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• High interest rates and their connection to oil...

  Posted on 06/13/2008

  This is a pretty simple concept to understand. Oil is and has been a hedge against inflation for a very long time. This is because oil is traded in US currency making it an attractive investment to investors trading in foreign currency when the value of the dollar is on the decline. They buy and hold on to the oil futures until the dollar recovers a bit leading to a sell off and profit taking.
  
  Since oil is currently such an attractive investment to investors trading in foreign currency we are seeing huge oil rallies that are driving the price per barrel perpetually upward. Of course this is causing a trickle affect in the sense that the majority of our goods are delivered by plane, train, and truck all of which use derivatives of oil as their fuel sources.
  
  Another factor to consider is that many goods are made by equipment that uses diesel fuels and other derivatives of oil as well. Many of our goods are being produced and delivered through the use of fuels that are derived from oil. Considering that Oil is at slightly less than $136.00 per barrel right now it stand to reason that the cost of our goods and services cost more.
  
  But How Does This Affect Interest Rates?
  
  You might ask... Well, again this is pretty simple. Interest rates on fixed rate mortgages move in lock step with the 10 year treasury bond; the higher the yield the higher the interest rates. Their are some pretty complex calculations that go into the determination of interest rates for for the purposes of this post I am going to K.I.S.S... Thats right I am going to Keep It Simple.
  
  The yield on the 10 Year Treasury Bond moves opposite its price. The higher the price the lower the yield and vise versa. That is in large part due to the fact that if you pay more you net less... See pretty simple so far.
  
  Here's where things get a little bit complicated -> Bonds are extremely sensitive to inflation... Again there are some complex calculations that go into the reasons for but for the purposes of K.I.S.S I will say simple that inflation could turn your investment in the bond market south real quick. In large part that is due to the fact that the dollars that you just invested into the bond market are now worth less.
  
  I am not going to stray too far into the algorithms that make up the bond market except to say that inflation makes the bond market an unwise investment. Accordingly since bonds are often packaged into mortgage backed securities when the bond market is under diress mortgage interest rates go up.
  
  In order for the bond market to start doing well we are going to have to see a reduction in inflation. The only real way to boost the value of our dollar is for the FED to raise the FED Funds rate. That of course will lead to a sell off of oil which will lead to a lower cost per barrel, lower inflation, and ultimately lower mortgage interest rates.
  
  

  E-mail | in plattsburgh mortgage, Platt...

• Should the government stay out of our affairs?

  Posted on 06/04/2008

  Should the government keep out of our affairs? That is a questions that sparks uncomfortable and spirited debates over dinner table. Different people have different opinions on this matter. My opinion is that when the governement gets involved they disrupt natural cycles and slow recovery.
  
  I read an article today in where Richard Bernstein of Lehman holdings said "Washington is misguided in focusing on mortgages," Bernstein said. The federal government should focus on "job creation and people keeping their jobs," Bernstein said. "That is the key to rectifying this situation."
  
  That ties in with an article that I wrote on the subject recently on this very site. The problem is that when the governemtn gets involved investors lossen their own risk assesments and tend to make bad bets. What difference does it make if the government covers your losses.
  
  This is a very specific issue to the mortgage industry. Unfortunately instead of helping Americans way of life by using our federal money for job creation and retention our federal money is being used to bail out investment banks for funding bad loans.
  
  The old addage "it has to get better before it can get worse" is very true in this case. For years lenders and financing companies extended credit to people with a poor history of repaying debt. Loose lending standards is a major contributing factor to this fallout that we have been experiencing.
  
  Of course because of this fallout we will now see several years of tighter lending standards before things loosen up a little bit to level off at a more reasonable level. I do not expect to see the type of lending practices that we saw between 2000 and 2005 ever again but currently lending institutions and financing companies are over compensating and scrutinizing borrowers who otherwise would be very well qualified with regard to their ability and willingness to repay debt.
  
  The governments intervention is going to make investors more comfortable in the future with financing bad debt and extending credit to those who they should not. the governemt is not fixing the problem but instead they are aggitating it by resetting the cycle in the wrong direction.
  
