We all get caught up with our day to day life’s and for the younger generations do not take for granted what it took to get the freedoms that we all enjoy today.  We all need to take a few minutes and remember these people.  Never forget these people below and the price that they paid for our freedom.  Our Freedom is a serious issue that needs to be protected at all times and at whatever cost! 

  I have received several responses asking why I am making the connection between the mortgage industry and politics.  Well the answer is this.  Currently the Obama administration has appointed several Czar’s to watch over many industries / companies.  The whole Czar thing is unbelievable to me as it is a communist approach.  Currently the Banking Czar / Fed’s are telling the bank CEO’s that they will reduce their bonuses regardless of their financial standing.  It is huge and people are missing the message. 

  Yes the banks received bailout funds, raised our interest rates, lowered our credit limits and are making it hard to get a loan and this all sucks!  The problem here is that the average person does not realize how the banking business works.  So I will break it down in simple form.  Banks receive deposits and pay simple interest on these deposits.  The deposits are used to make loans to people and this is where the banks make their money.  Monthly account charges, overdraft fees, bounced check fees, ect are all fees charged in order to process paperwork.  People seem to forget that there has to be a person processing this paperwork that receives a paycheck with all of the required insurances and taxes.  Not to mention an office, phone, fax, computer, copy machine, office supplies, postage and all other required supporting systems.  This all cost real money and it adds up.

  Banks make money from lending money.  Yes I said it from making loans.  Here is the problem, banks also lose money from making loans that go bad.  To date, I have not seen, read or even heard a single Media outlet report this correctly.  Not CNN, FOX, MSNBC or a local TV or Newspaper.  They all report pieces but never enough to connect the dots.  So are the backs stock piling money?  Absolutely!  They have been put into a position to do so because the FDIC can do an audit at anytime and deem them underfunded and take them over just as they have done to over 100 banks since this meltdown began. 

  So what does that mean?  Just as many people have suddenly lost their value in their homes the banks have lost too.  The banks make loans based upon a percentage of deposits.  A loan is then made to a borrower on a property and the borrower repays the bank or lender with interest.  This is how the system works.  It a borrower defaults on a property then the bank has to foreclose on the property and then the property is then sold and the bank collects the proceeds to cover their lost revenue and fees.  Believe it or not the bank is to return any additional moneys collected from the sale to the borrower if there is any. 

  The problem here is that with the sudden real estate collapse that has hurt so many people has also hurt the banks balance sheets.  The FDIC requires the banks to hold in cash reserves enough money to cover a foreclosed properties note value.  Not current value but the notes value.  That means the value of the property plus in cash reserves the difference need to note.  This is important so here is an example, if the bank is holding a note with a balance due of $300,000 and the property’s value is now only $200,000 the bank has to hold in cash reserves $100,000 to cover the full value to the note.  Now times this but all properties foreclosed or not and then you will get an idea of what I am talking about. 

  Foreclosures are what makes it into the media but the FDIC will use foreclosed and current notes when they do their audits so it is simple to see that most banks are borderline as best with their balance sheets.  So where does this leave the banks?  Every bank is doing everything that it can to raise funds to pay back TARP funds that they may have received.  So they can get back to doing business their way and not the way the Fed’s want them to do so.  This is why we have outrages credit card interest and new found check account fees.  Until the banks get out from under the Fed’s thumb we are going to have to live with a horrible economy. 

  So what is the answer to fix the current economy?  This is so simple that I do not understand why our elected lenders can not see the answer for the lobbyist.  There are three major things that need to be addressed in order to get us on track. 

Healthcare – This is a serious issue as everyone should have health coverage.  Health cost can be cut 50% is we simple limited the malpractice suits.  If there was limits on the lawsuits then insurance cost would be less and heath cost would be less.  The current Healthcare from does not address malpractice and why not?  Lawyers wrote the bill and they will not cut themselves out. 

Economy  -   I know there has been a ton of money spent and I have not seen a dollar in my pocket, has any average person?  All of this money spent has done little for the average man.  We just had the largest collapse in real estate values in history.  The money would have been better used as insurance if a bank actually imploded.  The FDIC rules need to be relaxed here for a limited time in order for the banks to work their way out of this mess.  Giving the banks money does little to make them work their way out.  If you put the banks in a position to work their way out then more loans will get done as this is the primary source of income for the banks.  Needless to say there would be more people working to process these loans and more people workings because the loans were done.  This is not rocket science.

