Mortgage Market Meltdown Melts Morgan Stanley Again 
The Mortgage Market Meltdown. Such an incendiary phrase, no pun intended. People immediately think the worst, and possibly rightfully so. The truth of the matter is that the problems in the mortgage market have come back to bite Morgan Stanley again.

Morgan released a statement announcing they have a 4th quarter loss of $3.6 billion, due mostly to a $9.4 billion write-down form their investments in mortge backed securities. Now that is a lot of money. They addressed their problem by selling the Chinese Government a 9.9% share of the company for $5 billion. The new CEO, John Mack, blamed the loss on a "small team" of employees that have been fired. Always easy to blame someone that is no longer around.

I find the size of the amounts amazing. Also, Morgan's stock price rose $2 on the news of the cash infusion from China. Interesting as well. The main impact of this news on Main Street is the sames as it has been. Certain high risk mortgage loans have ben drastically changed or eliminated.

The good news is also a recurring theme. There are still many, many programs available and rates are great.

Have a wonderful day.

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Mortgage Industry Changes 
The mortgage industry has been phenomenally fluid for the past 5 months. Lenders are still closing their doors, while others are opening new Regional Offices. Loan programs are changing daily, with guidelines typically tightening. Some programs just go away.

We all remember the "Liquidity Crisis" that happened this summer, and some people believe we still have the same problem. My opinion is that there is plenty of liquidity, read money, on Wall Street available to purchase mortgage loans. I think the institutions that would normally buy mortgage backed securities still have the cash, they just don't want to buy them.

This is especially true for Jumbo Loans (loan amounts above $417,000) at the present time. This summer, jumbo rates jumped from 6.75% to 8.00%. Then as the markets calmed, they dropped to 7.00%. Now they have climbed back to roughly 7.5%

All of this information leads me to my point, which is, don't wait and take the risk that the mortgage program which best meets your needs is no longer available or the rate has worsened. If you are looking to make a real estate purchase or refinance a mortgage, NOW is the time.

Have a great day!

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Was the Fed's Cut Enough? 
Yesterday the Federal Reserve Open Market Committee (FOMC) decided that the economy needed a little boost and reduced the Fed Funds rate by 0.25%. This is the rate banks charge each other for overnight loans. The 1/4 point was widely anticipated, but the FOMC didn't deliver the 0.50% the markets wanted on the Fed Discount Rate.

The Discount Rate is the rate the Fed charges banks to borrow from the Fed. A 1/2 point decrease in the Discount Rate would have a been a more aggressive move, providing liquidity to the mortgage market and signaling that the Fed wanted to be pro-active.

I have heard some rumors that we may see something very unique from the Fed in the next few days. Stay tuned.

Have a great day.

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Washington Mutual Next in Line 
Washington Mutual Inc. (WaMu) announced huge layoffs and massive write-downs yesterday. WaMu, one of the nations largest lenders, is the latest to be affected by the downturn in the lending industry.

WaMu has been one of the most aggressive lenders in the country, continuing to market their payment options arms. These are the programs that allow a borrower to make a very small mortgage payment, while deferred interest is being added to the balance of the mortgage. This process is known as negative amortization, and is one of the reasons that there are ao many borrowers having difficulty making their payments. When the rate adjusts, the new payment is based on the now larger mortgage balance, creating cash flow problems.

The intended layoffs will represent 22% of thier staff, or roughly 2,600 employees. They will also close over half of their home loan centers, which are retail offices, and 9 Processing Centers used in their wholesale origination business.

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The Federal Reserve - How Much is Enough? 
Well, The Federal Reserve Open Market Committee (FOMC) meets tomorrow, and the debate among the experts is whether or not they will cut rates .50% (50 basis points) or .25% (25 basis points).

My money is on .25%. For what it's worth, I think the Non-farm Payroll Report last Friday was large enough (94,000 new jobs) to allow Big Ben (no, not Roethlisberger, Bernanke) and his band of policy makers to take the safe route. The Fed has been waffling a little bit over the past few months, trying to determine whether the risk of inflation was outweighing the necessity to stimulate the economy and avoid a recession.

And we think we have it tough with our jobs. It must be wild to have the weight of the country's economy, and people's well-being, on your shoulders.

Look for a .25% and watch your Home Equity Lines of Credit go down accordingly. It looks like we are going to save a little interest over the short term.

Have a great day.

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