Rates are down - A Global Market slow down heads the reason for this morning's big stock market drop!
Fred's YouTube: http://www.youtube.com/watch?v=bM-9kYL1VDY
Wachovia has just halted trading pending a news alert. Brazil & Russia halted trading on their exchanges today. Never before in history. What are people doing? Buying Bonds? You got it! When they do that guess what happens to interest rates? That’s right, they come down.
In many of our last year's (2007) radio show broadcasts, I told you this was going to happen. People were so afraid about inflation and the dollar dropping and I said no way. I just don’t see it with $1.4 Trillion of loans adjusting. Now, they are predicting $1.4 Trillion to go into default by the end of 2008. There are 250,000 people per month in the U.S., receiving foreclosure notices. These numbers are growing not slowing down. They are going to drop the rates by a 1/4 point at the next Fed meeting.
This is a perfect storm for a very negative market. “A credit crisis & fear in the marketplace” were the words I heard on CNBC this morning. Interest rates are down.
The thing that stinks is that because of the liquidity crisis rates are not as low as they should be. We are currently at 3.48 on the 10 year Treasury as of 9:10a PST. The all-time record low on the 10 year Treasury of 3.09 was on June 9th of 2003. Rates were 5.25% for a 30 year fixed at zero cost where we pay for title, escrow, appraisal, credit, all the costs that go into the cost of refinancing. Right now we are in the low to mid 6’s on a 30 year fixed up to $417,000.
If your loan is above $417,000, well the maximum loan amount is $729,750 until December 31st, 2008. Starting January 1st, 2009, this loan amount will be reduced to $625,500. So, give us a call if your loan amount is above $417,000 and lower than $729,750 asap. The rates are down again. If your loan is larger than $729,750, the best loan for you would be a 5 or 7 year fixed adjustable. Oh, by the way, those are the same loans that are causing people to go into Foreclosure.
Some personal friends I know, got into a 5 year adjustable and now can’t refinance because they don’t qualify with full documentation and their property value has dropped. If you are one of my personal clients, you know I told you to get into a 30 year fixed loan since the day I got into this business in 1990. In fact, we did such a good job of putting our clients in the correct loan program, that we almost put ourselves out of business because not too many people wanted to refinance into a higher rate.
So, get a 30, 20, 15, or 30 year fixed interest only (where the rate will never change over 30 years but gives you the option to pay an interest only payment for the 1st 10 years). The payment will change after 10 years, but not the rate. We call it the Smart Loan and we have info on all these different loan programs on our website. Which one is the smartest for you?
If it wasn’t for fixing other people’s bad haircuts (getting them into a better loan program), we would have been a victim of this mortgage meltdown -- just like everyone else.
If you are upside down and have no lates on your mortgage, you may qualify for what is called a “Short Pay” refi. Basically, what the Government is doing is reducing your principal balance to 90% of the current market value (writing down the principal balance). So if you owe $600,000 and your property is only worth $500,000, the Government will allow you to write down the principal balance to $450,000 (a $150,000 principal reduction). The tax rules will be very similar to a Short Sale (please consult with a CPA – sometimes it makes more sense to file BK and let your property go into Foreclosure). However, the Government will participate in 50% of your future equity when you sell. The rules and guidelines are not quite out on this program, but it is effective October 1st, 2008. Call us if you are upside down.
If you have enough equity to refinance, it may not make sense to do “short pay” refi. It might make more sense to do a FHA refi up to 97%. Call us & we can figure out which situation makes the most amount of sense for you. You will probably need to call your CPA as well.
I was talking to a client last week. They bought their home for $140,000 20 years ago. They currently owe about $800,000. Their home is worth $750,000 after dropping in value about 35% over the last 18 months. They took out cash and used their home as a cash register. They are going to have a Capital Gain when they sell. A real estate agent suggested they do a short sale to protect their credit. I told them to talk to their CPA because, if the property sells for $750,000 and they bought it for $140,000, they will have a Capital Gain of approximately $610,000 minus any improvements and closing costs (real estate commissions, etc.). If you have a capital gain above $250,000 (single) and $500,000 (married), then you will have some tax ramifications unless you can prove insolvency if they end up doing a short sale (please consult with your CPA). There is also a 1099-c issue as well on a short sale that you don’t have on BK & Foreclosure (please consult with your CPA). Please call us so we can help direct you & tell you what your best options are.
If you are doing a loan modification, please make sure you know which lenders will / will not send you a 1099-c. I want to tell you right now, that WAMU will do what is called a “Lein Release” and they won’t send you a 1099-c at the end of the year. What they will do, is make you sign something a note modification which allows them to come after you up to 10 years and collect all that money that they forgave. Oh, and there are industry vultures that buy this paper and are looking at you to see if you hit the lottery and become solvent so they can come collect from you for the next 10 years and if they come after you, guess what, you will lose. So, be careful & have your loan modification documentation reviewed by a CPA or Tax Attorney who understands Real Estate. Call us and we can help you with this as well.
These are incredibly history making times, and there are incredible opportunities out there. We are going to be bringing some incredible foreclosure opportunities to our database of over 15,000 clients. Take advantage of these times if you are financially capable. Come to our next workshop on October 23rd. It is a lunch & learn. Kerri Kasem (Casey Kasem’s daughter) is going to be speaking with us (she is extremely positive & her energy is magnetic) – http://www.kerrikasem.com. Of course, I will sharing my 18 years of real estate knowledge with you as well.
You will hear me ask questions like, how many of you think it is a good time to buy residential real estate right now? How many people think that real estate prices are going to drop over the next one to two years? Wait, you are telling me that it is a good time to buy Real Estate but home prices are going to drop? If you are paying cash, I say don’t buy right now. However, if you are financing the property, then take advantage of historic low rates. We are 1% away from all-time record low rates of June of 2003. We will go over an article I wrote, called The Cost of Waiting, which will change your perception in 2 seconds, guaranteed!
You can call our office to sign up for this event. There will be a charge of $49 and lunch will be served. I am so excited about this event because of all the opportunity available in this marketplace. If you have or haven’t come to one of our events, you DO NOT want to miss this event. Give us a call to sign up for this event.
I have been reading through several of your blogs. You are doing a lot of good work. This blog did bring a few questions to my mind. What will this really do to help? Will this help to stabilize housing values? There are some major issues facing the economy as a whole due to the government being reactive rather than proactive.
Posted by: Adam Ferguson | October 08, 2008 at 04:43 PM