One of our key strategic mortgage partners sent us the following message that gives a summary of that news.

“Its just another manic Monday”…The Bangles. If you thought last Monday was wild on the news from Fannie and Freddie, the headlines that lead us into this week are even crazier. First, Mortgage Bonds are up sharply, which should lead to much better home loan rates and the great refinance opportunities that we have been expecting.

Let’s begin with more fallout in the financial sector. Lehman Brothers is done after 158 years, thanks to their exposure to sub-prime mortgages. And another casualty, that was narrowly avoided was Merrill Lynch, which is being acquired by Bank of America, again this is all due to their greed and exposure in the risky mortgage business. Also on the ropes is insurance giant, AIG, as they try to raise cash quickly to stay afloat.

So what do all these headlines mean to us in the mortgage business? It’s a time to look for opportunities. Pricing will be at its best level in some time, homes are at much more attractive prices, terms to purchase are far more favorable than they have been and the forecast could get even better. Prices should improve nicely today as money flows out of Stocks – but there is another story on the Bond side. We know that Treasury Bonds offer the lowest yield with the lowest risk. Then Mortgage Bonds offer a higher yield and for an even greater yield, there are Corporate Bonds. But they do carry higher risk. With all the turmoil in the financial sector, the risk on Corporate Bonds has increased significantly. While this will translate to higher yields being offered, the risk on Corporate Bonds may be greater than the appetite or tolerance of investors. In fact, many funds will preclude
investments in riskier Bonds.

As fund managers and investors seek alternatives they will notice that Mortgage Bonds offer a much higher yield than Treasuries with the same guarantee. This should help Mortgage Bond pricing down the road…especially, with some potential good news on inflation. The Dollar has made significant gains against other major currencies, which should help import prices. The Job market is weak and that should keep wage based inflation in check. The move in Oil lower has been dramatic. A $52 drop in two months puts Oil at $95…likely on its way to $85. All these positive inflationary factors spells good news for mortgage rates.

But this time it will not be as easy, as credit and appraised values will represent more of a challenge. That said, there are a lot of deals to be had. Brush up on how to improve credit scores with the tools inside MMG and do as much research as possible on valuations for potential refi clients ahead of time.

Remind your clients that these drops in rates don’t last forever and should be taken advantage of if they make sense. Greed kills.

As we have said quite a few times, both on this blog, in messages to our cusotmers, and in face-to-face meetings that the wrong focus is one that focuses on the price of the home you are looking at, but the price of the money you need to purchase that home. You will purchase that home only once, but you will be making payments for that mortgage loan month after month for many years.

Essentially, this is the time to buy a home! The price of money, in terms of interest rates are low. FHA loans are at 5.5% and Conventional 30 year loans are at 5.875%. If you can qualify for a mortgage loan and want to buy a home, this is the time to do it. People who were looking for homes are now giving up because they’ve been told that it is the “end of the home selling season” and will stop pursuing that new home. You nnow have less competition out there. The homes that were for sale did not automatically get removed from the market. Many are still for sale!

But no activity or serious offers will cause them to pull their homes off the market…either permenantly or temporarily.

This is the period that most buyers miss out on opportunities. They want to wait until the next home selling season next year, when EVERYONE IS THINKING OF DOING THE SAME THING. Think about it. When would you like to be purchasing a new home? When everyone else is looking at the same home as you or would you prefer that they stay home so you can have your pick of homes?

If we can’t find your new home, it doesn’t exist.

Linda & Terry Iwaniw
REALTOR Associates
RE/MAX Home Team
Laurel Springs, NJ
http://www.snewjerseyhomes.com/
http://www.i-teamhomes.com/
609-417-1086

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