by Carl Kiger, President of OakWealth Mortgage Group

The United States economy is truly a wonderful thing. Without too much government control or intervention, our economy grows and contracts based on the rules of supply and demand. You need only to look at the poor economic issues seen in other countries with too much government control to see the benefits of our “free market” economy. The recent issues in the mortgage industry have caused problems for the economy, and have also caused the federal government to look at greater intervention into the mortgage industry. If you have been watching the news media, you have probably heard discussions concerning the federal government stepping in to prevent lenders foreclosing on homeowners who are behind on their mortgages. While this may sound like great news to anyone who is in the foreclosure process, here is a brief description of why that would be negative for our overall economy.

Have you ever wondered why mortgage rates go up and down with the state of the economy, but credit card rates always tend to stay very high? Mortgage rates are tied to a tangible asset- your house. Lenders can loan money and provide a better interest rate because their risk is low. The money they are lending is tied to your house. If you ever stop making payments, they can recoup their money by selling your house. Inversely, the money loaned on credit cards is not tied to any tangible asset. Credit card issuers loan you money on your “good faith” promise to pay the money back. Although they can make your credit score look bad if you refuse to pay them, they cannot get their money back. Therefore, the risk that the credit card issuers take must be built into the rate they offer to consumers. This risk is why credit card rates are higher, and tend to stay high, even when other short-term rates drop.

With this information in mind, think what will happen if the federal government does not allow home mortgage lenders to foreclose on people who have stopped paying their mortgage. The lenders will not be able to recoup the money loaned out, and the mortgage industry will start taking on the look of the credit card industry. The risk the mortgage lenders are assuming will be much greater, and this risk will have to be built into the rates they offer to consumers. This would cause mortgage rates to be much higher on a permanent basis. Please do not get the impression that mortgage lenders are perfect. Over the last decade, there have been many predatory practices and high-risk lending practices that have contributed to the issues that we are currently facing in the mortgage industry.

While some additional government controls or laws may be needed to curb these practices, too much government control would cause more harm than benefit. Look at it this way: has the federal government ever run a program more efficiently than private industry can do? It may take over a year for our economic outlook to start improving; however, if we can make it through this downturn without breaking aspects of the economy which have worked well for decades, then I think we will all be better off in the long run.

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by Carl Kiger, President of Oak Wealth Mortgage Group

Many of you have contacted me recently about refinancing. Given this fact, I thought it would be helpful to explain why you should be prepared to move quickly when making a decision about refinancing.

First, let’s look at what causes the 30-year fixed mortgage rates to fluctuate. The 30-year fixed mortgage rate most closely tracks to the 10-year Treasury bond yield. As the yield moves up, 30-year fixed rates tend to move up; as the yield moves down, 30-year fixed rates tend to move down. You can easily get a feel for what mortgage rates are doing on a given day by going to websites such as this to see what the 10-year Treasury bond yields are doing on that day.

Given the relationship described above, we now need to understand what causes movement in the 10-year Treasury yield. Whenever the economic outlook for our country is unfavorable, many investors place their money in safer investments such as the 10-year Treasury bond. This investing drives the prices of the bond up and the yield of the bond down. Therefore, when the economic outlook is unfavorable, mortgage rates tend to fall because of this relationship. Similarly, when the outlook for our country’s economy is favorable, investors look for more aggressive investments, typically not 10-year Treasury bonds. With this type of investing, the price of the bond starts to fall and the yield on the bond starts to rise. Therefore, when the outlook for the economy is more favorable, 30-year fixed mortgage rates tend to rise.

Now that we have a basic understanding of how it all works, let’s look at a recent real-world example. In late January of 2008, the news regarding the economy started to look unfavorable. The amount of housing foreclosures, the problems in the mortgage industry, and the rocketing oil prices, all served to create a negative economic outlook. Mortgage rates started to fall. In fact, the 30-year fixed rate fell all the way to 5.25%. The federal government reacted quickly and made two reductions in the “federal funds” rate, also announcing that tax rebates would be sent to all taxpayers. These actions immediately caused the economic outlook to brighten somewhat, causing 30-year fixed rates to rise. Over a four week period, the 30-year fixed rate rose all the way back up to 6.25%; however, our economy had some serious issues at this time. After the exuberance of these announcements wore off, the bad news concerning the economy continued to roll in, causing the long-term outlook for our economy to look poor. In fact, many economists believe we are now in a recession; therefore, the 30-year fixed rate has trended back down to the 5.625% range.

