One thing I have picked up on the Zillow discussion boards is that there is a huge amount of resentment towards consumers who bought into the frenzied 'must act now! prices are skyrocketing, don't get left behind!' marketing ploys. Some of that anger is not misplaced- after all, without the all-too-willing consumer, we would not be in the pickle we are in!

I met people along my winding road in the business who absolutely, positively were abusing the privilege of owning a home. People cashed-out their equity once a year to 'consolidate' their debt. From 2002 to 2005, people refinanced as many as 5 times 'chasing' the lowest rate and adding thousands to their loan balance each time, not to mention the new car, or the new boat.

As a rule, consumers are not smart. We are not supposed to be. If we were smart, snazzy advertising and 'bright shiny objects' would have little affect on us. Let's build up our defenses so that the next time we are all brought into the 'money money money- get it while it lasts' fiesta, we can walk away unscathed!

Here's a few ways we can ensure that this mess we find ourselves in doesn't happen again.

1) Cut up your credit cards. I'm just as guilty as anyone of buying something on credit- Idiocy, and this practice should be as limited as possible. If you have very little debt, there won't be a 'rush' to consolidate next time housing prices go up. Many, many people had 30-60k in credit card debt, and felt that refinancing was the 'magic pill' to help them out of trouble. That didn't end well, did it?

2) Don't EVER go by what a loan officer or real estate agent tells you that you can 'afford'. Don't go by underwriting guidelines, go by what is comfortable for YOU to pay. If you make $5000 a month, but take home $2300 and have a lot of unreported expenses- a $300 phone bill, $600 month bill for your electricity (all those hot tubbies add up!), $45 jelly of the month club bill etc, you have much less money to work with. If someone says you qualify for $1800/month, it is up to YOU to determine whether or not that is accurate and doable. No one knows your exact financial situation better than you!

3) Read your loan documents. Even if your attorney says 'everything's fine!', you still must read them. If you refinance your home, you have 3 days (and more if you close before a weekend) to review your documents with a fine-tooth comb. DO IT. If you have questions, ask. Come onto the Mortgage Discussion Boards and ask for free advice, from people who have no 'stake' in whether you close or not. If you are purchasing, ask for your loan documents in advance, or take your time at your closing. If you feel rushed, tell your attorney, agent and whoever else is there to relax. If they are not answering your questions, walk away from the table. Sellers these days are willing to work with people, so tell them you want to buy the house, but need more time. Find a new lender and a new attorney if necessary. Is this overboard? Perhaps. But I can't tell you how many people signed on the dotted line because they felt they 'had' to. What were they signing? Pre-payment penalty riders, mortgages for loans they did NOT even apply for, you name it!

4) Don't get greedy. I'd say one of the biggest reason we are in this situation is the old 'keeping up with the Joneses' phenomenon. Your neighbor buys a hot-tub, so you do. Your cousin goes to Cabo, so you do. Living within our means has never been especially easy, but if we aren't going to be taken advantage of again, and if we feel any remorse at all for where we are right now, we must get beyond this immature behavior. If you cannot afford something, don't buy it. Just because Chase or CITI or whoever sends you a credit card with a $15k limit doesn't mean you have to take it and use it.

Whether you want to blame the banks, the brokers, the real estate agents, or the consumers, one thing IS absolutely true- WITHOUT the willing consumer, there is no 'frenzy', there is no 'over-inflation', there is no 'market collapse'. So, let's avoid it next time, shall we?

Jennifer Monastero

Citizens Community Bank

Originally published on Mortgages Unzipped http://www.zillow.com/blog/mortgage/author/jennifermonastero/

With the current economic conditions, it’s no wonder we have seen an increase in many types of scams and ‘too good to be true’ offers. Unfortunately, we live in a world where sociopathic behavior is fairly commonplace, and even rewarded! For some strange reason, tough economic times brings out the worst in some people. Today brings a new breed of scammers to the forefront, and this is a group of people that will be growing in numbers for many weeks and months to come. I speak of “Mortgage Modification Experts”, or whatever fancy term they come up with for their unnecessary business. You know them well- just a year ago they were selling houses, selling mortgages, or selling electronics at Best Buy. Now, all of a sudden, they want to ‘give back’ and help distressed homeowners. Pardon me if I sound cynical, but I think it’s more likely they just need to make a little extra money at any cost.

