With the constant change in our industry, economy, and culture I have to say I spend plenty of time on the web.  Pretty much every aspect of my job involves some need associated with the good ol’ WWW.  Much of my time is consumed by communicating via email, updating blogs (conradventi.com, blog.ventiscafe.com, and my family blog), and keeping up with friends, family, and business associates on social networks such as Facebook.  The new way of online communication, also known as Web 2.0, allows business or people like myself to communicate with clients in an interactive fashion.  Blogs are good examples of Web 2.0.

A good amount of my time is also consumed with research.  I spend time on lender and bank websites researching product guidelines as change is more prevalent than ever.  The constant flow of information on news websites also makes the WWW a primary resource for up to date stories.  Many recent headlines have been focused on the economy and Obama’s new administration.  After the approval of Obama’s new American Recovery and Reinvestment Act, I quickly turned to Google to help me find details of the new programs for home owners.

With the simple search of “American Recovery and Reinvestment Act” on Google I found several great resources.  A couple of the top links lead me to whitehouse.gov and recovery.gov.  I had stumbled upon whitehouse.gov in recent weeks and found it a fairly good resource for Obama’s new plans that I may have missed on the Nightly News on any given day.  As I spend a little more time reading about the new programs it didn’t take me long to thinking about the effectiveness of whitehouse.gov and some of the other new information websites for the recent programs.  I’m definitely not saying that I agree with everything that’s being pushed by Obama’s new administration, but I do think his web presence is absolutely amazing. 

I continued to think about Obama’s web presence when I was updating my blog with a new website makinghomeaffordable.gov.  As I thought about Obama’s new “social network”, if you will, Facebook came to my mind.  I remembered seeing plenty of advertisements on Facebook looking for support of his campaign for who knows how long.  So I quickly tabbed Firefox over to Facebook and searched for Barack Obama.  I was amazed to see that he has nearly 6 million supporters on Facebook.

Education is a primary goal of my business plan.  I love having the opportunity to provide my friends, family, and clients with information regarding home ownership and more.  As we continue to work through this economic downturn as a country I will do my best to provide helpful resources here at conradventi.com.  Although I don’t agree with all that’s being proposed by the new adminstration, I will continue to turn to whitehouse.gov for a reference for anything new coming in the works.

If you have a moment take a look at whitehouse.gov, you’re bound to have some questions about programs that have come up in recent weeks.

Today the US Senate advances the new Stimulus Bill which includes an increase in the current home buyer tax credit.  Currently a home buyer purchasing a home from April 2008 to July 2009 may be entitled to a tax credit up to $7,500.  Currently the credit is to be paid back in increments of $500 each year thereafter.  The new Stimulus Bill proposes an actual tax credit of 10% of the sales price with a maximum of $15,000.  This provision may rid of the requirement to repay the credit, making it a true benefit for the home buyer.

In the article Senate Advances Tax Breaks for Homebuyers, Senator Johnny Isakson said,

“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now”.

“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”

The Stimulus Bill that was passed by the house last week will be reconciled with the Bill passed today and may have a final approval as early as Thursday February 5th.

Stay tuned for more information regarding this tax break.  Rates are still great and inventory is beginning to move again!

Consumer spending dropped 0.3% in September, the largest decline in four years.  July and August showed no change in spending.  The standstill and slide in recent months represents the purchasing activity of US consumers.

In recent years, the growth and abuse of consumer credit has caused the US economy to be dependent on consumers borrowing to purchase goods.  According to the Federal Reserve Board, the average consumer debt (credit card debt) per household has reached $8,565, an increase of 15% since 2000. Disposable income required to be set aside to pay for household debt (credit cards, auto loans, etc.) stands at 14.5%, compared to 11% in 1993.

Not only has consumer spending correlated with taking on credit card debt, but the consumer savings rate has also significantly decreased.  The Bureau of Economy Analysis reports the nation’s savings rate, which exceeded 8% of disposable income in 1968, now stands at 0.4%.

The American mindset, “buy now, pay later” must end!  Many are finding that they simply cannot live this lifestyle any longer because it is becoming increasingly difficult to obtain more credit.   The high default rates have affected the credit markets in such a way that they have re-standardized credit requirements.

Now is a great time to analyze your personal finances.  Before the holiday season is in full swing sit down and look at your budget.  If you don’t have a budget now would be a great time to start one.  Please email conrad@landmarkmortgage.com or call if you need help setting starting a budget or just want a few helpful tools.

I had an interesting conversation with one of my family members today regarding current state of available mortgages.  Dino Venti owner of Venti’s Cafe in downtown Salem has been building his loyal clientel for nearly 13 years.  When you step into Venti’s you feel a sense of community among the regulars – it definitely has that “Cheers” type of atmosphere.  Having the face to face contact with customers nearly every day for the past 13 years, Dino has established many friends and acquaintances in the Willamette Valley.

He mentioned to me this evening as I was picking up my Boulder Bowl and Teriyaki Chicken for dinner, that he had a client tell him today that there are no mortgages available for people who have a credit score less than 750.

We’ve all heard, seen, or read about the housing industry and the changes in lending from banks.  As I mentioned in my post titled “Yes, You Can Still Get A Loan!” there are plenty of loans originating in these harsh economic times.

