October 29th, 2012 12:50 PM by Gregg Mower
A hurricane on the east cost effecting business on the west coast. This is what we are waking up to this morning in California. The Stock Market and many warehouse banks have closed due to Hurricane Sandy. Although our weather is sunny and mild, without East Coast Banks most lenders here in California can't do business. With the major traders not working there is no market to sell mortgage on the secondary market for those that have the ability to fund loans. This is economically disastrous in many ways the first of which is the average consumer may be involved in a refinance transaction that will have to wait till next month to close their loan transaction and that would leave them paying another 30 days of high interest on their old loan. This will also push over a large volume of Refinance transactions to November that would have been able to close in October. Now transactions that were due to close in November might be pushed to December by the sheer volume of loan transactions being processed across the US.
The Real estate Industry will also be affect as well, by transactions not being able to be funded on time. For Example an individual seller might have a FHA loan that they are paying of by closing their transaction at the end of October and Sandy blows and the transaction con not close until the beginning of November. You have to be aware that FHA and VA loans will charge 30 days of interest not matter if those 30 day of interest are used. So sellers, will get stuck paying an additional 30 days of interest which could be in the thousands of dollars due to the Storm. Realtors and lenders are on commission so if their deals do not close at the end of the month their pay checks will be effected to the point where they may miss some bills and in turn hurt their credit.
So it is easy to say banks will lose money, and most folks don't care as they figure they have the money anyway. I am mostly concerned about the individual as that is where economy starts. We as Americans traditionally drive the market with our money, and if we have less we tend to spend less. spending less leads to a weaker economy. So as I sit here on the West Coast I am rethinking my companies budget and have actually made some big financial decisions to day based on the the transactions I will be able to close over the next 30 days. Over the next several days and maybe weeks we are going to be hearing hurricane stories on the East Coast, we are very much effected here on the West Coast and probably will not hear those stories as they nothing compared to having your home destroyed, or the financial district being flooded in New York City. Stay tuned and pray it is not as bad as the forecasters are predicting. MAE Capital Mortgage will do what we can for our East Coat Neighbor's and our clients here on the home front.