tag:blogger.com,1999:blog-56926382585173241162024-03-13T21:41:56.650-07:00DRA Properties BlogRick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-5692638258517324116.post-84103155281215832122011-03-08T06:12:00.000-08:002011-03-08T22:21:50.077-08:00The Looming War on Mortgage Lending...I am not sure how this is going to end, but if the past few months is any indication, it is going to end in a bad way.<br /><br />Conservative lawmakers have been given a mandate to cut spending. That being said, it appears all budget items are on the table, including the privatization of <a href="http://fanniemae.com/kb/index?page=home">Fannie Mae</a> and <a href="http://www.freddiemac.com/">Freddie Mac</a>.<br /><br />In order to make to make the shift from government controlled entities back to the private sector, the two <a href="http://en.wikipedia.org/wiki/Government-sponsored_enterprise">GSE</a>'s will have to be made more attractive to Wall Street and investors. One way to do so is to eliminate the subsidies and insurance now provided by the government.<br /><br />That sounds good on paper, but if an action such as this is acted upon, it could place a already cold real estate market into a deep freeze. The GSE's currently purchase loans from lenders and banks and then sell them off to investors globally. This allows the lenders to offer more loans to new borrowers, and so goes the mortgage lending cycle. If the GSE's are not there, and it is left to the marketplace to decide, there could be an interruption in the cycle. The end result could ultimately harm the borrower with higher interest rates, fees and tougher loan qualifications with nowhere else to turn.<br /><br />Enter the real estate consortium of real estate agents, builders, banks, civil rights groups and other concerned citizens. The <a href="http://www.realtor.org/">NAR</a>, <a href="http://www.aba.com/default.htm">ABA</a>, <a href="http://www.nahb.com/">NAHB</a>, <a href="http://www.nationalfairhousing.org/">NFHA</a> and other civil rights and real estate trade organizations are planning to go to Washington and make sure their voices are heard and actions are taken contrary to the conservative law makers wishes.<br /><br />This group has galvanized their separate but equal interests in the real estate industry into one potent machine aimed at accomplishing one goal - the continuation of government backed insurance on mortgage loans.<br /><br />Why is this going to be a war ? Well, a lot of new conservatives have been hired by voters to curb government spending, and cutting the responsibility of backing mortgages is a way of cutting costs and saving money. But, the aforementioned real estate and civil rights organizations are a powerful lobbying corp, with deep pockets.<br /><br />These two are heavy hitters - one with a mandate to give the taxpayers what they are looking for - savings; the other looking out for the public's interest by making sure housing continues to be affordable.<br /><br />I am not real clear as to which side is right, because the devil is in the details. If one side wins, does that mean the other side deserves to lose ? I have a bad feeling no matter which side is victorious, it will not end well for taxpayers or borrowers in the future...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com15tag:blogger.com,1999:blog-5692638258517324116.post-89091400686428053902011-03-01T10:09:00.000-08:002011-03-01T22:44:36.384-08:00Why We Remain Financially At Risk...You would think that after the <a href="http://en.wikipedia.org/wiki/TARP">TARP</a> funds were distributed to all of the major banks, and then returned to tax payers shortly thereafter - that the U.S. would be somewhat solvent as far as lending institutions go...<br /><br />Well, according to the economists at <a href="http://www.nyu.edu/">New York University</a>'s Stern School of Business - not so fast.<br /><br />With the help of <a href="http://nobelprize.org/">Nobel Prize</a> winner <a href="http://en.wikipedia.org/wiki/Robert_Engle">Robert <span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">Engle</span></span></a>, the university has developed it's own model on how to measure if a financial institution is systemically "risky".<br /><br />There is a somewhat sophisticated mixture of financial benchmarks used in order to determine the risk level, but it basically shows that the largest lending institutions would possibly need the same infusion of cash and tax payer backed funds if the financial events of 2008 repeated itself any time in the near future.<br /><br />But it is not fair to place all financial institutions in the same boat. Just like any other sector in business, some lenders just do things different than their competition. In this case, bigger can be better, if it's done correctly.<br /><br />I do not know how the large institutions can become less risky, since risk is the game they play. But it appears that you can be in the risk game, and not be risky at all...<br /><br />Want to know more ? Visit the site with the results, <a href="http://vlab.stern.nyu.edu/welcome/risk/">Vlab.Stern.edu</a> and read the findings and other information concerning the riskiest financial institutions in the U.S today.<br /><br />I would like to thank <a href="http://www.businessweek.com/"><span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">Bloomberg</span></span> <span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">Businessweek</span></span></a> magazine for presenting this article. It is the Feb.7<span class="blsp-spelling-error" id="SPELLING_ERROR_3"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">th</span></span> - Feb.13<span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">th</span></span> 2011 edition of the weekly magazine. The article is located on Page 39, and is written by Craig Torres. Good information to know, Craig...Thank YouRick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com2tag:blogger.com,1999:blog-5692638258517324116.post-28339738127897240422011-02-21T17:43:00.000-08:002011-02-24T21:24:01.752-08:00Is Congress Trying to Eliminate Mortgage Brokers ?April 1st. April 1st is April Fool's Day. It's also one of my dearest friend's birthday.<br /><br />But this year, it's significant in another way as well. April 1st, 2011 is the day Mortgage Brokers will have to decide how they will be compensated - 100% by the borrower, or 100% from the Lender. One or the other. Brokers will not be able to "straddle the fence" and receive compensation both ways anymore, as has been the case for quite some time now.<br /><br />Brokers are going to lose the ability to tailor the loan to suit the borrower. If compensation is to be lender paid, the broker must pick one flat premium to charge on all loans, no matter the situation. No broker credit allowed. And because the lender premium will have to pay for all of the broker compensation and lender fees, that means a higher rate must be charged by the broker to cover the costs. This means higher interest rates have to be quoted to borrower. Who benefits the most from this ? The large banks do, that's who. <br /><br />Now that the only borrower who can get a loan is a borrower with a good score, all lenders, banks and brokers are competing with interest rates, not loan programs like a few years ago. And if everyone is competing on the pricing of interest rates, it would appear as if brokers are really about to lose...<br /><br />Sounds like a really bad situation for borrowers and brokers. It's difficult enough getting a transaction to work as things stand today. This new legislation is bound to make things worse, it seems. <br /><br />But will it really ?<br /><br />My first impression was yes, it's bad. Real bad. But after thinking about it a bit, reading some lender guidelines on the subject, and watching video from my friends at <a href="http://thinkbigworksmall.com/mypage/archive/1/58696"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">TBWS</span>.com</a> I am not so sure.<br /><br />Of the course the "big banks" would love to crush their smaller, more elusive competition (smaller regional banks and mortgage brokers), and with the help of Congress, it appears the new <a href="http://en.wikipedia.org/wiki/Financial_Reform_Bill">financial reform</a> legislation is geared towards serving that purpose. Brokers and smaller lenders have long shared a "scratch my back and I'll scratch yours"relationship in the past, and the new law will probably strengthen the mutual benefit affair between the two...<br /><br />The one-way or another broker compensation legislation is definitely in place to cut out the niche brokers and small banks, and to give an even larger slice of the mortgage loan pie to large lending institutions.<br /><br />But, I do not think it is actually going to be that bad. Sure, brokers and banks will have to make adjustments to comply, but they will. The everyday, hard working industry professionals will figure out the legislation, the competition, and the way to get things done - despite the constantly changing obstacles that are ever present.<br /><br />Hasn't it always been that way ?Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com6tag:blogger.com,1999:blog-5692638258517324116.post-57447399175362689922011-02-16T16:50:00.000-08:002011-02-16T20:58:07.656-08:00Pre-Qual, Pre-Approval, Conditional Approval - What's the Difference ?As long as I have been in the mortgage business (about 8 years now), there has always been confusion by borrowers (and some loan officers) about the difference between a loan Pre-Qualification and loan Pre-Approval.<br /><br />Not Even Close...<br />A <span style="font-weight: bold;">Pre-Qual</span>, or <span style="font-weight: bold;">Pre-qualification</span> can almost be considered a task as simple as someone looking at a credit report and saying "yes, they have a credit report with decent scores, therefore, they are pre-qualified for a mortgage loan !". It isn't that simple, but it is very, very close. A pre-qual has no real standing, and is virtually worthless. There are so many nuances with a REAL approval for a mortgage loan that a pre-qual simply misses. If a broker or lender tells you they will "pre-qual you for a mortgage", first ask them what they mean by "pre-qual". If they then describe to you they will basically only review your credit report, tell them, "never mind". A pre-qual is simply a wast of everyone's time...<br /><br />Better, But Still Not There Yet...<br />A <span style="font-weight: bold;">Pre-Approval</span> is a little better. Why ? Well, a pre-approval contains more information about the borrower. Generally, a pre-approval involves <a href="http://www.pdfdownload.org/pdf2html/pdf2html.php?url=https%3A%2F%2Fwww.efanniemae.com%2Fsf%2Fformsdocs%2Fforms%2Fpdf%2Fsellingtrans%2F1003irev.pdf&images=yes">URAR 1003 loan application</a>. A lender, or broker will actually ask the borrower questions based on the 1003. Then, they just fill in the blanks. It is very similar (it is the same document the loan officer will use for loan submission to underwriting, but usually does not have verified information) to the actual loan application. <br /><br />Once the broker has the information, they will then submit the information to either <a href="http://www.fanniemae.com/kb/index?page=home">Fannie Mae</a>'s DO/DU (Desktop Originator/Desktop Underwriting) or to <a href="http://www.freddiemac.com/">Freddie Mac</a>'s LP (Loan Prospector) Loan Approval engines. A broker or lender can use DO/DU or LP to pre-approve a FHA, VA, or Conventional loan for a borrower. It is very powerful, and it is a simple, quick way to see if the borrower fits into the scope and parameters of the loan program they are seeking. DO/DU and LP are also used as guidelines by underwriters as to what the borrower will need to provide to the underwriter in order to receive final loan approval. We will talk more about that in a minute. But you still are not there yet...