More Changes Coming!

The days of asking a loan officer what his interest rate are going to end. Now the question will be what it should have been all along, what is your credit score, how much are you borrowing and at what loan to value. Both Fannie Mae and Freddie Mac have announced new risked based pricing models that will take effect on or about March 1, 2008 for all loans delivered to them. That means that by the end of 2007 if a loan is originated it will in all probability be price based on the risk base models. Here are the links to the Fannie and Freddie announcements:

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2007/0716.pdf

http://www.mortgagebankers.org/files/News/InternalResource/58173_BulletinNov15.pdf

So what does this mean to the consumer? First of all, if you don’t have a credit score over 680 and you are borrowing more than 70% of the homes value you are going to pay a premium in the interest rate. You may pay as much as .5% in the interest rate or as much as 2 points. Now more than ever it will be a priority to manage your FICO score and maintain at least the 680 mid score. If you remember I previously posted a blog on “Evolution Credit” back on September 20, 2007. Companies such as this will be extremely helpful in helping you improve your credit. However if you just do the simple things, pay your bills on time, avoid collection accounts, don’t max your credit cards, don’t have tax liens or judgments filed against you things will be just fine. If one of those things occurs you will have to work hard to get that FICO back up above the 680 number.

Beware of the credit repair scams artists though. No different from the “Dark Side” lenders who advertise and then take your money to rape you with it there will be people who try to profit from others misfortune. Avoid those pitfalls and don’t rush to a quick fix. Remember what you mother told you, if it seems to good to be true it probably is!

For questions or comments on this, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Flight to Safety?

What a 24 hour period on the bond for the mortgage backed securities. Yesterday the bond market was whipsawed by the statements made by Senator Schumer http://money.cnn.com/2007/11/26/news/companies/bc.apfn.countrywide.home.ap/index.htm?section=money_latest
During the next 3 hours interest rates on the 30 year fixed fell to 6% and depending upon the loan size some loans were locked at 5.875%. This knee jerk reaction is what Wall Street likes to call a “Flight to Safety.” When there is panic in the markets, safe money is parked short term in bonds and so as the money fled from stocks, it went into bonds and we saw the prices rise and the yields (interest rate) fall. As with any sharp movement like this the following day you can expect a correction to occur or in some cases simple profit taking. This morning began that way as demand dropped and rates started to rise and then Citi announced their cash infusion http://articles.moneycentral.msn.com/Investing/Dispatch/071127markets.aspx
and the correction continued throughout the day. As I just checked the price on my sheets, the same loan that I locked yesterday at 4:00 c.s.t. I am now able to lock and I have lost 45 basis points or almost .5%; which to the consumer usually means the difference in .125% in their rate. So over 24 hours we have seen rates fall .25%-.375% and then rise .125%-.25%.

What does this mean? If you are one of my clients, it means the next time I call you or send you an e-mail that says it is time to take advantage of a market movement, heading my advice will make you money. If you are not one of my clients, then when you talk to a loan officer and he tells you that his rate is x and you don’t pull the trigger and lock in, he just might be telling you the truth if you talk to him 2 hours later and he says his rate is now x+y or in other words higher.

For questions about this or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Are We Done With The Blame Game Yet?

I continue to read stories in newspapers and on line about who is to blame for the mortgage mess. The latest is posted here; http://articles.moneycentral.msn.com/Investing/CompanyFocus/WhosToBlameForTheMortgageMess.aspx.

At this point does it really matter who is to blame. As with the past financial challenges that this country has had to deal with, we have another caused by greed and lack of oversight. http://www.dailyreckoning.com/rpt/FinancialDisasters.html. Now is the time to move on. How do we do that? I am glad you asked!

