More Fiscal Cliff Talks

My Quick Rant On This Topic

You know...this crap of fear mongering by the media is so elementary and obvious it's sickening.  This whole show about the Fiscal Cliff and taxes, and the wealthiest Americans paying more, and blah blah blah, is such a racket that is designed to divide us all.

When really looking at the numbers the top earners don't pay as much in taxes as you think they do folks.  Warren Buffet even said openly that he pays less in taxes in terms of percentage of income, than the average person does.

The very top earners pay people to find ways to reduce their taxes. Don't get me wrong I'm not against being wealthy and making money and living a very good life - who doesn't want to live a rich and fulfilling life? Everyone does that's a no brainer.. My point is this is a sneaky way to divide people through social stratification.

If you have money and ran a business or several businesses your goal would be to reduce your tax expense..duh.. Who likes to pay taxes? Nobody does.  The real people who pay taxes are the ones in the middle.  They carry the load which is why the soundbites are always targeted to "middle class" Americans which again the labels create a huge problem as it divides people into groups which leads to warfare...which is what they want!

If we're too distracted fighting a false paradigm, we can't actually come together as a nation and figure out a way to fix the problem.  "Class warfare" they label it ensues only worsening the problem.  It's trickery and is designed to keep us distracted, fighting, and living in fear and confusion.

What you fail to realize is that inflation is a silent tax and is way worse than what we're dealing with here on income taxes.  Have you noticed your food bill lately?

Oh but they want you to think that's a good thing because if prices are going up then that means your incomes will go up to match and plus the stock market is doing good and home prices are rising so just shut up and "feel" more wealthy when in reality you're income is not going up and the only ones profiting from the rising prices are the ones that control the lever...

If it's not a war on drugs, it's terrorism or taxes, or a bad economy, or murders, shootings, rapes, car wrecks, environmental calamities...It's a constant stream of bad news designed to keep people distracted, scared, confused, and worried all the time..

Jesse Ventura says it best when he describes our Congress as the world federation of wrestling as in front of the camera's they hate each other we have division, they're fighting it out but behind closed doors they're all buddies.

What you need to do is educate yourself and don't be fooled by what's going on around you.

This economy isn't going to get any better any time soon.  You need to decide how you are going to utilize your skills, talents, and brains to create extra income you can convert to stores of value like gold and silver and protect your family from the worst case scenario.

There are many ways to get started now in creating additional streams of income in your part time and start protecting yourself now - create your own economy and don't let this trash talk distract you or rob you of joy, happiness, and peace in your life.  Spend time with loved ones and cherish the special memories.

God Bless,

D...out...

New Housing Market

The days of fast money and anybody and their mama getting into the real estate business and hitting it big is over obi one kenobi...

And you know what I say?

Thank God!  The reason is we need a marketplace of professionals; leaders; trend setters; and customer service oriented champions who know what they are doing and can take their business to the next level.

Don't mean to be so harsh here (actually I do and I hope the wannabe's feelings are hurt) but this industry suffered greatly by people being able to get in so easily, and do to all the fast money, booming economic conditions, title companies, brokers, realtors, everybody was just jumping in for the quick buck, ran around and caused a muck.

See my post on building a brand or chasing a check because I dig into this by talking about what kind of value you bring to the marketplace and pose the question are you just in it for the money or are you in it to build a brand and a presence or chasing a check?

The new housing market; the new economy; the new way of doing things will be far different than what it was before. We'll be in a wet, sloshy, and muddy waters for some time to come. Call this cycle the "cleansing"...

Because while the wannabe's are going to be stuck in the mud, trying to figure out why the same things; the same talk; marketing schemes, advertising; and using old tricks that work in a booming economy where EVERYONE gets a piece... are not working anymore.

The Champions are flying above looking down for just a second then back up focused on achieving their next level.  See there are walkers and talkers ladies and gentlemen and their are people who talk a lot of "stuff" but are not getting the results.

What are you going to do in this new housing market?  Are you going be those stuck in the mud or are you going to build your brand and following, and create your own economy out of the ashes and prosper for the next year?

Ignore the governments numbers - people will always need housing.  Ignore the FED and the news talking about interest rates - interest rates can't and won't go anywhere for a while.  Stop focusing on where the market is everyday - unless you're a stock broker; investment adviser or something because that's just  a distraction...

What you need to do are these simple steps:

1. Have a clear vision
2. Decide on a strategy
3. Simplify and implement the strategy at the same time building value
4. Take MASSIVE freaking action.

Want to know the secret?....