Environment – The environment is important to everyone.  Global warming needs to be studied for a while longer before we enter into any treaty that requires us to pay money to lesser countries.  Al Gore speaks about a science group that pointed out Global warming.  These same scientist have now said that Global warming may have been caused due to sun flares.  If the sun was to hiccup we would feel it in Global temp.  We need to think about this issue a bit more.

Right & Wrong – Just a few days ago there was a horrible incident at Fort Hood.  This is a clear situation of how gun control dose not work.  No one on base other than the MP’s are suppose to have guns yet this guy had a gun has affected hundreds of lives.  The gun was not the problem the person was and if you think bad people will not have guns then think again.  Aside from the guns the Media is focused on the gunman and why he did it.  Why is the countless family members and victims that have had their lives impacted by one gunman’s selfish and cowardly act.  The Media covered the countless people who had their homes foreclosed and taken from them.  Why are they not covering the people who lost their lives or the families that are now forever changed.  Why and why the double standard. 

Unemployment – Obama told us that if he did not get his stimulus package put through that unemployment would go to 8%.  We are now over 10% unemployment.  The America’s infrastructure of bridges, utilities and pipelines are failing and yet no real money is being spent here?  With Obama, the green president, why isn’t any of the stimulus funds being spent on improved sewer systems if nothing else?  Every year countless tons of raw sewage goes into our waterways and no one says a thing?  Why?  And why the double standard?  Think about all of the jobs rebuilding the countries infrastructure would create and the tax dollars would follow.  Again not rocket science here.  And yet our elected leaders, people we voted to put in office, can not see this.  Why? And why the double standard?

The employment picture in the U.S. continues to be a drag on the economy as evidenced by the 10.2% Unemployment Rate in October.

There were also 190,000 jobs lost last month, more than the -175,000 that was expected. The weaker than expected data lifted the Bond markets today.

The benchmark 4.5% coupon closed at $101.28 up 22bp.

The $8,000 tax credit for first time home buyers was extended through April 30, 2010 with an additional two months available to close the deal.

Existing home owners will also benefit with a $6,500 tax credit for the same time period.  There are strings so speak with your tax professional for details. 

Stocks didn’t have much movement today – the Dow gained 17 points to 10,023.42, the S&P 500 Index 2 points to 1,069.30, while the Nasdaq rose 7 points to 2,112.44.

Crude oil fell $2.19 to $77.42/barrel as investors feel that the high unemployment could lower demand – Gold hit a record high of $1,100/oz in today’s trading.

Next week on the economic calendar is light but the Treasury will auction yet another $81B in notes and bonds.   

Have a great weekend.

  The Mortgage Melt Down, other than a catchy phrase what do it really mean.  We have to go back to the Bill Clinton Administration days.  Clinton wanted to make it possible for almost anyone to become a home owner.  This is great in theory but it is not realistic.  Fannie Mae and Freddie Mac soon began purchasing mortgages with no money down, 100% financing.  If you have no down payment then you had nothing invested so who or whom is carrying all of the risk?  That is correct, Fannie Mae & Freddie Mac are and by direction of the Clinton Administration. 

  Let’s move forward, I am sure remember all of the radio ads claiming 100% financing, 520 credit score and no income documentation.  I could not believe my ears when I used to hear these ads day after day.  So Fannie & Freddie made the loans possible the Lenders offered the loans to Brokers and brokers found people who wanted the loans.  And we all remember how the Media turned on the Brokers when the wheels came off.  It’s the Broker’s fault that we are in this mess.  The Media clearly was told what to say and not I reporter ever interview me or anyone in my office even after countless request from us. 

  With the HVCC now proofing to be more corrupt that the old appraisal processes anyone that can read can now see that the problem was never the Brokers.  Getting the Brokers out-of-the-way would create a monopoly for the banks.  We will talk more about this later.

