Archive for September, 2006
NAR Takes A Lickin From Competitors At Oxley Hearings
September 29th, 2006 Categories: Real Estate News
NAR Takes A Lickin From Competitors At Oxley Hearings.
If you’ve read the Redfin rant, then you already know I’m keenly interested in news like this. Not because I hate Realtors, mind you, but because it’s the kindling of a fire that may well transform the real estate service markets from shark infested waters to a crystal clear sea of tranquility.
OK, maybe not that extreme. But I have Realtor friends (really, I do) who see the writing on the wall and know with a wave this big, you either ride it or get pulled under.
Sphere: Related ContentHow to Speculate on the Future of Mortgage Interest Rates
September 22nd, 2006 Categories: Mortgage News
Dan Green over at The Mortgage Reports hits on an interesting topic and trend, the speculation of mortgage rate futures. Interest rates have evolved to sprout ‘commodity’ features with the advent of the $6.1 Trillion dollar value Mortgage Backed Securities (MBS) market. The MBS has created liquidity and relative volatility for a typically illiquid security, making it prime for speculation.
Inside players are using technical, psychological, and mash-up strategies to make their predictions much like the Buffet, Soros, and Lynch, loyal speculators of the stock markets. Barry Habib offers a fine service called the Mortgage Market Guide (MMG). Part of their service broadcasts live candlestick charts fueled by MBS intraday trading prices. Barry teaches subscribers to watch for ‘patterns’ in his charts that have names like The Morning Star and The Inverted Cross that are purported indicators of pending change (sorry if I didn’t get the names exactly right Barry).
While I must confess, I didn’t study the charts to the degree that I could predict a pricing change based on patterns in charts, I did pay close attention to a few, easy to track economic and MBS market indicators. You may Google any of the report names for detailed explanations and actual release dates.
- Jobless Claims Report
- Non-Farm Payroll Report
- New Residential Housing Starts
- Consumer Price Index
- Intraday support and resistance price barometers for MBS bonds
On the short term, each of these indicators will affect rate pricing by either exceeding or falling short of ‘expert analysts’ predictions, literally within 30 minutes of the reports release. For example, if the Jobless Claims Report (JCR) is predicted to be 300,000 and the real number turns out to be 280,000, this would be a direct indication of a stronger than anticipated job market, which translates into a stronger economy, which translates into ‘inflationary economic conditions’. ‘Inflationary Conditions’ = pricing for the worse or rising mortgage rates.
Conversely, if the JCR turned out to be 320,000, more people are unemployed than expected, the economy is soft, pricing improves and rates drop.
The same dynamic works similarly for all four economic reports, with varying degrees of impact. Intraday resistance is a forecasted price level where the rate of exchange should encounter selling pressure, which should stop the price/rate from rising any further. Support is a forecasted price level where the rate of exchange should encounter buying pressure, which should stop the price/rate from falling any further. Speculators look for resistance and support levels to place orders and thus they become, to a large degree, self-fulfilling prophecies. (Definitions provided by HiFX).
Although self-fulfilling prophecies don’t seem to have a place in speculation, they most certainly do. Typically, once these resistance and/or support levels are breached, a volatile buy or sell pattern ensues, affecting pricing and rates accordingly (buying = better pricing/lower rates, selling = worse pricing/higher rates).
For a long term view, one need only ‘zoom out’ and view these reports from a wider date range and ‘watch the trends’ OR pay attention to the Federal Reserve Boards, Fed Funds Rate adjustment policy. The FOMC takes into consideration the above economic indicator reports (amongst other factors) when making their decision on increasing, decreasing or ‘pausing’ the movement of the FFR.
Dan took to speculating the FOMC’s recent pauses as a psychological play by the Fed, which seems plausible. While the FFR movement influences some mortgage rates directly, such as a Home Equity Lines, it is truly more of a general economic indicator.
Hopefully this information can somewhat tame and explain the arduous process of predicting mortgage rate futures. If you don’t care to follow economic indicator reports in relation to mortgage rate futures but would like to listen to people who do, Bankrate.com enlists a panel of ‘experts’ to weigh in on the matter.
