An alternate approach to mortgage shopping

Commentary: Regulators can't see past best mortgage price

Midsummer is known in the news biz as "silly season." In the absence of real news, headlines run "MAN BITES DOG." It’s a little early this year, but it got hot early. The usual time is on the cusp of July to August, when Europe shuts down for a month’s vacation; this year Europe may shut down somewhat later, for longer.

Only one piece of hard economic data this week: An index gauging the sentiment of small-business owners dumped three points of index optimism in June. That’s a lot for a single month, but the overall index value is still in the middle of the chatter back to 2010.

The Thomson Reuters/University of Michigan index of consumer confidence fell in July versus expected gain. Confidence measures are among the softest of data, but usually rise when gasoline falls — not so now.

Then the sillies …

The U.S. Treasury auctioned $21 billion in new 10-year notes at an all-time record-low yield of 1.46 percent. There were 3.5 times as many bids as bonds, and 45 percent of the bids were "direct," noncompetitive, often from overseas (we don’t care what yield we get, just give us the bonds), both measures of volume double normal.

Yields on short-term government bonds issued by Germany, Denmark and Switzerland touched new-record negative returns, investors paying interest to borrowers to keep money someplace safe from the euro collapse.

The Swiss are trying desperately to hold down the value of the franc, pushed up by safety buyers. As the franc rises, the Swiss feel rich, prices falling on any product or commodity sold in another currency; yet the franc rise threatens to put Switzerland out of business. Midas knew about that. The standard strategy to weaken an overstrong currency: print wads of its own and buy the other currencies. The Swiss now hold foreign exchange equal to 65 percent of Swiss GDP, upward pressure on the franc unrelieved.

Spain’s new Rajoy government, confronted by depression, announced a new package of $100 billion in spending cuts and tax increases. Spain’s banks as of the end of June now owe the European Central Bank $411 billion, about 30 percent of Spain’s falling GDP, secured by trusty Spanish collateral.

Bank regulators in the U.S. and Europe are focused on Libor irregularities in 2008.

Has anyone seen U.S. Treasury Secretary Tim Geithner?

President Obama said yesterday that he had been too focused on policy and had not delivered enough inspiring speeches. The crusty CEO of one of my first employers: "Mr. Barnes, here we value people who do things, not people who talk about doing things."

Mitt Romney is trapped in Nixon’s Law: "To be a Republican president, one must campaign far enough to the right to be nominated, and then move far enough to the center to be elected." Mr. Romney will deliver his acceptance speech to the Republican convention on Aug. 30 (counting the hours, aren’t we …). If he has any centrist thought, and says it before Aug. 30, the fruitcake half of that convention will walk out on him before he gets there.

This week the new Consumer Financial Protection Bureau released its first project. Not quite 1,100 pages to explain its recrafting of the three-page Good Faith Estimate (GFE) that borrowers receive when applying for a mortgage.

The GFE was just redone in 2010, the result a totally incomprehensible three pages to replace the previous one-page document that everyone had understood for the preceding 40 years. The new one will be better, but still on the same trail (picture a dim bloodhound following the scent of a hambone tied to a merry-go-round, while the real perps depart the scene).     

Consumer protectors are just certain that there is nothing to getting a mortgage beyond getting the best price. And that no banker should be paid for skill, or varying difficulty of application, and that a banker’s sound financial counseling has no value.

An alternate approach to mortgage shopping: Ask simple questions. How long have you been making loans? Do you have a resume? References? While making eye contact: Can I trust you to look after me? Why? How will you do it? What skills do you have to offer me that others do not have?

Dream on. Silly season.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

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