  Countrywide, New Century, Wamu, and countless other banks made billions while the real estate run up was on.  There was free money flowing everywhere.  So how did this happen?

What made it possible?

• Fannie & Freddie offering 100% financing with reduce qualifications
• Investment funds, 401Ks, Equity Funds, Portfolio Managers, Ect, Ect bought up all of the mortgage bonds that they could find because real estate values where sky rocketing. 
• Everyone wanted a home of their own and the bidding war was on.
• Investor wanted properties and often had up to 10 properties financed.

What caused it to stop?

• The cost of the war in Iraq was big as human emotion began to swing. 
• Families of service men began to tighten their belts as the unknown is a reality.
• The Media begins to cover the cost of the war and people begin to focus of the money that the Fed’s are spending. 
• Servicemen are now staying longer on the front lines and their wife and kids are moving in with other family to cut cost.
• Rental properties begin to take longer to rent. 
• Layoffs begin in the service business as these businesses slow down.
• New Century recognizes the trend reversal and closes down.  The first big subprime lender to close.
•  Small time Investors without reserves begin to lose their properties because they have no renters and not enough money to cover everything without the rental income.
• Home values begin to fall. 
• The Mortgage Melt Down begins.
• The Presidential Election is nearing
• The Media begins its coverage of the meltdown, blames Brokers for it and continues to this day to talk about real estate values falling.
• People listening to the Media begin to hold money even tighter and stop buying houses.
• Banks begin to fail because their reserves drop below minimum FDIC levels.
• Senator Schumer makes his cowardly remarks about IndyMac Bank and then hides behind his Senator position to escape legal responsibility.
• The Bank Meltdown begins and over 100 banks have failed to date.

So where are we now?

• Bush request and receives 700 billion in TARP fund to help the banks and gives out 350 billion to many banks. 
• Obama wins the Presidential Election and immediately changes the rules on the TARP funds; he wants to control any entity that received the TARP funds by why of a “Czar.”
• The Banks suddenly start charging more on the credit cards, service fees, mortgage rates, loan cost and I am sure most people have experienced the banks are cutting your credit limits. 
• The Fed’s put pressure on the Banks to reduce their credit card fees but allow the Banks until February of 2010 to make it so.  Just enough time for Christmas spending.  Imagine that!
• It is now harder to get a home mortgage than ever.  Over 60% of current home owners can not refinance under the current guidelines.
• The Feds roll out the HARP loan program to help existing home owners take advantage of the current lower rates.  Then than 2% of current home owners will benefit from this program. 
• The Fed’s had a closed-door meeting with banking Executive Officers and directs them to reduce their Executive Compensation.  If they do not they threaten a FDIC audit.
• Banks continue to raise their fess in order to raise enough capital to pay back the received TARP funds.  This way they can run their banks the way they want to.
• The Fed’s continue their assault tax all business and they act surprised as they close down one by one.  
• The Fed’s continue to tell us that “thousands of jobs have been saved or create.”  That sounds nice but without money in my pocket it is difficult to believe.   
• The White House begins to pick and choose which media outlet they will allow to cover them.  Are you kidding me?  This is censorship!

  The TARP funds were intended to offer the Banks some additional Capital to ride out the down turn in Real Estate values.  Every Bank under the FDIC guidelines experienced reserve issues and if you think different then stop, you are just kidding yourself if you think any different.  

  Did the Banks take chances, yes they did.  They took a chance on us the people.  Every business takes a calculated risk on every deal it does.  This is just simple business 099.  Banks calculate their lending limits based upon their reserves and real estate values are part of those reserves.  Just as home values fell so did Bank reserves. 

  The Media reporting on the so-called bad loans that were done are seriously misinformed.  At the time the loans were done the values were what they were.  Did the Media have a crystal ball and knew the values where going to fall?  What about the other sides of the story, if the Banks thought the values were too high and they did not want to do the loan then the Media would have been reporting that a Lender is refusing to offer mortgages to people who live in whatever city. 

  The truth is this, there was tons of easy money flying around and as long as everyone was making money then we looked the other way.  The FCC, FDIC, The Banking Committee, Federal Reserve and countless others did not do their jobs.  They is already laws in place to address all of this just no one enforced them as we were all making money.  The sad reality it that this real estate run up was much like a pyramid scheme.  Those left holding the hot potato are paying the ultimate price.

