Low consumer confidence heralds cheap mortgages/refis on clarkhoward.com

CLARKONOMICS: The newly released Confidence Index (as compiled by the Conference Board) shows that consumer confidence has taken a dive. People who had hoped their own situation was getting better aren't feeling so optimistic any longer.

It means that we're not seeing the "green shoots" popping up we were hearing about back in the spring. People are not feeling the love from the economy.

Is there a valid reason to be more pessimistic? That's a very personal question that Clark can't answer for you.

What he can tell you is that we're in a long haul deal. It will take years to work off the problems of too much house, too much debt, too much car and on and on.

It doesn't mean, however, that we'll always have high unemployment and no economic growth.

Meanwhile, Clark wants to alert you to a window of opportunity that's opening for cheap mortgages and cheap refinances. He expects that rates will drop a quarter-point to half a point over the next week in response to this newfound pessimism.

Mortgage rates are directly related to the 10-year Treasury. Several weeks ago, 10-year Treasury rates were in the 4s. Now the last rate Clark saw was 3.48%. (Editor's note: Rates accurate as of June 30, 2009.)

The opportunity is there, especially for 15-year refis; look to credit unions for 7-year fixed and 10-year fixed loans as an alternative.

What others are saying

Refi Denied
Here is an unusual one. Requested refi from Bank of Blue Valley (Internet Mortgage) Overland Park, Kansas. Loan request was for approximately 44% of appraised value with no money out. Purpose was to rid myself of an adjustable mortgage. Request was rejected because adjustments made by the appraiser for comparables used in apprasial were excessive. Bank said apprasial could not be used to establish value. Apprasier was State certified. Income was ok, credit excellent, but apprasial unacceptable. I still had to pay for apprasial and as far as Bank concerned there was no room for discussion.
By Bob @ 08/02/09 04:07:13 PMreport abuse
refi's are WAY up... part 2
It occurs to me: anyone looking for a job, with a background in banking or real estate, if you want to find work, check your local banks to see if they are hiring mortgage loan processors, I'll bet they need a lot of them right now...
By vicki @ 07/06/09 08:51:39 AMreport abuse
refi's are WAY up...
Well, it might depend on the type of housing market you're in, but the (local, regional) bank where my dad used to work as a loan officer has asked him if he'd consider coming out of retirement to help them out. They are SO swamped with so many refi's -- it's the busiest they've ever been in decades, they are having trouble keeping up with demand! Dad prefers just staying retired, 'though. :-)
By vicki @ 07/06/09 08:49:42 AMreport abuse
REFIS
WENT TO BANK OF AM. FOR A REFI. WAS APPROVE ASAP. AFTER I GOT MY PAPERWORK EVERYTHING CHANGED.ADDED HIGER POINTS,ALL KINDS OF CLOSING COST. YOU MIGHT GET A BETTER RATE BUT THEY TRY TO ADD SO MANY CLOSING COST AND POINTS.
I HAVE BEEN A CUSTOMER OF BOA FOR 30+YRES. GREAT CREDIT MONEY DOWN MORE THAN 20%. AND THE REFI IS THERE OWN LOAN. WAY DO BANKS TREAT GOOD CUSTOMERS THIS WAY.
THANT YOU
DON
By DONALD COPPOLA @ 07/05/09 10:18:42 AMreport abuse
REFI?
Well, its like this, as only creditworthy need apply. The banks, who took taxpayer money, decreased individuals credit limits, in most cases within a couple of hundred dollars of the reduced limit. This now has thrown many individuals credit rating into the impossible to refinance or borrow category. To add insult to injury, they, the banks, have taken to raising the interest rates in effort to beat the sanctions that are coming down the pike in 2010. Thus resulting in higher minimum payments and driving individuals closer to their now reduced credit limits. Once over the limit, the banks invoke another round of fees, thereby generating more money into their coffers.
It simply amazing the Government can call for the removal of the CEO of General Motors but not place harsh sanctions on the banks to protect the American taxpayer, whose tax dollars bailed them out. Sanctions should have been established to automatically refinance existing loans reducing rates on credit cards, loans and mortgages at any bank that received bailout funds.
Now as it stands, many middle class Americans will be forced into bankruptcy, foreclosure, not continuing their education, or worse simply because of poor politics. Until the American people allow these poorly ran financial institutions fail no quarter will be given to the normal working class American citizen.
In my humble opinion.
By JW @ 07/04/09 11:34:41 AMreport abuse
Housing subsidies
Dear Clark,

