Good Thursday Morning To You Team!
Aside from the gloomy grey clouds in our weather forecast today, I would like to lift up your spirits and have you know that there is some sunshine out there! Yesterday our team received our 6th contract just within the last 2 weeks!! As mentioned previously we have recently seen an increase in loan applications as well! I also told you about RPM closing a Jumbo Refinance for $1.2 Million within LESS THAN 25 DAYS (In-House Underwriting and Appraisers!!). We’re readily prepared to continue taking on new contracts, loan applications, and any new business – period! If you need to discuss any difficult scenarios, or inquire on our loan programs to include the Jumbo Loan, FHA, Fannie Mae HomePath, or Conventional you know you can always give me a call! I’ll be in the office today, and I look forward to hearing from you! Have a great day!!
“When we direct our thoughts properly, we can control our emotions…” – by W. Clement Stone
FORECLOSURE DIPS, BUT REMAINS ELEVATED
According to the Associated Press fewer Americans fell behind on their mortgage payments in the final three months of last year, but foreclosures are still rising.
The Mortgage Bankers Association said Thursday 8.2 percent of homeowners missed at least one mortgage payment in the October-December quarter. The figure, which is adjusted for seasonal factors, improved from 9.1 percent in the previous quarter and from a high of more than 10 percent in the January-March quarter.
The percentage of homes in the foreclosure process rose to 4.6 percent from 4.4 percent, tying an all-time high for the survey. Foreclosures are expected to peak this year as 5 million troubled loans move through the process.
Typically, the percentage of seriously delinquent borrowers — those more than 90 days behind on their mortgages or in foreclosure — is just above 1 percent. In the fourth quarter, that figure was 8.57 percent.
An improving job market is behind the decline in the delinquency rate, said MBA Chief Economist Jay Brinkmann. He noted that the private sector added 1.2 million jobs last year and the number of people applying for unemployment benefits started to fall in the fourth quarter.
“It’s a sign we’ve turned a corner, that’s the good news,” Brinkmann said. “The bad news is loans in foreclosure are still very high.”
Foreclosures dipped in the July-September quarter as lenders addressed allegations of improper paperwork during the foreclosure process. But by the final three months of last year, many had resumed taking back homes.
Banks are on track to repossess more than 1 million homes this year, the most since the housing meltdown began, according to foreclosure tracker RealtyTrac Inc. That will drive home prices down because foreclosures are sold at deep discounts.
The foreclosure crisis started years ago when borrowers took out risky loans with adjustable interest rates that they couldn’t afford. Many also qualified for loans without providing proof of income. The crisis spread to homeowners with good credit who took out safe, fixed-rate mortgages, but are struggling in a weak economy.
HEADLINERS & OTHER NEWS
Initial claims increased by 25,000 to 410,000 for the week ending February 12; and the prior week was revised from 383,000 to 385,000. Continuing claims increased by 1,000 to 3.911 million for the week ending February 5, and there are millions more on extended and emergency benefits not counted in this figure. That claims did not jump even higher is encouraging and indicates that the labor market recovery remains on track.
Conference Board’s Leading Indicators increased 0.1% in January after rising 0.8% in December Six of the 10 indicators in the leading index contributed to the increase, led by the interest-rate spread and the stock market. The interest-rate spread between the overnight federal funds rate and the yield on the 10-year Treasury note widened, boosting the index by 0.34 point. “With January’s slight increase, following two large gains, the U.S. LEI is still pointing to economic expansion in the coming months. Falling housing permits and weakening labor market indicators were barely offset by the continued positive contributions of the financial components. The LEI remains on a rising trend, with its growth rate picking up in recent months. However, current economic conditions, as measured by the coincident economic index, while improving slowly, remain weak.” Says Ataman Ozyildirim, economist at The Conference Board.
with the UST rally pushing the 10-year note yield down to 3.56%, the lowest level since Feb. 4. This could possibly set the stage for a continued rally to test 3.50% resistance. The market has basically erased the selloff since the January nonfarm payrolls report and the 10-year yield has fallen from a nine-month peak of 3.77% on Feb. 9. Two Iranian warships will pass through the Suez Canal and the Iranian government is in contact with Egyptian officials to arrange passage, and pro-democracy protesters in Bahrain are demanding the government resign, boosting demand for safer U.S. assets. The Fed will be buying Treasuries maturing between 2018 and 2021 today, and the U.S. will also be auctioning $9 billion of 30-year Treasury Inflation Protected Securities today.
