This week, several scheduled items could cause some more manic movements in the markets...and the biggest of all could be the Fed Policy Statement and Rate Decision that will come on Wednesday, following the wrap of the Fed's regularly scheduled Federal Open Market Committee meetings. Remember: The Fed joined with other central banks from around the world and cut their benchmark Fed Funds Rate earlier this month to help restore confidence to the financial markets. The Fed is widely expected to cut its benchmark rate again this week, and some people are wondering if the Fed could go where it has never gone before and bring the rate below 1%.
Other important reports to note this week include Wednesday's Durable Goods Orders, which is a measure of how many "durable" or non-disposable goods have been purchased during the previous month, and Thursday's Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. Also, on Friday we will get the details on the Fed's favorite gauge of inflation, the Core PCE (Personal Consumption Expenditure) data, from the Personal Income report. Each of these reports will be telling, given the growing talk of recession.
Before all of this, there will also be housing news in store with Monday' New Home Sales Report. Last week, we learned that Existing Home Sales jumped to a thirteen-month high as foreclosures continue to drive down home prices, and it will be important to see if a similar trend is occurring with New Home Sales.
If the economic news this week is dismal, Bonds and home loan rates may be the beneficiary and find some improvement...but the words and actions of the Fed are likely to be the primary driver for interest rate action this week. As always, I will be watching closely and would welcome your calls with any questions you may have on your own situation, and how the changes of the week may impact you.
Ernest Tepman
President
The OCD Group Inc.
Los Angeles: 800-963-4623
San Diego: 877-863-4623
E-Mail: marketupdate@theocdgroup.com
Best Real Estate News
Sunday, October 26, 2008
Daylight Saving Time
Turning Back the Hands of Time
The sun is about to set on another season of Daylight Saving Time. In case you hadn't noticed, Daylight Saving Time (DST) began earlier last spring and ran longer into this fall. But, alas, all good things must come to an end...and this year Daylight Saving Time ends Sunday, November 2nd.
The extra month that we enjoyed was actually the result of the Energy Policy Act, which was enacted by Congress back in 2005 and first went into effect last year. Originally, the bill was written to extend Daylight Saving by two months, but some very verbal opponents fought the change. Farmers say that DST has a negative impact on their livestock in general--as it is tough for them to adapt to the time change, and they consequently produce less milk, eggs, etc. Because DST is not followed uniformly around the world, airlines claim that it might mean many missed international flight connections. Additionally, TV and Cable stations argued that they would lose viewers and advertising revenue, simply due to less time spent in front of the television because of more time spent outdoors in daylight.
So a compromise of one additional month of DST was reached. However, Congress did retain the right to revert back to the old dates if the change proves to be widely unpopular, or if the energy savings aren't significant.
Why is Daylight Saving Time Longer?
Despite the concerns listed above, Americans overwhelmingly like Daylight Saving Time. There is simply more sunlight in the evenings to enjoy the outdoors and get things done. Additionally, there may be emotional benefits, as we typically feel better with more daylight.
Plus, additional hours of daylight can help save energy on a national scale. Less electricity is needed, as fewer lights are turned on as early in the evening...and with energy costs so high, even a small amount of savings is very welcome.
And brighter is safer - studies have shown that the DST shift reduces traffic accidents. An increase in accidents in the dark mornings is more than offset by the evening decrease in accidents, due to the increased visibility gained with more sunlight. Halloween is also arguably safer. Child pedestrian deaths are four times higher on Halloween than any other night of the year. By extending Daylight Saving Time, however, trick-or-treaters are able to spend an extra hour gathering treats while it's still light out. Candy manufacturers are happy too, as they've lobbied for years to have DST extended through Halloween.
A study by the US Law Enforcement Admin also determined that crime is consistently lower during DST, with violent crimes down as much as 10% to 13%. For many crimes, like mugging, darkness is a factor--so more light in the evening hours reduces these types of crimes.
Falling Back... Manually
Since DST has been extended, you'll want to double-check all of your electronic devices and confirm that the time is correct. Although you may be accustomed to your computer and maybe even your digital clock in your car automatically updating, the recent change of dates for Daylight Saving Time may require that these devices be manually changed, as they now may NOT be ready to update to the correct time on the correct date!
