A Month of Harvest; Great Change for Reverse Mortgages; Market Report; Stats for Underwater HomeOwners and Credit Card Use

With this being the first week of November (which is Thankful Month), I want to thank you for your referrals. We always want to be your information source, but we also love to reap our harvest and appreciate you having us be your mortgage lender of choice. Our team is knowledgeable, experienced and all have their underwriting certifications so there are no surprises at the end. We can be reached Monday-Saturday at 972-278-3400 (and after hours if you need us) or email us a ldavidson@servicefirstmtg.com. Thanks, Linda Another volatile week with an incredible Fed Fund cut to 1.00 and a Discount Rate cut to 1.25. We are truly in historical times. After the cuts, we saw was is the typical overreaction, especially in the mortgage bonds and rates ended with an increase of around .50 from the Friday before. My prediction on this is that it was an overreaction and so it will be interesting to see how much ground we gain back this week in the bonds (hopefully a lot :)). See market report below. Below also we have given you information on the stats of "underwater borrowers" as well as the mind blowing numbers on the increase use of credit cards. We also are sending out the exciting news about our senior buyers being able to purchase with a Reverse Mortgage (!) as of 1/1/09 and remind you of our last Training Class of the Year on This Tuesday as we continue to work to be great at communicating (as it IS Communication Week!). Interesting Numbers for those Short Sales NEW YORK (CNNMoney.com) - According to a report by First American CoreLogic, at least 7.5 million American homeowners are "underwater borrowers," meaning they owe more on their mortgages than their homes are currently worth. This is called negative equity, and the report shows an additional 2.1 million people are on the brink of falling into it. Their homes are worth less than 5 percent more than the mortgages they''re paying on them. The report''s 7.5 million estimate is a conservative number. Some organizations, including Moody''s Economy.com, estimate that as many as 12 million borrowers may be underwater. In Texas, 16.6 percent of homeowners have negative equity, caused by a recent influx of people who bought homes and did not have enough time to build up equity before prices began to fall. Nevada is home to the highest number of underwater borrowers, with 48 percent of homeowners having negative equity. Michigan follows with 39 percent. New York is faring best at 4.4 percent. Use of Credit Cards (this one is really mind blowing!) Credit Card Loans, 10 months Sep07-thru-Jul-08 ... $29.1 billion Credit Card Loans, 10 weeks Aug-08-to-mid-Oct-08 ... $32.3 billion "In other words, Commercial Bank ''exposure'' via the total amount of Credit Card ''loans'' outstanding has risen MORE in the last ten WEEKS, than it did in the previous ten MONTHS COMBINED !!! What consumer spending there is has been fueled in part by credit card. The second largest "merchant-vendor" for credit card use is now McDonalds. This suggests that many consumers are in serious distress when they need to get their $4 Big Mac and fries with a credit card. This is a problem facing the economy next year. Credit card growth like we have seen in the last few months has never been sustained at such a level, and is unlikely to be this time either. For more information on this, go to our blog at lindadavidsonmortgage.blogspot.com and go to Electing the Janitor -In-Chief editorial. Exciting New Change for Reverse Mortgages! As of January 1, 2009 buyers that are 62+ of age and older can now purchase a home using a HECM* Reverse Mortgage. What does this mean to your senior buyers? They can use the HECM* Program to purchase and never have a payment on the mortgage for as long as they occupy their property as their primary residence. We will be sending more information out in December so that you can forward this information to your senior buyers that are looking to purchase a home and would like to look at this great option. *HECM (Home Equity Conversion Mortgage) which is FHA''s version of Reverse Mortgage. Over 90% of all Reverse Mortgages are currently HECMs for refinancing so this is really big news! The terms, interest, etc is much better on HECMS than what we have had in the past for purchase Reverse Mortgages. Market Report Last Week in Review "TAKE TIME TO DELIBERATE; BUT WHEN THE TIME FOR ACTION ARRIVES...STOP THINKING AND GO IN." Napoleon Bonaparte. And taking action after deliberating was exactly what the Fed did last week, when they cut the Fed Funds Rate by .50%, lowering it to 1.00%. Why did the Fed take action last week, after it had already lowered the Fed Funds Rate by .50% on October 8 in a coordinated effort with other central banks? To continue to help ease the credit crisis, and prevent a long and severe global recession. In fact, several foreign central banks followed the Fed''s lead again last week, with Hong Kong cutting their lending rate by .50%, Taiwan cutting by .25%, and Japan cutting by .20%. This is important because cuts by other nations help stabilize the US Dollar, which typically loses ground after our Fed cuts rates, because of the lower yield offered comparatively offered in the US. Another interesting point to note: since oil is Dollar denominated, the price per barrel typically jumps after our Fed cuts rates, because of the decline in the value of the Dollar. The cuts by other central banks should keep oil...and gas prices, in turn...from skyrocketing again. Another reason the Fed took action: The Fed''s statement discounted threats of inflation, saying that slowing economic growth should lower inflation pressures over time, but added that downside risks to economic growth remain. And last week''s negative Gross Domestic Product reading is confirmation that things have slowed quite a bit. Although experts have speculated that the US may already be in a recession, the first hardcore signs appeared when the Third Quarter Advance GDP report showed that consumer spending declined at the fastest pace in 28 years. The report also reflected the largest quarterly decline since the end of the last recession in 2001. So what did all of this mean for Bonds and home loan rates last week? After worsening early in the week, Bonds and home loan rates attempted to stabilize by week end. And while it was a treat that Bonds did bounce off an important level of technical support, home loan rates still ended the week nearly .50% worse than where they began. Forecast for the Week The excitement continues, as the heavyweight Jobs Report is scheduled for release this Friday, which will show the number of jobs lost or gained in October. Remember that the Department of Labor averages their numbers, and part of each month''s report includes "revisions" to the several prior months'' numbers. Last month, the Labor Department reported that 159,000 jobs were lost in September, which was worse than the 105,000 lost jobs that economists were expecting. As of last month''s report, the US has lost 760,000 jobs so far in 2008. And the news for October is not expected to be any better. A negative report could be bad news for Stocks and good news for Bonds and Home loan rates, as bad economic news typically causes money to flow from Stocks and into Bonds. But as has been noted in recent weeks, things are anything but typical at the moment. Bottom line: count on me to be watching closely to see how the markets react to this report and all the other news of the week...and feel free to call me anytime at 972-278-3400.