Some of these people mean well, some are downright thieves. The thieves business model is simple- approach fearful homeowners with promises that their money woes can be fixed- and only THEY (the modification people) can help them! They ask for a nominal up front fee (I have seen fees ranging from $495 to $3000!) and in return promise NOTHING. (that’s right- they make no promises of success!!!) They lead the homeowner to believe that they will work diligently on their behalf to get their mortgage loan ‘modified’, and even make claims such as ‘we can help you keep your home and get you a 2% interest rate!’. The problem is, they do NOTHING, and simply take that money and RUN. The homeowner goes into foreclosure, and now they are out even more money in the process.

Consumers will see ads, hear commercials and be approached by family members who have heard of such ‘teams of professionals’. Don’t be fooled!

Here’s a list of what ANY consumer can do to modify their own mortgage, free of charge!

1) Contact the loss mitigation department or loan modification department of your current lender. You may feel uncomfortable calling them and explaining your situation- but believe me- they want to hear from you.

2) Fill out the ‘loan modification documents’ they require. Wow, that was fast.

It really is that simple. Why? Because if you fit certain criteria, the bank will work with you to help you keep your home- no “help” required. That’s what the new legislation is all about! Typically you need to have one or more of the puzzle pieces to qualify for loan modification:

1) You owe more than the house is worth

2) You have lost your job and can no longer afford the full payments

3) You have an ‘Option ARM’ from a lender like Countrywide or Washington Mutual

4) You have missed two or more payments

What a Loan Modification means for you:

1) They ‘write-down’ the balance of your loan to a percentage of the home’s CURRENT VALUE. That’s right. If you live in an area that has seen dramatic losses, the lender may forgive a portion of your loan balance.

2) A lower interest rate. This is huge- especially for people who are stuck in Adjustable rate mortages like ‘Pay-Option ARM’s’. If you are at 9%, expect a large rate decrease!

If a lender is going to modify your loan, YOU have the power to inquire about it. You do NOT need the help of any ‘team of professionals’, and anyone who tells you that you DO need them is lying. You either qualify or you don’t! No company can negotiate to “make” you qualify- but they can steal your money by telling you so. So keep that in mind.

I cannot stress this enough- do NOT give anyone money up front for loan modification services. Remember that there are always shady characters looking to take advantage of people’s fears. Do not fall victim to the latest too good to be true scheme/scam/waste of money.

If you approach your lender and they are willing to work with you, have an attorney review the documents if you don’t understand them. Be sure to check for what happens when you SELL the home, and other such contractual obligations you may have under the new terms.

The bottom line is simple- banks want you to stay in your home. They see the writing on the wall too- housing prices are continuing to fall, and a foreclosure auction will do them no good! They want your interest payments, that is all they care about. And with the new bailout, they don’t really mind ‘losing money’.

Don’t let your worries and fears hold you back- you can do this! And you don’t need the help of a fly-by-night industry to do it!
For free information, feel free to contact ANY lender on the Zillow Mortgage Discussion Boards.

Jennifer Monastero

Citizens Community Bank

So, with all the horror stories of people losing their homes, rates adjusting, astronomical mortgage payments, job loss etc..., the government decides to formulate a new FHA program aimed at helpig borrowers who are 'facing foreclosure'.

The short version of the program is this: Borrower has an adjustable rate mortgage. Rate adjusts. They are late on some credit card payments and some mortgage payments, but want to keep the house. The idea would be, FHA would refi the loan to a lower, fixed rate and help keep that borrower from losing the house, which is supposedly a lose-lose situation.

First round of pickiness states that the borrower can have no late payments PRIOR TO the adjustable rate hike. Meaning, no irresponsible loan hog will get a new deal. Fine. I can grasp that. You don't want to 'bail' out someone who is reckless with their spending, and not responsible with their debts.

But the second round is really bothering me. See, they won't help if the house is IN foreclosure. So, if you miss one or two payments, and your lender has not filed foreclosure paperwork yet, you're fine and can get approved. BUT, if they have, you're disqualified.

Who does this help? The people will lose the house, the banks will have another property they don't care about, and sales prices continue to plummet because no one has confidence in the lending system, and therefore won't buy at any price.