FYI - Definition of czar on the Web:

• a male monarch or emperor (especially of Russia prior to 1917)
• a person having great power
• Usage Note: The word czar can also be spelled tsar. Czar is the most common form in American usage and the one nearly always employed in the extended senses “any tyrant” or informally, “one in authority.” But tsar is preferred by most scholars of Slavic studies as a more accurate transliteration of the Russian and is often found in scholarly writing with reference to one of the Russian emperors.

A little off topic here but not really

   Last night was a strong message to all incumbent politicians.  This is not a Republican or Democrat issue but rather a clear message that we the people are tired of the same old song and dance.  It is time for all politicians to now walk the walk. Last nights defection of  Dede Scozzafava (R) is a perfect example of what I am talking about.  It does not matter what party they claim they are a lined with as most of them are working together behind the scenes regardless of party. 

  Al Gore, Nancy Pelosi & Barney Frank clearly are the front runners of hypocrisy.  Gore & Pelosi on their green issues alone show overwhelming proof that they are making millions pushing “Green Initiatives” and live their own life’s with complete disregard to this Green Doctorain.  If it walks like a Doctorain and quacks like a Doctorain then it is a Doctorain! 

  Barney Frank is single handily standing in the way of the Real Estate Market recovery.  Barney wants all “non banking institutions to be put out of their misery.”  Let’s put this into prospective, 80% of all mortgages originated today are done by “non banking institutions.”  This would clearly create a monopoly for the big four and the Fed’s will clearly misuse their power to make it so.  This would leave no mortgage competition between mortgage companies to keep cost fair to the consumers, which are you and I.  Needless to say that it would put several thousand people out of work too.  So ask yourself, is this yet another bonehead move in the works?   

  Barney is also the head guy that force feed us the HVCC, Home Value Code of Conduct, appraisal process.  The HVCC has increased the cost of an appraisal to consumers by 60% on average.  The HVCC went into affect on May 1^st, 2009 and we have had sometime now to see how if is working.  Well the answer is not good.  The HVCC appraisal process does not work and there is even a large amount of appraisal fraud.  Imagine that!  So the Brokers can no longer have contact with appraisers and appraisal fraud is up.  This is yet more overwhelming proof that Brokers where not the problem.  The problem here still exists and Barney wants to help the problem makers to keep a lid on it.  The question here is does he relies that he is enabling the culprits. 

  I am in no way trying to say that Barney is knowingly using his authority to help anyone or business entities defraud consumers.  In my opinion I am saying this.  He is clearly demonstrating that he does not understand the mortgage industry as it results to consumers or the people that he serves.  So this makes him out of touch with the average person so his shelf life has expired and it is time to go. 

  Barney and Nancy are #1 and #2 on a long list of politicians that need to go.  Both clearly show the desirer to set themselves up financially with complete disregard to us the people that they took an oath to server.

  I am having another problem with a statement that continues to be repeated like it is a good thing.  The Fed’s have all ready spent 207 billion dollars and have saved 604,000 jobs.  How can anyone stand up make this statement and feel good about it?  Or even worse try to make anyone else feel good about it?  So was does this statement mean?  The Fed’s have spent $342,716 dollars per job that they have saved.  Are you kidding me?  I am sure it is safe to say that there is no way that all of these people where getting paid $300,000 plus salaries.  Hello, the money is not getting to the people.  Do something about! 

  History has shown that we are soon going to be looking at a 20% mortgage rates just like we did at the end of the Jimmy Carter years.  Does that seem hard to believe?  Then Google it and read about the debacle that was the Jimmy Carter administration for yourself.  Home ownership of becoming increasingly difficult and no one in the Media is even reporting on this.  Why? And why the double standard from the Media?

The HBMO wishes everyone a Happy Halloween

   Most people do not realize that the mortgage industry and politics are closely connected.  The Fed’s Treasury Secretary, Timothy Giethner, use of the words “War of Necessity” while speaking about companies that are “to big to fail.” So what does this mean and how does it affect you.  Let’s put this into prospective here, the Fed’s helped the big four to become even bigger than the “to big to fail” banks that they purchased.     

