Archive for July, 2008
- Consumer sentiment comes in higher than expected. Durable
goods orders come in higher than expected. NEW HOME SALES come in
better than expected.
- Today is a victory for low expectations, much more than a sign of
recovering economy, but still, stocks are benefitting and bonds getting
beat up. We had had a little rally, but we’re losing ground today.
- Of note: FHA conventional-to-FHA refinances have been put into
the FHA Secure program, which was originally designed to allow
delinquent homeowners to get out of their ARMs before they lose their
homes. Obviously – OBVIOUSLY – lumping these two kinds of loans
together is silly, as it takes good loans from responsible homeowners
and prices them the same as risky loans to those missing payments.
This costs good borrowers, no matter how good their credit, about .5%
to their rate when refinancing to FHA.
- There is, however, an exception, and it comes from Countrywide,
of all people. That company has decided that it will not buy FHA
Secure loans except when the homeowner has never been delinquent.
Therefore they do not have to lump risky and good loans together,
therefore they can offer better pricing, and it is that pricing that is
reflected in the chart above.
- Never thought I’d say it, but Countrywide is acting very smart. And it’s a good thing for us.
Today’s topic: purity.
And right away we have mental images that are conflicting and likely somewhat negative. So let’s get to terms immediately. Raise your hand if you consider yourself pure. Excellent. Nobody. I didn’t raise my hand either. Now hands up, please, if you think purity is impossible. Not many hands there, either (most of you thought of Christ at some point when considering this, as I did). Therefore, since most of us do not consider ourselves pure, yet believe that purity is possible, would I be right in saying that most of us are disappointed with ourselves?
I know I am.
Once, that wasn’t such a problem for people in this country. People knew they were imperfect and reconciled that imperfection with recourse to religion. But in the 60s, the notion that everyone was just fine as they were, thanks, began making the rounds as a movement (of course, the concept itself has been around since Cain). This has lots of advantages, in that you can just flat reject the idea that you should feel guilty about anything.
Problem with that is, people still did. You can tell yourself all day that you’re fine, that none of this cheating and lying and sleeping with the neighbor’s wife is any big deal, everyone’s doing it, what’s the matter anyway, since all this stuff is just a manifestation of white-male dark-ages religious fanaticism. And lots of people did tell themselves this. But it didn’t take, if the culture is any evidence. You don’t need to keep telling yourself that you’re just fine and psychoanalyzing your guilt away if you don’t feel any.
And everyone feels it (some not so often, admittedly). So when all that psychobabble didn’t do the trick, the world turned to another age-old concept, which is that the rules themselves were to blame. Get rid of the rules, and the guilt goes away. Since most people believed that the rules came from God, that necessitated either destroying God (which “science” chose to do) or pretending that God never sent us any rules (which was the choice of “religion”). We’re not going to debate the existence of God here. To those of use that know Him, the debate is farce itself, and to those that don’t know Him, debate is pointless. There will be proselyting another time.
But let’s deal with the idea that God sent no rules. You would think that if you believe in the concept of God that you would therefore believe in the concept of rules, since in every religion I know of God has some sort of book, and in that book there are lots and lots of fairly explicit rules to follow. And yet there exists in the world at large, and most prevalently in the US, a set of believers in a God that has no rules. This makes religion most convenient, you will immediately realize, because it allows one to be a good, God-worshipping individual (which US culture encourages) and still have fun at prom. This is a concept with real durability.
My argument against it is not based on any evidence that the trend can be reversed, so don’t get that idea. Yet there are those that are attempting to reverse it. There’s this group, which sponsors a “Purity Ball” designed to give girls and their fathers a framework (and a buddy) with which to resist the idea that anything goes. It runs counter to culture. There is a good deal of opposition and snipping about “letting girls explore their sexuality” and other such, but it seems to me a good idea. Fathers too long have gotten away with thinking mothers will do the heavy lifting on daughter-rearing (or, egads, that none need be done at all), and this group gives dads back a sense of their power and their responsibility in raising their daughters. Good for them.
There are others. My church released a proclamation a few years back that basically says the family is important, mothers and fathers have responsibilities, and there are rules about these things that matter, which rules come from God and can’t be dismissed by Dr. Ruth Westheimer. There’s the old adage that one can’t break the commandments; one can only break oneself on the commandments. It’s an adage because it’s largely true.
Girls today – and dare I say, boys today – can be pure. They can be. It’s hard, but it’s always been hard. It’s harder, perhaps, than it has ever been, but folks, shouldn’t something be harder now than it ever was? Heaven knows practically everything we do these days is 20x easier than it has ever been, from listening to music to staying cool in the summer. It seems only fair that today’s kids have some kind of troubles to deal with. So I don’t buy the cop outs. I don’t care that it’s hard, that TV and the Internet bombard us with opportunities to view and participate in filth of all kinds – or, I care, but it doesn’t matter. It’s a reason why we do stupid things, but it’s still not an excuse to do them.
I do stupid things, too, so I know whereof I speak. I fall short of my professed ideals. Happens every day. I feel guilty about it. I know I could be and should be better, but that doesn’t mean I don’t have purity as a goal every single day. It is the standard I commit to live by. Call me a hypocrite if you like, but which is worse, a man with standards that admits he does not always measure up to them or a man without any standards at all?
Kids today (and adults as well) can have and can live up to standards of purity. If they do they will be happier, more productive, better at school and in social engagements. They will have better marriages and families, fewer illnesses, more opportunities for accomplishment. Every study ever done on this subject backs this up. All will fail to meet the standard. All will be better than if they hadn’t tried.
