Mortgage News Updates

PennyMac Investors Make $558 Million Deal with the FDIC

2009-01-07T14:21:00.000-08:00

When business failed at the First National Bank of Nevada due to unsafe and unsound practices, a group of investors saw it as an opportunity to make a deal involving the remaining assets. The private investors, known as PennyMac (Private National Mortgage Acceptance Co.), which includes former executives of Countrywide Financial Corp., announced on Wednesday that they purchased $558 million in home mortgages from the FDIC.

PennyMac's chairman and CEO Stanford Kurland stated in a recent press release, "We are excited about investing in and managing mortgages in this unique transaction where we share in the economics with the FDIC." Under the new agreement, PennyMac will receive 20% of all cash flow from the mortgages, with 80% initially going to the FDIC until revenue from mortgages reach an agreed threshold, then the split will shift to 60/40 through plan to rework mortgages in an "arrangement that is beneficial for both parties", according to David Barr, spokesman for the FDIC.

Lowest Mortgage Interest Rates in 37 Years of Freddie Mac History

2008-12-26T11:18:00.000-08:00

Mortgage interest rates plummeted last week, falling to the lowest level in the previous 37 years, setting the record for the lowest 30-year fixed rate interest rate since Freddie Mac began to survey the data in 1971. Rates averaged 5.14% for the week ending December 24, 2008, down from the previous week's low of 5.19%, but more than a full percentage point lower than the previous year's 6.17% average, according to Frank Nothaft, Freddie Mac's chief economist.

But does that mean people should phone their local mortgage broker just yet? In order to get these rates, it would require about an 0.8 point payment average. The 15-year fixed-rate mortgage would follow close behind, requiring an 0.7 point payment average and ARMs would an average 0.6 point payment requirement. Considering that one point is equivalent to one percent of the mortgage amount, and housing prices in some areas remain inflated, this end up being quite a bit for hopeful home buyers. But others are currently searching for mortgage refinancing assistance, if even to find out how they can benefit from the current low interest rates, perhaps find their way out from under their high ARMs, and get into a more reliable 30-year fixed-rate mortgage instead.

But as mortgage rates tumble, the number of mortgage applications is climbing high. The Mortgage Bankers Association (MBA) reports that mortgage applications have skyrocketed 48% upwards to 1,245.4, which is the highest since 2003. Banks and mortgage firms have begun to hire back some of the same mortgage and loan employees that they so recently fired and laid off. Potential borrowers have been eager to refinance since government interventions that helped push the interest rates down to record lows.

With unemployment on the rise, and a volatile stock market, the already troubled housing market continues to suffer, and housing prices continue to drop. As predicted, this is proving to be a tremendous strain on homeowners who purchased homes at the inflated price, leaving them to either refinance for a lower interest rate and pay off the bloated mortgage, or hope for the possibility of selling out at a huge loss, perhaps owing a large chunk of mortgage on a house they no longer own.

But those who have a currently high interest rate and clean credit report, refinancing at these low rates could be life saving. Many homeowners are stuck in high-interest ARMS, and a lower interest rate - even on a 30-year fixed-rate mortgage, could provide just enough monthly financial relief to slide through difficult times. And just maybe - the drop in interest rates could save the homes of those struggling to make payments that just don't fit in the budget anymore.

Your Tax Refund Check Can Help Shave Your Mortgage in Half

2008-01-19T09:40:00.000-08:00

Many people who get refund checks are wondering how they will be spending their extra money this year. But if you play your cards right, you could be shaving years off of your mortgage - and save thousands in the long run.

Whether you are locked into an ARM or a fixed rate mortgage, you can still greatly benefit from this debt-diminishing payment method. They key is to come up with an extra mortgage payment each year, which in turn will shave the life of the mortgage by up to half. Just think, by making one extra payment per year, you can turn a 30-year mortgage into a 15 year mortgage, saving you tens of thousands of dollars in the end.

There are several ways to pull this off, even if you are on a tight budget. Lets say that your mortgage payments are $1200 per month: You can either split that one-time-per-year payment into monthly installments that you regulate yourself, or you can pay a lump sum each year on the principle only using holiday bonuses from work, or using your annual tax refund check. Either way, your extra payment will go towards just the principle, rather than the typical payments, which are nearly all interest payments.

