The new administration proposed an 850 billion dollar new stimulus plan.

The House passed it, although the vote was entirely over party lines.

About 30% of the plan is in the form of tax cuts which potentially would have an immediate effect on the overall economy.  The rest of the bill left a lot to be desired as it was almost entirely filled with pork, not measures directed at housing, and many of the “projects” funded would take years to get the money into the economy.  The markets gave this plan two thumbs down and bond yield have retreated 50 basis points, and the stock market had a terrible January.

The Senate is now considering the bill, and though it is early, and there is much that can/will change, several Senate proposals are much more focused on housing.

There is talk of the government utilizing various tools to bring residential home mortgages to 4% (better than the 4.5% Paulson had suggested.)  How they do this is still a bit of a mystery, although there is talk of both a subsidy to the lender and an insurance enhancement to the lender.  The humorous part is that the same folks that called to get their loans are once again calling. The $7500 home buyer credit may be expanded to $15,000 and available to all buyers of a primary residence.  The Senate is also looking at making it a “real” credit…right now it’s really a loan, since it has to be paid back.  There is talk of a 90 day foreclosure moratorium.  Reverse mortgages may get a boost nationwide as of the middle of February to a maximum of $625,000 under the FHA.  Their is a concept that loan modifications will be determined by reducing mortgages to a “31%” DTI, which is pretty close to where it had been (between 28%-33%) for many years prior to Direct Underwriting, no doc’s and crazy loan programs.

But, the two big tools being used right now are the government continuing its open market purchases of Fannie, Freddie, and Ginnie securities and notion that creating a “bad bank” or “bad banks” may work better than TARP.  Agency securities (Fannie, Freddie, and Ginnie) are presently 40% owned by central banks and investors in the Asian Basin, particularly by China.  Financial markets have been closed there for the last week to celebrate the New Year, so there has been no buying (also no selling) by the Chinese, who have only reentered the market in the last 72 hours.  The other tool the government is using is the notion of setting up “bad banks” or a “bad bank” to allow lenders to stay in business, and move bad assets to another institution.  TARP, was in theory set up to do this, but no one could agree on how to value the “bad assets”.  Sellers wanted a high percentage of par, but the TARP was unwilling to “over-pay”. Few bad loans were moved off anyone’s books.  Arguably new bad loans to car companies and others were entered into.  Thus, TARP has gone for all sorts of kooky things: jets, bonuses, travel boondoggles, $35,000 “commodes”.  However, the idea remains, get bad loans off the good bank’s books, give them the cash for the asset so they can lend it out.  Have the bad bank hold the bad asset rather than dumping it on the market and pushing real estate values down even further.

Stay-tuned.  Just when you think the politicians and the new administration “don’t get it”, they watched the market rather than the politicians, and they may be a lot closer to understanding that bigger tax cuts and targeted spending on real estate will work as opposed to useless pork.

Matthew J Northup

Private Mortgage Banker

Arlington Capital Mortgage

(908) 507-1642

mnorthup@arlingtoncapital.com

Efax-(866) 637-0395

This article was written by Dorothy Albala of Albala Financial Services, a preferred professional of Referrals4Success. If you want to contact Ms. Albala you may find her contact information on the R4S Site.

Why would I need one?  (A 3-5 year strategic benefit plan)

·        It can be described as a winning strategy suited for tumultuous economic times and market conditions. 

·        It will inspire you to review your goals (semi-)annually to make sure you are on target. 

·        It will also bring to light the gaps in your plan that you feel should be addressed, in a more timely manner.

Here are some thoughts that might come to mind:

·        What is most important about our plans; price, coverage or service?

·        What is my biggest concern?

·        Do you have a process to add new benefits or modify old ones?

·        Would conducting a benefit survey be of interest?

Keeping in mind that these economic times might be somewhat stressful, it is a good idea to review your long term plan, and make value a priority.

Would you like to learn more?  Give me a call or e-mail me for an appointment.

Registered Representative of and offers securities through Sammons Securities Company LLC Member of FINRA and SIPC                

Why the Community Reinvestment Act or CRA is not responsible for the current financial crisis. 

