Sam Pabón Earns Certified Mortgage Planning Specialist (CMPS®) Designation

UPPER MARLBORO, MD – Sam Pabón, a mortgage broker with Premier Investments Mortgage, LLC, has passed the qualifying exams to earn the Certified Mortgage Planning Specialist (CMPS) designation granted by the CMPS Institute, Ann Arbor, Michigan. The CMPS Institute is a training, certifying and ongoing membership organization created to help mortgage professionals integrate financial planning concepts into the mortgage process. CMPS designees can offer clients strategies that encompass mortgages, debt, home equity and real estate investment.

“My focus is to help my mortgage clients build and protect wealth by better managing their home equity and personal cash flow,” says Sam Pabón, (Premier Investments Mortgage).

Many homeowners have become frustrated and confused with the myriad choices in today’s mortgage market and the lack of both ethics and financial knowledge among many mortgage providers. The CMPS Institute is a joint effort by leaders in the mortgage and financial planning industries to raise professional standards among mortgage professionals and integrate sound financial planning advice into the mortgage process.

Today life expectancy is higher than ever before; health care costs are skyrocketing; pensions are shrinking; social security is uncertain, and corporate America has gone through one bankruptcy after another. Today’s mortgage market can be a dangerous place for some consumers with certain real estate markets experiencing signs of a “bubble,” and “exotic” mortgages representing a greater market share than ever before. These signs point to the fact that homeowners and buyers need expert advice on how to manage their mortgage, cash flow and home equity.

This trend toward expert mortgage advice is growing in popularity. At the CMPS Institute more than 200 mortgage professionals are taking certifying courses each month. “A mortgage professional who dedicates the time and effort to learn about these financial concepts is much more qualified, committed and equipped to serve the complex needs of today’s home owner and buyer,” says Gibran Nicholas, Chairman of the CMPS Institute.

The CMPS curriculum incorporates five essential skill sets including:

• Financial market and interest rate analysis
• Cash flow analysis
• Debt analysis
• Real estate equity management
• Real estate investment analysis
  

Sam Pabón can be reached at 301.702.0190.

For more information on the CMPS Institute go to http://www.cmpsinstitute.org, or call 888.608.9800.

Investing In Your College Student's Housing

For parents with children in college, or nearing college age, this video from NBC's Today Show is worth watching.

Investing in collegiate housing is not for everyone, but if the angle interests you, don't forget to purchase an accompanying personal liability insurance for injuries that may occur on-site.

Americans Will Spend $179 Million More On Gasoline Today Than One Year Ago

Economists worry about rising oil prices because it tends to generate higher pump prices for Americans. With more money spent on gasoline, there's (theoretically) less money available to spend on goods and services.

Today, GasBuddy.com says that the average price for a gallon of unleaded gasoline is $2.792, up from $2.344 last year at this time.

Now, as a country, it is estimated that we consume 146,000,000,000 gallons of gasoline annually. That converts to 400 million gallons each day.

Therefore, the 44.8-cent difference between today and last year at this time, costs Americans an additional $179,000,000 in fuel charges daily.

And this doesn't account for premium gasoline or diesel fuel charges.

Consumer spending makes up roughly two-thirds of our economy so when gas prices rise, economists worry -- it means that less money is available to pump back into businesses, and that the economy should slow down.

The good news in this type of story is that people in the market for a new home loan may benefit. A slowing economy tends to lead to lower mortgage rates.

As Hurricane Season rolls on and the post-Fed meeting chatter dies down, expect to hear more from the news on the price of oil and gasoline.

What Happens On The National Real Estate Scene Doesn't Matter To You

The National Association of Realtors® released its monthly Existing Home Sales report for August 2006 and, as usual, you should be ignoring it.

The report discusses real estate on a national level and we all know that real estate is a local phenomenon.

It's not that the report isn't helpful -- it is. The Existing Home Sales report paints a broad picture of our nation's housing market which has implications for the economy as a whole.

The reason why the EHS report is not helpful to individual homeowners is because the process of buying and selling real estate is not a national occurrence -- it's a very, very local one.

When you buy your next home, you won't be buying a home that exists in all 50 states. You'll be buying a very specific home on a very specific street in a very specific neighborhood.