For some interesting figures that may help you decide how much you can afford, how much time you'll save, estimate your expected pay-off date, and the total amount you'll pay over the life of your loan, check out this mortgage calculator!

Can the 40-Year Mortgage Save You Money?

2007-07-10T08:04:00.000-07:00

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?

2007-06-12T16:27:00.000-07:00

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!

2007-06-10T07:59:00.001-07:00

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

2007-05-22T14:05:00.000-07:00

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

2007-05-05T07:52:00.000-07:00

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

2007-04-26T20:59:00.000-07:00

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

2007-04-06T20:54:00.000-07:00

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

2007-03-22T20:48:00.000-07:00

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

2007-03-04T14:44:00.000-08:00

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

2007-02-26T20:39:00.000-08:00

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

2007-01-25T19:55:00.000-08:00

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

2007-01-03T19:49:00.000-08:00

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.

LoanMagic is not New News, But Good News

2006-12-17T19:33:00.000-08:00

Posted Jun 14th 2006 7:14AM by Christi LundquistFiled under: Mortgage technology
Okay, so LoanMagic is not news to some, but to others (like me) who are new to the wonderful tools of LoanMagic - there could be some real benefits. LoanMagic was launched in 2003, but has hit my desktop today - and like a ton of bricks! There is just so much that I have wanted to do for so long, and even though I am going to enjoy my free trial, I don't think I'd want to let go of it for quite some time.

There are a few things that really grabbed me, one of which was the ability to track the activity of loans, allowing you to notify your clients of any changes in the market that may affect their loan. Aside from that, it's user friendly - even with the multitude of tools available with the program. I don't make a penny by sharing this information with you, I just truly feel like I'm spreading peanut butter on bread with a knife instead of a spoon now! It used to take me hours to compile some of the reports that I can pull up in just minutes, and I am amazed - so I had to share! Finally the word "instant" really means something to me. You can download a free trial or see a demo from their website. One of the loan officers that raved to me about it last week says it really helps her close more loans per month just due to the types of reports she pulls, impressing her clients with how easy it was to understand what she was telling them. That's what I want to hear - and I sure look forward to testing that theory myself!

Changes Needed In Mortgage Industry

2006-12-09T17:26:00.000-08:00

Is it enough just for consumers to be aware of the issues that the mortgage industry are facing - or maybe the mortgage industry needs to take some responsibility in the relaxed regulations that govern the industry. Possibly, but since that has been a topic of debate among industry leaders due to the increase in publicized mortgage fraud there has been less of an emphasis on the more common problem with loan officers, brokers, and lenders: commission-vision. Okay, so that's not an official, but compared with tunnel-vision the affects are surprisingly similar.

When a professional in the mortgage or lending business only has one thing on their mind, the results can be disasterous for the borrower. There are laws popping up all over the country regulating title loans and payday loans, so why are there not more laws regulating the mortgage industry, designed to protect the consumer? Well, most states have laws, although they could be more defined, and more closely monitored. Some states have no regulatory laws on the industry, and fraud is rising at an alarming rate. But paycheck "boosting" doesn't seem to fit very tightly into the current laws.So how can you protect yourself as a consumer? Education.

Knowledge is power - we've all heard it, but believe it. The more you know about a subject (and are confident about that knowledge) the less likely you are to be dooped. If you were receiving advice from your doctor that you didn't believe or agree with, you may opt for a second opinion - it may be best to also get a second opinion about your mortgage options. Don't believe everything that your loan officer tells you, check it out for yourself - it could save you thousands, or even save your home. The moral of the story? Just don't put all of your marbles into one jar because if it breaks, you may end up loosing your marbles!

Need Mortgage Education? Here are a few places to start...

2006-11-01T19:22:00.000-08:00

One of my favorites is Mortgage Professor, run by Jack M. Guttentag. It is indepth, it covers a huge number of subjects that can be useful not only to buyers, borrowers, and sellers, but to mortgage professionals - and it's not written in mortgagese. You can visit their website for quick tips, better understanding of specific loan types, and more.

