David Neal's Mortgage Blog

The Fed is at it again, offering words that may sound encouraging at first blush, confirming that their program to buy Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media will pick this up and translate into their own interpretation, saying "Good news, the Fed's words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer..." But is this really what that means? No, Not so.

Here's the truth.

Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of Fannie Mae 30-yr 5.5% and 5.0% Bonds...which won't have much of an impact on present interest rates. Why? First, see the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying - http://www.newyorkfed.org/markets/mbs/index.html.

So then, why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.

Are you with me so far...

With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, allowing the Fed to quickly recoup some of their investment. And this is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

Here's the most important part.

Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher, and this window of opportunity could pass them by entirely.

The Kicker is this:

Even if those clients ultimately are correct in timing the market, and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.

I don't want anyone to miss an opportunity by either waiting, or not understanding what is at stake. Let's talk further on this - call or email me and let's discuss what this might mean for you.

All I can say about the Rates is "Wow"!

I normally focus primarily on purchase loans, but with interest rates where they are right now, it's just crazy! There is huge volatility in the rates from day to day, so it definitely pays to have someone that knows how to be on the leading edge of the rate changes.

Rates are approaching an all time low for 30 year fixed loans. I hear that a lot in advertising or see the ads on the net and think to my self "that's crap"....but right now it's true.

Now, before you get all bent and go off trying to get a lower rate, there are some things you should look at. The biggest is, the amount financed. Someone with a 50k loan won't benefit as much as someone with a 200k loan, for an equal drop in rate. Also, you want to look at how long you have had your current loan. If you have already paid the bulk of your interest and are half way through your loan repayment, then paying the interest all over again, even if it is at a lower rate....would silly. The time it will take you to recoup your closing costs, can also be a factor.

The number one thing you can do is contact a trusted mortgage professional and have them do a detailed analysis of your current mortgage to really determine if there is a clear benefit to refinancing your home. Hopefully I would be that person, but if not, just make sure the the person you contact knows what they are talking about, because there are a lot of loan officers who don't. If you have any questions, just call me and I would happy to answer them without a high pressure sales pitch...just a low pressure one. LOL, no really I'll answer your questions without an obligation from you.

On This Friday after Thanksgiving Day, I wanted to take some time to reflect on some of what I'm thankful for. It's so easy to get out of mindset of being thankful or grateful, especially when its seems as though we have so many problems in our lives, from day to day. I'm thankful that we have a whole day that I can focus on the things and people that have been a blessing.

Some people might think that I would have to out of my mind to be thankful for the mortgage business. While it has definitely had it's ups and downs,  overall, it has allowed me to provide for my family for years. Everyday, I have new challenges that always keep it fresh and never boring. I've said before, that's what I like and dislike most about this business....it's always different. I am also very thankful for the opportunity to provide a better overall experience for our customers and not have to do things the way I've been witness to for many years. I am also very thankful for still being in business in a time that is very difficult for mortgage companies. I have had the distinct opportunity to have many people around me, that make that very thing happen everyday and that I am able to learn from. I am thankful for the underwriters and processors at Fist Liberty, as well as the management that make it all work on a daily basis. I am thankful for my assistant Amanda! She helps keep everything on track and working from day to day, regardless of what's going on. I am thankful for my loan officers who work to help bring my vision to our clients.

Now, I'm not going to lie...things have been pretty tight lately, but I am grateful that I am able to be thankful for what I have. The quality of my problems is pretty good compared to those of others. My family is healthy, we have a roof over our heads and food to eat. Where there are an awful lot of people and families out there that don't have those things. I am thankful for my friends that are there, in good times and bad or when it's not convenient for them. Most of all, I am thankful for God and all that he has done for me throughout my life. While I might not know what he has in store for me and why this or that happens, I have faith that there is a plan, regardless if I understand it or not. Many times in my life, I've had something happening in my life seemed terrible, that ultimately turned out to be a blessing. I just couldn't see that at the time! Thanks Big Guy!

I am thankful for the members of our Armed Forces, who are defending our personal freedoms and way of life. I am grateful for them, who are away from their families, so I can be with mine. Our whole country, whether you agree with why they were sent....should be very thankful that the Armed Forces follow orders and stand their post, even when they don't want to or don't agree with the reasons why they're there. I am thankful for all those whole have given their lives in defense of the United States and my heart goes out to all of their families.

Last but not least, I'm thankful for my family that are there through thick and thin. My wife and children are truly a gift, along with my parents and grandparents. My Wife's family is a blessing and I'm thankful that they are a part of my life. I am also thankful for my cousins, aunts and uncles. Maybe we don't spend much time together or even talk much, but that doesn't make them any less important. Oh, and Sharon...I'm thankful for you too!