<br /><br /><br />You Are Getting Close...<br />A <span style="font-weight: bold;">Conditional Approval</span> is actually that - Your loan is approved based on the conditions that have been set by the underwriting. The 1003 has been completed by the loan officer with the information contained on the application verified with the borrower's documentation. The loan officer has looked at paystubs, W2's, bank statements and verified work history, rental history, and various other items and tasks required for the loan to be approved. A conditional approval is much better than a pre-qual and a pre-approval, but it definitely the riskiest area to be in, and the scariest. You are fully immersed in the loan process now. The chips are stacked - you have drawn a line in the sand...This is your position and you will stand behind it, 100%. You are all in...<br /><br />There are so many things that can go wrong now, and you are totally exposed, unlike when you are in the pre-qual/pre-approval stages. You can pay for an inspection and the foundation is bad. You can pay for a appraisal and the value is not there. Or if it is at first, the lender will ask for a field review and drop the appraised value $60,000 (welcome to today's real estate market !), which will absolutely kill your deal. Or their is a cloud on the title of the property. There are so many things that can go wrong here. <br /><br />I do not mean to scare anyone. Most real estate transactions go through okay. Very few have things that happen that stop the transaction cold in it's tracks. But I will tell you this - <span style="font-weight: bold; font-style: italic;">There Will Always Be Something to Deal With in a Real Estate Transaction</span>, I can promise you...<br /><br /><br />This is What You Want...<br /><span style="font-weight: bold;">Final Approval</span>. Nirvana. You have made it. This is what it is all about. You have met all of the conditions required to close your mortgage loan transaction, and everything has checked out and fits the parameters set by the DO/LP Approval and underwriting. The underwriter now has no choice - they issue Final Approval, and your loan is Clear to Close. The underwriter then forwards your loan to the lender's closing dept., and then you schedule your closing. The bumpy ride is over, and you have won...<br /><br />I have been through this process a hundred times, and everyone of them is a unique experience, never to be forgotten...<br /><br />So, the tip of the day is this - Ask for a "Pre-Approval", always. It will start you off on the right track, and if you do not measure up right now, at least you will know what you may need to do in order to get your final approval in the future...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com2tag:blogger.com,1999:blog-5692638258517324116.post-89263742589524950062011-02-10T19:46:00.000-08:002011-02-10T20:38:27.116-08:00Who Does the Closing Attorney Represent in a Transaction ?Who does the Closing Attorney represent in a real estate transaction?<br /><br />Well...It depends...<br /><br />In a cash transaction in the state of Georgia (outright purchase of the property), the attorney generally represents the party that contacted them first to oversee the transaction. But this can be seen as a gray area as well, it's according to how the parties act in the transaction as to whose interest the attorney represents. Therefore, it is very important to establish who the attorney will represent in the transaction at the very beginning, so there is no confusion. There is a box of the <a href="http://www.pdfdownload.org/pdf2html/pdf2html.php?url=http%3A%2F%2Fwww.1st-forms.com%2FFMLS%2FappStylesheets%2Fidc_fls%2Ffrm%2FHARRYN%2FF20_2010_HARRYN.pdf&images=yes">GAR Purchase & Sale Agreement</a> form (Page 2, Paragraph 7) that allows either the buyer or seller to be represented.<br /><br />Borrower's almost always assume (mistakenly) that the closing attorney represents them during the real estate closing. It is totally understandable to think this, since the buyer generally is footing the bill for the title services.<br /><br />Sometimes the seller thinks the attorney represents their interest in the transaction, since they offered to pay closing costs to the buyer. And it is true, generally the seller can stipulate who the closing attorney shall be simply because they are paying the cost for the attorney.<br /><br />But if a lender is involved in the transaction (in the State of Georgia), the attorney represents the lender, and acts on the behalf of the lender throughout the whole transaction. It doesn't matter if it is a purchase or refinance transaction (see the <a href="http://www.pdfdownload.org/pdf2html/pdf2html.php?url=http%3A%2F%2Fwww.1st-forms.com%2FFMLS%2FappStylesheets%2Fidc_fls%2Ffrm%2FHARRYN%2FF20_2010_HARRYN.pdf&images=yes">GAR Purchase & Sale Agreement</a>, Page 2, Paragraph 7)<br /><br />Every so often, (rarely) you run into a closing attorney who is NOT on the lender's approved attorney list. If they are not approved (or <a href="http://en.wikipedia.org/wiki/Blacklist">blacklisted</a>), you cannot close your loan with that attorney. You have to find an approved attorney. And the seller has to choose an approved closing attorney (or allow the buyer to select the attorney), or choose another buyer.<br /><br />That's how you know who's interest the closing attorney represents...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com6tag:blogger.com,1999:blog-5692638258517324116.post-2688714477307427032011-02-08T16:22:00.000-08:002011-02-09T21:00:18.545-08:00What Alternatives Do You Have ? Alternative Credit and How to Make it Work for You...More and more these days, it seems I am running into buyers and borrowers that just have, for some reason or another, decided to stop using creditor that report to the credit bureaus.<br /><br />For some clients, this is a REAL BAD THING, because their credit scores were bad before, and since there has been no recent activity, the bad scores are frozen in time, as well.<br /><br />These potential borrower have one thing to do and one thing only - GET THAT SCORE UP IMMEDIATELY. There are several ways to do this, but there is one way I recommend to most people in this situation: Find a <a href="http://www.rushcard.com/index.aspx?referer=Gengoogle33&gclid=CIHSiPfp-aYCFU5a7AodVxt-CQ">prepaid credit card company</a> (two or three actually, if you really want to get your credit in good condition quickly), and pay the fee. Charge on the card, and make sure you carry a balance of 1/3 of credit limit at all times. If there is a possibility of a debt-to-income ratio issue, simply pay off the balance 45 to 60 days prior to signing a mortgage loan application. And it should work. I have had several clients to follow this formula, and it seems to turn out in a positive way. However, the borrower must be patient. It can take up to a year of seasoning to maximize the effects of the new credit and diminish the old bad credit on the credit report.<br /><br />For others, it's a good thing. Their credit scores appear to "freeze" in time, holding up that same numbers as the last time there was any activity by the borrower. These borrower have the scores to qualify for a mortgage loan immediately, but do not meet the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">tradeline</span> qualification quantities or seasoning required by the lender.<br /><br />That's when <a href="http://en.wikipedia.org/wiki/Alternative_data">Alternative Credit Data</a> comes into play. Lenders understand (yes, they ACTUALLY understand this, at least some of them do) that not everyone uses credit to live. A lot of people use alternative means - barter, money orders, checks (remember checks ?) and cash to actually pay to live. So there is a system set in place where a borrower can use alternative credit to get around normal credit requirements.<br /><br />First and foremost, a borrower that will use alternative credit must know in advance they will do so, that way they can make sure their cell phone, electrical and gas bills are in their (the borrowers) name. The alternative credit account(s) must be in the borrowers name. Otherwise, alternative credit will not work.<br /><br />There are different levels, or tiers, given to alternative <span class="blsp-spelling-error" id="SPELLING_ERROR_1">tradelines</span>:<br /><br /><br /><a href="http://3.bp.blogspot.com/_u_WaFb7PitE/TVIT2cz1PUI/AAAAAAAAALw/ZgLKGoSlDNg/s1600/DRA%2BPRoperties%2BBlog%2BAlternative%2BCredit%2BChart%2B%2523%2B7%2B%25282-8-2011%2529.gif"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 400px; height: 318px;" src="http://3.bp.blogspot.com/_u_WaFb7PitE/TVIT2cz1PUI/AAAAAAAAALw/ZgLKGoSlDNg/s400/DRA%2BPRoperties%2BBlog%2BAlternative%2BCredit%2BChart%2B%2523%2B7%2B%25282-8-2011%2529.gif" alt="" id="BLOGGER_PHOTO_ID_5571537515178179906" border="0" /></a><br />Each tier has a descending level of importance, with the Tier I alternative <span class="blsp-spelling-error" id="SPELLING_ERROR_2">tradelines</span> carrying the most weight, and the the Tier III <span class="blsp-spelling-error" id="SPELLING_ERROR_3">tradelines</span> carrying the least. For instance, proof of 12 months Rental Housing payments are so strong, they often double as Verification of Rent and as 1 of the necessary 3 <span class="blsp-spelling-error" id="SPELLING_ERROR_4">tradelines</span> needed to meet the the alternative <span class="blsp-spelling-error" id="SPELLING_ERROR_5">tradeline</span> requirements.<br /><br />There is one caveat to all of this is - with any source of alternative credit provided, you cannot be late. You are putting the last nail in your coffin if you provide documentation with a history of <span class="blsp-spelling-error" id="SPELLING_ERROR_6">lates</span>. Take my advice - Don't do it.<br /><br />You will get the benefit of the service being provided to you, and have the ability to tap into this source when you are ready to take the plunge and buy a new home, without the hassle of maintaining the much heralded credit score rating...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com1tag:blogger.com,1999:blog-5692638258517324116.post-21533504186862482892011-02-03T21:41:00.000-08:002011-02-03T22:19:18.550-08:00Rental History - Where You Live and How You Pay Matters...Inevitably, people who rent or live at home always run into this problem - they do not have a 12 month history of rental payments. So when they decide to apply for a mortgage loan, this fact slaps them right in the face, and can lead to the borrower not being approved.<br /><br />Of course, this does not apply to those who live in apartment complexes, or have a mortgage in their name that reports to the credit bureaus. The rental or mortgage history is easy for a prospective lender to track in this case, because a apartment complex is a non-interested third party, and your mortgage company will report to the bureaus if you are late with your payment.<br /><br />The problem arises when a potential borrower lives at home with his or her parents. If you are seeking <a href="http://www.hud.gov/offices/hsg/fhahistory.cfm">FHA</a> financing you may be okay (with certain lenders and when certain loan parameters are met, rental history is not required), but as lenders continuously tighten lending requirements, I have seen rental documentation become a requirement on some FHA loans.