Shopping Around?

Here’s the Inside Scoop on How to Do It Right!

First: make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS…RUN…DON’T WALK… RUN…TO A LENDER THAT DOES!

1. What are mortgage interest rates based on? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.)


2. What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, visit www.SilverstarFinance.com and hit the “market update” link at the top of the page – this is where we put recent news and blog posts that are important to you when it comes to buying, refinancing, or investing).


3. When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us a call).


4. Do you have access to live, real time, mortgage bond quotes? (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!)

Be smart... Ask questions… Get answers!

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but we do this every single day. It’s your home and your future. It’s our profession and our passion. We're ready to work for your best interest.

Shopping…Part Two

Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets you must know to “shop” effectively.

First - IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS. But you didn’t really need us to tell you that, did you? Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the length of the lock-in? If fees are discounted, is it built into a higher interest rate?

Second - YOU GET WHAT YOU PAY FOR. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder. Best case; expect very little advice, experience and personal service. Worst case; expect that you may not close at all. All too often, you don’t know until it’s too late that cheapest isn’t BEST. But if you want the cheapest quote – head on out to the Internet, and we wish you good luck. Just remember that if you’ve heard any horror stories from family members, friends or coworkers about missed closing dates, or big surprise changes at the last minute on interest rate or costs…these are often due to working with discount or internet lenders who may have a serious lack of experience. Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the long run. This is the largest financial transaction most people will make in their lifetime. That being said – we are not the cheapest. Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve.

Third - MAKE CORRECT COMPARISONS. When looking at estimates, don’t simply look at the bottom line. You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls. And make sure lender fees are not “hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line! APR? Easily manipulated as well, and worthless as a tool of comparison.

Fourth - UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

Fifth - UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.

Ask questions. Get answers.

Never underestimate a small group of dedicated individuals to change the world.

~Margaret Mead

As you may or may not know, there have been some MAJOR changes made in lending industry. One in particular that we would like to bring to light is the new HERA/TILA (Truth in Lending) regulations pertaining to loan disclosures. Please keep reading, as this is important to all of us!

Here is a summary of what we are referring to:

These new disclosure requirements--which are the result of the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) passed by Congress in 2008--are intended to protect consumers from deceptive lending.

While lenders are still formalizing their compliance policies, it appears that the slightest change in a loan could trigger re-disclosure requirements that could add days or even weeks to closing dates.

This means that when we send out our initial disclosures to clients to sign at the time of application and we don't have a rate locked in and/or fees settled on, for a number of reasons (property has not been found yet, lender has not been picked, etc.), if there is a change of 1/8th in the APR - Annual Percentage Rate (more OR less), we must re-disclose. Which means that clients will need to resign all documentation and have it re-verified.

Just like the HVCC regulation (new appraisal guidelines), we don't think we will completely grasp the impact of the new HERA/TILA regulation until all the procedures are put in place by lenders. One thing is for certain, there will be an increased number of missed closing dates, expensive lock extensions and frustrated borrowers. We will always do everything in our power to limit this frustration, however, a lot will be in the hands of the lending institution. Our current business practice is to disclose, disclose, disclose, but unfortunately we broke our rate-quoting crystal ball, so there will be times when a re-disclosure, under these new guidelines, is inevitable. Preparation is key.

Based on these changes, there is opportunity for failure in scheduling closing dates that are unmanageable, which can cost buyers money from blown rate locks and extended closing dates with some sellers. In an effort to under promise and over deliver we meet with all of our clients one-on-one at their initial strategy planning session. Communication is key not only with our clients but with their Realtors, Escrow, Title and other parties to the transaction.

We want to make sure you are aware and not caught off guard. These changes affect everyone who is purchasing a home or refinancing their existing mortgage.

If you have any questions meet with our T.E.A.M. ~ Trusted Equity and Asset Management ~ and get them answered.

"We should never allow ourselves to be bullied by an either-or. There is often the possibility of something better than either of those two alternatives." ~ Mary Parker Follett

Something to think about.

45% of retirees aged 55-75 surveyed in April 2009 have either not calculated how long their assets are anticipated to last during their retirement years or they have never given the issue any thought.
~source: Society of Actuaries

Are you prepared?