Obviously this isn't about mortgages, but I wanted to share a recent experience that I had with Ebay and Paypal.

I haven't sold or bought much on Ebay, but recently I sold two items. The first transaction went smoothly, but the second is a completely different story. Between Ebay and PayPal (who is also owned by Ebay, now) decided that they were going to put a hold on the payment that the buyer made to me to purchase the item I was selling. Not a large transaction, only $74. I was informed that the only way to get the money released was to ship immediately and for the Buyer to leave positive feedback. PayPal said that I had to prove that the item had been delivered and then they would release 3 days after that or wait 21 days.

So against my better judgement, I shipped the item. As soon as the buyer received it he left positive feedback on Ebay for me. Once I saw that, I checked PayPal to find out about my money being released. Much to my dismay they hadn't released the money and now said that they would only release it 24 hours later, even though PayPal's website clearly said that they would release upon positive feedback being left, not 24 hours after.....

So PayPal and Ebay are screwing their sellers. They only seem to do it to the little guy that only sells things occasionally, which I think is most of their business. These people must be issuing holds on billions of dollars and drawing interest on it. That's the reason for the mandatory holds that they say "is designed to protect the buyer"...which is crap. Why then would they still continue to hold my money after the buyer said everything was okay.

This has been a two week process and I will never sell or buy anything through Ebay again. I will use Craigslist! as for PayPal.....I don't believe that I will be using them in the future either, based on this recent experience. If you enjoy being screwed and having your money hijacked and held without any recourse...then I would recommend these people. Otherwise I would steer clear. I would have gotten my money faster, if the buyer had sent a check regular mail. I might add that I had to pay for the upfront cost of shipping the item out of my pocket and Ebay withdrew the funds from my checking right away...knowing full well my money for the transaction was being held. They should be ashamed of themselves.

Great customer service guy's!

 Another Fed Day arrived and in a unanimous decision, the Federal Reserve cut the Fed funds rate by 50bp to 1.0% and also lowered their discount window rate by 50bp, taking it down to 1.25%. The bond market didn't react well to the cut as usual. Mortgage bonds lost the gains from yesterday morning and then some.

What does all that mean you ask? Well, what it means is that mortgage rates went up yesterday. There is a common misconception that when the Fed cuts rates, that it is a cut in the consumer rates, which is FALSE! The effect the cut has can trickle down to the consumer in the way of car loans and such, but mortgage rates are tied to mortgage backed securities that are traded on Wall Street. So, interest rates on mortgages change as the market changes. Under normal circumstances, usually when stocks rally bonds fall and when stocks fall bonds rally. That balance has been thrown out the window here lately.

 In the last several weeks we have seen huge swings in the rates. Larger than I have ever seen.....really, in 14 years. Please do not assume that the rate you saw a week ago is the rate now. I have watched it change as much a a full point in a day or so. This means that it is now more important than ever  to talk with your mortgage professional about what your strategy is for locking your interest rate and timing the lock to catch the downward spikes.

I know it's hard to believe.....but we are still lending money. A lot of people have been asking me if lenders are back to lending money yet. My answer is...We never stopped!

Yes, don't get me wrong...there have been huge problems in the credit markets, but that's mostly in the "commercial paper" and "intra bank" lending. The rest of the market is feeling the tightening that the mortgage markets have been feeling for a year now. Is getting a mortgage a little harder, right now? Yes, but most people still qualify and at very good rates.

Now it's more important than ever to work with a loan officer that knows how rates work and what to watch. If you do, you should b able to take advantage of the market volatility and catch the downward spikes in the rates, to get the best rates available. If your loan officer doesn't know what rates are tied to or can't tell you what's going on in the market that will impact rates, then...be prepared for anything when you get to closing, because rates have been shifting wildly. You could very possibly get to close with a rate that's as much as a point higher than you thought, if the loan officer isn't paying attention or being careful.

Alright, enough of my propaganda. I just feel it's important to make sure people are informed about what's going on and the dangers that are still out there if you assume that your loan officer knows what's going on.

If you have questions about the what's happening in the mortgage market, please don't hesitate to give me a call.

Dave Neal

Today, I'm reflecting back and remembering my late friend Eric Kos on what would have been his 31st birthday. It's not mortgage related, but who cares...it's important none the less.

I think that it's better to remember the day of his birth instead of the day of his tragic and untimely death. You know, to remember and celebrate his life.

Eric would have been losing his mind with the stock market the way it's been. He was employed with AG Edwards as a Financial Consultant. He was always very particular to the most unbelievable levels....I remember and chuckle every time I think of the time Eric was telling me about an online course he was taking and was going clean off about the punctuation used in the course. He said to me " how can I possibly continue or understand this, if they're not using proper punctuation?" I thought that was one of the funniest things I've ever heard, but that was Eric...and let me tell ya, he wasn't kidding! That's what made it so funny.