If the program is supposed to help those 'facing' foreclosure, why do they leave out the biggest group- people who are IN foreclosure?

I just don't get it. Has anyone had any experiences with this program yet? Positive experiences, I mean. So far, I've just heard of a lot of turned down applications, and a lot of disappointment.

Well the spring season is coming to a close, and I have to say I did see a lot of activity in and around my area.

Inventory is still very high- it seems that everyone is trying to sell right now, and most are not having much luck.

What is it like where you are? Are you seeing the 'bottom' of the market yet? Are we still 5-15% overvalued? Some areas are obviously hit harder than others- Las Vegas for example.

I feel optimistic, but I still wish that people who do not HAVE to sell right now would just take there homes off the market. That would be a great way to get some inventory off the table, and supply and demand could get back onto equal ground.

Rates have gone up quite a bit over the last few weeks, and that is going to be a major concern in the coming months. Why would someone buy now, when they feel they can get a better rate by sticking it out 5-6 more months??? Why would someone buy now if they don't really NEED to? Rates have to remain attractive, and while they still are (6.5%- basically where we were late summer/early fall '07), a month ago they were comfortably at 6% or below... That's a big jump, and I fear it's going to keep going!

Well, we'll all see what happens. It's definitely going to be an exciting summer. But let's hope rates come down a touch, and people get excited about owning homes again!

Good luck out there!

:)

Wow... Lots of ups and downs over the last week or two... and unfortunately, most were 'ups'. Rates have gone up about .375% from two weeks ago! Why? Well one reason is the bond yields- I know more people keep talking about Mortgage Backed Securities- I get it... But you can't argue with the fact that the bond yield on the 10 year note has gone from about 3.75 to up over 4.05 today! That's huge! Hopefully rates will back off a bit tomorrow, I did hear that the end of the day forecast for the MBS was better than the morning...

I wish that lenders would let the news of the day play out- instead, what we have is a constant shuffling, and ruffling of the rates throughout the day. We have had days where there were 3 price changes! It's enough to make anyone's head spin. Put a moratorium on knee-jerk rate reprices! Like that will ever happen :)

I just hope rates stay under 6.5% or so... Obviously, we'd all love to have rates in the low 5's again, but with cheap money, came very expensive houses and bad decisions... we don't really need that again...

So, let's hope for steady rates, and an end to this up and down roller coaster of constant repricing.

:)

Is that so wrong? On another thread, I asked a very simple question... actually, two if you want to get technical. I know how some of you guys love your semantic arguments.

First, I stated that in the mortgage/real estate biz, we are 'capped' on profits... I can't make more than 5% on a given loan. Boy, was I taken to task for THAT slip up. See, my misuse of the word 'profit' was too confusing for some. Call it what you want, I am CAPPED on what I can make on any given loan. Period. Very simple to understand. My question was- if I am capped, why can't we cap the oil industry as well? They affect EVERY SINGLE other industry, they affect our quality of life, they affect EVERYTHING. Why are they free to do as they please?

Secondly, people were discussing drilling in Alaska, and other places in the US and offshore. I asked a very simple question here as well- When we let the oil companies drill ALL OVER our country, are they not going to sell that oil for the going market rate, and probably to other countries??? The answer, although no one wants to admit it, is that since oil will not be regulated by our government, these private companies will have free reign to sell to the highest bidder. What good does that do us, the consumer? NO GOOD AT ALL.

I say get people signed up for our new public works project- drilling for our own oil. We will not be beholden to any foreign country. We will not be beholden to a for-profit industry that cares for one thing only- PROFIT. We will create thousands of good-paying jobs- if not hundreds of thousands! Let's get our greatest natural resource to work FOR us. Not against us. And not for the Chinese. US.

Is that so wrong???????

Like everyone, I deal with my fair share of 'Communication Breakdowns'. Conversations that should have been had, that weren't. Conversations that should be had, but with SOMEONE ELSE, that never happen. Arguments over fivolous matters occur, probably for no other reason than entertainment or to relieve stress that was built up ELSEWHERE.

What are some good keys to communicating effectively?

I know from my past experiences that if you talk TOO MUCH, you're labeled a 'squeaky wheel' and ignored. If you voice concerns no one is comfortable dealing with, you are ROCKING THE BOAT. People tend to get defensive when they hear things they don't WANT to hear.

