Refinance Free Credit

I’m back. Hold your applause please.

It has been several weeks since my last post. I promised the Blown Mortgage cognoscenti that I wouldn’t write posts unless I was moved to do so. I should probably be moved more often, but I digress.

The past four days have been a whirlwind at Brown Ram Mortgage as they have surely been elsewhere. I can break the week down into four parts:

1) Rates Hit the Floor- As 30-year Fixed Mortgages hit 5% the leads from prospective clients roll in real time. My partner and I brace for the windfall of new applications.

2) Existing Clients Want in on the Action- After sending out a flurry of applications to potential clients, old clients come calling with one demand: they want in on the action. Many of those clients whose rates have not changed as a result of the Fed Rates Cut (i.e. 99% of them) heard the news on Good Morning America about “rates being cut.” Why can’t theirs be cut too???

3) Pleading for Clients to Send in Their Applications- My partner and I hit the phones pleading with clients to take advantage of our free 30-day rate lock. “We can lock the 5% for free for 30-days. Worst case scenario you get the 5%, with the best case being a continuing drop in rates, whereby I will move you into the better loan.” Our fax sits quietly at its desk, waiting to be called upon.

4) Mortgage Rates Return to Normalcy (and by normalcy I mean still well below historical averages)- My partner and I call each potential client to let them know that we can no longer honor the rates on the applications due to back-to-back midday rate changes. Tears well up in our eyes; defiant prospects point to another “rate cut meeting” at the end of the month. Frustration brews a cup of coffee in our office kitchen.

So why did people wait? Why did they not send in their application and lock their interest rates at 5%? Why did homeowner’s who could merely swap their 6.625% for a 5.625% without cost hold-off??? Because Predicting Rates is the Newest Vegas Table Game.

This forum has already been used to bemoan the fact that everyone is an “expert” on mortgages, especially those people who aren’t involved in the industry at all. If I knew as much about my potential borrowers jobs as they knew about mine, I would be a qualified auto-mechanic, doctor, lawyer and geologist all at the same time! That mortgage arrogance, as I would like to deem it, is certainly part of the problem. However, there is a greater problem which is greed. Much like at the blackjack, craps or poker tables, mortgage shoppers always want more. Cutting their rate by .5% or even 1.25% isn’t enough because they want more. And much like that friend of yours who “knows how to win at blackjack” because they read a book, each mortgage shopper has the inside scoop from their trusted source about the direction of rates. “I heard on the_________(radio, TV, neighbor, newspaper, etc.) that rates are going to go down even more, so I am going to hold out.”

Well, I have heard that if you double down on 11, split 9’s or higher, and hold on 16, that you can win more money playing blackjack. But, I can count on one hand the amount of times that advice has panned out, so I’d rather take the guaranteed money (or savings) and push away from the table.

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Lots to cover - and I was planning on getting to it all last night until my little one decided not to sleep.  So I had to play all night instead of writing (which was great!) but unfortunately not so timely.  Needless to say there is a lot of ground to cover.  I’ll try to get to it tonight for your reading pleasure.

My initial thought on the new loan limits?  Will that push conforming rates higher?  Bigger loans, more risk, more risk mitigation (capital) needed for Fannie and Freddie.  But that’s at first blush.  I’ll be back.

Happy Friday.

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Fitch Ratings on Thursday cut Indymac Bancorp Inc.’s long-term issuer default rating on $440 million in debt to ‘BB’ from ‘BBB-,” citing continued weakness in the residential mortgage market and the “virtual absence” of a private secondary market.

The cut moves IndyMac’s debt to junk status, and follows a move by Standard & Poor’s in January to cut the thrift’s counterparty credit rating to below investment grade. At the time of the S&P downgrade, Indymac spokesperson Grove Nichols said the ratings cut would have “no practical impact” on its business.

No such statement was made in the wake of Fitch’s ratings cut Thursday, although CEO Michael Perry granted an interview to Bloomberg that suggested the Pasadena, Calif.-based thrift expects a possible return to profitability this year — and allowed him to throw around information on rate-lock volume.

Via Bloomberg:

“I think we’ll have a good shot of returning to profitability for the rest of the year in ‘08,” Perry said. “Not a lot of profitability, but profitability.” …

Declines in 30-year fixed-rate mortgage rates to the lowest since mid-2004 have caused applications for refinancing to surge, Perry said.

“It’s been a long, long time since we had a rate-lock day like yesterday,” he said. “We rate-locked over a billion [dollars worth] of loans.”

Indymac shares jumped nearly 25 percent on Perry’s outlook, rising to $5.43 in very heavy trading to close Thursday’s session; the shares continued to climb an additional 26 percent in after-hours trading to $6.83.

Disclosure: The author held no positions in IMB at the time this story was published.

Fitch Ratings on Thursday downgraded its second ‘AAA’-rated insurer, Security Capital Assurance Ltd. and its primary financial guaranty subsidiaries, cutting its rating five notches to ‘A’ on SCA’s XL Capital Assurance Inc. and XL Financial Assurance Ltd.

The move to downgrade SCA’s guaranty businesses comes after Fitch struck Ambac’s ‘AAA’ insurer financial strength rating down two notches to ‘AA’ on January 18.

Much like Ambac before it, SCA said on Wednesday that it would not raise new capital in an attempt to maintain its ‘AAA’ rating, and that it would instead seek to reduce risk through reinsurance agreements.