Another well-put-together informational geared towards educating consumers against mortgage fraud is the "Stop Mortgage Fraud" website. They cover a great deal of information that can educate borrowers and mortgage professionals alike. For "lender specific" education, such as information about Freddie Mac, Fannie Mae, or HUD, visit their websites. Each has training and educational tools, and some even have classes or scheduled internet events that you can be a part of.

Distractions in the Mortgage Office - Part Two

2006-10-10T16:11:00.000-07:00

If you plan to continue working in the office, you may want to consider a few things that are sure-fire distractions. For example, you will definitely want to avoid these time consuming activities: Gossiping co-workers, personal phone calls, phone calls from rate shoppers, driving aimlessly while wondering how to get more business, discussions of recent television shows or office politics, dreaming up other money making ideas (other than mortgages), surfing the net, and one of the most common work-stoppers - Solitairre. Recent studies show that the average office worker (in any field) will spend about two hours on productive activities. In other words, before you put all the blame on your slothful co-workers, you should consider adding a few more productive hours to your day.

If you find that distractions are seeking you out, then you may need to consider a different work environment (such as shutting your door, or working at home.) In the event that you are unable to do either, consider pointing out to your fellow mortgage originators or brokers that with less than two hours of productive work in any given day, by the end of the 40-60 hour work week, the total number of "working" hours is lowered to just 10 hours. This makes sense in a job where you are paid by the hour, but it sure makes you wonder what your total monthly income would be in a commission only career if you were to actually WORK for the entire 40 hours per week - you'd be amazed.

Distractions in the Mortgage Office - Part One

2006-09-25T19:05:00.000-07:00

One of the more common "distractions" in the office (granted, this issue is not limited to the mortgage industry) is a non-producing attitude in co-workers. Although there are many techniques to avoiding the distractions associated with workplace sloths, you're going to need a bit of self control and discipline to pull it off, whether you choose to remain in the office, or take your work home with you.

One very realistic solution for many mortgage professionals is to set up shop in your home office. One of the most important factors in originating mortgages from the home is local and state laws. In some states, there may be laws regulating how the information is stored (such as in a locked room, locked file cabinet, etc.) If you're considering working from your home, you should also be aware of the possibilities of distractions in the home, such as T.V., family members, too many breaks, or other potentially distracting factors. Be sure that you set up your home office to prevent distractions, such as using a spare room with a door that you can close, and telephone line, computer & internet, a file cabinet and a fax machine.

Getting Your Docs Signed Faster and Easier

2006-09-07T18:57:00.000-07:00

I received a free disc in the mail, and I am truly impressed with the program. I usually don't like to try out the programs because there are so many so-called free programs that turn out to be demos. But this one said it was fully free at the time, so I thought - what the heck. The program is called SureDocs (some of you may already use the program.) It was being offered for free at the time, an introductory marketing campaign - but I'm not quite sure what the deal is now.

So what does it do? Well - the part I like the best, it works within any LOS or application you are already using, sort of like a docs printer for your PC, and makes it clear where to sign with some really nifty "Sign Here" and "Date Here" symbols. Documents are immediately sent to you with an audit trail of when it was received, read, and signed. It can be easy to use either electronically with digital signatures, or the docs can be produced in PDF format for easy printing and faxing. It's definitely worth a try, and it's totally secure. Pick up a copy of the SureDocs program if you don't have a disc by visiting their download site.

Correcting Prices and the Interest Only Mortgage

2006-08-10T16:46:00.000-07:00

There's been quite a bit of talk over the exotic loans and their affects on homeowners' equity lately. The more "leveling" we see in home values and prices over the next few years will have a great impact on how the loans will affect the borrower, and their ability to pay off the mortgage. Combine the "correcting" home values with the lack of payments toward the principal amount, factor in the borrowers' stretched incomes, and you have a recipe for disaster.

The interest only or I/O loan was originally set up and geared towards someone who is financially set and well prepared for the purchase of a home. However, many borrowers "stretched their buying power" with the interest loan, using the bulk of their monthly income to pay the mortgage payments. People who would not otherwise have qualified for a loan - instantly became qualified. The changes and adjustments that the rates may bring, added to the fact that many of these loans are in areas with inflated housing prices, may cause many homeowners to lose their homes and walk away with nothing due to lack of equity built up during the I/O period.