Communication is a key element in every aspect of our lives.  The media’s job is to communicate the message to the people.  How that message is interpreted by the people can vary on many levels.  In times when there is a massive amount of information flowing from every source of media imaginable, it is vital to understand where you stand in the midst of the changes.  The lack of financial education in our country has been prevalent for so long that we’re now dealing with the consequences.   Education is the tool that must be utilized to understand the meaning of what we hear, see, and read.

If you have questions about how the changes in our banking, mortgage, and real estate industries affect you, please don’t hesitate to ask!

Today the Federal Reserve, the European Central Bank, the Bank of England, and the Swiss national bank announced they will lend an unlimited amount of funds to commercial banks in an effort to revive the financial markets worldwide.  The Feds lead the way in the unprecedented event that backs the governments recent intervention.

In response to the central banking announcement the Dow rebounded with an advance of 936 points, the largest gain in 70 years.  The gain marked a sign of confidence in our financial system.  A single positive day does not prove a total revival coming in our market by any means, but investors have some hope in sight after an advance of this margin.

The week ahead will prove to make history yet again.

A couple of weeks ago I mentioned the FHA minimum down payment would be changed to 3.5% effective October 1, 2008.  The Department of Housing and Urban Development (HUD) has postponed the change to FHA minimum down payment until January 1, 2009.  So for now, the down payment remains at 3%.

As the banking system has undergone some obvious changes in 2008, FHA has become one of the most chosen products for clients looking for a low down payment.  The VA home loan and USDA rural housing are the two programs still offering 100% financing.

Today the Federal Open Market Committee unexpectedly lowered the federal funds rate by 50 basis points (.5%) to 1.5%.  Several central banks from around the globe also reduced funds rates by 50 basis points in an effort to restore some confidence in the markets.  The prime interest rate will be reduced to 4.5%.

The FOMC acted fiercely with this cut due to evidence pointing to weakening economic activity and a reduction in inflationary pressures.  The financial turmoil and perceived unavailability of credit has caused spending to decrease significantly.  The FOMC hopes the reduction will encourage spending and expects the decline in energy and other commodity costs will reduce the upside risks to inflation.

The daily media focus on the economy has brought the “banking crisis” to the forefront of everybody’s mind.  The failure of several large players in the banking system including 158 year old Lehman Brothers and the largest savings and loan bank Washington Mutual, has undoubtedly proven struggles in our banking system.  The congressional decision to pass the bailout plan will provide the much needed relief to the banks with a manageable recovery in sight.

Being in the midst of the daily information overload as a mortgage professional, I enjoy coming home with the family and turning on the evening news to see how the media will portray the day’s events.  Lately, I have been more than disappointed with the news of the banking system.  As banks fail or are aided by the government, the media provides the message that credit has completely “dried up” for American consumers.  The reality in the lending system now is that there are still loans available.

What we fail to hear is that Americans became used to a banking/lending system that was unconventional and much too lenient.  The performance of these banks was more important than education for those who lend and those who borrow.  This lending system has lead to an unusual amount of defaults in nearly all areas of banking.  The result has been a shift in lending practices.  There are still loans available for any need American consumers may have, but we have reverted to normal qualification standards.

We hear that bank loans have “dried up” or that there is no longer any loans available for consumers.  These claims are extremely vague and rarely come with any facts.  Please know that we are in a transition period to return to normal lending standards and there is still money available to borrow.  Below are some numbers from the Federal Reserve Board’s weekly report.  Note that consumer loans were up 9.5% from August 2007 to August 2008.

The need for education about credit, lending, and overall financial planning should accompany every credit decision.

If you have questions about how the transition period will affect you please comment or email to Conrad Venti.

U.S. Bank Loans (Billions of Dollars)

Federal Reserve Board, “Asset and Liabilities of Commercial Banks in the United States” (H.8)

Today the Federal government announced a rescue plan after a historic week in our financial markets.  Earlier in the week Lehman Brothers declared bankruptcy, Merrill Lynch was sold, and AIG was bailed out by the government.  Central banks from around the world poured hundreds of billions of dollars into the banking system in hopes to calm the storm.  Despite the surge of news and volatility in the financial markets this week, mortgage rates had little change.

The rescue plan announced today by the Treasury spoke of a broad plan.  A legislative proposal for lawmakers will be drafted by the Treasury this weekend.  The plan will likely include help from the Treasury to banks who have illiquid mortgage assets.  Buying the mortgage assets at a discount provides relief for the banks and will allow the government to provide help while forecasting a positive return.

Treasury Secretary Henry Paulson said, “I am convinced that this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.”

For more information about the Treasury’s announcement visit www.bloomberg.com.

Tuesday the Federal Reserve Board met and left the federal funds rate unchanged despite the news of Lehman Brothers’ bankruptcy and the buy-out of Merrill Lynch.  The federal funds rate, which banks charge each other for over-night deposits, will remain at 2%.  The prime interest rate will follow suit, remaining at 5%.  Consumers are more familiar with the prime interest rate because the rates for home equity loans/lines of credit and credit cards are tied to the prime rate.

Although there has been several significant downturns with Wall Street and banks in our country this week the Federal Reserve felt that inflation is high and lowering the rate could cause an increase in inflation.  The Feds expect inflation to moderate through the next quarter.  Tuesday’s meeting laid the groundwork for a rate reduction before the end of the year.

As always, if you have questions about how this affects you, please don’t hesitate to ask.