Rates Take a Powder

Well, we hung on for a while, but the ride appears to be over for the forseeable future. Bond rates today touched - and then broke - a 21-month high, based on employment numbers that were in the main pretty even, but which are being interpreted as an indicator that the economy is hotter than the Fed likes, and that will mean rising rates.

Note what I'm saying here. I am not saying that these employment numbers are being seen as an indicator of inflation. Employment, even full employment, is a measure of productivity and rising productivity is actually a depressor of inflation. No, what I said was that the market is interpreting this data as being negative because of the FED. The market itself appears to have a good read on what consitutes inflationary pressure, and it isn't seeing any. But the Fed sees it, and that means the Fed will keep raising short-term interest rates. That creates pressure on bond ratess across the spectrum; in the long run, an inverted yield curve is not sustainable.

So if you're buying a house, your interest rate just went up a quarter point in the last two days. Blame Ben Bernanke. Or, if you want to get to root causes, blame John Maynard Keynes, whose completely discredited economic philosophy is, nonetheless, the dominant one at the Federal Reserve.

I have friends that believe the Fed itself is illegal. Though I don't believe this, I am solidly rooting for them to have some impact.

Mortgage Lending - Behind the Scenes

We're currently working a loan for my cousin, and trying to get the loan funded. As most of you know, there is a 3-day right to rescind a refinance loan after the close date, a sort of buyer's remorse thing. The recision period ended Saturday night at midnight, and the loan was due to fund on Monday. It's Wednesday. Still no money.

So allow me to pull aside the curtain for a moment and describe to you how the process works from the time your loan arrives at the originator until you make your first payment:

1. You contact (or are contacted by), an originator. This person is variously referred to as a loan officer, loan consultant, or what have you.
2.Information is collected by that originator and compiled, along with other information (appraisal, title report, credit, desktop underwrite, etc.) into a loan file.
3. The loan file is handed off to a processor, who submits it to a lender.
4. The lender underwrites the file according to the loan program guidelines. All information in the file is verified (supposedly), appraisal is reviewed, etc.
5. The underwriter sends the file to the closing department for final review.
6. The closing department conducts its review and clears the file to close.
7. The clear is communicated to the processor, who tells the originator, who tells you.
8. Closing is scheduled, and the file moves from the closing department to the documents department at the lender.
9. Documents and instructions for closing are transmitted from the lender to the title company. This step actually invilves the preparation of the docs at the lender, transmission of those doc instructions to the processor, to the originator, who approves the docs and sends them back, then the docs are prepared and sent. Most of theses steps, incidentally, involve about ten substeps I just don't feel like typing in there.
10. The file closes at the title company (or the attorney, or the escrow company, depending on your state). The title company overnights the documents back to the lender's closing department.
11. The file, now with signatures on the loan documents, moves from docs to funding at the lender.
12. Funding reviews the docs for errors and transmits the funding conditions to the processor.
13. Conditions are filled and sent to the lender.
14. The lender wires funds to the title company, which disburses the money.
15. The loan moves from the funding department to the warehouse line management department, where the loan is packaged with other loans and sold on the secondary market to a servicing lender, who sends you a little book of payment slips to use in making your payment.

Quite a bit of stuff, huh? Even in the best companies, with the cleanest files, there aer a large number of places where things get hung up. Usually there's a delay after the underwriter first gets the file while conditions to meet the approval are gathered and sent. And re-sent when the fax does not go through. And re-sent when the underwriter goes on vacation and the file is moved to another underwriter. And so on.

On this file, we sent all this stuff in. Then there was a review appraisal. That took a week and a half. Then there was a large delay for something, we're not sure what, before we could get to docs. Finally, we got docs drawn and we closed. We waited for the recision period to expire so we could fund.

Oh, but then the fun began. The funding conditions are usually things like "you missed a signature on a document" or "we need the most recent paystub from the borrower" or even sometimes "the insurance needs to be changed to match the property address". Piddly stuff like that. There are sometimes as many as ten of these. This lender sent us - no exaggeration - 30 conditions. Stuff like "verify employment" and "ascertain recipient of benefit check". They argued with the payoffs at the table, which payoff procedure THEY PROVIDED TO US. And so on ad infinitum. Ray faxed over the stuff three and four times. Nobody ever seemed to know what the bleep was going on.

