Announcement - Joining Sierra Pacific Mortgage

On December 1, 2009 I officially start as Senior Mortgage Banker for Northwest Indiana with Sierra Pacific Mortgage (local Indiana affiliate Residential Mortgage Group).

Many of you know I have been providing assistance to small businesses in Northwest Indiana, especially those affiliated with mortgage lending and home building. Let's be honest if you've read this blog more than once you know that I am passionate about home ownership.

• First time new home buyers
• FHA loans and VA loans
• Helping homebuyers fix credit blemishes through honest credit repair
• Helping REALTORs use online tools to find customers and to sell homes quickly
  
• and, helping home builders engage consumers
  

I will still be doing all those things, but now will be able to originate and work directly with consumers, home buyers, homeowners, and real estate professionals. I'm sure it will take a week or so to get all the details nailed down, but for now feel free to email me or call (219 465 8352) if you're ready to get started.

DLGF Audit of Lake County books

State audits, slams Lake County books - Post Tribune article

State audits, slams Lake County books

State auditors had a few simple suggestions for Lake County to do a better job of handling taxpayer money. Keep ledger books. Reconcile them with bank statements. Close the door to your safe.

Financial practices in the county received sub-par reviews in a host of State Board of Accounts audits for 2008 that were released this week. The county's overall bookkeeping received a rating of 'qualified,' said Tammy White, who supervises audit of county government units.

To learn more

To view the audit reports online, go to the State Board of Accounts Web site, www.in.gov.sboa, and look for Lake County reports posted Nov. 19.

The state's 'qualified' assessment of county financial controls -- as opposed to a positive audit that includes no qualifications or deficiencies -- could be a negative when lenders are considering whether to loan money or sell bonds on the county's behalf.

Auditors were not able to review records dealing with tens of thousands of dollars flowing through the Sheriff's Department, and noticed far smaller miscues, including $1,300 that went missing from the Parks Department after an office flooded and staffers left a safe door open for two days to dry the cash inside.

'That is obviously insufficient controls to safeguard the county's assets,' White said. 'We always are happy to make recommendations, but (in that case) obviously, it was not rocket science.'

The Board of Accounts annually audits all units of government, often turning up bookkeeping errors or problematic practices.

White said Sheriff's Department officials did not turn over ledger books showing how cash was collected and spent from the commissary accounts for county jail inmates, or records of spending for inmate medical fees and several other accounts.

Sheriff's attorney John Kopack said the department had the records, but the state auditor and department administrators were not able to meet to exchange the documents this fall because of miscommunication. Records have since been turned over to the state, and a private accounting firm has reviewed department records, Kopack said.

'They made their recommendations and the sheriff has followed them,' Kopack said. 'The records exist, despite what it says in the report. The problem is (with) the new auditor.'

White said her staff made multiple attempts to get the records, and would have spent several days at the Lake County Government Center while conducting the audit. Several items mentioned in the report, including complaints about the lack of supervision of who has access to county gas pumps, have been repeated from previous audits.

The state also requested that Calumet Township Assessor Booker Blumenberg repay $16,000 for a mass mailing his office sent to township residents before the Nov. 4 election, urging them to vote against a referendum eliminating township assessors.

'It was deemed self-serving, and it didn't help the taxpayers,' White said.

Blumenberg said other township assessors sent similar mailings with taxpayers paying the postage, and that county attorneys reviewed the materials and said they were appropriate.

'The state board of accounts and (Department of Local Government Finance) in recent years, under this governor, have become a political agencies,' said Blumenberg, who this week received a critical letter from DLGF Commissioner Tim Rushenberg.

'This was a nonpartisan issue. We weren't backing any candidate, and there was other information in the mailing.'

The County Council, the board that approves all county budgets and spending, also received a few criticisms including not properly reporting spending on millions of federal dollars that county officials had assumed were flowing from the state, Council President Larry Blanchard said.

