Can the 40-Year Mortgage Save You Money?

I hear the question asked all the time, "How much money can I save with a 40-year fixed rate loan?" The answer is simple, every time: None. In fact, over the life of a loan you will end up spending much more than you may have thought. While it may seem reasonable could save $100.00 each month on their mortgage payment, a "snail's pace" doesn't even seem to begin to describe the rate at which a borrower would build equity on their new home. The truth of the matter is, that the higher interest rates and over-priced housing has caused an alarm bell to go off with lenders, and new and inventive ways to keep sales up have become necessary to keep the industry afloat. Does it help borrowers? It helps keep the monthly payments slightly more affordable, but when it comes time to resell, financial problems could surface. A simple shift in the economy could send some 40-year borrowers into foreclosure instead of a profitable sale; as interest rates continue to climb, sales prices in some areas deflate, the 40-year loan has great potential to turn upside down - and fast.

Freddie Mac has introduced a line of 40-year mortgage products with a catchy sales pitch: "40-Year Home Possible Mortgage: More House with Less Income", and boasts that it has "standard low down-payments, flexible credit underwriting, and conforming conventional rates to give cash and credit strapped borrowers even more buying power." New homeowners are in the most danger from this type of loan, as most of them believe that in the long run, this type of loan will actually help them. Remember, 2007 is when many of the trillions of dollars of creative ARMs will do their thing - adjust. Do we really need to put more homebuyers at risk of foreclosure by "loosening" the credit and income standards even more?

Can Part Time Loan Officers Be Successful?

This question can be answered in two ways, but first one would have to ask themselves why they would be working as a loan officer part time. If you already have experience in the business, and you understand the ins and outs of mortgages, you may do fine. But if you have a lot to learn, and are new to the industry, you may not find that you are learning at a pace that brings you any substantial income for quite some time. There are mortgage companies out there that can assign other more experienced loan officers to be your "mentor" and help you learn some of the lingo and more popular products.

If you have another job, you may be pressed up against deadlines that you can't realistically meet. I have read about a man who is actually in the mortgage industry, stayed in a hotel with a wife, two kids, and a cat for five weeks while waiting for his loan to close through a moonlighting loan officer before finding out that it was causing him to sleep most of the day. He gave the loan to a co-worker and his loan was closed in 4 days. Although it is true that there are full time workers that accomplish part time volumes, and part time workers that generate full time incomes successfully, it is generally a good idea to focus on one thing, and do it well. Many times, a new homeowner's dreams are becoming reality at this point in their life, and a good mortgage professional is there to ensure that things are going smoothly and quickly.

I Wanna Buy a House NOW!

Today's mortgage products reflect more and more who we are as a people, as a whole unit, as Americans. Interest Only for example, or I/O, has become a popular trend for people who would not otherwise be able to afford a home. I/Os sound more like "rent to own" from a lender instead of a private owner. You pay the mortgage payment (just the interest) monthly, but no money towards the actual purchasing of the house until the predetermined interest only period expires. With rent to own, you pay the owner for a predetermined period of time, then begin to make payments towards the purchase. With many of the new mortgage trends, uneducated buyers don't really know what they are getting into, or that they'll be further behind than they planned.

Many of the new products sound like gold to the untrained ear. But to the fully informed consumer, mortgages sometimes sound more like layaway at Wal-Mart, But more recently consumers have become okay with making payments without actually getting to purchase the product. The difference is you get to live in it while you pay large fees, but still don't have to pay a penny towards equity. This also means that if you sell or default, there is no money actually paid on the house - sometimes for up to ten years. "Don't pay off your house just yet, that's too expensive. You can just pay us a giant monthly fee (but less than you would pay for the house payments), and we will own it for you until you can afford it."

It's not just the house, it's the cars and big-boy toys in the garage and dozens of pairs of boots and strappy heels in the closet. I remember watching sitcoms and cartoons when I was a child, and an image of a cute little girl in pig-tails pops into my mind, smiling and asking for something she wants, bashfully fluttering her long eyelashes. Mom or Dad says no, and she immediately turns into a horrid monster - jumping up and down and screaming, "I want it now, Now, NOW!" It's an image I once thought to be funny, but it has become an ugly American reality today. In fact, that behavior has nearly become habitual, and has infected not only the American people, but is exemplified and encouraged by the very core of our government, and has led to one of the greatest unnatural disasters in our history - overspending. The aftermath is the debt. Think about it, earthquakes and hurricanes are devastating, but the aftermath involves an enormous task of cleaning, repairing, rebuilding, and new building standards. Sound a bit like credit and debt solutions?

