your personal packaging is a way to communicate the substance, the integrity and likeability of you as an individual.

“People are influenced consciously and unconsciously by your appearance, your physical attributes, your accessories, your speaking pattern and grammar and your gestures. You will be evaluated on your business card, your resume, the car you drive, the pen you write with, the clothing you wear, your voice and your posture.

“Polish, poise, posture, presence and positioning all add up to a fabulous presentation of yourself. Always showcase yourself in the best possible way – your personal and professional most appealing and authentic self.

“Learn to stand out in the crowd. Select garments that suggest power. Clean lines, solid colors and accessories that spell success. Build a core wardrobe around two or three basic colors and add accents in a blouse or shirt and your accessories. Cloak yourself in the garments that spell leader.

“Excellent posture adds presence, makes you look thinner and adds to the look of confidence and leadership. Head to toe, your package should express your talents and ability, your winning attributes and charisma.”

http://www.gloriastarr.com

MTG Benchmark – 12/17

FNMA – 30 Year 4.5% Sale 102.12 19bp

Reaction to yesterday’s huge gains in Mortgage Backed Securities has been underwhelming this morning. It could be that today represents a reversal of sorts on the gains that have been made by floating to this point.

I am in a locking bias today – watch for my next post on the outcome.

What We’re Hearing Daily

By Paul Muolo

It’s official: we’re in a recession! (Twelve months and running, apparently.) Historically, recessions usually spell good news for mortgage bankers because the Federal Reserve (in an attempt to work the nation out of the economic morass) usually cuts short-term rates drastically, which is what we saw earlier in the decade under Alan “The Maestro” Greenspan. But short term rates are already at 1% and the mortgage and housing markets (as we all painfully know) are hardly booming. The question on everyone’s mind is this: when will home values stop falling? The key to answering that question is the unemployment rate, not interest rates. This Friday the new monthly employment figures come out, and based on the headlines of the past four weeks don’t be surprised to see the figure north of 7%. As for interest rates, look for the Fed to cut another 50 basis points off the overnight borrowing rate at its next FOMC meeting…