TEAM EMPOWERMENT MORTGAGE CHATTER: January 24; Distressed Inventory; RPM Jumbo Program; RPM Co-Branding


“The indispensable first step to getting the things you want out of life is this: decide what you want.”   – Ben Stein



To all of you sport enthusiasts keeping track of who will be meeting each other at the next Super bowl, looks like we’ll be watching the Steelers and Green Bay on Sunday, February 6th. To start off a new week, the news is light, but we do have some RPM News! If you haven’t talked to me about it yet, we’ve got a new 30 Year Fixed Jumbo Loan program rolling out, call me for more details. As mentioned last week, this feature is one of many from RPM, aside from our loan programs offered we also have our own manually underwritten loans which are done in-house as well as our appraisals, also done by in-house by appraisers who are local and know our market and areas. Don’t forget about co-branding, this is a great opportunity for you to continue your marketing even after a home is sold and you’ll also be able to utilize our co-branding library for open house flyers and more! Have yourself a great Monday and a wonderful week! I’m in the office today so please do not hesitate to contact me to discuss any of the above mentioned information or if you’ve got a loan scenario or need a pre-approval!

Rates continue to chop along. MBS prices were better by .250-.375 on Friday, and the 10-yr sitting at 3.42% keeps us right in the middle of our recent range. Traders reported “Seeing good buying of the basis by hedge funds and decent real $ buying 4.5s and 5s is helping MBS firm up into the afternoon. With the expectation of supply being light into the afternoon and continued rally, MBS could go out pretty well to end the week.” The same might be said for this week.

The biggest economic event this week will be Wednesday’s FOMC meeting, with an update on the economy and the Fed’s plans for monetary policy (but don’t look for any change in overnight rates). For economic news, there is nothing slated for today. Tomorrow we have the Case-Shiller 20-city Index, along with Consumer Confidence, the FHFA Housing Price Index (I lose track of the dozens of house price indices that come out every month), and, of course, the State of the Union Address. Wednesday we have the MBA applications index and New Home Sales, along with FOMC rate decision. Thursday has the usual Jobless Claims, but also Durable Goods & Pending Home Sales. Friday is the Employment Cost Index and GDP number for the fourth quarter along with the University of Michigan Consumer Sentiment survey. And don’t forget that $99 billion 2-yr, 5-yr, and 7-yr supply. Currently the 10-yr is about unchanged at 3.42%, and MBS prices are also about the same as Friday’s close.


We are beginning 2011 with much more positive news about real estate than we have had in several years. The pending sales numbers (houses going into contract) have been climbing for several months. Last month’s Existing Homes Sales Report from the National Association of Realtors showed an increase of over 12%. Demand definitely seems to be increasing. Does that mean prices will begin to appreciate? Probably not. Though buyers have finally come out of hiding and started to purchase homes again, an increased inventory of distressed properties is also emerging from the shadows. These houses will impact prices.

Prices are determined not by demand alone but instead by the relationship of demand to the supply of inventory available. We are talking about the ‘shadow inventory’ of homes that will come to market at discounted prices when they are sold as short sales or foreclosures. This inventory has swelled to several million units.


Over the last year, banks have been slowly releasing this inventory to the market being careful not to release too great a number in fear of driving down house values even further. Over 25% of all sales in 2010 involved a distressed property. The numbers increased as the year went on with 33% of all sales in November being in this category. In December, that number jumped to 36%! It now seems that banks are preparing to increase the flow of such properties to the market.

Last month, CNBC reported on economist Nouriel Roubini’s predictions on this issue:

“There has been an effective moratorium on foreclosure,” said Roubini.

And the beginning of the end of that moratorium means more housing supply is about to become available on the market.

“The shadow inventory of not-yet-foreclosed homes – due to the moratorium – will surge in the next year,” Roubini says.

And Housing Wire reported last week that Fannie Mae “directed its mortgage servicers to delay scheduled foreclosure sales 45 days” for borrowers trying to get assistance through certain government programs

What impact will this have on prices? Wells Fargo projected that house prices will drop 8% by mid-year. Fannie Mae and Bank of America have also predicted price depreciation for the first half of 2011.


Not necessarily. Remember, sellers should sell now before prices do begin to fall. However, as a purchaser, you should look at cost. With interest rates on the rise, waiting may result in a higher monthly mortgage payment even with a lower sales price.

As a good example, Mr. Roubini, who was mentioned above, just sold his home and upgraded to a more expensive residence. Get counsel from a mortgage professional before you consider delaying a purchase.

Bottom Line

If you are looking to sell, you probably want to do it before this ‘surge’ of discounted competition comes to market.



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