Jerry Wright MLO 181458's Blog

The Myth of The Freddie Mac Average Mortgage Rate

Jerry Wright MLO 181458 (Absolute Mortgage) — Wed, 16 Nov 2011 15:08:19 -0800

Each week Freddie Mac—one of the giant Government Sponsored Mortgage Enterprises—releases their “Primary Mortgage Market Survey” or “PMMS”. For the week ending November 10, 2011 the average 30-year fixed rate conventional mortgage was reported at 3.990%.

Almost invariably the mainstream media will spin this report as “Mortgage Rates Hit All-Time Lows” or “30-Year Mortgage Rates Drop Below 4%!”

You may be surprised to hear that this sort of media coverage causes our phones to ring off the hook. A typical conversation starts like this:

“I just heard that mortgage rates dropped below 4%. Why can’t you get me a lower rate?”

This is a very fair question. Not surprisingly the media neglects to share much of the information that is available on Freddie Mac’s very own website[i]. The reality is that only a small percentage of borrowers are eligible for the rate that is disclosed in Freddie Mac’s PMMS survey.

First off the survey only solicits information from lenders on a very specific loan profile, as follows:

· A first mortgage “conventional” (lowest available rate) loan

· On a primary residence

· With 20% equity (80% “loan-to-value”) in the subject property

· With an average amount of “points” (one point = a fee of 1% of the loan amount) paid

In addition there are countless other factors that will affect the interest rate that is available to a consumer such as:

· Their credit score. At that same 80% loan-to-value a borrower with a 660 credit score would pay 2.5% more in points than a borrower with a 740 score. That equates to an additional $7,500 in fees on a $300,000 loan.

· The presence of a second mortgage. Depending on the amount of the loan the cost here could range from nothing to as much as 1.5% in points just because you have a home equity loan or line of credit on your home.

· Whether you are just refinancing an existing loan or pulling cash out for any other purpose. Here again a “cash out” refinance can add nothing, or as much as three additional points, to your loan cost.

· The property type. Do you own a condo? If so it will cost you 0.75% in points more to refinance at 80% loan-to-value than a borrower with a single family detached dwelling.

And the list goes on. Generally lenders build a good portion of these additional points into the rate that they quote a consumer (because it rarely makes sense for the consumer to have closing costs ramp up into the tens of thousands of dollars). So let’s use the above and do a hypothetical example:

Bob Homeowner hears the news about the Freddie Mac average mortgage rate dropping below 4% and is excited to refinance his $300,000 mortgage. Bob figures he owes about 80% of the value of his condo. He has a second mortgage that puts the total debt on the property to 97% or so. While he has paid every single mortgage payment on time the tough economy has caused him to miss a few credit card payments here and there so his credit score is sitting around 670.

Bob contacts his existing lender to get his refinance started. He is shocked to hear that, instead of 3.99% with 0.70% in points—$2,100 in loan fees plus closing costs (the average in the 11/10/11 Freddie Mac PMMS)—he is offered:

· 3.990% with 5.45% in points ($16,350 in loan fees plus closing costs), or he can build some of those costs into his rate and get,

· 5.250% with 1.25% in points ($3,750 in loan fees plus closing costs)

The moral of the story—as is so often true with the media—is don’t take what you hear at face value. Their agenda is getting ratings not conveying accurate information about your home loan.

The Freddie Mac PMMS is a very useful tool to follow trends in the mortgage market. If the average rate is down from last week it is almost certain that the available rate for your personal refinance is also down. But don’t assume that means you are necessarily eligible for the interest rate quoted in the survey. Contact a trusted local mortgage advisor who can educate and inform you about your personal circumstances and whether or not it makes sense for you to refinance at today’s historically low interest rates.

[i] Some basic information along with FAQ’s can be found at: http://www.freddiemac.com/pmms/abtpmms.htm

USDA is adding Monthly MI

Jerry Wright MLO 181458 (Absolute Mortgage) — Thu, 01 Sep 2011 16:48:41 -0700

In a surprising announcement, the USDA Guaranteed Rural Development Home Loan Program announced starting October 1st, 2011, they will begin collecting (charging) monthly mortgage insurance of .3%, but their up front mortgage insurance will be reduced from 3.5% to 2%.

If you are unfamiliar with the no down payment 100% financing USDA Guaranteed home Loan, please give me a call.

Why is the USDA now charging monthly mortgage insurance? Due to some upcoming nationwide changes to make mortgage lenders more accountable to the loans they approve, USDA implemented this in order to prevent the American tax payer from subsidizing the last true 100% financing no down payment home mortgage program. It’s very rare for a government agency to not look to the tax payer to fund their program……hats off to the USDA for not wanting to suck the life blood out of the American tax payer.

How will this change reduce your buying power? On a $200,000 purchase using the USDA loan @ 5%, your current mortgage payment will increase $34/month ($1,145 payment) under this new split premium mortgage insurance structure. Make sure your Lender updates your pre-approval to be sure you still qualify if purchasing later in the year.

Is FHA now a better loan option? Nope. An FHA loan with a purchase of $200,000 requires a 3.5% down payment….that’s an extra $7,000 you would need to scratch up……unless we can get you approved for one of our FHA down payment assistance programs. Even with the 3.5% down payment, the monthly payment using an FHA loan would still be $86 more per month than using the USDA loan!

$86 over 30 years means an FHA loan would cost you $30,960 more to purchase your home! Do you want to pay more for your home?

USDA is adding mortgage insurance

Jerry Wright MLO 181458 (Absolute Mortgage) — Thu, 02 Jun 2011 18:51:17 -0700

USDA Loans Will Have Monthly Mortgage Insurance as of October 1, 2011
What Does This Mean To You?

USDA Rural Development and its loan program were designed to help improve the economy and quality of life throughout rural America. The program continues to remain a wonderful option for qualifying homebuyers, with zero down payment required.

But a change is coming!

Beginning October 1, for the first time in the history of USDA, the Single Housing Guaranteed Loan Program will have an annual fee. This fee will be calculated based on the guaranteed loan amount and based on the average annual scheduled unpaid principal balance for the life of the loan.

If you're thinking of purchasing a home and you're wondering if you may qualify for a USDA loan, give me a call right away. Home loan rates are still very attractive. Let's see if this program is right for you...before the October 1 fee begins.

Sincerely,

Jerry Wright
Mortgage Advisory Group

jwright@magloans.net

Super Conforming loan limits to expire Sept 30.

Jerry Wright MLO 181458 (Absolute Mortgage) — Fri, 27 May 2011 18:31:21 -0700

Over the last few years, the government has funded mortgages as large as $729,750 in high-cost areas throughout the country. Those loan limits were temporarily increased because the economy was struggling and many lenders would have refused to make those loans without the government covering the risk of default.

