Change is the Only Constant

Boy, just when we thought things may settle down a bit after Fed's takeover of Fannie and Freddie, the fiascals at Merill Lynch, AIG and Lehman just reminded me that we are still in the middle a major shift, not just in the financial industry and but also in the relationships between consumers and service providers. When companies like AIG with 150+ years of history and brand recognition go down in no time, you really start to wonder what the new paradigm will look like, and what kind of trust and relationship we will have with our service providers going into the future.

A year ago when the mortgage industry started experiencing the credit crunch, we started a marketing campaign called "A Scent of Change", which was a series of seminars that were meant to educate our clients about the major changes we were seeing in the lending industry. At the time, we had planned for that campaign to go on for about 6 months. But now, 12 months later, that theme still seems to be applicable. What does that teach me?

There are always external factors that will be thrown at us, which we can't control. But what we CAN do is focusing on the fundamentals so that we don't get blown away by the unexpected. For me, it's about taking care of my clients, building long term relationships, and keep working at my short-term and long-term goals - One Piece At A Time!

We can't time the market in stock prices or mortgage rates, but we CAN time progress in our own journey to success IF we have a plan!

Mortgage Rates Lowered by Government Takeover

Another big day for the mortgage industry. On Sept 7, Treasury Secretary Paulson announced plans to place Fannie Mae and Freddie Mac in a conservatorship governed by their regulator, the Federal Housing Finance Agency (FHFA). As part of the announcement, both companies’ chief executives will be replaced and the government will provide up to $200 billion in capital to restore the firms to financial health.

What does this mean? Essentially, both Fannie Mae and Freddie Mac are effectively government agencies now, from being private companies that were established in 1968 and 1970 resepectively. What's the implication for the consumers? And, why did the mortgage rates go down are a result?

As the U.S. government steps up to gaurantee both Fannie & Freddie's maturing bond payments, more investors are becoming interested in buying their bonds. With more investors buying their bonds, there will be more liquidity into the market to extend mortgages to consumers. More liquidity = lower rates. Yeah!

With what has just happened to Fannie and Freddie, and the fact that the conforming Jumbo limit of $729,500 going away by the end of this year, it makes it a really good time to refinance or buy your next home, especially if your loan amount is in the range between $625K - $729,500. For more detail info and a free consultation about how to take advantage of the current situation, you know where to find me!