• Are you saving $$ on autopilot each month?
• Is your debt under control or managed correctly? Especially your Biggest Debt...your mortgage?
• Do you have a financial plan in place?
• Do you know what tax laws can benefit or hurt you?

Consider this...

• People are living longer and working longer than planned.
• "Bad" debt is eating away at your retirement.
• Is much of your financial growth being lost because of the current financial turmoil?
• Taxes ARE increasing like it or not. Do you know how to protect your hard earned income?

"Getting Fiscally Fit" is just one of the employee benefit workshops that we offer to help business owners and managers offer their team to help become happier and more productive employees.

Here are the things we discuss during our 1 hour workshops at places of business, groups, organizations, etc.:

• How to overcome the roadblocks to financial success.
• Creating and maintaining a financial blueprint.
• How our daily habits influence our financial fitness.
• How to develop our own action steps to financial freedom.
• The need to identify cash flow traps.
• Why tax-planning vs. tax-preparation can put dollars back into your monthly cash flow.

Before you quit reading, consider the statistics presented by the Society of Actuaries. People are concerned, stressed and fearful about their futures. Wouldn't it feel great knowing that you have helped a co-worker or employee lay the right path to a successful financial future?

If you answered YES then read on..

If you would like to host one of these events or you would like your employer to host one of these events so that you can get started on working on the answers to the question above, all you need to do is forward this email to someone in your Human Resources or Employee Benefit Department and/or reply with the person in charge of scheduling these kinds of benefits.

We are a 501(c)(3) non-profit organization that provides corporations, family businesses and organizations with financial education through seminars and workshops. Our 20 plus seminars cover a wide variety of topics meaningful to everyone.

We offer these seminars at NO CHARGE. You and your team will obtain useful information that will help identify your financial needs. As an employer, family business owner, or organization you will be receiving / providing a valuable, but yet NO COST SERVICE. As for us, we benefit by the exposure that we gain in the community.

Our seminars are NOT SALES EVENTS. We do not endorse any specific products nor companies. Our primary purpose is to provide general financial education to the community.

Feel free to research us more at www.sofa.org.

The Question Remains,

What is Really Happening in the Real Estate Market?

Lenders for months have been holding back a high volume of homes in the foreclosure pipeline that could further depress home values if they are released at once into the market, industry experts say. The artificially created shortage of foreclosed homes for sale comes when there is a strong resurgence of home buying, with consumers finding, often to their surprise, that they must make multiple offers to compete for a diminished supply of bargain homes.

Meanwhile, financial institutions have been encouraged by federal and state lawmakers to slow the foreclosure process to provide more time to work with borrowers on mortgage modifications in an effort to reduce foreclosures.

So where does this game playing lead us?

Scott Anderson, vice president and senior economist with Wells Fargo, said by withholding a portion of foreclosed properties from the market, lenders may deliberately be preventing home prices from falling as fast as they otherwise would.

So don't be fooled by a low supply of homes and a perceived surge in home buying...

A tally by one company that closely monitors foreclosures showed only about a third of repossessed houses are being actively marketed. If this "phantom supply" of bank-owned houses is put up for sale at once, Anderson said, it would probably prompt another steep plunge in property values.

The median price of an Inland house has dropped 43 percent in San Bernardino County and 39 percent in Riverside County in the past year, but the rate has slowed in recent months.

Statistics confirm that banks are keeping foreclosed houses off the market much longer than usual, said Rick Sharga, senior vice president of RealtyTrac, a company that monitors foreclosure trends nationally. Sharga said RealtyTrac studied the 234,716 bank-owned California homes in its database as of the end of November and discovered that only 34 percent were advertised through the state's dozens of multiple listing services, which is how bank-owned properties are normally marketed. "We were frankly stunned by that," Sharga said. Usually repossessed houses are processed, fixed up and listed for sale within 30 days, he said.

While the gradual release of foreclosed properties helps to prop up prices, it also could prolong the real estate recession.

Foreclosure Hiatus

Also, the foreclosure process has been interrupted repeatedly by federal and state moratoriums designed to encourage lenders to modify loans to help financially stressed homeowners keep their homes. Two large government-controlled lenders, Fannie Mae and Freddie Mac, in November imposed holiday suspensions of foreclosure-related evictions that were repeatedly extended until March 31.

