Is It Half Full or Half Empty?
All depends how the Media spins it.
Two articles from Wednesday April 25, based on the "latest report by the Mortgage Bankers Association.
Headline from CNN Money:
"Mortgage apps fall for fifth week"
"Mortgage applications continued their recent decline last week, falling for the fifth straight week, according to the latest report by the Mortgage Bankers Association.
The industry group's seasonally adjusted index of mortgage applications dropped 2.5 percent to 630.6 in the week ended April 13, from 649.5 one week earlier. . ."
Headline from Reuters:
"Mortgage applications rise but home sales tepid"
"The Mortgage Bankers Association on Wednesday said its mortgage applications index climbed by a seasonally adjusted 3.6 percent in the week ended April 20 to 653.3, its highest level since the week ended March 23 when it hit 671.0.
Mortgage applications rose last week after five straight weekly declines, but March home sales were weak and tighter lending standards suggest more of these loan requests will be turned down, economists say. . ."
My Analysis:
Are we actually as bad off as the mainstream media keeps telling us we are? Certainly there are areas of the country where housing inflated beyond prudent values, but for much, if not most of the country overvaluation is not the case.
We all know that bad news sells, and I think that is 50% of the story. I think the other 50% is essentially the reticence of the media to say anything good about the economy. It really makes no difference wether you are a fan of the Bush administration (who has certainly made more than its share of mistakes), or not. It is impossible to deny the fact that the DOW is at an all time high, and employment is also at an all time high. (The "half full" form would be that unemployment was at an all time low),
The Media has the populous all up in arms over ARMS(adjustable rate mortgages) and the Subprime sector of the market; trumpeting the bad news, or making the good sound bad. How about a couple of "Did-ya-Knows" about the mortgage markets Did-ya-Know that the FHA delinquency rate is slightly higher than the Sub Prime delinquency rate? Do you realize that the total Sub Prime delinquent (>90 days of Foreclosed) mortgages are less than 2% of the total mortgages outstanding? Losses in the Sub Prime market will be borne by the investors who have chosen to be in that market, while losses in the FHA secured arena will be reimbursed to the lenders from Taxpayer’s dollars.
It is too bad that there are people who wanted to have a home and were sold a mortgage which they could not afford. It is too bad some bad apples, i.e. lenders and loan officers took advantage of people some of those people who wanted a home and oversold them without concern wether or not the borrowers could make the payments in the long term.
But turn that thought around and I wonder how many more families today own their own home because of the availability of Sub Prime mortgages than owned their own homes in 1999? The good part of the story is the 86% of people who now own their home and are making the payments. who were helped by Mortgage Advisors who really helped them achieve the American Dream via Sub Prime Mortgages .
Dave Skibowski, Branch Manager, 1st Metropolitan Mortgage Co., Traverse City, Michigan
No-fee mortgage. Are you kidding me?
"No fees. No worry. No, really," (yeah right!) Relax, you've just found the best mortgage deal." Translation: Get your back to the wall, you're about to get Sc_ _ _ _ _ ! ! !
If these kinds of misleading ads were true, in the truest sense, all of the Mortgage Brokers in the country could and would be out of business shortly.
Do you honestly think any bank would really pay every mortgage closing cost? In my "Never-to-be-Humble" opinion, the vast majority of banks pride themselves in figuring out how they can squeeze out every last penny in a fee of some sort. Now, keeping that in mind, do you REALLY think they are going to do a mortgage loan for you without exacting a price which will more than make up for those ever loving fees they are not going to charge you. Where do they recoup their additional profit? In a HIGHER RATE! (Is that a surprise?) It doesn't have to be much. Does the deception work? Read on . . .
With the nation's housing markets in the dumpster, the Bank of America says its home-loan applications are up 40 percent from a year ago, and all of their bank branches and telemarketing facilities are doing a land office business. "The response has been tremendous," Terry Francisco, BofA spokesperson said. "We think it's a very breakthrough product." According to Francisco, the BofA deal has: "No appraisal fee, no title-insurance charges, unless the borrowers choose to purchase a policy for themselves as well as for the lender" (is there a Real Estate PROFESSIONAL out there who would recommend purchasing property without title insurance?). "No administrative, application, underwriting or other lending charges." "No requirement to buy private mortgage insurance, usually required when a buyer's down payment amounts to less than 20 percent of the purchase price. A guarantee that the mortgage will close within 25 days (unless the borrowers request a longer closing period). The "No Fees Deal" does include a "walk-away" penalty of only $250 if the customer has been approved for a home loan but later chooses another lender. How many Brokers could or would get away with this kind of a fee? The BofA "No Fee Deal" still collects for escrows for taxes, insurance, state and/or county revenue stamps,
While "No Fee Deals" do save up front costs, the price of paying with future value dollars, and the total of those costs because of the higher interest rates charged usually don't make any monetary sense. According to www.Bankrate.com, the market rate on the 23rd of May was 6.3% average with a low of 5.8%. Bank of America's 30-year, fixed-rate, "no fee" mortgage loan for customers with good credit on that date was going for 6.8 percent, a half percent premium!
A $250,000 mortgage, would have cost a borrower $30,000 more over the life of the loan with BofAs "No Fee Deal" when compared with a loan based on the 6.3 percent market average.
What BofA is doing is the same thing as Ditech.com, E-Loan, Countrywide and others have been doing for some time; they are just the latest on the band wagon. There is no such thing as a free lunch; and the old adage "if it sounds too good to be true, it is", has never had a better personification than in the "No-Fee" mortgage.
Caveat Emptor (Buyer Beware) should be the watchword for anyone looking at a No-Fee mortgage. Check it out, but check out a good Mortgage Broker before you go the closing table. If you expect to be in a house for only a few years, you still might want to consider loans that fold many of the up-front fees into a rate. Any good Mortgage Broker can do this for you and be honest about it. Just remember, no one works for nothing, and with the "No Fee Mortgage", the second half of "Pay me now or Pay me later" is the operative part of the phraise.
David l. Skibowski
Branch Manager. 1st Metropolitan Mortgage,
President, The Skibowski Company LC
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