Happy Halloween!

Probably one of the better explanations

And a Happy Monday Morning to you. This is probably one of the better “simple” explanations of what Citibank and some of the other big banks might be up to with the SIV Super Fund…….

Market Snapshot….

First, I want to thank so many of you who took the time to give me some feedback on these weekly updates. It really helps to know what is most useful for the people who read this weekly updates. I also have to say that I was a bit overwhelmed at how many people responded and said that you really appreciate getting the e-mails. It’s nice to know that it’s appreciated.

There were a couple of prevailing comments running throughout the responses. I’m going to summarize them here:
1. We can read the news anywhere, but we’d really like to hear your take on what it means.
2. Even though the news right now is predominantly negative, don’t stop telling it like it is. We need to know the reality of what the market is like right now.
3. Try to keep them a little shorter (that must be my B.A. degree in English coming through!)
4. If we could get the rates in a different format, that would be great.

So, starting today, I’m tweaking the format a little bit. It’s going to consist of two parts:
Part 1- What I feel are the top 4 or 5 news stories from the week in terms of how they impact the mortgage and real estate markets. I’m not going to copy and paste them, I’m going to give them to you in my words.
Part 2 – My opinion of what they all mean.

I’m also going to start sending the rates in two attachments. One will be, as they have been, a Microsoft Word document and the other will be a .pdf file. That way you can use the one you feel is easiest for you to open.

So, here goes the top 5 news stories from the mortgage world this week:
1. Home Sales – Both existing home sales and new home sales were announced this week. There’s one word to describe them: UGLY. They were both down substantially and the sales for previous months were revised downward as well.
2. Bank of America – They announced that because of a very bad third quarter, they are laying off 3,000 people. 700 of them are in their wholesale mortgage division which is being eliminated completely. The remainder are in the part that packages and sells mortgage backed securities.
3. National City – announced that they are eliminating their correspondent lending division. What is correspondent lending? In simplified terms, it’s a way that they would buy loans from smaller banks and mortgage companies.
4. Merrill Lynch – they announced a $8.4 billion (that’s $8,400,000,000) write down (loss) in their mortgage trading area. The scary thing about that one is not only the number of zeroes in it, but also the fact that it’s about $3 billion more than what they anticipated three weeks ago. Do they not know what they are doing, or is the market crumbling that bad? I’d vote for the former rather than the latter.
5. Countrywide – wow have they made the news this week. Two main things:
a. Their “save America” campaign. They are supposedly reaching out to approximately 80,000 of their customers to try to save them from foreclosure. Well, excuse the cynicism here, but a couple of thoughts come to mind:
1) Many of those people can afford to refinance any way, so that puts it back into the realm of just normal business.
2) The number of people who would be eligible for loan modifications, compared to the potential amount of people who would need them makes it a drop in the bucket.
3) The nature of the secondary mortgage market makes it very very difficult for people to actually get a loan modification.
So, call me a cynic, but I see it as more of a PR move than something that’s actually going to help people out that much.
b. $1,200,000,000 – That’s how much money they lost in the last 90 days. Ouch. They said that they expect to turn things around quite quickly and be back to making money in the 4th quarter of 2007. They also suggest that the market has stabilized and is returning to “normal” and things will rebound in 2008. I hope they are right, but I remember what the CEO of Washington Mutual said just 9 days ago, “We are not making projections as to when the market will stabilize,” he added. “At this point, we have not seen signs of stabilization.” They can’t both be right.

So, where does that leave us? Frankly, right smack in the middle of it with no clear sense as to where things are going to go from here. Housing sales are down, bank losses are up, mortgage units are being dismantled, it’s an ongoing adjustment that’s working it’s way through the mortgage and real estate markets. So far, the Fannie and Freddie fixed rate loans (under $417,000) have been holding up quite well., and that’s crucial, in my book to keeping things in West Michigan from getting a lot worse.