I'm a huge fan of your show and often find myself passing on advice that you give on the show to friends. You do a great service, keep up the great work. I would however like to voice some disagreement with you over a point you have made in the past. On several occasions when you discussed the government programs that spend taxpayer money to subsidize people who can no longer afford their mortgage you voiced support for these programs because you said they would increase home values for all Americans. This is true in the short term (although what we are really doing is just borrowing money to keep our home values up in the short term ) but in the long term subsidizing housing encourages a decrease in home values for several reasons.
Subsidizing housing creates demand above the equilibrium and encourages excess building (as we have seen from the most recent housing bubble). When the subsidies come to an end there are now more houses than would have been provided in a free market. Since supply now outpaces demand values must fall (as we have seen recently). So in the long term the subsidies actually decrease the value of existing housing.
Short term subsidies only keep values high in the short term and actually force existing homeowners to not only pay the subsidy for the folks who made bad decisions, but also pay higher property taxes in the short term and higher insurance premiums because in the short term home values are inflated. You can see why government wants this bubble to continue!
Furthermore the benefit to the people who get to stay in their homes is offset by the people who now do not get homes at a reasonable price. If left to the market it isn't as if the houses would not be lived in, they would just be sold at a more reasonable price.
Lastly consider that the subsidies have to be paid for in one way or another, either through increased taxes, which hurt the economy, or through increased debt. We are financing the subsidies through debt. It's not as if this money would have sat under someone's mattress if they didn't loan it to the government. They would have been spending it or investing it (either way they would have been contributing to the economy and probably more efficiently than the folks we are subsidizing)
As is usually the case with economics it really comes down to who can most efficiently use the resources and in this case we are taking the money away from people who have proven to be efficient and giving to those who have not (government and homeowners facing foreclosure) . . . bad idea for the health of the country.
So you missed one (in my humble opinion)! Nobody is perfect.
Brandon
Modesto CA
By Brandon @ 07/03/09 10:31:29 PMreport abuse
Economic Collapse?
Jasper we had an economic collapse in October of 2008? How much did GDP really decrease in this "collapse", it similliar to the "collapse" clinton left office with. Obama has to take responsibility for the 1.5 trillion he has put us further in debt. Bush was a fool but Obama might be even worse. Bottom line is Obama wants to take resources from productive uses and give them to people who have proven to be poor decision makers in big banks and home owners facing foreclosure . . . not smart!
By Brandon @ 07/03/09 10:18:37 PMreport abuse
Who was in office?
Who was in office when the economy collapsed during October 2008? Oh, it was Bush.
By Jasper @ 07/03/09 09:59:23 PMreport abuse
Re: Let's see
Hey there Mr. Jim. Clark is usually dead on with these type of predictions. Not sure what you're talking about.
By Todd @ 07/01/09 11:22:37 PMreport abuse
Hmmm
If they go this low, could be a good opportunity for me.
But why, oh why, do the Democrats so completely misunderstand economics? No matter what party you belong, you must admit that Obama has been the biggest disaster this country has ever seen in its history. It's just an economic fact. Bush wasn't great economically, but he's a GENIUS compared to this Obama disaster. He's the worst president of any country ever in the history of all mankind. Without exception. Seems pretty clear.
By Mikey @ 07/01/09 08:40:36 PMreport abuse
Ony creditworthy need apply
What good are low rates if the borrowers can't qualify for the loans? And nobody refis houses that are worth less than the mortgage.