So, when the NAR -- a national group! -- reports that home supply is up and home sales are down, it is lumping every street in every town together into one giant chunk of irrelevant data.

Again: real estate is a local business, not a national one.

On the "street" level, the story can be much different from what the general reports tells us. Locally, there are plenty of areas in which there is a shortage of homes and in which property values are increasing.

This is why "national" real estate stories in the papers are often wasted ink -- accurate real estate stories are the local ones.

(Image courtesy: Wall Street Journal Online)

Can't Find Your Cash? You Probably Ate It Or Drank It.

In a study of 2,036 U.S. adults commissioned by Visa USA, nearly half of all Americans are losing track of their money.

An average of $45 in cash is "lost" each week in what Visa dubs "mystery spending", Visa's version of "I know I had this money in my wallet but I can't figure out what I spent it on."

Averaged out over the course of a year, mystery spending accounts for $2,340 -- enough to fund a Roth IRA or other investment plan.

According to the study, events most likely to cause "mystery spending" include:

• Out for a night on the town (58 percent)
• Grocery shopping (55 percent)
• Out with children (50 percent)
• Shopping during a sale (40 percent)
• Shopping with friends (33 percent)

How people spend money isn't the point of the survey but it does raise an interesting point about how careless we can all be with our dollars.

On one hand, we wonder how will we fund retirement, or pay for college, or send our children to tennis lessons. On the other hand, we aren't even aware of how much cash we're spending and where we are spending it.

For example, if the average American saves the $2,340 annually at 8% instead of "mystery spending" it, that money could grow to $31,000 in 10 years, $91,000 in 20 years, and $204,000 in 30 years.

Being aware of your money is the best way to control it.

Source
Half of All Americans Say They Lose Track of $2,000 In Cash Each Year
September 10, 2007

The Week In Review (September 24, 2007) : What To Watch For

In a semi-surprise move last week, the Federal Reserve lowered the Fed Funds Rate by 0.500%.

The Fed wants to prevent a dramatic economic slowdown that started in the housing sector and appears to be spilling over into other sectors now, too.

According to some pundits, the half-point FFR drop was exactly what the markets needed -- it restored confidence and promoted liquidity.

According to others, though, the Fed bailed out risk-takers and may have re-ignited the flames of inflation.

It's hard to tell which side is correct, so we'll have to believe that both sides have valid points worth considering.

And, like the market players themselves, the best course of action now is keep an eye on economic data and try to interpret what it foretells about the future.

This week, we'll see a bevy of inflation-related data come down the pipe:

• Consumer Confidence (Tuesday)
• Existing Home Sales (Tuesday)
• New Homes Sales (Thursday)
• Consumer Sentiment (Friday)
• Personal Consumption and Expenditures (Friday)

Each of these data points has an impact in its own right, but the PCE is a known favorite of the Fed. If PCE comes in higher than expected, mortgage rates will likely increase in response.

At least until the market regains into a sense of balance, expect an over-reaction to most newly-released data. This could present some terrific (or terrible!) opportunities to lock in mortgage rates.

Want More Proof That The Fed Doesn't Control Mortgage Rates?

For more proof that the Fed does not control mortgage rates, consider this:

In the immediate aftermath of the Fed's decision to lower the Fed Funds Rate by 0.50%, mortgage rates improved by about 0.25% on average.

But, in the two days since, mortgage rates have not only given back those gains, but have climbed to their highest levels of the month.

This is because post-rate cut, the U.S. dollar is trading at all-time lows against the Euro and other currencies. Therefore, buyers of dollar-denominated securities such as mortgage bonds are getting less return for their investment.

When an investment loses its return, buyers tend to become sellers and that pushes the supply-and-demand balance to the supply side.

Additional supply of mortgage bonds drives down prices and increase mortgage rates.

It can be complicated web, of course, but consider it to be additional evidence that the Fed Funds Rate and mortgage rates are unrelated.

How Prime Rate Relates To The Fed Funds Rate

Prime Rate is currently 7.750%.

Prime Rate is the "shorthand" name for the Wall Street Journal Prime Rate, a variable interest rate that is used in pricing many types of consumer loans.

These loans include:

• Home equity lines of credit
• Credit card loans
• Auto loans

Prime Rate's variable nature is tied to the Fed Funds Rate. Prime Rate moves in tandem with the FFR and is always three percentage points higher.