But now those loan limits are due to expire in just a few short months, on September 30, 2011.

So, why is this a big deal?

Mortgage rates are typically much lower when they are supplied through Fannie Mae and Freddie Mac. When these loans are no longer allowed under Fannie Mae and Freddie Mac, the loans will be considered non conforming (Jumbo) loans, and these usually have a much higher rate because they will be backed by private investors and not Fannie Mae or Freddie Mac.

The bottom line is this: If you are looking to finance a large loan through the government, you need to act quickly before those loan limits are reduced. Get in now or you could be paying higher rates.

Give me a call if you would like more information. I'm happy to answer any questions you have and do what I can to help you secure the home of your dreams.

Jerry Wright MLO 181458

425-238-2095

HUD does it again

Jerry Wright MLO 181458 (Absolute Mortgage) — Wed, 16 Feb 2011 15:22:04 -0800

Can you believe it? HUD announced today that starting April 18th the mortgage insurance on FHA loans will go from .9 to 1.15% for it's monthly mortgage insurance. They recently bumped it up from .55 to .9 monthly and now they are raising it again. This will make the monthly payments for this great first time homebuyer program go up and less will quallify. This makes no sense at all!

If they want to do something that actually helps the market why not have a program that allows people who make their payments on time and have income to support those payment, to refinance even though they owe more than their houses are worth?

The Key to Creating Intimacy; Use a Concierge Form

Jerry Wright MLO 181458 (Absolute Mortgage) — Tue, 07 Dec 2010 14:51:42 -0800

Superstar REALTOR Terry Moerler has clients fill out a concierge form at home, prior to meeting with them. This helps her better understand those prospects and target their hot buttons. It affords her an opportunity to probe their minds, know their likes and dislikes, and then meet their needs with efficiency.

The more you know about your clients' needs, the better you can adapt your presentation to exceed their expectations. But you must implement a system for gathering this information up front. After the initial information is obtained, you and your team members must collaborate in an effort to collect additional facts. This fact-finding mission forms the foundation for database marketing.

Never presume to know your clients' definition of great customer service. It is more useful to ask what they are looking for and then try to meet those demands. Below are some questions to ask your clients up front:

Is your existing financial philosophy conservative, moderate or aggressive?
How many children do you have, and what are their ages?
When is your birthday, and when is your spouse's birthday?
What is your favorite type of wine? (Red or white, sweet or dry, American or imported?)
What is your favorite cuisine?
What are your hobbies?
Rate on a scale of 1 to 10 (10 being best) your existing CPA relationship.
Rate on a scale of 1 to 10 (10 being best) your existing financial planning relationship.
Rate on a scale of 1 to 10 (10 being best) your existing relationship with your mortgage lender.
Rate on a scale of 1 to 10 (10 being best) your existing insurance situation.
Do you currently have a Will or Living Trust?
Do you currently have a college education fund established for your children that allows you to grow your money tax free?

Imagine the tremendous marketing value of knowing intimate details of your clients' needs and circumstances!

Make Your Next Open House a Winner

Jerry Wright MLO 181458 (Absolute Mortgage) — Fri, 03 Dec 2010 11:49:58 -0800

Many Real Estate professionals feel that open houses are too time-consuming. Frankly, they are time-consuming. But I can provide assistance as a mortgage professional on hand to field many questions for you regarding financing options.

Even in a booming market, homes don't sell themselves. I would like to be an ally for you and assist you at your open house events by providing answers to questions about financing on location. I am prepared to help you roll out the red carpet for your upcoming open houses with the following info-marketing materials:

Pre-qualification on the spot
Sample financing options for the property
Current "Hot List" of loan programs
Information about the credit scoring process
Tips for credit cleanup
First Time Home Buyer's Guide*

As a follow-up, I can also provide pre-approval for prospects so they may shop as a cash buyer. Your seller will receive legitimate offers through this process, and I will be able to weed out any unqualified prospects. I have a sophisticated database management system for follow up, and I ask many questions about each prospect's long-term goals. This enables me to get a clear picture of what type of financing is best for them, and work with them as an advisor rather than someone who simply quotes rates and provides the debt.

It is important for you to know that my policy is as follows: My job just begins when the client's loan closes with me. I continue to monitor rates for the borrower and stay focused on helping them manage this debt. In addition, I send out a friendly quarterly newsletter, a financial newsletter, and follow up with an Annual Mortgage Planning Review. At any time throughout the life of their loan, my clients are advised to inform me of any changes which might affect their financial situation, at which point I provide them with spreadsheets to help them see what their options are.

Let me know when you would like me to work an open house with you, and provide me with the property information so I may prepare relevant materials to outline financing options for the home.

Get inside the mind of the consumer; Websites every realtor needs to know

Jerry Wright MLO 181458 (Absolute Mortgage) — Wed, 01 Dec 2010 12:31:16 -0800

Studies indicate that over 80% of today's home buyers visit the Internet long before seeking the professional assistance of a REALTOR®. This means that, thanks to popular realty-themed websites that compete for your business, your clients are already armed with more information than ever before.

That's why today's savviest real estate agents must change their perspective and fight back. And the best way to do this is to visit and become familiar with these kinds of sites and the features they offer. This data will not only prepare you to answer any questions your clients might have, it will allow you to provide a more complete service that your clients will want to recommend to all of their friends and family members.

Property Listings & More

1) Redfin.com: In addition to listings, this site offers information such as how long a home has been for sale, its last sales price, and its current value. It also provides virtual tours to listed homes.
2) Trulia.com: Like Zillow.com, which offers satellite views and the estimated values of each home, Trulia's "heat maps" show how hot or cold an area is based on prices, sales, and popularity among its users. Trulia.com also has free tools real estate agents can easily add to their own websites to increase functionality and traffic.
3) Maps.Google.com and Bing.com/maps: For a bird's-eye view, even 360 degrees in some cases, these amazing map sites offer a virtual perspective of available homes that's truly hard to beat.
4) Walkscore.com: Is an interesting site that rates any address based on the walking distance of its nearby stores, restaurants, schools, parks, coffee shops etc.
5) SchoolMatters.com: A Standard & Poor's company, this site offers parents (and potential home buyers) an objective rating of public schools and public school districts by region, including test scores and demographics. GreatSchools.net offers similar info and ratings on private schools based on region.

Government Websites: Government loan programs offer great opportunities for many consumers in many regions across the country, especially first-time buyers and veterans. The following websites are likely one of the first of many sites potential home buyers visit during this process:

1) HUD.Gov is the official website for the U.S. Department of Housing and Urban Development (H.U.D.) This site lists HUD homes and provides information for home buyers, including financing options and home buying programs available through the Federal Housing Administration (FHA).
2) Homeloans.va.gov: This site houses information about government home loan programs specifically for veterans.