<br /><br />So I am going to say what all mortgage industry professionals know, but the general public seems to be totally unaware of - You must pay your rent with a check, or automatic withdrawal from your banking account. And you must pay at the same time, AND same amount, for 12 months consecutively, in order for a lender to consider your rental history as valid. Renters which have a landlord will be required to provide rental documentation in the form of 12 month's bank statements, because the lender will not accept a <span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">VOR</span></span> (Verification of Rent) from this source. The landlord is deemed to be an INTERESTED party (they may not tell the truth about the rent being paid on time, or they could say you were late one month, and you weren't), so lenders do not accept any written documentation from the property owner. <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">VOR's</span></span> are only acceptable from a apartment complex or property management company.<br /><br />I have had people to say they pay by checks some months, then by money order, then - sometimes with cash. Or they paid $600 last month, and $750 this previous 10 months, but have been able to skip a month or two because they did some personal favor for the landlord. All of this sends a red flag to the lender, and the borrower with the best credit scores and income is all of a sudden in trouble.<br /><br />So, if you are a person wishes to purchase a home within the next 12 months who lives at home with your parents rent-free, has a roommate that you share a apartment with but you're not on the lease, or rent from a private landlord, do yourself a BIG favor - open a checking account and pay by check from NOW ON.<br /><br />When it's time to buy your new home and get mortgage financing, you will be glad you did...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com3tag:blogger.com,1999:blog-5692638258517324116.post-30760877446138087142010-12-31T12:03:00.000-08:002010-12-31T13:15:26.924-08:00Stay The Course - Housing Market Continues to Need Government Intervention...The Housing Market is not ready to float on it's own right now. As for the past two or three years, it still needs a life preserver in order to survive.<br /><br />Without <a href="http://www.fanniemae.com/kb/index?page=home">Fannie</a>, <a href="http://www.freddiemac.com/">Freddie</a> or <a href="http://www.ginniemae.gov/">Ginnie</a>, the housing market would come to a complete stop. The private market is not ready to take the reins from the <a href="http://en.wikipedia.org/wiki/Government-sponsored_enterprise"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">GSE's</span></a>. If Fannie and Freddie were released from government care, the housing market would become as slow as molasses runs during winter.<br /><br />Prior to the new Congress being elected, there was political talk that suggested Fannie & Freddie should not be ran by the government, and should be returned as private companies. Now that the new members have been elected, and power has shifted in the <a href="http://www.house.gov/">House</a>, it appears there are second thoughts about dissolving the relationship between the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">government</span> and the <span class="blsp-spelling-error" id="SPELLING_ERROR_2">GSE's</span>. At least for the near future.<br /><br />And that's a good thing...<br /><br />According to the article written by <a href="http://www.theatlantic.com/business/archive/2010/12/why-are-republicans-changing-their-tune-on-fannie-and-freddie/68651/">The Atlantic</a> online website<span class="byline"> (</span><span class="byline"><a href="mailto:dindiviglio@theatlantic.com">Daniel Indiviglio</a>)</span><span class="byline">, the new majority in the House are reconsidering their mantra of government cutting ties with Fannie and Freddie.<br /><br />And with good timing, because the housing market still has a way to go before it stops bleeding. Fannie and Freddie are currently propping up the market, providing much needed life support to a severely wounded sector of the U.S. economy.<br /><br />If the government cuts ties with Fannie and Freddie anytime soon, the housing market will lose the much needed support, and will be DOA...<br /><br />Let's hope <a href="http://en.wikipedia.org/wiki/United_States_Congress">Congress</a> continues to realize this, and dedicates itself to stay the course to legislate a economic road to recovery - not a road to disaster...<br /></span>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com1tag:blogger.com,1999:blog-5692638258517324116.post-37183196266367506462010-08-01T15:04:00.000-07:002010-08-10T13:31:13.575-07:00Appraiser Independance - A Must Have For The American Economic Recovery...I was thinking a bit about the phasing out of <a href="http://en.wikipedia.org/wiki/Home_valuation_code_of_conduct">HVCC</a> and how that is going to positively impact the real estate industry specifically and the economy as a whole. We sure do not need any more silly legislation that stops any of us from doing are jobs as efficiently as possible. Then I started thinking about what for sure was the central reason why <a href="http://www.fredlaw.com/articles/banking/bank_0809_esa.html">HVCC was written</a> and enacted as a rule in the first place - The Undue Pressure and "Force" applied to appraisers to get the value. This pressure caused a lot of strife, and helped to drive the whole real estate industry into the ditch. It has got to stop, for good...<br /><br />Let Appraisers Be Independent<br /><br />All of us - Mortgage Brokers, consumers, Realtor, Real Estate Agents, Builders, Loan Officers, Lenders, must let appraisers be independent and not unduly influenced. We have got to let these people do their jobs with confidence. Confidence in knowing there is not going to be retribution if that value is not correct. Assurance that they can give their opinion of value freely, and not be penalized because they do so in the market place by loan officers, brokers and lenders that seek their business.<br /><br />I have had the privilege of working with two very fine appraisers in the last seven years. I would submit my Request for Appraisal to the appraiser. He would let me know his schedule, and would take a quick look at the comps, PRIOR to performing the appraisal. Since I have my real estate license as well, I could see a lot of the same comps that he did, so I knew what the comps looked like before I submitted my request.<br /><br />But I could not see EVERYTHING that he could see. If things were going to be o.k., I did not hear from him at all, he would just perform the appraisal, and send it to me when it was completed. Sometimes it was higher than expected. Sometimes it was lower.<br /><br />However - when there was a problem, a $20,000 problem - let's say, he would let me know immediately, prior to him submitting the completed appraisal to me. And I would alert the borrowers and agents that there could be a potential problem with the value and they had better start figuring out the solution right away.<br /><br />Even though appraisal are opinions of value, they are based on facts. Actual market conditions. Actual comparable sales within a certain time frame. Real adjustments based on standard appraisal practices. The facts are the facts. Based on market conditions, comps and standard adjustments, the value is "X". Ever noticed how you can contact two appraisers that do not know each other and the tell you nearly the same estimate of value ? That's because it's based on factual, obtainable data that appraisers have access to...<br /><br />NOW, I am not talking about fraudulent behavior. False comps, False adjustments and False opinions of value. Those people are criminals. And they belong in jail.<br /><br />I am talking about an honest, open, fluid relationship between the client and the appraiser.<br /><br />If we do not allow appraisers to do their jobs honestly, comfortably and with dignity, then some body is going to invent another HVCC type fiasco and set us back at least another two or three years, again...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-76812440781339983332010-07-31T09:00:00.000-07:002010-08-01T15:18:42.649-07:00Heard It Through the Broker Vine Vol. 1 - No More HVCC ?I heard something the other day through what I call the "broker vine" that was very interesting.<br /><br />First, let me tell you what the "broker vine" is - it's a mortgage broker "huff & puff" fest that generally happens once or twice a month.<br /><br />Here's how it works - some loan officer or broker hears some "news" from some inside or unknown source and begins having these "impromptu" meetings all over the office about some good or bad legislation or law that's coming down the road real soon (whether real or imagined).<br /><br />These sessions are almost always followed by a series of hoots and hollers and high fives for good news, and a lot of fist clenching, teeth gnashing and swearing at the ceiling at bad news.<br /><br />Huff & Puff. Get it ?<br /><br />You want to know EXACTLY what I mean. Visit <a href="http://www.thinkbigworksmall.com/">tbws.com</a>. These guys are the huffiest, puffiest mortgage guys on the internet, period. Watch one of their daily videos. You'll see what I mean...<br /><br />Alright - Back to the Point.<br /><br />I was told the other day that the <a href="http://en.wikipedia.org/wiki/Home_valuation_code_of_conduct">Home Valuation Code of Conduct</a>, or <a href="https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf">HVCC</a>, is going to be nixed within the next 90 days. Apparently, President Obama just signed <a href="http://www.housingwire.com/2010/07/23/obama-signs-bill-eliminating-hvcc">The Death of HVCC</a> with the signing of the <a href="http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act">Dodd-Frank Act</a>. It must be true, because news sources all over are stating that is for real. But still - Like I said, it's "huff & puff".<br /><br />The HVCC bill came about from an <a href="http://www.fredlaw.com/articles/banking/bank_0809_esa.html">agreement</a> New York Attorney General Andrew Cuomo made with <a href="http://www.fanniemae.com/kb/index?page=home">Fannie Mae</a> and <a href="http://www.freddiemac.com/">Freddie Mac</a> on requiring new rules and standards over appraisals. It seems the New York Attorney General, in a short period of time, turned himself into a "real estate appraiser guru", and decided he knew what was best. For ALL of US. I like Andrew Cuomo. But. Dude. Bad Idea. Really.<br /><br />Why HVCC Does Not, and Will Not Work<br /><br />This is a true story. Borrowers are going to use Lender A to finance their new home purchase. Lender A orders appraisal for the property through Appraisal Management Company A. Appraisal cost equal $400, paid by borrower. Appraisal equals the sales price of the home on the Purchase and Sale Agreement. Lender A cannot close the loan for the borrowers. Per Lender A, borrowers do not qualify.<br /><br />Borrowers leave Lender A and make a loan application with Lender B, while still under contract to purchase the home. Lender B approves loan. However, because of HVCC rules, Lender B cannot transfer the appraisal from Lender A. Lender B orders new appraisal from Appraisal Management Company B. Appraisal cost an additional $500 ($400 plus $100 "rush fee". Trying to still go to closing on time). Appraisal comes back from appraiser $20,000 short. And the appraisal was just completed by AMC A about 30 days ago. There are negotiations between the AMC and the appraiser, but he will not re-consider the value.