  I would love you hear your feelings on this subject. I look forward to your comments. Thanks for reading and have a great day!
  
  
  Sincerely,
  Christopher Ohlsen
  Mortgage Advisor
  1-866-562-6930 ext.105
  1-518-335-8791 (cell)
  1-518-324-3358 (fax)
  www.northcountryloans.com

  E-mail | in plattsburgh mortgage, Platt...

• What do you think the FED is up to?

  Posted on 05/30/2008

  I'm talking about the spike in oil recently... Who'd of guessed? A diabolical plan to increase the cost of oil while a Bush is in the whitehouse...?

  Oil is a hedge against inflation. Oil is traded in dollars so when the dollar drops oil becomes a more attractive investment for those trading in foreign currency.

  The FED cutting its key rate increases the likelyhood that the value of the dollar will drop. When the value of the dollar drops investors world wide rally around oil and the cost per barrel soars.

  The FED Funds rate cuts did not help the consumer, they did not help the housing market and they certainly are not helping the financial markets but oil is doing just fine.

  I've seen a lot of speculation on this topic as I wrote about it on the ActiveRain network entitled:

  Deliberate plan by the Bush Administration FED or just coincidence?
  
  
  I am adding this here as well because I would like to see what some of the readers of this blog think. Do you think that all of this is just coinidental or is it intentional?
  
  Another topic of interest to me that is along the same lines as this is that 150 Billion dollars that the pentagon is missing... The original "Stimulus Package" that was presented before the pork got loaded in was 150 Billion dollars...
  
  I've never been a conspiracy theorist but some of the things going on within the current White House is obviously not above board which leads me to mistrust the entire administration. I hope to hear some opinions on this. Thanks for reading!

  E-mail

• The Importance of Taking an Accurate Application... Avoid surprises down the road!

  Posted on 05/30/2008

  It is amazing to me how many people call up and ask for a rate with out wanting to supply any information. It goes something like this; the phone rings, I pick it up and greet the caller. Often times at this point I am asked "whats your rate". I used to try to explain to them that I cannot give them a rate without asking them a few questions first. I've heard the old adage "you wouldn't want a doctor to diagnose you with out checking you out first. Right?". But often times when you start explaining to them why you need the information they start explaining how they are running short on time. I don't go through this step anymore. Now if someone calls and asks me for a rate I simply say: "Yes I can get a quote right out to you, first thing that I need to verify is your address." Then I just start taking the application. If I run into rebuttals while I am taking the application I just simply explain to them that the key to an accurate quote is an accurate application (1003). I can't just start promising rates based on the sound of someones voice, no one can. All of those television commercials and web companies out there are "selling" mortgage loan products, they are not properly educating consumers. Things like $395.00 flat fee do exist but they are not as good a deal as they are made out to be. When you go to such Internet company sites and actually look at the information posted you will see what I mean. There are disclaimers in small print stating that the figures posted are based on "assumptions". Those assumptions basically mean that you are an absolute A++ borrower and maybe you are, but I'll need a 1003 to verify it. The other thing that you will notice about those sites is that they do have $395.00 flat fee but at an inflated interest rate. Brokers are paid in YSP (yield spread premium), banks in SRP (service rebate premium). There is a chart that shows that the lower the fee the higher the rate and the higher the fee the lower the rate. It makes much more sense financially for a borrower to take a lower rate than a lower fee. Most of these Internet companies offering flat fees still have 3-4 "points" built into the loan, and they are going to get it on the "front" (mortgage broker/loan origination fee) or on the back (YSP/SRP).

  This is why I can beat an Internet company any day. I charge much less than they do. I can offer lower fee on the same or lower rates and still make an honest living. I can charge zero up front and come in with a lower interest rate than they can. Rates are rates and they are what they are; we all get them from the same sources, but what I can do that Internet companies can't or won't is properly educate my clients so that they are poised to receive the best deal based on their own knowledge of the industry and so that they will never be made prey to a predatory lender.

