Analysis: Employment numbers came in right in line this morning, followed by home sales numbers that are so anemic they’d be confined to bed in any other market.  The stock market euphorically rose to over 9000 on this news.  Whatever.  Who can analyze this stuff?

But I know how to control it.  This has been tested so many times now that it’s as good as proved.  We know here at the office that when we lock a loan, we reverse the market (this only works when the market is tanking).  In the last two weeks we’ve done it several times.  The market starts to fall, so we call up one of our loans and lock it.  The second we do, the rally begins.  Happens 100% of the time.

Why didn’t we do something about the terrible crash of Black Wednesday two months ago?  Funny you should ask.  We TRIED.  Lenders stopped accepting locks, so we couldn’t get one down.  We sent in the request, and it was eventually honored – at the open of the market the next day, which sparked the largest up day for bonds in several years.  I’m telling you, it’s a curse having this much responsibility.

But I promise you I will use it with discretion and wisdom.  I also promise that your personal loan will not be the one we sacrifice on the altar of the gods of mortgage rates.  We’ll get someone else.

Cj

P.S. Thought I’d again thank all of you for following me, and let you know that it matters a great deal to me.  Today I picked up a gig writing for the Scotsman Guide, somewhat because of RateWatch.  You are all very important to me, and you do get service that’s not available to just anyone.  Thank you again, and welcome to our new signups.  Hope you like it here.

Analysis: Markets liked Ben Bernanke’s testimony yesterday.  He’s forecasting more unemployment, and the economy hitting a bottom here and starting to climb late this year or early next.  But he’s also telling us that he sees a slow climb, with no huge bounce, especially in real estate.  This is what is called an “L” recession, where things fall and then plateau at the new, lower level.  I think that’s a good analysis.  I expect the same, for a good while, until US households shed more debt and build more cash.  Right now it is the cash dearth that is starving the economy.  That dearth has been created by huge appetites for debt.  Eventually, all debt payments come a’cropper, and that’s what is happening now.  It will pass, if we’re smart, and if the government doesn’t insist on a recovery according to some electoral timetable.

Which is why I’d get my own house in order as fast as possible.  We’re not all that smart, and the government always acts according to electoral timetables.  The basics still work, though, people.  Save some, pay off your debt, find someone to help and help them.  That’s the way through.

Cj

On the other hand, since according to Mortgage Strategy only 19% of the real-estate industry is even kind of using social media (this from a tweet this morning), and from experience I can testify that 90% of that 19% is using it badly and doing harm to itself, I thought I might at least give my opinions about how social media might be used well in a real-estate context.  I am certainly using these tools better than most in my industry, and that has translated into gigs at Zillow and the Daily Herald Newspaper, so apparently my ideas do not entirely suck.  Take them for what they are worth.

Here’s how I got to writing this:

From Seth Jenson, a really good Realtor in Colorado: “Chris, what do you think about Twitter vs. Facebook? Do you think I need to be on both?”

Seth-

Whoo.  What a question.

Facebook is a terrific way for people to connect.  I’m no huge FB-er; I have about 400 friends, which is not a big number by any stretch of the imagination.  I don’t spend a lot of time trying to find friends on FB, or I likely could have a couple hundred more.  And maybe I ought to do that.  Probably I ought to do that.  But it depends on what I’m using Facebook for.

If I’m using Facebook to keep tabs on people I know – my family, my close friends here in town, a few of the guys I went to HS with – then I’m doing it the right way.  You can’t possibly keep track of the doings of 1000 people every day.  Impossible.  However, if one of the reasons for you to be on Facebook is that you want people to remember YOU, well, then you might want a few more friends.  You’d want to update your status at least once a day, and probably more than once.  These wouldn’t all be real-estate updates.  In fact, most of them would be about anything except real estate, and would be only for the purpose of strengthening relationships.  It is those relationships that bring the referrals that make you successful, and coincidentally, it is those relationships that make your life richer and more rewarding, so that’s a happy thing.  Facebook makes strengthening those relationships easier than ever, so I would definitely be on Facebook.