I watched a home go from $250K skyrocket to a range of $450k to $500k in just two years, then "corrected" back down to $350,000 in just a few months. If during that time a buyer "stretched" their buying limits to afford the home at $450k, in less than six months they are owing $100,000 more than the home can sell for, and with rising rates - possibly a mortgage they are no longer comfortable with. Of course, don't forget - there's relatively no equity built up in the first few years, and none for the first 10 years if the borrower obtained an interest only mortgage. Just a hypothetical - yet very real example.

Using Home Equity to Pay Off Credit Debt

2006-08-07T14:38:00.000-07:00

Many homeowners around the world are turning to home equity loans, and home equity lines of credit, and even their IRAs and 401(K) funds to decrease or eliminate their credit card debt. Partly fueled by the recent growth in home equity and home values, partially due to lower interest rates on home loans, thousands of people per day are shifting their debt from their cards to their homes. While in some cases this can be beneficial, there are some very real hidden dangers to be aware of when chosing an option that involves taking from your home equity.

One thing that many borrowers are not aware of - or are chosing to ignore - is the definite possibility of homes in your area experiencing a "leveling off" of home values. While over the past few years the equity seemed to grow at an unreasonable rate - without much effort on the part of the borrower, that same equity could essentially disappear just as quickly. In addition to leveling home values, most ARMs are scheduled to begin to reset as early as 2007, and many homeowners will find themselves with a much higher monthly mortgage payment. For those who have a large enough monthly income to compensate for the higher payments, the jump in interest rates may not have as severe of an effect. But most borrowers will experience payment shock - even without adding in the credit card debt, and have a hard time with the monthly payments.

If a borrower has a low monthly payment now, and a higher than normal property value - it can cause a false sense of security, and lead to choices that would not otherwise be made based on the equity in the home. One of the most important thing to remember, is that there are collectors paid to collect on the credit card debt, and by not making the monthly payments on the debt - you could have your cards taken away. When you struggle to pay your monthly mortgage payments, the price is much higher - you could eventually lose your home.

Taking the extreme risk of paying off credit card debt may seem like a wise decision due to the difference in interest rates between credit cards and mortgages, but weighing your options as well as the risks may save your home. And the biggest danger of all?? Most Americans who use their home equity to pay off their credit card debt refuse to change their habits and lifestyles, and actually see their zero-balance cards as an invitation to go shopping - perpetuating the cycle. However, in this cycle, there is one detrimental factor - home values will probably not continue to experience the rise, leaving the borrower with very few recovery options for the future.

A False Sense of Home Equity

2006-08-01T18:19:00.000-07:00

With so many Americans living with a false sense of security (called home equity), it's no wonder that spending has risen to an all time high. If it's not the pressure to take out a home equity loan to pay off credit card debt, there's the pressure of wanting the big kid toys like boats, cars, and oversized electronics. But what has fueled this excess spending? In part - inflated home values - in which homeowners can borrow money against their equity. The problem is, in some areas of the country, the equity in their homes is due to a temporary "bloating" of the value. This equity used to be viewed as security for the retirement years, but more and more individuals are watching their equity dwindle away while experiencing the rising debt on their home, and payments extending into their golden years. In a world where reality TV is a new form of entertainment, it's like watching a high-stakes game of "reality Monopoly".

Here's just a brief example I was able to witness in my lifetime: A home was purchased around 1970 for a price in the $40k range, and a 30-year mortgage with a monthly payment of around $80. By the mid 90's, the home was nearly paid off, but the car was getting old. The logical solution seemed to be at the time to take out a home equity loan, and buy a new car. Why not - it was becoming an increasingly popular way of obtaining the things that would otherwise not be affordable. Several years later, another new car, then an expensive sewing machine, and finally - a cruise with friends. Today - the home is valued around $300k, and the total monthly payment is in the range of $700. Not one of the more extreme examples, but a great example of the way homeowners view their home equity as a checking account - rather than a savings account.

Types of Mortgage Fraud - Raising Awareness

2006-07-29T18:13:00.000-07:00

There are many types of mortgage fraud, but to raise awareness about this extremely rampant crime - we all need to be aware of the different types of fraud that are used. As one of our readers pointed out, there are FBI agents that are currently pursuing individuals and groups who are not only committing crimes with full intention of defrauding their customers, but they are also actively investigating common documentation "errors" that can be construed as mortgage fraud.