So keep an eye on your electronic devices and remember to change your clocks on Sunday, November 2nd as we turn back the hands of time once again!
Ernest Tepman
President
The OCD Group Inc.
Los Angeles: 800-963-4623
San Diego: 877-863-4623
E-Mail: marketupdate@theocdgroup.com
The sun is about to set on another season of Daylight Saving Time. In case you hadn't noticed, Daylight Saving Time (DST) began earlier last spring and ran longer into this fall. But, alas, all good things must come to an end...and this year Daylight Saving Time ends Sunday, November 2nd.
The extra month that we enjoyed was actually the result of the Energy Policy Act, which was enacted by Congress back in 2005 and first went into effect last year. Originally, the bill was written to extend Daylight Saving by two months, but some very verbal opponents fought the change. Farmers say that DST has a negative impact on their livestock in general--as it is tough for them to adapt to the time change, and they consequently produce less milk, eggs, etc. Because DST is not followed uniformly around the world, airlines claim that it might mean many missed international flight connections. Additionally, TV and Cable stations argued that they would lose viewers and advertising revenue, simply due to less time spent in front of the television because of more time spent outdoors in daylight.
So a compromise of one additional month of DST was reached. However, Congress did retain the right to revert back to the old dates if the change proves to be widely unpopular, or if the energy savings aren't significant.
Why is Daylight Saving Time Longer?
Despite the concerns listed above, Americans overwhelmingly like Daylight Saving Time. There is simply more sunlight in the evenings to enjoy the outdoors and get things done. Additionally, there may be emotional benefits, as we typically feel better with more daylight.
Plus, additional hours of daylight can help save energy on a national scale. Less electricity is needed, as fewer lights are turned on as early in the evening...and with energy costs so high, even a small amount of savings is very welcome.
And brighter is safer - studies have shown that the DST shift reduces traffic accidents. An increase in accidents in the dark mornings is more than offset by the evening decrease in accidents, due to the increased visibility gained with more sunlight. Halloween is also arguably safer. Child pedestrian deaths are four times higher on Halloween than any other night of the year. By extending Daylight Saving Time, however, trick-or-treaters are able to spend an extra hour gathering treats while it's still light out. Candy manufacturers are happy too, as they've lobbied for years to have DST extended through Halloween.
A study by the US Law Enforcement Admin also determined that crime is consistently lower during DST, with violent crimes down as much as 10% to 13%. For many crimes, like mugging, darkness is a factor--so more light in the evening hours reduces these types of crimes.
Falling Back... Manually
Since DST has been extended, you'll want to double-check all of your electronic devices and confirm that the time is correct. Although you may be accustomed to your computer and maybe even your digital clock in your car automatically updating, the recent change of dates for Daylight Saving Time may require that these devices be manually changed, as they now may NOT be ready to update to the correct time on the correct date!
So keep an eye on your electronic devices and remember to change your clocks on Sunday, November 2nd as we turn back the hands of time once again!
Ernest Tepman
President
The OCD Group Inc.
Los Angeles: 800-963-4623
San Diego: 877-863-4623
E-Mail: marketupdate@theocdgroup.com
Housing Prices INCREASING despite reduced demand
By Tim & Julie Harris - REO Specialists and owners of www.agentreosecrets.com
Interest rates are INCREASING for the best borrowers….
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
Interest rates are INCREASING for the best borrowers….
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
Saturday, October 4, 2008
What the heck is going on?
My clients, co-workers, referral partners, family and friends are all asking "what the heck is going on?" And it's truly a question I am getting hourly. Here's an in-depth look at some of the cause of the current situation we are in so you have an overview understanding. We ALL are learning more and more about our economy and how it "really works" daily.
Whatever the political posturing, a plan needs to be passed - and passed soon. Credit markets are frozen and banks are going bust every day. This is not totally because of so-called "toxic" mortgages as the media has portrayed. This has a lot to do with new legislation and rules passed last year by the SEC (Securities and Exchange Commission) and the FASB (Financial Accounting Standards Board) with the SEC's elimination of the uptick rule for Wall Street and the FASB's 157 ruling, also known as "mark to market".