By now we've spoken to the general manager, the regional sales director, and the angel Gabriel, all without any discernible success. The clients are not only nervous, but getting frantic, because of course the end of the month is coming and late payments are not pleasant things to have to make, especially when the payments were supposed to have been made from the refinance. And what can I tell them? Nothing. We're trying. But we are at the mercy of the competence - or incompetence - of the lender.

The moral of the story is that however much we try to provide world-class service and speed, and we do, in fact, try to provide this, we have to be very careful what lenders we work with and what title company we use and what appraiser we select and so on, or we can promise nothing. The further moral of the story, I can promise you, is: don't screw with our clients' files, or you will never get a loan from us again, or from anyone we know. We talk.

The lender is First NLC. The website is www.firstnlc.net. More information about how to avoid these people available on request.

MEantime the Fed has raised rates for the 15th consecutive time, thank goodness, since we were beginning to think that Ben Bernanke was not going to provide us any material for this column about how ridiculously inept the Fed is. Short-term mortgages have now moved to rates worse than the 30-year fixed. A delightful situation for many of our borrowers.

However, defying the Fed and all the hosts of evil it employs, the real-estate market in Utah is exploding. I've not seen buying this fierce in the last 3 years.

Ben Bernanke vs. Mira Madeline Jones

Ben Bernanke, the Chairman of the Fed, made a speech yesterday that rocked the markets a little, in which he said nothing whatever about raising rates except that he acknowledged that the markets were watching the Fed and that he knew they needed to be careful. The Dow, as you might have noticed, has risen pretty strongly since the first of the year. That ordinarily would mean a flight out of bonds, but it hasn't meant that so far, at least not out of the long bond. That's holding our 30-year rate in the neighborhood of 6.125%.

Sorry - I had more to say, but my daughter just asked me if I wanted to watch Alice in Wonderland with her. It's evening. I belong to her for now.

This can wait.

Cj

Mortgageblogger Goes Atomic!

We've been asked several times for the URL for the Atom feed for this blog; now you can subscribe to us instead of having to visit the site to see if I posted anything today. The link is to the right on the sidebar under "Site Feed", but it's right here, too.

Let's see, where were we. Oh, yes. The markets. Well, CNBC is not so optimistic, but it very much looks like the economy is picking up. Ben Bernanke, our esteemed Fed Chairman, seems determined to raise one more time, so hold on for that, but it is possible that that will be it. Message from this: stay away from HELOCs and other adjustables for the short term, but long-term fixed rates are going to remain relatively good for the forseeable future. Not 5.5% on the 30-year good. but good. Remember that an entire generation came and went in between the times we saw rates that low, so be grateful that we're here right now.

An amendment/correction to my previous post on the tournament: Charlotte, my 4-year-old, did, in fact, choose Northwestern State to win. But Jeanette leads the family, of course.

Tonight are the precinct caucuses here in Utah, and regadless of your political party, you really should go if you live here. I am a large fan of representative democracy, and there's no better place to see it in action than the precinct meetings. If you don't know where to go, call me (310-3407) and I'll point you.

March Madness - and Worse Kinds

Full disclosure continues: my 4-year-old daughter Charlotte and I got the same number of first-day games correct this year.  Jeanette, naturally, leads the pack.

None of us picked Northwestern State.

One thing that is obvious to me, watching these games, is that the parity in college ball is increasing.  There’s a reason that the 5/12 games have produced the most upsets in tournament history – it’s the point that the difference in seeds is the greatest amount larger than the difference in quality of the teams seeded.  But those upsets nearly always come in games where the #5 plays poorly, or the #12 shoots the lights out of the ball.  This year, though, the 12s are just as good as the 5s.  Heck, so far the 13s and the 4s haven’t displayed any real quality differences.  Duke struggled with Southern.  Seton Hall was blasted by Wichita State.  12 seed Texas A&M was just better than Syracuse.  And so on.  There really hasn’t been much to choose between many of these teams.  UNC Wilmington and Wisconsin-Milwaukee (the team we call the Electric Blue Raincoats, because we can never remember their mascot) are now just as likely to win a first-round game as Syracuse (which didn’t) or Indiana (which did, but shouldn’t have).

I think it’s great.  It does make it hard to win the dang bracket, though.