Twitter is very different.  I love Twitter, myself.  I like Twitter better than Facebook.  Where I post or comment about 5x a day on Facebook, I do that twice as much – or more – on Twitter.  Twitter is a research tool as much as it is a communications network.  I get a lot of my news from Twitter, most of my reading material, and have most of my online conversations there, even more than email.  Now, again, it depends on what you’re using the tool for.  Twitter can be a huge and pointless waste of your time.  It can also do you harm, I think.  But if you use it with respect, I think it has the potential to be incredibly valuable.

Here are some examples.  I am not a big noise on Twitter.  I have fewer than 200 followers.  I’m following only about 100 people.  I determined when I got involved that I wouldn’t try to amass a gigantic following until I had some idea what I was doing it for.  I didn’t know enough about Twitter to know what I was doing, so I figured I’d start by following some people that DID know, namely, those that have good blogs about social media.  So I followed Amber Naslund, Olivier Blanchard, Beth Harte, and some others, and learned about what Twitter could do, and more importantly, what I should NOT do on Twitter.

Then I started using the search functions of TweetDeck – TweetDeck is an indispensable tool for using Twitter – to follow mortgage news.  There were some interesting conversations that came out of that, which resulted in my following Tyler Osby, Dan Green, and Agentopolis and a few others.  They are doing most of the blogging and commenting about what’s going on in the mortgage industry.  There were two or three other topics that I thought would be good (hobbies, etc.) so I started running searches on those as well.  I’ve acquired my 160 or so followers through conversations, not spam.  In fact, most of those that are following me would unfollow if I used Twitter to promote myself ad-style.  But because I blog, many of them are reading what I write, and following them allows me to read what they write, get smarter, and engage them in conversation.  Again, for me it is about the relationships.  It’s made me better at mortgages, even though I haven’t spent a great deal of time on Twitter talking about mortgages per se.

Bottom line?  Yes, you should be on Facebook and on Twitter.  Figure out what you want these tools to do for you, and design a strategy to get them to do that.  Expect it to take time.  If you do it right, it will take a lot of it, and a fair amount of work as well.  Farming does.

Good luck.  Follow me at @chrisjoneslehi, and I’ll follow back.  You can friend me at www.facebook.com/chrisjoneslehi.

Cj

P.S. I’m thinking of changing my legal name to “Chris Jones Lehi”.  It’s just so dang much easier for people to find me that way.

Just kidding, Dad.

P.P.S. I’ll have Volume 2 of this post next week, with examples of what to do and what not to do on Facebook and Twitter, and how I think Realtors and mortgage agents can use those tools most successfully.  Stay tuned.  And for Heaven’s sake, get the opinions of some of those above that really know what they’re talking about.

Analysis: A manufacturing reading of 0 means that the industry is stable, so today’s reading of -.55 is not good news except in the context of last month’s reading, which was -.9.45.  So things are looking up.  Sort of.  The inflation number continued to be higher, boosted by a spike in oil prices, but stripping that out the core CPI was still higher than expected, the second such inflation reading to the high side this week.  Mortgage-backed securities have dropped about 100 bps this week so far, a now three-day negative run.  We’ve given back most of what we got last week.

The economy is still in a shambles, but just as nothing goes up in a straight line, nothing comes down in a straight line, either.  There are inevitable plateaus, and every plateau looks like a potential bottom, especially to a population starved for good economic news.  In the macro sense, I hate to say this, but in the mortgage rate sense, I’m happy to report, that the economy is still moving the wrong way and doing so with some rapidity.  We are not at the bottom yet.  Repeat.  NOT at the bottom yet.

Look for rates to make a small rise here, then drift back to where we were last Thursday, or even a skoshe lower.