Uptick rule: The uptick rule was a securities trading rule used to regulate short selling in financial markets. The SEC eliminated the uptick on July 6, 2007 causing short-selling to be at record levels by early 2008 and wild swings of the markets. The problem with the elimination of the uptick rule is that without it, short sellers were devaluing perfectly solid stocks. On September 19, 2008 the SCE halted short-sales temporarily of 799 financial stocks.
FASB 157: http://www.fasb.org/st/summary/stsum157.shtml Each day lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.
Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this the opportunistic shorting that was done, while the uptick rule was eliminated, on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector mentioned able.
As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process - and it is never, ever pretty.
This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on.
Once this bill is done it will take some time but the markets will stabilize. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to fix our industry. We just need to be patient.
I hope that you found this ecomonic information helpful and informative - as it's important to me that my clients, referral partners, family and friends are kept up-to-date and in-the-know! If you have any questions whatsoever, let me know.
Make it a great day!
Jeff Cook
Senior Loan Officer
Metro Sunset Mortgage
Phone: 310.623.1307
Fax: 866.445.7068
jwcook@metrocitiesmtg.com
www.MetroSunset.com
Whatever the political posturing, a plan needs to be passed - and passed soon. Credit markets are frozen and banks are going bust every day. This is not totally because of so-called "toxic" mortgages as the media has portrayed. This has a lot to do with new legislation and rules passed last year by the SEC (Securities and Exchange Commission) and the FASB (Financial Accounting Standards Board) with the SEC's elimination of the uptick rule for Wall Street and the FASB's 157 ruling, also known as "mark to market".
Uptick rule: The uptick rule was a securities trading rule used to regulate short selling in financial markets. The SEC eliminated the uptick on July 6, 2007 causing short-selling to be at record levels by early 2008 and wild swings of the markets. The problem with the elimination of the uptick rule is that without it, short sellers were devaluing perfectly solid stocks. On September 19, 2008 the SCE halted short-sales temporarily of 799 financial stocks.
FASB 157: http://www.fasb.org/st/summary/stsum157.shtml Each day lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.
Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this the opportunistic shorting that was done, while the uptick rule was eliminated, on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector mentioned able.
As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process - and it is never, ever pretty.
This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on.
Once this bill is done it will take some time but the markets will stabilize. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to fix our industry. We just need to be patient.
I hope that you found this ecomonic information helpful and informative - as it's important to me that my clients, referral partners, family and friends are kept up-to-date and in-the-know! If you have any questions whatsoever, let me know.
Make it a great day!
Jeff Cook
Senior Loan Officer
Metro Sunset Mortgage
Phone: 310.623.1307
Fax: 866.445.7068
jwcook@metrocitiesmtg.com
www.MetroSunset.com
New Credit Card Scam
This one is pretty slick since they provide YOU with all the information, except the one piece they want.
Note, the callers do not ask for your card number; they already have it. This information is worth reading. By understanding how the VISA & MasterCard Telephone Credit Card Scam works, you'll be better prepared to protect yourself.
One of our employees was called on Wednesday from 'VISA', and I was called on Thursday from 'Master Card'. The scam works like this: Caller: 'This is (name), and I'm calling from the Security and Fraud Department at VISA. My Badge number is 1246. Your card has been flagged for an unusual purchase pattern, and I'm calling to verify. This would be on your VISA card which was issued by (name of bank). Did you purchase an Anti-Telemarketing Device for $497.99 from a Marketing company based in Arizona ?'
When you say 'No', the caller continues with, 'Then we will be issuing a credit to your account. This is a company we have been watching and the charges range from $297to $497, just under the $500 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address), is that correct?'
You say 'yes'. The caller continues - 'I will be starting a Fraud investigation. If you have any questions, you should call the 1- 800 number listed on the back of your card (1-800-VISA) and ask for Security.'
You will need to refer to this Control Number. The caller then gives you a 6 digit number. 'Do you need me to read it again?'
Here's the IMPORTANT part on how the scam works. The caller then says, 'I need to verify you are in possession of your card'. He'll ask you to 'turn your card over and look for some numbers'. There are 7 numbers; the first 4 are part of your card number, the next 3 are the security Numbers that verify you are the possessor of the card. These are the numbers you sometimes use to make Internet purchases to prove you have the card. The caller will ask you to read the 3 numbers to him. After you tell the caller the 3 numbers, he'll say, 'That is correct, I just needed to verify that the card has not been lost or stolen, and that you still have your card. Do you have any other questions?' After you say No, the caller then thanks you and states, 'Don't hesitate to call back if you do, and hangs up.