It’s time to be bold about this, parents. It sucks not to go out drinking and get laid at prom, especially when it looks like so many other kids are doing it and enjoying themselves. Tough. We’re not budging on this. Despite what it looks like, the dawn comes after the dance, and the ones who are happiest to meet it are the ones that remember without regret what they did the night before.
The Purity Ball people have the girls make a pledge that they won’t date unless the guy asks their father for permission. Anyone else think that sounds like a good rule to start with?
P.S. I do have to address the idea that failure to meet the standard engenders feelings of hopelessness and shame. First, I’m a fan of shame. I think we don’t have enough of that left these days. But shame isn’t the purpose of the rule any more than smoke is the purpose of a campfire; it’s a by-product, not the aim, and it’s to be gotten rid of as quickly as possible. Not by putting out the fire, but by burning off the poor-quality fuel. Shame tells us to change what we’re doing. When we are not true to the best of ourselves, we should feel bad about it, and then we should fix it.
Of course, the fact is that we can’t fix it. Once something busts, it’s beyond our power to mend it. I don’t reconcile my shortcomings by trying harder (although I do try harder); I reconcile them with repentance. The God that gave me the rule also gave me a Ruler, and His job is to take the blame, even though I deserve it. If I allow Him to take it, He gives me a new rule, one that I can follow a little better. He asks me to be humble, to be kind, and to love everyone. That’s not easy, either, but it’s something I can work on because I have a teacher that keeps the heat off while I study.
Many people have trouble with this principle, and I used to be one of them. That trouble sometimes leads to people committing suicide, divorcing, going completely off the rails in one way or another. I’m not ignorant of that. The solution is not to get rid of the rules, to pretend that they or their Giver don’t exist. That way madness lies. Neither is the solution to pretend that one does keep them all, because only One could (and we aren’t Him). The rules are important, our effort is important, and in the conjunction between our efforts and the mercy of God in sending His Son, there is peace. And purity.
- Bonds rallied yesterday a little, but have given back all that
momentum and more today, so we’re back to where we were Friday on
rates. At least oil is falling – we’re more than $18 off the high and
- There is a proposal out there being put together by a
private/public consortium of mortgage people and government regulators
that actually has some merit. It will be a couple of months before we
get the full details, but right now it appears that what we’re looking
at is a plan to increase transparency in the packaging of mortgage
loans so they can be purchased. This would add confidence to the
secondary mortgage market, increase liquidity, and probably drive down
rates, especially for good borrowers.
- This is the technical part, so skip it if you don’t care:
mortgages are packaged in large groups for sale on the secondary
market. Primary lenders have used this packaging to shed loans from
the books and obtain new lending capital. However, up to the moment,
the packages of loans have been fairly opaque; that is, the secondary
financiers were never quite sure what it is they were buying. The
packages of securitized loans were often significantly heterogeneous,
and as the market has melted down, that has contributed to the
distress, because the lending institutions that purchased these
packages couldn’t really tell what they were worth – they didn’t know.
- Some of the loans were fine, most of them, even, but many were
not. How many? Nobody knew. Was this package better or worse than
that one? Nobody knew. How much real exposure did the financier have
to market downturn? Nobody knew.
- To a large extent, nobody knows now, either, which is why the
recent spate of better-than expected earnings from servicing banks has
been such welcome news. At least we’re pretty sure the entire
portfolio isn’t going to self-destruct.
- This opacity does two things: one, it increases risk-based
pricing for good loans (20%+ equity, 720 credit, full income
documentation) while significantly decreasing pricing for bad loans,
and two, it allows lenders to make riskier loans, because they can then
package them with good ones and sell the whole shooting match as “A”
- You’re right, this is stupid.
- What this proposal would do, then, is make it much easier for an
investor to tell what he was buying, because all the loans in any given
package would share characteristics. This will increase liquidity,
especially for good borrowers, and get some money moving in the
mortgage market again. Rates will fall for less risky loans.
- Rates will, of course, rise for more risky ones, which will
emphasize things that need emphasizing, like having a job and some
money in the bank, and a history of paying bills on time. That will be
painful for some, but better on the whole for everyone.
- Congress will then step in and prohibit risk-based pricing as
being discriminatory, and the entire market will collapse. But we will
have made a good try, and that’s important.
Today is the 16th, and we have yet to hit 100 this year.
In 2003, there was only one day that we hit 100, but every other year there were at least six days, almost all of them in the last two weeks of July. So far this month, we have had only one day above 97, which means we’re running about 3 degrees cooler than normal for the last 6 years.
I blame global warming and George Bush.
What I want to take a minute to do is acquaint you with some of the new
rules for FHA loans that will be effective August 1. These are
critical to many borrowers, as FHA loans are currently substantially
better both in interest rate and in underwriting flexibility than
No loans approved less than 2 years from bankruptcy.
As of August 1:
No loans approved less than 4 years from bankruptcy, unless significant extenuating circumstances can be proved.
No loans approved less than 3 years from foreclosure
As of August 1:
No loans approved less than 7 years from foreclosure
Rental income allowed to offset liability for residence being converted to investment property (when purchasing a new home)
As of August 1:
Rental income disallowed on conversion to investment, unless 30% equity in the property.
There are more in the same vein. Please be aware of these changes.
Additionally, FHA is changing LTV requirements, cashout requirements
and reserve requirements for most loans, and altering the up-front
mortgage insurance premium required, although in this case, it is true
that many borrowers will now pay less than they otherwise would have.
So it’s not all bad news.
Stay tuned for more. And as always, call with questions (801-310-3407)
or hit reply and we can get you the information you need.