Give me a call if you think of any more sites I should add to my list. I look forward to developing ways that we can grow our business together.

The Art of Database Management

Jerry Wright MLO 181458 (Absolute Mortgage) — Tue, 30 Nov 2010 12:10:01 -0800

Most of us are sales people when you get right down to it. Our job is to sell our services - and ourselves - as we strive to add more clients to our existing book of business. The unfortunate fact is that most of us are in such a hurry to sell our services that, in the process, we forget to do the most important thing relative to sales.

Remember the quote from Bill Gates? The most important thing we can do is gather as much information as possible and understand what our customers need. From there, we can construct a presentation that has a high probability of giving them exactly what they want and hitting the bull's eye.

We've all heard of The Golden Rule, "Do unto others as you would have them do unto you."

I prefer to consider The Platinum Rule which states, "Do unto others the way they would want you to do unto them."

The only way to accomplish this is by asking intelligent questions up front when speaking to clients and making a better effort to understand them. Here are some examples of questions you should be asking clients at your first meeting:

What are your hobbies?
Do you have a clearly defined investment strategy?
Would you consider your investment strategy to be conservative, moderate, or aggressive?
How old do you want to be when you are financially independent and completely debt free?
Do you currently have a college fund set up for your children?
What is most important to you about the relationship you are seeking with someone in my profession?
What is your preferred form of communication during this process?

If you had honest answers to all of the questions listed above, on every one of your clients, wouldn't you stand a better chance of being able to provide them with what they need, thereby ensuring they will be clients for life? Wouldn't they also refer more of their family, friends, and co-workers to you?

Stop Paying your Landlords Mortgage!!!

Jerry Wright MLO 181458 (Absolute Mortgage) — Mon, 22 Nov 2010 11:59:11 -0800

It's staggering when you think about the cost of living, especially if you're a renter and not a home owner. If you are currently paying $1,000 a month for rented housing, then over the next three years, your property management company will effectively have reaped $36,000 of your hard earned cash! You're paying their mortgage when you could be building equity in your own property.

What if I don't have the money to buy a home right now?

There are many loan programs available that offer low and no down payment options. Some programs permit gift money as a down payment, and often sellers are willing to make a contribution to your purchase if they want to sell the home quickly.

There are many benefits of home ownership to consider, most of all, tax deductions. Let's take a look at how advantageous this can be as a homeowner:

How much is tax deductible?

Tax deductions vary, but the IRS has laid out solid rules. They also have several tax publications full of helpful information worth taking the time to read. Publication 530, Tax Information for First-Time Homeowners, is very thorough, as is Publication 936, Home Mortgage Interest Deduction. For quick reference, you can refer to Tax Topics 505, Interest Expense, and 504, Home Mortgage Points.

These publications often refer to local and state guidelines, so you may want to consult a CPA to answer all the questions that arise from reading these materials. Here are a few tips you should know up front:

Real Estate taxes are deductible on a primary residence. Real Estate taxes are paid at settlement or closing, or through an escrow account.

Mortgage interest is deductible on a loan to purchase, build or improve your home. Your lender will provide you with a Mortgage Interest Statement (Form 1098) to list the total interest paid during the year. This should include any deductible points paid for that year.

Pre-paid interest is deductible in the year it is paid. At the close of a real estate transaction, borrowers usually pay for the interest on their loan that falls between the closing period and the first of the next month. Mortgage payments are made "in arrears" so when a loan is closed mid-month, there is interest due to the new lender which must be paid in advance.

If you are building a home, the interest on the construction loan is deductible. The construction period cannot exceed 24 months prior to the date that you move in if you claim this as your primary residence.

Call me to discuss your specific needs and we'll find the program that's right for you.

Be the Gate Keeper...take control of the lead

Jerry Wright MLO 181458 (Absolute Mortgage) — Fri, 19 Nov 2010 12:25:49 -0800

The Law of The Gate Keeper states: The business professional that refers out the most business will create the most reciprocal referral relationships in return. Translation: The business professional who controls the lead WINS!

Regardless of your vocation, there will always be other business professionals that you should seek to align yourself with because they represent a potential increase in business for you through referrals. The easiest way for you to develop relationships with the people you want to work with is to start off the relationship by referring new business to them. This is The Gate Keeper concept in its truest form.

Start with knowing what your own clients need. Position yourself to refer out a significant amount of business by first knowing the needs of your own clients. When you begin working with clients, ask a lot of probing questions to get an idea of their needs. Are they happy with their existing real estate situation? Are they happy with their existing accountant, or their financial planner? Are they happy with their current insurance situation? Are they happy with their lender? Do they need to be introduced to people who provide these other types of services?

The more you position yourself with your clients as a conduit to professionals in other areas of finance and commonly needed services, the better off you will be in the long run. In your marketing material, you must continually remind your clients that you want to be in the forefront of their mind at all times when they have important decisions to make in their lives. Make sure they know that they should always consider you to be a resource in the future. Too often we leave our relationships with our clients open ended, and we fail to educate them on the role that we would like to play in their lives. The more you make your clients aware that you wish to be an ongoing resource to them, the more they will use you and, in time, they will provide you with more business to refer out to other professionals.

Learn more about the professionals with whom you want to have a referral relationship. One of the easy ways to go about putting yourself in a position to refer out a business is to sit down with the parties that you desire to refer business to and ask them to educate you on how they would like you to represent them in a conversation. Ask them to provide you with the proper scripting you will need to refer business to them. You will find this to be a very successful appointment with the prospective strategic partner that you are seeking to align yourself with. Use their wealth of knowledge on how they sell themselves and learn how to sell them.

Be the Gate Keeper of the lead, and the rest will take care of itself.

Let's discuss ways we can refer business to one another!

Recycling with a Payoff

Jerry Wright MLO 181458 (Absolute Mortgage) — Thu, 18 Nov 2010 14:23:23 -0800

It's safe to say that recycling plays a significant role in most of our lives, and is very rewarding when we consider the ecological impact we collectively produce by our efforts to recycle, reduce, and reuse. But, what if I told you that "going green" could be financially rewarding as well?

The following are some easy ways to make a little "green" for yourself, just for doing the little things you already do to lessen your ecological footprint.

Like Money in the Bank
In some states, RecycleBank.com is changing the way we take out the trash. This company takes the recyclables you already wheel out to the curb each week, and pays you for it by the pound - depositing points into a "bank account" redeemable for products and services in your area. The Recycle Bank takes paper, plastic, glass, phone books, cardboard, and cans.