Eric's favorite TV show of all time was the Shield on FX. It's hard not to think of him when My wife Stephanie and I are watching the final season this year. I'm not sure if he would have been happy or sad about how the show is winding down, though. My wife and I always joke that Eric was my sensitive side, because he always agreed with her on issue's or when I wasn't paying attention to things I should have. That was alright by me, it was like having an almost live-in mediator and probably is part of the reason Stephanie and I get along so well now.

My family and I are so very fortunate to have known and been a part of his life during his short time on this earth. We are also thankful for his family, which is like our own.

Happy Birthday Eric!

I have to tell you about an FHA mortgage that we recently did. It really shows off the system that I have worked on for several years, to expedite the loan process.

This FHA loan was one that had to be done by the 11th of September,  because of the downpayment assistance programs going away and our ability to fund them after that date. The official date was supposed to be October 1st, but we like many others got surprised at the last minute. To make a long story or not so long, depending on how you look at it....we cleared the loan to close in 8 business days. That's right I said it... an FHA in 8 business days. We only had a week and a half, and not only did we get it done, but we had the settlement statement to the borrower 24 hours in advance. I know lenders that can't provide the HUD 24 hours in advance after working on the loan for 30 days.

Now most certainly, we can't do that on every deal, but when push comes to shove......I have to mention that the only reason that this was possible is because the loan was very clean, the Realtor and borrower were very organized. The Realtor Jennifer Goodspeed was very skeptical and even after my assurances, didn't feel real confident about our ability to pull this off. I'm quite sure, that's because we had never worked with her before and well let's face it...most are lucky to get them done in 30 days. Here is what the buyer's agent wrote to us in a thank you card, that I just received.

We are expanding. I know it's hard to believe that anybody would be expanding a mortgage company in this market but I am. I'm not quite sure if I'm doing well or just plain stupid, but I'd like to think it's the first one not the later.

Things over the past week have been kind of chaotic as the carpenter cut a door and a big section on the adjoining wall to the new office space we added. It's kind of hard to focus when there is hammering and sawing going on in the office, but we managed. Now we have the task of putting everything back together. The main thing left is the wiring for the phones and computers, which I hope to have done this weekend. Please bear with us if we seem a little slower at the moment or out of sorts. Things are returning to normal more everyday and by the first of next week, we will be back full strength. We are full functional now, so please don't misunderstand. It's business as usual, just a little bit slower until we get everything reorganized.

Of course the reason for leasing more office space is that I have hired several new loan officers. We are glad to have them as a part of the team. They all bring skills that will be beneficial to our team, to continue to provide the best mortgage experience possible. I should have their Bio's up soon, on the website. If you have some feed back, I welcome it.

As I said in the first paragraph, I like to think we are doing well. I believe that the reason we are expanding in a world that most are downsizing or going under, is our commitment to our core beliefs, which are Service, Communication and Relationships. Keeping with those belief's I am not expanding for the sake of it, but to add to the service we can provide our customers. I truly feel that no other mortgage company provides the service and experience we do. 99% of our customers say that they would recommend us to family and friends, in a survey they complete at closing. The important part is "at closing"...anybody can make their customers happy to start with. Sorry, it seems as though I'm on a mini rant....it's just that I'm so passionate about it.

Forbes Magazine recently named Hamilton County the Best place to raise a family in the U.S., which is pretty cool! I am proud to be a long time resident and also to have my office located here.

I don't have to read the article to find out why, it's just a nice place to live. Hamilton county is clean and well kept. We have low crime, thanks to our wonderful police departments. Here in Carmel, Indiana we have the best school system in the state, but Zionsville, Westfield and Noblesville are all very good school systems.

On this Fourth of July weekend we had family over from out of town and one of the things they pointed out, was that Carmel was a very walking friendly city. I spoke with the Mayor Jim Brainard about eight years ago on how we really needed to focus on making our city more accessible to pedestrians, which I have to give him credit....boy did he listen. We now have one of the most walking and biking friendly cities in the country. The Monon Trail is also great, it's like a pedestrian superhighway that runs all the way to Westfield.

Some people in Indiana think that Hamilton county residents are stuck up or think we're better than everybody else. For the most part, I do not think that's true. What I do think though, is we have a strong sense of pride in our communities here in Hamilton County. Not to make our communities better than others, but simple to make them the best place to live that they can be and evidently it shows.

I am proud to be a resident and businessman in Hamilton County. It makes me think my Great Grandfather and Grandfather who moved here in the early 1900's really knew what they were doing. So, if you're thinking about moving and care to live in the best place to raise a family...come on down and check us out!