Salt Lake City Mortgage Market Update for Nov. 19, 2008

The big news today is the auto industries seeking bail-out money from Congress.  I have mixed feelings about this being that for 11 years I was immersed in it as a Tier 1 and Tier 2 supplier to the auto industry.  I saw close-up as an outside observer at the plants how screwed-up the system really is, and how the industry is clinging to 1960’s way of doing things while the foreign manufacturers have continued to progress.  In fact if the foreign manufacturers have made any mistake in the past 30 years is was not seeing the need for more alternative fuel vehicles sooner.  Of course, the American auto industry screwed-up here, also, but they had no alternative fuel vehicles in their production lines when fuel prices began to soar while at least Toyota and Honda had a couple.

So my first reaction it “let em’ sink.”  However, it’s not just GM, Ford or Chrysler that will go down.  It’s all or most of their suppliers too.  The ripple-effect throughout the economy will be felt.

I worked for a “big” small business that employed over 150 people and was a Tier 1 and Tier 2 supplier to the industry.  As a Tier 1 you supply components to assemble vehicles directly to the auto manufacturer.  As a Tier 2 you supply parts to a Tier 1 manufacturer that uses you components to complete their components that they sell to the auto manufacturer.  There are thousands of such businesses globally and locally that do this.  Nary a single component of your vehicle is actually made by the auto manufacturer.  They buy assembled components built to their specifications from others and simply assemble the car you buy at the dealer.

If even one of the Big 3 should be allowed to fail to teach those “failures” of executives (like Sen. Richard Shelby called them today) a lesson then many more jobs will be lost than just those at the auto assembly plants.  Jobs will be lost at all the suppliers to the Big 3 as well as in the shipping and logisitics industries that keep the parts moving to the assembly plants in a timely and organized fashion.  Suppliers, shipping and trucking companies, logistics companies, auto dealership employees, etc. will all go under, furthering an already crippled economy into further ruin.

As I’ve said before: It’s not the mortgage industry that has caused this problem… It’s the economy.  People can’t pay their mortgages because they don’t have jobs, or their hours have been cut so far at the job they do have that they can’t meet all their monthly liabilities. As an industry study showed: 60% of homeowners in default are in default on their mortgages because of partial or total loss of income.  20% are in default because of medical problems or divorce.  Less than 10% are actually in default because of a reset of their Adjustable Rate Mortgage.  It’s not that they can’t afford the higher payment if it did go up, it’s that they can’t afford any mortgage payment.

This is also why the governments programs to help homeowners have fallen dramatically short of the figures they used to gain public support and push the legislation through Congress.  They weren’t looking at the real disease, just treating a symptom.

Unemployment is at a level not seen since the Nixon administration.  Overhauling the mortgage industry isn’t going to fix the problem.  Overhauling U.S. industry will.  Flat-out we need more domestic jobs so that more Americans have money to spend in America which will spur the economy and everyone will be happy.

But our long-time governmental leaders don’t want to face this fact. Doing so would be admitting they screwed-up with all their policies and tax breaks to American companies sending American jobs overseas.  It’s much easier to feed other people your crap than to eat it yourself.

So I say “Lets bailout the American auto industry. Lets give blue collar America the same consideration and love we’ve given to white collar bank executives.”  But the current sentiment in Congress seems to be that they’re more willing to help-out their, white collar rich croanies on Wall Street than they are the blue collar worker on Main Street.  Just another reason politicians are like diapers: they all stink and they should all be changed often.

Enough of my rant.  Bonds are trading higher today, in fact the eleventh straight day they’ve bounced against the 200-day moving average.  So if you are looking at closing a loan in the next 30-days I recommend to float for now.  If something changes I’ll let you know.

For Salt Lake City, UT this morning’s mortgage rates are as follows:

30-year fixed: 5.75%

15-year fixed: 5.375%

Jumbo 30-year fixed: 5.875%

5/1 LIBOR ARM 5.75%

FHA 30-year fixed: 6.125%

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