Does anyone know what a loan is?

One of the best parts of my new gig is that I have more time to get out of the office to do sales, recruit new employees, meet with other industry professionals, and continue to get educated on the ever changing market.

Yesterday was one of those days. I had the opportunity to educate some very important people on what I do every day.  I was asked to visit my little cousin’s kindergarten class and talk about loans and what it is to be a banker. Every day they are having a different professional come in to speak.

I tried to break lending down to 5 year old lingo -- toys, sharing, allowances, chores.

But even though I was there to "teach" I was able to take a very important detail away with me.
Here's a little sample of my morning:

Me: Good Morning Class

Class: Good Morning Mr. Jones

Me: Today I am here to talk to you all about banking . But don’t worry, I will make it fun for you all.

Class: Yeahhh!

Me: Does anyone know what a loan is or what it means to borrow money. (A little boy raises his hand)

Little Boy: A loan is when you are at home by yourself and your mommy and daddy are gone.

Me: Well yes….that is correct. ALONE is when you are at home by yourself. A "LOAN" is when you borrow money from the bank.

Ha, well how can I argue with that?

What did I take away from this?  It is important to remember that when speaking with your clients, you must explain to them things in a way they will understand.  It is crucial to know your audience and take out all the complicated jargon that comes 2nd nature to industry professionals.

It was a refreshing experience and a nice little break from the ups and downs of the work day.  Hopefully I made some new clients or future bankers in the process. Thank you to AMES School and to my little cousin Aubrey for allowing me to speak to your class. J

Some exciting news!

I mainly stick to financial related posts, but today I would like to share some exciting news with you all.

It comes with great excitement to announce that I have started a new position as Branch Manager and Senior Loan Officer at Mortgage Master Inc. After almost a decade of service at PNC/National City, I have decided to take a leap and explore new opportunities.

The mortgage Industry has forever changed. The only true way to be competitive and offer my clients the best rates and service possible is to stay ahead of the volatile market and evolve with the changes that we face every day.

Mortgage Master Inc. is a correspondent lender. We are signed up with 55 different lenders throughout the country, enabling me to find you the best rate out there. Previously, I only had the ability to shop PNC rates, but now I have the luxury of searching different rates and programs with our numerous lenders throughout the nation. I have also recently received federal and state certification, allowing me to work as a correspondent lender, but moreover, becoming even more knowledgeable about various policies and regulations in the mortgage industry.

Our corporate headquarters is based out of Boston, MA but all loans will still be handled locally. We are currently building 2 offices – one in Chicago and my own head office, which will be in Park Ridge, IL. We also have a processing center located in Lisle, IL.

The only thing that has changed is the name on my door. I will still provide the same excellent service, easy and consistent accessibility, passion, and integrity you have been receiving from me all these years.

Thank you for your loyal business and support all these years. I look forward to working with you in the future at Mortgage Master Inc.

Be aware of your market, educate your clients, and let’s close some deals.

Josh

Joshua Jones
Branch Manager & Senior Loan Officer
Lending you can bank on!
NMLS # 588201
jmjones@mortgagemaster.com
www.mortgagemaster.com/jmjones
www.twitter.com/jjmortgage
www.linkedin.com/in/joshuamjones

Jobs Friday - Market Update 6-07-13

Good Morning Everyone-

Today is Jobs Friday. If you do not know what that means, the first Friday of every month we have the Non-Farm Payroll numbers released at 7:30 am eastern.

The Fed reported that we had 175,000 jobs created in May. Estimates were at 163,000. So why will mortgage rates be lower today? Two reasons. First there were negative revisions to the previous months jobs number by 12,000. This means that there were fewer jobs created than originally thought. Secondly, the unemployment rate did tick up from 7.6% from 7.5%. Why...think of the time we are in. We just had high school and college graduations. These workers will be entering the unemployment numbers. Most of them will likely not have jobs or bot be able to find a job.

Let's face it though, the past month has not been kind to us in terms of Mortgage Rates. We have seen rates move up at least .5%. Mortgage Bonds (what rates are based off of) have lost over 500 basis points over the past month. 500 basis points on a 200,000 loan is a $10,000 loan charge. That is huge.

Why did this happen? Some Federal Reserve members feel that we should start tapering the QE (quantitative easing). They have not done it or even started too. Some members feel that they should though. That is all. With some members of the Fed thinking they should stop buying Mortgage Bonds, that has caused hedge funds and pension funds to re-position themselves....thus the huge sell off.

So what is some advice we can give to clients? The days of the 3.250% are most likely gone. Do I feel 3.5% or 3.625% will be back? I do. We have unemployment ticking up, manufacturing slowing, and in case you haven't been watching, Japan has lost over 20% in there market over the past 2 weeks and Europe is not looking much better.

