Patrick Whelan's Straight From The Hip - a realistic view of today's mortgage marketplace

by Patrick Whelan

Happy New Year Everyone!

Well, it doesn’t look like Santa or the New Year brought the Real Estate and Mortgage Markets any relief from the “crisis” according to the many articles I read this week (Citi Bank is being bailed out by overseas money, mainly China and a Saudi Prince, the big buy out of Countrywide by Bank of America, and Mr. Bernanke’s report of our economy). All of these things are very alarming and are costing taxpayers a lot of money and good, hard, working, people their jobs. Yet, I also read mortgage applications are up 35% the week ending 01/04/2008. Which raises the question, is it okay for us to profit while good Americans are suffering? Let me explain why I ask this question and then hopefully I will hear from you on this topic as it is an important one.

I had a man ask me in the grocery store if I was okay with profiting from the problem I (as a mortgage professional) and the banks have created for America. I was furious! How can he ask me this? I didn’t create this problem; I have a zero default rate on any loans I have originated. Then driving home it hit me maybe he was right, maybe I shouldn’t profit because of what my industry helped create. What a dilemma.

Right now the reason applications have risen 35% and refinance applications 50% is because of the low interest rates we are currently experiencing. Rates have dropped with the Fed aiming to keep this country out of a recession that has already started; one that we feel mainly at the pumps and at the grocery store checkout lines. Funny, we are paying more for a gallon of milk than a gallon of gas, yep; think about that, it’s not that funny. The problem with all of this is that during a recession good people lose jobs, companies close their doors, and we the tax payers help finance Bank of America’s buy out of Countrywide, while Americans are jobless and suffering. Is this ok?

Is it ok that my phone was ringing off the hook last week with refinance applications? Is it okay that I will be profiting while others are suffering?

I can say that we are helping bail-out some clients who were taken advantage of by other brokers and originators. We are helping some good families save a lot of money on a monthly basis to help them defer the inflated costs we are experiencing on many items. We are helping new home buyers jump on low house prices and rates to take some of the foreclosures off the market.

Is it okay…I think so.

by Patrick Whelan

WOW! Last week the 30 year fixed rate dropped to 5.125% paying a 1% origination fee, which is the lowest rates I have witnessed since right after 9/11/2001. Those rates appeared for a moment on Tuesday night and again early Wednesday morning and then they vanished causing many mortgage professionals and clients feeling a bit queasy. They should have too, rates moved to 5.375% in less than five hours on Thursday. They all thought they had just lost their low rate by gambling and floating instead of locking when they had the chance. Believe me I know this happened; my office was flooded with calls from clients asking me to lock their rate. I said no, this was just a last gasp of air from Wall Street to gain some confidence but it wouldn’t last. Guess what, I was right!

Friday afternoon rates improved back to 5.250% and will continue to move back down to 5% this coming week. How can I be so sure? The reason is we are not going to get out of the recession we are currently in for quite some time, no matter how hard Wall Street pushes. The reason rates soared on Wednesday is because the employment numbers were up for the Country, so the traders thought all the problems were fixed and that was good enough reason to put money back into stocks and pull them out of bonds. The problem is the numbers were slightly better than last month but Consumer Confidence is down, inflation is up and people aren’t spending money, so they were dead wrong. Hence rates came down three times on Friday.

The truth is we are going to be in this mess for at least another year and there is no way out for the Government except to keep rates low and hope we can kick start the economy. I truly hope for the good of everyone the economy turns around but right now enjoy the low rates and refinance why you can.

by Patrick Whelan

Staying successful in today’s market is very simple; you have to take what the bank gives you. Whether you know it or not banks control the real estate market so they control our incomes as Loan Originators and Real Estate Brokers. So, staying successful in this business requires a solid understanding on the financial side of this business and a willingness to change with the market around you.

For instance, banks are the ones that came up with those “Nifty” little things called sub prime mortgages and interest only mortgages, not the originators. The banks gave us these programs to sell and the market took of for all of us, brokers, Realtors, insurance agents, etc…. Everybody got rich, now the same people that got rich are complaining things are slow and they hate the mortgage industry for what it did to their business. Nobody complained when they were making money!

So here is an idea, take what the banks give you! Right now rates are lower than ever and house prices are dropping every day. So if you’re a broker, refinance people out of the horrible arms and sub prime loans they are currently in. Give these people good rates and low costs and make a few dollars while making amends for the loans you sold them in the past.

Realtors, I can’t say that my stomach doesn’t turn when a Realtor tells me that THEY DON’T sell houses under certain prices or work with first time homebuyers. WHAT? If you are struggling to keep your head above water you need to be doing exactly that. Working with first time home buyers and selling them houses under your normal range. Why, because that’s what the banks are giving you, low rates and a declining housing market. Nobody in your database is looking to sell their homes right now but maybe they have children in college, right now is a great time to buy an investment property through the FHA Kiddie Condo Program (call me for details).  Maybe somebody in your database knows a first time buyer that was thinking of buying but is scarred by all the news, reach out to them. There is plenty that can be done generate business if you change with the market and your style of thinking.

I have personally had to revert back to refinances to stay busy in this market. Until recently, I was fully engaged in construction loans and the banks have taken away almost all the programs I once used to approve clients, oh I’m sorry, most of those banks have actually closed. So yes I too have had to change my mind set and throw away thousands of dollars of marketing materials for my construction loans.

I feel your pain; we are all in the same boat. If you need help figuring out the market or how to get back into your database please give me a call and let’s get you some more business.