Quitely astutely explained, from The American Scene:
Finance professionals, like members of all occupational categories, attempt to build barriers that maintain their own income. One of the techniques used is to shroud what are often pretty basic ideas in pseudo-technical jargon. The reason that it is dysfunctional to have an insured banking system that is free to engage in speculative investing is simple and fundamental. We (i.e., the government, which is to say, ultimately, the taxpayers) provide a guarantee to depositors that when they put their savings in a regulated bank, then the money will be there even if the bank fails, because we believe that the chaos and uncertainty of a banking system operating without this guarantee is too unstable to maintain political viability. But if you let the operators of these banks take the deposits and, in effect, put them on a long-shot bet at the horse track, and then pay themselves a billion dollars in bonuses if the horse comes in, but turn to taxpayers to pay off depositors if the horse doesn’t, guess what is going to happen? Exactly what we saw in 2008 happens. Link to article…
From the NY Times:
The Obama administration plans next week to revamp its $75 billion program aimed at sparing homeowners from foreclosure, streamlining the documents required of borrowers seeking lowered payments, according to financial industry executives and others who have met in recent days with Treasury officials.
The latest effort to accelerate the Making Home Affordable program — now widely viewed as a disappointment — comes as the administration faces growing pressure to do less for banks and more for households struggling with double-digit unemployment. Link to article…
MBS- FNMA 4.5 price: 100-27
10-yr Treasury Yield: 3.67%
Week 3, January 2010
More tightening of FHA guidelines on the way. That’s the message that came out this week with an implementation-time predicted somewhat nebulously as “this summer.” I have to say I find it interestingly ridiculous how we get fed this line from politicians about how we “need to free up credit and get banks lending again” and yet month after month on the front lines of lending we are seeing guidelines tightening. But frankly, for once, I think these restrictions are pretty reasonable. So now, with FHA’s new rules the two changes that will affect most borrowers are that the Up Front Mortgage Insurance premium will rise from 1.75% to 2.25% and that the current 6% max “Seller Credit” will now be capped at a max of 3%. In real dollars, the change in the up front premium makes a difference of only about $11 a month on a $400,000 loan at 5.5%. And the seller credit restriction? Well, that one will be a tough one for some situations. But generally, in the bay area, a 3% credit enables a pretty substantial sum and only rarely have I even seen a larger credit than 3%. And lastly, the change that maybe will grab some unusual attention is that for borrowers with credit scores below 580 the minimum downpayment will now be 10% instead of 3.5%. Well, in reaction to that I have to say I haven’t seen an FHA lender in California funding loans for borrowers with credit scores lower than 620 anyway. So, we’ll see if there is much effect at all from that change for our area. So, in general, the toughest change in my opinion is the reduced seller credit for some situations. The .5% increase in the up front premium sounds bad, but I think it will be hardly noticeable in real dollars. And the lower credit score requirement is basically off the table in our area right now already. Conclusion: be glad for the FHA program. It’s going to continue to be a great opportunity.
See here for more on the coming updates to the FHA program.
To contact me about financing your dream-home click here.
Weekend Wanderer’s Events
…finding the treasures in your town and beyond.
Two for This Weekend:
Harry Denton’s Starlight Room in San Francisco: This is just one that I haven’t mentioned in a long time and after being reminded of it today I felt there was no question I would recommend it today. Overlooking the center of Union Square at the top of the Sir Francis Drake Hotel, Harry Denton’s is both welcoming and glamorous. The seven-piece Starlight Orchestra pumps out the beats on the weekends and the vibe is unmistakably San Francisco. You’ll see for yourself when you get there. Cheers!
San Francisco Segway Tours: These days, the tours are running in both daytime and nighttime. Once again, I know I am a sucker for touristy things. (Maybe I’m just a life-tourist.) And this funky little tour option enables you to ride on these awesome single-person transports (like you’re in some science fiction movie or somethin’) and up and down the hills around the waterfront near Fisherman’s Wharf. An alternative route takes you through the Marina District and directs you to the beautiful Palace of Fine Arts. Day or night, check it out!
Help Your Fellow Living Beings:
Charity Navigator: From their website: Charity Navigator, America’s premier independent charity evaluator, works to advance a more efficient and responsive philanthropic marketplace by evaluating the financial health of over 5,400 of America’s largest charities. The disaster in Haiti is a poignant reminder of how important it is to take up these causes. Hope this resource helps those of you who choose to give to various charities.
Two Weekends from Now:
San Francisco Hearts Haiti: It’s actually next Wednesday, not on the weekend, but it’s a fantastic benefit show being put on at The Independent in San Francisco. Here’s the lineup: SILA, Kalbass Kreyol (from Haiti), Bayonics, Native Elements, Joe Bagala, Meklit Hadero, Thank You Julius, and DJ sets by Jeremiah (with Afrobeat Nation), Non-Stop Bhangra Djs, Felina, DJ Amar & Electric Vardo Live and J-Boogie. You can join in, have a fun Wednesday night, and contribute to this great cause.
Pic of the Week… from my phone camera:
Stinson Beach After a Rainstorm
MBS- FNMA 4.5 price: 101-03
10-yr Treasury Yield: 3.61%
Waveform animation: quite mesmerizing stuff.
From Reuters:
Effective Feb 1, the Housing and Urban Development Department will waive for one year an FHA rule that prohibits insuring a mortgage on a home owned by the seller for less than 90 days, giving FHA borrowers access to a broader array of recently foreclosed properties. Link to article…
From MarketWatch:
HONG KONG (MarketWatch) — Most Asian markets ended lower Wednesday, as concerns China may step up its tightening measures to cool a rapidly growing economy hit banking and resource shares hard.