Sphere: Related Content‘E-Lenders’ When Thieves Compete, You Lose
September 20th, 2006 Categories: Mortgage News
There is an army of foot soldiers on the other side of these nice web façades banking on your ignorance. DiTech, Lending Tree, e-Loan, Quicken, and a slew of other ‘e-Lenders’ have created convienient web-sites to exploit and facilitate the deceptive nature and huge revenue streams of the mortgage industry.
Selling inflated rates that pay huge premiums at the expense of the consumer is still the name of the game and these guys are doing it more efficiently than ever.
E-lenders are likely to be much more expensive than a local mortgage brokerage or bank. Most of them are mortgage bankers (also called Direct Lenders), who have the very special privilege of not being required to disclose all fees associated with obtaining a mortgage.
This is more than just opinion…click this comparison between DiTech and Wholesale Direct Rates. The problem doesn’t end with the e-lenders, their model is fostered by ’spider-web’ - information aggregation (IA) sites like Bankrate.com and Lending Tree, which amount to little more than advertising platforms with a catchy URL and an interface that offers some generalistic industry information and remedial finance tools. Just about any broker or banker may advertise on or through an IA, thus making the site no more reliable than the paying broker/banker on the other side.
Visiting any of these sites in hopes of researching accurate mortgage rate and program information is the absolutely futile equivalent of rate shopping through the phone book. Finding an honest and transparent broker or banker through an IA is analogous to playing Reverse Russian Roulette; 5 bullets, 1 empty chamber. ‘Their’ perception is your reality….
Look past the message, through to the entity that’s providing it. What’s their incentive? Change your perception and ‘their’ reality…. **Zillow has recently added a Finance Tab which is a patch link to these ‘misinformation’ sites. Zillows affiliation with such advertisement services defeats their message of ‘helping people make smarter real estate decisions’.
Sphere: Related ContentEssential Mortgage Broker Technologies Part II
September 10th, 2006 Categories: Mortgage News
VoIP Business Suite
Phone and fax expenses usually consume a huge portion of any client service driven businesses bottom line. The Mortgage Brokerage is especially sensitive to these costs. There isn’t just long distance anymore, now there’s “extended-regional” and all sorts of other pricing tiers that send phone bills into the many thousands of dollars per month range, not to mention the cost to lease the equipment.
Sphere: Related ContentDisclose Fixed Fees to Repair the Mortgage Broker Business Model
September 9th, 2006 Categories: Mortgage News
FACT: It doesn’t cost a mortgage broker/banker any more to close a $1,000,000 loan than it does a $200,000 loan, assuming the same documentation type. Same internal cost, same effort. So why is should one loan pay five times more than the other? Excellent question.
All things being equal, what are mortgage services worth? What’s fair for both sides? In today’s market, it simply isn’t practical for a broker/banker to charge much less than $2,000 to close a loan. Although this threshold is likely to decrease as technology continues to offer broker/bankers the prospect of ever greater efficiency, the costs associated with originating a mortgage and the right to a reasonable profit remain. This is a business, after all. So what’s the number?
I can hear the whining from spoiled broker/bankers already. "How do you expect me to live on a lousy $3,000 a deal?" Easy, considering the CPA (cost per acquisition) of a closed mortgage loan these days runs about $1,200—which makes a $3,000 "rip" a 250% ROI (return on investment). Hell, if you can’t find a way to survive on that kind of margin, it’s time to start looking for a new job, or better yet, get a new business model.
On the consumer side, you may be saying to yourself, "$3,000? Why would I pay that when I can get a $395 flat-fee loan from DiTech?" YOU SHOULD BE SO LUCKY. For the inside scoop on that load of manure, click here. As a consumer, GFE’s and HUD-1’s can be so difficult to interpret that it may look like you’re getting a good deal—one even cheaper than the XBroker fixed fees above—but in reality the broker/banker’s putting at least $10,000 in their pocket. It’s a game of industrial-strength smoke and mirrors.
Think you may have been duped on your last mortgage? Wonder if you’re getting ‘the business’ on your current deal? It’s time for a Mortgage XRay.
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