The important thing to remember is that rates will always ebb and flow with the economic outlook and the fluctuation of 10-year Treasury bond yields. When the overall US economy is weak, the 30-year fixed rate will tend to be lower. The government will try to do things to stimulate and strengthen the economy. These actions will cause temporary spikes in the rate, but overall the rate will tend to remain low. Similarly, when the economy is strong, the 30-year fixed rates will tend to be higher. When this is the case, the government will try to take actions to keep the economy in check. There will be temporary drops in the rate, but overall the rate will tend to remain high.

Finally, it is important to understand what you are hearing in the news media about rates. When you hear that the federal government has cut the “fed funds” rate, it is important to understand that this is a short-term rate meant to stimulate the economy. This specific action tends to make mortgage rates go up.

When the news media talks about mortgage rates, please keep in mind that their data is usually one to two weeks behind. If they report that rates are dropping, that means that rates dropped a week or so ago. Since that time, rates could have possibly stayed low or trended back upward.

Because of the state of our economy, mortgage rates are very volatile right now. During normal economic times, rates typically move only once per day. However, right now they can move four or five times per day. Given this, if you are looking to refinance, you should be prepared to move quickly when making a decision. If we hit a rate that you are interested in, you should lock it and move forward; otherwise, you may miss it all together.

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As the first quarter of 2008 is coming to an end, interest rates are still more volatile than in the past few decades. According to an article from the Raleigh Real Estate News, recent past interest rates for home loan rates for prime borrowers would move 1/4 or 1/2 in discount points per week, roughly 1/16% or 1/8% in rate. However, now that move occurs in a single trade. This kind of volatility has led to nothing short of chaos in lending communities where the interest rates change as much as four or five times in a single day.

Why is There So Much Volatility?

According to the Raleigh Real Estate News article, the volatility is caused by two main reasons. First of all, liquidity issues are forcing many banks to sell prime assets in order to raise cash for battered balance sheets and inflationary pressures that are rising. Additionally, as we all know, consumer confidence is down and actually reached an all-time low of 64.5 in March (the lowest in five years!). Consumers also have reasons to worry due to high commodity prices with oil reaching a record high of $110 per barrel as well as rising food costs. One of the other reasons that there is so much volatility is because mortgage interest rates are directly attributed to banks needing to sell loan holdings, investors growing weary of any investment dealing with mortgages as well as rising inflation fears.

So, How Can We Protect Ourselves?

Borrowers don’t really have any set way of protecting themselves against changing market rates because no one knows (at least, not at this point) what direction the future of the economy is heading in. The only thing that people are somewhat sure of is what interest rate makes sense in terms of getting a loan. To help offer some semblance of stability, borrowers can look into mortgage backed security (MBS) in which investors know ahead of time the type of return that they are going to receive, just like a certificate of deposit. This requires that the investor makes sure that the borrower is capable(has a job), willing to repay the debt(credit report), has the cash to close (verification of deposit), and the value is in the property (appraisal), thereby helping to assure the buyer that the bond will perform as expected.

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Confidence among United States homebuilders is continuing to decline, according to recent articles posted in the Wall Street Journal and Bloomberg.com. Many potential home buyers are being scared away by more stringent lending rules as well as plummeting home values.

According to the Wall Street Journal, the National Association of Home Builders/Wells Fargo, the index of builder sentiment is still holding at 20; but that’s still better than 18, which is the all time low that they were at back in December of 2007. The Wells Fargo index is a chart that shows how respondents view the recent market conditions. If the levels fall under 50, then that means that the respondents view the conditions to be poor; and as many can see, we are well below the mark, hence the hesitation of potential home buyers.

Consequently, builders are reluctant to undertake new projects as the overall number of houses that have been sold has, once again, continued to decline for the third year in a row. Some areas, such as Raleigh, NC, have been lucky enough where the housing market crisis hasn’t hit quite as hard. However, this doesn’t mean that we haven’t been affected. Recent reports show that the Triangle area has also been on an overall decline.

Future Predictions

“We’ve got a long way to go before the market moves back into balance. We think building activity will remain restrained through the next four years.”

-Mark Vitner-

Senior Economist, Wachovia Corporation (borrowed from Bob Willis, Bloomberg.com)

Recent housing statistics from a Commerce Department report showed that housing in the United States declined 5.2 percent in March, according to the median estimate in a Bloomberg survey of economists. The declining home prices are leaving increasing numbers of homeowners feeling less inclined to spend their money on new houses, which might spell trouble for future home owners.

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Many people see the YMCA simply as a building where kids can get together after school and hang out.� However, the YMCA has grown to be and mean so much more.

A Brief History

The Young Men’s Christian Association (aka YMCA or “the Y”) was founded on June 6, 1844 in London, England by a young man named George Williams, who was dedicated to putting Christian principles into practice.� At that time, young men who came to London for work were often living in squalor, and the YMCA provided them a clean, safe place to go and study as well as meet other people.