  I have made rookie mistakes when I was just getting started, but if there is anything that I can emphasis to anyone just entering this business it is; TAKE AN ACCURATE AND COMPLETE 1003 EVERY SINGLE TIME!! And it will be easier to keep your clients happy, under promise and over deliver. If you quote someone something based on an erroneously filled out 1003 your quote will not be accurate and you will find yourself "back-peddling". But if you have taken a complete and accurate 1003 your quote will be very close to the final numbers on the HUD-1 Settlement Sheet and everyone will be happy.

  E-mail | in plattsburgh mortgage, Platt...

• A Unique Little Economy...

  Posted on 05/30/2008

  
  
  The title of this post is referring to the economy of Plattsburgh, NY and the North Country as a whole. Amidst all of the doom and gloom being reported daily in the national news with regard to our economy nation wide out little economy is still booming!
  
  People are still buying homes, more businesses are coming to town, and there are still plenty of employment opportunities. LaGrange is coming to town soon which is going to create another boom and shortly after that troops will start coming home (hopefully).
  
  Our gas and food prices are a little higher here than the national average because of the distantance that the gas must be shipped but all in all people for the most part can afford to drive. While food and fuel cost more we have some of the lowest cost for electricity, housing, and sewage in the country.
  
  The low living expense in Plattsburgh and much of the North Country offsets the additional cost for food and fuel in this region. I am very happy to be here and I am excited about what the future holds.
  
  

  E-mail | in Plattsburgh, plattsburgh mo...

• Lake City Mortgage is Now Offering The Lake City Home Express!

  Posted on 05/29/2008

  We have an amazing new loan program here at Lake City Mortgage that is sure to help a lot of people. To my knowledge we are the only mortgage company in the area offering anything like it. 100% conventional financing has completely gone away which is why I am so thrilled to be able to offer The Lake City Home Express!
  
  Here Are a Few of The Highlights:
  
  

  1. 100% financing of appraised Value.
  2. Unlimited Seller Concessions.
  3. Gift Funds Acceptable From Family and FRIENDS.
  4. Can finance Closing Costs Up To Appraised Value If Sales Price is Below Appraised Value.
  5. No Minimum Credit Score.
  6. Exceptions on Loan Program Restrictions For Credit Scores 620 and higher.
  7. No Declining Market Restrictions.
  8. Phenominal Interest Rates Compared to Conventional.
  9. Entire Process Takes 4 Weeks or Less.
  10. No Monthly PMI!
  This program is limited to Sub-Urban and Rural areas. Lake City Mortgage and I are located in Plattsburgh, NY 12901. While we cannot close the Lake City Home Express directly in the city of Plattsburgh we can provide this financing for any property located in the sub-urban and rural areas that surround Plattsburgh, NY including Cumberland Head.
  
  This program is viable in many regions of the North Country including:
  
  
  1. Keeseville, NY.
  2. Peru, NY.
  3. Cadyville, NY.
  4. The Town of Plattsburgh.
  5. Malone, NY.
  6. Moira, NY.
  7. Brushton, NY.
  8. Dannemora, NY.
  9. Lion Mountain, NY.
  10. Saranac, NY.
  And any other region in the NY, RI, and MA that has a population of 20,000 or less. I am very excited to be able to offer this program. To get pre-qualified for this program just give me a call at 1-866-562-6930 ext.105
  or send me an email at cohlsen@lakecitymtg.com.
  
  We also have a full suite of conventional financing options for ineligible areas and a paralegal to close your refinance transactions in-house. We basically run the Full Gambit here at Lake City Mortgage so give us a shot today! I promise you that it is worth the call!
  
  Sincerely,
  Christopher Ohlsen
  Mortgage Advisor
  1-866-562-6930 ext.105
  1-518-907-4665 (cell)
  1-518-324-3358 (fax)
  www.lakecitymtg.com
  

  E-mail | in plattsburgh mortgage, Platt...

• I don't want interest rates to go down... I want people to get jobs!

  Posted on 05/22/2008

  
  Interest rates are near historic lows. I remember when mortgage interest rates were in the high teens and you were very lucky to get a 12% rate. That was before I was in the business but I do remember hearing my parents talk about it as a young child.
  