By Jim Brown a lender with 25 years of experience and member of Referrals4Success

An introduction to the CRA-The Community Reinvestment Act (or CRA, Pub Law 95-128, title VIII, 91 Stat 1147, 12 U.S.C. § 2901 et seq.) is a Federal Law written and voted into law  for the purpose of allowing commercial banks and savings and loans to meet the needs of borrowers in all segments of their communities, including low and moderate-income neighborhoods. The Act was intended to reduce discriminatory credit practices against such neighborhoods, a practice known as redlining.¹

CRA is NOT responsible for this mortgage debacle; absolutely not. These programs required full documentation at the time of origination. This means borrowers had jobs also known as employment, credit which also means 5 pieces of proven payment and a down payment verified.

Why is everyone looking back to 1977? The answer is right in front of us. Blame can go back to as early as 2000. Banks started the demise by offering option arms, negative amortization and started loosening underwriting eliminating the need for a down payment of 20%, waiving job verification, and accepting credit scores above 620 (today that won’t get you any kind of loan).

And people thought “Hey, this Option ARM thing seems to be working,” and loans were coming in. People could afford to borrow more when they only had to pay at say 3% instead of a fully indexed 6.90%. And then what happened?

Things started getting really good. The homeowners were losing equity on the low payment which everyone thought was no big deal in a rising market. But several years later they are now losing the equity due to the changes in the Real Estate market.

No one was looking were they? In the mean time; the Wall Street companies came along and said we can enhance those old underwriting scenarios which now look like “tough underwriting requirements”. We will do loans to 100% as long as they have a credit score of 620. And if they don’t we can still give them a loan and just charge them higher fees to close.

Hey when your down you need a punch to keep you down.

This is exactly what a higher rate and more points did to those borrowers. You would also hear; we can do that loan self-employed too. Just get me a business license!!!!!

Now the client says…”I want that loan and I can pay for it.” “Ok, sure.” So it gets done. The client thinks “I will be able to refinance when I ‘earn’ 20% more equity by next year with the market going up.”

He asks the loan officer, “Think that can happen?” The common refrain, “Oh sure homes sold today at 300K should easily be worth 360K.”

How sad that one of these Wall Street guys went down in just 2 years. But did they make one good loan?

So stop trying to find blame…it is right in front of us.

What about the responsible ones?

So, it begs the question, who wants bail out for making your payments on time with your sensible “Conventional Mortgage”? Even though you did the right thing you have been penalized by an economic calamity that caused by Greed and Money. What’s the penalty, possibly, your job, your 401k, or your pension?

Should we really thank the wizards of Wall Street and the banking system for creating this mess with bail out money? Or should we pass it along to the consumer who lost their job because of it while dutifully paying their mortgage on time. I say give them a year of no payments, and let’s bail out the folks who deserve it.

If you enjoyed the article and want to discuss this further with the author Jim Brown you contact him directly or via the Referrals4Success website:

Jim Brown
Senior Vice President
Kastle Mortgage
732.245.5121
Fax 732.845.5130
www.JimBrownMortgage.com

25 years of lending expertise

After you join and for a modest sum, you will discover that you have allied yourself with a select group of members who are the best in their respective professions.

The meetings provide an environment that allows for communication and exchange of ideas; specifically, our expectations regarding trust in business relationships and delivery of service to referral clients.

No one is ever pressured at Referrals4Success; in fact, we encourage the creation of an environment in which referrals are voluntarily exchanged. Members are provided exclusivity in each profession and/or business and a supportive environment.

Business referrals are exchanged after trust is established and that takes time.

Now, you may agree with everything that has been said but how will this didactic sounding rhetoric translate to additional business for each member?

We request that members of R4S be generous and consider the golden rule. Yet, many members wonder, where is the best place to find referrals to share with their fellow members.

Think about this, isn’t the best place to network with close friends and business associates?

After all, intentionally networking with the people you already know is better than trying to connect with individuals and organizations you don’t. Those you already know have an interest in you and can link you to everyone you don’t know!

Finally, after you join you will be encouraged to start contacting people you know well.

These people may not have referrals to share but because they are the people most likely to want to help you (friends, family classmates, business associates, etc.) you must trust that this will work.

Ask these people to contact people they know who will be able to help. Remember, be patient, sometimes it takes time for the message to circulate.

If you like what you have read, please click to the home page of Referrals4Success and consider joining. If you live in NJ you may join a physical group. If you live outside of NJ consider a virtual group, an online classroom designed to allow you to spread your referral network nationwide.

If you have comments, please post them here.

Best regards,

Keith Singer, Esq.

Founder/Referrals4Success, LLC