With the Prime Rate down to 5.0% at banks, what does that do
for borrowers and their HELOC’s? Well, assuming that a borrower still has
a HELOC, some might be searching their database for clients where it makes
financial sense to use their 2nd to pay down their 1st.
One top NL agent said, “Most clients are trying to fix as much as
possible and don’t trust that rates will stay low. Those guys are
watching the economic stimulus carefully.” Another leading agent
affirmed, “Most of the
HELOC's we have done are 80/10/10 for purchase clients, and only encountered
one client who has thought about using his 2nd to pay off his 1st. If
my own first wasn't at 4.875%, I would probably do this with my own
loan!”
Got some extra money? How about buying some mortgages,
changing the terms, and selling them at a profit? Get in line….Investors of all sizes are buying loans for pennies
on the dollar lenders who want them off their books. By paying less than face value for the
mortgages, the new holders can modify loan terms, including shrinking the
amount owed, and still make money. Legislators and regulators are hoping to
encourage wide use of this model, and want lenders and investors in mortgage
bonds to mark down what borrowers owe and then provide them with lower-cost
loans. Check out:
http://www.latimes.com/business/la-fi-loanbuyer-2008may01,1,4825593.story
Chase improved their price adjustments applied to the base
price for the government rates for FHA. Nice!
I don’t know a tremendous amount about corporate
finance, but this doesn’t sound great. In a story from Reuters, Bank of
America stated that in their purchase of Countrywide, “…there was
no assurance any of the mortgage lender's outstanding debt would be redeemed,
assumed or guaranteed,” Bank of America said Countrywide had outstanding
debt of about $97 billion at year end, including Federal Home Loan Bank
advances to Countrywide Bank of about $48 billion, which it expects will remain
outstanding until repaid by Countrywide Bank, in the filing with the SEC. The
bank said it was examining options to dispose of the remaining Countrywide
indebtedness, including redeeming, assuming or guaranteeing some or all of this
debt or allowing it to remain outstanding as obligations of Countrywide.
What recession? Not only is GDP still positive, but today's
April payroll report, expected -75k, only showed a drop in Non-farm payroll of
20k, stronger than expected. The Unemployment Rate moved from 5.1% down to
5.0%, although Hourly Earnings were -.1%. During the last recessionary period,
the US Unemployment Rate hit 6.3% five years ago. Did it move the markets? You
bet: mortgage prices are worse between .250-.5, and the 10-yr yield shot up
into the mid-3.80’s.
Speaking of how many of us feel in the mortgage
business…
A man walked into a cafe, went to the bar and ordered
a beer.
"Certainly, Sir, that'll be one cent."
"One Cent?" the man thought.
He glanced at the menu and asked, "How much for a nice juicy
steak and a bottle of wine?"
"A nickel," the barman replied.
"A nickel?" exclaimed the man. "Where's the guy who
owns this place?"
The bartender replied, "Upstairs, with my wife."
The man asked, "What's he doing upstairs with your wife?"
The bartender replied, "The same thing I'm doing to his business
down here."
Rob