The county has struggled to close a $17 million budget gap expected in 2010, and county officials are watching every dollar, Blanchard said.

'There are some departments that need a little bit of help, and I'm being nice,' Blanchard said. 'But when it's brought to your attention, you put corrective measures in.'problems range from missing money to no records at all

Home Builders beginning to sell again

It would appear that new home sales and existing home sales improved in October. This will no doubt cause even more increases in consumer confidence, which is important for retail sales improvement, as well as reductions in inventories of homes will allow prices to level off or even increase in many markets.

New Home Sales Improve in October: "The Census Bureau and the Department of Housing and Urban Development today released New Home Sales survey data for October 2009. The survey is primarily based on a sample of houses selected from building permits. Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics. It takes four months to establish a trend of new home purchases Last month, single family new home sales fell for the first time since March, snapping a five month trend of increasing sales. The pace of new homes sales was 402,000 sales per year, well below economist's expectations

Irene Tron

Irene Tron from FC Tucker on the holidays

Grateful for God's Gift: "

I love this time of year! I love the cooking, baking, getting together with family and friends, excitement of Christmas getting closer, looking forward to snow and so much more. This year has been a fantastic year and there is so much to be grateful for.

I thought about making a list of everything I'm thankful for but I think it would go on and on and on! So, then I thought, "If I had to name only one thing that I am grateful for, what would it be?"

The answer to that question took about 2 seconds for me to consider. I am thankful that God is in control of everything, both good and bad, that happens in my life and around me. Even when things do not seem to be going as I think they should, it is still in God's loving hands. He knows the beginning and the end and nothing is a surprise to Him.

That knowledge is what takes the worry away when I get concerned and makes the pain lessen when things hurt. I am grateful for the things He teaches through all of life's circumstances. I am grateful for the love He shows me every single day in the people and things He places around me. I am grateful that I can talk to Him at any second and turn my concerns over to Him. I am grateful that God is concerned about insignificant me.

Irene Tron
Making Real Estate Enjoyable in Northwest Indiana
www.IreneTronREALTOR.com
direct 219-476-5459

Home Sales - Economist suggests recovery is on

I am a regular reader of Professor Mark Perry's Carpe Diem blog. This is a bigger selection than I would normally take, and I hope he isn't offended. But the two graphs really tell the tale. Without government manipulation the markets have already begun to correct themselves. The best possible thing though going forward would be to stop the STIMULUS spending so that interest rates don't soar above 7% on mortgages.

This provides two insights: First, if you are still sitting on the sidelines waiting for better deals, you have waited too long, go look for a house. Second, interest rates are being held arbitrarily low by massive purchases of mortgage bonds by the government ... this will end soon ... they've already hit their debt limits. Watch for rates to increase generally next year to "normal" levels in the high 6's and low 7's.

Home Sales at Highest Level and Months Supply of Inventory at Lowest Level, Both Since Feb. 2007:

Highlights from today's report on existing home sales:

1. Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1% to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5% above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

2. The inventory of existing homes for sale in October fell to 3.57 million homes, the lowest level in more than a year. At the current sales pace, there is now a 7.0 months supply of existing homes, which is the lowest level since February 2007, more than two and a half years ago (see top chart above). Compared to the peak of 11.3 months supply of inventory in April, October's 7.0 months supply represents a reduction of 4.3 months.

Bottom Line: The national real estate market is gradually recovering as the balance between the supply and demand (measured by the months supply of inventory) has returned to the 2006-2007 levels, suggesting that the worst is definitely behind us.

Decision time - making a change

Someday I'll sit down and write the long version of our saga, but since the truth is sometimes better than any fiction, I'll leave that for a time in the future when I have a whole bunch of free time. Right!

This is the week that my wife and I have chosen to make a final decision on my direction for moving forward out of the last couple years. For those needing a cliff-notes version:

• We ran a successful home building company for 8 years, building about 250 homes in Northwest Indiana, and we loved it. We focused primarily on first time home buyers, FHA financing, and building with enough momentum to maximize cost controls.
  
