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I have decided that the phrase “shopping mortgage rates” is an oxymoron. There is no such thing. A mortgage rate is a mortgage rate is a mortgage rate. What you are actually shopping is truth. I will skip the dishonest mortgage broker rant here and cut to the chase.

How to Buy a Mortgage

NOTE: Carve out some time to call all of these brokers on the same day.
Steps:
1. Ask friend near your home or office if they know a decent mortgage broker. Get 3 names.
2. Call broker.
3. Be pleasant and professional. These are generally nice hardworking people and deserve respect.
4. Tell him/her the amount of the mortgage, downpayment if purchase, estimated value of home and term you want (1, 3, 5, 7, 10, 15, 20, 30, 40 years) . Be prepared to give him/her recent credit scores for the borrower/co-borrower.
5. Once that information has been delivered simply ask “From all of your wholesale sources please tell me the lowest par rate you can lock my loan at today?” Also mention that you want to be fair and let them know you are calling 2 other brokers but you are asking the same question.
(At this point they may feel compelled to ask you what rates you have so far and may attempt to sell against the others - cut them off and tell them you are keeping all rates confidential and will do the same with their rate.)

6. Ask broker if there are any discount points priced into the rate.
If answer is yes then go back to Step 5 and stress PAR RATE.
If answer is no then ask to confirm the wholesaler lender’s name. Write it down and the rate quoted next to the broker’s name.

Step 7. Go back to Step 2 and repeat until you have 3 par rates.

Step 8. When you are done you should have 3 VERY similar rates. Wholesale loan rates reflect a commodity - the time value of money on a certain day. If 2 of the rates are close and 1 is much higher - throw that rate out.

Step 9. Now take the lowest 2 rates and call each back to confirm the rate. Also ask them to email or fax you the rate and the wholesale lender name confirming this is “the lowest par rate you can lock my loan at today”. If they refuse to do this then scratch them from the list.

Step 10. Once you have a winner (lowest rate or person you prefer if rates are same) then call them tell them you would like to buy a mortgage for ___ rate for a term of _____ and there will not be any origination fees or junk fees but you would be willing to pay them a flat fee of $1,500 for their time and expertise. Also promise them you will not further shop the loan and you will not respond to all the phone solicitations you will receive once they run your credit (these phone calls are from unethical loan officers that buy trigger leads from the unethical credit bureaus that sell them - you become a trigger lead when you have your credit pulled by a mortgage broker or bank. (Make sure your loan officer DOES NOT provide your email or phone number when they pull your credit.)

If they agree then you buy the mortgage if not go back to Step 1. They won’t like this method as mortgage brokers love to control the information flow. Some may even tell you this is not legal. Hogwash. Again move on you will eventually find someone honest enough that would rather make $1,500 for performing a service than play games in an attempt to make $4,500.

Good luck and be strong.

This post was inspired by a post by Terri Ewing

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Image from http://www.msnbc.msn.com/id/7148582/

Historical mortgage rates for the last 37 years
http://www.freddiemac.com/pmms/pmms30.htm

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Vultures circle Wall Street, but hesitate to feed

Vulture” investors, as they are called, have raised tens of billions of dollars over the past year in anticipation of opportunities to scavenge distressed assets and debt at discounted prices.

Speculators are eyeing potential profits in many of the same areas now at the center for the financial mess: real estate in foreclosure-plagued Florida, high-yield commercial paper, and pools of questionable mortgages.

Yet, so far, most have hesitated to swoop in. Instead, they have circled and watched for nearly a year as the turmoil worsened, wary about committing to anything with the financial system in chaos.

 http://www.theoaklandpress.com/articles/2008/10/10/business/doc48efa637920a0295625254.txt

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This says it all….
1. An FDIC document on the risk weights of different bank assets. The higher the weight, the more capital the bank has to hold against that asset. As I read table 1 and table 3, if you originate a loan with a down payment of 20 to 40 percent, the risk weight is 35. But if you buy a AA-rated security, the risk weight is only 20.

So if a junk mortgage originator can pool loans with down payments of less than 5 percent, carve them into tranches, and get a rating agency** to rate some of the tranches as AA or higher, it can make those more attractive to a bank than originating a relatively safe loan.

If you want to know why securitization dominated the mortgage market, this explains it. Regulatory arbitrage, pure and simple.

http://www.fdic.gov/news/news/financial/2008/fil08069a.html

http://econlog.econlib.org/archives/2008/10/some_useful_not.html

**

Sept. 24 (Bloomberg) — Frank Raiter says his former employer, Standard & Poor’s, placed a “For Sale” sign on its reputation on March 20, 2001. That day, a member of an S&P executive committee ordered him, the company’s top mortgage official, to grade a real estate investment he’d never reviewed.

S&P was competing for fees on a $484 million deal called Pinstripe I CDO Ltd., Raiter says. Pinstripe was one of the new structured-finance products driving Wall Street’s growth. It would buy mortgage securities that only an S&P competitor had analyzed; piggybacking on the rating violated company policy, according to internal e-mails reviewed by Bloomberg.

