Interview with a mortgage expert – what the HECK is up with loans???

Posted on September 18, 2008. Filed under: Informed Investor Alliance, Orange County Real Estate | Tags: |

Yes, this is a blog about Orange County real estate.  But this week Mike and I have invited a couple guest bloggers to get involved, because you can’t get real estate without financing and loans.  Right now the media is all over what happened with IndyMac bank, and Fannie and Freddie.  We want you to hear from local mortgage and financial EXPERTS, not just the media, what is really going down, and how it may affect you and your current home loan situation.   The following info has been provided by Derek Beisner, one of our trusted OC CERTIFIED Mortgage Specialists.  We encourage your comments, rants, and other expert opinions on this post too!! 

 Uncertainty in Financial Markets Could Cause Dramatic Rise in Existing ARMs at Next Adjustment
If you or anyone you know has an Adjustable Rate Mortgage, this is an important point to consider. Many ARM loans are tied to the London Interbank Offered Rate (LIBOR). In fact, there are six million loans in the United States that use LIBOR to determine the interest rate and as the name suggests, many banks use this rate to lend money to each other.

But, today, banks lack confidence that the money they lend will be paid back. In light of what has happened with Lehman Brothers, IndyMac Bank and others, as well as AIG, banks are requiring much higher rates on LIBOR to offset the added risk.

The Federal Reserve Left Rates Unchanged but…
The Federal Reserve met yesterday leaving the target rate unchanged at 2.00% but just like LIBOR the actual rate being charged by banks to each other is closer to 6.00%. This again suggests that those with ARM loans should consider a refinance into historically low fixed rates.

What Happened?
Financial companies have been under attack. IndyMac was the largest bank to falter in twenty years. What brought IndyMac down was their exposure to defaulting loans. This sapped investor confidence and drove down the stock price until they filed for bankruptcy.

Following IndyMac, we saw Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch succumb and were either forced into conservatorship, to close their doors, or to sell themselves. AIG, the world’s largest insurance company was also impacted, forced to make a deal with the U.S. government to stay in business.

What You Can Do Now?
ASK AN EXPERT!  DON’T try to figure out this complicated situation yourself!!!!  I’d be happy to go over your loan situation and help you understand how the recent events may affect you, and how you can best be protected. Additionally, chaotic times like these often present opportunities. I look forward to hearing from you.

Derek Beisner
Certified Orange County loan advisor

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