• The summer of 2007 was just plain awful, and the mortgage industry explosion affected us greatly to the extent that we were forced to shut down that company
• In the meantime I have reverted to my former career providing strategic corporate consulting for a few great companies right here in NW Indiana: Cender and Company and First Financial Trust Mortgage
• Oh, and yes I still write a ton on my political and real estate blogs of course

I won't divulge the whole plan today, since we are still working out details and Julie and I committed to wait until the end of the week to really get things kicked off. But to leak just a bit, I will be continuing to consult in 2010 and I will be ramping up my efforts in real estate mortgage lending beyond my current consulting and online marketing role.

On Wednesday I'll send a personal letter out to friends, family, and contacts interested in the details. On Friday after the Thanksgiving turkey is consumed, I'll be posting here and sending out information to a wider readership on the ways we can work together going forward. Please join us in our prayerful consideration of this exciting set of opportunities and challenges.

Since this blog will become a big part of that launch, please take the time to add your name to the email list, and/or subscribe via RSS reader. You can leave a comment too, with email if you'd prefer.

Steve

Rates are arbitrarily low right now

I'll have a big announcement on Monday or Tuesday, for those of you care keep an eye on my twitter profile and facebook too, news there first.

Blogger Calculated Risk, typically pretty negative with predictions of woe and further market capitulation, does act a good question: How low are mortgage rates, and how high would they be if the federal government weren't buying all the mortgage bonds? One thing I'll agree on, rates are way too low right now and will go up over 5% and probably even over 6% soon. If you are sitting around waiting for some reason to buy, let's talk.

Earlier this year, Political Calculations introduced a tool to estimate mortgage rates based on the Ten Year Treasury yield (based on an earlier post of mine): Predicting Mortgage Rates and Treasury Yields. Using their tool, with the Ten Year yield at 3.356%, this suggests a 30 year mortgage rates of 5.33% based on the historical relationship between the Ten Year yield and mortgage rates.

Freddie Mac released their weekly survey Thursday:

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.83 percent with an average 0.7 point for the week ending November 19, 2009, down from last week when it averaged 4.91 percent. Last year at this time, the 30-year FRM averaged 6.04 percent.

This suggests morgage rates are about 50 bps below the expect level ...

Here is an update to the previous graph. Sure enough mortgage rates have been below expectations for about seven months (recent months in yellow with blue outline at lower left).

Although this is a limited amount of data - and the yellow triangles are within the normal spread - this suggests the Fed's buying of MBS is reducing mortgage rates by about 35 to 50 bps relative to the Ten Year treasury.

Home Owner's Association - Budget need revision

I came across this post earlier today, and need to do some checking with our lenders to see how quickly this process is being implemented. I have to agree with the general assertion though. Property Owner's Associations are generally underfunded for reserves for things like parking lot and roof replacements. Hoping for a hail storm is not a plan for roof repair.

If you have a Northwest Indiana HOA or Property Owner's Association and need some help re-budgeting to meet these requirements let me know.

HOA Reserve Study Conundrum

Some states have specific legislation that requires homeowner associations to have and follow a 30 year repair and replacement plan known as a 'reserve study'. It is the kind of plan that all HOA boards should follow even if no law exists since that's what good businesses do: plan ahead. Failure to plan for these expensive events inevitably leads to inadequate maintenance, declining property values and dreaded special assessments.

But there are now several new twists that make the idea of a reserve study even more compelling. In most states, HOA boards are allowed to set the level of reserve funding (how much money is set aside each year to address future costs). The fairest approach is the 100% funding model which requires all members along the 30 year time line to contribute a fair share of future costs. However, some boards have for political reasons put less in reserves (sometimes much less) to placate current owners that want to the obligation paid by future owners who have no say in the matter (sound familiar).