That's it, there is no secret... YOU are the secret...

Clock's ticking....every second you let pass by with indecision is another second lost that you could be working on becoming the person you want to be. 

So in conclusion; we are in a new housing market, a new economy, but the best part is WE make our own economy.. so lets get to it.

Looking at 2010 for Housing

As we get closer to the end of the first time homebuyer tax credit which has helped get first timers back into the market, we ask will it be extended. I'll agree this was badly needed (the first time homebuyers buying that is) because they are the first domino that leads to all the others falling into place. As sellers list properties for sale - they need the first time buyer to come in and buy their homes - which will lead to them buying someone else's, and so on and so forth. It's a domino effect that needs to begin with the first time buyer.

Will the government extend? I'm really not sure. As the residential market begins to stabilize Congress may not extend the credit as it would, yet again, add to the ballooning deficit which ended 2009 fiscal year at 1.42 trillion dollars. Wow! That's an amazing number; but since trillions and billions has been thrown around like a frisbee in the media lately, when you think of the concept of that much money, it just goes in one ear and out the other. This is boat load of money and its being projected by economists, the deficit will continue to rise unless either spending is lowered or taxes are raised or a combination of both. If you ask me I"m tired of taxes.

But any rate - Congress has a tough decision as we reach the final stretch here and we approach the November 30th deadline. Interest rates have been low all year except for a few weeks in May and beginning of June when we saw massive government auctions that took the market by surprise. Record debt flooded the market and buying just couldn't mop up the access - almost like dipping a sponge in a bucket full of water - the market just couldn't absorb it all so selling forced prices downward and yields up (making interest rates rise).

Now that we've enjoyed almost the whole year with low interest rates; what will happen in 2010? Well inevitably rates will have to go up as the FED exits stage left, and the market adapts to a major buyer disappearing, forcing it to stand on its own. With 1.25 trillion in MBS (mortgage-backed securities) the FED will eventually look to unload those securities which will cause even more downward pressure on bond prices equalling higher mortgage rates as a result. All year it seems as if investors have been trading on policy and not spreads. Will the FED hold its positions? Will it sell most or all of its securities? Who knows but the FED.

If you're in the market - now is the time to jump in and buy while historically low rates still remain. But that's not the only reason you should buy right now. As you know home prices have retracted since their highs of 2006 and owning home has many benefits of which building equity is only one. You have tax advantages along with knowing you've made a long term investment that pays dividends for years to come. Not everyone deserves a home and its something that is earned, and in my opinion, not guaranteed.

Make it a wonderful end to 2009

God Bless!

Can Mortgage Rates Stay This Low?

What is really going on behind the scenes? Well, in a shortened version, it started with a bubble caused by the Federal Reserve, Alan Greenspan, during the Clinton Administration that burst in 2001 and we know what happened next - 9/11. Alan Greenspan dropped the short term federal funds rate to super low of 1%. While this doesn't have a direct effect, mortgage rates dropped to 50 year lows fueled by purchases of treasury bonds and mortgage backed securities by foreign countries and hungry investors for high returns.

Wall Streets ingenious plan of packaging subprime loans into mortgage backed securities and collateralized debt obligations to pension funds, institutional investors, etc, and finally came to a crash with the bust of Bear Stearns two hedge funds that went broke. These two hedge funds bought Alt A and subprime loans packaged into securities with loans that were 2 and 3 year Arms, 100% percent no income no asset loans, and all the other stated income, no income, low credit score loans, that nobody ever thought would go bad. Please, WAKE UP!

The same idea that Wall Street sold to investors about Internet company stock prices that would just go up and up and up, with no fundamentals backing them, or earnings being put back into the companies, would last forever, is exactly what happened to the Real Estate market. Now you see the mess that we are in. So what does the government about all the foreclosures on homes from people who couldn't afford them? We borrow and spend more money to get people to borrow more. How does that make sense?

The treasury has spent billions of money that we don't have, that we are just borrowing from the Fed at interest, to temporarily price fix to subsidize mortgage rates to...... ta da, get people to borrow more! If we borrowed and spent to much to get into this mess why would borrow and spending more get us out. Multi billion dollar bailout after bailout will cause inflation to rise, interest rates will go back up, and we'll be still in debt paying interest on that debt at higher and higher interest rates crippling us from the debt load.

So back to the question, can mortgage rates stay this low? They can if demand for mortgage backed securities begins to rise again. Now that the treasury has wained from buying MBS, the FED has stepped in and committed to $500 Billion, of which its spent a good portion of it.