<br /><br />All of a sudden, the appraiser becomes GOD. All parties of the transaction are willing to do whatever it takes to get the deal done. BUT, the appraiser is NOW GOD, and GOD SAYS NO.<br /><br />The appraiser unduly influences the transaction. And he is protected by HVCC. Not by his Appraisal Management Company mind you, because they opted to negotiate with the appraiser on behalf of the buyers. It did not work.<br /><br />Lender B orders another appraisal through AMC B. This is appraisal number three. And that will be another $400 please. This appraisal comes in low as well. But it's $10,000 lower than the original appraisal - not $20,000. This number is much more reasonable, and it is negotiated between the buyer and seller. Deal Done. Transaction closes.<br /><br />Here's the problem - Besides the borrower spending $1,300 on appraisals. Besides the HVCC rule that basically does not allow transference of appraisals from one AMC to another (in some cases it works, but from what I have seen and heard, it's rare). In the story above, Appraisal Management Company A & B are THE SAME COMPANY.<br /><br />The AMC managed to bilk $1,300 from the borrower with 3 appraisals, and were not able to transfer the original appraisal so that the borrower could use it with the new lender. It seems that there is some rule that once you generate a transaction number for one appraisal, you cannot change it to another lender. And there is no way you can transfer a Conventional appraisal into an FHA appraisal. Before HVCC, the appraiser had to do some additional work, but as long as he was a Certified FHA Appraiser, he could definitely change a Conventional appraisal into a FHA appraisal. No Big Deal.<br /><br />So, going back to the "old way" of doing business is going to be a welcome change to what we are currently muddling through. It's time to get the ball rolling again. I believe the real estate industry is the bedrock of the U.S. economy. If we can get all of the inventory sold, new housing starts rising, and real estate sales to begin to tick up again, maybe we can get America back to work and on it's feet. HVCC was as sure-fire way to make sure an economic recovery was going to be a long, drawn out ordeal, for sure.<br /><br />The phasing out of HVCC couldn't come any sooner. Hopefully this barrier to the real estate industry will be put to bed forever, never to return...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com1tag:blogger.com,1999:blog-5692638258517324116.post-40700055411376462102010-07-25T11:58:00.000-07:002010-07-25T13:44:24.909-07:00My New Real Estate Hero - Jean Gregoire Sagbo, First Black Politician in RussiaI have never heard of <cite class="caption">Jean Gregoire <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Sagbo</span>, </cite>until I read the article today from <a href="http://www.associatedpress.com/">Associated Press</a> and <a href="http://news.yahoo.com/">Yahoo! World News</a> titled "<a style="font-style: italic;" href="http://news.yahoo.com/s/ap/20100725/ap_on_re_eu/eu_russia_black_politician">A Russian Milestone..</a><a style="font-style: italic;" href="http://news.yahoo.com/s/ap/20100725/ap_on_re_eu/eu_russia_black_politician">.</a>"<br /><br />He negotiates Real Estate sales in Russia. He has lived in Russia since 1982, is married and has two children. Sounds Normal, right ?<br /><cite class="caption"><br /></cite>But Apparently, He in anything BUT normal. He is special. He is a member of the Town Council, and is not paid for his services. He is heavily civic minded. He cares about the people and his community, and the townspeople of <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Novozavidovo</span>, Russia know it. So, in what has been the called the town's first fair and honest election, Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Sagbo</span> was elected as a Councilor.<br /><br />Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_3">Sagbo</span> is also African. He is the first Black person to ever be elected to a Russian political office. EVER.<br /><br />He has what it takes to cross the color lines, and make people color blind. The people of <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Novozavidovo</span> do not see race or color when they think of Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Sagbo</span>. They just see a fellow <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Russian</span> who cares about his community in a way that is necessary and welcomed. However, he does not like being compared to President Obama. He believes his situation is very different than the current U.S. President's, and who can argue with him ?<br /><br />The world needs more people like <cite class="caption">Jean Gregoire <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Sagbo</span>. </cite>My goodness, DO WE. Congratulations Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Sagbo</span>. You are MY HERO for the day...<cite class="caption"><br /></cite><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/_u_WaFb7PitE/TEyRRvJxLiI/AAAAAAAAAHQ/2bkrb2M1-Lc/s1600/Jean+Gregoire+Sagbo+Photo.jpg"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 320px; height: 223px;" src="http://2.bp.blogspot.com/_u_WaFb7PitE/TEyRRvJxLiI/AAAAAAAAAHQ/2bkrb2M1-Lc/s320/Jean+Gregoire+Sagbo+Photo.jpg" alt="" id="BLOGGER_PHOTO_ID_5497928979013774882" border="0" /></a><br /><div style="text-align: center;">Photo of <a href="http://news.yahoo.com/nphotos/First-black-politician-elected-office-Russia/ss/events/wl/072510jeansagbo">Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Sagbo</span></a> from <span style="font-style: italic;">Associated Press </span>via <span style="font-style: italic;">Yahoo! News</span><br /></div>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-2115747520923232872010-07-23T16:42:00.000-07:002010-07-23T22:25:13.268-07:00DEATH of a MORTGAGE BROKER...Loss of YSP to Remove Brokers from Mortgage Market...Well, they have went and done it now. If you read my posts regularly, you know I am a staunch advocate for <a href="http://en.wikipedia.org/wiki/Mortgage_broker">Mortgage Brokers</a> and <a href="http://en.wikipedia.org/wiki/Yield_spread_premium">Yield Spread Premium</a>.<br /><br />I have worked with different mortgage brokerages for the last 7 years, and have seen the benefits of being a broker versus being a lender or a bank.<br /><br />Mortgage brokers have built-in flexibility in the way they do their business. They can move fluidly from one lender to another, and the borrower does not have all of the hassle of making multiple applications and credit report pulls from different banks or lenders. And that's the simple part.<br /><br />Mortgage Brokers are the kings of the low interest rate. I do not care what bank or lender you walk into off the street and that institution offers you an interest rate - the mortgage broker is almost always going to be able to beat the rate you just received. FROM THE SAME BANK OR LENDER.<br /><br />Why ? You guessed it - Yield Spread Premium. Lets call it "YSP", for short. YSP, or the percentage a bank or lender will pay to a broker for a certain interest rate sold to a borrower, RULES.<br /><br />The lender will offer YSP as an incentive for mortgage brokers to send them their borrowers. It's a great way for lenders and banks to supplement their mortgage loan pipeline. Quite often, banks and lenders offer better rates to mortgage brokers (wholesale) than they offer on their own websites or in their branches (retail). With retail interest rates, the bank is rolling all of the costs of the bricks and mortar into the interest rate. Somebody has got to pay the light bill. Might as well be the customer...<br /><br />Ultimately with YSP - The BORROWER is the winner. How - You may ask ? Well, the mortgage broker can give some relief to closing costs by switching some of the burden to YSP. That way, the seller's contribution on a purchase can be used to help pay more than just the closing costs - now money can be extended to the escrow account, etc...Everybody Wins...<br /><br />Banks do have interest rate YSP as well, but it is not disclosed. So what do you think will happen if you do not have to disclose YSP and there is not competition from mortgage brokers ? Artificially higher interest rates. The banks make a killing. Guess What ? You lose, Mr. & Ms. Borrower...<br /><br />You would think the U.S. Congress would understand the way this works. Apparently they don't. Or they do and do not care. Or, they are just trying to give more business to banks. Who knows what their motivation is to legislate pure, unadulterated garbage ?<br /><br />Enter the Game Changer:<br /><br /><strong><span style=";font-family:'Times New Roman','serif';font-size:14pt;color:navy;" ><span style="font-size:130%;"><a href="http://www.house.gov/apps/list/press/financialsvcs_dem/1728.pdf">The Financial Regulatory Reform Bill,</a></span> </span></strong>or <a href="http://www.house.gov/apps/list/press/financialsvcs_dem/summary_of_hr_1728_--_03_26_09.pdf">H.R. 1728</a>, is going to change everything - or make the mortgage industry a good bit different than it has been for quite some time. According to the <a href="http://www.namb.org/namb/Default.asp">National Association of Mortgage Brokers</a>, borrowers will have two choices - 1) Pay all closing costs out of pocket, or 2) put ALL closing costs into their interest rate. Now, that is not going to have that much of an effect on refinances (most refi's roll the total closing costs and escrows into the new refinance loan), but it is going to have an adverse affect on purchases. Go to the NAMB site and read their <a href="http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=283&SnID=2008353046">press release</a> concerning Bill HR 1728. If you are so inclined to read more about Bill H.R. 1728, Save yourself some time - go to the <a href="http://www.house.gov/apps/list/press/financialsvcs_dem/summary_of_hr_1728_--_03_26_09.pdf">Bill H.R. 1728 Summary</a> site to get a snapshot of what we are dealing with here.<br /><br />When purchases are negotiated, there is usually money contributed by the seller, and the borrower can use these funds to help pay for closing costs, prepaids, etc...But what if the seller has little to no funds available to contribute to the transaction ? Here comes the mortgage broker to the rescue. The loan officer can lower or eliminate the closing costs by utilizing YSP, and allow the borrower the flexibility to pay less or pay zero closing costs at closing, AND keep a decent interest rate.<br /><br />The interest rate staying low is in the best interest of the borrower and the lender. The borrower can remain qualified with their debt-to-income ratio and payment, and the lender has a better chance of getting the monthly payment from the homeowner because they can afford to pay the mortgage payment. Well, guess what just destroyed THAT practice ?<br /><br />If the borrower must roll all of his closing costs into the interest rate, then they may not qualify. Either go buy a cheaper home or forget it. In the Metro Atlanta area, that can be quite easy to do. In Charleston, West Virginia, well - Good Luck ! Or, they lose the house because they cannot DTI, nor do they have the additional funds to pay ALL of the Closing Costs. Lose/Lose...