Meanwhile, XL Capital also said Wednesday that it expected to report a fourth quarter loss between $1.0 and $1.2 billion, including a $550 million write-off of its 46 percent investment into Security Capital Assurance and a $300 loss provision to cover reinsurance claims tied to SCA.

Saying that it expected SCA to “have likely reduced at least a portion of its capital shortfall” after being put on negative watch last December, Fitch noted that SCA’s execution of its capitalization plan has “fallen materially short of prior expecations.” The rating agency has originally warned it would drop XL’s ratings to ‘AA,’ making today’s cut larger than might have been expected by market participants.

The downgrade of Security Capital means that three bond insurers have been downgraded as a result of the current mess; Standard & Poor’s also downgraded ACA Financial Guaranty Corp. to junk on December 19, sending the guarantor running into the arms of its regulator in an effort to stave off bankrtupcy.

What’s next?
Many of the largest US banks have been under pressure to bail out the monolines as part of an effort to prevent future losses stemming from counterparty risk. Per the Financial Times:

Eric Dinallo, New York insurance superintendent, on Wednesday met executives at the banks and has strongly urged them to provide $5bn in immediate capital to support the bond insurers and to ultimately commit up to $15bn.

Regulators in the US have worked round the clock to find some way of getting the monolines to patch up their capital bases after they miscalculated the risks associated with insuring payments on bonds backed by risky mortgage loans.

Rumors have been flying as well that none other than Wilbur Ross — who swooped in and picked up American Home’s mortgage servicing business out of bankruptcy for $435 million in October of last year — is considering a $14 billion takeover of troubled insurer Ambac. (H/T: Calculated Risk).

The question still seems to be getting a grip on just how much risk really exists in the monoline insurance business, particularly as it relates to insurance written on mortgage-related derivatives. Which means, of course, that $15 billion might not be nearly enough: Egan Jones went on record Thursday with the suggestion that mortgage bond insurers would need a whopping $200 billion to maintain their AAA ratings.

Disclosure: The author held no positions in any insurer or guarantor mentioned in this story at the time it was published.

Either toppling current market logic on its head, or demonstrating just how powerful the pull of housing markets in California, Florida, Nevada and Arizona really is — depending on your viewpoint — First American CoreLogic said today that its LoanPerformance Housing Price Index found annual price gains during November in 31 U.S. states.

Of course that means 19 states posted losses annual losses in November (or, at least, were flat), so I suppose perspective matters here. The October HPI found 21 states in such probable decline, by way of comparison, which means your perspective likely comes down to how you choose to interpret a swing of two states.

Honolulu and Salt Lake City were among the nation’s largest winners, with each posting 12-month price gains besting 10 percent in November, according to CoreLogic. Among the worst-performing MSAs were California’s Inland Empire (Riverside-San Bernardino-Ontario) and the San Diego metropolitan area.

Below is a map of price performance — click for a larger view.

This is the first month that CoreLogic has presented the LoanPerformance HPI numbers, suggesting a shift in strategy at First American as it looks to bolster the market presence of its information services operation.

For more information, visit http://www.facorelogic.com.

Mortgage rates continued to fall for the fourth consecutive week, with rates on a traditional 30-year fixed mortgage falling to 5.48 percent for the week ended January 24. In its weekly rate survey, Freddie Mac said that rates averaged 5.69 percent last week.

Rates on a 30-year fixed-rate mortgage have not been lower since the week ending March 25, 2004.

Five-year Treasury-indexed ARMs average 5.13 percent this week, according to the rate survey, down from last week’s 5.40 percent — the lowest rate since June 2005. Rates on 15-year fixed-rate and 1-year ARMs fell as well, Freddie Mac reported.

“Economic news released last week confirmed the weak condition of the housing market,” said Frank Nothaft, Freddie Mac’s chief economist.

“When the Federal Reserve cut the target federal funds rate by three quarters of a percentage point, the action was extraordinary in both the magnitude and the timing of the rate cut. As a result, mortgage rates continued trending down for the fourth consecutive week across loan products.”

For more information, visit http://www.freddiemac.com.

If you are like me then you did not always know the ins and outs of a home equity loan. Well, this can be a good option for you to pursue, but you cannot go about it without the right amount of information. So here are some things to pay attention to when going after a home equity loan. Learning about the costs will help you decide between a good home equity loan and a bad one.

The Fees of a Home Equity Loan

Like everything else finance related, you will face some fees and costs. Unfortunately there is not much you can do about it, but you can make them work to your advantage. If you know what you will come across, then you can look for how it can best suit you. These fees can cost up to 5 percent of your loan. Which does not seem like a large number, but anytime you can pay less you need to go for it.

Here are some of the fees you will come across:

• Preparing the document fee
• Application fee
• Appraisal fee

In order to borrow from your home equity you need to figure out how much your house is actually worth. That way you know how much equity your house has. That is why there is an appraisal fee. When you originally apply for the equity loan, someone will come out to your house and value your home.

Watch Out for Interest

Interest can always sneak up on you and make you spend more then you bargain for. That is why you need to see what the average rate is. It might not be the best time for you to seek an equity loan. Getting a loan at a rate to high can be very hurtful to your finances. Get to know the trends, because then you may be able to get a sense of when the rates will begin to drop.

Tips to Use

• Become familiar with the rates
• Shop around for the best rates
• Make sure you get all your questions answered from the lender. No secrets!
• Know if there is a minimum payment you have to make

Additional Resources:

• Home Equity Loan
• How Home Equity Loans Work