Like an good over reaction, and our 500 basis point sell off is that, we are do for a correction. We should see rates get better over the next two weeks. The market needed to see that things are not as good as some members of the Fed think it is. With negative revisions to previous numbers, and unemployment ticking up,  and just because we have a slightly better jobs number (do to service industry and not manufacturing) the picture is only slowly getting better. I mean slowly. The Fed really wants to see 4 months in a row with 200K plus jobs before they decide to truly step out of the QE department. We are not even close to this. Talking is the only action going on right now. Unfortunately, talk is not cheap....especially to the mortgage rates increase.

With all this being said, stay diligent on the market. Watch it everyday. Remember, Volatility IS the new normal.

Be aware of your market, educate your client’s, and let’s close some deals.

Josh

Market Update 5-16-13

Record Highs! Record Highs! Record Highs!

Everyday we consistently see our stock markets posting record highs. Is this a bull market? Do we keep flooding the capital markets with cash and buying and buying stock? Bottom line is something has to give. We can not have record high markets and artificially low interest rates. We just can’t. Stocks and bonds in a normal free market, have inverse relationships. When stocks rally, bonds sell off, when bonds rally, stocks sell off. Now we do have those intermittent days were we see stocks and bonds both heading in the same direction. Typically those are the days that investors feel there must be an incorrect valuation.

Now let’s talk about mortgage rates and our mortgage bonds/mortgage backed securities (what rates are based off of). Were are they going and how can we plan for the next few weeks and months? Right now mortgage rates are hovering at the 200 day moving average. That is called support. At this support level, we can expect one of two things. First we can get a bounce off of it and we can see our rates improve or we can see us break through it and then this once support level, is now resistance.

My gut tells me in the next week, stocks or bonds have to give. I personally think stocks are going to give in the short term, but that’s just me. In the long term, stocks will win. The economic data we have been exposed to has been lack luster. We have seen mediocre retail sales, tame inflation, so-so consumer confidence, higher trade deficit numbers, and besides one great jobs number, stagnant job growth. The market will do what the market will do. The numbers that have been really good, and which is very important to our industry, is the housing data. Housing is a huge part of our economy.

We have seen purchase activities pick up immensely, multiple bidding wars on properties, places selling in days and not months/years, and people are really re-investing in their homes. This type of activity is what our economy needs. As housing improves….and it is, you will see our rates go up in the long term. I think many mortgage bond buyers are seeing if housing is really improving or is this just a mini “bubble” happening right now. Only time will tell if this activity is here to stay or will it subside some.

All I can say, if we do get a little break on the rates on the low side in the next week, capture that business. The trend for rates in the short term looks good, in the long term, they will go up. They just will. Our economy is starting to move towards a pure free market.

 As a loan officer, what do we do? Be ahead of the game. Since the crisis started around 2006/2007 we have had almost 4.5 million foreclosures nation wide. That is staggering. What that means is these borrowers, based on loan programs (on average you need to wait 3 years in order to buy again), are starting to trickle back into the market. Along with people downsizing (which are baby boomers retiring), and divorces (which have been more rampant in the crisis), you have many people who are coming back to buy homes. This influx of borrowers will keep housing boosted.

We just received some economic data. First we had the Consumer Price Index (CPI) which measures that average price of a fixed basket of goods for urban consumers. The number came in at -.4% and estimates were -.2%. This number is an inflation number. So inflation is tame. Then we had housing starts. Housing starts came in average at 853K in starts. Then we had over 1 million in permits. Lastly, and this proves our stagnant job growth, we had the initial jobless claims. The number came in at 360K which is up 28K from last week.

Mortgage Rates will open slightly better today than yesterday. Mortgage bonds are modestly higher this morning and stocks are flat. However, this proves that in the short term, something has to give.
 Be aware of your market, educate your client’s, and let’s close some deals.

Josh

Market Update - 3-08-13

Good Morning Everyone-

I will keep this short.
 Today was Jobs Friday. We just had a huge jobs number today. The market estimated that we would should have 165K new jobs created for February, the real number came in at 236K. The unemployment rate dropped from 7.9% to 7.7%. Many components go into the unemployment rate, however for simplification purposes, its better than what it was.

We did have some revisions to old jobs numbers and it turned out the economy shed 15K more than expected. This is peanuts compared to the huge number we just received.

Mortgage Rates will open up most likely .125% worse (roughly .375 to .500 in price). Make sure your clients know why the markets have had this huge move in the past 60 days and note to them how the stock market has been on an absolute tear since the start of 2013.

Be aware of your market, educate your clients and let's close some deals.

