What a week for natural disasters here on the East Coast. After a 5.8 earthquake hit outside Washington D.C., Hurricane Irene is expected to hit North Carolina this morning and work its way up the coast today and throughout the weekend.
Hurricanes at their worst can cause damage to life and property on a catastrophic scale, but fortunately they can be predicted and prepared for.
It’s been a chaotic week of outrage and finger-pointing over the AIG bonuses. Depending upon your view, the bonuses — which were put in place last year and known to the Obama administration since at least early March, if not earlier — are either a necessary evil to keep the employees who know how to unravel the Gordian knot that other, long-gone employees put into place…
The handful of souls who championed the firm’s now-infamous credit-default swaps are, by nearly every account, long since departed. Those left behind to clean up the mess, the majority of whom never lost a dime for AIG, now feel they have been sold out by their Congress and their president. …
We postulated not long ago in this blog that the subprime mortgage markets — one of the causes of the mortgage market meltdown — will re-emerge. What we don’t know is when that will actually occur, but we remain convinced that it will.
There are a number of factors which support the return of the subprime market.
I was thinking about the plan laid out in Foreclosure Assistance Through Eminent Domain?, in which the National Community Reinvestment Coalition (NCRC) urged Congress to adopt their large-scale loan mod program by seizing mortgages via eminent domain:
…the NCRC believes that by utilizing the government’s power of eminent domain, “legal impediments regarding the complexity of selling loans held in securitized pools” can be avoided. Under the plan, eminent domain eliminates an investor’s say in the loan mod process, since the government would purchase the property directly.
Freemoneyfinance.com has a very informative and enlightening post that details the author’s experience when he almost bought a house — the deal never went through. The post reveals how the author locked in on the lowest possible rate, negotiated his closing costs, and received a discount on his homeowner’s insurance:
We got a very low mortgage rate by pitting two different lenders against each other (one a bank and one a mortgage broker). I knew both guys and was upfront with them throughout our process that we would 1. give them both an option to bid on the mortgage and 2. select the lowest bidder. I went back and forth a couple times — with them lowering rates (initially) then closing costs and other criteria (like them escrowing for taxes — something I didn’t want) — before one cried “uncle.”
The most recent issue of HSH’s Market Trends Newsletter, “Mortgage Rates: It’s All About Change,” leads off by discussing last week’s rise in mortgage rates:
October 31, 2008 — Rates go up, rates go down, and back around we go. Home mortgage rates spiked higher this week, as it appeared that at least some money stuffed into shelter amid the recent market storms came back out to play again in equity markets. Stock markets sprung higher, dragging interest rates upward, as the continuing search by investors trying to rebalance uneasy portfolios continues to whipsaw different markets at different times.
HSH’s latest featured article, “The 1% Solution?,” reports on the latest action by the Federal Reserve and its influence on consumers and the market. As most of you know, the Fed cuts its target for the Fed Funds rate to 1% yesterday:
The Fed’s overnight target rate for the cost of interbank lending of reserves is just that: a target. The actual cost of the money fluctuates both above and below that number as demands for those funds between banks waxes and wanes. These increases and decreases reflect stresses in the marketplace.
From HSH’s Market Trends Newsletter:
October 3, 2008 — After an initial and shocking failure, elected representatives spent most of the week scurrying to come up with a “better” version of Treasury Secretary Paulson’s plan to use up to $700 billion in taxpayer funds to buy up bad mortgage and financial assets. In the end, the tab could run as high as $810 billion, with hopes that some of the assets can be resold back into the market for a profit. Of course, this assumes there will still be a market for them — or any market at all — when it’s time to sell them.
It’s believed that with such a plan in place, credit spigots will begin to crack open to a greater degree, and perhaps they might. There’s no certainty there, either. Investors may simply shed bad assets in exchange for cash, invest the money in 100% guaranteed Treasury obligations, and swear off any form of risks for the foreseeable future.
While no one is ready to call the bottom of the worst housing collapse in decades, there were glimmers this week that the severity could be waning.
Reports Tuesday showed the glut of newly built homes on the market fell to a five month low last month, while the decline in home prices is starting to ease, and in some cities values are even starting to rise. What’s more, existing home sales rose slightly from June to July, according to data Monday.
The housing crisis has many little helpers that have contributed to its devastating effect. Real estate agents and mortgage brokers seeking higher commissions through an inflated home-sale price, have sought out home appraisers to fraudulently estimate the value of a home:
After the nation’s last major banking disaster, Congress set up a system to catch rogue appraisers. Their game: inflating the value of homes at the direction of equally unscrupulous real estate agents and mortgage brokers, whose commissions are determined by the size of the deals.
HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.