Music to Your Ears
iPods and other mp3 players have turned CD collections into dust collectors. Instead of piling them up in your closet, check out AbundaTrade.com. This innovative company allows you to trade in your CDs and DVDs for items like flat-screen TVs and digital cameras at a major discount. Think how happy your children will be when you trade in your old CDs and DVDs for a new PlayStation®.

Dial "S" for Savings
Do you have a drawer full of old, out-of-date cell phones you don't use anymore? Well, GreenPhone.com wants to buy them from you! That's right, as long as your old phone still works, you could get anywhere from $1 to $70 for it. GreenPhone, in turn, sells the cell phones to people all around the world who can actually use them. Plus, you can also earn commissions for any referrals you provide. And, for every phone that GreenPhone buys, they plant trees through partnerships with American Forests and Sustainable Harvest.

Electronic Deposit
Similar to Greenphone, MyBoneYard.com takes your working flat panel TVs, laptops, and computers, erases all of your personal information, and then donates them to women's shelters, senior citizens, schools - or sells them to companies worldwide that can use them. What an e-volved concept!

Who said recycling doesn't pay off? Take advantage of these great companies and help the environment at the same time. If you know of any other green companies or websites that I should add to this list, please give me a call! I'd love to hear how you're making recycling pay off for you and your family.

10 Fees You Shouldn't Be Paying

Jerry Wright MLO 181458 (Absolute Mortgage) — Wed, 17 Nov 2010 13:13:46 -0800

10 Fees You Shouldn't Be Paying
Awareness and planning will help you avoid these unnecessary charges.

It's easy to overlook fees when they're just a couple of bucks. But even the small ones quickly add up. However, most of the time you can avoid being nickel and dimed. With the help of BillShrink.com - a free cost-savings site - we created a list of ten fees you can escape.

1. Free checking fee. Some banks are starting to attach more strings to their free checking accounts. That is, you'll have to pay a monthly fee unless you meet certain criteria (see Free Checking Is Tougher to Find). However, several online banks and community banks and some major banks still offer free checking without all the requirements to qualify.

2. Balance-transfer fee. Some credit-card companies now charge up to 5% for balance transfers. So before you transfer a balance from one card to another with a low or 0% introductory rate, you should do the math to see if the amount of interest payments that you save with the introductory offer outweighs the balance-transfer fee that has to be paid immediately. See Are Balance Transfers Still a Good Deal? You might find that you'll get a better deal by negotiating down your rate on your current card.

3. Retailer credit-card fees. The new credit-card rules make it harder for retailers to extend credit on the spot. However, that doesn't mean you'll no longer hear "Do you want to save 10% on your purchase today by opening a card account with us?" The discount is tempting, but these cards usually come with higher interest rates than traditional credit cards. If you don't pay your bill in full, that discount you got will quickly be wiped out by the high rate you'll be paying on your balance.

4. Credit-card late fees. Although the new credit-card rules prohibit card issuers from charging $25 for a first-time late payment, issuers can charge $35 if you're late a second time within six months. To avoid these fees, sign up for payment alerts from your credit-card company. You'll receive an e-mail or text message several days before your bill is due.

5. Rewards card annual fees. An increasing number of rewards cards charge an annual fee. However, there are cards with great perks and no fees. BillShrink.com recommends Capital One No Hassle Miles Rewards, Chase Sapphire Card, and Pen Fed Visa Platinum Cashback Rewards.

6. Directory assistance fees. Calling 411 can cost $1.25 or more. You can get free directory assistance by calling 1-GOOG-411 or 800-FREE-411.

7. Baggage fees. Unless you fly on Southwest or JetBlue, you'll have to pay a fee to check even one bag. If you're flying with any of the other airlines and have to check a few bags, you might find it's cheaper to send your luggage to your destination by FedEx, UPS or U.S. Postal Service Ground Shipping. See Save Money by Shipping Your Luggage.

8. Airline booking fees. Don't even think about picking up the phone to book a flight - unless you don't mind spending $15 or more for the privilege of talking to a booking agent. Book your flights online to avoid this fee.

9. Cell phone early termination fees. You can face a termination fee of up to $200 if you cancel your service before your contract is up. You can avoid these fees by signing up for prepaid service (and save money because these plans usually are cheaper).

10. Roaming fees. Make sure that you understand the way your cell-phone roaming and international charges work. According to BillShrink.com, some roaming rates are $2.49 per minute. And, some carriers will even charge you to access your voicemail (a charge of $4.99 for a missed call) even when you don't pick up that call while you are roaming. If you send a video while roaming, you could be charged up to $7.

What is your Mothers Maiden Name?

Jerry Wright MLO 181458 (Absolute Mortgage) — Tue, 16 Nov 2010 12:41:48 -0800

Passwords are crucial to accessing your personal accounts and information. The problem is we all have so many accounts that we worry more about remembering our passwords than we do about making sure that they actually protect our data from hackers. Because of this, we end up using passwords like our mother's maiden name or child's first name. But even if you add a few numbers to the end, those types of passwords are easy to break. And that means your data isn't safe.

The following tips can help you avoid the most common password pitfalls and even implement a few new ideas that will make your passwords easy to remember, and hard to break!

Use a random string of characters: That means no sequential letters or numbers.
Make it looooong: The longer the better, even up to as many as 10 to 14 characters.
Switch things up: Use a combination of upper and lower case letters, along with a few numbers mixed in the middle or end.
Don't use substitutes: Using "@" for "a" or "1" for "I" may look good to you, but most hackers are smart enough to break those substitutes rather quickly.
Avoid easy targets: Words straight out of the dictionary or things like family names and birthdays should be avoided.

Most of us cheat when it comes to passwords. We come up with two or three that we can remember and use them everywhere. But you should avoid the temptation. The fact is, once a password is compromised, all of your accounts are vulnerable. There's no way around it. You need a way to create and remember multiple passwords, a different one for each account!

Good passwords come down to two things: they're easy for you to remember and they're hard for others to break. Implementing the tips above can make your passwords hard to break, but what about remembering them - especially if you have a unique password for every account? Here's a sure-fire tip to help!

1. Think up a phrase: Instead of a common word or family member name, think up a unique phrase that only you know. For example, you may think up something off-the-wall such as "I Like Short Hair Too."
2. Make it an acronym: In our example, "I Like Short Hair Too" would become ILSHT.
3. Add Complexity: Remember those substitutes you're not supposed to use with dictionary words? Well, you CAN use them with your acronym. For example, "I Like Short Hair Too" can become "1 Like $hort Hair 2" which makes: 1L$H2. You can also use upper and lower case letters to make it 1L$h2. The point is to be creative, but in a way that you can easily remember it.
4. Make it unique: A password is only really unique if you use it for one account and one account only. So you can't just use 1L$h2 for every account. And, in reality, it's still too short. Be sure to mix in additional letters and numbers that are unique to each account. For example, if you're logging into a Gmail account, you can use the "Gm" and "@cct" (for acct) to make: 1L$h2Gm@cct. Then, for a Netflix account, you may use: 1L$h2Nf@cct.