<br /><br />Mortgage Brokers are not the only losers with the new legislation. Lenders who use brokers for their pipeline are going to lose as well. The lenders I currently work with count on me and other mortgage loan originators to feed them fresh, highly qualified borrowers to keep their businesses viable and solvent. If a lender does not have retail outlets to handle customers, and borrowers have never heard of them so they will not consistently receive internet traffic, then what are they going to do ? Collateral Damage is at play here. The Winners ? The Big Banks. Hmmm...Aren't they the ones that got us into this big mess in the first place ?<br /><br />You may ask about the rampant fraud in the mortgage industry, some of it due to mortgage brokers doing a lot of illegal activities just to get a deal done. Well, in some cases the lenders own employees where steering a lot of mortgage brokers into doing a lot of "shady" things so they could get things done. The income margins for some lenders employees was so low during the housing boom, employees where doing whatever they could to make more income. But that is not excuse for bad behavior.<br /><br />Bottom line is this - fraud was rampant in the mortgage industry. Builders, Real Estate Agents, Closing Attorneys, Mortgage Brokers, Lenders, Banks, Buyers, Sellers, Appraisers, Borrowers, Home Inspectors, ANYONE involved with a real estate transaction - ALL sectors of the real estate industry were committing mortgage fraud.<br /><br />Hence the regulatory changes to common practices we have seen in all sectors of the real estate industry. Some of the changes are good. For instance, I do not particularly like <a href="https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf">HVCC</a> (it gets in the way of getting things done - not everybody is a crook, for gosh sakes), but I think it serves it's purpose. And the <a href="http://www.dfi.wa.gov/cs/pdf/mdia-notice.pdf">Mortgage Disclosure Improvement Act of 2008</a> portion of the <a href="http://en.wikipedia.org/wiki/Truth_in_Lending_Act">Truth In Lending Act </a>(TILA or Regulation Z) requirement surely offers protections for borrowers by not allowing them to go hastily to closing.<br /><br />But this new legislation if just plain bad. Misplaced, Misunderstood, Misjudged, Misaligned - It just Misses, Know What I Mean ? It's like a $4 bill. Just wrong...<br /><br />Borrowers for purchases and refinances are going to be the Ultimate Losers. And when the borrowers lose, WE ALL LOSE.Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com9tag:blogger.com,1999:blog-5692638258517324116.post-80405939097280987002010-07-20T20:06:00.000-07:002010-07-22T14:08:02.982-07:00Vacation House Swapping - The Modern Day Way to Get Away...So, I am reading this article on <a href="http://finance.yahoo.com/family-home/article/110125/how-to-upgrade-an-old-phone-into-a-porsche"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">YahooFinance</span>!</a> about the kid that, through a series of trades on <a href="http://www.craigslist.org/about/sites"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">Craigslist</span></a> - started trading an outdated cell phone and ended up with Porsche.<br /><br />Nice...!! I like cars, so naturally I am going to read the article. Kudos to the kid for having so much business prowess at such a young age.<br /><br />But, that's not really what caught my eye. The article goes on to mention something very interesting:<br /><br />Vacation House Swapping.<br /><br />It is becoming more and more popular since the economy has basically tanked. Instead of people booking a hotel for vacation, they are swapping homes with others in their destination city.<br /><br />I do not know how simple this would be for me, but I think a lot of families would really reap the benefit of savings from the cost of hotel accommodations versus house swapping.<br /><br />Go to this <a href="http://www.ehow.com/how_2146709_swap-homes-craigslist.html">website</a> for instructions on how to swap vacation homes using <span class="blsp-spelling-error" id="SPELLING_ERROR_2">CraigsList</span>. The rules appear to be simple. Look for someone who wants to swap. Get to know that person beyond email. Talk to them on the phone. Remove valuables, ask neighbors to watch, then SWAP !<br /><br />Now, that was easy...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-58736498432886513512010-07-17T10:43:00.000-07:002010-07-17T15:05:52.652-07:00Isn't This Living ? 89 Square Feet Per Person...For the past few years, all homebuyers in the area I live in have been interested in one thing and one thing only - Square Footage.<br /><br />"I want the biggest house my money can buy", was their motto. Somehow, we equate Square Footage with prestige. If you have a big house, everyone will think You have Made IT - You have arrived.<br /><br />What a myth !! Now, I must admit I live in a 1-1/2 story traditional frame home, with about 1,900 square feet. It's roomy enough, especially for two people. As I get older, I am beginning to not like the floor plan. Maybe I need to knock down some walls or something. Haven't figured it out yet...<br /><br />Sorry for the interruption - To get back to my reason for writing this blog: I think the accesses of the 80's and 90's ingrained in our brains that we needed to have more - better cars - hence the rise of <a href="http://www.bmw.com/">BMW</a>, better clothes - the rise of designer jeans (I guess, I don't know much about clothing. I like t-shirts, shorts and jogging shoes. That's it), and all of the other excessive purchases that really proved that we had arrived.<br /><br />No wonder when the interest rates dropped beginning in 2003, and the lenders invented the "<a href="http://www.investopedia.com/terms/l/liar_loan.asp">liar loans</a>", everyone decided - "I need a bigger house too. This will accentuate my portfolio of wretched excessiveness".<br /><br />Remember growing up in the home with you parents and your brother and sister in a 1,200 square foot home. It had a living room, dining room, kitchen, 3 bedrooms and a basement. And that's it.<br /><br />Ahhh...But we are better than that. We have arrived - We need a room for our exercise equipment, and another one for the television. And so went the housing boom.<br /><br />Well, it's bust time now. A lot of people have lost their t.v. and exercise rooms to foreclosure. Some are looking to downsize, but cannot sell their behemoth McMansions.<br /><br />We all are re-thinking what it means to own a home. And how big does it need to be ?<br /><br />And THEN, there's this guy. Meet Jay Shafer. Jay has this whole Square Footage thing figured out. I recently had a three person family purchase a home with over 5,000 Square Feet. Absolutely Ridiculous. By Jay's measurements, they would be good with about 267 Square Feet. Which is the size of their den. The downstairs den.<br /><br />With all of that extra space, they have to have a excessive use of cooling in summer and heating in winter. No wonder we use up to 25% of the worlds energy resources. BIG HOUSES with no one living in them (or not enough people, I guess I should say).<br /><br />Jay - My hat is off to you and those like you. Maybe we all need to get our own version of "Tumbleweed". I actually would be interested in a tiny home, but I am almost finished buying the home I currently live in. Yes - I have been here that long. Oh well - Maybe it could be a Second home ?<br /><br />Here is Jay's video. Enjoy...<br /><span style="font-weight: bold;"><br /><br /></span><div><object height="324" width="576"><param name="movie" value="http://d.yimg.com/nl/cbe/vitality/player.swf"><param name="flashVars" value="vid=20910192&shareUrl=http%3A//vitality.yahoo.com/video-second-act-jay-shafer-20910192&"><param name="allowfullscreen" value="true"><param name="wmode" value="transparent"><embed allowfullscreen="true" src="http://d.yimg.com/nl/cbe/vitality/player.swf" type="application/x-shockwave-flash" flashvars="vid=20910192&shareUrl=http%3A//vitality.yahoo.com/video-second-act-jay-shafer-20910192&" height="324" width="576"></embed></object></div>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-54528109874192597882010-07-16T07:22:00.000-07:002010-07-16T16:26:17.819-07:00Part II - Why Homeowners Need to Understand that Ownership Is Not a Business...I wrote a blog the other day rebuking the idea that a Strategic Default was, and is a "Business Decision".<br /><br />In my opinion, that's the furthest idea from the truth. Now I have ammunition to back it up.<br /><br />An article written by US News reporter Luke Landis, "<span style="font-size:85%;"><a href="http://finance.yahoo.com/news/5-Home-Ownership-Myths-to-usnews-3874381652.html?x=0">5 Homeownership Myths To Avoid</a></span>" suggests that buying and living in a home is almost exactly the opposite of running a business:<br /><br />Your home is a good investment. A business relies on ROI (Return on Investment) and P/E (Price to Earnings) ratios in order to stay relevant and viable. Maybe that's part of the problem we are in today. Some people are looking at the numbers and deciding it's not a good way to invest. It's your home, you moron. It protects you and your family from the rain. If you want to invest, buy gold. If you want to gamble, go to Vegas.<br /><br />Taxes breaks. Easily offset by the homeowner having to buy a new furnace. Or water heater. Or lawn mower. Whatever.<br /><br />Renting. Renting can be cheaper than owning because of the upkeep issues associated with owning a home. And it makes the renter much more flexible when it comes time to move.<br /><br />Forced Savings. That's funny. Forced SPENDING is more like it. Ever heard of the <a href="http://www.homedepot.com/webapp/wcs/stores/servlet/HomePageView?storeId=10051&catalogId=10053&langId=-1">Home Depot</a> ?<br /><br />Your home is not a good investment. In fact, here's an article with that title "<a href="http://www.consumerismcommentary.com/your-house-just-isnt-a-good-investment/">Your House is Not a Good Investment</a>". Hmmm...I wonder what the article is about ?<br /><br />I understand that during the past 5 years, everyone wanted to be a "real estate investor". People would sell their old home and move into a bigger, better house in that brand spanking new neighborhood. And keep the old property as an "investment".<br /><br />But there is a significant difference between an actual investor and a "forced" investor. The real investor has knowledge. Expertise. Understanding of the market place. They are professionals. It's their job. It's a BUSINESS.<br /><br />In my opinion, these "forced investors" should have sold their homes before moving into new ones. Or else stayed put. If it was a new job or requirement to move for one reason or another, that's understandable. But I would almost bet they were not. People moved because "everyone was doing it". And now a lot of these so called "investment" properties set on the foreclosure rolls of the banks and other financial institutions.<br /><br />Others would take advantage of the newly available "liar loans" and go out and buy five or ten investment properties with Interest Only loans, thinking that real estate would continue to appreciate in perpetuity. These activities were the drivers of the housing boom. And they were also the same activities that drove the housing market into the ditch.<br /><br />The myth that your home was a good investment has led to society thinking that owning a home was also "good business". Your home has nothing to do with business.