The Veridian Blog

Hi all -

In case you have been travelling in outer space, the Fed decreased the Discount Rate last Friday by 0.50%.  No, this doesn't mean that the Ben Bernanke Bobbleheads are now half-price - it means that the Fed is now lending money to the nation's banks and lenders at a cheaper rate than they were a week ago, in hopes of improving liquidity in the secondary market.  The Fed Funds rate (the rate banks charge each other) will follow suit during the next Fed meeting on September 18.  Almost always, the Prime Rate (what the banks charge the best customers - you) follows accordingly.

Despite a 50 basis point drop in the benchmark 10-year note during the last 2 weeks, mortgage rates have risen dramatically - why?  Usually the mortgage rates move in lock-step with the 10-year note.  In laymans terms, this simply means that lenders don't trust borrowers as much as they used to.  Even though the rate of return on lending to the US government has gone down, there is too much risk to put money with borrowers who are defaulting in record numbers.  Soooo much risk that they are asking for bigger spreads to compensate.  That's the theory - but it is frightening to see the pace at which this has occurred.

What has happened in a nutshell:

All Jumbo and 2nd mortgage products have been significantly hit - even for A-paper borrowers.  Some lenders have opted to disband with these programs entirely.  All subprime, Alt-A and reduced documentation loan programs are subject to intense scrutiny, if available at all.

What's next?

We believe this situation is "temporary" - meaning that it will resolve itself within the next 6-12 months.  It does not make economic sense for A-paper borrowers to suffer from the subprime plight and we anticipate the secondary market to eventually come to its senses.  It's simply the power of supply and demand that will pull investors back.  In addition, the Fed will do what is necessary to avoid a total housing meltdown and subsequent recession.

If you have an intermediate-ARM that is set to convert after such time, we strongly advise against refinancing until absolutely necessary. 

Please call us for more detailed information, or just call to say hello!

Hi all -

Rates have been as flat as a pancake as mortgage markets are settling in from the roller coaster ride of two weeks ago.  However, since then, we've already noticed the re-emergence of Alt-A and low documentation programs from some wholesalers.  In addition, the no-cost 15 year fixed has returned and conforming loans (those < $417,000) are still relatively unaffected by the credit crunch. 

Over the next few months, we anticipate rates to slowly drop, in particular, for A paper borrowers seeking Jumbo loans.  In addition, there is a strong likelihood that the Fed will decrease rates during its next meeting on September 18.  Those of you holding on to HELOCs will enjoy a slight decrease in your monthly payments.

More updates and site improvements to come... thanks for reading!

The sky continued to fall last week for equities and traders flocked into the bond pits, sending yields plummeting to mid-May levels.  As a result, the benchmark 10-year note yielded 4.68% by week’s end.  Mortgage rates, however, did not react in lock step.  Rather, because many MBS (mortgage-backed securities) packages are no longer being purchased by investors – even those with the best credit ratings - the wholesale originators were forced to shut down completely and many have immediately discontinued “Alt-A” programs (those that feature low documentation loans to borrowers with credit ratings generally higher than those in subprime), Pay-Option ARMs and 2^nd mortgages.  Even the bigger banks raised rates on A-paper 30-year Jumbo loans on Thursday and Friday to frightening levels as to what I think is a knee-jerk reaction to the sudden evaporation of liquidity in the secondary market. 

It is without doubt an unsettling time in the mortgage markets right now the result of which will eventually put a greater sag on the housing sector.  That said, let me reassure every client and realtor we are dealing with, or have worked together in the past, that Veridian is unequivocally in no danger as a going concern.  Having been through several recessions, two stock market crashes, one big earthquake and a couple of what some of you would call “wars”, we understand the importance and appreciate the unpredictability of the cyclical nature of the real estate industry and the economy as a whole.  We therefore have always conducted business in a manner that is conducive to the goal of long-term survival and will endure this trial as well.

All eyes will be on the FOMC meeting this Tuesday to see what they say about the sudden credit crunch in the secondary markets.  In my opinion, the Fed may be forced to lower rates now by end of 2007 in anticipation of a likely recession around the corner.

Hello again Veridian clients -

Just a quick note to let you know what is the latest and greatest here at Veridian.

1. Version 4 has launched (as you probably know)

2. Educational blog - check in every week now to try and answer the question of the week.  These topics will be related to mortgage financing and real estate.  Winners will receive prizes!!!

3. Postcards galore - please be on the watch for those shiny colorful postcards coming in the mail - we have ratcheted up our direct mail campaign to target those of you with soon-to-covert-ARM programs.

4. Please welcome our two newest loan agents - Jennifer and Michael Garcia.  More on them later!

Richard

Hi all!

Welcome to version 4 of www.veridianmortgage.com!  We're excited to have added new features and content plus a more modern look and feel.  Please take some time to peruse the site and let us know what you think.

In browsing around, you may notice that we are no longer posting rates.  After much deliberation, we choose to omit this information because it had been causing more confusion than convenience and tended to mislead some clients.  In addition, most of the time our actual rates were lower since not every lender we deal with was allowed to post rates on our previous host's server.

Finally, some parts of the site are obviously still under construction.  Give us until end of August and it will be 100% complete.

Thanks for reading and hope all is well!

Richard