While not all mortgage professionals are intentionally participating in criminal activity, the only way to stop the "mistakes" that can lead to criminal prosecution is to become truly educated in the mortgage process, and make sure that all the documentation is correct and complete. It is extremely important that the lender or broker provide copies of ALL documentation.

As a consumer, the best protection that you can give yourself is education. Read all documentation BEFORE you sign. Don't just trust that your mortgage broker or lender is going to be completely honest with you. Remember - their paycheck depends on the outcome of the transaction. If you feel uncomfortable, don't give in to pressure, you must feel comfortable with every aspect of the purchase, and may even be in your best interest to have an attorney go over the documents before you sign. If you are put into a position in which you do feel overly pressured, there may be a problem - there may be a hidden agenda that is in the works, and you have every right to take some extra time to read through the disclosures and the documents that you are signing. The key is education - so if you don't understand something, ask questions until you do.

2006-07-24T17:22:00.000-07:00

When you make the decision to purchase a home, there are generally three types of financing you can opt to use to pay for the home: Cash, owner-carry, or obtaining a loan from a mortgage broker, lender, or loan officer. Chances are that you are least likely to pay cash, finding an owner to finance the purchase limits your choices in which home you would like to buy, which leaves the most popular choice: a mortgage loan. There is one very important thing to remember when looking for a lender or mortgage company - they are in the "sales" business. This is not to say that there aren't honest mortgage professionals in the industry - because there are many truly honest mortgage professionals. But because your purchase means part of your purchase price will include the paychecks of several individuals.

There are many loan officers and brokers that would like you to believe that they are not in a sales related industry, but that would be far from the truth. The reality is that all mortgage brokers, lenders, and loan officers have products that they offer, and if they are a successful sales person, their customers will "buy" their products. I have been involved in the mortgage industry for a long time, however, I believe that consumers have the right to make an informed decision about their purchases. I found a very commonly worded advertisement on Craigslist.org this evening, and thought that I would share something that I found interesting (and common) in the ad."Credit score is a big factor as a qualifying tool, but it's not the only one. There is a lot more to it than that and I would be happy to go over with and show you your options. You may qualify for more than you think. So give me a call for a complete NO cost evaluation even if you simply have questions." The first thought when I read the ad is that there are people out there that have bad credit, which could indicate that a buyer is not financially stable, and they are offering to find the most money available for a buyer's purchase. Okay, so in other words, more debt on an already financially strapped individual.first time buyer who does not know what they can or cannot afford, it may mean they are more likely to end up with a low introductory rate that leads to a future rate hike - and a mortgage payment that they can't afford to maintain.

The Problem With Option ARMs

2006-07-23T18:00:00.000-07:00

The option ARM became very popular, and with the real estate rush that we experienced over the past years, it's no wonder how so many people became wrapped up in the many types of creative loans for buyers to choose from. However, the option ARM wasn't intended to be used by buyers who "wanted more house for their money" - it was created as a good choice for investers and homeowners who were not going to own the home for very long. But the majority of buyers who are now stuck with this type of loan were exactly the buyers who should have been wary of the option ARM.

But in reality, rates have begun to rise and home values are dropping in many areas, and the option ARM has become more of a danger than it looked to be in the past. With an option ARM, there are several choices for the monthly payment, but the choice that poses the most risk is to pay the minimum due. This would be a similar risk to paying your credit card off by simply making the minimum payments. If you pay the minimum paymnet on your credit card, you would end up with a balance that is greater than the original charges. This would be exactly the result on an option ARM in which the homeowner paid just the minimum payment option.

Most borrowers with the opton ARM are opting to pay just the minimum payment, and are putting their homes at risk. The minimum payment is usually calculated using the first month's interest rate, generally a low "teaser rate" as low as 1-2%. When the monthly payments are not even covering the total amount of interest that is accumulating, the balance of the loan continues to grow, while the value of the home may not be rising as quickly as the balance due. Any unpaid interest is added to the principal, and the total of both are then used to calculate future payments. This is called negative amortization, which can present only problems for both the borrower and the lender.

