Stimulus Plan Finalized

Government announcements dominated the financial news this week. Updates on two major programs both were favorable for mortgage markets, and mortgage rates fell modestly during the week.

The most highly anticipated news concerned Tuesday’s speech from Treasury Secretary Geithner on the financial institution assistance plan. This “Financial Stability Plan” involves multiple programs to remove bad assets from banks’ books and to support new lending. It also contains funds to help prevent foreclosures. Investors were sorely disappointed by the lack of details about how the plans would work, however, and they responded to the uncertainty by purchasing relatively safer assets. The stock market plunged, while Treasury and mortgage-backed security markets rallied, pushing rates lower. Geithner suggested that more information about a plan to purchase troubled assets and a comprehensive housing program will be released in the next few weeks.

Later in the week, the House and the Senate agreed on a compromise $789 billion fiscal stimulus plan, which is expected to pass within days. The Obama administration estimates that the plan will create 3.5 million jobs. Both the House and the Senate had passed versions which were larger than the final compromise plan, and the reduction in scope helped mortgage markets. A smaller plan means that the government will have to issue less debt. Unfortunately, one of the spending cuts in the final plan was a provision for a $15,000 homebuyer tax credit, which came with an estimated price tag of $35 billion. Instead, the government will leave in place an existing $7,500 tax credit, applicable to only first time homebuyers. The primary change to the tax credit is that it will no longer need to be repaid. The estimated cost of this $7,500 tax break is less than $3 billion.

From Mortgage News.

I hope

As I was reading my emails today, I came across this: 

OVERCOMING THE PSYCHOLOGY OF FEAR

Amid the constant bombardment of market-related information over the past weeks, there’s one important question that isn’t getting the attention it deserves. Why is it that a house that sold in an immediate bidding war for $500,000 two years ago now sits on the market for 12 months when it’s priced at $300,000? Why aren’t potential home buyers becoming more active as homes become more affordable?

Psychologist Daniel Kahneman can explain. Kahneman was awarded a Nobel Prize in economics for the discovery that because of the way we humans are wired, we fear losing far more than we enjoy winning. When something precious is at stake, we fixate on the downside risk. This fear, which probably relates to millennia of survival, is an incredibly powerful emotion that short-circuits reasoning, no matter how highly disciplined the decision-maker is.

On top of this innate fear of loss, the models that financial markets once relied on to assess credit risk have proved to be about as useful as a Magic Eight Ball. So what do investors do? They buy the safest securities they can find: U.S. Treasuries.

Clearly, it’s vital to restore confidence, encourage broader investment, and eliminate the perception that asset prices will keep dropping. These three objectives have been at the heart of initiatives from the Fed, Treasury, and FDIC. But although these programs seem to be having a positive impact, there’s a limit to their effectiveness. After all, fixing credit markets is second nature to the Fed and Treasury. Slowing or stopping falling home prices is another story.

The solution, according to Economics 101, is to decrease supply and/or increase demand. On the supply side, lenders including SunTrust Mortgage are making an enormous effort to keep struggling homeowners in homes and avoid putting more properties on the market. On the demand side, the Treasury is extremely serious about lowering mortgage rates, as shown by its recently announced plan to spend up to $500 billion to support the market for agency mortgage-backed securities.

Unfortunately, the level of fear has reached a point where many home buyers don’t recognize the opportunities they’re missing. But unlike monetary and fiscal policy where most of us are only spectators, we can all play a role in influencing buyer psychology by communicating these facts to them:

1. Mortgages, both agency and non-agency, are readily available.
2. Mortgage rates are currently at some of the lowest levels ever seen.
3. Through a combination of lower rates and lower home prices, housing affordability has returned to levels not seen in many years.
4. While it’s true that there are a lot of houses on the market, they are not all created equal. The good ones will go fast as buying starts again.

History tells us that attitudes can be changed by a single voice that finds a way to be heard. Names like Roosevelt, Churchill, and Mandela come to mind. If these individuals had the power to turn widespread fear into confidence, imagine what an entire industry could achieve! What can you and your colleagues do today to help spread the good word to your customers?

Go Platinum Lending is your local lender that is here to help YOU make the best of todays market. Prices are low and so are interest rates. Call us! 

Go Platinum Lending
Ph 559-683-LOAN (5626)
Fx 559-683-3788
www.goplatinumlending.com

Last month we at Go Platinum Lending were handing out free pumpkins to past and future clients in a celebration of our anniversary. This month we’re teaming up with Montecino & Associates in an effort to help the Marine Corps Reserve collect “Toys for Tots”. Toys for Tots has been around for 61 years and all the toys and money that we collect here in Eastern Madera County will be given back to the children in Eastern Madera County. We understand that many people are struggling financially this year – but if you are able to spare a few dollars for a new toy, think about the difference you can make for a child when they too have a present to open on Christmas day.

Christmas should be a happy family time – and by no means should it be measured in materialistic wealth. But Christmas should also be the time for joy and smiles. The way “Toys for Tots” works is that the Marine Corps Reserve will distribute the toys to the parents of the needing children. By donating a toy, you will make Christmas a joy for a child or two and also support our Marine Corps reserves.

The new and unwrapped toys can be dropped off in our Coarsegold office at 35285 Highway 41 # C. The gifts can range from $1 to $20 – the children receiving them are all ages from newborn to teens.

The last day for donations is December 12th so don’t wait.

We thank you for your support.

Go Platinum Lending is celebrating its  1 year anniversary. Go Platinum Lending is a local mortgage company that services Coarsegold, Oakhurst, Bass Lake  and other mountain communities as well as the entire state of California. In these turbulent time we at Go Platinum Lending feel very strongly about providing a high level of personal service along with solid financial solutions. By being a mortgage broker we can find the deal that best fits each individuals needs.Go Platinum Lending is closely connected to a local real estate office – Montecino & Assoc. This allow us to give buyers a “one-stop-shop”  and eliminates a lot of the stress a home buyer sometime experiences.Since Halloween is coming up we at Go Platinum Lending have decided to hand out free pumpkins to anyone that stops by our office beginning Oct 18 – as long as supplies last.We like to support our local community as much as possible and for this event we are able to help a local pumpkin patch increase their sales.So stop by and come and see us and help us celebrateJ