How do YOU address situations where discussing something makes someone uncomfortable, or angry, or nervous? How do we say 'I don't like this at all' without coming off as abrasive and trying to pick a fight? How can we voice our opinions and actually be heard???

Ah, a question for the ages.

So, again, someone is TRYING to pick a fight about whether or not 'Mortgage Accelerator' programs are worth a penny, let alone $3500. I just wish that people would get off of the 'well, they make it sound so complicated- I must NEED the software' track and take a step back and THINK about what the whole concept is based on- ADDING MONEY TO YOUR MORTGAGE PAYMENTS!

This is what I wrote in response to this particular character, and I am re-posting so this topic gets more attention.

Let's see here....

$118,000 30 year fixed at 6%= 707/month.

Let's say your sister grosses monthly income of $2000

Subtract 707 for the mortgage, plus another heap for regular living expenses- heat, water, cable etc...

That leaves a nice cozy $593 (In my calculations, phew... glad I had a calculator handy- THAT WAS HARD!!!)

NOW:

ADD that $593 to the monthly mortgage payment, and voila! Instead of paying off the mortgage in 30 years time, you pay it off in JUST 10!!!! Wow! Who knew paying off a mortgage could be so much fun!

Tell your sister to give back her software and pay a $3500 contribution to the charity of her choice instead. THAT'S money well spent.

Please, if you know ANYONE who is either being bombarded with sales calls to PURCHASE the product, or if you are a mortgage pro, real estate agent etc... that is being asked to SELL this product, come back here and read this blog again. Don't do it!

A certain person was just booted off of AR, and understandably a lot of people are upset about that. I am NO fan of censorship, and even though I thought what this person had said on several occasions was pretty foul, I did not ONCE flag the comments or blogs. I don't believe that we should necessarily be without any side of an issue- even the most crass, simplistic and vulgar viewpoints.

BUT, I am reminded of when Connecticut was pushing forward with the effort to ban smoking in bars and restaurants. Being a smoker at the time, I WAS TICKED. How can they tell us that we can't smoke and drink at the same time!!! That's my favorite thing in the whole wide world!!!!! :)

But you know what happened after the ban took place and all that nasty, worthless smoke was gone? People drank more... haha... Just kidding... we drank less- but the point is- we didn't STINK. That foul odor wasn't nesting in our hair every morning after a long night at the bar... :)

Looking back, getting rid of that putrid smoke was the best thing CT ever did. I hope the people that are upset about that certain person's exit will come to realize that he added nothing useful to the debate- and was often times overboard in his comments. He basically stunk up the place. And now he is gone, and so is the stench. Hopefully, that will turn out to be a good thing. Only time will tell.

Thank you AR for paying attention.

And to those who feel let down by AR for this, remember it was this person's own actions that caused this. Warnings, I am sure, were issued. So, don't blame the wrong people here. What is done is done, and I hope that the debate gets healthier now- and we don't drag it down anymore with outrageous behavior.

So, these have been popping up ALL OVER. People are trying to recruit real estate agents, mortgage brokers and even Bingo Ball cleaners to sell a software program that can 'help' people pay off their mortgages in record time.

This is my take:

If someone were to take every ounce of their paycheck, after taxes and basic expenses, and put it towards their mortgage- they would pay their mortgage off FAST. In fact, I would guess that they would pay it off just as fast as they would if they used this stupid program. Think about it though- instead of having ANY leverage in your house- every penny you make will be tied up in your home's equity. Sorry, there has to be a happy medium. Why would you want to have 100% equity in your home, but no cash in the bank? What is the brilliant strategy there??? I get the 'ownership' quotient, and the value there- but again, you don't need a $3500 program to tell you how to do it. If you have the discipline to use the program, you probably have the discipline to add $800/month to your mortgage payment. 

My question is simple- why would someone actually recommend this ridiculous program??? Surely there are less expensive, less vertigo-iducing ways to explain to someone HOW TO KNOCK YEARS OFF OF THEIR MORTGAGE. In fact, I show my clients how to do it for free, and with a few clicks of the mouse. Am I missing some genius formula here? Or is the cow pattie it seems to be?

How long before this scam gets called out for what it is???

If you plan on commenting, and you are a seller of this miracle product- no spam, just the facts please. Thanks in advance.