FOMC Minutes: Fed Forecasts Faster Growth as Economy Improves, expecting GDP to grow by 3.4 to 3.9 percent this year, up from the previous forecast, released in November, of 3 to 3.6 percent. The Fed’s outlook for the job market was largely unchanged: 8.8 to 9 percent unemployment this year. “On the one hand, the additional spending could reflect pent-up demand following the downturn, or greater confidence on the part of households about the future, in which case it might be expected to continue,” the minutes noted. “On the other hand, the additional spending could prove short-lived, given that a good portion of it appeared to have occurred in relatively volatile categories such as autos.”
GOVERNMENT & HOUSING MARKET – REFORMING AMERICA’S HOUSING MARKET
Late last Friday – when the world was focused on the resignation of Egypt’s President Hosni Mubarak — the Obama administration sent Congress a white paper entitled ” Reforming America’s Housing Finance Market ” laying out its recommendations on how to “wind down” the role of Fannie and Freddie and “dramatically transform the role of government” in the U.S. housing market.
According to the Wall Street Journal, the government suggested these three options which could be slowly implemented over the next five to seven years:
Option #1: The first option puts the vast majority of the mortgage market in the hands of the private sector, where lenders would originate mortgages and securitize them without any government backing.
Option #2: The second option is the same as the first, but would also create a limited government backstop that would primarily become active buying or guaranteeing loans in periods when private lenders retreated during financial shocks.
Option #3: The third option would create new privately owned companies to buy mortgages from banks and sell them as securities. Those securities would be explicitly guaranteed by the government as long as they meet certain criteria.
These government-sponsored enterprises were initially created to offer homebuyers easy and better access to more affordable capital when purchasing a home. And for decades, Fannie and Freddie did help many Americans realize the American Dream of home ownership.
But times have changed since the financial crisis of 2008, which was spurred by the mortgage industry – Fannie and Freddie included – granting subprime loans with adjustable rates to borrowers who really could not afford to be purchasing a home.
In the last three years, Fannie Mae and Freddie Mac have received roughly $150 billion of your tax dollars to prevent their failure and an even worse collapse in the housing market.
So now, it looks likely that Fannie and Freddie will be dismantled for the same reasons they were created. In a press release, Treasury Secretary Tim Geithner said, “This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it.”
REAL ESTATE CONSULTING
Recommended Reads: Julie Garton-Good (“Real Estate a la Carte: Selecting the Services You Need and Paying What They’re Worth”) and Mollie Wasserman (“The End of Six Percent: How to Get the Expertise You Want without Paying A Commission Unless You Want To”) – On Real Estate Consulting
First, it’s extremely important to note that like regular commissions, there is no fixed rate on consulting. Commissions and consulting fees are negotiable. Each agent has to determine the best fit for his or her business.
To understand how real estate consulting works, it’s important to differentiate between consulting and the normal commission sales model.
According to Garton-Good, a salesperson “tells and sells” as opposed to a consultant who “guides but not decides.” Her premise is that consumers want someone who is on their side and who is hired to represent their interests. She also believes that too many agents are working for free. She was one of the first experts to argue for the unbundling of real estate services.
Today, Gen X and Gen Y prefer to research information online or through their friends. As a result, a better approach is to be the “trusted resource” that supplies clients with the informational resources they need to make the best possible decision.
According to Garton-Good, most agents spend way too much time providing service and not being paid for it. “Free” doesn’t exist. In fact, her experience is that the typical real estate agent is worth between $75 and $150 per hour. Consequently, if your hourly rate is $100 per hour and you spent three hours doing an open house or any other activity that doesn’t generate any leads, you just cost your business $300.
Garton-Good says that agents who shift to the real estate consulting approach have a strong understanding of how much their time is worth. Tracking your return on various activities is critical. You must also determine which activities pay you your hourly rate or more. For the activities that are not generating a return, you have two choices: dump them or delegate them.
Wasserman draws the distinction between two types of real estate activity. “Functionary” activities include those activities that technology can handle, such as providing information about local areas, schools, and crime statistics. It also includes activities, such as holding open house events, that do not require a high level of expertise.
Wasserman also argues that the real estate consulting model is your best defense against commission-cutting. To illustrate, for-sale-by-owner sellers normally do not want to pay a listing commission. They may, however, be willing to pay an agent to provide them with comparable sales and to help them with staging their home.
Given that only 5 percent of all sellers successfully sell their own property to a buyer they do not know, there’s a high probability that the FSBO will ultimately list with an agent. As Wasserman points out in her training: “Consulting is the antidote to commissionectomies!” Once they have already paid you a consulting fee, they’re highly unlikely to list with another agent.