Of course, these are just examples. You'll want to be creative and think up your own acronym and ways to add unique characters for each account.

Follow these simple steps and you'll have passwords that are tough to break, unique to every account, and easy to remember!

Get to the IRS on Time: Even If You Can't Pay

Jerry Wright MLO 181458 (Absolute Mortgage) — Mon, 15 Nov 2010 13:19:33 -0800

Have you ever completed your tax returns only to find out that you owe way more to Uncle Sam than you were expecting - or worse, that your tax bill is more than you can possibly afford to pay right now?

Don't worry. If this is the case, you're not alone. And, more importantly, you're not going to jail just for being a little short on cash. Rest assured, the IRS only seeks criminal charges for those who the agency can prove intentionally chose not to file and pay taxes. So, even if you can't pay your bill right away, file your return on time, and not only will you stay off the IRS' bad side, you'll avoid some hefty financial penalties in the process.

Penalties
According to the IRS, the penalty for filing late is generally 5% per month, or up to 25% of the total tax amount due. Not to mention interest charges, which the IRS changes quarterly, and which range between 4% and 9%. This interest applies to the unpaid balance, penalties, and to any interest that has been charged to the account as well.

If no effort is made to pay back-taxes, the IRS can impose stricter penalties, including levying bank accounts, wages, other income, or taking other assets like houses and cars. A Federal Tax Lien could also be filed, which could ruin your credit history for years to come.

The penalty for filing on time but paying late, however, is only half of one percent or .5% per month, up to 25% of the total amount owed. If you choose an installment plan to pay your debt, interest will accrue on the unpaid debt amount only. Therefore, when you file your return, pay as much as you can and cut down the penalties even more.

Extensions
It is possible to get a 30 to 120-day extension to pay your taxes after filing a return on time. Soon after filing, the IRS will send you a tax bill for the amount you still owe. Simply call the number on the bill and request an extension and explain your situation. If granted an extension, the penalties and interest will be much lower.

If you cannot pay any part of your tax bill, the IRS may temporarily delay collection until your financial situation improves, although interest and penalties will accrue throughout this time. But this extension is reserved for what the IRS calls "significant hardship."

I'd appreciate any thoughts or stories you might have on this subject. Please feel free to give me a call!

The Four Steps To Properly Setting Goals

Jerry Wright MLO 181458 (Absolute Mortgage) — Fri, 12 Nov 2010 15:28:30 -0800

First, set a positive goal for yourself. "I will save to buy a home" is a positive goal, while "I will not spend money" is a negative goal. By focusing on the positive, you'll quit spending money because you'll be so focused on your goal that you won't notice you've stopped spending money.

Second, set a date for achieving your goal. A goal is not a goal until you set a date for it. So set a date for achieving your goal, and make sure your date is attainable. If it's not, you'll become discouraged and quit. But don't set a date so far away that achieving it is pointless. "I want to be debt free by the time I die" is a silly deadline, because you won't be able to enjoy the benefits of achieving that goal.

Third, write it down. Until you see your goal in front of you, it's not real. Tape your goal onto your bathroom mirror, your refrigerator door, your car's steering wheel, and your PC's monitor. Keep reminding yourself of your goal. One client of mine kept a picture of his dream house above his television. Another, who wanted to buy a Jaguar, bought a Matchbox version for five bucks and kept it in his pocket. His co-workers regularly saw him playing with it at his desk. (Today, he drives the real thing.)

And fourth, stay focused. Keep your goal in front of you. If your goal is to buy a home, tour model homes. Read House and Garden, Architectural Digest, and similar magazines. Design your own floor plan. By immersing yourself in your goal, you'll find it easy to stop spending money, because you won't regard it as "not spending." You'll regard it instead as "preparing to spend my money on something really special."

Focus on the benefits you'll derive by reaching your goal, not on the sacrifices you're enduring. If you can't perceive the benefits, you won't achieve your goal, and even if by some chance you do reach your goal, you won't sustain your victory.

Keep all this in mind as I show you the mechanics of getting out of debt, for if you simply follow the steps I outline for you, you won't do yourself any good. Oh sure, following my plan will get you out of debt - but it won't keep you out of debt. Only you can do that.

Set your goal, give yourself a deadline, write it down, and stay focused. You'll be amazed how far this will take you.

Five Tax Breaks Every Homeowner Should Know

Jerry Wright MLO 181458 (Absolute Mortgage) — Mon, 08 Nov 2010 12:40:48 -0800

Five Tax Breaks Every Homeowner Should Know

Benjamin Franklin once said, "In this world nothing can be said to be certain, except death and taxes." More than 200 years later, this certainly holds true. And while being a homeowner won't add years to your life, the modern tax code has a number of benefits certain to make your tax bill lower. The following are a few ways your CPA or Tax Preparer can help you save:

Take an interest in your mortgage interest - Statistics show that only about half of homeowners claim this valuable deduction. Make sure you're one of them. On average, qualified American homeowners save about $2,000 per return by deducting mortgage interest. And when added up over the life of the loan, this can make a big difference in your retirement savings. This is a huge break that renters don't get! So take advantage of it.

Don't forget about the points - Points paid to refinance your home are also fully deductible throughout the life of the loan. For example, let's say in February of this year you refinanced your home for a new 20-year loan (or 240 months) and you paid $3,000 in points. By the end of this year, you can write off $125.00 for those 10 months (March through December). Beginning next year, of course, and each year thereafter, you can write off the full $150.00 until the points have been fully deducted. It's important to note that buyers can also deduct mortgage points that are paid by the seller, as long as the cost basis of the property is reduced by the amount of the seller-paid points.

Old points are as good as new - Unamortized points from old refinancing are deductible in the year of a new refinance. Using the above example, let's say rates dropped again and you refinanced again in February of the next year and paid $2,400 in points. The remaining balance of the points on the old loan, $2,875, is fully deductible - plus the money you could deduct for any qualifying mortgage payments made toward the new points.

Sell Your House - While points are not deductible for sellers, you can exclude as much as $250,000 in gain ($500,000 on a joint return) when you sell your primary home (your principal residence for two of the last five years). If you don't qualify for the two-year rule, you can get a partial exclusion if the sale of your home is the result of either qualifying changes of employment, health reasons, or other unforeseen circumstances.