In California, legislation took effect in September that requires lenders to give borrowers 30 days notice before taking the first step toward foreclosure. And starting this summer, loan servicers in the state must delay for 90 days the foreclosure of owner-occupied homes or have a comprehensive loan modification program. As the moratoriums expire, the number of foreclosures is expected to spike. So GET READY...this is definitely the time to buy deeply discounted properties and interest rates are fantastic too!

Meanwhile a surge of first-time home buyers and investors, attracted by low prices and mortgage rates and government tax incentives, are competing for a diminishing number of homes for sale. Buyers are snapping up foreclosed houses, many of which receive multiple offers, faster than they can be replaced by new foreclosures.

"At the rate they are dishing out these repos (repossessed houses) it will be years before they all sell," said Kershaw of Prudential Realty, who claims that the banks are missing out on a great opportunity to clear out their foreclosures. "It is spring and we are in the big buying season. This is probably not the time to choke the market with no inventory. It is like not having iPods at Christmas time," said Kershaw. RISMEDIA, April 22, 2009.

Don't Miss Out Like the Banks Are

If you are considering buying property or your clients are, not snooze, it may take longer than you think and you will risk missing a GREAT opportunity by not be prepared.

Have a super successful day!

Did you know?

It's Financial Literacy Month. And to long with this, please read this perfect quote to think about as you go through this very changing period of time.

"What is" is always shifting. Be aware of the shift in order to create the life I want.

Please take a moment to watch my SHORT, yes it's true, it's only 1:56 mins, video

PRESIDENT OBAMA URGES MILLIONS TO REFINANCE THEIR MORTGAGE

Quote of the Week:

"There are 7 to 9 Million people across the country, who right now, could be taking advantage of lower mortgage rates."

~Barrack Obama

CLICK ME TO READ MSNBC ARTICLE

CLICK ME TO WATCH OBAMA'S PRESS CONFERENCE

Please remember, we are able to orchestrate the new programs available and are excited about the programs that are being released in the next few weeks.

Part of being qualified for this new program is that your existing loan must be owned by Fannie Mae or Freddie Mac. Click on each of the links below to find out if you are a candidate.

Does Fannie Mae Own Your Mortgage?

If you are indeed a candidate, great, inquire to find out what I can do for you right away.

Great News!!!

It's really nice to finally hear some good news on the home front. Sales of new single-family homes jumped 4.7 percent from January to February, the Commerce Department reported today. And interest rates are hitting all time lows since 1971.
But...Better compared to what?

What you are NOT hearing is that there is STILL a lot of volatility in the market. Now you may be aware of this but it's important to keep that in perspective and definitely within your focus, especially when you are advising your clients on the right steps to take over the next few years. I couldn't believe it, this morning on one of the major news channels, I actually heard the newscaster say that interest rates hit an all time low today of 4.375%! I couldn't believe what I was hearing. Over the last 2 days interest rates have gone up .125% each day and 2 days ago we were on average at 4.75% for a conforming 30 year fixed loan, $417,000 or less. Take care who you get your information from.

So how does the volatility play out?...

A FEW STATES - 50% of the foreclosure action that took place last month on nearly 291,000 troubled properties nationwide occurred in just 3 states. And guess who is in the top 3? That's right California along with Florida and Arizona (source: RealtyTrac).

While the unexpected increase in home sales and interest rates dropping was welcomed by many including the financial markets, sales of new homes were down 41% from a year ago. February's numbers were the second worst on record, surpassed only by January's annual sales rate of 322,000 homes..

So, although this is good news, in reality, we're really just bouncing off the lows and we have a ways to go. It's important to always be prepared for the worst so that you and your clients aren't taken by surprise.

You can always count on us to provide you and your clients w up to date and insightful market views on real estate and mortgages. So keep checking back for more...

So the question is, do you qualify for the any of the new mortgage programs?

Since last week, I have been contacted repeatedly by clients, friends and family wanting to know if they qualify for any of the mortgage relief programs that have been signed into law over the past few weeks.

