The 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.

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 Fannie Mae and Freddie Mac.

In order to make to make the shift from government controlled entities back to the private sector, the two GSE'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.

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.

Enter the real estate consortium of real estate agents, builders, banks, civil rights groups and other concerned citizens. The NAR, ABA, NAHB, NFHA 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.

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.

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.

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.

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...

Is 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.

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.

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.

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...

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.

But will it really ?

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 TBWS.com I am not so sure.

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 financial reform 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...

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.

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.

Hasn't it always been that way ?

Pre-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.

Not Even Close...
A Pre-Qual, or Pre-qualification 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...

Better, But Still Not There Yet...
A Pre-Approval is a little better. Why ? Well, a pre-approval contains more information about the borrower. Generally, a pre-approval involves URAR 1003 loan application. 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.

Once the broker has the information, they will then submit the information to either Fannie Mae's DO/DU (Desktop Originator/Desktop Underwriting) or to Freddie Mac'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...


You Are Getting Close...
A Conditional Approval 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...

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.

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 - There Will Always Be Something to Deal With in a Real Estate Transaction, I can promise you...


This is What You Want...
Final Approval. 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...

I have been through this process a hundred times, and everyone of them is a unique experience, never to be forgotten...

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...

Who Does the Closing Attorney Represent in a Transaction ?

Who does the Closing Attorney represent in a real estate transaction?

Well...It depends...

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 GAR Purchase & Sale Agreement form (Page 2, Paragraph 7) that allows either the buyer or seller to be represented.

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.

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.

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 GAR Purchase & Sale Agreement, Page 2, Paragraph 7)

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 blacklisted), 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.

That's how you know who's interest the closing attorney represents...

What 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.

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.

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 prepaid credit card company (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.

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 tradeline qualification quantities or seasoning required by the lender.

That's when Alternative Credit Data 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.

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.

There are different levels, or tiers, given to alternative tradelines:



Each tier has a descending level of importance, with the Tier I alternative tradelines carrying the most weight, and the the Tier III tradelines 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 tradelines needed to meet the the alternative tradeline requirements.

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 lates. Take my advice - Don't do it.

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...

Appraiser Independance - A Must Have For The American Economic Recovery...

I was thinking a bit about the phasing out of HVCC 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 HVCC was written 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...

Let Appraisers Be Independent

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.

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.

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.

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.

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...

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.

I am talking about an honest, open, fluid relationship between the client and the appraiser.

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...

Heard 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.

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.

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).

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.

Huff & Puff. Get it ?

You want to know EXACTLY what I mean. Visit tbws.com. These guys are the huffiest, puffiest mortgage guys on the internet, period. Watch one of their daily videos. You'll see what I mean...

Alright - Back to the Point.

I was told the other day that the Home Valuation Code of Conduct, or HVCC, is going to be nixed within the next 90 days. Apparently, President Obama just signed The Death of HVCC with the signing of the Dodd-Frank Act. It must be true, because news sources all over are stating that is for real. But still - Like I said, it's "huff & puff".

The HVCC bill came about from an agreement New York Attorney General Andrew Cuomo made with Fannie Mae and Freddie Mac 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.

Why HVCC Does Not, and Will Not Work

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.

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.

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.

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.

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.

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.

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.

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.

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...

My New Real Estate Hero - Jean Gregoire Sagbo, First Black Politician in Russia

I have never heard of Jean Gregoire Sagbo, until I read the article today from Associated Press and Yahoo! World News titled "A Russian Milestone..."

He negotiates Real Estate sales in Russia. He has lived in Russia since 1982, is married and has two children. Sounds Normal, right ?

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 Novozavidovo, Russia know it. So, in what has been the called the town's first fair and honest election, Mr. Sagbo was elected as a Councilor.

Mr. Sagbo is also African. He is the first Black person to ever be elected to a Russian political office. EVER.

He has what it takes to cross the color lines, and make people color blind. The people of Novozavidovo do not see race or color when they think of Mr. Sagbo. They just see a fellow Russian 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 ?

The world needs more people like Jean Gregoire Sagbo. My goodness, DO WE. Congratulations Mr. Sagbo. You are MY HERO for the day...

Photo of Mr. Sagbo from Associated Press via Yahoo! News

DEATH 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 Mortgage Brokers and Yield Spread Premium.

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.

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.

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.

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.

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...

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...

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...

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 ?

Enter the Game Changer:

The Financial Regulatory Reform Bill, or H.R. 1728, 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 National Association of Mortgage Brokers, 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 press release concerning Bill HR 1728. If you are so inclined to read more about Bill H.R. 1728, Save yourself some time - go to the Bill H.R. 1728 Summary site to get a snapshot of what we are dealing with here.

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.

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 ?

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...

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 ?

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.

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.

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 HVCC (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 Mortgage Disclosure Improvement Act of 2008 portion of the Truth In Lending Act (TILA or Regulation Z) requirement surely offers protections for borrowers by not allowing them to go hastily to closing.

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...

Borrowers for purchases and refinances are going to be the Ultimate Losers. And when the borrowers lose, WE ALL LOSE.

Isn'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.

"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.

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...

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 BMW, 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.

No wonder when the interest rates dropped beginning in 2003, and the lenders invented the "liar loans", everyone decided - "I need a bigger house too. This will accentuate my portfolio of wretched excessiveness".

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.

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.

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.

We all are re-thinking what it means to own a home. And how big does it need to be ?

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.

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).

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 ?

Here is Jay's video. Enjoy...