<br /><br />Your home is where you raise your children, grow your tomatoes, play with your dog, get married, cut the grass and paint the walls. Where you work is business.<br /><br />If you are a homeowner, your home is simply where you LIVE.<br /><br />What ever happened to just living ?Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com2tag:blogger.com,1999:blog-5692638258517324116.post-21449756058116269202010-07-14T16:00:00.000-07:002010-07-19T08:50:39.585-07:00In Memory of PFC Jacob A. Dennis, 22, of Powder Springs, Georgia...<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/_u_WaFb7PitE/TERWyC9bxiI/AAAAAAAAAGU/u61CKHulowY/s1600/PFC+Jacob+Dennis.jpg"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 187px; height: 320px;" src="http://2.bp.blogspot.com/_u_WaFb7PitE/TERWyC9bxiI/AAAAAAAAAGU/u61CKHulowY/s320/PFC+Jacob+Dennis.jpg" alt="" id="BLOGGER_PHOTO_ID_5495612863086839330" border="0" /></a><br /><div style="text-align: center;"><div style="text-align: left;"><div style="text-align: center;">I did not know Pfc. Jacob A. Dennis, 22, of Powder Springs, Georgia.<br /></div><br />But I am deeply saddened he is not here anymore. <a href="http://waronterrornews.typepad.com/home/2010/07/rip-pfc-jacob-a-dennis.html">War on Terror News</a> reports the following:<br /><br /><span style="font-weight: bold; font-style: italic;">"Pfc. Jacob A. Dennis, 22, of Powder Springs, Ga., died July 3 at <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Landstuhl</span> Regional Medical Center, <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Landstuhl</span>, Germany, of injuries sustained June 30 in a weapons system accident at Forward Operating Base Lane, Afghanistan (<span class="blsp-spelling-error" id="SPELLING_ERROR_2">Zabul</span> province)."</span><br /></div></div><span style="font-size:78%;"><span style="font-size:78%;"><span style="font-size:78%;"><span style="font-size:13px;"><span style="font-size:14px;"><strong></strong></span></span></span></span></span><br />I never knew the kid even existed. But I am from Powder Springs, Georgia. I have been a resident her for the past 19 years. And I have a son that is 23 years old, and a Step Son who is 21. All of these boys would have been in High School together. Hearing the death of PFC Dennis reminds me of how much anguish I would feel if one of my boys were gone. I do not know what I would do with myself...<br /><br />My heart goes out to his family. I wish there were never wars where we have to send our children into harms way. As parents, we try so hard to protect them as they grow up. When they become adults, they are free to do and be as they wish.<br /><br />I did not know you PFC Dennis, but I honor you and respect you for serving your country, and for protecting my rights to say what I feel, think what I want, and do as I wish...<br /><br />May God Bless Your Soul Forever. Rest in Peace, My son...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com1tag:blogger.com,1999:blog-5692638258517324116.post-37405536798514175172010-07-07T23:16:00.000-07:002010-07-13T21:43:04.210-07:00Strategic Default - A Business Decision. Really ?I have heard quite a few conversations lately in which people have decided to call the act of Strategic Default a "business decision", so I decided to take a look at the meaning of the phrase "business" "decision".<br /><br />The <a href="http://www.thefreedictionary.com/business">Free Dictionary Online</a> site defines the word "business" in the following ways:<br /><br /><span style="font-style: italic; font-weight: bold;" class="hw"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">busi</span>·<span class="blsp-spelling-error" id="SPELLING_ERROR_1">ness</span></span><span style="font-style: italic; font-weight: bold;"> </span><script>play_w2("B0573700")</script><i style="font-style: italic; font-weight: bold;"></i><div style="font-style: italic;" class="ds-list"><b><br />1. </b><div class="sds-list"><b> a. </b> The occupation, work, or trade in which a person is engaged: <span class="illustration">the wholesale food business.</span></div><div class="sds-list"><b> b. </b> A specific occupation or pursuit: <span class="illustration">the best designer in the business.</span></div></div><div style="font-style: italic;" class="ds-list"><b><br />2. </b> Commercial, industrial, or professional dealings: <span class="illustration">new systems now being used in business.</span></div><div style="font-style: italic;" class="ds-list"><b><br />3. </b> A commercial enterprise or establishment: <span class="illustration">bought his uncle's business.</span></div><div style="font-style: italic;" class="ds-list"><b><br />4. </b> Volume or amount of commercial trade: <span class="illustration">Business had fallen off.</span></div><div style="font-style: italic;" class="ds-list"><b><br />5. </b> Commercial dealings; patronage: <span class="illustration">took her business to a trustworthy salesperson.</span></div><div class="ds-list"><b style="font-style: italic;"><br /><span style="font-style: italic;">6.</span></b><b style="font-style: italic;"><br />a. </b><span style="font-style: italic;"> One's rightful or proper concern or interest: </span><span style="font-style: italic;" class="illustration">"The business of America is business</span><span style="font-style: italic;">(Calvin</span><span style="font-style: italic;" class="illustration"> Coolidge).</span><br /><div class="sds-list"><b style="font-style: italic;"> b. </b><span style="font-style: italic;"> Something involving one personally: </span><span class="illustration"><span style="font-style: italic;"><span style="font-style: italic;">It's none of my business.</span><br /><br /></span></span><span class="illustration">It's not until you get to definition# 6 that it actually becomes personal. There are five other more relevant definitions that describe the word business. That's a lot. So using the word "business" as a personal description of an action, or DECISION, is weak at best.</span><br /><br />Here is the dictionary's definitions for the word "<a href="http://www.thefreedictionary.com/decision">decision</a>":<br /><br /><span style="font-weight: bold; font-style: italic;" class="hw"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">de</span>·<span class="blsp-spelling-error" id="SPELLING_ERROR_3">ci</span>·<span class="blsp-spelling-error" id="SPELLING_ERROR_4">sion</span></span><span style="font-weight: bold; font-style: italic;"> </span><script>play_w2("D0073800")</script> <span style="font-weight: bold; font-style: italic;"> </span><span style="font-weight: bold; font-style: italic;" class="pron" onmouseover="return m_over('Click for pronunciation key')" onmouseout="m_out()" onclick="pron_key()"></span><div class="pseg"><i style="font-style: italic;"><br /></i><div style="font-style: italic;" class="ds-list"><b>1. </b> The passing of judgment on an issue under consideration.<br /><br /></div><div style="font-style: italic;" class="ds-list"><b>2. </b> The act of reaching a conclusion or making up one's mind.<br /><br /></div><div style="font-style: italic;" class="ds-list"><b>3. </b> A conclusion or judgment reached or pronounced; a verdict.<br /><br /></div><div style="font-style: italic;" class="ds-list"><b>4. </b> Firmness of character or action; determination.<span class="illustration"><br /></span><br /></div><div style="font-style: italic;" class="ds-list"><b>5. </b> Sports A victory won on points in boxing when no knockout has occurred or in wrestling when no fall has occurred.<br /><br /></div><div style="font-style: italic;" class="ds-list"><b>6. </b> Baseball A win or loss accorded to a pitcher: <span class="illustration">has four wins in six decisions.<br /></span><span class="illustration"><br /></span></div></div></div></div>However - the use of the word "decision" does make sense. People are deciding to default on their loans. But this has nothing to do with business. It's a personal decision.<br /><br />Using the phrase "Business Decision" sounds much better than "default decision" or "foreclosure decision" or "failure to pay your contractual obligation decision". We do this to lessen the blow, to ease the mental picture of shirking responsibility, and to allow ourselves to do what we know is not right.<br /><br />Throughout human history, man has used alternative words or phrases to ease his mind of guilt, and to allow the unthinkable or the absurd to take place, simply because they changed what the act was called.<br /><br />Calling Strategic Default a "business decision" is no different.<br /><br />Unless you are in the business of buying and selling homes, commonly known as an "investor", your primary dwelling is not part of a business. A person does not buy their home with the idea they are going to treat it like a business, at least not normally. Buyers purchase homes out of sheer passion, or emotion. That's why people who have a family which consist of a father, a mother and one child will purchase a 5,000 square foot home, even though a 1,500 square foot home would serve all of their needs. Unless their building and selling furniture out of their garage, the house purchase has nothing to do with business.<br /><br />I personally have lost at least 30% in equity in my own home. And I am one of the lucky ones, because I still have 25% or 30% in equity remaining. The reason: I have lived in my current home for the past 17 years. Think of my neighbors that purchased in my area in 2005. They are drowning.<br /><br />There are currently 3 - 5 foreclosures in my subdivision of 200+ homes. I can't keep up with how many there are, because it seems to change almost every day.<br /><br />My point is this - if 30% of the defaults are strategic "business decisions", then 1 or 2 of the current foreclosures in my subdivision is due to some homeowner just walking away. Does that hurt ? You darn right it does. Instead of the appraiser having to go outside of my neighborhood to get a more decent comp, he's going to count that strategic default and it's going to keep my appraised value down. It's going to hurt...<br /><br />People are going to say what they want to say and do what they want to do, and that is their right, it's their prerogative. This is America. But that does not change the fact that when you perform an act such as a Strategic Default, it damages the bank that lent you the money, your neighbors, your community, your state and your country.<br /><br />And calling it another name does not lessen the infliction of pain we all are feeling now...<br /><br /><br /><div class="luna-Ent"><div class="dndata"><span class="ital-inline"><span id="hotword"> </span></span></div></div>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-55316799416714887792010-07-05T13:57:00.000-07:002010-07-05T15:31:17.489-07:00The Re-Forestation of America - The Foreclosures for Forest Initiative...It now looks as though there is a real plan to make the massive amounts of foreclosures to serve some common public good for the general population - Foreclosure properties for parks, recreation and re-forestation.<br /><br />A <a href="http://money.cnn.com/2010/06/25/news/companies/fannie_freddie_foreclosure_downsize.fortune/index.htm?postversion=2010062513">Fortune Magazine article</a> written by <span class="storybyline">Nin-Hai Tseng reports there is a movement towards returning foreclosed properties back into usable green space for the public.<br /><br />To me, this is extremely ironic. And is shows how incredibly inefficient things can be when the top priority is your financial statement.