Points of Interest

They didn't do it last week.  But when the monoline insurers, those guys whose policies are bought to keep the credit rating on the trashy products that Goldman Sachs, Bear Sterns, Merrill Lynch and others were selling tried to raise capital and could not, the Asian and European markets crashed yesterday while ours was closed for the King holiday.

Even with the Fed cut, mortgage rates for conforming rates are only marginally lower.  And in my opinion it doesn't have anything to do with the rate cut.  I believe it is more a "flight to quality" driving bond rates down.  Big money trying to find a secure place for its capital.

In this market it becomes all too true.  Your credit report is everything.  All pricing and loan program approvals are contingent on what automated underwriting systems are programmed to accept with specific credit parameters.

Most conventional lenders and their loan programs use the lowest middle FICO score of all borrowers involved in the transaction.  This can prove to be problematic when one spouse has good credit and the other has encountered problems and the loan request requires the income of both.

There are specific steps you can take to improve your credit profile in the short term.  But the outcome of any strategy followed is not easily predicted.

And there are steps you must take to protect the privacy of your credit information and history.  This is simple but very effective and you can do it today.

Rates are now low.  Once again.  Not as low as in 2003, but we’re feeling the adverse effects of that wrong, prolonged action.

Through my everyday conversations with borrowers here in Fairfax County, Virginia, particularly those that have an adjustable rate mortgage, too many are considering waiting for lower rates.

This past week in an unprecedented acknowledgement and heads-up from Fed Chairman Bernanke, the economy continues to weaken with credit trouble spreading beyond mortgages.

Bank of America buys Countrywide saving it from bankruptcy.  Their stock prices drop in tandem.

CIT Group, Inc., boosts loan loss provisions to $300 million.

American Express writes off $440 million.  No small number.

Yesterday, Capitol One increased its loan loss reserve for the fourth quarter of 2007 to $1.9 billion.  It's getting bigger.

But the $15 BILLION in writedowns forecast by Merrill Lynch just puts the others to shame.  That is gigantic.  What were they smoking?  No wonder they are out globtrotting the world trying to gather more capital.  This sum represents about 13% of the shareholder's equity at the beginning of 2007.  It reminds me of Carl Sagan's famous line, "billions and billions..."  Shameful.

We have been hearing much about the ongoing debate of recession v. inflation and what the fed will do to combat either one to eliminate the possibility of stagflation.  We haven’t heard as much about it as the Iowa primary but a decent discussion has been making it to the airwaves.

The term ‘stagflation’ was coined by a British Tory by the name of Ian MacLeod in a 1965 speech to Parliament.  He said that stagflation represented the “worst of both worlds – not just inflation on the one side or stagnation on the other.  We have a sort of ‘stagflation’ situation.”

This term must drive the Keynesian theorists wild.  For according to Keynes recessions are solved by inflation which in turn is solved by a recession.

In the 1970’s, with the expectation of inflation and higher prices consumers purchased more goods increasing demand and reinforcing inflation.  We were at war then too, so the money supply was increased because wars are expensive.

We have inflation in things we need to power, feed, educate and insure the world and deflation in things we want, such as cell phones, plasma large screen tvs, laptops and second homes.