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

I hope everyone had a great week! First, let me start by saying, “WOW”! It looks like I really stirred the pot last week. I received a slew of responses from heated realtors explaining why they would not work in an area that is not their specialty. Thank you all for your responses, it makes me feel good that my time is not being wasted. The problem with all the responses I received was not one person thought I should have received a phone call prior to my Realtor telling my best friend that they will not represent them anymore. Since of course I was the one that referred my friend to the Realtor, I guess future referrals are not an important piece to a Realtor’s business model? Interesting!

Now let’s get in to this weeks topic because it is a very important one and I promise not strike up any more controversy, at least this week!

I am going to explain in my own words why mortgage rates don’t fall every time the Fed lowers rates and give this to everyone in laymen’s terms so you can pass it on when asked.

When the Fed lowers interest rates on short term lending they do this to help give the economy and spending a shot in the arm and rejuvenate the market. The rates they lower are on short term borrowing which affects home equity lines of credit, credit card rates, and the rate businesses pay on overnight lending from the government. When this occurs it allows businesses to charge lower prices on goods, encourages consumers to feel more confident in spending since they are paying lower interest on their credit cards and prices are lower, and supports job retention in the industry of gross domestic production of goods.

Since the Fed has lowered rates twice now, the above mentioned benefits are further resulting in a rise in the stock market. When consumers are spending money the goods producers in America are making more money and this causes more confidence in consumers. This helps businesses show more profit and thus causing investors to pull their money out of bonds and invest in companies in the stock market. When investors pull their money out of bonds and reinvest it in the stock market this causes the bond prices to go up. Mortgage rates are based off of the 10 year bond rates and when the yield price on the bond rises so do the mortgage rates, which happened slightly last week.

Now when consumers are not spending money the reverse happens and mortgage rates go down. A good way to gauge what is happening in the market is watching for a few economical reports that come out monthly. The Consumer Confidence Index, which measures consumer’s confidence in spending and saving. The Core Inflation Report which measures inflation on certain products such as food and oil. The Gross Domestic Product report which measures the total market value of all final goods and services produced within a country in a given period of time. When these reports negatively the economy is not doing well but usually the mortgage rates are down because investors will most likely pull their money out of the stock market and put in back in to the bonds, causing the bond price to come down and mortgage rates with it. This would have the opposite affect if these three reports are positive.

Hopefully all this made sense. If you have any questions, please post them to my blog and they will be answered immediately.

Updates:

This week we may see a drop in mortgage rates if a few businesses report the losses we are expecting them to. Their reports will cause investors to become uneasy and put their money in a safe place (bonds) and cause a rally for the bond market.

I hope everyone enjoyed Thanksgiving last week with their families and friends; I am still sleepy from all the turkey I consumed. This week I wanted to address and stress the importance of personal service and seeing the job through to the end. This topic is on my mind because I failed last week to do this myself and it could have harmed an important relationship with one of my builders. Luckily, I have the opportunity to fix the problem and save an important relationship. I would like to take the opportunity to share this story and really drive this point home because I know this has happened to all of us at some point in this business.

I have a very large residential construction loan that is currently in process and close to making it to the closing table this coming week. This loan has been in process for about five weeks which is the average processing time for a construction loan but the process has been a nightmare for my clients and me with the ever changing underwriting guidelines. I have always been the main point of contact for my builder and have always kept him aware of the loan process and any new wrinkles that emerge along the way. Last week I failed to do that and it could have cost me a great client.

I left last Monday for New Jersey for a few weeks as I always do to spend time with my family from Thanksgiving to Christmas. I usually fly but this year I drove with my girlfriend because she has three dogs and she can’t bring them on the plane. No, we did not kill each other or the dogs. However, never doing this before I did not know how available I would be for my clients and left everything in the hands of my business partner and processor who are more than capable of handing questions or issues. While I was on my trip an issue arose with this particular loan and I asked my processor to handle it which she did but my client did not have my reassurance that this latest wrinkle would be handled and it caused him to feel uneasy.

I received an email from my builder explaining that he had left me two messages while I was driving and that if I couldn’t return his calls in a timely manner he would no longer do business with my company. At first I was angry, don’t I deserve a vacation, and can’t I have few days to myself? Then I thought about it and realized the answer is no, not when you have people that depend on you and bring their business to you, not your processor. My builder made it clear he does business with me because of who I am and the manner in which I conduct business not my processor and when he does not hear from me that it is not the same. He is 100% correct, it is not the same to hear bad or even good news from somebody either than the person you trust with your business. It is a partnership and when you’re on vacation some things take precedence and I lost sight of that for a few days.

