Archive for January, 2010
The Federal Open Market Committee (the policy arm of the Federal Reserve) adjourned their two-day meeting on Wednesday. It wasn’t so much what they did as what they said.
The FOMC said it would continue to keep The Federal Funds Rate – an overnight interest rate banks use when lending money to one another – near zero for an “extended period,” but mentioned the economy has “continued to strengthen” and recovery would be “moderate for a time” (a rosier outlook than in previous statements).
These statements, while somewhat generic, do have an impact on Real Estate and lending. However it was one reaffirmation in particular that could have a HUGE impact on the housing industry.
But first, a quick primer on the Fed…
FED 101
The aim of the Federal Reserve in it’s interest rate policy is to either speed up or slow down the economy. In times of economic downturn, the Federal Reserve will cut rates to help create a boost. Conversely, in times of heavy inflation the Fed will raise rates to help slow down the economy. That’s it; speed up or slow down….no tricks.
When the credit crisis begin to spiral in 2007, what did the Fed do? They cut rates – sometimes dramatically so – in hopes of jump-starting the economy.
The Fed keeping rates near zero is an indication – oddly enough – that the economy is moving along at a steady pace. If the economy blows up and inflation starts to creep in, watch for the Fed to begin hiking rates.
While keeping rates near zero wasn’t a surprise to anybody, there was one statement that made Realtors and lenders across the country very nervous…
Continue reading the rest of this article…
The crisis of credit visualized.
The above video is by Jonathan Jarvis, an interaction & media designer who specializes in taking complex situations and making them intelligible through motion graphics. I’ve seen the credit crisis explained in many ways over the past couple years, but nothing this succinct and clear-cut. It is – in a word – brilliant.
So take 11 minutes and have a gander – I promise you one thing; the credit crisis will make WAAAY more sense. You’ll even be able to wrap your head around difficult topics like Collateralized Debt Obligations, Credit Default Swaps, and Bond Risk Tranches without having to get a finance degree. In the end it demonstrates that this market meltdown (like most market meltdowns) is caused by one thing: greed.
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Nick Mallory is an active loan officer in Portland, Oregon. Have any questions or comments about this post? Visit the contact page and drop Nick a line.
After the bubble burst on subprime loans in the wake of the mortgage meltdown of late 2007, loans backed by the Federal Housing Administration (FHA) became the de facto “go-to” instrument for anybody seeking to secure a mortgage with a low down payment and/or less than stellar credit. However, being the “low-down-payment-imperfect-credit-go-to-lender” comes with a price…sometimes a steep one.
Facing rising defaults and a battered balance sheet, FHA has announced sweeping changes and stricter guidelines. In a nutshell, borrowers will have to bring more money to the table, and have better credit scores in order to qualify.
Overall there are four major changes to keep an eye out for:
UP-FRONT MORTGAGE INSURANCE
The Up Front Mortgage Insurance premium is being increased from 1.75 percent to 2.25 percent. Up Front MIP is paid on every FHA transaction, and is normally rolled into the overall loan amount – on a $200,000 loan with 3.5% minimum down payment, the increase results in almost $1,000 being added to the loan amount.
FICO/DOWN PAYMENT
Borrowers with FICO scores less than 580 will see their down payment requirement jump from 3.5% to 10%. However, many banks won’t approve an FHA loan with a FICO less than 620 (some even 640), so in many cases this change won’t apply.
Continue reading the rest of this article…
It was a whirlwind of content. A battery of speakers and presentations. Non-stop networking. Late nights, early mornings…..and it was fantastic.
The 1st annual Mortgage Revolution in Atlanta was a complete breath of fresh air – loan originators getting back-to-basics with one goal in mind: rehabilitating and changing a battered industry. In the end the 300 loan originators 
from across the country came together in a collective “group-think” that was an absolute honor to be a part of.
As for me, the takeaways and epiphanies could fill volumes. No tricks, new gimmicks, or radical implementation strategies… just overall themes and ideas on how to be a better mortgage professional. How to truly improve the way I do business – the soul behind our business.
My personal highlights…
Meeting the giants of our industry; people like Sue Woodard, Jim McMahan, Khai McBride, and Dave Savage.
Meeting mortgage professionals who I’ve followed for some time; people like Rene Rodriguez, Jason Klaskin, Chris Brown, Mark Madsen, and Ed Conarchy.
The incredible networking that took place each night after dinner. Frankly, these conversations and connections were worth the trip alone.
Finally, the privilege of getting to know two of my co-workers better. This time was filled with great insight, strategic planning, and most of all…laughs. It meant the world to me to hang out with these two folks – frankly my #1 highlight of the trip.
So where does this leave us? The industry is still hurting. Loans are still tough. However, with a renewed focus on getting better – on being better – we’ll be able to come out on the other side part of a healthy, thriving industry.
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Nick Mallory is an active loan officer in Portland, Oregon. Have any questions or comments about this post? Visit the contact page and drop Nick a line.
This weekend I’ll be heading to the first annual Mortgage Revolution conference in Atlanta, Georgia. Mortgage Revolution is a 3-day (Jan. 10-12) non-profit mortgage conference developed to bring originators together for the purpose of education, networking, and change (check out their site here).
Some of the industry’s top speakers will be discussing new guideline changes and regulations, along with advanced concepts like tech, web 2.0, and social media. At the very least it’ll be a great place to hear new ideas, and what other lenders are doing around the country to work through a difficult transition period in the industry.
Aside from that it will be my first conference…so I’m especially fired up. Here’s what you can expect from me:
If I hear something great, or learn something new, I’ll blog on it. Check back often.
I’ll be giving updates on Twitter throughout the conference (follow me @lendingjournal).
Above everything else I hope to meet some cool people, spread the word about The Lending Journal, and have a great time.
Stay tuned…