THE NICE PEOPLE AT ISLAND HOME CAPITAL weigh in on the latest news about the loan market. I asked for permission to reprint this particular article because it speaks to the interaction between our US real estate market and the economy world wide.
IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES…
Wait, maybe last week was just plain the worst of times, as far as the financial markets around the globe were concerned. French bank BNP Paribas – the largest bank in France and second largest in Europe – touched off a crisis in Europe on Thursday when it announced that it couldn’t determine the values of three of their mutual funds due to their containing US sub-prime mortgage investments, and actually prohibited withdrawals from these funds until a valuation could be made.
This led to a lack of confidence not only with their customers and investors, but also among all European Union banks. These banks, not knowing the extent of each other’s investment exposure in US mortgage backed securities, suddenly realized they couldn’t trust one another enough to lend each other money via normal inter-bank loans. This created an instant “liquidity crisis” in Europe, and Stock markets across the world reacted negatively as a result.
The European Central Bank, their equivalent of our Fed, took immediate action to stem the crisis by allowing their banks to borrow $131 Billion last Thursday and another $83.8 Billion on Friday. The amount borrowed shocked many analysts, as it was more than three times as much borrowed during the crisis created following the events of 9/11. Back in the US, the Federal Reserve Bank of New York intervened in the liquidity crisis here in the US by adding $84 Billion of liquidity to our own banking system. The Fed’s intervention is designed to stabilize our financial markets by restoring confidence, and allowing the markets to continue to trade in an orderly fashion. And while the Fed left the Fed Funds Rate stable following their meeting last week, the current liquidity crisis will likely give the Fed the impetus to cut rates, and cut them aggressively. It may even happen before their next scheduled meeting on September 18th. For perspective, the last time the Fed made rate changes outside of a scheduled meeting was on September 13th and 17th, 2001 – just following the disastrous events of September 11th, 2001.
Closer to home, First Magnus (parent company to Charter Funding) says it has discontinued funding mortgage loans as of August 15 and will no longer accept mortgage loan applications. Countrywide has turned to banks for support and has tapped into an $11.5 billion credit line to help the company through the current crisis.
Amazingly enough, in spite of all the dramatic action, conforming home loan rates ended the week close to where they began.
Mortgage Interest Rates*
IF YOU ARE INTERESTED IN LEARNING MORE ABOUT ISLAND HOME CAPTIAL, the source of this article. I will be happy to e-mail you a copy of their latest rate sheet and contact information. Unfortunately the rate sheet would not load onto this blog. This lender specializes in Jumbo Loans. They can handle requests up to $10M.
WHAT DOES ALL THIS MEAN TO YOU? Contact me for a personal consultation and a password to more in depth analysis.
Joyce Murphy, Realtor Broker BIC
Accredited Luxury Home Specialist
Hawaiian Isle Real Estate LLC and Luxury Real Estate Florida, Inc.
“In Real Estate, Experience Counts!”
808-443-4302 / 808-327-1155
More Kona Real Estate Information at:
www.LuxuryRealEstateHI.com
*Rates are subject to change due to market fluctuations and borrower’s eligibility.
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