  The other thing that I remember from my child hood is that houses were selling! Sure you'd see the occasional real estate sign indicating that a home is for sell but there were way less of them and they did not stay up for very long!
  
  The economy was doing fairly well at the time as Regan's terms was coming to an end and America was the bread basket of the world!
  
  Of course I was young during those times... I am nearly 30 years old now and things have changed a whole lot. I am questioned every single day about interest rates. I am sometimes told as rates begin to creep up that the interest rate is high. Interest rates are one portion of the transaction that until we lock a rate in I have zero control over but I do know how to watch the market and I can make recommendations based on what the market is doing.
  
  The thing about interest rates is that they are only really significant with regard to individual economic well being when the individual is considering a refinance. It would not make any sense to refinance into a higher interest rate mortgage than you are currently in.
  
  People will still buy when rates get higher... As a matter of fact they will buy a lot.
  
  Unemployment numbers affect the bond market. Usually a very high percentage of unemployment signals to a weakened economy. When the economy is weak the stock market declines and investors seek shelter under the umbrella of the bond market.
  
  When the bond markets are doing well mortgage interest rates are low and the better the bond market does the lower interest rates go. Since high unemployment figures are a good thing for the bond markets and interest rate pricing the more unemployed people that we have in this nation the better our interest rates will be typically.
  
  From this perspective you can see why as a mortgage professional I am not opting for lower rates. I love being able to give people rates that they are happy with as customer satisfaction is my number one goal! However, what good is a very low interest rate if the average american cannot afford it?
  
  Our ecomony is in trouble! We have a very high unemployment rate, the housing market is slumping, and consumer spending that makes up 2/3rds of the economy has slowed to a standstill. Eve those people who are employed are feeling the pain including myself.
  
  We are all hurting because our dollar is not worth what it was 6 months ago! Low interest rates don't matter when people can't afford to fill their gas tanks.

  E-mail | in Plattsburgh real estate

• Individually qualifying each person.

  Posted on 05/12/2008

  
  
  Gudelines continue to change so quickly that it is hard to keep up. I work hard to stay on top of guidelines but in this market environment that just simply is not enough.
  
  I see cookie cutter loan scenarios all the time that a while back I would not have given a second thought to issue a pre-approval letter on.
  
  That is no longer the case; I call my underwriters, AE's, and Product specialists on every single deal. It does not matter any more what the guidelines say... The guidelines may say that you are perfectly qualified but they may not be reflecting a change that may have taken place yesterday for example.
  
  So, instead of playing a guessing game with my clients futures I am making absolutely certain that A transaction can be done before moving forward on it. 
  
  As a mortgage professional I recomend to all of you that you make sure that you are dealing with someone who will make sure that they can do the transaction before commencing. 
  
  
  Happy Home Hunting and Best Wishes!
  
  
                  

  E-mail | in plattsburgh mortgage, Platt...

• PMI is going, going, and gone for some people...

  Posted on 04/15/2008

  
  Since beginning my career in real estate finance I have often been asked questions about PMI. Some people want to know why they need it; they are concerned that the PMI brings the payment too high. Others know that it is a requirement but want to know why it is so high, is it their credit, loan to value, or is it because I am charging more for PMI.
  
  I have given many different descriptions of PMI to people depending on their questions. Most importantly to note; conventional lenders would not be willing to take on the risk associated with lending more than 80% of the homes value. PMI companies saw an opportunity to offer insurance on loans that exceed 80% of the value of a home and because it made sense for the lender(s) so they agreed to make the loans over 80% with PMI as a requirement.
  
  I've explained why PMI needs to be present on loans in the past and I've explained why PMI is as high as it is in some instances. Something that is very new to me is having to explain to people why they do not qualify for PMI and therefore cannot satisfy conditions that are required to be satisfied in order to get the authorization to close on a file.
  
  Something that is new to this industry since the inception of PMI is that PMI companies are now restricting what they will lend on... News moves fast in this business and by now this is old news to many of us in the business. The most recent changes to PMI certification took place on the 31st of March.
  