So, after the FFR's 0.500% drop Tuesday, consumer loans tied to Prime Rate dropped by 0.500%, too.

Prime Rate was 4.000% in June 2004 before the Federal Reserve started a string of 17 rate hikes to 8.250%. Tuesday's drop is the first reversal since the rate hikes began.

Making English Out Of Fed-Speak (September 2007 Edition)

The Fed lowered the Fed Funds Rate by 0.50% yesterday. A rate decrease was expected by most market participants, but the 50 basis points movement seemed to catch some players off-guard.

Mortgage rates dipped in the wake of the announcement, but the real winners are homeowners with balances on their home equity lines of credit and holders of credit card debt.

Each saw their respective borrowing rates drop 0.50% yesterday because the interest rates for HELOCs and credit cards are based on Prime Rate.

Prime Rate moves in lock-step with the Fed Funds Rate.

In the statement above -- as explained by The Wall Street Journal -- the Fed expressed concern about a broader economic slump and the half-point reduction is attempting to prevent it from worsening.

Source
Parsing the Fed Statement
The Wall Street Journal Online
September 18, 2007
http://online.wsj.com/mdcapp/public/page/2_3024-info_fedparse_shell.html

How The Fed Will Disappoint No Matter WHAT It Does Today

It's all eyes on the Fed today; the market anxiously awaits the central bank's 2:15 P.M. ET press release.

Some of the market bias towards a 0.50% rate cut has decreased in favor of a 0.25% cut. This shift is largely psychological.

Markets are trying to "get inside the head" of Fed chief Ben Bernanke, speculating about how he will react in the first Federal Open Market Committee meeting since the credit crunch reached a head in mid-August.

The speculation and guessing tells us that there is tremendous uncertainty about how the FOMC will vote today.

Uncertainty in markets leads to volatility.

No matter which course the Fed chooses - 50 basis points reduction, 25 basis points reduction, or something else -- there will be a lot of traders scrambling to reposition their portfolio because of "bad bets".

Mortgage rates are calm this morning. The calm likely won't last. If you are floating your mortgage rate and don't like taking on additional risk, locking your rate prior to the FOMC press release may be a safe play.

The Week In Review (September 17, 2007) : What To Watch For

The volatile path of mortgage rates last week followed the changing expectations for Tuesday's Federal Open Market Committee meeting.

The FOMC sets the Fed Funds Rate, a benchmark interest rate upon which Prime Rate is based.

According to Federal Funds Rate futures, there is a 94 percent chance that the Fed will lower the FFR by at least 25 basis points Tuesday. The same analysis shows a 50% chance for a 50 basis points cut.

One basis point is equal to 0.01%.

The wayward path of mortgage bonds last week reflects varying opinions about tomorrow's Federal Reserve press release and subsequent action. As the expectations for a Fed Funds Rate cut increases, mortgage rates appear to fall. When expectations of a cut damper, mortgage rates appear to rise.

The speculation will end tomorrow at 2:15 P.M., however, after which mortgage rates will rebalance. Higher or lower? We don't know.

Therefore, today may be a good day to lock an interest rate in order to avoid the risk that the FOMC surprises market participants.

Also hitting the wires this week: Producer Price Index, Consumer Price Index, and Housing Starts. Each is a predictor of inflation, but will take a back seat to the big show Tuesday afternoon. It's all eyes on the Fed for next 36 hours.

What Would It Take For YOU To Feel The Pinch Of Higher Gas Prices?

As crude oil crossed $80 a barrel Thursday, the Wall Street Journal ran an interactive poll with its readers.

What sustained price for gasoline would cause you to cut back on other household spending?

The graph above shows the on-going results of the non-scientific study. You can chime in, too, at http://forums.wsj.com/viewtopic.php?t=805.

As consumers cut back spending, the economy slows down which generally leads to lower mortgage rates and weaker housing markets as a result of job losses. According to GasBuddy.com, some areas of San Francisco are already topping $3.50/gallon.

What The Price Of Gold Says About The Economy

Headlines yesterday read that the value of gold is nearing its all-time high (adjusted for inflation). The lay people would ignore this story, but those in the know understand that the price of gold is usually reflective of the state of the global economy.