Inflation numbers came in benign yesterday, and since the Fed hasn’t said anything too awfully dumb in a week or so, the bond market was free to absorb the news and start buying.  That dropped mortgage rates almost 1/8 in a day.  We’re losing back some of that ground today, and we were, of course, losing more over the past week, but it was nice to see a little rally.

We’re in the middle of a really interesting negotiation with some clients who are buying a foreclosure house.  I think it’s instructive of the use that a good mortgage consultant can be.  The house itself, we discover, has not actually been foreclosed on just yet.  The Realtor whose name was on the sign in front of the house is apparently working with a conglomerate that is flipping the house, offering to the current (defaulting) owner to buy it from him and then re-selling it to our clients before they actually have to come up with the cash themselves.  It’s a neat way to make a quick $20k profit.

But there have been problems right from the beginning.  The original negotiations were to buy the house for $140,000, but our appraisal came back at $130,000.  There was no consideration of making sure that the money was available to close the loan, as the clients need a 100% deal and did not have $5000 cash on top of that to get the loan to close.  We can make sure that’s written into the sales contract and covered by the seller, but we have to be in on the deal from the beginning and it really helps to have a Realtor that is actually working for the client instead of himself and his buddies.  Etc.  We’ll get the deal done, it appears, but please, people, please.  Before you go out to buy a house, call us and let’s get you the best possible bargaining position before you do it.

Let me repeat this: before you go out to buy a house – or build a house – call us and let’s make sure you have the best possible leverage for the coming negotiations.  

Go Northern Iowa.

Oh, the Madness!

We don't really have an office the way most folks do, so we don't do an office pool for the NCAA Tournament. However, I have more people at home in my own house than many people have in their offices, so the tourney in the Jones house is a big enough event even without the wagering. In the interests of full disclosure, let me say that this is the 16th time Jeanette and I will have picked the tournament, and I will be attempting, this year, something I have never before accomplished: winning twice in a row. In fact, my wife has beaten me 13 of the 15 previous years. You marry a Kentucky girl, you have to be prepared for what comes with that.

There's been a good deal of carping about the tournament selections, as there always is, so let me address that first. I've seen Air Force play, and they are absolutely maddening. They are different from practically anyone else in basketball. They are a good selection. I know all baout their RPI, which is mostly composed of games against the other teams in the MWC, which isn't a very good league in many ways. But in the preseason they did not lose to anyone. They beat Miami and Georgia Tech out of the ACC. They're good. They'll give Illinois a tussle.

Brent Musberger pointed out last night something that I think people forget, which is that the tourney committee did not leave out anyone that was going to win the whole thing. So for all intents and purposes, we can just deal with it and be happy that this year we get to see Bradley and Air Force instead of Cincinnati and Maryland. And we should be happy about that.

My own favorite team, BYU, did not get an at-large bid despite winning 20 games. We're not all that surprised out here in Cougarland, though we are disappointed that the NIT gave us a 6 seed and forced us to play on the road. We really don't have any reason to be disappointed. First off, last year we won 9 games, so this represents a significant improvement. Second, we have all but one player back next season, so we should be in very good shape next year. Third, we do have postseason, and we get to play Houston instead of, say, Illinois, so that represents a better chance to have some success, which is key for young players. But most of all - MOST OF ALL - we shouldn't be disappointed that we weren't selected, because we actually had a chance to get in. All we had to do is win our conference tournament.

Let me illustrate: in 2004, the University of Utah (referred to, in this space, as the Spewts) won every single football game it played by at least 14 points. As a reward, the Spewts finished the season ranked #5. This is so impossibly asinine that it bears repeating. Utah won every game - EVERY game - by two touchdowns. No team was even close to defeating them. At 11-0, the team was selected to play in a BCS game, against a woeful Pittsburgh team that didn't even play as well against Utah as Air Force did. And that was it. Many cheered the fact that the BCS could be "broken" by a mid-major football team, as if congratulating themselves on having awarded the fiercest knight the ribbon for Mister Congeniality. Most of us in mid-major land, however, saw it for what it was: proof that no non-BCS team can ever again win a national championship. If Utah can't do it with a season like that, then it categorically cannot be done.

There is no other sport, college or pro, where a team can win every single game it plays and not end up champion.

BYU didn't go to the tournament, but Monmouth did. Is this fair? Sure it is. Monmouth, tiny little Monmouth from West Long Branch, New Jersey, has a conference tournament and they won it. So they are in. BYU has one, too, and it didn't. Nobody can say they didn't get a chance. This isn't college football, after all. And if Monmouth, tiny Monmouth, wins the rest of its games, it will be national champion. Period.