Now enters several new 600 pound influences into the reserve funding debate. In December 2007, Fannie Mae and Freddie Mac (the entities that have in past years underwritten most condominium mortgage loans) enacted the following requirements for condominiums where their loans were made being proposed:

1. The condominium is required to have a reserve study.


2. At least 10% of the annual budget must be put into reserves.
   

FHA (the government agency that insures low down payment loans which have become a huge part of the current mortgage market) is proposing to establish even stricter requirements for condominiums including:

1. Developer controlled condominium reserve funds are required to 100% funded.


2. After developer turnover condominiums are required to be at least 60% funded.

Since Fannie Mae, Freddie Mac and FHA are the 600 pound gorillas in the current condo mortgage market, this means is that if your condominium does not 1.) have a reserve study and 2.) maintain the indicated level of reserve funds, these entities will not underwrite your buyer's or your refinance loan. Folks, this is HUGE.

Condominiums that have an underfunded reserve study need to take decisive action to comply or risk losing vital lending sources. Condominiums that have no reserve study need one as soon as possible and to fund it to indicated levels.

I would add that this doesn't only apply to condominium communities, although they are the most difficult, even communities with normal property owners associations for common areas are going to be on the radar for better budgeting for reserves. The communities that just bug me to death are the ones where the residents paid almost nothing for the years the developer was still in charge, and then throw a huge fit when they are in charge and realize how much reserves will cost. In almost every situation they try to sue the developer to get hundreds of thousands of dollars to put in their reserves account.

Anti-growth still alive and ugly in Porter County

I seldom use this blog for political issues, we have a totally different site for Northwest Indiana Politics, but the issue of anti-growth really irks me and has had serious affects on construction and real estate values in our area.

Let's be frank, there is no reason whatsoever for Porter County to continue its anti-growth, Citizens Against Virtually Everything (CAVE) ways. Commissioner Harper and the Porter County Democrats have relentlessly focused on stopping construction, development, annexation, and infrastructure growth. We need jobs, economic growth, and risk taking developers, and we need them now, not 10 years down the road when the central planning committee deems it necessary.

I was reading the sad story of Tower Meadows in Center Township. The original developer and investor partners were able to sell about half the lots to Vision Homes before the county and the banks came down on them and basically closed the place down. Now the residents have seen a chance to get back, so they won't pay their POA dues. The county will sue the developer, force the bank to foreclose, then sue the bank to grab as much cash as possible. If the bank is smart they'll sell the project cheap and get out, Porter County anti-growth anti-builder anti-developer leaders are firmly in place and prepared to sue to keep the project ugly and half completed.

Tower Meadows could be finished even in a slow market in a matter of 9 months if the county, the bank, and the residents would let someone complete the project. Now, even worse when I was reading the comments on the story I noticed a trend of ugly anti-growth anti-developer comments and one commenter honestly suggesting that all development should be stopped until the economy turns around. Are you serious, you want Bob Harper to determine when we can start building again, when we can start hiring again? Stalin didn't have that kind of power.

Disclosure - I am not an investor, a consultant, or any party to the project. I was a long time ago an interested buyer, as my home building company would have enjoyed building in the project and I was sad to see it go the way it has.

Real Estate Bar Camp - Free Tuesday Online

Mortgage markets mixed - be aware

A great rundown on what's going on in mortgage rate markets this week:

MBS OPEN: Yield Curve Flatter. Rate Sheet Influential Prices Higher:

---

Recap of Last Week

• Senior Loan Officer Survey indicates credit conditions still tightening. DU 8.0 will continue to contract credit availability in the mortgage market
• Home buyer tax credit resources HERE
• FHA Audit reveals FHA reserves at all time low READ MORE
• Fed Purchases $13.5 billion agency MBS. Slowing pace of purchases still yet to affect MBS valuations
• Purchase Mortgage Applications at 9 year low. Refinance apps +11.3%. MND Story
• JP Morgan Chase hiring originators. READ MORE
• Senator Dodd Proposes Financial Reform. Section 1503 encourages transparency in asset securitzation. Tall task for mortgage market to accomplish...READ Brian Montgomery's comments
• BEWARE: GSEs Strictly Enforcing Loan Buyback rules. Lender's must have skin in the game. Tim Rood discusses
• Wells Fargo reducing borrower payments to help struggling borrowers. READ MORE
• 2010 Loan Limits Announced. Temporary 'high cost' loan amounts extended. MND STORY