The spot price of gold tells a lot about investor psyche and it is up nearly 10 percent from its 30-day low.

As a "safe haven" investment, gold's value tends to increase when an economic recession is expected. That's because gold tends to hold its value during a recession; its value is tied to the global economy and not that of any one country.

In the chart above from Kitco, the path of gold's price appears to mirror the path of market expectations for the Fed's meeting next week. As the likelihood of a Fed Funds Rate cut increases, so does gold's relative value in U.S. dollars.

As gold reaches new highs, it's predicting somewhat of an economic recession.

Why Mortgage Rates Fell BEFORE The Fed Meeting September 18

Mortgage rates "come from" one place only: the prices of mortgage bonds as determined by investors.

The higher the price, the lower the corresponding return, or rate.

Bonds -- like stocks -- are traded as securities. An investor may buy Microsoft stock if he thought the company's future looked bright, and he may buy mortgage bonds if he expected favorable bond market conditions ahead.

In a declining economy, bonds can be an especially attractive investment because they offer a fixed rate of return to an investor. As more buyers line up to buy, of course, the price of bonds goes up.

Again, higher price = lower rate.

So, because Friday brought us a surprisingly weak job report, investors have increased their exposure to mortgage bonds, pushing prices higher and, therefore, pushing mortgage rates down.

Now, all of this is happening in advance of the Federal Reserve's meeting September 18 and that's important to recognize.

Mortgage rates, in effect, have dropped because of the market's expectation of what the Fed will do next week -- not because of something that it has done already. Markets expect that the Fed will lower the Fed Funds Rate, thus signaling that the economy is in decline.

Therefore, if the Fed's actions meet the market's expectations Tuesday, mortgage rates shouldn't move even a hair -- that "future scenario" has already been priced in. If the Fed fails to meet expectations -- on the high-side or the low-side -- mortgage rates will change.

Explaining Why Per Diem Is Not A Closing Cost

Line 901 of a mortgage settlement statement is commonly confused for a closing cost. It's actually an "advance payment" on the mortgage.

Often called a per diem by mortgage professionals, line 901 itemizes a borrower's prepaid mortgage interest charges due at closing. The total amount due equals the daily rate of interest multiplied by the number of days remaining in the month.

If a mortgage funds on September 28, for example, the per diem would be 3 days.

One reason why per diem is due at closing is because mortgage interest is billed in arrears. That means that on the first of every month, the mortgage interest that accrued in the month prior is due.

Now, in the scenario above in which the closing is set for the last Friday of the month, it is highly unlikely that a mortgage lender would receive the loan documents from closing, process them through quality control, and then get a statement to the new borrower in time for the borrower to make his mortgage payment Monday morning.

Even with a 15-day grace period, it's a challenge.

So, to keep life simple, lenders collect all of the interest that would normally accrue up to the date of first payment at the time of closing. Then, when the 1st of the month arrives, there is no payment due -- it was already paid at the time of closing.

The Week In Review (September 10, 2007) : What To Watch For

Weak employment data pushed mortgage rates lower last week. Against expectations of 110,000 new jobs created in August, last Friday's Non-Farm Payrolls report showed a loss of 4,000 jobs.

The story made headlines all over the country this weekend but its connection to mortgage rates is not always clear. Here's how the jobs report relates to mortgage rates:

1. An employed person earns an income
2. An employed person spends money on goods and services

When more people are employed, more U.S. dollars are circulated inside the U.S. economy. It's widely believed that two-thirds of the economy is the result of consumer spending, in fact.

So, because the economy showed job losses, market participants are predicting that the economy will start to slow down as fewer dollars are spent. Fewer workers, in other words, equals slower growth.

Now, when the economy is growing quickly, the dollar is a risky investment because its purchasing power can weaken dramatically. This contrasts with when the economy is slowing down, when the risk of devaluation (i.e. inflation) subsides.

A less-risky dollar renders mortgage bonds more attractive for foreign investors because bonds are denominated in U.S. Dollars. More demand for bonds leads to lower rates.

And that's the connection -- fewer workers means slower growth means less risky dollars means more demand for mortgage bonds means lower mortgage rates.