    Purchased Country Wide, Merrill Lynch, MBNA & Fleet

  Purchased WAMU, Bear Stearns & Bank One

  Purchased Golden State, ABN AMRO, Travelers & 

                                        First National  

  Purchased Wachovia, World Savings & First Security

  All of these banking take over’s were forced sales by the FDIC and the Federal Government brokered deals, imagine that.  This is unbelievable as the big get bigger.  So I have to ask the question, are they now, “to big to survive?”  If the bank’s in trouble were allowed to have failed, then the smaller banks would have come into play.  The bailout money locked out the medium size banks as they had to and continue to have to make a profit to survive.     

  Giethner went on to say that there is a plan in the works that could even eliminate shareholder’s in the big four.  With that being said why on earth would anyone want stock in these banks?  I would highly recommend that anyone holding stock in any of the big four get out now while you have some value. 

  The current administration is clearly following its plan to change the United States to a socialist country.  Given the current state of the economy all of us are hurting and most are clearly grasping at hope without thinking it through.  Us as people do have some fundamental flaws as when faced with death, or lack of money, most of us would do anything to survive.  Even if it is the most unreasonable or unrealistic of chances most of us will take that chance when faced with no alternatives.  We do not like to admit this but this is what serial kills use so affectively against their victims.  We all remember the movie Silence of the Lambs.  The killer in the movie was horrible & amazing in his philosophical ability to control his victims.  The philosophical approach is much the same as what is happening with our country and the current state of the economy is what is held to our necks.

  The younger generations did not have to work through the Jimmy Carter years and I was only in Jr. High School myself at this time, but I do remember the lack of Christmas presents or any activities that cost money.  Even when work returned to normal for my parents I do recall interest rates in the 18% range for a home mortgage.  This was done to hold off inflation by the Federal Reserve Committee.  Given the current environment we could be looking at 25% rates for home mortgages in the near future.  I know that sounds absurd but think about it.  Historically inflation usually lags 24 to 30 months behind low Fed Prime Rates.  Today’s rates are historically low and will not last much longer.  Take advantage of the current rates now if you are fence as I would hate to see anyone lose out.

  The Free Market system rewards people who work hard and hurts people who take too big of risks.  Think about all of the companies that failed only to have new less expensive companies open up in their absence.  Companies like Builders Emporium, Price Club, Pace, White Front, TG&Y, Treasury, Gemco failed and new companies like Wal-Mart, Home Depot, Lowes, Costco, ect were born.  Free market means competitive pricing for us all.  Don’t we all want the best value for our money?  We continue to watch our banking options be reduced and no one in the Media is even discussing this.  Why and why the double standard?   

Stay Tuned…

  Well depending upon where you live real estate values could be moving up or down.  The Huntington Beach Mortgage Oracle or HBMO is reflective of Huntington Beach California.  In Southern California there is a huge amount of homes and nearly half of the homes have little to no equity.  This makes is easy for loan modification companies to set up shop and defraud home owners.  It is human nature as we all want to get what the Jones’s are getting with little regard as to what it really cost.  So this is where loan modifications come in. 

  Los Angles County has recently been listed as the county with the most foreclosures in the country.  Loan Modification companies often tell people not to make their house payments as this will force the mortgage holder to modify their loans.  Also the money saved can be used to pay the Loan Modification Companies their fees.  Needless to say this causes some real problems if the loan is not modified as there is another property in foreclosure and a home owner with back payments to be paid up. 

  The economy will remain a mess until we all get on the same page.  Currently I talk daily with roughly 5 – 7 people everyday that feels they are entitled to own a home.  This is a major misconception as we get what we work for or earn.  I will give you some serious examples how far out of sink we are as people. 

