How does the "meltdown" affect net branching?

Does the "meltdown" affect net branching?

As a nation and as an industry we are in uncharted waters. I doubt anyone can accurately predict the outcome. What we can do is make some estimates on how the mortgage meltdown will change our industry in the short term - The next 18 - 36 months. Purchase - Purchase - Purchase - FHA - FHA - FHA - Reverse - Reverse - Reverse.

You need to be aligned with a company that is is in a good position to originate FHA loans and Reverse mortgages in your market and you can for the most part eliminate refinance out of your business model.

Refinance will not disappear completely but I believe you will see the numbers continue to drop.

With home values dropping home equity is going with it. Even the best markets have lost 20% - 25% equity. This greatly reduces the refinance market. With the problems Fannie and Freddie are facing FHA is going to be the primary source of mortgage funds in the short term.

If you are not with a company that is in good standing with FHA you should consider making a move.

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.

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Mortgage net branch refinance opportunity

The LIBOR INDEX is rising... Refinance opportunity for net branch



the LIBOR rate has really spiked upward in recently.

What is the LIBOR and why is something your clients should be concerned about?



From a report on Bloomberg this week..
"The overnight Libor rate in U.S. dollars soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The one-week rate rose by more than a percentage point, to 3.88 percent from 2.49 percent on Monday, and the one-month rate increased to 2.75 percent from 2.5 percent."

LIBOR is short for London Bank Inter Offered Rate. It is a rate index that is set by the British Bankers' Association.

Created in the mid 80's the index became widely used in the mid to late 90's in the US mortgage markets as the preferred index for adjustable mortgages. Most subprime and about 40% of conforming adjustable rate loans are based on a LIBOR index.

The LIBOR is set by the British Bankers' Association so these loan rates cannot be controlled by the FED.

If the LIBOR's recent increases continue this means that the adjustable rate mortgage payments that are tied to the LIBOR could more than double.

In recent years the LIBOR rate has been a safe place for borrowers looking for the lowest payment.

Most LIBOR based loans are tied to the 6-month index. This means that the rate is a rolling 6 month average. So will a short term spike cause rates to jump? No. But an ongoing increase will.

If you have past clients in a LIBOR rate keep a very close watch on the monthly rate.

This would be a great opportunity to make contact with these clients and make them aware of the possibility and to alert them that they should not wait for the rate to spike before they have an exit strategy.
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Thanks,

Lee W.

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(image courtesy of Jane Cleary, www.digitalenvie.com)