Frank Gageby Blog

As the mortgage market continues to crumble, a market favorite may be disappearing.  No money down financing appears to be on the way out.  Just last week, Freddie Mac released information that, if implemented, all but eliminates competitive 100% financing to the average borrower.  Industry leader Fannie Mae cannot be far behind.    

Declining home values have made these types of products too risky for lenders.  Although our Indiana real estate values are down only slightly, the national trend of larger declines provide stronger influence to these agencies.  The old days of needing a minimum of 3-5% down payment may be just around the corner.

The upshot of all this is you better move fast if you want to buy with no money down.  Real Estate Agents need to convince their "on the fence" buyers.. Now is the time before it is too late! 

As a twenty year veteran of this business, I have never seen a time when the mortgage market was tightening so dramatically.  Unfortunately, I feel things will get worse before they get better.

3:26:41 PM

The Fed has given us a treat for Halloween!

The Federal Reserve has lowered the key Federal Funds Rate by .25% to 4.50%.

The change by the Fed will be followed shortly by a .25% drop in the Prime Rate to 7.50%.  The Prime Rate is the rate charged by banks as the basis for their consumer and business lending.  This means credit products such as Home Equity Loans and some credit cards should see immediate improvement. 

First mortgage products will be slower to react as the market must digest what the Fed move means to the overall economy.  The trend over the last few months has been for lower rates.  Hopefully we continue to see further lowering of rates in the weeks ahead.

Check out our daily rate forecast available on our website or by daily or weekly delivery to your email. 

Have a Happy Halloween!

The Federal Reserve cut interest rates today that could effect mortgages in a number of ways.  There were two significant rates effected by today's interest rate cuts.  The Discount Rate, which the Fed lowered by .50 for the second time in a month.  More importantly, the Federal Reserve lowered the Federal Funds Rate by .50 to 4.75%.  The latter is the biggie!

The Federal Funds move was the first reduction in four years.  This should cause a corresponding lowering of the Prime Rate charged by member banks across the country.  This will spur reductions in Home Equity Loans, Credit Cards interest rates, and some Adjustable Rate Mortgages. 

Fixed rate mortgages may also see a modest reduction in addition to the reductions we have seen in the last few weeks in anticipation of the Fed ease. 

In my view, the most important aspect brought about by today's Fed move is the positive psychology for the marketplace.  The moves add much needed liquidity which should boost investor confidence in the credit markets.  This new mind set could help ease credit guidelines, add programs, and lower interest rates going forward.     

Hearing all the main stream news regarding the "meltdown" in the mortgage market makes it seem like all mortgage money has disappeared.  While the market is going through a painful adjustment period, mortgage money is still very much available.

Qualified borrowers who can document their income and assets still have relative ease obtaining financing. 

The segment of the market in upheaval consists of mortgage programs for poorly qualified borrowers.  Borrowers with poor credit histories, sketchy employment, and little or no assets.  Most of these borrowers probably should not have been approved in the first place. 

Simply, we are back to a market where you have to reasonably be able to make the payment.  What a novel idea!

Frank Gageby is a 17 year veteran of the mortgage industry and the President of Castlestone Mortgage in Indianapolis, Indiana.