More details have been released by Fannie Mae and Freddie Mac on how they will handle refinance transactions authorized by the Home Affordable Refinance program. The complete details of both programs can be found by accessing the program guides from Fannie Mae and Freddie Mac, but I will point out some of the highlights below to help answer your questions.

Lenders and investors are in a holding pattern as they determine if and when and how they will accept these transactions. Even though this legislation has passed - they are not all required to participate. In all cases loans will have to be refinanced with the existing owner of the loan today. Meaning, if Fannie Mae is the owner of your loan, the loan must be delivered to Fannie Mae and underwritten according to their guidelines. The same is true for Freddie Mac.

So how do you know if your loan is owned by Fannie or Freddie?

You have the ability to do this by contacting your loan servicer (company that sends you your mortgage statement) and asking...or you can do this by using the links below. If you need help, I can submit the information for you, simply send me a copy of your current mortgage statement. Note that your property address must be entered exactly as the agency has it on file, or it may not be found (ie: Rd or Road? St or Street?

• Does Fannie Mae Own Your Mortgage?


• Does Freddie Mac Own Your Mortgage?

Let's look at the guidelines for both Fannie Mae and Freddie Mac and some of the key factors I see that will impact or enhance your ability to participate. Even though these are some of the highlights, you can also read more detailed guidelines on your own.

One key point to remember is that these are the guides from the Freddie and Fannie. And just as participation in the programs is voluntary, individual lenders and servicers may choose to implement constraints that deviate from the guidelines on their own.

Fannie Mae

Qualifications for a refinance

• You must be receiving either a lower mortgage payment or moving to a more stable type of product like an Adjustable Rate Mortgage to a Fixed-Rate.


• The maximum loan amount can only be 105% of your homes value. There is no limitation if you have 2 mortgages but 2nd lien holders will need to re-subordinate and that probably wont be that easy.


• If mortgage insurance (PMI) does not exist on the loan today, it will not be required on the new loan. If PMI does exist on the loan, the loan will be required to be re-insured and re-qualified through the existing PMI company.


• The availability for appraisal waivers will exist in limited situations.

Applications can be taken now but loan findings may not be available until early April or May but again, each lender may or may not be participating.

Freddie Mac

The Freddie Mac guidelines are somewhat similar to Fannie Mae's, but they are a bit more vague at this time. Although Freddie Mac initially stated that these refinances may ONLY be conducted by the loan servicer or one of their retail channels, I have learned that they are looking at options that could enable more mortgage brokers, like me, to be involved in refinances under this program.

Bottom line - it is still too early to see how this will all play out. If you are truly in financial hardship then other options might be a better way to go.

And if you are truly not in financial hardship and you are looking at options just because the value of your home has dropped then most likely you will not qualify for any of these options. If you HAVE to sell your home, call me to discuss alternative options, there are many.

And if you don't then like many of us, we all get to just sit tight and wait for home values to go up again in the future...and they will.

Additional Resources:

Fannie Mae

Freddie Mac

Does Fannie Mae Own Your Mortgage?

Does Freddie Mac Own Your Mortgage?

Hopefully I've helped clarify some of the confusion...unfortunately, there's probably more coming. =)

What Lenders Learned During Prior Refi Booms

First off, what is happening with interest rates and reduced yield spread premium? 15 years ago it wasn't uncommon to see nice buy-up schedules on many products, with an increased yield spread premium being offered in return for a higher interest rate. But then along came the refinancing frenzy of 1993 and 1998, followed by the grand daddy refi bonanza of 2002 to 2003. As home loan rates dropped ever lower over the years, you can imagine how the investors felt as they watched loans turn around to be paid off in a relatively short time, as increasingly lower rates made it attractive for clients to refinance, sometimes multiple times in a year. These losses on loans were very costly to lenders.
So...after learning their lesson many times over...the lenders got smarter and started to reduce the amount of par premiums, followed by making those premiums more expensive by demanding even higher rates in return for a smaller premium and have now nearly eliminated that premium pricing which cost them so much money in the past.

