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Mortgage Market Week in Review…..

Sorry this is a little late.   Had a closing out of town and it tied up a lot of my afternoon.

Happy Labor Day weekend! I hope that you take some time to enjoy a very relaxing weekend on the last long weekend of the summer.   Due to the fact that it’s the Holiday Weekend, I’m not going to make this as long as some of the others have been.    So here’s what’s been going on in the mortgage world:

1. Fannie and Freddie – while nothing has changed substantially, the immediate market fears over Fannie and Freddie have diminished somewhat.   I guess you could describe it as a situation where it’s still cloudy and rainy, but the worst of the storm has passed for now.

2. Credit Markets – there is continuing fear and questions regarding the status of the credit markets.   How big of a problem is there floating under the water yet?  I’ve heard rumblings that as Fannie and Freddie’s shares have fallen in value and as it’s rumored that when (not if) the Fed does bail out Fannie and Freddie, the shares will go to zero.   Many banks own substantial shares in those two companies and a reduction in their holdings to zero will require additional writedowns and additional belt tightening on their parts.   That doesn’t bode well for the health of the banks.   Speaking of banks, there’s some questions about a certain bank out in California (Washington Mutual) because they are currently offering CD rates that are approximately 25% higher than the going rates most banks are paying.   The thinking is that they are paying higher rates because they need cash and need it desperately.

3. Economic reports – the Gross Domestic Product report came in much stronger than expected.   Does that mean that the economy is going well?   Let’s put it this way, the aircraft industry had a very good quarter.   The vast majority of the increase came because of the aircraft industry.   Apparently some airlines are upgrading their fleets to improve fuel efficiency.    Consumer Confidence came in higher than expected as well.   The market consensus seemed to be that it was because the drop in oil prices is making people feel better because they aren’t paying as much at the pump.   Personal incomes fell in July (not good).   Inflation numbers came in higher than anticipated and that put some pressure on the bond markets.

4. Home Sales – I’m starting to see and hear some anecdotal evidence of certain parts of the housing market showing some signs of life.   What parts?   Distressed portions of certain markets, like the foreclosure and short sale markets in some areas, are starting to move faster.   Is this a sign of a bottom?  It’s too early to tell.   I really think that before we see a bottom in the housing market, we’re going to need a couple of things:  1) A stabilization in house prices (so far the house price indexes are showing that the rate of decrease is slowing, but it hasn’t stopped yet).   2) A reduction in inventory levels. So could some of the signs that we’re seeing lead us to say 6 months from now that this was the beginning of the bottom?   Very well could be, but it’s too early to tell for sure.  Oh, and will some of these things happen sooner in some areas than others?   Absolutely.

5. Oil and the guy named Gustav – there’s a lot of nervousness on what the pending Hurricane could do to the oil production in the Gulf.   I can imagine that the Weather Channel’s ratings are going to be pretty high this weekend.   How does that effect mortgages?   If oil production takes a major hit, we could be looking at higher gas prices which will be a drain on the economy.

With all of that, rates have actually drifted down a bit this week.

Until next week…..

Thanks!
Tom Vanderwell
Cell (616) 292-7559

Quote of the week:  “A word to the wise ain’t necessary – it’s the stupid ones that need the advice.”  Bill Cosby  (thanks to Bawldguy for the quote!)

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  • Mortgage Market Week in Review – Fannie and Freddie
  • Project Bloodhound – Advice Needed

  • 6 comments

    6 Comments so far

    1. Smithers August 29th, 2008 6:32 pm

      “Speaking of banks, there’s some questions about a certain bank out in California (Washington Mutual) because they are currently offering CD rates that are approximately 25% higher than the going rates most banks are paying. The thinking is that they are paying higher rates because they need cash and need it desperately.”

      Tanta (Calculated Risk) has a humerous post today on this very topic. (But, you folks probably already knew this).

    2. Tom Vanderwell August 29th, 2008 7:17 pm

      I’ve been reading Tanta and CR at Calculated Risk for a long time. They do a phenomenal job of enlightening others to the goings on in the finance world, just like BHB does to the real estate world……

      Tom

    3. Sean Purcell August 29th, 2008 7:55 pm

      Tom,

      Nice wrap up, as always. I especially like the rip and compliment treatment you give Fannie & Freddie:

      …the immediate market fears over Fannie and Freddie have diminished somewhat… the worst of the storm has passed for now.
      Which you immediately follow with:
      It’s rumored that when (not if) the Fed does bail out Fannie and Freddie…

      But then you and I have always enjoyed a different opinion on that score. :)

      Also enjoyed the info on WaMu. The consensus around here has been WaMu for a while and your observation definitely reinforces that. The last big post I can remember on this had some great comments on who was next. Although I agree then and now with WaMu it is Wachovia that has been fun to watch. Lately they have been a model on how bankers handle problems (as opposed to mortgage banks).

      Couple notes to add to your banking woes: FDIC just announced that they will probably have to tap the Treasury in order to handle the upcoming bank failures they expect (their list of troubled banks grew from 90 to 117 just in the last quarter!) Also, the short-term, floating rate debts that so many banks are carrying will be coming due over the next 18 months at an unprecedented volume and at a time when the cost to refund them is substantially higher. Looks like these bankers “picked a bad week to quit drinking.” (Apologies: times like this always remind me of Lloyd Bridges playing Steve McCroskey in the movie Airplane) :)

      Nice Post.

    4. Tom Vanderwell August 30th, 2008 11:57 am

      Sean,

      Thanks. I had thought about adding the stuff about the FDIC and the short term refinancing coming up but then Bawldguy already accuses me of being too negative, so I left those for another day.

      Tom

    5. Austin Real Estate Blog August 31st, 2008 3:10 am

      If the government takes over Freddie Mac and Fannie Mae do you think it could help the real estate market. I was hoping the feds might get rid of some of the recent mortgage restrictions in an attempt to help the markets.

    6. Tom Vanderwell September 2nd, 2008 5:17 am

      Austin,

      I don’t see the Fed easing up on mortgage restrictions soon for one very simple reason. The old underwriting guidelines didn’t seem to work because they aren’t making any money right now.

      Does that make sense?

      Tom