The Dangers of 125% Financing

2006-07-22T17:52:00.000-07:00

There are two main factors that determine how much equity you have in a home: The value of the home, and the amount owed on the home. In other words, if you have a property that is valued at $250,000 and a mortgage loan on which you owe $175,000 then you have $75,000 equity in your home. Since the amount of the loan in a 125% leaves the buyer with no equity, and in most loans, owing more than the home is worth, these loans generally pose the greatest risk and are not usually offered by most lenders. If the homeowner defaults on the mortgage, and the lender forecloses on the property, the lender will require the homeowner to repay the difference - and lose the home.

The present danger with the 125% loan is that many homes values are not rising at the pace they once were. This not only poses a problem for the homeowner, but for the lender as well. At this juncture, if there are lenders out there that are still offering home loans that are above the value of the home, this should be considered a red flag - unless you are taking out the loan to make major improvements on the home that will definitely raise the value of the home.

Some states actually have laws that prevent lenders from loaning out more than the value of the home. Tax deductions are not available on any part of a home equity loan that exceeds the fair market value of the home. The IRS has been monitoring the 125% loans with a watchful eye, making sure than homeowners aren't incorrectly trying to write off too much interest.

Foreclosures Rates Jumped in June

2006-07-21T17:36:00.000-07:00

In May of 2006 the national foreclosure numbers came in with a grand total of 62,432. This number quickly jumped up by 7.4% with one in 1,726 households in foreclosure by June. While the total number for June topped out at 67,024 - six states have made up for more than half of the nations total.

Texas, Florida, Georgia, Ohio, and Illinois hold rates higher than the national average. California also made it into the top six states, with an increase of 19%. These six states together account for over 37,000 of the national foreclosure totals. In June alone, Texas had the highest foreclosure rate, totalling 12,693 - a 69% increase from May, raising the state's foreclosure rate to 2.7 times the national average.

This data was compiled using RealtyTrac, and many have speculated that these numbers are a small indication of what we may be seeing in the years 2007 and 2008 due to the large numbers of mortgage resets scheduled to begin in January. So far, there is very little to indicate that these numbers are not a forecast of what is to come. With the great number of exotic loans and interest only mortgages in the hands of homeowners that are already financially strapped, there is a great chance that these numbers will continue to rise, and many will find foreclosure unavoidable.

You've Got Mail - Mortgage Mail

2006-07-20T17:27:00.000-07:00

So over the next few years, many mortgage holders will find that their mailboxes may be filling up with offers to help you refinance your mortgage. This is a serious time to consider your options. If you have a mortgage that has a low introductory rate, and you are nervous that your interest rate may rise out of control - you may actually be a prime candidate for the opportunity to break out of the adjustable rate mortgage. Although there are many people that are actually benefiting from the ARM - if your payments are already as much as you can handle - consider your options before the mortgage resets. When this happens, (for many borrowers, this could as much as double the payments) the payment shock can be overwhelming, and many borrowers could be in danger of default.

There are options that can prevent the drastic rate hike, and talking to a lender or broker that you trust can be the best option available. If you don't already have someone you trust, ask your friends and family. If you still don't have anyone you can talk to, the best thing you could do would be to talk to several mortgage and loan companies. Don't take the first answer you get as written in stone, you should definitely shop around. Also, don't be afraid to tell them that you are shopping around, you may actually get a better response, and a fair quote. Some loan officers will quote you the low introductory rates, and then you are subject to the same problems you may already have been experiencing. Not all mortgages are the same, and not all of them work in the same way. Use a mortgage calculator to come up with some figures that you are comfortable with, and then bring those figures to your lender. Discuss the possibilities with your loan officer, there are definitely things you can do to prevent disaster before your mortgage resets.

Homeowners "Needed" Creative Lending

2006-07-19T17:17:00.000-07:00

In recent years, it borrowers were finding it more and more difficult to find a home loan that they could afford. But now it is catching up with all of us. Renters were crying out for solutions to high interest rates, bad credit loans, and in general - a way to jump on homeowner's bandwagon. It led the way for the interest only loans, the exotic loan, or as someone once put it - the "toxic loan". The question is, can lenders be creative enough to save millions of homeowners from sure financial disaster? The 40 and 50-year loans aren't gaining momentum the way it was once thought, and refinancing might become an impossibility since lenders are correctly hesitant to hand out 130% loans. Many people were unwittingly victim to the "scare tactics" used to create an urgency to buy before prices skyrocketed beyond affordability. Others bought their homes convinced that they would double their profits over the next few years. Creative lending may not be able to pull troubled homeowners out of the pending crisis at hand - and yet lenders don't seem overly concerned.