Now, who would have ever thought that a credit score of 680 or an LTV of 90% would be considered such risky business? But it's been a tough year for everyone, including Freddie and Fannie, and risk-based pricing is one measure they can take to protect themselves. Previously adjustments could fairly easy to build into the rate, with a small bump up in rate. But those days are gone, often leaving the borrower with no choice but to pay points for the adjustment. This can be frustrating to clients who don't understand why the recent pricing adjustments have to translate into potentially thousands of dollars in cash out of pocket.

Bottlenecks in the Pipeline Keep Rates Artificially Inflated

But wait there's more...Investors have been slammed with the recent uptick in volume, at a time when they have both shrunk in number and depleted their head count, in an effort to slash costs. So while the increase in volume is certainly a good thing, it is apparently "too much too soon" for some investors to handle...and the only way to slow down the volume is by an increase in pricing. And why wouldn't they want to do this??? If their capacity is maxed out, raising rates helps increase profits while making the workload manageable by slowing down the flow of incoming files. Not great for us but good for them.

The bottom line is - smart consumers cannot just call a lender and say: "what's your rate and closing costs?" There are simply so many unknowns with the combination of credit score, loan to value percentages, property type, etc... that it is imperative for your clients to speak with a trusted mortgage advisor before making any final decisions about a property.

We are here to provide honest, straightforward advice. We will take ongoing care of you and anyone you refer to us in the same upfront fashion as we always have and this level of service does not end when a transaction is complete. Adapted from MMG

"A good goal is like a strenuous exercise- it makes you stretch."
~Mary Kay Ash

For some reason, when we can't see the future clearly, we tend to see things as becoming worse rather than better. However, the optimistic attitude that gave us the world we now live in is what is needed to take advantage of the fantastic opportunities all the despair and market uncertainty is generating today.

Attitude is Everything>

Much of life is about striving to improve - whether that's in our relationships, our professional accomplishments, or in our financial well-being. But success does not come by accident. Decide to achieve your goals and then get the help you need to implement them and be successful!

Read the full article =>> Attitude is Everything!

I was in the process of recording a video this week but I'm loosing my voice and the video was just not turning out so great.

So ....Continuing on from "Why Houses Make Great Investments"...that I wrote to you about a couple of weeks ago.

What a GREAT environment we're in for buying real estate....yep that's right, I said "Great". I'm sure you've read or heard by now how fantastic interest rates are, hopefully you read my email from last week. =) And...you know that homes are on sale and investment earnings are down.

So, how does this affect your plan?

People who are self-employed who will not be getting a pension from their employer, myself included, need do some extra planning to put money aside for our retirement. And now, especially in today's income and investment environment, it's difficult to have enough money to save, right?!

Alright so even if you aren't self-employed and you're expecting a pension, how secure is it? Probably not something you are going to rely on solely, right?

So what are your alternatives. Although there are many, real estate happens to be an excellent choice. Think about your own Estate / Retirement plan, you do have one right? Use this simple form below to start thinking about how rental income can help your bottom line.

Estate Building Plan

Situation:

• You want to be able to retire with a secure annual income of:
• $____________ or $_________/month.

Problem:

• Social Security will not produce all that you need.
• Your Pension will only produce annual income of $___________
• or you are Self-Employed and do not have a pension plan.
• You do not expect to get a BIG inheritance. =(

Proposed Solution:

• Acquire ____ rental houses.
• Live long enough to have your tenants pay off your house!! =) Or at least paid off way down!
• Your real estate portfolio will produce the extra passive income that you desire. And...you get to collect the income along the way, even before you are retired.

** Here's an idea: Have each house represent a specific purpose in your plan. One house pays for your insurance. One house pays your mortgage on your primary residence. One house pays for your vacations etc.

On the chart below, I've listed 3 types of income, the tax benefits and how much can end up in your pocket. I used a self employed person to keep it simple. Keep in mind these are just general numbers, everyone has their own unique situation.

Now....think of it this way, just imagine how you will feel if you have all 3 types of income working for you? Happy, Secure and Financially Free?

2009 is going to be a golden year for purchasing real estate and ultimately will set you up for an incredible retirement, if you plan ahead and develop the right exit strategy. Do not wait, the market is changing rapidly and you have to be prepared in advance.

Next week, I'll show you how real estate can be a fantastic hedge against coming inflation.

All the best wishes for you and your family in 2009.