Has a nice ring to it, doesn't it. Hope the football guys are watching.

Cj

P.S. We are also picking the NIT here, since it has a bracket this time, and last night I went 7 for 8, missing only the Temple game, which went to overtime. So we're starting out well.

P.P.S. However, I chose Hampton over Monmouth in the NCAAs, so I'm already 0-1. Sigh.

P.P.P.S. Full disclosure sucks.

We're Number One!

No, this post is not about the BYU basketball team (obviously) or even Kentucky (my wife's other team) or North Carolina (my other team - we cover all the important shades of blue), but about The Chris Jones Group, which today hit #1 on Google (well, actually, it is this blog that hit #1, but since the Group publishes it, we feel like that's pretty much the same thing). As you may know, this can't happen without other sites linking to us.

All I can say is thank you. You guys are awesome.

Apropos of the first paragraph, I'll have my annual blog on the NCAA Tournament later this week.

A Change Will Do Me Good

We're in the process of relocating - actually splitting - our offices today. It became obvious to us that with the huge growth of Wells's Caring For Your Clients business and Ray's expansion of processing duties for select loan officers at Aspen Home Loans that we probably couldn't effectively house ourselves in the single location at American Fork any longer. So Wells has an office in Eagle Mountain, just joined the Chamber of Commerce and was elected Secretary of the Lehi Area Chamber of Commerce last Thursday (huzzah!), Ray opened a branch for us in Orem, just off the main crossroads at University Parkway and State Street, while I will maintain the AF location and open another branch in Lehi, just north of the high school. Presto! From one branch to four in about a month. Today we are moving stuff around, so this will be fairly short.

Rates continue to push upwards - we're seeing the highest rates of the last three years this morning. The 30-year is about 6.25%, with the 15-year at 5.875% or thereabouts. Consensus is that the Fed will keep raising rates to head off inflation, the signs of which continue to be completely absent. This will be bad for mortgage rates. Our forecast is for rates in the 6.5% range on the 30-year by mid-year, and close to 7% by the end of the year.

Thus, to find good bargains in the market will require more work and better planning than heretofore, which is good for us, because we are uniquely positioned to help our clients to find those deals. We do get a fair number of calls from clients who already have a deal in mind, but we are also proactive about creating them, as you know if you have been reading this blog for any length of time. We are, for instance, very close to announcing a series of seminars for first-time homebuyers, and we are in talks to form a partnership with a builder and a Realtor to create a home-investment collaboration. I am really excited about the possibilities for that. There is still very good money to be made in Utah in construction and other real estate ventures - Utah has risen from 50th in the nation in 2004 to 12th in 2005 for home appreciation. As the market cools elsewhere, Utah and other parts of the West seem to be finally getting their act together. More on that later.

Thoughts on the Winter Olympics

Still trying to get caught up.

Winter Olympics: we watched a great deal of the Games here at the
homestead, though I caught most of them on the computer's PVR
recording. I was hugely disappointed in the US performance overall,
though of course there were some bright spots. The figure skating,
which my daughters loved, was, in my opinion, incredibly bad, with more
falls than I've ever seen in any Olympic competition. The US continues
to win some medals, mostly in sports we invent and get added o the
Olympic schedule so that we can...um...win some medals. We won four
golds in speed skating (about which more later), one in the men's
combined (skiing), and one in the women's giant slalom, and other than
that we won nothing at all in sports that were part of the Olympics even
ten years ago. You can make the case that Apolo Ohno's short-track gold
counts in the "invented sports" arena as well.

As for the real winter sports, like cross country skiing, biathlon,
downhill, ski jumping, luge, bobsled, etc. - except, again, for speed
skating - we won absolutely nothing except Shaunna Rohbock's impossible
silver in the 2-woman bobsled and Julia Mancuso's gold in the giant
slalom. Oh, and the women's hockey bronze, after losing for the first
time in the history of the sport to any team other than Canada. Yes, I
know about Pete Fenson's bronze in curling. We're all proud of him.

A few years back, I remember an interview with one of our cross-country
skiers, who had finished something like 43rd. The question was asked,
"what do we have to do to compete at the elite level with some of these
other countries like Austria and Norway?" and her answer was, "well, we
have to find something that works for us. We're not going to get up at
4 in the morning, eat our bowl of oatmeal, and go ski for six hours.
That's not going to work for us. So we need to find something that
does." To me, that explained a great deal.