  While this is old news to industry professionals I am finding that this is new news to many people who are applying for mortgages. I am still getting a lot of people who are telling me that they want 100% financing and at a low fixed rate. One of the recent changes is that every PMI company out there just restricted the issuance of PMI to loans that are 97% of the value of the home or lower. There is no more conventional 100% option (at least for now). Fannie Mae and Freddie Mac will still issue a conditional approval for these loans that have been excluded but the approval will be conditional and one of the conditions is to obtain a PMI certificate.
  
  Another change that has come into effect is that PMI companies will not insure anyone who has a credit score that is below 620 period. If your score is 619 and Fannie Mae says that you qualify for financing you will not be able to obtain the PMI coverage needed in order to obtain the authorization to close.
  
  Also, you will need a 680 mid credit score to qualify for PMI if you are financing more than 95% of the homes value. These are the most recent changes and there may be more to come. Initially I thought that this would be a quick change and for some reason I thought that there would be some public announcement or something... But that hasn't been and I am still getting a lot of questions from people who would like to finance 100% of the sales price of a home and I just can't do it... no one can. So I wanted to write a little blurb about it here just so that people have access to this information and can plan accordingly.
  
  That being said; there are some great FHA options and theoretically you can qualify to finance 100% of a homes value if you also qualify for a grant program like NHF or Ameridream.

  E-mail | in Adirondack Real Estate, Pla...

• Is a Money Merge Account Right for You?

  Posted on 04/14/2008

  
  I guess the answer to that question is can only really be answered after you have had the opportunity to have your current situation analyzed by an expert. I personally have come across several reviews concerning Money Merge Accounts; some good some bad.
  
  Some people consider it a pure rip off; I have read many peoples opinions who state that you can do the exact same thing with a savings account. While it is true that you can do something similiar with a savings account it is not a Money Merge Account.
  
  There is a whole lot of speculation concerning the Money Merge Account so I wanted to provide a little information here on the topic.
  
  I am not an expert on the MMA (yet) but I do understand how it works quite well and I will probably begin offering the product soon procided that my research finally concludes that it is in the best interest of my client(s).
  
  The way that it works is quite simple; you take out a line of credit and you use the line as a "personal interest cancellation account". More simply stated you can use the line to reduce or eliminate much of the interest that you pay on your mortgage.
  
  The first thing that I believe is important to mention is that your line of credit should be interest only. The reason that it is important to use an interest only account is because your minimum payment will be determined by the interest rate; in this case you will be using the line of credit in a way that will actually cancel out any interest on it.
  
  Think of a credit card for a moment. If you make a purchase on your credit card then pay for that purchase before you actually receive the bill or before it "posts" you will have cancelled out any interest on it. Revolving debt is calculated each day based on the balance that you have accrued. A line of credit just like a credit card is a revolving debt.
  
  With a Money Merge Account you deposit your entire paycheck into the line of credit. The beauty of this is that the money that you deposit into your line of credit counts as the payment but because you are paying each month well in excess of the minimum payment therefore paying off sums that you have used of the line of credit you are cancelling out the interest.
  
  The balance on your line of credit will continue to go down depending on how much discretionary income you have each month after all of your bills are paid. Once your paychecks are deposited into the line of credit you write your checks directly from the line to pay all of your bills; your bills will be the same each month.
  
  As the balance continues to go down the MMA will prompt you to make a transfer from your line of credit to your first mortgage. Of course the length that it takes to pay off the mortgage will really depend on how much of your discretionary income is actually left over after your bills are paid.
  
  I am not an expert on the MMA but i am doing some research and studying. Ultimately I think that this product may be a great financial planning tool for those who have trouble keeping up with their monthly debts but still want to pay off their mortgage early. Some people say that you should not pay off your mortgage early because it is the cheapest money that you can find... Well, I personally think that 0% is cheaper than 6% or 7% and if you pay your mortgage off you will save tens and sometimes hundreds of thousands of dollars.
  
  I will learn a lot more about the Money Merge Account and I will keep you all posted. I imagine that probably only half of the people I deal with will actually benefit from this type of mortgage planning but that is enough of my client base to do the research.
  
  Please comment if you have information about Money Merge Account's that you would like to share.

  E-mail | in Adirondack Real Estate, eth...