As much as it pains me, I do believe that we need more regulation and licensing of mortgage originators; especially those that choose to be mortgage brokers. The challenge with a broker is that they are in theory there to help their client get the best by being able to offer products from a variety of companies. What has happened instead is the majority of brokers are there to only make as much money as they can and then move on to the next victim. Now I realize that victim is a harsh term, but the way the majority of the “dark side” behaved was to make as much as they could from as many as possible. As I sat in my office today helping one of my new loan officers understand some terminology on some different loan programs, he mentioned that there should be a school for loan officers so that they could go somewhere and get the education to understand what it was that they were selling. For far too long this has been an industry of graduates of the School of Hard Knocks and the School of the Easy Path to Fast Money. Those of us that have chosen this career path to help people achieve their financial dreams need to push for licensing and education requirements so that we can keep the people who only want to make as much money as possible with the greatest of ease out of the business.

For you comments or questions, please contact Chris Scheer at 314.223.9824 or cscheer@cornerstonestl.com

Something Different For the Holidays

Wishing Your Family A Happy Thanksgiving

Try a Pumpkin Cheesecake

INGREDIENTS

· 1 1/2 cups crushed gingersnap cookies

· 1/2 cup finely chopped pecans

· 1/3 cup butter, melted

· 2 (8 ounce) packages cream cheese, softened

· 3/4 cup white sugar, divided

· 1 teaspoon vanilla extract

· 3 eggs

· 1 cup canned pumpkin

· 3/4 teaspoon ground cinnamon

· 1/4 teaspoon ground nutmeg

Directions

1. Preheat oven to 350 degrees F (175 degrees C). In a medium bowl, mix together the crushed gingersnap cookies, pecans, and butter. Press into the bottom, and about 1 inch up the sides of a 9 inch springform pan. Bake crust 10 minutes in the preheated oven. Set aside to cool.

2. In a medium bowl, mix together the cream cheese, 1/2 cup sugar, and vanilla just until smooth. Mix in eggs one at a time, blending well after each. Set aside 1 cup of the mixture. Blend 1/4 cup sugar, pumpkin, cinnamon, and nutmeg into the remaining mixture.

3. Spread the pumpkin flavored batter into the crust, and drop the plain batter by spoonfuls onto the top. Swirl with a knife to create a marbled effect.

Bake 55 minutes in the preheated oven, or until filling is set. Run a knife around the edge of the pan. Allow to cool before removing pan rim. Chill for at least 4 hours before serving.

As much as I would love to tell you that I make this each and every year, this is the first year I have brought this recipe out for those that I care about. Be sure to check this blog out later in November to make sure that we all survived my cooking!

I Knew Everything!

I had the chance to get my shoes shined last week and found more wisdom in the person shining my shoes than I do in most people I meet on a daily basis. Life has been hard to him but he also has finally learned from his mistakes. He says it took him the opportunity to be locked up for 7 years to learn he didn’t know it all. “I knew everything but my own ignorance” he said. “I was always with a pocket full of money and living for the moment. My decisions were always about me and what I wanted at that moment. How could I get satisfaction or how could I get enjoyment at that moment. Most of the time it was alcohol and women; it took me going to jail to learn what gives you pleasure gives you pain.” Think about it! As he took the time to shine my shoes he kept on talking about how he made the wrong choices kept on making the wrong choices. But now he saw the light and realized that it wasn’t about now, it was about the rest of his life. He is now saving money and planning for his retirement. Think about that, this man shines shoes for a living and he is saving money and planning for his retirement. How many people in this country make $100,000 a year and don’t manage to save money. I don’t know what my enlightened shoe shiner earns, but I know that for a $5 shine I gave him a $5 tip. Those two quotes, “I knew everything but my own ignorance” and “what gives you pleasure gives you pain” were worth more to me than my college education.

So what does this have to do with buying a home or financing a home? I hate to say that if you didn’t get the message then you weren’t paying attention. Quit living beyond your means! Start saving money! Stop using credit cards. Here is a quote for you, “only poor people use credit cards.” Stop believing that you have to live better than your friends or at least as good as them. If they are your friends they will accept you for who you are not what you look like. This applies to your home also. Do you really need that giant house? Do you really need that new car? Is what giving you pleasure now going to give you pain later in life? Remember our entire economy is on the brink of disaster. The Federal Deficit is growing by the second. Be sure that you are preparing for the future and not living for the present.

For questions of comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.