Indy Mac Alive But Not Kicking
Indy Mac is offering a feeble excuse for the large decline in mortgage loans being originated.
From Reuters:
IndyMac last year shifted its business to loans eligible for purchase by the two government-sponsored enterprises from the riskier, “Alt-A” type, characterized by loans to borrowers that fall short of income documentation or down payments. The move was made as investors in Alt-A and subprime loans pulled their support as defaults soared.
The GSEs, which posted larger-than-expected losses in the third quarter, have raised fees on loans they guarantee and added a surcharge on loans for higher-risk borrowers.
This means that taking out a normal loan is often harder than acquiring a second mortgage for many folks. Since lenders don’t want to issue loans with any degree of risk, many are being declined when they attempt to purchase a home.
Banks Learn Lesson The Hard Way: Lend Smart
As more and more borrowers default and fail to pay off mortgages, Banks are starting to show that they have learned a lesson. Reuters reports.
A Traiger & Hinckley LLP study of 2006 mortgage loan data suggests that the Community Reinvestment Act, a federal law that requires banks to help serve the credit needs of their local communities, including low- and moderate-income neighborhoods, deterred banks from engaging in the kinds of risky lending practices that are provoking the foreclosure crisis. Compared to other lenders in their communities, banks making loans in their CRA assessment areas (CRA Banks) were less likely to make a high cost loan, charged less for the high cost loans they did make, and were substantially more likely to eschew the secondary market and retain high cost and other loans in portfolio. Foreclosure rates were also lower in metropolitan areas with proportionately greater numbers of bank branches.
It’s nice to see that some banks have learned to modify their lending strategies, although many will argue it took far too long for them to ‘get’ it.
What Is Going On With Gold?
Many are surprised at the jump gold has made in recent years, increasing in value so fast that $1000 an ounce now seems likely.
Mish is offering an explanation for this:
The message behind gold is simple: Gold is acting like money because gold is money. In deflation, the value of money rises. Money is hoarded. Furthermore, in economic turmoil in general, gold is sought as a safe haven. Gold has both of those things going for it.
With leverage everywhere under attack however, there is a possibility of a sharp pullback. From what level such a pullback might occur is anyone’s guess.
Good news for those that have owned gold for sometime. Those that do not may find it a better and easier investment to simply payoff mortgage debt.
Treasury Notes In Decline
Yet another sign that the US economy is in trouble, treasury notes are taking a beating. Bloomberg is reporting:
It was the worst housing market decline since the end of World War II. The Federal Reserve was doing everything it could do to avoid a precipitous recession and investors in the shortest-term U.S. government securities had reason to be jubilant.
While two-year Treasury notes returned 10 percent in 1989 as the target rate for overnight loans between banks fell four times, no one is saying deja vu this year. Even the bond market’s best start since 2001 won’t get investors more than 2 percent, according to a Bloomberg survey of 65 economists and strategists.
On a more positive note, those seeking a Utah home equity loan may find that rates are lower than usual right now. As with all finance related news, some are benefiting, some are losing.
Rescue Coming For Failed Banks?
Sadly, at least for banks that have already failed, there is little that can be done to save them. Those that still retain some liquidity are the only ones that gain from Fed intervention.
Mish blogs:
The question at hand is: Can the Fed provide capital to GSEs or failed banks? Anyone who thinks so is wrong.
The Fed can only provide liquidity, not capital, to failing institutions. That is not only my opinion, that is the opinion of the Fed as well. Let’s start by taking a look at Fannie Mae (FNM) and Freddie Mac (FRE) and continuing further with a close look at liquidity itself.
Whether or not banks will manage to get out of debt with the latest Fed intervention depends on bank management.
2nd Mortgage Rates May Increase
Those that have been sitting on the fence considering a 2nd mortgage may soon wish to lock in, as rates are currently lower than normal.
The Wall St. Journal has the following hopeful news for the new year:
U.S. fixed-rate home mortgage rates fell to the lowest level in a month, according to a Freddie Mac survey.
The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 6.07% in the week ended yesterday, down from 6.17% a week ago and 6.18% a year earlier.