Cj

Analysis: This is really quite interesting.  The government auctioned off $8 billion in 10-year notes this morning and the demand was very solid, both domestically and internationally.  There was more money out there in that auction than there has been in years.  That’s a much different result than the auction of two weeks ago, let alone the one a month ago, which was disastrous.  What it means is that there is a good deal of pressure in the market forcing bonds higher, and if you’ve been paying attention, and of course you have, you know that bonds moving up means rates moving down.

But it’s more than that.  Just the bond level is not entirely indicative of where rates are going to be.  There’s also the question of risk and liquidity on the bank side.  The more liquid bank assets are, the lower they can set rates without exposing themselves to rate risk.  As the credit markets froze up last year, banks had to raise rates to protect themselves, and had to chop programs until essentially only a-credit borrowers could qualify.  It’s too early to say that we’ve started the pendulum swinging back again, but today’s auction was a thing that makes you go hmmmmmm.

We’ll be keeping a close eye on the auctions later this week.

The Home Valuation Code of Conduct (HVCC) is causing a firestorm of controversy and a growing wave of disgust across all parts of the mortgage industry.  I’ve already said before that I think it’s not going anywhere, and why, so I won’t rehash that, but as I was thinking about it the other day, I realized why I wasn’t as upset about the HVCC as others are.  And I realized that I had a solution to the frustration out there.

There’s nothing seriously wrong with the HVCC.  There is, however, something seriously wrong with the appraisal management companies (AMCs) that administer it.  The problem is this: almost all of them suck.

What used to happen, in brief, was that the loan officer would order the appraisal directly from the appraiser, who passed the completed appraisal back to the LO, and ordinarily this resulted in fairly quick service, or the LO would simply use a different appraiser next time.  Now, though, the LO has to order the appraisal from an AMC, which then orders the appraisal from the appraiser.  When completed, the appraiser transfers it to the AMC, which sends it to the LO.  Sounds simple, though not as simple as it used to be.

There are 3 problems with this:

1. The AMC takes a large cut of the appraisal fee for doing piddly.

2. The AMC slows down the process because it’s incompetent.

3. The AMC, as an intermediary, reduces the feedback between the business end of the loan (the LO) and the appraiser, which results in slower service and worse appraisals.

Let’s look at each of these three more closely.

1. The AMC takes a large cut of the appraisal fee for doing piddly. Well, yes, but not always.  Where there is competition in the marketplace, where LOs are free to select any AMC they like, this happens less often.  Where the problem comes in is where the AMC is the subsidiary of the lender, so that the LO has no choice but to use the AMC the lender dictates.  This used to be illegal.  No lender could dictate to an LO a particular appraiser he had to use.  But now, effectively, they can do this.  The AMC has a sweetheart deal with the lender, and screws exorbitant fees out of the borrower, while paying the appraiser less than standard wage.

It doesn’t have to be this way.  Appraisers can and should fight back by refusing to perform appraisals for AMCs that pay less than full fees.  LOs should ask for a fee sheet from the AMC, and the AMCs should be required to provide one.  If the AMC fee adds more than $100 to the cost of the appraisal, the LO should choose a different AMC, if at all possible.

Personally, I refuse to do business with an AMC that shorts appraisers money.  I went to my broker (at City 1st we have the advantage of being correspondent) and fought for the right to use an AMC that made my appraisers happy by paying them what they were worth.  LOs have much much more power with their brokers than with the State of New York.  Time to use some of that power on behalf of the many great appraisers that are being hurt by the HVCC – hurt because we haven’t cared enough to protect them.

2. The AMC slows down the process because it’s incompetent. AMCs are made up of people.  Generally, these aren’t the world’s most competent people.  Their customer service sucks, they’re slow, they charge too much, they’re unresponsive, or they burst into tears when they get criticized (this is not a made-up deal, ask @mortgagereports).  In short, they’re small, understaffed businesses.  But be fair.  Are these guys worse than your local contractor?  Your DMV?  Are they a lot worse than most appraisers?  No.  They aren’t.  But this is no compliment – the aforementioned “service” personnel are among the most proverbially terrible for customer relations.