The first YMCA in the United States was founded by Captain Thomas Valentine Sullivan, an American seaman and missionary, and was opened on December 29, 1851 in Boston, Massachusetts.� The facility provided a “home away from home” for young sailors who were on shore leave.� Over the years, the YMCA evolved from simply being a place of spiritual and mental study into establishing branched out divisions to satisfy the� needs of local neighborhoods.� It charged annual membership fees and began to offer day camps for boys and later girls which included activities (i.e. sports and fitness, arts and crafts, camping, hiking, etc.) that focused around building strong families.

The first YMCA in the Triangle area of North Carolina was founded in 1857 but disbanded before becoming a permanent part of Raleigh in 1911.� By the mid 1900s, major changes were taking place within the YMCA.� The organization acquired 300 acres of land in Pamlico County, NC for the site Camp Sea Gull, a new boys’ resident camp that opened up in 1948 and focused on seamanship. Later, in 1961, Camp Seafarer, a camp for girls, was founded.

Years later, in 2002, The Capital Area YMCA merged with the YMCA of Greater Durham to form the YMCA of the Triangle, which currently has 15 branches and wellness centers in Wake, Durham, Johnston, Lee and Pamlico counties.

YMCAs in the Triangle Today

YMCAs in the Triangle area of North Carolina have been providing facilities, programs and services for approximately 150 years that build healthy spirits, minds and bodies for people of all ages.� Contrary to popular belief, YMCA activities aren’t just confined to the building; but rather,� they extend outward to include schools, churches, community centers and parks (to name a few places).

The YMCAs of the Triangle serve thousands of men, women and children each day through various after school programs, adult and family fitness, teen programs and leadership, parent/child programs, youth service projects, swimming lessons, sports programs and senior adult programs. Given the past success of the YMCAs of the Triangle, there is no doubt that it will continue to see success in the future.

The Kraft Family YMCA Joins the Triangle Family

The Kraft Family YMCA was established in 2000 and is the latest addition to the YMCAs of the Triangle. It serves youth, adults and seniors in the southwest Wake County area, including the following towns of: Apex, Holly Springs and Fuquay Varina.� For fitness schedules, membership, outreach programs or other programs that this particular YMCA offers, feel free to visit their web site.

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With the value of the U.S. dollar falling to all-time lows, the housing market over here is looking mighty good to people from other countries who are thinking of purchasing a home. Realizing this, the National Association of Realtors (NAR) has joined hands with Europe’s largest home and resort exposition, Salon Inmobiliario de Madrid (SIMA), to educate potential International 2nd home buyers about real estate investment options in the United States. This only makes sense, since NAR represents 1.3 million members involved in all aspects of residential and commercial real estate within the United States.

A Different Type of Market

Every year, more than 100,000 U.S. homes are sold to people who are not from the United States. Of these international 2nd home buyers, most are from Europe, North and South America, Africa and the Middle East. Because of the threat of an impending recession as well as skyrocketing gas prices, the United States seems to be in the middle of an economic crisis, which translates to one of the world’s greatest bargains.

Instead of letting the economic crisis deter them, NAR is embracing their foreign friends. NAR’s vice president of international affairs, Miriam Lowe states:

This is our fifth year participating in the SIMA event, which draws investors from more than 50 countries. As the leading advocate for real estate in this country, NAR welcomes this opportunity to educate overseas buyers about the benefits of real estate investment in the United States.

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Lawmakers in Washington are debating a bill that would assist struggling homeowners who are facing foreclosure. In the meantime, people in the Raleigh, Durham, Chapel Hill areas of North Carolina as well as real estate brokers are paying close attention to a key component of the bill–a $7,000 tax credit for new home purchases–which could possibly boost home sales.

According to a recent article in the News and Observer, which is following this story, lawmakers in Congress are hoping to ease the amount of foreclosures on a national scale with a $15 billion proposal that will provide home buyers with the following:

• More than $1 billion to help states issue $10 billion in bonds to refinance sub prime loans
• $4 billion to help communities that are hit hardest by foreclosures
• $100 million for counselors to assist homeowners who are at risk of losing their homes

However, this proposal would allow builders as well as other industries affected by the mortgage crisis to use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year time frame. People in the Triangle area are having mixed feelings about the whole mortgage/foreclosure crisis. Dudley Price from the News and Observer interviewed Dave Servoss, chairman of Anderson Homes in Cary, NC who stated:

 A lot of this [national housing problem] was caused by overbuilding in mostly other places– California, D.C., Florida…This would have a negative impact on the builders that continued to make money and lets other builders not quite pay the penalty that is the price from overbuilding.