I don't like negative thinking or being a doomsdayer, but this low rate environment can't sustain itself. Back in the hottest moment of subprime loans, 65% of those loans were repackaged and given AAA credit ratings. That is the best credit rating you can get. How is that possible to rate subprime mortgage backed securities with the "best credit" ratings available. Sounds kinda of silly don't it?

So where are we going from here? Could we see another Carter Administration with interest rates in the teens? Probably not but I can tell you one thing. If you are in the market, and can afford to buy a home, now is a wonderful time to purchase with lower home prices and interest rates temporarily low by government subsidies. If you are looking to refinance out of an ARM or payoff high interest debt into a longer term fixed rate mortgage, now is the time.

Guidelines have tightened so be prepared for some surprises along the way. Get your information together and speak with a mortgage professional about your financial situation today.

God Bless

New Mortgage Rate Lows

Well how about those mortgage rates? Right after Thanksgiving mortgage rates plummeted to new lows driving up refinance volume to new highs. How did this happen? Why the sudden drop? What is going on and how long will it last?

Readers what we're seeing is yet more government intervention trying to stimulate the housing market, which is roughly 16% of the U.S. economy. Starting in 2007 we started to see home prices drop and record foreclosures pulling home prices down even further. Yes i know it sounds so horrible and people are losing their homes and causing banks to lose billions and billions of dollars, but, home prices must come down to restore equilibrium.

You're probably thinking I'm crazy right now. Dustin what are you talking about? Well its simple. Home prices were artificially inflated and rose too high for incomes to catch up. We're not seeing incomes rising in America and with home values and prices sky rocketing into double digits, people couldn't afford to purchase homes. Not to mention the very lax regulatory initiatives from the government to keep predatory lenders at bay. If anything they promoted it.

The Community Reinvestment Act provisions in 1995 set off a chain of events that led us to the current sub-prime, Alt-A meltdown. Guess what? We're not finished. So what has the government been doing lately to promote growth in the housing sector? Well first the Treasury, and now the FED - also known as the Federal Reserve - has been buying up billions of dollars in mortgage-backed securities issued by Fannie and Freddie. Without going into too much detail, mortgage-backed securities are bonds issued by Fannie Mae and Freddie Mac - which are government sponsored enterprises known as the Federal National Mortgage Association and the Federal Home Loan Corporation - aka Fannie/Freddie.

These companies buy mortgages from banks and mortgage lenders, and promote the funding of mortgages by providing liquidity to lenders, through their purchases, freeing up lender capital to continue to fund these loans. Fannie and Freddie then package these loans into securities and sell them to investors worldwide while providing a specific guarantee to investors for any losses and receipt of timely interest payments. When money flows into this secondary market, it drives the price of these bonds higher, resulting in lower yields, thus lower mortgage rates.

Well before the Treasury and Fed stepped in, this market was unstable and had little confidence from investors, and for good reason. Our country was seeing rapid foreclosure with no end in sight. So steps were taken to try to subsidize mortgage rates in hopes that it would make mortgages more affordable thus bringing buyers back into the market, stabilizing home prices, and stimulating the economy.

Its worked in generating business but very few realize what had to be done in order to do this. The Treasury, in order to pay for this, has been issuing billions of new bonds, which is debt, in order to achieve its goal. Now for many of you, this may not send off red flags in your head. Not because you're unintelligent, but because nobody explains it to you. Believe it when I say, if it doesn't want to be known, it won't be told, but that doesn't mean you can't find out or learn.

The government is expected to run a 1.2 trillion dollar deficit in 2009. YES YOU READ THAT RIGHT, 1.2 TRILLION DOLLARS. This means that we are spending 1.2 trillion more than we're taking in and on top of that we are borrowing this money from the Federal Reserve and foreign countries. If Obama gets his stimulus package through Congress it'll turn into 1.6 trillion dollars.

So while I'm very happy to be busy behind keeping up, I'm very concerned about our countries debt load, and the burden it will place on my children and their children for years to come. This debt must be paid and if interests begin to rise again, and they will, this debt will become harder and harder to service putting an even greater burden on the government and leave them to no other option but raise taxes on EVERYTHING they can.

Be very aware of what our government is doing and speak out against actions that will jeopardize the well being of our economy, families, country, and our civil liberties. We are spending our way into bankruptcy leaving us at the mercy of foreign countries who, some of them, don't like us very much. Think your dollar is worth something? Think again. Since the inception of the Federal Reserve in 1913, our dollar has lost 96% of its value and it continues to drop.