The fix for this in the contracting world is that there are hundreds of contractors, and the good ones do well, and the idiots die off as word gets around.  Good plumbers and good mechanics and good appraisers float to the top.  You can find them, because the market makes it possible to find them.  What would happen if a contractor had a monopoly, got to build all the houses in a particular zip code?  That’s the DMV, and that’s what happens when you don’t allow competition.  But that, again, is what the HVCC allows that it should not – AMCs to be owned by, and exclusively provide appraisals for, particular lenders.  The good AMCs – and they are out there, I use one myself – are actually faster than my old process.  They’re easier to use, and I get better service than I ever did.  But I shopped.  I was lucky – I could.  If you can, you should, too, and let the incompetent companies die.

3. The AMC, as an intermediary, reduces the feedback between the business end of the loan (the LO) and the appraiser, which results in slower service and worse appraisals. Tough to argue this one.  Intermediaries are rarely a good solution to any problem – except where getting the relevant parties together directly (in this case the LO and the appraiser) could result in conflict or undue influence.  And that, ladies and gentlemen, is what the HVCC was supposed to prevent.  AMCs are supposed to solve this problem, but most of them simply create a new and larger one.

Does it have to be this way?  Absolutely not.  A good AMC could function better than a large appraisal company, taking orders in and efficiently passing them to the appraisers, while helping maintain a degree of autonomy for the appraisers.  The appraisers should be happy that they are not getting heat about their values, and that they no longer have to perform collections.  LOs should be happy that they don’t have to worry about overloading their appraisers in heavy times, causing slowdowns in performance, and they should be thrilled to be relieved of the task of selecting and vetting new appraisers all the time.  HVCC ought to make everyone better off.

But it doesn’t.  And it doesn’t, again, not because of what the HVCC contains, but what it doesn’t contain.  It doesn’t contain the one sentence that would make all of the above go away:

“No lender may mandate the use of any specific AMC for the performance of appraisal services.”

That’s it.  Instantaneously, AMCs like the one I use would get huge influxes of business, because they’re excellent at their job, they treat appraisers like professionals, and their customer service is outstanding.  The bad AMCs, and those are everywhere, would dry up and blow away, or they’d improve in a hurry.  Just like everywhere else in the economy.  Just like LOs, like lenders, like appraisers.

All of this frustration, all this lost business, all the howling and letter-writing and distractions from us simply doing our jobs, all of it, would go away.  We don’t need to force the State of New York and the FHFA, two gigantic bureaucracies, to completely toss out the results of two years of lawsuit.  All we need is one sentence.

Probably, it’s too much to ask.  But I’m asking, all the same.

Earlier today the bond market opened down 41 bps, then reversed to even, then lost 16 more bps and we got all sorts of “alert to lock” warnings.  Currently, the market is up 53 bps and the afternoon rally is well and truly under way.  I can’t say I expected this, but I’m glad of it.  And very glad we ignored the warnings this morning.

Inflation was tame this morning (and more than tame – we had deflationary pressure) and that is helping a lot.

For now, rates are moving the right direction, and slowly, slowly, we are climbing back out of the hole of two weeks ago.  Keep your fingers crossed, and for Heaven’s sake, make sure I have enough information on your loan that I can lock if we hit the rate you want.  Do not get caught short on this.

Analysis: Well, not so fast.  The “recovery” (which those of you that follow us closely know we have never believed in) has not been overly juicy, and today’s manufacturing numbers were even worse than forecast.  The Obama Administration continues to blame the economy they inherited for the bad employment numbers we’re seeing, and still defend the stimulus package as necessary to keep things from getting worse.  I’m not sold on that, but I am a pragmatist – this is what we have, so let’s deal with it.  I don’t expect that the economy will roar back – that’s some time off, and very tenuous at best – but I also don’t think things are going to get (visibly) much worse in the near future.  We should be okay through the summer.

Assuming we have summer.  Utah is basically stuck in April.

P.S. For those that like to see the little guy make good, I address you to Zillow’s Mortgages Unzipped blog, where they have a new columnist.  You might know the fellow.