Among other proposals that are being considered, home buyers would be eligible for a $7,000 tax credit if they purchased a foreclosed home or a brand new home that’s just been sitting around. Also at issue is the fact that the Raleigh area has seen the influx of a ton of people who are relocating to the area. After all, Cary, NC is often referred to as the “Containment Area for the Relocation of Yankees,” and it’s true! However, many of these transplants are delaying buying a house because they’re still waiting for their other house to sell in the city that they moved from.

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Due to fiscally tighter economic conditions, many potential home buyers are taking a more pessimistic step back when it comes to purchasing a home. Reasons for this stem from the belief that banks won’t be willing to lend money to buyers whose credit isn’t as great as it could be. However, what many buyers do not realize is that they have a lot more financing options available than they think.

In a March 2008 newsletter from the National Association of Realtors (NAR), the NAR stated that federal housing administration (FHA) loans have come back. According to the NAR, FHA loan originations saw almost a 60% increase in 2007, and currently, the program’s loan limits have been increased to a maximum of $729,750.

Additionally, tax law changes have made private mortgage insurance (PMI) more attractive. Since 2006, PMI premiums have been a deductible on federal taxes, and last year, Congress enacted a 3-year extension on PMI deductibility. This helps buyers who would otherwise be financing with piggyback loans, which are harder to get in today’s market.

Home buyers also have the option of looking into the USDA Rural Development Loan Program. I spoke to Sabrina Schell, who is a loan officer at Southeastern Mortgage Corporation, and she explained the details of the USDA Rural Development Loan Program further stating:

Rural development is a fantastic 100% financing program in a time where most 100% financing has been eliminated. It is driven by population per capita and most of the surrounding counties of Wake are eligible (all of Johnston; all of Granville; all of Franklin, etc..). There are small portions of wake that are eligible too; and while it does have income limits, they are escalated for number of bodies in a household. This is an amazing fixed rate program at market interest rates with no mortgage insurance…

Buyers Advantage wants you to know that you don’t have to miss out on the buyers market simply because of misinformation about current lending practices; 100% financing is still available to those who are looking to purchase their dream home!

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 Timeshares have been around since the 1970s in the United States, but the idea for them originated from Europe in the 1960s. If you’ve ever dreamed of having a vacation home, but could never afford it, timeshares offer you that chance. The way they work is that several families will have access to a particular property throughout certain times of the year. What this does is it allows a family to, essentially, own a vacation home at a fraction of the cost.

If you think that you’d be interested in owning a timeshare, make sure that you first know the location you’d like the timeshare to be in. Once you’ve figured out a location, get in touch with a realtor. Sure, you can drive around the area yourself (especially if you vacation there a lot); however, when buying into a timeshare, it’s best to get a realtor or someone who is skilled in handling business as it relates to timeshares, this way you won’t get into trouble. In the past, home owners have lost money due to illegal activities having to do with the sale and re-sale of property.

If you are looking at buying a timeshare and you know of a couple of other people who are as well, feel free to talk with them about your upcoming ideas of purchasing a timeshare. Who knows, they might want to be a part of it! Some timeshares are purchased outright where you will actually receive a deed to the property, while others will be leased out. Just check with your realtor and the owner to see which one is the case and then enjoy it!

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In this day and age, increasing numbers of men and women are working full time jobs, which is leaving little time for family enjoyment. It’s no longer: daddy goes to work while mommy stays home. Instead it has evolved into Mommy and Daddy go to work while Susan gets dropped off at day care or with the baby sitter. Having fun as a family is important. It is a way for families to bond. And while it is important that both parents have the opportunity to further their careers, they also need to make sure that they are remembering to make time for their children.

Family Fun

There are a lot of family projects out there that get the entire family involved. Keeping the interest of children is sometimes a challenging job in itself, but there are a few fun projects which they are sure to love. One family fun idea is to build a fort. If you ask any kid, building a fort is one of the most fun things to do, and there are so many ways to do it!

Building A Fort

To build a fort outside, you can use anything you want. Allow your children the freedom and creativity to come up with ideas on their own, but also feel free to throw in little advice or tips here and there. For example, if they want to pull all of the cushions off of your couch to build an outside fort, you may want to politely interject here to suggest that they use something else that you don’t mind getting dirty (ex: cardboard boxes, etc.) Take them out to the garage and point out several things that they can use that you’d be ok with such as boxes, old blankets, string. Allow them the creativity to do what they want, but at the same time don’t be afraid to get involved. If you want, let them invite a few friends over and have their friends bring one or two items each to add to the whole “fort” experience.

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