This Week, I am going to change the format of my Newsletter a little.

Flight to Quality!

We saw instability in our global markets last week and also this week as reflected the ups and downs of stock markets in Asia, Europe and the US.  Last week we saw over a 400 point drop in our stock market.  As a result of market instability, we saw the flight of money into the Stability of the Bond market.  Bad economic news tends to be good for Bond prices and home loan rates because investors tend to pull money out of the stock market with bad economic news and put the money into Bonds to the benefit of bond rates and home loan rates.  As a result we saw home loan rates improve slightly.

But the news I want to talk about is the "Flight to Quality" of many of our home buyers.  Home purchasers are more and more starting their mortgage conversations with loan officers who work at their own retail bank.  Buyers are going to "Quality" institutions like Bank of America to fund mortgages as the wholesale, Alt A, and sub prime markets worsen.  We are seeing many sub prime lenders go out of business.  One large bank reported that the current market for wholesale mortgage banks is the worst it's been in since the S&L Crisis in the 1980s.  Many analysts are predicting that as many as 6 out of 10 medium size wholesalers will be forced into bankruptcy in 2007 due to non performing loan buybacks.  Additionally, every lender is on high alert for loan fraud because of over stated income.  The market is also starting to severely cut back on 80/20 financing. 

The positive for Bank of America and me is that we are a "Quality" banking institution.  We are known for our stringent guidelines to minimize fraud and our make sense approvals for our mortgage customers.  Whether we are working with a customer who is looking at a super jumbo loan or 100% financing through our ACORN program, we try to ensure that we fit the best product/program for them.  Bank of America will be around in the future; thus, we plan to continue building customers for life.