•  Roman Polanski drugs a 13 year old girl and has sex with her.  He then leaves the country for roughly 30 years and is now finally caught and Hollywood seems to want to give him a pass.  Why the double standard?
• Jamie Foxx makes a horrible commit about Miley Cyrus and says he is sorry and all is good. Why the double standard? 
• Rush Limbaugh wants to be part of an ownership group to purchase a NFL team and there is a huge up roar because of his alleged commits.  While is commits on ESPN where questionable in nature to some.  They were extermly weak when compared to Jamie Foxx.  Why the double standard?
• David Letterman makes multiple statements about Sara Palin being stupid and look at the mess he is currently in.  I do hope he does not live in a glass house.  Again why the double standard? 
• Nancy Pelosi flies in a Boeing 757 – 200 seat jet to commute between California and DC just because she does not want to stop to refuel small jet she was issued.  Why?  Does she not understand that there are several smaller reasonable jets that cane to the same job and at a lot less money?  Pelosi lead the charge about Palin’s dresses and flies in a 200 seat jet.  Why the double standard? 
• President Obama responds to fox news like he is a mayor of a small city.  Why?  The people are out of work and need money.  We do not care what anyone is now saying we care about the money we have in our pockets and the less we have to more upset we become.  Why the double standard? 
• Main Stream Media still does not report the mortgage meltdown correctly and is unwilling to dig into this issue.  Why?  The L.A. Times is a local newspaper where my office is.  The newspaper had one of their callers contact me to see if I wanted to receive their paper.  Upon speaking to this person I asked why the LA times did not report the mortgage meltdown correctly for which I received the response that they did not know what I was talking about.  Exactly!  Why the double standard?   
• Healthcare, this has to be the biggest misconception of them all.  I can fix the problem overnight if anyone would listen.  Limit the amount of malpractice lawsuits to 5 times of the cost of procedure done.  This issue is not even being discussed.  Why & why the double standard? 
• Al Gore talks about global warming and makes millions from it.  He lives in a roughly 14,000 square foot home and flies in a private jet.  Obama and Pelosi talk the same green talk but none of them walk the green walk.  Think about the carbon footprint that is being generated by all of this private jet flying.  Is it really nessacary?  I think not!    

  There are multiple other issues that need to be addressed but my point here is that we need to all get on the same page.  As long as we continue to remain divided the economy will go now where.  So what do you think, are we moving in the right direction?

  Well, it’s official, the economy is not fixed.  We continue to hear from the Fed’s that “the economy is fixed but it is going to take time” or my favorite “we have saved or created thousands of jobs.”  Well I am not sure how you could say you have created jobs when the numbers do not bare this out.  Also if this is the Fed’s way of saving or creating jobs then we need a new plan.

  The Consumer Confidence Report came in this morning and it came in low at a 47.7.  The estimated figures were 53.5 and the prior actual figure 53.4.  The impact on the Bond Market is positive as rates have improved today.  The big picture is not so good as clearly there will be more jobs lost in the coming months.       

What is the Consumer Confidence Report?

  This survey measures the level of confidence individual households have in the performance of the economy now and in the future. It is a leading indicator of future spending and the business cycle. 5000 consumers in the nine census divisions across the country are surveyed each month. The level of consumer confidence is directly correlated to the strength of consumer spending, which accounts for two-thirds of the economy.

  It also correlates closely with joblessness, inflation, and real incomes. Only index changes of at least five points should be considered significant. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. Note, changes in consumer confidence and retail sales do not move in tandem month by month. If the economy experiences a long-term expansion, buying intentions may decline even while the jobless rate declines because of the satisfaction of pent-up demand.

  Conversely, if inflation begins to accelerate, spending plans may increase for the short-term as consumers buy now to avoid having to pay higher prices later. Regional differences in consumer confidence are an indication of differing business cycles across the nation. This has implications for spending on durable goods and, more importantly, for residential real estate markets. Financial markets interpret rising consumer confidence as a precursor to higher consumer spending. Higher consumer spending could in turn spark inflation.

  Look for a change in the direction of the six month moving average of the index. Consumers do not usually have the necessary information to accurately assess income and job growth six months in the future. The report provides information on planned spending, which does not necessarily turn into actual spending, although it is unlikely that increasing consumer confidence would be followed by a decline in spending. The Consumer Confidence survey is not useful for any type of forecasting. The Consumer Confidence survey is scheduled for released at 9:00 (CST) on the last Tuesday of the month by the Conference Board.