In my last post, I reflected on a comment made by a hopeful in the industry, who believes that the troubles that overburdened borrowers could experience may be an "opportunity" for lenders to cash in on the need to refinance. However, what he did not mention was the probability that many homeowners are using their equity as a cash giving ATM machine, and actually facilitating financial doom. A huge portion of buyers who were approved for either interest only or exotic loans would not have qualified under traditional standards. I have probably hit a nerve with some homeowners who feel entitled to own a home even though they can't afford one, but I speak from experience. I am a renter not only due to circumstance, but choice. I could have easily for a creative loan, but under the advice of my father, an attorney, I read the fine print. By doing so, I realized what my payments had the potential to become, and "disqualified" myself as a buyer at that time. I couldn't be happier that I made that decision. Signing the documents that were set before me would have nearly tripled the sticker price of the home. While I stood back and watched the housing market over the past 10 years, I can honestly say - right now the grass is greener in my rented yard, while my landlord stuggles with the rising interest rates and increasing mortgage payments.

Possible Dangers in Home Equity Loans

2006-07-18T17:08:00.000-07:00

Now, more than ever, home equity loans have become the "thing to do". With credit cards holding interest rates higher than the rate on most mortgages, homeowners have been looking towards home equity lines of credit (HELOCs) to buy the toys that they have always dreamed of. Now this may not sound like much of an issue to the untrained ear, but to those in "the know", there is a huge problem brewing in the real estate and mortgage industries. Home prices are beginning to drop in previously booming areas, interest rates slowly climbing, and a burst the number of exotic loans have increased the risk for homeowners, borrowers, and industry professionals. So why are so many mortgage professionals remaining calm? This type of build-up of financial burdens on homeowners brings about a perfect opportunity to cash in on the increasing need to refinance to keep their mortgage payments under control. According to Brad Brunts, with Citi Mortgage, these changes will bring him more business, "It offers an opportunity."

Freddie Mac estimates that Americans took $556 billion in home equity loans or cash-out refinancing programs. With little or no equity left in their homes, many homeowners will find that when their mortgage adjusts, that their payments could nearly double. This may even leave the borrowing homeowner with very few choices, and none of them good. The homeowners could choose to sell their home, but would most likely be in a position in which they owe more on the house than it's worth, and many similar homes on the market.

So is there hope? There is, take action before it's too late. In fact, it would be better to act on it before millions of other interest-only or exotic mortgage holders join the rush to dump their homes on the market.

Mortgage Training Should Not Be An Option

2006-07-17T16:21:00.000-07:00

When I first started in this business, I signed a contract that stated that I would be "fully trained" by the company that I signed on with. What a surprise it was to find out that I was supposed to "fake it until I make it." Many times when I would ask for help I was told that the answers would come to me over time, and to speak with confidence - that way the customer would have confidence in me.

Prior to getting into the mortgage business, I studied real estate in two states, Oregon and California. I was required to take many hours of courses and to have a certificate of completion prior to taking any tests for my licensure. But years later, as I sat with a blank expression on my face in my mortgage broker's office, I found myself wondering something I'm sure I wasn't alone in: Why don't mortgage brokers and loan officers face such a rigorous learning program?? I still to this day have not come up with an answer.

Today, more than ever, I am pushing for loan officers and consumers alike to educate themselves. I would highly recommend that ALL borrowers take a class or two, do internet research, and talk to many loan officers before locking yourself in with the first LO you find. It's not enough anymore to "trust" that brokers and LO's know what they are doing, many of them do know what they are doing - and many times - it's not good. My father had the best advice growing up: "If you want something done right, do it yourself." I've rambled and vented, and I believe that my point is this: education, education, education. Whether you are an industry professional, or a consumer, if you are educated - even self educated - you stand a better chance at obtaining the desired results.