Please listen to my advice and always give that personal service especially in today’s market. Relationships are the most important part of our business and losing just one could cost you many in the future. I know everyone will say they already know this but although we know it sometimes we forget and that one time we forget my be the last chance we get with that relationship.

Have a great week everybody!

Hello everyone and thank you again for your responses to my blog last week. What I am about to say will probably cause everyone to scratch their heads amidst all the misleading information in the media but it is getting better everyday for the home buyer and buyers agents.

Interest rates are lower than they were at this time last year, house prices are lower than ever, and I would have to imagine with all the foreclosures, the inventory is there to sell. What more could we ask for to sell homes? … Buyers! This is the answer I get when I talk to Realtors and investors. I scratch my head in amazement when I hear this because mortgage loan applications are up 5.5% this month. Now, some of this is due to refinances but refinances only made up about 6% of overall applications this month. So, somebody must be buying houses somewhere.

I truly believe we are in a great position here in Denver for buying and selling houses. We are no longer listed in the top 25 cities for foreclosures and I am seeing huge increase in applications for purchases in my office. We are getting busy going into the winter, this is GREAT NEWS! Everyone please share in my optimism and get out there and get it done for Colorado! I am tired of hearing the media talk about Realtors and Mortgage Brokers needing to look for employment in another field if they want to survive. I can tell you one thing that will never happen to me or my company. We have never believed it was bad … therefore it’s not. Please remember the only time you see obstacles in your way is when you take your eyes off the path. This is so true!

One last thing before I go; please be patient with your mortgage professionals. We are all definitely experiencing tightening underwriting guidelines on all loans from all banks. While new products and programs are rolling out to the market daily the underwriting is getting more and more strict everyday. Loans that are already in processing are falling victim to these new guidelines after being submitted thus holding up our approvals and causing longer underwriting turn times. I ask that our friends on the Real Estate side of our business make their sellers and buyers aware of this when writing contracts and deciding on closing dates. Quick Closes are becoming a thing of the past for purchase transactions; appraisal and document reviews are making it impossible.

Unbelievable, I am steaming mad today over a comment I heard last week. Yes, I am still mad five days later but for good reason. A friend of mine told me last week that they had decided to look in another part of town for a home and their Realtor said that she doesn’t work in that area. Huh! What? Excuse me! You don’t work where? I can’t believe after two months of searching for homes with my friend that this particular Realtor has so much business, that an extra fifteen mile drive to look at homes was, “out of her area.”  I can’t believe this; I referred this realtor to my friend, I am so embarrassed. This brings up a very important topic about referrals I would like very much to talk about.

How strong is your team? In this business you need to make sure you have a team that you can trust will always make you look good. This team consists of Realtor, Lender, Title Company, and if your busy enough, an assistant. All these players need to be on the same page at all times and must always take each other’s business into account before they make final decisions that can be disastrous to a member of the team. The Realtor needs to establish with the team what s/he expects from the team and how they do business. The lender needs to be honest, have great communication, and tailor their work style to match that of the Realtor. There is nothing worse than a lender who is afraid to say no to a loan and wastes everyone’s time. Then, when they get the final decline for the loan they knew they couldn’t do from the beginning they hide. Not good! The title company needs to get title out quickly and understand that everything does not always run smoothly on transactions and not to ‘sigh” into the phone when we need to change the lender on the title commitments or change a closing date. Most importantly with everything that is changing in our industry on an everyday basis we all need to be understanding and willing to work hard no matter what to get the job done.

Most importantly when somebody sends you a referral, whoever receives it, Realtor, Lender, Title Company, or Insurance Agent, please, please, please call the referral source before you say or do something stupid!

I was made to look bad last week and it stinks!

Updates: FHA has suspended the seller assistance ruling until further notice last week. Please read last weeks blog if you are not sure what I mean.

Rates are staying unchanged but if the stock market keeps rolling, expect to see an increase in rates soon. Please remember when the Fed cuts interest rates it does not directly affect the mortgage rates. There is a series of events that have to take place for mortgages to be affected. Next week, please make sure to look for my blog as I will explain all of this in more detail so it actually makes sense.