Mortgage Foreclosure Scams Part 7 of 7

Here are some tips, from the National Conusmer Law Center's Foreclosure Report, warning what should NEVER be done as a consumer:

• Don't panic. Get all of the information on the foreclosure process in your state, and how much time you have to resolve your problems before losing your home. Paying special attention to the date that you can lose your legal right to your property is extremely important.


• Never sign a contract under pressure. Take your time to review the paperwork thoroughly, preferably with a lawyer representing your interests only.


• Don't sign away ownership of your property (often referred to as a "quit claim deed") to anyone without advice from your lawyer. Be especially suspicious of offers to take over ownership of your home as part of a deal that will allow you lease or rent the home until you buy it back in a few years. Most buybacks are extremely expensive or nearly impossibly to pay, and most people never get their homes back. (As I think about this form of property theft I'm reminded of the pawn shop concept of jewelry robbery!)


• Beware of any home sale contract where you aren't formally released from liability for your mortgage. Also, make sure you know what rights you're giving up and that you are actually agreeing to give them up.


• Never make a verbal agreement. Get all promises in writing and get full copies.


• Don't sign anything that has blank lines or spaces. Information could later be added that you don't agree to - after you've signed.


• Don't give in to promises such as the following, often used as ploys to entice consumers into deals which could cost far more than the promised savings:

- "We'll pay for your closing costs" or "We'll save your credit"

- "We'll pay your first two months rent or payments in your new home"

- "You'll get several thousand dollars cash back to use any way you'd like."

- If you sign the title over to us the foreclosure will be recorded against us, not you."

- "We'll buy your house 'as is'."

- "We guarantee we'll find you a buyer in seven to 14 days." (But at what price?)

- "We'll get you a new mortgage with low monthly payments." (But they don't tell you how much is borrowed or for how many years worth of payments.)

- "We'll help you file bankruptcy to stop this foreclosure." However, bankruptcy only buys you time to fix the finances, it doesn't stop a foreclosure. If you do this, make sure the person offering to help is a reputable bankruptcy attorney, who really knows what they are doing.)

- "It may cost you thousands more if your property is sold at a public auction."

- "We'll give you $40.00 in Free Gas."- "We have an interpreter for you." If you do not speak the same language as the "rescuer", bring your own translator, do not depend on the accuracy of the translation of a referred translator. Trust your own.

Mortgage Foreclosure Scams Part 6 of 7

Here are some signs that one should proceed with caution, or even question the transaction. These can help protect consumers from fraudulent transactions, and help loan officers and mortgage professionals learn to recognize fraud, and even help to educate customers in the event that they need help in the future. Use extreme caution if you are asked by an individual or a company to do any of the following: (This advice comes from the U.S. Trustee Program of the Federal Department of Justice for homeowners facing foreclosure or having trouble paying their mortgage.)

• Calls itself a "mortgage consultant," a "foreclosure service," or anything similar.


• Contacts or advertises to people whose homes are listed for foreclosure, including anyone who sends flyers or solicits door-to-door.


• Collects a fee before providing services to you.


• Tells you to make your home mortgage payments directly to them instead of to your mortgage lender.


• Tells you to transfer your property deed or title to them.

You should always stay in touch with your mortgage company, and if necessary, contact an attorney WHEN YOU FIRST REALIZE YOU ARE IN TROUBLE. My father, who was an attorney in Los Angeles for very many years would give the same advice. (In fact, he has given me similar advice - contacting someone the moment you realize that you could POTENTIALLY be in trouble, and each time I did not follow that advice, I was in deeper trouble at the last moment than I would have been if I had just communicated any information I had known AT THE TIME I FOUND OUT. The aftermath is generally worse, too.)

So far there have proven to be two key tactics to avoiding not only foreclosure in some cases, but fraudulent transactions robbing you of your equity or your home, or both: communication and education. Sound too hard? The alternative is lose everything you have worked hard to obtain and gain over the past years.