The 15-year fixed-rate loan averaged 5.68%, down from 5.79% a week ago and 5.94% a year ago. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.78%, compared with 5.90% a week ago and 6.02% a year ago.
“The new year has begun with mixed signals on the direction of the economy and mortgage market,” said Frank Nothaft, Freddie Mac vice president and chief economist.
While rates are this low, a mortgage loan will likely appear a solid bargain when they jump back up later in the year.
New Construction Unexpectedly Picks Up In US
A sign that the housing market may be making positive steps towards getting out of debt, Bloomberg is reporting that construction spending has actually picked up in the United States.
The latest word is:
Spending on U.S. construction projects unexpectedly rose in November as work on schools, power plants and factories helped overcome cutbacks in homebuilding.
The 0.1 percent increase followed a 0.4 percent drop the prior month that was smaller than previously reported, the Commerce Department said today in Washington.
The report showed private homebuilding fell by the most in more than five years, a sign the glut of unsold properties will delay a housing recovery until at least mid-2008. Commercial and government projects showed gains that help ease concern that economic growth stalled last quarter, economists said.
If the market continues to gain in this area, chances are high that home values may actually stabilize. Usually new home construction signifies a pickup in the housing market.
Paying off ARM early
Properly managing the payoff of debt can be difficult to successfully accomplish, so getting a good method to payoff and control large amounts of debt can become a great habit or a new year’s resolution. Those looking to find payoff mortgage early strategies may be pleasantly surprised at the options offered them. An ARM can be destructive on one’s finances, as they tend to adjust upwards quickly.
Reducing the amount of debt, whether during the holidays, or at other periods of time through out the year is one of the most important traits one can develop. Keep in mind that paying off your mortgage early can save you tens of thousands. This can be necessary if you find yourself with a high rate adjustable mortgage loan (ARM) about to adjust upwards. In addition this can make retirement far more affordable. Without a monthly house payment, one finds their life becomes quite a bit more affordable. Often, almost 50% of one’s gross income ends up being spent on a mortgage. Some free mortgage calculators allow users to calculate their mortgage debt on the fly and realize how adding a payment to a mortgage here and there can actually result in a paid down loan years earlier.
Payoff Your Mortgage Early
Properly managing the payoff of debt can be difficult to successfully accomplish, so getting a good method to payoff and control large amounts of debt can become a great habit or a new year’s resolution. Those looking to find payoff mortgage early strategies may be pleasantly surprised at the options offered them. Some free mortgage calculators allow users to calculate their mortgage debt on the fly and realize how adding a payment to a mortgage here and there can actually result in a paid down loan years earlier.
Reducing the amount of debt, whether during the holidays, or at other periods of time through out the year is one of the most important traits one can develop. Keep in mind that paying off your mortgage early can save you tens of thousands. This can be necessary if you find yourself with a high rate adjustable mortgage loan (ARM) about to adjust upwards. In addition this can make retirement far more affordable. Without a monthly house payment, one finds their life becomes quite a bit more affordable. Often, almost 50% of one’s gross income ends up being spent on a mortgage.
Payoff Mortgages Early
Properly managing the payoff of debt can be difficult to successfully accomplish, so getting a good method to payoff and control large amounts of debt can become a great habit or a new year’s resolution. Often, second mortgages can be tempting enough that they convince consumers to take out large loans on frivolous expenses. Those looking to find payoff mortgages early strategies may be pleasantly surprised at the options offered them. An ARM can be destructive on one’s finances, as they tend to adjust upwards quickly.
Reducing the amount of debt, whether during the holidays, or at other periods of time through out the year is one of the most important traits one can develop. Keep in mind that paying off your mortgage early can save you tens of thousands. This can be necessary if you find yourself with a high rate adjustable mortgage loan (ARM) about to adjust upwards. In addition this can make retirement far more affordable. Without a monthly house payment, one finds their life becomes quite a bit more affordable. Often, almost 50% of one’s gross income ends up being spent on a mortgage. Some free mortgage calculators allow users to calculate their mortgage debt on the fly and realize how adding a payment to a mortgage here and there can actually result in a paid down loan years earlier.