Casualty deductions - Floods, forest fires, hurricanes, earthquakes and other natural disasters can be devastating, especially to homeowners. Ask your CPA how you can take deductions on casualty losses, even if you collected insurance. In addition, if the President declares your area a disaster area, you have even more options.

There are, of course, income limits to qualify for this incentive, and other important details, but give us a call, and we'll see if you can take advantage of a tax gift that even Ben Franklin could appreciate.

Remember, this, or any article you might read on your own, should never serve as tax advice. Always consult with a qualified CPA or Tax Preparer before making any tax decisions. If you need a referral, give us a call, and we'll be glad to give you the names of the reliable professionals we work with on a regular basis.

9 Rules to follow when applying for a home loan

Jerry Wright MLO 181458 (Absolute Mortgage) — Fri, 05 Nov 2010 16:58:22 -0700

Lenders get very cautious when your life circumstances change during the period between applying for a mortgage and closing on it. Here are some rules that you should follow during those critical weeks:

Rule 1: Do not change employers, become self-employed or quit your job

Rule 2: Do not take on a long-term debt such as buying a car, boat RV or furniture

Rule 3: Do not overly use your credit cards or let your accounts fall behind

Rule4: Do not spend any of your cash reserves (you will need enough set aside to cover closing costs)

Rule 5: Do not omit any debts or liabilities from your loan application

Rule 6: Do not originate any inquiries into your credit history

Rule 7: Do not make large deposits without first checking with your Mortgage Advisor.

Rule 8: Do not change bank accounts

Rule 9: Do not co-sign a loan for anyone

It is important for you assist your Mortgage Professional by vigilantly following these rules and disclosing EVERYTHING to your Mortgage Advisor during and after the loan application all the way through closing. You will certainly have a much more pleasant transaction!

Tick Tock Tick Tock, It's time for a home loan checkup

Jerry Wright MLO 181458 (Absolute Mortgage) — Mon, 01 Nov 2010 12:14:53 -0700

They say that home is where the heart is. Yet do you know that a mortgage is the heart of every good financial plan? Making sure you've got the right one can save you a ton of money, along with creating wealth and financial health for your family. And with home loan rates near historic lows, now is the perfect time for a home loan check up.

When it comes to determining if your mortgage is still the right one for you, some important factors to consider include the type of loan (or loans) you currently have, your current loan balance, your current interest rate, and any recent or upcoming changes to your financial situation (i.e. job change, marriage, divorce, kids going to college, etc). While analyzing your home loan can seem like a daunting task, have no fear. The mortgage professional who supplied you with this month's issue of YOU Magazine can help!

Be sure to find your loan paperwork. Remember signing all those papers at your closing...and walking away in an ink-stained blur? If you cannot find the thick packet of documents you were provided at closing, check with the title company or real estate attorney's office you closed at. They may be able to provide you a copy - sometimes for a fee - or at least point you in the right direction in tracking them down.

One of the most important documents is called the Note, which you will clearly see labeled on the top of the form. It is several pages long, and you probably have several copies of it. This document will tell you the amount of your original loan, as well as the interest rate you closed at, and most importantly, the terms of the loan itself.

Oftentimes, there is an addendum to the Note, which may or may not be directly attached to it, which can explain more details about an Adjustable Rate Mortgage (ARM). If you have an ARM, your Note will say how often your interest rate will adjust (for example, annually, semi-annually, or monthly). In addition, the Note will explain if your ARM carries a Prepayment Penalty. These are key factors in determining whether your current ARM remains the best loan for your situation.

Just as it is important to gather the information on your first mortgage, you should also gather the information for your second mortgage, if you have one. Home Equity Lines of Credit (HELOC's) and Home Equity Loans are a little bit different than a standard first mortgage, and the paperwork will look slightly different. These loans are usually called "second mortgages" since they are in second lien position behind a first mortgage.

Remember, your mortgage is the heart of your financial plan. Now is the perfect time to discuss your options with your loan professional as home loan rates remain at historic levels. But keep in mind: They won't stay this way forever

USDA 100% Financing!!

Jerry Wright MLO 181458 (Absolute Mortgage) — Thu, 28 Oct 2010 13:54:32 -0700

USDA HOME LOAN
GUIDELINES

Sometimes good credit and a steady income are
not enough to qualify for a home loan at a commercial
lending institution such as a mortgage company.

More rural families and individuals may be eligible
to become homeowners with the help of a
USDA guaranteed home loan. When the federal
government agrees to guarantee a loan, lending
institutions can help buyers while incurring less
risk. Through USDA's Guaranteed Rural Housing
Loan Program, low- and moderate-income people
can qualify for mortgages even without a down
payment.

Guaranteed Rural Housing Loans

To be eligible, applicants must:
Have an adequate and dependable income;

Be a U.S. Citizen, qualified alien, or be legally
admitted to the United States for permanent
residence;

Have an adjusted annual household income
that does not exceed the moderate income
limit established for the area. A family's
income includes the total gross income of the
applicant, co-applicant and any other adults in
the household. Applicants may be eligible to
make certain adjustments to gross income-
such as annual child care expenses and $480
for each minor child-in order to qualify.

USDA Rural Development field offices can provide
information on the moderate income limits
for the areas that fall within their jurisdiction,
and can provide further guidance on calculating
household income.

Have a credit history that indicates a reasonable
willingness to meet obligations as they
become due;

Have repayment ability based on the following
ratios: Principle, Interest, Taxes, and Insurance
(PITI) divided by gross monthly income must
be equal to or less than 29 percent. Total debt
divided by gross monthly income must be
equal to, or less than, 41 percent

USDA Loans For 1st time homebuyers

Jerry Wright MLO 181458 (Absolute Mortgage) — Mon, 25 Oct 2010 14:13:34 -0700

USDA Loans are great for the first time home buyer! Zero down, good quality home and no out of pocket closing costs. When applying for a USDA Loan, rent VS owning here are a few things that should be talked about.

Renting you have to do 1st last and deposit, (if you have a pet, add that deposit on the total as well).

This is a TRUE ZERO DOWN PROGRAM. It is cheaper than renting.

A USDA loan in 100% financing and the closing costs can be rolled in. There are income limits and the property must be outside the city limits. I have income guidelines and location maps available

USDA Loans are structured for families with income limits, USDA Loans are for 30 years. The promissory note interest rate is set by the lender. There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

If you think you know anyone that can benefit from a USDA loan Give me a call for more information.

Credit Repair Should not cost money

Jerry Wright MLO 181458 (Absolute Mortgage) — Fri, 22 Oct 2010 14:46:26 -0700

In these times there are going to be companies that will charge money to fix a persons credit. That is a waste of time and most people don't realize it. There are ways that a person can fix their own credit for free. It just takes time a effort. If a person takes the time and puts in the energy they can save money and make sure that the job is getting done properly.