Mortgage Foreclosure Scams Part 5 of 7

Okay, so are you ready for some real life examples? I have looked up a few (I don't personally know anyone who has been through it, or been responsible for it) and hope that they help you - or if anything, pass the word on so that we can help others avoid these financially devastating scams.

Daniel Ebihara, of Las Vegas and staff attorney for Clark County Legal Services in Nevada, recently won a trial on behalf of a young couple who fell victim to fraud. They thought that they had sold their home to avoid foreclosure. When the couple went to go buy a car, they found out that the 30-year mortgage was still theirs. The predatory lender that took advantage of the couple's financial distress, and the couple didn't even know that it had happened.

Ebihara says not only is the situation not a rare occurrence, and does not only happen at the hands of "rescuers" and predatory lenders, I am shocked to find out that it happens also with family members! The elderly are often taken advantage by their own children, who are offering to take care of them for the rest of their life if the parents put them on the mortgage. "As soon as the papers are signed, the kids are kicking their own parents out on the streets. It's horrible." I think if I had not been born and raised in Los Angeles I wouldn't believe that the human race could be so cruel, but I know it is. But there are solutions, signs to look for, and precautions you can take, and in the fraud business - a consumer who is armed with their educated mind and trained eye, is pretty much like a Kung Fu master taking on an unarmed bank robber. The key is educating, it's the best protection you can bring with you in homeownership.

Mortgage Foreclosure Scams Part 4 of 7

Another very dangerous and very concerning type of foreclosure "rescue" scams is what is referred to as the "bait and switch" scam by Steve Tripoli and Elizabeth Renuart, authors and researchers of a report by the National Consumer Law Center in 2005, (more information about the report below.) The dangers of the bait and switch are tremendous, and homeowners are often not aware their ownership may be at risk. They usually involve forgeries of deeds and documents. Many homeowners are unaware that there was any intention by the "rescuer" to purchase the home, and most often it is for pennies on the dollar, and the unwary homeowner is evicted. Many victims of this type of fraud claim that the documents the scam artists possessed were not the same documents that they signed, or worse yet - still holds the original mortgage on a home he or she no longer owns! Yes, that's right, in this scam, the victim is often left with no home, but a remaining valid mortgage contract on the original amount borrowed to purchase the home. It is popular in the areas of Colorado, Nevada, Florida, Virginia, Minnesota, Illinois, and Washing D.C., but again, it can happen anywhere or to anyone.

The report by Steve Tripoli and Elizabeth Renuart is entitled "DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-Stripping Foreclosure "Rescue" Scams". This is a very well researched report that deserves reading by every concerned consumer and honest professional in the mortgage industry. It can be downloaded in PDF form here.

Mortgage Foreclosure Scams Part 3 of 7

Another widely used foreclosure "rescue" scam includes a variety of techniques, all of which lead to the homeowner surrendering the title to their house, believing that the "rescuer" will be paying the mortgage payments while you remain in the house as a renter, buying it back over the next few years. The homeowner may even be mislead to believe that surrendering the title is necessary in order to enable someone with a better credit rating than the homeowner can obtain a new mortgage in order to prevent the foreclosure. Typically the buyback is near impossible due to the nature of the terms of the deal, and the homeowner suffers permanent loss of the home, and the "rescuer" makes out with either all or most of the home's equity.

This type of fraud is most prevalent in California, Colorado, Massachusetts, New York, Washington, Illinois, and Washington D.C., although it can happen anywhere. Unless you plan on selling the house to another person, you should not be giving title of your house to them. It is a similar scam to the "car title loans" that you may have either heard of or been in. The car title is surrendered to the "loan" company who charges enormous amounts of interest on a loan not more than the car's Blue Book valuation. Most people who take out this type of loan are unable to obtain a traditional loan, and are therefore vulnerable to the scam. Due to unreasonable repayment terms, the borrower is at risk for the repossession of the car by the title loan company. Sound similar to you?

Mortgage Foreclosure Scams Part 2 of 7

There are several factors that give opportunity to a predatory lender for fraud. Homeowners in financial distress are the most likely to become a victim of this type of fraud, and I'll cover a few of the ways that scams can take place, and the effects it can have on the homeowner.