WAKE UP AMERICA, its time to be heard!

God Bless!

Copyright © 2008 by Dustin Swigart

State of The Housing Market

Wow its been a very busy two weeks. Starting November 25 rates took a dive and have stayed down to levels not seen since the beginning of the refi boom in 2002. About mid week, rates had only been lower on 5 days in the last 50 years and 6 days where they were the same. this should be some great news for the market but we haven't seen alot of buyers jump back in yet.

I've been so busy with refinances working morning and night. While this is good for business, the whole purpose of the Treasury buying plan was to pull buyers back in helping to reduce our bloated inventory and stabilize home prices. I'm already starting to see some signs of stabilizing home prices and I think we've reached the lowest point we're going to see so and only back up is where we should focus our attention.

You'll hear alot of professionals and economists give their opinion on the market saying we're going to see more declines, mortgages are few and far between, and credit is so tight; just to name a few. I'm not saying credit hasn't been tight, I'm just saying that the media does make it sound alot worse than it is creating even more fear. Fear is the worst thing we need right now.

What happened in the mortgage market needed to happen to flush out the risky loans, bad mortgage brokers, and corrupt title companies. I'm not happy about the record foreclosures but little was done to regulate these people. The few bad apples ruin it for everybody else. Loans are plentiful, especially government insured loans like FHA, VA, and Rural Housing loans.

When shopping for a mortgage make sure you work out your budget, that you have at least 3.5% down (this will be the new FHA requirment Jan 2009), and take into consideration costs that are associated with buying a new home. Its been communicated by the media that you can't get a loan unless you have 20% down. This is simply not true.

Copyright © 2008

Mortgage Rates

So what in the world is going on with mortgage rates? We have so much volatility its hard to judge the direction. Keep in mind the market is highly emotional right now. From day to day you don't know what is going to happen.

I try to coach my buyers the best I can but sometimes the window of opportunity is only there for a couple of days and then gone again for a few weeks.

Many people do not realize that mortgage rates are determined by the secondary market for mortgage-backed securities. Let me explain what I mean and it will make more sense.

Lenders make loans to borrowers for mortgages, car loans, etc. Lenders can get their money from a few places. Deposits are the cheapest. This is why banks REALLY stress and focus on what is called core deposit growth.

Banks can also use short term funding like commercial paper or short term notes usually ranging from 90-120 days. They can also borrower from other banks. If the lender is publicly traded they can raise capital through the issuance of more shares or preferred shares. Preferred shares are a hybrid of stock and debt and are paid dividends by either a percentage or dollar amount per share. Example 8% preferred would pay 8% interest on the par value of shares held. If the pare value is $100, they would receive $8 dollars a share. If the stock is a $3 preferred, this would mean that the investor would get $3 per share regardless of the par value (example if the par value was $60). Issuing common shares would dilute common shareholder equity and is usually not seen favorably by investors with big positions within the company. This is a whole other topic.

So once the lender makes the loan they can either hold the loan on the books, a portfolio loan, sell the note to an investor such as Freddie or Fannie -- these are government sponsored entities with the sole purpose of providing liquidity in the mortgage market -- or they they can sell the note and then sell the servicing rights altogether. Selling the note and servicing provides fee income for the originator of the loan and then frees up the capital to go lend more moving all the risk to someone else.

Freddie Mac and Fannie Mae will then pool these loans together and package them into securities and sell them as bonds to investors worldwide. This is also to provide more liquidity to them so they can continue to buy more and more loans. The cycle just repeats itself.

Freddie and Fannie do have loan limits that are set by the Federal Housing Finance Agency, who on July 30 2008 was created by the Housing Recovery Act, to oversee Freddie, Freddie, and the Federal Home Loan Banks, to make sure the secondary market is functioning properly.

These MBS or Mortgage-Backed Securities are sold in the form of bonds. If you are not sure with how bond pricing works it can be a little confusing. When bond prices move up (which means investors are buying), the yield at which those bonds pay goes DOWN. Yes that's right price and yield move inversely from each other. When bond prices move down (which means investors are selling), the yield moves up. This can get really complicated because a bond has a stated interest rate or coupon, doesn't mean the investor will pay that. Market prices change all the time and if an investor wants a higher yield, that means the price has to come down.

