A Brief Respite! In the Mortgage industry

A Brief Respite!

As I come to you each week with an update about the machinations that have become the credit markets within our grand nation…..and around the world…..I sometimes can’t help but be somewhat dismayed. Last week the tension in the mortgage industry was palpable. On Friday of last week we reached a crescendo. Lenders, loan officers, processors and underwriters were forced to make decisions about loans that would have made no sense just 90 days ago. The pendulum had swung all the way to the other side of unreasonable.

However, on Monday things started to change. The Fed’s move to lower the Discount Window Rate, the rate which banks borrower from the government for up to 30 days, was lowered by .5%. While this move in and of itself was seen by many economists as a gesture to the credit markets, it was not seen as a complete solution. What the naysayer failed to recognize was that the Fed did something else. This time they allowed banks to collateralize the loans with Mortgage Backed Security Pools. Essentially the Fed said they were so confident in our banking system that they would buy the pools until banks could sell them on the open market for a fair price. At the writing of this email, Bank of America, Citi, JP Morgan and Wachovia have all visited the Window of the Fed and have borrowed as much as $2 billion. Whew! Let’s all breathe a sigh of relief.

The markets have regained some confidence and that should give us all a few moments to breath. Some reasonableness should begin to reenter the underwriting vernacular and hopefully we will see loan approvals that don’t ask our clients to provide details about the length, in centimeters, of the big toe on their right foot! LOL!

Even with news today that Accredited Home Mortgage will close, that Lehman Brothers has closed BNC (their subprime division) and that Delta Funding will layoff 20% of its workforce, I can’t help but be optimistic. During tough times my father used to use an analogy of pushing a boulder up a mountain. When you get close to the peak you begin to tire and going that few extra yards seems impossible. However, if you can get to the pinnacle and push the boulder over the top, then you’ve won. I truly feel we’ve reached the pinnacle and with one more push we’ll see the boulder begin to roll down the other side. It will be slow at first, but it will gather steam and beginning in 2008 we will all be back on track.

For now, let’s all take a breath…..a short break if you will. Then next week we can all stand in unison and make one more big push. As always, Dividend America will be here for you. We are closing loans and we have the wide variety of lending channels and resources to make the lending process successful for your clients. I hope you’ll give me a call if you have any questions, concerns or opportunities. I will continue to bring you these weekly updates until you all scream STOP! Until then, I hope that the information I try to boil down to layman’s terms is helpful to you and your clients. Thanks for reading and stay positive! J

Sincerely,
Michael D. Gross
President
Dividend America |Mortgage
770-350-7373
404-819-4511 (cell)
www.dividendamerica.com