With all of the changes in lending guidelines it is very important to have a decent credit score. There are websites out there where a person can get a free credit report to make sure that nothing is reporting incorrectly. If something is they just need to put forth the effort to make the calls and write the letters to get them removed. If there are collections or judgements then make the calls to set up terms for repayment and satisfy those trade lines.

I have a FREE Credit Aid packet that I can email to anyone looking to save themselves the money if they are willing to put forth the time and effort to fix it themselves. Interest rates are great if you have the score so if you need to get your score up then let me know and I will email you the packet.

Everything that Americans Once Knew About Home Mortgages — But Should Ask

Jerry Wright MLO 181458 (Absolute Mortgage) — Wed, 20 Oct 2010 12:50:48 -0700

Americans are discovering the concept of foreclosure and the loss of a home in a very real and disturbing way. Despite the rhetoric from Washington and sensationalist media, the process of resolving defaulted mortgages is moving ahead, one reason why the U.S. will not be Japan. But we have all forgotten the experiences of the 1930s when it comes to home foreclosure.

We seem to be moving from voluntary foreclosure moratoria put in place by banks for public relations purposes in 2010 to unilateral state law foreclosure moratoria like those put in place during the 1930s in 2011. States such as Michigan are considering "new" laws to limit foreclosures by creditors. But all Americans are also experiencing a journey back to the 1930s, a journey of remembering and one that is teaching this writer something new each day.

In the 1930s, a total of 28 states enacted foreclosure moratoria and a 1934 Supreme Court decision upheld such laws provided that a state of emergency existed. Many of these state law moratoria remain on the books today and were last invoked during the 1980s. The Iowa laws provided for suspension of foreclosures in the event of natural disasters such as drought, Neil Harl reported in his book, "The Farm Crisis of the 1980s," or by order of the governor of the state. These state moratoria drove the banking industry to look at changes in how home sales are financed and particularly the rights of investors.

Another Supreme Court decision that predated the Great Depression already had set in motion a series of changes in commercial practice in the U.S. regarding mortgages. In Benedict v. Ratner, 268 U.S. 353 (1925), Justice Louis Brandeis simply and accurately said that ambivalent mixtures of possession and control of collateral for debt are "conclusively fraudulent," veteran mortgage securities attorney Fred Feldkamp recalls. This decision and the resulting body of precedents would eventually lead to agreement on new disclosure procedures that would exempt validly secured loans under Article 9 of the Uniform Commercial Code, including possessory pledges of mortgage notes.

"To survive the Brandeis logic, one must assiduously follow the UCC and avoid all the pitfalls of the Uniform Fraudulent Transfer Act," Feldkamp said in an email last week. "Otherwise the state mortgage recording laws and Benedict v. Ratner could turn an investment record error into a fraud and may require them to rescind the investment -either under securities laws or common law fraud." Then a young attorney, Feldkamp worked on an early legal opinion for one of the mortgage insurers in the 1970s that helped define the first loan servicer agreements and pave the way for the securitization boom.

What does the Benedict v. Ratner decision by the Supreme Court and the related agreement by the states in the 1950s mean to today's families fighting foreclosure and communities striving to clear the real estate markets? First and foremost, the key thing to understand is that the fundamental principles on which securitization was built are (1) sound financial assets namely homes and (2) ALWAYS remember - the collateral follows the debt -and ownership of the debt is most clearly represented by possession of a note.

The basis of the original "true sale" opinion for mortgages was that respected counsel in 48 states all agreed (and opined to attorneys such as Feldkamp and to the credit rating agencies) that if there is a dispute between a bona fide holder of a mortgage note and a different assignee of record of the mortgage, the note holder always wins. The fact of the mortgage note coming under the UCC means that while the record at the courthouse regarding the assignee of record on the mortgage may be a complete mess, this is not necessarily evidence of fraud nor does it void the obligation of the borrower to repay.

Thus when that young activist lawyer is telling you and yours to fight a foreclosure - this even though you have not paid the mortgage in more than six months - it is time to start looking for a new place to live. The fact is that despite all of the bad press, MERS (done correctly) eventually wins in most foreclosure hearings that are contested. This is not reason for joy in terms of the human suffering involved in the loss of a home. But the sad fact is that the family that is not paying the mortgage probably is unable to pay property taxes either.

Ultimately it is important for Americans to learn how mortgages are priced and sold, both to borrowers and investors alike. There are big legal problems now being exposed in this multi-trillion dollar industry, a financial sector which is essential to the economic well-being of the U.S. For example, what happens to the investor in a mortgage backed security if the underwriter fails to deliver the mortgage note to the trustee? This is just one issue that will be litigated by the banks, investors and housing agencies in Washington for years to come.

But the most important thing for all consumers to understand is that when a mortgage is in default, the fact that the title records at the court house are in disarray does not void the mortgage note nor does it change the fact that the loan is bad. Foreclosure is a tragedy for one family, but an opportunity for another and the means by which communities and financial institutions defend their tax base and financial health. This process of liquidation and sale is why the U.S. will recover from the housing mess.

The bad guys in the housing bust are not the banks who must foreclose on homes, but the politicians in both political parties who used reckless housing policies to further their personal interests. This is a bipartisan national scandal. Barney Frank, Chris Dodd, Phil Graham, Alan Greenspan and their contemporaries are the authors of our collective misery, not the local banker who must clean up the mess created by government intervention in the housing market.

Pitches to fix bad credit to be a scam

Jerry Wright MLO 181458 (Absolute Mortgage) — Tue, 19 Oct 2010 12:39:24 -0700

By Michelle Singletary

Every day, consumers pay untold sums to companies that promise a quick credit fix. Most of the time, that money is wasted.

I understand why these offers might seem so enticing. Good credit can get you much better interest rates for a car or home loan. A bad credit history can leave you stuck with loans carrying high rates and other onerous terms. In some cases, bad credit can even cost you a job.

But make no mistake about it. While there are some legitimate credit-repair companies, many of the claims you hear advertised are usually false and a con to get your cash.

On my XM satellite radio show, a couple called in recently to ask if they had done the right thing in signing up with a company that said it could remove negative information from their credit files.

Now mind you, the information was correct. It included, among other things, a bankruptcy filing by the couple about five years ago.

In a move to clean those blemishes from their credit record, the couple hired the company, agreeing to pay it a $200 upfront fee. And -- this nearly made me fall out of my chair -- they agreed to allow $100 to be withdrawn from their bank account each month for ongoing efforts to fix their credit.

I asked the couple for details of the services they were getting. I found out that the so-called credit-repair company wasn't doing anything for them that they couldn't do for themselves.