Where’s it going to end up? I read an article the other day after Merrill Lynch came out with their earnings (loss) report and it was $3 billion worse than they projected 3 weeks ago. That means that one of three things has happened: 1) Merrill doesn’t know what it’s doing. 2) Conditions are getting worse in the credit markets by the minute or 3) The rest of the big banks (Citibank, Bank of America, Washington Mutual, Wachovia) were all getting creative about their earnings because they should have been worse. I vote for option #1. I don’t know what the real answer is, but stay tuned.

I think that about sums up the week. Thanks for your input, I continue to value it. Feel free to pass this on to anyone who might benefit from it and as always, let me know what I can do to help.
Have a good weekend!

Banking Regulation by the Government

If you want to read a good analysis of it, click here. It’s still pending, but if it passes, it’s going to change the mortgage landscape quite dramatically.

Third Quarter Builder Earnings Reports

These are some of the national builders, and aren’t too much in our area, but they aren’t good numbers.

As a matter of fact, the term ugly comes to mind.

Foreclosure predictions

This story says there will be a lot of vacant homes coming on the market in the next 12 to 14 months. The questions that raises (in my mind) are:

1. Should these people have bought homes in the first place? Some of them should have, but something bad happened to them. Some of them probably shouldn’t have.

2. Where are all of these people going to go? It might be a good time to be a landlord?

$4,000,000,000,000

That’s a really big number. Read the story here……

Bank of America exits the wholesale mortgage business

Read the full story here.

Countrywide – a glimpse into how big of an issue it is?

This article from www.money.cnn.com lays out a compelling case that Countrywide’s earnings (or loss) report on Friday will show just a bit of a glimpse at how bad things really are….

Click here for the article…..

Week in Review – the good, the bad and the ugly.

Well, we made it to the end of another work week. If you’ve been following the reports, you know it’s been a challenging week from an economic news standpoint. I’m not going to go into the details on those here (see my previous post for information on that). Instead I’m going to throw a few thoughts in about the good, the bad and the ugly that we’ve seen this week:

The Good – Fifth Third announced earnings reports this morning that were ahead of 3rd quarter last year. When you compare that to what some of the “big guys” did for this quarter, not only did we not lose money, we actually made more than last year. That’s a good thing.

The markets have gone from anticipating that the Fed won’t lower rates the end of this month to anticpating that they will lower rates. That’s a good thing, but the reason that switched is when we get to the

Bad – there were just a lot of really challenging economic and news reports about the impact of the credit crunch, home sales, oil prices, job losses, and such. I wish that I could say that it wasn’t so challenging, but in reality, I can’t. Keep in mind that many of these reports are national and don’t reflect the individualized numbers of the area. If anyone has reports from the local Realtor board on sales, listings, inventory and such and can share them with me, I’d love to share them with others.

The Ugly – I’ve used the baseball image stating that we’re in maybe the 2nd inning of a ballgame with this challenging times. A couple of people (a lot more notable and influential people than I am) have used that analogy and have all said that we’ve got quite some time for this market to work itself into a healthier status. I’ve heard estimates from reputable sources saying spring of 2009 is optimistic to as far as 2012 before the market. That’s ugly.

We’re, frankly, in the beginning stages of a seismic shift in the housing and real estate markets. Michigan led the way into the housing doldrums so I don’t expect that the price swings and the volatility will be as drastic here as it is in other areas. However, it’s going to be the type of market that requires adaptability.

There’s a saying, “If you do what you’ve always done, you’ll get what you’ve always got.” I don’t think that applies in the real estate and finance fields right now. The old models don’t work right now. We need to look at new and inovative ways to do business. Sales are still happening. I talked to one builder this morning who’s business is down 11% from last year. He’s quite pleased with that, and frankly I would be too.

I’d love to hear from you on what you think is going to work in this new market. I’ll be sharing some ideas that I’m working on as time allows……

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