Several other regional markets also reversed direction or pared early gains made after a strong finish on Wall Street, after the Chinese banking regulator said the nation’s banks were expected to make fewer loans this year than in 2009. Japan’s Nikkei 225 and Taiwan’s Taiex fell 0.3% each, while Australia’s S&P/ASX 200 ended 0.1% up — well off the day’s high. Link to article…
Here is one that piques my interest from The NY Times and CNBC:
President Obama on Tuesday stepped into the middle of a fierce lobbying battle by reinforcing his support for an independent agency to protect consumers against lending abuses that contributed to the financial crisis. The president’s move also signaled a tougher line and a more direct role as Congress weighs an overhaul of banking regulation.
The financial industry and Congressional Republicans have singled out the administration’s proposed consumer agency in particular, hoping to greatly weaken if not kill it. With liberal Democrats and Web commentators fighting just as hard for a strong independent office, the issue is becoming the central flashpoint in the debate over regulation. Link to article…
MBS- FNMA 4.5 price: 100-31
10-yr Treasury Yield: 3.64%
Improving market for mortgage rates this morning. I’ll take a look at what’s going on and will add some of what I find. Looks like today is probably going to be a good day to lock rates for loans in process. If you have one in process I’d recommend looking into it.
MBS- FNMA 4.5 price: 100-19
10-yr Treasury Yield: 3.70%
MBS- FNMA 4.5 price: 100-22
10-yr Treasury Yield: 3.67%
Week 2, January 2010
This week we have been doing some training and have been experiencing some challenges with the new 2010 rules on the Federal Good Faith Estimate for purchase and refinance loans. In general, the changes to the estimate make the disclosure clearer and they are good for consumers. What isn’t fine is how the California Mortgage Loan Disclosure Statement (MLDS) does not correctly reconcile with the new Federal Good Faith Estimate. The new rules for lending are that the fees covered under the term “origination” include the commission for the broker, the broker processing, the lender underwriting and processing, and any other fees a lender likes to throw in such as flood certification fee, wire fee, and tax service fee. All of these are now singularly called the “origination fee.” What was once called the “broker rebate” or “yield spread premium” and was once paid to the brokers by the lenders is now redirected as a credit paid to the borrower to offset the cost of origination. The trouble is that the MLDS does not show it that way. Maybe it’s California’s budget crisis that’s keeping this from being up to date, but on the California MLDS it’s still showing as a rebate paid to the broker. And as of January 1, 2010 that is incorrect disclosure. But we still have to use it. How do you like that? Bottom line is that there can be a “rebate” paid by the lender for choosing a slightly higher interest rate. Whatever rebate that is will now be credited to the borrower to offset the costs of the loan. Eventually the MLDS will be updated to be consistent with the new Federal Good Faith Estimate. It just isn’t doing that quite yet. So, keep in mind that instead of going to the broker the “rebate” now goes to the borrower to potentially offset the origination cost of the loan, and whatever fees go to both the lender and the broker are disclosed on the Federal Good Faith Estimate as the “origination fee” for doing the loan. The Federal disclosure is actually pretty good, it’s just California that needs to get itself up to date (IMHO).
See here for more on the battle to update consumer protections in the finance industry.
To contact me about financing your dream-home click here.
Weekend Wanderer’s Events
…finding the treasures in your town and beyond.
Two for This Weekend:
When Lives Become Form: Contemporary Brazilian Art, 1960s to the Present: Focused on a particular art movement in Brazil in the 1960s, here is how it’s described: “Tropicália sought to escape the shadow of the West and create a uniquely Brazilian art culture. Its central figure, Hélio Oiticica, took inspiration from Brazilian favelas, “a product of fantastic improvisation in creating a ‘vital place’ for communicating not form so much as joy.” Check it out!
Continued into January “Affordable Art for the Holidays”: Just a few blocks from the BART stations in the Mission District is the CityArt Cooperative Gallery, which has extended their holiday show with all art in the back room priced at $200 or less. Another group show is in the front as well. It’s looking like a great chance to find some great art for a good price, and to have a fun visit to the Mission’s progressive and hip shops and restaurants. Check it out and enjoy!
Help Your Fellow Living Beings:
American Red Cross for Haiti: With the 7.0 earthquake hitting Haiti on Tuesday, at press time, it is very unclear how many are dead and injured from this disaster. There are estimates of around 3 million people who must are being affected, and it’s up to the rest of the world to respond. Needless to say, the Red Cross is always there. If you are moved to respond at this time of crisis, click the link and send a donation.
Two Weekends from Now:
Health, Wellness and Goals Workshop in San Francisco: Here’s how it’s promoted in The Chronicle: “This New Year, discover principles from do-able yoga, daily meditation, going back to nature, affordable and nutritious cooking, simple detox steps from breath, colon and more, developing a calm/purposeful life & ways of giving! Explore “111 ways to lose weight, look younger and great and feel energetic”.” Looks like a good one for us all.
Pic of the Week… from my phone camera:
Green of winter in Loma Rica, CA
MBS- FNMA 4.5 price: 100-09
10-yr Treasury Yield: 3.76%
As Financial Crisis Inquiry Commission Chairman Phil Angelides says, “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.” Yep.
WASHINGTON — Goldman Sachs’ chief acknowledged Wednesday that the investment bank engaged in “improper” behavior in 2006 and 2007 when it made huge bets on a housing downturn while peddling as safe more than $40 billion in securities backed by risky U.S. home loans. Link to article…