Josh

Market Update 2-28-13

Good Morning Everyone-

I went looking around some websites and found some interesting numbers on 2012. The Federal Housing Administration (FHA) insured over 242 billion in mortgages last year and VA insured 128 billion. This accounted for 20 percent of the total 1.8 trillion origination mortgage market for 2012. Fannie Mae and Freddie Mac accounted for 73 percent of the market at roughly 1.3 trillion. So what this shows is that the mortgage market was thriving in 2012. 2013 is expected to be a rebuilding year for many companies. Some companies are poised to grow and expand, other companies have such large portfolios that they are just looking to retain servicing.

More rules of Basel III are coming out. Basel III are rules and regulations that are being put forth on banks to improve/limit risk regulation and supervision. With Basel III there will be tougher capital requirements for banks (stress test). So what that means is that companies with a 2 trillion dollar servicing portfolio, such as Wells Fargo, are going to have to make sure they have enough cash on hand to meet requirements set forth in the new laws. Many of the laws in Basel III have to be fully complied with by early 2014.

So with the purchase market right around the corner, this is primetime to grow. PNC is well capitalized and ready to lend. Were other companies are just looking to maintain and raise cash to meet new requirements, we can look forward to being able to go out and sell a bank that wants to lend.

So what is going on with our rates? The sequester is big news that is going on right now. If a deal is not reached by Friday, then 85 billion in automatic spending cuts will take place. On top of the social security tax increase we all felt starting January 1, the total we would have had the Fed’s take from the economy is 200 billion with increases in taxes and cuts. We have also had some other issues going on. The United Kingdom’s debt problem was recently downgraded and we had a crazy Italian Election. All of these items in some degree do affect our mortgage rates. Ben Bernanke (Chairman of the U.S. Federal Reserve), Mario Draghi (President of the European Central Bank), and Haruhiko Kuroda (the head of the Asian Development Bank) all drive our interest rate market in some form or another. Rates are predictable to some degree, however when one of the people above make a statement on monetary policy, predictability gets thrown out the window. The main thing we know is inflation is tame (the nemesis of bonds) but as we are slowly starting to improve our economy, rates will creep up.

We have had some decent and promising economic data come out. The Case-Shiller Home Price Index was released Tuesday. It came in at 6.8% increase. Existing Home Sales units for January came in at 437K instead of the expected 385K. These are signs of a housing recovery.

How do we tackle this market? We just do. We know these low rates will not hold for much longer. So if people are on the fence about refinancing they shouldn’t be. If people are waiting for prices to go lower on that home, they won’t be. The data does not show that things are getting worse. Things are starting to improve…..modestly. That is all this market needs to truly rally…just a little sign of hope. We are starting to see it, so let’s be ready to harness it.

Be aware of your market, educate your clients and let's close some deals.

Josh

Market Update 2-1-13

Good Morning Everyone-

Today is Jobs Friday. Job's Friday is the first Friday of every month. On this day they will release the Non-Farm Payrolls number and the Unemployment Rate. Expectations are that we will have had 180K in jobs created and an unemployment rate of 7.7%. The actual numbers were 157K jobs created. The unemployment rate came in at 7.9%. Interest Rates will be better today. The prior Job numbers in November and December were revised higher. As we know, In November and December, we had a lot of seasonal hiring that happened for the holidays. So we are shedding those jobs right now. Also, last month we had 9K in government jobs loss. We can argue that this is a good thing as those jobs are based on tax revenue and they typically garner costly pension's that tax payers have to pay for.
On Wednesday we also had the first reading of Quarter 4 GDP. Estimates were that we had 1.0% growth but the actual came in at -.1%. Then we had the GDP Chain Deflator, which is inflation within GDP. Estimates were 1.6% and the actual reading came in at .6%. Inflation is the nemesis of bonds but has remained tame.

What we can derive from this week and these numbers, is the economy is sluggish. With the recent run up in stocks and equities that we have seen in the past week has caused our rates to have increased almost .250%. I believe this will be short lived. With the economic data that we have received, this proves that the situation in our country is just average. In order to truly grow, we need job growth around 250K to 300K. With that growth we will start chipping away at the unemployment rate.
Remember the rule of thumb, if stocks do well, interest rates will increase, if stocks do poorly, interest rates will decrease.

So were do we see our mortgage market moving? I think we will be at this level for a few more months. I think the days of having 30 year fixes at 3.25% are gone. We are still slowly improving and this year will most likely be the year of the investor. We will see many people moving more of their money into the market because the current portfolio they have is way  too bond heavy. So basically with less money moving into bonds, it will be harder and harder for the FED's to keep the rates as low as they are/were. The lousy economic data will help keep it there but I think the trend over time, will be rates will move slightly higher.
Rates are still good though and they will remain at these levels for sometime. Remember, with one policy change from our government or one major announcement, it can erode or boost our market in a moments notice.

Be aware of your market, educate your clients and let's close some deals.
Josh