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Aug 13, 2004 |
Brought to you by Chip Cummings, CMC |
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Provided to over 30,000 industry professionals at no-charge by Northwind Financial Corp, and Chip Cummings, CMC - national speaker, trainer, consultant and originator. Please forward this on to customers and associates! |
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The Federal Reserve raises rates, then interest rates go down?
Yup..... that's how it works! The Federal Reserve expectedly increased the
Discount Rate by 1/2% to 1.50% - the first increase in a long time, but more are
expected before the end of the year.
The problem is, that the economy is still soft. Mortgage interest rates
are tied to the Mortgage Backed Securities market, fueled by the 10-yr. Treasury
index (see above). As the index moves DOWN (meaning the yield goes up),
interest rates react accordingly. While Mortgage
rates have not returned to the near-record low level seen a year ago, they are
low enough to continue to drive the nation's housing market. The Mortgage
Bankers Association reports that interest on 30-year mortgages averaged 5.8
percent a week ago, compared with 5.97 percent the week before that. Although
refinancing volume is off 83 percent from the middle of last year, the
proliferation of reasonable borrowing costs has sparked a resurgence in
activity, according to MBA's index charting refinancing activity--which rose 2.5
percent last week even as demand for purchase loans ebbed. Adjustable-rate
mortgages, which accounted for 34 percent of total loan applications across the
country last week, are becoming more popular with borrowers, meanwhile.
Surprisingly, mortgage lenders added 3,000
full-time employees to their payrolls in June, according to the July employment
report released Aug. 6 by the U.S. Bureau of Labor Statistics. Mmmmm... that'll
change! According to
the MBA, home-loan applications slipped 0.7 percent during the week ended Aug.
6. The group also reported that demand for purchase money tumbled 2.7 percent.
Refinancing applications, however, edged up 2.5 percent as interest on 30-year
mortgages dropped from 5.97 percent during the previous week to 5.80 percent.
Meanwhile, residential builders of
all sizes increasingly are plugging incentives to offset rising interest rates,
offering such breaks as below-market rates, six-month rate locks, and
closing-cost assistance to buyers in sluggish markets.
Research by Wholesale Access
reveals that 75 percent of the nation's top builders have their own lenders,
which are responsible for 15 percent of new mortgages. Because their profits are
tied to home construction--not loan origination--builders can more readily offer
incentives than banks can. Such incentives from builders, which also are
promoting interest-only loans and hybrid adjustable-rate mortgages as a means of
keeping monthly payments at affordable levels, promise to keep the housing boom
alive for a little longer.
We're #1.... we're #1..... Not exactly the kind of
chant they're proud of out in Utah - Dexter Bell,
director of the Utah Division of Real Estate, reports that falsifying home loan
applications has become an increasingly prevalent source of mortgage fraud
throughout the state. One of the more common deceptions involves mortgage loan
officers knowingly signing off on fraudulent loan applications in order to
ensure that the client qualifies for financing. In recent
years, Utah has emerged as one of the states with the highest rates of mortgage
foreclosures; separately, Salt Lake City ranks tops on the Mortgage Asset
Research Institute's list of major U.S. metro areas with the highest rate of
early-payment defaults--which often are traced back to fraudulent loans.
Overall, the institute has ranked Utah as the fifth-worst state in the nation
for overall mortgage fraud, following South Carolina, Florida, Nevada, and
Georgia. Fair Isaac
Corp. has launched a new credit-rating system, developing an "extended" score
that will cull information about people from nontraditional sources such as
deposit accounts and rent-to-own furniture retailers. The goal is to broaden
credit files on divorcees, widows, students, recent immigrants, and other people
who lack a sufficient credit history in order to support a standard credit
score. Craig Dillon,
Fair Isaac's vice president of global scoring solutions, stated, "Between 5
percent and 15 percent of all loan applications are just dropped on the floor
because there is no score available for that person." However, credit
experts and consumer advocates have less enthusiastic in their praise of FICO's
expanded scoring model, contending that it is still too soon to tell if it will
help or further damage those 50 million or so Americans who are under the radar
of traditional credit-scoring systems.
In related developments, Louisiana
and Vermont are following in the footsteps of California and Texas by allowing
consumers to freeze their credit reports to guard against identity theft. The
action prevents creditors from performing credit checks unless the consumer has
given his or her PIN number to the three major credit bureaus to either permit
checks from particular creditors or to temporarily unfreeze their data.
The cost of
freezing and unfreezing reports ranges from $8 to $12 per credit bureau. The
credit-reporting industry opposes the trend because it delays credit approvals
for mortgages and other loans; moreover, insiders insist, sufficient safeguards
already are in place under the Fair and Accurate Credit Transactions Act.
Despite the implementation of the
federal CAN-SPAM Act in January, 47 percent of 2,000 people polled by Consumer
Reports say they are receiving even more unsolicited e-mail than before.
A whopping 69 percent of
respondents report that spam constitutes 50 percent or more of their incoming
messages. The law, which aims to limit e-mail marketing to customers who have
pre-existing ties to the sender, requires marketers to provide a means for
consumers to opt out of future mailings; but consumer advocates believe mass
mailings should be sent only to those who have asked to receive them, anyway.
The study urges consumers to avoid
purchasing items through spam messages or clicking "unsubscribe" links if they
want to keep spam out of their inboxes, adding that they should obtain new
e-mail addresses if spam gets out of hand. Recharging The
Batteries! Lisa and I took the family on a long-overdue vacation (yes,
we still brought the kids!) Then it was right back to work as I headed to
Long Beach, CA for the CAMB convention! While I spoke just before the
conference, and didn't get to stay for the entire event, "hats off" to Jon
Eberhardt, president - who boldly struck out to define "predatory lending"!
Great event guys! As the Olympics get started this week, and
we pray for the safety of all the athletes from around the world - here's hoping
that Iraq comes away with a medal. They're just glad to be there.... and
not get killed if they lose! I have a very busy few months
coming up, as I will be criss-crossing the country speaking at several events.
In a special event in October for top-producers, at
"The Mortgage Masters Academy", Ron has talked me into presenting a
special session including several incredible new e-Marketing Strategies that are
producing HUGE results!
Click here to find out how to attend! And finally, many
people have asked HOW to set up domain names and simple websites CHEAP - now you
can. Click here to go to a special site to register domain names for only
$8.95! Also, in 3 weeks, I will be announcing a special
marketing event just for loan officers and business owners. Stay tuned!
In the meantime - go get some more loans!!!!! Cheers!
-Chip
Chip is a speaker, certified trainer, and consultant to the mortgage lending
industry, with over 19 years as a loan originator and business owner. He
has helped thousands of people increase their production and efficiency.
Learn how you can increase your business, efficiently train your team, and stay
ahead of the competition! Contact us for more details....
Click here for Northwind Financial
Website
Click Here for Chip Cummings Website Click Here
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