While data and events do indeed serve as a catalyst for rates directionality, the market's long term bias remains clouded by a great amount of economic uncertainty. This forces the market to focus on trade flow dynamics and supply and demand fundamentals:

Plain and Simple: The major mover of money in the markets continues to be the moving of money itself.

Last week, $40 billion 3s, $25 billion 10s, and $16 billion 30s were the obvious guidance giver in the rates market. With the Fed's withdrawal from the Treasury market complete, the Treasury reminding of their intentions to lengthen the duration of their debt portfolio, and the market confident the Fed remaining accommodative for an "extended period" , the obvious profit churning trade was to let the yield curve steepen. This move started after the FOMC statement was released on November 4 and carried all the way through the 30yr bond auction last week. The "steepener" trade did however start to unravel following the duration heavy auction cycle. The life of the recent "steepner" trade is apparent in the 2s/10s chart below. Notice how yield spreads began to tighten late last week after short covering profits were booked in the long end of the yield curve. Wider yield curve spreads = steeper yield curve. READ MORE on the shape of the yield curve and yield spreads

Generally when the long end of the yield curve sells off (bear steepens), rate sheet influential MBS coupons suffer and mortgage rates increase. However this has not been the case in the TBA MBS market lately. A lack of new loan production combined with ongoing official support (the Fed), call out nervousness (prepayment risk), and the Class A settlement process helped spark a massive tigthener in the agency MBS market.

Plain and Simple: Rate sheet influential yields outperformed those of their benchmark's....even as the long end of the yield curve sold off and benchmark rates moved higher (yield curve steepened)!. You can thank the Federal Reserve for keeping mortgage rates stable over the past two weeks. I should also add that I have been receiving a larger than normal amount of consumer 'lock/float' inquiries lately...I advised locking.

Here is a look at my spreadsheet...

I waited until the end of the week to give the 4.0 coupon a little extra weight...by Friday afternoon "rate sheet influential" yield spreads were at their tightest levels since May and the secondary market current coupon had fallen to 4.169%. If my spreadsheet is not spatial enough for you, here is a chart of the FN 4.5 with 10yr yields overlaid...

I dont usually overlay benchmark YIELDS on mortgage PRICES, but I think the inverse relationship, or lack thereof in early November, is demonstrated clearly enough to warrant the comparison. Notice how MBS prices and 10yr yields generally move in opposite directions? This wasnt the case in early November...check out how MBS prices continued to rise even as 10yr yields moved higher. This shows you how MBS supply/demand dynamics sheltered mortgages from the steepening bias that was controlling their benchmark big brother (guidance giver). Perhaps the best way to say it is...we disconnected from the benchmark lever?

The Week Ahead is busy, lots of data and Fed speakers. READ THE MND WEEK AHEAD for more. The trade tactic we anticipate to be a rates money mover...the unwinding of the yield curve STEEPENER trade. We expect the long end of the yield curve to recover some of the beating it has taken over the past two weeks and for MBS/TSY yield spreads to widen up as the long end of the curve outperforms "rate sheet influential" MBS coupons.

Plain and Simple: MBS profit taking is looming

Since its getting kinda late for the OPEN, I will continue this conversation later in the morning.

The long end of the curve and 10yr TSY note has been bid well so far this morning. Currently, yielding 3.395%. The FN 4.0 is +0-06 at 99-11 yielding 4.072% and the FN 4.5 is trading +0-01 at 101-25 yielding 4.283%. The secondary market current coupon is 4.146%.