I urged them to immediately cancel the contract, telling them they were being scammed. But their response was frustrating. Despite my warnings, I could hear in their voices that they didn't believe me. They wanted -- maybe even needed -- to believe the company.

"But they guaranteed they could get the bankruptcy removed," the wife argued.

"They promised they could improve our scores," the husband said.

"You know what, you might as well take a $100 bill every month and light a match to it," I said.

How could I tell that this deal was no good for the couple? There were several signs of trouble.

The first was the upfront fee. Under the federal Credit Repair Organizations Act -- enacted to address deceptive and abusive credit repair business practices -- it is illegal for companies to charge consumers money before performing the promised credit-repair services. Credit-repair companies cannot seek payment from you until they have completed the services they have promised.

Next, the company said it could permanently delete accurate, negative information from the couple's credit files.

That's a lie.

While you can dispute information in your files that you believe to be false, no credit-repair company or individual has the right to remove accurate, current information from a credit report. If the information in your file is correct, only the passage of time can reduce the impact of a negative report. Negative information such as late payments can stay on your credit file for seven years. In the case of a personal bankruptcy filing, it can take 10 years. But don't despair. The impact of that information on your credit scores decreases as the years go by.

Finally, after much discussion, the couple said they would cancel the contract, though I wasn't totally convinced they would.

If you're thinking about responding to a credit-repair offer, you should at least know your rights. To avoid being scammed, the Federal Trade Commission says consumers should look for the following warning signs and avoid any firm using these terms:

The company requires an upfront fee.

The company says it will dispute all information in your file, including things you know are correct. On that last point you should know better. If the company's strategy is to lie or dispute accurate information, it's not a reputable operation.

Before you sign a contract, the company does not provide you with a copy of the FTC's "Consumer Credit File Rights Under State and Federal Law," which outlines what is permissible.

You are told not to directly contact the credit reporting agencies.

You are told that the company can get you a new credit identity by applying for an employer identification number, or EIN, from the Internal Revenue Service. The pitch is that you can use this number instead of your Social Security number. If you don't own a business, this is not a legitimate way to repair your personal credit history. It is a federal crime to obtain an EIN under false pretenses.

If you've got some credit issues, the best thing to do is go to http://www.ftc.gov/ and get the agency's free publication, "Credit Repair: Self Help May Be Best." You can also call toll-free 877-382-4357.

I'll tell you what I told that couple. Don't waste money on a credit-repair service.

© Washington Post Writers Group

Understanding the Credit Crunch in Lending

Jerry Wright MLO 181458 (Absolute Mortgage) — Mon, 18 Oct 2010 14:30:01 -0700

The media has coined the phrase "Credit Crunch". Most people that I talk to have no idea what this is or what it means. All they see is on every news station that more lenders are going bankrupt or cutting programs. What I will attempt to do here is explain what happened and how it affected our markets. But first I need to take it back a few years and explain a bit about the system.

We will start about 3 years ago. Appreciation of homes in the nation was growing rapidly. I will use some very conservative figures and say they were appreciating at a rate of 15%. So lenders had very loose restrictions of the loans. They did this because if they loaned on a house at 100%, after year 1 they were only at risk to 85%. At the end of the 2^nd year the risk to the lender was only 70%. This means that if they had to repossess the property and sell it at auction they could recoup their initial 100% financing. This was the reason that the guidelines eased and we started seeing financing for lower credit scores, no down payments and investment properties with 0 down.

Another thing that needs explaining is how lenders make there money on the back end. Lenders make loans to their credit line. So let us use $100,000,000. When they had that block of $100 million they would take it to the trading floor and get bids to buy that bond. In this same time frame when the lenders would take that line to the floor they would have 35 to 40 groups bidding to buy that line at around 102%. They would pay premium pricing for that line because of the interest they would collect on the line down the road. So that lender would get bids of around $102 million for the $100 million in loans that they had. That $2 million profit is what kept that company in business and made the profits for the company. At this time homes were appreciating across the board and the default rate was low so the risk of buying those bonds was very low.

Now we need to jump ahead to the middle of 2006. The default rates of those high risk loans started to climb and the housing appreciation started to level off and in some areas started to drop. I will not even include the billions of loans that defaulted due to hurricane Katrina. So those investors that bought those loans are repossessing some of the houses and sell them at auction. Since the rate of appreciation had leveled off they were and are taking losses. This made the buyers of the bonds start to rethink their positions about the amount of premium that they would buy future bulk mortgage notes. Now those same lenders that bring $100 million to the floor for bids are getting different offers. Now instead of 35-40 bidders there may be 5-10. The amount of the bids had decreased on the credit lines to .96 to .97 for that $100 million. So to free up the lenders credit line they would have to take a loss of $3-$4 million. Not many of the Alt A or Sub-Prime lenders could sustain those types of losses for any period of time.

Now is a good time to explain that these are NOT all loans. The government insures loans in conforming amounts. Those are loans that are at $417,000 and below. Those loans also provide documentation of income, credit and assets. The loans that are considered Alt-A and Sub-Prime were loans that are commonly known as "Stated Income", "No-Doc", "Reduced Doc", "No-Ratio", and are jokingly known as "liars loans". The other types of loans that are at issue are the "Negative Amortization" loans. These types of loans were broadcast though different media sources saying that you could get loans for 1-2%. Few consumers realized that this type of loan was a Negative Am type loan. For an example the loan balance at the beginning of the year may have been $200,000 and they made the minimum payments on that loan for a year. At the end of that year their loan balance might be $208,000. They were eating away at their equity without even realizing what was happening. Then as appreciation slowed they could potentially owe more than the house is worth.

That brings us to the collapse of some of the lenders. Some lending institutions relied heavily on the types of loans talked about above. They did very little "Conforming" loans and the blocks of mortgage notes they sold were the risky ones. As the default rates rose some foreign investors stopped buying the mortgage backed securities. Some lenders could not sell off those notes and their credit lines were full. The issuers of those lines started to call the margins and they had no money to pay them down and had to file for bankruptcy. This started to affect all lenders because the buyers of the bonds were scrutinizing all the loans that are being sold. So lenders had to tighten guidelines requiring document and higher credit scores so that the investors would buy those notes and free up their credit lines.

There are still 100% financing options available out there. The criteria just became a little tighter. The borrower must prove income, assets and have a credit rating that is above 620 and have no late payments. The borrowers who have some late payments or need reduced documentation loans can still get them also. They just need some sort of down payment. The amount down would depend on what the issues are. Refinancing a mortgage follows basically the same standards.

I hope this has clarified some of the confusion out there and if I can be of any assistance please don't hesitate to call.