National Mortgage Regulation System As Soon As 2008

2006-07-15T16:19:00.000-07:00

The National Association of Securities Dealers, Inc. and the Conference of State Bank Supervisors have entered into an agreement to develop a nationwide licensing system for state residential mortgage regulators. This 18-month effort, which involves CSBS, the American Association of Residential Mortgage Regulators and the industry to develop uniform mortgage licensing applications that would be used by each state mortgage regulator. Industry leaders are hoping that the system will lead to benefits from access to a national licensing and enforcement repository, and will likely be the result of the uniform application process and produce more closely related regulations throughout the states.

There are quite a few industry skeptics with growing concerns about how such a system will be implemented, but there are a few states that are currently testing the forms for new license applications. We could be seeing this new system available as early as January 2008, and so far a total of 30 state agencies have agreed to participate in the system. An online mortgage banking compliance service, iComply, suggests that careful consideration should be taken when deciding what information will go into the new system. A pilot program was tested in Illinois, in which implementation issues were much more dificult than anyone anticipated.

Colorado Enacts Mortgage Licensing Regulations

2006-07-12T16:12:00.000-07:00

Colorado becomes the 49th state in the U.S. to enact licensing or registrations of mortgage brokers, leaving Alaska as the last state lacking regulation on the mortgage industry. Governor Bill Owens signed the house bill enacting the Mortgage Broker Registration Act, which will require a mortgage broker (as defined below) to register with the state by January 1, 2007, although the act went into effect July 1, 2006.

The act defines a mortgage broker as anyone negotiating, originating, or offers to attempt to negotiate or originate. Originate (under the act) means to submit an applications or documentation to a lender or underwriter in an attempt to obtain a loan. After January 1, 2007 a person may not broker a mortgage, offer to broker a mortgage, act as a mortgage broker, or offer to act as a mortgage broker without first obtaining registration through the state of Colorado.

The act will also require registrants to pass a criminal background check, submit a disclosure of specified administrative discipline, and application fee, fingerprints, and a $25,000 bond or equivalent alternative. It also establishes criminal penalties for those who engage in any of these regulated activities without first obtaining the proper registration.

A Great Write-Up on the Right of Rescission

2006-05-30T20:08:00.000-07:00

Some mortgage transactions are subject to a three day "cooling off" period allowing the borrower to essentially back out of the loan before the money is actually received. I found an article that clearly explains what types of loans are subject to this cooling period, and what types are not - and why.

Originally set up to protect borrowers from unethical business tactics by lenders and mortgage professionals, the laws also provide for borrowers who may wake up and decide they have made a bad financial decision. But more often than not - it's being used to undo a bad financial decision. I have not seen this right excercised very often, but when I have - it was usually not due to fraudulent activity on the part of the lenders. But it is comforting to know - especially with my week long report on foreclosure scams (which often involve equity loans, in which these laws and rights apply) - that you can consult an attorney with the paperwork that you signed, and you would have three days to "cancel" the loan. Read the article by Holden Lewis, of Bankrate.com

It's actually a reality check. I can understand the young kids making quick descisions, such as a drunken choice of what to pierce . . . And even marriage has a "cooling off" period of it's own - during which the marriage can be annulled. But an escrow takes a while - if you can see the train wreck coming for 30-60 days, geez, get out of the way! Don't wait for it to hit you

Regions Financial to Acquire AmSouth Bancorp

2006-05-28T20:15:00.000-07:00

Regions Financial will acquire AmSouth Bancorp in a merger that would create a bank with nearly $140 billion in assets and market capitalization of about $26 billion, said officials Thursday. The two banking giants will merge in a $9.8 billion stock deal, creating the nations 10th largest bank, and hold nearly $100 billion in deposits.

Although the combined company will employ 37,000 people, the deal would reportedly save the company $400 million a year by closing 150 branches, and cutting as much as 10% of the total combined work force, about 3,600 employees will lose their jobs. The resulting bank will keep the Regions Financial name, and will have about 2,000 branches across Texas, and 16 other states across the South and Midwest regions. Jackson Moore, president/CEO of Regions, will become chairman of the combined entity. C. Dowd Ritter, chairman and president/CEO of AmSouth, will become president/CEO. Regions Financial will remain headquartered in Birmingham, Alabama.