IndyMac On The Ropes, UBOC Changes, Spending Up On Stimulus

Waiting for that big inheritance? Don’t hold your breath. According to figures compiled by the Tiburon Strategic Advisors and the Wall Street Journal, and published in their Saturday June 14th edition, 25% of workers believe that they will need less than $250,000 for retirement (although 23% have a goal of having $500-$999k). The median value (half above, half below) of baby boomer’s inheritance to date is only $48k, due to our parents’ spending needs, longer life spans, and health care costs, and only 2% of baby boomers have received more than $100k in inheritance!

MORTGAGE UPDATES
There is a saying that “men love with their eyes, women love with their ears”. So what is being heard out there about mortgages? All systems appear to be “go” with the July 1 date at Countrywide & Bank of America with the buy-out. An article yesterday in the WSJ by Bob Hagerty said that Senator Schumer sent letters to the FDIC and OTS asking them to monitor more closely the financial health of Indymac Bancorp. He is “concerned that Indymac’s financial deterioration poses significant risks to both taxpayers and borrowers and that the regulatory community may not be prepared to take measures that would help prevent the collapse of Indymac or minimize the damage should such a failure occur.” Indymac’s share price is near $1 per share, down from about $31 a year ago!

Effective, Tuesday, July 1, 2008 UBOC will no longer accept new applications or new locks for loan transactions using a Union Bank of California purchase money HELOC. They also reminded brokers that although the closed end program is available up to 90% TLTV per their rate sheet, the TLTV cannot exceed 75% if the appraisal reflects the property is in a declining market.

Radian announced that investment properties will no longer be eligible for Mortgage Insurance, cash-out refinance loans in declining markets are no longer eligible for Mortgage insurance, and commitments will be valid for a period of 120 days from commitment effective date, which is consistent with the lending community’s credit requirement. At this time, they have not changed their Declining Markets Policy to match the GSE’s- they will continue to apply the same declining market policy they have been using: Maximum eligible LTV reduced by 5% if in a declining market, for loans greater than 95% LTV, they will reduce to 95% in a declining market, and the maximum LTV for Condos in declining market is 90%.

Wells Fargo will accept conforming conventional loans at maximum financing according to Fannie Mae/Freddie Mac guidelines. Effective June 27th, Wells will accept prior approval conforming conventional loans meeting agency guidelines for maximum financing as announced by Fannie and Freddie. Delegated and contract underwritten conforming conventional loans were allowed to follow the new Fannie Mae and Freddie Mac requirements on June 1, 2008, and sellers are no longer required to apply Well Fargo’s At Risk Markets policy.

MARKET UPDATE
Treasury rates continue to improve slightly – the 10-yr is down to 4.01%. (Mortgages are unchanged.) Yesterday’s news included Existing Home Sales (85% of the US housing market), which were +2% in May and stronger than expected. But compared with a year earlier sales were down 16% in May, and the median price dropped 6.3 percent from May 2007. Stocks got hit hard yesterday, and appear like they are heading lower this morning although May’s core personal consumption expenditures, an inflation gauge closely watched by the Federal Reserve, has helped a little this morning. Oil prices certainly aren’t helping our equity market, and have hit $142/barrel this morning, yet another record high. Later this morning we’ll see the University of Michigan survey of consumer confidence, but frankly (and this is what I tell folks) if I am not confident, odds are no one else is either! The focus will likely be on the other markets today. We also had U.S. Personal Spending +0.8 percent in May, more than expected, due to the government stimulus checks, and surprisingly the Commerce Department said Personal Income was +1.9% in May, the largest gain since September 2005.

JOKE OF THE DAY
Mildred, the church gossip and self-appointed monitor of the church’s morals, kept sticking her nose into other people’s business. Several members did not approve of her style, but feared her enough to maintain their silence.

She made a mistake, however, when she accused George, a new member, of being an alcoholic after she saw his pickup parked in front of the town’s only bar one afternoon. She self-righteously told George and several others that everyone seeing it there would know what he was doing. Being a man of few words, George stared at her for a moment, then simply turned and walked away.

He didn’t explain, defend, or deny. He said nothing.

Later that evening, George quietly parked his pickup in Mildred’s driveway…walked home…and left it there all night.