Count the disasters: the Chad Hedrick "I'm going for 5 golds" meltdown,
his public and childish feud with Chani Davis, Davis's own "I got me
here, not any of these other guys, and I'm here to win for me" rant, the
women's hockey team flaming out, the men's hockey team winning only one
game out of six, every single one of our figure skaters kissing the ice,
Daron Rahlves failing pretty much to show up for the Games, and of
course the winner of the Icarus Award for stupidest, most collossally
embarrassing performance of the new millennium - Bode Miller, who failed
to finish two of his runs and managed just a 5th place in one event -
his best showing of the Games. Guess skiing drunk is not the best way
to win.

Bode Miller is the iconic American, unfortunately. He "does it his own
way", and when he is weighed in the balance and found wanting, he says
"hey, at least I got to party on an Olympic level". No, really, that's
what he said. Who is the most recognizable US athlete at the Games?
Miller is. This is incredibly sad. He's a hedonistic head case with
acres of talent and no desire to be anything other than a boorish jerk.
Good thing his "Are you a Bodeist?" commercials were so bad that nobody
can remember what they were advertising.

The saddest part of it is that there were actually a few Americans at
the Olympics that really should be the ones everyone remembers - Apolo
Ohno and Ted Ligety and Shauna Rohbock and Sasha Cohen and Tony Benshoof
and especially - oh, especially - Joey Cheek. All of these people
competed in real Olympic sports against very difficult odds and all of
them were successful. Cheek won a gold medal all out of the blue, was
moved to tears when he realized what he had done, then donated his
$25,000 bonus to charity. He inspired others to do the same, including
athletes that didn't GET bonuses. What an incredible man. Why is HE
not the one doing the commercials?

But the best moment of the Games, bar none, was the celebration at the
finish line of the men's combined, when from absolutely nowhere Ted
Ligety won the gold. He skied perhaps the greatest slalom ever in any
competition, making up an unholy .75 seconds on his final run. But the
real drama was in second place, where a long-time fairly middling skier
named Ivica Kostelic from Croatia won the silver medal. Some silver
medalists (Cohen comes to mind) are disappointed. Not him. He was
elated. His sister Janica has won practically everyting there is to win
in alpine skiing. Ivica has never won anything. But there was Janica
at the finish line of every race, hoping, praying that her little
brother would win something - anything at all - after all the hard work
he put in.

And then he did. He won the silver medal. Janica came flying through
the barriers and threw her arms around him and the two of them stood
there in the snow, holding each other and sobbing. It's hard for me to
see the monitor even now, typing this, because of how deeply that scene
moved me. I'll never forget it.

That is why, next time around, though I know we'll have a Tonya Harding,
or a Bode Miller out there acting like wastrels and thugs, I'll be
watching for the great moment, that one spectacular moment when all the
hard work pays off for someone deserving, and a little ray of genuine
joy peeks through the clouds.

What I Did On My Winter Vacation

I cannot believe that I haven't blogged since February 23. And even that was a repost of Peggy Noonan, may she live forever.

Sorry. I was in a play.

Sounds a little cheesy for an excuse, doesn't it? But believe me, that's the reason. I was cast in Beauty and the Beast (I blogged about this) as Lumiere, and the last two weeks I have been gone from 5pm to 11pm every night in rehearsals and performances. I had forgotten how hard those things are to do, and how different they are. It is true that I have had gardening class some evenings previous to those rehearsals, but I can always duck out of class. There are breaks. Not during rehearsals, though. It's as if Chris Jones ceases to exist for six hours a day.

This necessitated my getting everything done every day before leaving the office, no answering email, no taking phone calls, no returning phone calls in the evening, which I am wont to do. That left no time at all for anything but servicing clients, even for blogging. Again, apologies.

The performances went well, thanks for asking. It was exhilarating. I'll post photos as I have them. The costuming was incredible, as you will see.

Mortgage rates are headed significantly higher. Nothing else matters but the Fed. Durable goods orders were down almost 10% this morning and bonds still fell. We've been anticipating for the last three years that we would start to see rates between 6.5% and 7% on the 30-year, and it looks very much as if this year is the year it actually happens.

More later.