You actually say very little, and they never ask for or tell you the Card number. But after we were called on Wednesday, we called back within 20 minutes to ask a question. Are we glad we did! The REAL VISA Security Department told us it was a scam and in the last 15 minutes a new purchase of $497.99 was charged to our card.
Long story - short - we made a real fraud report and closed the VISA account. VISA is reissuing us a new number. What the scammers want is the 3-digit PIN number on the back of the card Don't give it to them. Instead, tell them you'll call VISA or Master card directly for verification of their conversation. The real VISA told us that they will never ask for anything on the card as they already know the information since they issued the card! If you give the scammers your 3 Digit PIN Number, you think you're receiving a credit. However, by the time you get your statement you'll see charges for purchases you didn't make, and by then it's almost too late and/or more difficult to actually file a fraud report.
What makes this more remarkable is that on Thursday, I got a call from a 'Jason Richardson of Master Card' with a word-for-word repeat of the VISA scam. This time I didn't let him finish. I hung up! We filed a police report, as instructed by VISA. The police said they are taking several of these reports daily! They also urged us to tell everybody we know that this scam is happening.
Please pass this on to all your family and friends. By informing each other, we protect each other.
Note, the callers do not ask for your card number; they already have it. This information is worth reading. By understanding how the VISA & MasterCard Telephone Credit Card Scam works, you'll be better prepared to protect yourself.
One of our employees was called on Wednesday from 'VISA', and I was called on Thursday from 'Master Card'. The scam works like this: Caller: 'This is (name), and I'm calling from the Security and Fraud Department at VISA. My Badge number is 1246. Your card has been flagged for an unusual purchase pattern, and I'm calling to verify. This would be on your VISA card which was issued by (name of bank). Did you purchase an Anti-Telemarketing Device for $497.99 from a Marketing company based in Arizona ?'
When you say 'No', the caller continues with, 'Then we will be issuing a credit to your account. This is a company we have been watching and the charges range from $297to $497, just under the $500 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address), is that correct?'
You say 'yes'. The caller continues - 'I will be starting a Fraud investigation. If you have any questions, you should call the 1- 800 number listed on the back of your card (1-800-VISA) and ask for Security.'
You will need to refer to this Control Number. The caller then gives you a 6 digit number. 'Do you need me to read it again?'
Here's the IMPORTANT part on how the scam works. The caller then says, 'I need to verify you are in possession of your card'. He'll ask you to 'turn your card over and look for some numbers'. There are 7 numbers; the first 4 are part of your card number, the next 3 are the security Numbers that verify you are the possessor of the card. These are the numbers you sometimes use to make Internet purchases to prove you have the card. The caller will ask you to read the 3 numbers to him. After you tell the caller the 3 numbers, he'll say, 'That is correct, I just needed to verify that the card has not been lost or stolen, and that you still have your card. Do you have any other questions?' After you say No, the caller then thanks you and states, 'Don't hesitate to call back if you do, and hangs up.
You actually say very little, and they never ask for or tell you the Card number. But after we were called on Wednesday, we called back within 20 minutes to ask a question. Are we glad we did! The REAL VISA Security Department told us it was a scam and in the last 15 minutes a new purchase of $497.99 was charged to our card.
Long story - short - we made a real fraud report and closed the VISA account. VISA is reissuing us a new number. What the scammers want is the 3-digit PIN number on the back of the card Don't give it to them. Instead, tell them you'll call VISA or Master card directly for verification of their conversation. The real VISA told us that they will never ask for anything on the card as they already know the information since they issued the card! If you give the scammers your 3 Digit PIN Number, you think you're receiving a credit. However, by the time you get your statement you'll see charges for purchases you didn't make, and by then it's almost too late and/or more difficult to actually file a fraud report.
What makes this more remarkable is that on Thursday, I got a call from a 'Jason Richardson of Master Card' with a word-for-word repeat of the VISA scam. This time I didn't let him finish. I hung up! We filed a police report, as instructed by VISA. The police said they are taking several of these reports daily! They also urged us to tell everybody we know that this scam is happening.
Please pass this on to all your family and friends. By informing each other, we protect each other.
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