“I refused to go along with some of this stuff, and how they got around it, I don’t know,” says Raiter, 61, a former S&P managing director whose business unit rated 85 percent of all residential mortgage deals at the time. “They thought they had discovered a machine for making money that would spread the risks so far that nobody would ever get hurt.”

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ah839IWTLP9s

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ax3vfya_Vtdo

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There was some good news for troubled homeowners this week as new programs were announced that are aimed at helping delinquent borrowers more easily obtain a loan modification to avoid foreclosure. First, Bank of America, owner of Countrywide, introduced a new systematic mortgage loan modification program as part of a predatory lending settlement. Countrywide customers may qualify for these new benefits:

$8.7 billion earmarked to assist in loan modifications
400,000 loans to be reviewed
Loan modifications offering a lower interest rate and reduced principle
Foreclosures on delinquent loans to be suspended pending loan reviews
Late fees and pre-payment penalties to be waived
Lump sum payments to borrowers who can’t afford their monthly payment after a loan modification and who lose their homes thru foreclosure in the future
Also, Hope for Homeowners, signed into law July 2008, took effect October 1 and offers to refinance troubled borrowers into a low, fixed rate, government insured loan. This new program is expected to help thousands of homeowners refinance into an affordable monthly mortgage payment. Here is a brief outline of the program:

$300 billion allotted to assist distressed homeowners
Qualified borrowers must live in their homes and have loans that were originated between 1/1/2005 and 6/30/2007
Borrowers must be spending at least 31% of their gross monthly income on their current monthly mortgage payment
To participate, lenders are required to forgive all debt above 90% of the homes current appraised value-this means a reduction in the loan balance to accurately reflect the home’s current market value
This is a voluntary program and borrowers must ask their lender if they are willing to agree to it

http://www.trulia.com/blog/susan_gregory/2008/10/loan_modification_update

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With nothing but dire financial news ruling the airwaves lately, you can be certain children have pricked up their ears. As hard times begin to hit home—and purse strings yank tighter—how much of your worries should you share with the kids? U.S. News asked David Palmiter, a Scranton, Pa., clinical psychologist expert in counseling children and families, for advice on how and when to discuss difficult topics with children—without upending their whole world. Excerpts:

http://health.usnews.com/articles/health/childrens-health/2008/10/09/stressed-about-money-the-kids-might-be-too.html

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Oct. 9 (Bloomberg) — Investors pulled a record $52.1 billion from U.S.-managed stock and bond mutual funds in the past week, seeking the safety of government-insured bank deposits as the financial crisis worsened.

Shareholders took $43.3 billion from stock funds and $8.8 billion from bond funds in the week ended Oct. 8, according to data compiled by TrimTabs Investment Research in Sausalito, California. The exodus followed $72.3 billion of outflows in September, the most in a single month. Investors deposited $185.5 billion into bank accounts last month through Sept. 22, TrimTabs said, citing U.S. Federal Reserve data.

“People are scared,” Conrad Gann, TrimTabs’ chief operating officer, said in an interview. “This market is different from what we’ve seen before.”

The five largest diversified U.S. stock fund managers, including Fidelity Investments and Vanguard Group Inc., posted an average 28 percent loss this year through Oct. 6, about 2 percentage points worse than the Standard & Poor’s 500 Index, according to Morningstar Inc. Investors mostly switched into fixed-income through August, putting $97 billion into bond funds while withdrawing $74 billion from stock funds, TrimTabs said.

http://www.bloomberg.com/apps/news?sid=aTB_zifIPxIM&pid=20601213

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http://www.trulia.com/voices/marketcrisis/

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After working behind the scenes to negotiate on differences with House Financial Services Committee chairman Barney Frank (D-MA), Senators Chris Dodd (D-CT) and Richard Shelby (R-AL) on Wednesday rolled out a housing proposal that could be put to the Senate floor for a final vote as early as this week.

“Americans are looking to Congress to deliver solutions to the housing crisis, which has forced millions of homeowners to file for foreclosure, reduced home values for millions more, crippled the mortgage markets, and significantly weakened the American economy,” said Dodd.

The comprehensive housing legislation contains provisions from a Dodd-Shelby bill that was approved by the Senate Committee on Banking, Housing and Urban Affairs on May 20, as well as measures from the Foreclosure Prevention Act, which passed the Senate in April.

more at

http://www.housingwire.com/2008/06/18/dodd-shelby-roll-out-senate-housing-bill/

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From TucsonMortgageBlog.com

http://www.tucsonmortgageblog.com/18-of-20-real-estate-markets-show-signs-of-improvement/

In 18 of the 20 largest metropolitan areas, home values declined at a slower pace than in the previously measured month. The report also showed that national home prices are down 14.4 percent from March 2007.

Unfortunately, it’s the more sensational 14.4% figure that newspapers chose to report this morning. If you never went further than the headline, you’d miss a key piece of analysis.

Comparing today’s market to last year’s market is a lot less valuable than comparing it to last month’s market. That’s a better way to analyze the market’s health.