<br /><br />Woodlands, forest, pastureland, farms, lakes, streams, what have you - have all been razed across the country simply to build tract homes, subdivisions and neighborhoods. I am almost certain the level of real estate development in the U.S. for the past decade out-paced development in any other decade, hands down.<br /><br />Billions and billions of dollars have been spent developing land for new homes. And wasted. Within a five mile radius of my home, there are at least 10 incomplete subdivisions that all the land has been cleared, but there is not one house on the land. Just poles sticking out of the ground. Everything came to a screeching halt in late 2008 after the banks froze lending to developers. And the land just sits there. Empty.<br /><br />Now the land is full of grasses and small shrubbery. All of the beautiful hardwoods, naturally occurring Dogwoods, and other native plants and shrubbery are gone. </span><span class="storybyline">What a waste.</span><br /><br />The Non-Profit organization <a href="http://www.tpl.org/">Trust for Public Land</a> has been helping state & local governments & private citizens transform their otherwise unusable land and properties into usable space, with a focus on conservation for decades. That's good to know, but it would have been nice if the areas had not been destroyed in the first place.<br /><br />There is hope, however. <a href="http://www.tpl.org/">TPL</a> also has been known to take vacant, foreclosed properties in good shape and turn the properties into affordable housing. There are a lot of properties that have been completed but never occupied in my area as well. They are an eyesore, as the roads are not finished, the ac units are missing, and many windows or doors are boarded up.<br /><br />Hopefully the <a href="http://www.tpl.org/">Trust for Public Land</a>, which is now beginning to work with banks and their foreclosed portfolios, and others like them, can help the U.S. transition into a state of stability in the housing market by transforming the foreclosed properties, land and homes into something meaningful and useful, one tract at a time...<span class="storybyline"><br /></span>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-24970709617387519252010-06-25T10:32:00.000-07:002010-06-25T11:34:34.357-07:00Wall Street Wishes and Reform Dreams...Every since the financial crisis began, I have been waiting to see what response would be rendered by Congress and the White House.<br /><br />Reform is eminent ! I said to myself. The taxpayer and the individual should be given some kind of protection against the greed machine that is Wall Street.<br /><br />I watched for years as my money in my mutual funds would creep up ever so slowly for years, and then once worth something - would lose half the value in three months. Enough I said. I took my money out and paid bills with it. Was I losing money because I had the wrong funds in my portfolio, or was it due to fees ? I used to think it was because my ignorance. Nope. Fees. Wall Street greed.<br /><br />So, our government had a REAL chance of making a difference in how our financial institutions operate. I was looking for a return to the <a href="http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act">Glass-Steagall</a> days, when the government actually governed.<br /><br />Well, it looks like they blew it. Again. The two most important issues, banks to stop trading with their own money, and the requirement to move derivative operations to separate companies - appear to have been squashed.<br /><a href="http://www.blogger.com/shahien@huffingtonpost.com"><br /></a><a href="mailto:shahien@huffingtonpost.com">Shahien Nasiripour</a> with the <a href="http://www.huffingtonpost.com/2010/06/25/financial-reform-bill-pas_n_625191.html">Huffington Post reports</a> that the nation's largest banks now appear to have MORE capital available for speculation under the new reform bill. I would say the House and Senate negotiators should have went home and got some sleep instead of voting in favor of the reform garbage compromises at 5:40 AM that for sure will lead us to another financial crisis in the future.<br /><br />Wow. My question is - "who runs this country - the citizens or the businesses that hold their money ?"<br /><br />I am afraid I know the answer, as I am sure you do as well, dear reader.<br /><br />Now we just have to sit back and wait to see what the next financial disaster is going to look like...<br /><h1 id="firstHeading" class="firstHeading"><br /></h1>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-64181808309942511592010-06-12T11:31:00.000-07:002010-06-12T14:34:10.534-07:00Silent Death - The Gulf Oil Spill Effect No One is Talking About...<span style="font-size:100%;">As I watched the major TV News Networks discuss the tragedy of the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">British Petroleum</span> Oil Spill in the Gulf of Mexico, something dawned on me - The Residential Real Estate market in the Gulf States is toast for at least 10 to 15 years...<br /><br />According to <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">Wikipedia</span></span>, there remains 26,000 gallons of crude in the sand and soil from the <a href="http://en.wikipedia.org/wiki/Exxon_Valdez">Exxon Valdez</a> Oil Spill from 1989. That was more than 20 Years Ago !!</span><span style="font-size:100%;"><br /><br />I have heard estimates in the news that the <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">BP</span></span> Oil Spill in the Gulf is more than <a href="http://www.guardian.co.uk/environment/2010/jun/12/bp-oil-spill-gulf-mexico">8 times larger</a> than the Exxon Valdez spill, so is it going to take 8</span><span style="font-size:100%;"> times as long for the Gulf to recover to the level that Alaska is today?</span><span style="font-size:100%;"> As large globs of oil wash ashore on the beaches along the Gulf Coast, and news spreads about the dangers of the <a href="http://www.prnewswire.com/news-releases/gulf-oil-spill-dispersants-have-potential-to-cause-more-harm-than-good-93424899.html"><span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">dispersants</span></span></a> used to clean up the oil - the question remains: Will people want to buy condos or vacation properties along the Gulf, knowing the dangers to themselves and their families ?<br /><br />The <a href="http://www.costar.com/News/Article.aspx?id=A29633B3A61D835AB027939541FEBE8B">commercial property owners</a> along the Gulf Coast States have already begun assessing the effects of the spill on their businesses. Sure, in the immediate term, not many people will want to rent hotels or condos and vacation in the Gulf.<br /><br />But how long will it be until people actually want to purchase vacation properties there? Current Gulf Coast property owners are concerned about loss of value, and are looking for <a href="http://www.nuwireinvestor.com/articles/how-the-bp-oil-spill-Impacts-gulf-coast-real-estate-55147.aspx">compensation</a> from insurers or <span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">BP</span></span>. But that's a short term solution to the problem at hand. The long term, and unknown effect - will show it's ugly head when it's time to sell. Sellers could be hit with Short Sale like prices long after the rest of the country has recovered from the current real estate/economic crisis.<br /><br />We could be looking at the Death of Gulf Coast Residential Real Estate for at least a decade or more...<br /><br /><br /><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:100%;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/_u_WaFb7PitE/TBPy1h3PWCI/AAAAAAAAAFo/xIUC0ENnvdI/s1600/780px-Deepwater_Horizon_oil_spill_-_May_24,_2010.jpg"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 320px; height: 246px;" src="http://3.bp.blogspot.com/_u_WaFb7PitE/TBPy1h3PWCI/AAAAAAAAAFo/xIUC0ENnvdI/s320/780px-Deepwater_Horizon_oil_spill_-_May_24,_2010.jpg" alt="" id="BLOGGER_PHOTO_ID_5481992172877076514" border="0" /></a></span></span></span></span></span></span><br /></span><div style="text-align: center;"><span style="font-size:85%;"><span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">Deepwater</span></span> Horizon Oil Spill (<span class="blsp-spelling-error" id="SPELLING_ERROR_3"><span class="blsp-spelling-error" id="SPELLING_ERROR_5">BP</span></span> Oil Spill)<br /></span><span style="font-size:85%;">from space by <a href="http://en.wikipedia.org/wiki/File:Deepwater_Horizon_oil_spill_-_May_24,_2010.jpg"><span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_6">NASA's</span></span> Terra Satellite</a></span><br /></div><span style="font-size:100%;"><br /><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:100%;"><span style="font-size:85%;"><span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span style="font-size:100%;"><span style="font-size:100%;"><br /><br /></span></span></span></span></span></span></span></span></span>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-6890460260300214752010-06-04T18:16:00.000-07:002010-06-04T19:48:36.928-07:00In Defense of Mortgage Brokers and Yield Spread Premium...Today, I am cruising around the web just reading various articles, poking my nose in here and there, just snooping around as usual.<br /><br />All of a sudden, I come across a blog written by a person who once was treated poorly by a mortgage broker. He felt that he was taken advantage of, so he decides to start a blog "exposing" the dark secrets of mortgage brokers, and discussing why they are evil.<br /><br />Go ahead - take a look at the site. Read the <a href="http://www.refiadvisor.com/pblog/mortgage-broker/home-loan-refinance-dirty-secret/">blog</a>, it's sort of interesting. In a twisted way, I guess.<br /><br />Now, to be fair, I have a somewhat biased opinion about mortgage brokers - I have been a mortgage consultant with a mortgage brokerage for the past 7 years. I think brokers offer a legitimate service to borrowers, and a much needed alternative to going to a bank. A broker can save a borrower both time and money, because instead of paying multiple application fees to each bank, he can just pay the application fee once, and let the broker shop around for him. Immediate savings. OR, if the borrower works with someone such as myself - there is no application fee. No credit report fee. No upfront fees, whatsoever. Enough about me - this blog entry is not about me, anyway.<br /><br />Needless to say - It ticked me off. It's another dishonest cover up that confuses the public.<br /><br />So let's do some REAL mortgage loan exposure. The mortgage broker can provide the same interest rate or better than the average borrower can find at the neighborhood bank. How ? Because the bank offers incentives to mortgage brokers and <a href="http://www.mortgagenewsdaily.com/wiki/Correspondent_Lender.asp">correspondent</a> lenders to provide them with a steady stream of new borrowers, because a banks job is to lend money. This incentive is the <a href="http://en.wikipedia.org/wiki/Yield_spread_premium">Yield Spread Premium</a>, or the amount the bank is willing to pay the party who provides them with a new, qualified buyer.<br /><br />Usually the mortgage broker can offer a better interest for the borrower rate from the same lending institution, than the borrower can receive from walking into a bank and applying for the same loan. How do I know ? I do this all of the time.<br /><br />This is the wholesale versus retail aspect of mortgage interest rates. Why the difference ? The higher bank interest rate is derived from overhead - they have to pay the light bill, rent, the loan officer's salary, etc...The borrower's interest rate in intrinsically connected to this.