Sorry, but this ship is going down.
By Joe @ 07/01/09 03:57:29 PMreport abuse
lets see
Clarks predictions aren't very accurate lets see how off he is now.
By jim rivers @ 07/01/09 02:54:23 PMreport abuse
Years to work of excess
When is the government going to start cutting back. Their spending like a drunk spring breaker with their first credit card.
By drew @ 07/01/09 10:34:22 AMreport abuse

Refi Denied

Here is an unusual one. Requested refi from Bank of Blue Valley (Internet Mortgage) Overland Park, Kansas. Loan request was for approximately 44% of appraised value with no money out. Purpose was to rid myself of an adjustable mortgage. Request was rejected because adjustments made by the appraiser for comparables used in apprasial were excessive. Bank said apprasial could not be used to establish value. Apprasier was State certified. Income was ok, credit excellent, but apprasial unacceptable. I still had to pay for apprasial and as far as Bank concerned there was no room for discussion.

By Bob @ 08/02/09 04:07:13 PMreport abuse

refi's are WAY up... part 2

It occurs to me: anyone looking for a job, with a background in banking or real estate, if you want to find work, check your local banks to see if they are hiring mortgage loan processors, I'll bet they need a lot of them right now...

By vicki @ 07/06/09 08:51:39 AMreport abuse

refi's are WAY up...

Well, it might depend on the type of housing market you're in, but the (local, regional) bank where my dad used to work as a loan officer has asked him if he'd consider coming out of retirement to help them out. They are SO swamped with so many refi's -- it's the busiest they've ever been in decades, they are having trouble keeping up with demand! Dad prefers just staying retired, 'though. :-)

By vicki @ 07/06/09 08:49:42 AMreport abuse

REFIS

WENT TO BANK OF AM. FOR A REFI. WAS APPROVE ASAP. AFTER I GOT MY PAPERWORK EVERYTHING CHANGED.ADDED HIGER POINTS,ALL KINDS OF CLOSING COST. YOU MIGHT GET A BETTER RATE BUT THEY TRY TO ADD SO MANY CLOSING COST AND POINTS.
I HAVE BEEN A CUSTOMER OF BOA FOR 30+YRES. GREAT CREDIT MONEY DOWN MORE THAN 20%. AND THE REFI IS THERE OWN LOAN. WAY DO BANKS TREAT GOOD CUSTOMERS THIS WAY.
THANT YOU
DON

By DONALD COPPOLA @ 07/05/09 10:18:42 AMreport abuse

REFI?

Well, its like this, as only creditworthy need apply. The banks, who took taxpayer money, decreased individuals credit limits, in most cases within a couple of hundred dollars of the reduced limit. This now has thrown many individuals credit rating into the impossible to refinance or borrow category. To add insult to injury, they, the banks, have taken to raising the interest rates in effort to beat the sanctions that are coming down the pike in 2010. Thus resulting in higher minimum payments and driving individuals closer to their now reduced credit limits. Once over the limit, the banks invoke another round of fees, thereby generating more money into their coffers.
It simply amazing the Government can call for the removal of the CEO of General Motors but not place harsh sanctions on the banks to protect the American taxpayer, whose tax dollars bailed them out. Sanctions should have been established to automatically refinance existing loans reducing rates on credit cards, loans and mortgages at any bank that received bailout funds.
Now as it stands, many middle class Americans will be forced into bankruptcy, foreclosure, not continuing their education, or worse simply because of poor politics. Until the American people allow these poorly ran financial institutions fail no quarter will be given to the normal working class American citizen.
In my humble opinion.

