I had a Real Estate agent call me last night about the news he had heard on Countrywide planning to layoff 12,000 people. What concerned him was, he caught something from the media that it might cause rates to go up. Interest rates are determined by the mortgage bond market. While it is true that they tend to follow the 10 year treasury, that is not what they are based on. What this means is that if everybody is investing in mortgage bonds then rates will go down. If everybody is pulling their money out of mortgage bonds and investing in other securities like stocks, then rates go up. Which is why with all of the trouble in the mortgage industry, rates have only jumped slightly in the overall upward trend. I want to add that this only really applies to conforming (fannie mae, freddie mac) and government backed mortgages, which are the standard. All other mortgages, right now, are in danger. This is because investors have been pulling all of their money out of these riskier investments. This in turn has caused the rates to go up dramatically or for the loans to disappear altogether. Which is what happened last month when virtually all 100% alta-a and subprime mortgages vanished. I'll write more about that in another post. I keep a very close eye on this, so that I can accurately advise my clients.

It used to be that....and by used to be I mean six months ago, I only had about one appraisal come back for less than the purchase price a year. Now, It seems like almost half of the appraisals I get for purchase transactions are falling short of the sales price. I'm sure that this is first hand evidence of the declining housing market everybody has been talking about. This is good for the buyers, but makes it very hard on the sellers, especially when they owe more on the house than they are selling it for. This is also making it very hard for appraisers because they are the ones delivering the bad news. I actually had an appraiser cursed at by a seller's agent this week which is unbelievable. We have to be very careful on what we say and don't say to appraisers now a days. The last refi boom brought with it a ton of appraisals that really stretched the value on homes, sometimes far beyond the true value of the home. That has led to a crack down on appraisers and in some cases criminal charges. It has also led to a crack down on "influencing or attempting to influence the value of a home" when dealing with the appraisers. Just to be on the safe side, virtually all lenders require a review appraisal to double check the value on all 100% LTV mortgages. Which means even if an appraiser does "find a little more value", it could possibly be cut right back. Unfortunately I think we are going to have to get used to the whole thing, because I don't think we will see an immediate change and it may take some time before home values start returning. I use several different appraisers, because sometimes having intimate knowledge of the area can help as well as the loan officer having the same knowledge is critical. Which is why it really is better to go with a lender that routinely lends in your area and not some random lender on the internet in say Wyoming or something like that.