One of the ways that a homeowner can be defrauded is when a distressed borrower sees an ad or sign that states something such as: "We Buy Homes", "We Buy Houses - Fast Cash" or "Cash For Houses - Any Situation, Any Condition". These companies can charge enormous fees for simple phone calls and paperwork (which could easily be done by the homeowner). Homeowners are often left with little assistance, and little time left to save their home from foreclosure before they even realize it. Many times it keeps the homeowner from seeking qualified help at all because the "rescuer" has given the homeowner a false sense of security. The "rescue" company leaves the homeowner in a situation that may have been prevented with proper intervention. This particular type of fraud runs rampant in New York, Ohio, Michigan, California, and Oklahoma.


The Better Business Bureau (or BBB) can be of some assistance if you need further information on a particular company's reputation. Again, as I mentioned in Part 1 of this series, don't be afraid to call your lender or mortgage servicing company. They may have some referrals to legitimate help, rather than choosing a "rescue" company to help you spiral into foreclosure. Be wary of any company that doesn't offer contact information other than a phone number.

Mortgage Foreclosure Scams Part 1 of 7

Okay, so foreclosure scams are not something new, but the reason I am bringing them up now - with so many new homeowners stretched beyond their financial means, trillions of dollars in ARMs about to "reset" within the next year or so, there is a great chance that many of those homeowners will fall victim to foreclosure scams. While it may not be news to anyone that the predators are out there - and successfully robbing homeowners of their life savings, their equity, and their houses, it is the duty of all honest consumers and professionals to educate themselves to the tactics that are being used, in order to better protect your clients, and yourselves.

It is important to remember that, like every other crime, you must understand the criminal. Mortgage fraud is no different, and the crime should be understood by those who intend to avoid being a victim. If you feel that your home may be in danger of foreclosure, call the company that services your mortgage first. Let them know exactly what your situation is. Don't be afraid to talk to them about what you can and can't afford, and they may be able to restructure your loan for you if your situation is right for it. Possibly they can offer a temporary solution to help you catch up, or could refer you to a legitimate resource for help. They may not offer any of these solutions, but call them first. It is your first step in avoiding foreclosure.

If you have no other solutions at hand, at least be aware of some of the scams that are out there, and what signs to look for in avoiding a predator. We will explore some of these signs, and the tactics that are used in swindling homeowners out of their equity and their home, and how they can even hold you financially responsible for the mortgage payments.

The Crunch is on Title Companies

While smaller title companies are struggling to stay afloat, cutting costs and downsizing just to stay open. Some who were once flooded with work are in high growth areas - downright bored. On the other hand, overworked giants are outsourcing to compensate for the huge influx of transactions, yet poorly processing the paperwork, causing an uprise in claims - up 15% from last year alone.

Kickbacks, incentives, and "friendly gifts" abound in an industry that strictly prohibits any such activity, costing a hefty sum in settlement charges for many who are caught. Recently I read an article about a builder who even attempted to require that all of his clients used a single title company - illegal by any standards, but prohibited by Federal laws stating that "anything of value" used in exchange for referrals of consumer business constitutes a violation of the law.

While it may seem that this is a hot topic of debate surfacing in the recent years to those who are new to the industry, but this is a problem that has been cultivated into our culture - it's nothing new. What is new is that the industry has grown larger than the public it serves in some areas. Think of it in this sense - if you put too many lobsters into a tank together, only the strong will survive, eating the weaker creatures. Mirror any business you know of? Well, put into simple terms, too many professionals in the same area offering the same services create the "lobster tank" in which only the strongest will endure - surviving only on the failure of others. In the future, we may see more industry-related crackdowns as the Federal government scrambles to get a handle on the real estate industry.

Idaho Participates in Multi-state Licensing Bill

A bill designed to enable Idaho to readily convert to the national automated licensing system has made its way through the house recently. The state law, which will amend the Idaho Residential Mortgage Practices Act, will authorize the Director of the Idaho Department of Finance to participate in the implementation of a multi-state automated licensing system for mortgage brokers, lenders, and loan originators. Not all states currently require licensing, but many industry regulators are pushing hard for laws in all 50 states. The multi-state program is being coordinated by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.