By JW @ 07/04/09 11:34:41 AMreport abuse

Housing subsidies

Dear Clark,

I'm a huge fan of your show and often find myself passing on advice that you give on the show to friends. You do a great service, keep up the great work. I would however like to voice some disagreement with you over a point you have made in the past. On several occasions when you discussed the government programs that spend taxpayer money to subsidize people who can no longer afford their mortgage you voiced support for these programs because you said they would increase home values for all Americans. This is true in the short term (although what we are really doing is just borrowing money to keep our home values up in the short term ) but in the long term subsidizing housing encourages a decrease in home values for several reasons.
Subsidizing housing creates demand above the equilibrium and encourages excess building (as we have seen from the most recent housing bubble). When the subsidies come to an end there are now more houses than would have been provided in a free market. Since supply now outpaces demand values must fall (as we have seen recently). So in the long term the subsidies actually decrease the value of existing housing.
Short term subsidies only keep values high in the short term and actually force existing homeowners to not only pay the subsidy for the folks who made bad decisions, but also pay higher property taxes in the short term and higher insurance premiums because in the short term home values are inflated. You can see why government wants this bubble to continue!
Furthermore the benefit to the people who get to stay in their homes is offset by the people who now do not get homes at a reasonable price. If left to the market it isn't as if the houses would not be lived in, they would just be sold at a more reasonable price.
Lastly consider that the subsidies have to be paid for in one way or another, either through increased taxes, which hurt the economy, or through increased debt. We are financing the subsidies through debt. It's not as if this money would have sat under someone's mattress if they didn't loan it to the government. They would have been spending it or investing it (either way they would have been contributing to the economy and probably more efficiently than the folks we are subsidizing)
As is usually the case with economics it really comes down to who can most efficiently use the resources and in this case we are taking the money away from people who have proven to be efficient and giving to those who have not (government and homeowners facing foreclosure) . . . bad idea for the health of the country.
So you missed one (in my humble opinion)! Nobody is perfect.
Brandon
Modesto CA

By Brandon @ 07/03/09 10:31:29 PMreport abuse

Economic Collapse?

Jasper we had an economic collapse in October of 2008? How much did GDP really decrease in this "collapse", it similliar to the "collapse" clinton left office with. Obama has to take responsibility for the 1.5 trillion he has put us further in debt. Bush was a fool but Obama might be even worse. Bottom line is Obama wants to take resources from productive uses and give them to people who have proven to be poor decision makers in big banks and home owners facing foreclosure . . . not smart!

By Brandon @ 07/03/09 10:18:37 PMreport abuse

Who was in office?

Who was in office when the economy collapsed during October 2008? Oh, it was Bush.

By Jasper @ 07/03/09 09:59:23 PMreport abuse

Re: Let's see

Hey there Mr. Jim. Clark is usually dead on with these type of predictions. Not sure what you're talking about.

By Todd @ 07/01/09 11:22:37 PMreport abuse

Hmmm

If they go this low, could be a good opportunity for me.
But why, oh why, do the Democrats so completely misunderstand economics? No matter what party you belong, you must admit that Obama has been the biggest disaster this country has ever seen in its history. It's just an economic fact. Bush wasn't great economically, but he's a GENIUS compared to this Obama disaster. He's the worst president of any country ever in the history of all mankind. Without exception. Seems pretty clear.

By Mikey @ 07/01/09 08:40:36 PMreport abuse

Ony creditworthy need apply

What good are low rates if the borrowers can't qualify for the loans? And nobody refis houses that are worth less than the mortgage.

Sorry, but this ship is going down.

By Joe @ 07/01/09 03:57:29 PMreport abuse

lets see

Clarks predictions aren't very accurate lets see how off he is now.

By jim rivers @ 07/01/09 02:54:23 PMreport abuse

Years to work of excess

When is the government going to start cutting back. Their spending like a drunk spring breaker with their first credit card.

By drew @ 07/01/09 10:34:22 AMreport abuse

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Jun 30, 2009 -- Low consumer confidence heralds cheap mortgages/refis

What others are saying