This week, we'll get to see if consumer spending habits are changing yet. Friday, the Department of Commerce will release August's Retail Sales report. It's expected to show a 0.3% increase over July.

(Image Courtesy: The Wall Street Journal Online)

How Today's Jobs Report Impacts Mortgage Rates

This morning, the government reported that the U.S. economy lost 4,000 jobs in August. Led by losses in manufacturing and in construction, this is the first time since 2003 that the economy has failed to add jobs in any given month.

Markets had been expecting a job gain of roughly 110,000, but many players on Wall Street had been placing their bets to the weak side of that figure.

Very few (if any) expected a number this weak, however.

The implication of a weak jobs report is that many now believe that the Fed has an economicad nauseam in the press. reason to lower the Fed Funds Rate at its next meeting. This is different from a "bail out"-type reduction that economists and market participants have debated

Remember, a lower Fed Funds Rate doesn't directly correlate to lower mortgage rates. However, if the Fed acknowledges that the economy is slowing, that should help keep mortgage rates low.

Traders Predict The Fed Funds Rate Future Using Options

The Federal Open Market Committee meets September 18 and traders are aren't quite sure what to expect with respect to the Fed Funds Rate.

Will the FFR stay unchanged? Will it FFR decrease? If it decreases, by how much? These are questions that are perplexing market participants.

Luckily, we can measure how the market is betting on the future by looking at the options trading in Fed Funds Futures.

As of September 5, 2007, an analysis of Fed Funds Futures option pricing leads to the following predictions:

• 5.250%: 12 percent chance
• 5.000%: 28 percent chance
• 4.750%: 42 percent chance
• 4.500%: 10 percent chance
• 4.250%: 8 percent chance

The market is overwhelmingly expecting a drop in the FFR -- it just doesn't know by how much.

An Appetite For Jumbo Loans Returns

Yesterday was a rather drab day in mortgage circles -- not much happened and mortgage rates idled. The bigger story was how liquidity appears to be slowly returning to some areas of the beaten-down mortgage market.

Specifically, liquidity is returning to prime, fixed-rate, full documentation jumbo loans and pricing appears to be improving (slightly).

The "prime" designation loosely correlates to a salaried employee with a credit score of at least 720. This class of borrower is a much lower risk than a sub-prime borrower who is generally categorized as having a credit score below 620.

The higher a homeowner's credit score, the more likely he is to make on-time mortgage payments.

Jumbo loans differ from Fannie Mae/Freddie Mac conforming loans based on the amount borrowed. Jumbo loans meet the following loan size criteria:

• Home, condo or townhome: Over $417,000
• 2-unit: Over $533,850
• 3-unit: Over $645,300
• 4-unit: Over $801,950

As more investors express a willingness to buy jumbo mortgage bonds, we can expect jumbo mortgage interest rates to improve, and we'll maybe even see that improvement spill-over into other product types -- including sub-prime loans.

The Week In Review (September 4, 2007) : What To Watch For

Federal Reserve Chairman Ben Bernanke took the pulpit Friday in Jackson Hole but his remarks made little impact on mortgage bond trading.

The Fed is aware of economic issues related to housing and mortgage debt, Bernanke said.

He implied that the Fed wants more evidence that inflation has slowed before taking more drastic measures to help the economy, including reducing the Fed Funds Rate.

Friday morning, the Fed's preferred inflation gauge -- Personal Consumptions and Expenditure -- showed modest year-over-year growth of 1.9%, within the Fed's stated tolerance range.

In this holiday-shortened week, the big data point comes Friday in the form of the Non-Farm Payrolls report.

August is expected to have added 120,000 jobs to the economy after last month's 92,000 increase. The Unemployment Rate bears watching, too, however.

The Christian Science Monitor estimates that 21,000 housing-related job cuts took place last month and layoffs may have also impacted other industries. Job losses can impact the economy as much as job gains.

When Americans are working, they earn income. When they earn income, they spend. Of course, fewer workers means lower levels of consumer spending -- that can trigger an economic slowdown.

A slowly growing economy is generally good for mortgage rates because the dollar retains its value (i.e. no inflation). Therefore, if jobs created is lower than expected, or if the unemployment rate increases, mortgage rates should fall Friday because growth will be expected to slow.

(Image courtesy: Wall Street Journal Online)