<br /><br />The largest banks have stopped doing business with mortgage brokers altogether. They began phasing out their mortgage broker relationships in 2007. I think they new something was in the water. I think the large banks are behind an unnamed, unidentified scheme to get rid of the mortgage broker. That way, they can charge whatever they want in interest rates, and there is no competition.<br /><br />Funny thing is this - our friend the mortgage broker hater has mortgage interest rate ads from big banks and lenders DIRECTLY CONNECTED TO HIS SITE. Complete the "Real Mortgage Rates" info and select click on "submit". You will see what I am saying. I am an actual mortgage broker, and I do not advertise any rates on my site, other than the average weekly <a href="http://sites.google.com/a/draproperties.net/www/menu">Freddie Mac</a> rates, that are publicly available on the <a href="http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputYr.jsp">Freddie Mac Website</a> (I believe the borrower should have a good starting point on the rate they are being offered). What is this guys motivation ? Who's side is he REALLY on ?<br /><br />Every mortgage broker must reveal the Yield Spread Premium to the borrower. It is stated up front on the Good Faith Estimate, and is shown on the Settlement Statement at closing. Banks are not required to show how much they make on charging a borrower a certain interest rate. They are allowed to "hide" the true amount of money they make on charging the interest rate the borrower has been offered.<br /><br />Here's another truth - banks sell their loans to the secondary market (Fannie, Freddie & Ginnie) and receive a <a href="http://en.wikipedia.org/wiki/Service_Release_Premium">Service Release Premium</a>, or payment from the <a href="http://en.wikipedia.org/wiki/Government-sponsored_enterprise">GSE</a>'s when the bank sells the loan. This is on top of any income they may have received for charging the borrower a certain interest rate.<br /><br />Needless say, I continued to prod around and found an excellent article about this subject, "<a href="http://www.myforeclosurenightmare.com/why-oh-why-ysp-why-mortgage-brokers-can-price-better">Why Oh Why YSP? Why Mortgage Brokers Can Price Better</a>". It verifies everything I am expressing here...It is recommended reading for those who want to have a good understanding of how yield spread actually works.<br /><br />There is a lot of truth out there in the <a href="http://en.wikipedia.org/wiki/Blogosphere">blogosphere</a>, but there is also a good bit of fallacy. People are being bombarded with all kinds of information, and it is hard to discern what is truth, what is fiction and that gray area in between.<br /><br />I am sorry the blogger was given a raw deal by a mortgage broker. There are bad apples everywhere. But one bad apple should not destroy the reputation of an entire industry, especially when it provides a legitimate, viable service to the public.<br /><br />I am going to tell things as I see them, and point out any information that seems not quite right. And this blogger is not telling the whole story...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com5tag:blogger.com,1999:blog-5692638258517324116.post-38868829257910738032010-06-02T17:54:00.000-07:002010-06-02T18:38:46.591-07:00Strategic Default Retribution ?<p>Well, it appears the <a href="http://www.mbaa.org/default.htm" mce_href="http://www.mbaa.org/default.htm">Mortgage Banker's Association</a> has conjured up a way of penalizing the homeowners who have decided to just walk away from their properties, utilizing the now infamous "Strategic Default" mortgage scheme.<br /><br />A Strategic Default results when property owners just literally "walk away" from their properties for no apparent reason - other than they don't want to pay the mortgage any more.<br /><br />The MBA apparently has decided to punish this group of people by requiring theme to wait up to 8 years before allowing them to enter the mortgage financing arena again.</p><p>If this is a scare tactic, as I have heard it may be, than I think it's a waste of energy. It may be that the MBA would like to slow down the strategic default rate, but people are smart. If they don't put teeth to it, it will not work. You need the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">GSE's</span> (Fannie & Freddie) to come out and support the idea of punishment. Otherwise, the initial scare will go away, and the strategic default rate will continue to rise.</p><p>However, I do think this is fair, as long as it is genuine. If the MBA is going to use it's influence and choose to punish the Strategic Defaulters, it must be fair and not try to conjure up it's own "default" scheme of another name, whatever that may be. Check out today's <a href="http://www.thinkbigworksmall.com/" mce_href="http://www.thinkbigworksmall.com/"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">TBWSDaily</span>.com</a> <a href="http://www.thinkbigworksmall.com/mypage/archive/1/50938" mce_href="http://www.thinkbigworksmall.com/mypage/archive/1/50938">video</a>. There is a suggestion that the MBA may have used the <span class="blsp-spelling-error" id="SPELLING_ERROR_2">ol</span>' Short Sale scheme themselves...<br /><br />Everyone seems to be taking advantage of the distressed real estate market these days. It's sad, because we all are paying dearly for it as well...</p>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-19366821451965816532010-05-24T13:23:00.000-07:002010-05-24T21:50:38.766-07:00More HOA Woes...<p>My mother-in-law recently ran into a problem with her Home Owner's Association. Again. This time, it was not an increase in fees or decrease in services or whatever. It was a lack of communication from the <span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">HOA</span></span> to the property owners. </p><p>The <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">HOA</span></span> never paid the bill for the trash disposal service. They were not required to pay, so they didn't. However, instead of informing the property owners that they would have to pay for the disposal service themselves, they just kept silent. No invoices were sent. No mail notifications. Nothing. </p><p>So what happened ? She put her recycle bin and trash bin out to be emptied one day, and the the disposal service TOOK HER BINS...</p><p>She had to find out the hard way to whom and where to send the check to pay for the service, just so she could get her trash receptacles back and empty her trash.</p><p>Now this is pretty benign, but I wondered why <span class="blsp-spelling-error" id="SPELLING_ERROR_2">HOA's</span> are so notorious for being uncooperative. Maybe it's a power trip. Maybe it's because the property owners are just bad, and the <span class="blsp-spelling-error" id="SPELLING_ERROR_3">HOA</span> is just tired of dealing with them. All property owners and tenants can't be that bad, can they ?<br /></p><p>Problem is, <span class="blsp-spelling-error" id="SPELLING_ERROR_4">HOA</span> property management companies seem to all to be the same - awful. Why is that ?<br /></p><p>Well, I have not found the definitive answer to the question, but I did come across an article written online by <a style="font-style: italic;" target="_blank" mce_href="http://loan.yahoo.com/m/primer13.html" href="http://finance.yahoo.com/">Yahoo! Finance</a> about the<span style="font-family:arial;"><b> </b><span style="font-style: italic;"><a href="http://loan.yahoo.com/m/primer13.html">"10 Things a Homeowners Association Won't Tell You"</a>.</span></span> It's horrifying.<br /></p><p>I just thought I would forward the article to those who have clients that are purchasing properties with Home Owner Associations - pass this information on to them. It's good for the homeowner to know what kind of difficulties they could run across with their <span class="blsp-spelling-error" id="SPELLING_ERROR_5">HOA</span> in the future.<br /></p>I will continue my quest to find the answers, but in the meantime - Home Owner Beware...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-33120818809870791882010-05-20T10:47:00.000-07:002010-05-22T11:09:06.789-07:00GA DBF Allows MLO's to work until July 31st UnlicensedThe Georgia Dept. of Banking and Finance has a <a href="http://dbf.georgia.gov/00/press/detail/0,2668,43414745_155273141_159687320,00.html">press release</a> today that states the Dept. will allow Mortgage Loan Originators (MLO's) to continue working unlicensed until end of business July 31, 2010.<br /><br />That's a relief, because this will allow those MLO's that may have one or another issue concerning license approval a bit of extra time to get things straightened out before the deadline. I was told by more than one party that the deadline was June 30. The extra 30 days should be good news to all MLO's.<br /><br />If you are a MLO who is currently working with a Georgia licensed bank (non FDIC) or mortgage broker but you did not meet the April 16, 2010 MLO application deadline, the Georgia DBF will process your application on a First Come, First Served basis. This could be a potential problem, because after July 31st, you will not be able to originate until your licensed is approved...<br /><br />Moral of this blog - Get your MLO applications in as soon as possible !! There appears to be a little more time available to get it done, without a lapse in employment and compensation.<br /><br />Otherwise your going to have to allow others with licenses to originate your deals...Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0tag:blogger.com,1999:blog-5692638258517324116.post-50280353620313441332010-05-12T11:44:00.000-07:002010-05-22T11:08:24.920-07:00Strategic DefaultUnfortunately, the public and homeowners are being bombarded with all kinds of conflicting information, as well as disinformation.<br /><br />Along with the 60 Minutes segment on <a href="http://www.cbsnews.com/video/watch/?id=6470184n&tag=contentMain;cbsCarousel">Strategic Default</a>, Roger <span id="SPELLING_ERROR_0" class="blsp-spelling-error">Lowenstein</span>, a New York Times Magazine contributor, wrote an article for the magazine that was published on January 10, 2010 titled "<a href="http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html">Walk Away From Your Mortgage!". </a><br /><br />I do not know how many subscribers the NY Times magazine has, but you can bet millions of people have read this article.<br /><br />Until there is consensus throughout our society on what should be done and how to handle the current housing/foreclosure/financial crisis - mass confusion will continue at every level. Foreclosures have moved from a homeowner/bank problem to a social problem...<br /><br />You can view the 60 Minutes segment on Strategic Default right here:<br /><br /><embed type="application/x-shockwave-flash" pluginspage="http://www.macromedia.com/go/getflashplayer" src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/player-dest.swf" allowfullscreen="true" flashvars="linkUrl=http://www.cbsnews.com/video/watch/?id=6470184n&tag=contentMain;cbsCarousel&releaseURL=http://cnettv.cnet.com/av/video/cbsnews/atlantis2/player-dest.swf&videoId=50087374&partner=news&vert=News&si=254&autoPlayVid=false&name=cbsPlayer&allowScriptAccess=always&wmode=transparent&embedded=y&scale=noscale&rv=n&salign=tl" height="324" width="425"></embed><br /><a href="http://www.cbsnews.com/">Watch CBS News Videos Online</a>Rick Dixonhttp://www.blogger.com/profile/00155178157854563567noreply@blogger.com0