So what does all this mean? Well it means that if the yields go up on the bonds, mortgage rates will follow the upward trend. This is because mortgages have a risk of prepayment either through selling the home or refinancing into a new loan. When this happens investors do not get the cash flow from the bond they anticipated so to compensate for that risk these bonds are traded at a spread of government bonds. Spread simply means a numeric figure, expressed in terms of basis points, over the index (the government bonds). Basis points are a fraction of percentages expressed as a unit of 100. Example 1 basis point is 1/100 of a percent. One hundred basis points would be equivalent to 1%.

Right now investors are skeptical of the condition of the economy and even though the government is pumping billions of dollars into the system it boils down to investors wanting higher returns for loaning their money. Bottom line don't play the guessing game. If you are in the market to purchase a home now is the best time to do so.

Why you ask? Even though we have price volatility, mortgage rates are still at historical lows and on top of that you have home prices that have fallen some 30% in some areas making more homes affordable. Don't waste time we will start to see home prices going back up soon so don't get left holding the bag trying to wait it out to the last minute and time the market.

As a warning please make sure you work the numbers of purchasing a home prior to making any offer. Speak with a professional, sit down and work out your budget. Make sure you can afford to make the payments and don't get caught in the trap many Americans did by splitting hairs just to buy a home. Homeownership is the American dream.

Thanks

Dustin

Copyright © 2008 by Dustin Swigart

Are We At the Bottom in Housing?

Well experts are scratching their heads to answer this question. We've seen home prices drop some 27%-30% since the 4th quarter of 2006. But really if you look at the data the majority of the declines came from the west and east coasts, mostly California and Florida. Take these states out and you have a flat market. In some markets prices are actually increasing. So is there a bottom? How do you know?

I really believe if we can get the media to start telling good news, consumer confidence will come back and "the markets" state of mind will change. All the bad publicity housing has been getting has caused a shift in thinking keeping people on the sidelines. I can't stress this enough that NOW is the time to buy a home. The government is giving a tax credit for first time homebuyers and when they begin to jump back into the market, you'll see a domino effect upward.

In the midst of the RED HOT real estate boom home prices were skyrocketing and rates were low. Now you have the same low rates but home prices have come down so why not take advantage of the opportunity. Don't listen to the hype that makes news, work the numbers and realize that this is only a correction, a hefty one, but a correction that will not last too much longer.

The media wants you to believe that home financing options have vanished. This simply not true. FHA, which stands for Federal Housing Authority, was enacted in 1934 to help stimulate a flat housing market. FHA provides low down payment, low interest, affordable financing for not only first time homebuyers but repeat buyers alike. FHA is ran by the Department of Housing and Urban Development and operates fully on self-generated income that costs the taxpayers zero. The insurance premiums, called UFMIP or upfront mortgage insurance premium, is charged on every loan and is put into an account to which the program is funded.

FHA has mortgage insurance on a monthly basis as well, similar to PMI or private mortgage insurance issued by private companies such as Radian, PMI, MGIC, and RMIC. This mortgage insurance is at a much lower cost than conventional mortgage insurance and in some instances is half the cost.

The media doesn't talk about this program of course and its important that we get some stigmas out of the way. FHA in its old days was a little more strict on the property guidelines. They would require a very long form of an appraisal called a VC sheet. This sometimes made it difficult for the Realtors and buyers because certain guidelines required additional inspections and repairs not figured into the sales price that would delay closing or cost the seller more money than they anticipated. This was for the protection of the buyer so that they were not moving into a home that needed a lot of repairs and that would put a strain on the new homeowner. Realtors and builders grew to hate the program and tried to find other avenues of financing. Since 2006 FHA has loosened its guidelines to change with the market and has made it easier to close on a home using FHA financing.

With the explosion of 100% purchase programs FHA became obsolete. Do not be afraid of this program because this is an excellent way to get low cost, low down payment financing to purchase a home. The problems we are having came from the provisions in the Community Reinvestment Act in 1995, which made banks make more and more loans to people who really couldn't afford them. Very very lax underwriting guidelines fueled by greed on Wall Street with exotic mortgage-backed bonds and collateralized debt obligations that have crippled names like Merriyl Lynch and Bear Stearns.

We've seen some consolidation in the this industry and I believe we'll see more coming down the pike. So are we at a bottom? I honestly believe the worst is behind us and we'll see an upward trend in the coming quarters. Don't listen to the hype on the news, if you are in the market talk to a mortgage professional and work the numbers.

For information on FHA loans please visit my site, www.53.com/mlo/dustin-swigart.

Have a great weekend!!!

"We all have the seeds to personal growth within us, but very few ever realize the important role circumstances play in nurturing those seeds to trees of opportunity."

Dustin Swigart

Copyright © 2008 by Dustin Swigart