At Least Oil Is Down Too

• Bonds rallied yesterday a little, but have given back all that
  momentum and more today, so we're back to where we were Friday on
  rates. At least oil is falling - we're more than $18 off the high and
  still going.
  
  
• There is a proposal out there being put together by a
  private/public consortium of mortgage people and government regulators
  that actually has some merit. It will be a couple of months before we
  get the full details, but right now it appears that what we're looking
  at is a plan to increase transparency in the packaging of mortgage
  loans so they can be purchased. This would add confidence to the
  secondary mortgage market, increase liquidity, and probably drive down
  rates, especially for good borrowers.
• This is the technical part, so skip it if you don't care:
  mortgages are packaged in large groups for sale on the secondary
  market. Primary lenders have used this packaging to shed loans from
  the books and obtain new lending capital. However, up to the moment,
  the packages of loans have been fairly opaque; that is, the secondary
  financiers were never quite sure what it is they were buying. The
  packages of securitized loans were often significantly heterogeneous,
  and as the market has melted down, that has contributed to the
  distress, because the lending institutions that purchased these
  packages couldn't really tell what they were worth - they didn't know.
  
  
  
• Some of the loans were fine, most of them, even, but many were
  not. How many? Nobody knew. Was this package better or worse than
  that one? Nobody knew. How much real exposure did the financier have
  to market downturn? Nobody knew.
• To a large extent, nobody knows now, either, which is why the
  recent spate of better-than expected earnings from servicing banks has
  been such welcome news. At least we're pretty sure the entire
  portfolio isn't going to self-destruct.
• This opacity does two things: one, it increases risk-based
  pricing for good loans (20%+ equity, 720 credit, full income
  documentation) while significantly decreasing pricing for bad loans,
  and two, it allows lenders to make riskier loans, because they can then
  package them with good ones and sell the whole shooting match as "A"
  credit mortgages.
• You're right, this is stupid.
• What this proposal would do, then, is make it much easier for an
  investor to tell what he was buying, because all the loans in any given
  package would share characteristics. This will increase liquidity,
  especially for good borrowers, and get some money moving in the
  mortgage market again. Rates will fall for less risky loans.
• Rates will, of course, rise for more risky ones, which will
  emphasize things that need emphasizing, like having a job and some
  money in the bank, and a history of paying bills on time. That will be
  painful for some, but better on the whole for everyone.
• Congress will then step in and prohibit risk-based pricing as
  being discriminatory, and the entire market will collapse. But we will
  have made a good try, and that's important.

FHA Guideline Changes

Rates today are the same as yesterday.



What I want to take a minute to do is acquaint you with some of the new
rules for FHA loans that will be effective August 1. These are
critical to many borrowers, as FHA loans are currently substantially
better both in interest rate and in underwriting flexibility than
conventional financing.



Previously:

No loans approved less than 2 years from bankruptcy.

As of August 1:

No loans approved less than 4 years from bankruptcy, unless significant extenuating circumstances can be proved.



Previously:

No loans approved less than 3 years from foreclosure

As of August 1:

No loans approved less than 7 years from foreclosure



Previously:

Rental income allowed to offset liability for residence being converted to investment property (when purchasing a new home)

As of August 1:

Rental income disallowed on conversion to investment, unless 30% equity in the property.



There are more in the same vein. Please be aware of these changes.
Additionally, FHA is changing LTV requirements, cashout requirements
and reserve requirements for most loans, and altering the up-front
mortgage insurance premium required, although in this case, it is true
that many borrowers will now pay less than they otherwise would have.
So it's not all bad news.



Stay tuned for more. And as always, call with questions (801-310-3407)
or hit reply and we can get you the information you need.



Cj

Happy Birthday, Sis.

She was supposed to be the last one of us, and she was about as close to perfect as you could ask for.

My sister Catherine Gwynedd was born 28 years ago today. Seems impossible that it's been that long, but it has. She is the fourth of what eventually became five sisters, the sixth of seven children. She has ebony-dark hair and creamy white skin, the only one of us that looks like that. She's thin and tall and pretty, sings like a canary and is perhaps the single most organized person I ever met.

So, as I said, she's perfect.

This drove her sister Allison - a grasshopper bracketed by ants - up a wall, understandably. If she hadn't been so cute, there might have been real trouble. As it was, and is, though, she's extremely hard to hate.

When she was about six, she met this kid from down the way named Scott, little Scotty Carlson I called him, and decided she was going to marry him. Scott never had a chance, for which thing, I think, he'll be eternally grateful.

All through my mission in Hungary, I kept hearing that she thought I was playing basketball (I was gone a lot for that). When I got back, we took a family picture and tucked in the sash of her dress was a little plastic sword from the dinner we had eaten right before that. I love that picture; it's my favorite family photo.

She sang at our Granny's funeral, a song so achingly beautiful and so appropriate to the woman she was commemorating that none of us that were there will ever forget it. Her voice continues soaring and beautiful, not an operatic voice, but one of the sweetest and purest lyrical soprano voices God ever made. Her Christmas CD that she gave me as a gift is on permanent rotation on my computer. Yep, even in the summer.

Now she's a mother and some of that organization has cracked 'round the edges, at it will, and she's had to learn as much about modern fighter aircraft as she knows about opera (Scott is an aerospace engineer), but she's still the one we all assume will be planning any big family event. Hoping she will, because, like everything else she does, it will be flawless.

I love you, Cath. Happy birthday.

Extra! Extra!

You Read It Here First

• Oil has lost over $8 the last two days. If the runup in crude
  oil prices is, as has been contended often, mostly driven by
  speculators and hysteria, let's all remember that hysteria works in
  both directions. On the upside, it's called "irrational exuberance".
  On the downside, it's called panic.
• All commodities, actually, are down rather significantly from
  their highs, including precious metals and even corn and wheat. It
  appears that our capacity to grow things, find things, and innovate out
  of needing things is, in fact, expanding. Shocker.
• Bonds are up, the stock market is down, and despite FNMA and
  FHLMC writing off another $42 billion in bad debt yesterday, both those
  stocks are up this morning and there isn't any apparent worry that the
  backbone of the mortgage system will collapse any time soon.
• Fact is, the vast majority of homeowners will pay their bills on
  time and repay their mortgages on schedule. There's a lot of hysteria
  out there in the credit markets, but there are still good loans to be
  had, and lots of good people that need them. Lenders need to add
  really good loans to their portfolios, and are keeping rates relatively
  low to attract them.
• Here's the prediction: the sky is not falling. Oil will not hit
  $150 a barrel this year. Gas will not reach $5 a gallon this year, or
  next year. Mortgage rates will not hit 7% this year or next year. By
  spring of next year there will be a significant, noticeable rally in
  real estate. The world financial system will not collapse. Innovation
  will explode.
• You read it here first.

Cj


www.thechrisjonesgroup.com