Total Financial Fitness Blog

How can Jelly Beans help you sell more mortgages?

Karl Christen Credit Restoration Specialist — Mon, 18 May 2009 16:27:15 -0500

A new friend of mine just joined Active Rain. His name is Kody King, and he works for Springwater Capital. He and I recently were in a meeting together and he introduced me to a sales concept that he put together called the Jelly Bean Marketing Plan. It's really very simple, but effective in terms of the way it's designed. And I won't ruin his blog by talking about the details, but if you get a chance, please check out his blog.

Kody King, the Jelly Bean King

MMA real or a confidence game?

Karl Christen Credit Restoration Specialist — Mon, 20 Apr 2009 23:59:38 -0500

I've always been impressed how certain people can get away at times with elaborate flim flams. The recent arrest of Bernie Maddof is one such demonstration of this type of fraud and those who are duped. Normally it requires a mark, or victim, who is manipulated by their greed, honesty or compassion. Often these schemes are elaborate and can be perpetuated by the innocent and masterminded by those thinking they are providing others some type of better existence. Meanwhile capitalizing in the beginning with massive profits, which later leave their unknowing victims in bankruptcy or foreclosure.

This scenario is relevant in regards to the Mortgage Merge Account. Hailed as some great innovation brought to us by the land down under, it has turned into a nightmare that strangles many of it's victims. Offered by neighbors, friends and relatives, the victims think they are following the council of family or religious leaders by eliminating their mortgage. In reality they are creating the seeds of their destruction.

It all started the summer of 2006 in my home state of Utah. A group of average mortgage originators decided with the help of a couple insurance guy's to adopt a growing underground movement that used debt against debt. Yep, you heard that correctly. You take additional debt to leverage down the longer term debt you receive when getting a mortgage. The best way at the time was to get a equity line from the bank and then pay a nice salesmen $3500 dollars, which of course you could slap on that same Equity line, and now a little graph you could see on a web page would tell you when to pay your payment, how much to pay, and when you would be free!!! Wow....just $3500 and you didn't even have to really take it out of your checking account to do it!! Cool!!! Oh, and that small rainy day fund you have, you really don't need it, just put it in with the Equity Line and the software will help you pay your home off that much faster. Oh yes, did I forget to mention....you can make extra income by selling this to others as well.....oh your not a mortgage lender....no worries, anyone can sell this and isn't it wise to help others pay off their mortgages earlier.

Yes indeed, paying off the mortgage had become more important then curing cancer. The mortgage was evil and a vile hinderance to retirement and it should be taken out at any cost. We'll that's a slight exaggeration, but so did the salespeople who pitched the MMA product. Hey Mr. homeowner, you don't even have to CHANGE, just keep what you doing now, and you'll have that house paid off in 8 years!! Yes, it did sound too good to be true, and even a mortgage professional like msyelf was taken in for a short time.

But like most confidence games, circumstances can quickly change. Either it's a ponzi scheme and the organizer of the fraud runs out of new investors to pay the returns on the old investments and it collapses, or market changes swiftly cause the collapse of the fraud and the "mark" is left holding the bag. Guess what's happened to these MMA programs, there now crashing and burning.

What most people didn't realize is that the MMA couldn't predict future real etate markets. It's not a bad idea if the market is perpetually increasing each year. But you have one or two severe downturns, or an extended downturn of more then 20%, and look out! Now these same people who thought they had accumulated a 100k in savings and equity are now just staring at an empty wallet and bank account. Their good friend has long since stopped selling the snake oil. They're probably already invited you to attend some meeting they know nothing about, but it's cool and you should just check it out....(oh yeah...it's not just soap....it's SUPER soap!!"

So now your $3500 is long gone. You actually owe now a first and a HELOC that has been converted to a second mortgage because your in a declining market and the bank closed your equity line! Your also probably worried about losing your job and realizing that you have little in your reserves because you've needed them to fund your massive mortgage payment! Yes the confidence man struck once again, and now your one of those guys you read about in the paper, oh and someone is trying to deliver you papers from your wife who moved out a few weeks ago....oh crap!

Speaking of your credit recently, has this happened to you?

Karl Christen Credit Restoration Specialist — Wed, 11 Mar 2009 21:41:31 -0500

You open up your credit card statement and your shocked to see that your credit limit has been reduced to what you currently owe! Or worse, your American Express card was just declined due to your credit limit being limited (and you thought AMEX didn't have a limit).

As the economy continues to slide off a proverbial cliff, credit card companies/banks are looking at record default and bankruptcy. Their taking swift action to shore up their losses, and they may end up doing it at the consumers expense.

Credit Reporting has become a science, and the "evil" empire, Transunion, Experian and Equifax have created companies that have created the current system that banks use to analyze risk. You most likely have a credit score, and unless you live under a rock you know that having a 700 plus score now days is a must. The problem is there are several scores that the your are not privy to, and these scores are where the credit card companies are ambushing their clients.

The first culprit is called the Bankruptcy score. This score evaluates the likely hood of any of their clients risk of falling into bankruptcy. With over a million bankruptcy's in 2008, this number is bound to explode in 2009 with the deteriorating job market. As your probably can deduce, these scores are going to be looked at even more closely in preceding months. If your mysteriously cut-toff from your available credit, it could be a number of factors, the most likely being that your considered a high bankruptcy risk. This can happen even if you have no late payments or other risk factors that normally are considered important.

The problem with this system is that you the consumer have no rights in terms of knowing the factors used to determine your bankruptcy risks. Unlike many of the consumer friendly models, the Credit Bureau's are digging in their heels and refuse to release specific factors regarding how they make these determinations. The results can be devastating, from frozen credit accounts to higher interest rates, the consumer is left in limbo as to why and how their situation was made even worse.

What's even more alarming is the scoring model that is called "transactional scoring". If you use your credit cards at Nordstroms, then use them for cash advances or Walmart, the transactional score could alert your creditor that you maybe using your credit to mask cash flow issues. The creditor then responds and freezes credit and raises rates. What's tough for the consumer is that they could be just fine financially, but the transactional score, normally reserved to detect fraudulent activity, is now used to determine if your a risky credit user.

I hope this makes you mad as a consumer, because the credit card companies and credit scoring companies are employing ever trick in the book to keep their system secret. Consumer groups have fought for years to force the Credit Bureau's to provide some type of accountability to consumers in regards to reporting errors. But Banks and the credit reporting system is in for the fight of it's life right now, and the old rules of fair play maybe just ignored as they scramble to plug the dike.

If a score is used against you for any reason, you should have a right to see that score, know how it was calculated and protest any errors in the data used to calculate it. Therefore you need to contact your US Senator or US Congressperson and let them know that , Experian, Trans Union and Equifax need to change their disclosures and include consumers.

You also need to speak to someone who is well versed in credit law and reading credit reports. Not all mortgage professionals understand credit, and you may need to search in your community for someone who understands the "credit game" as I call it. There are a number of excellent of online sources as well, including the one your reading.

How to change your business and thrive in the upcoming depression : Part II

Karl Christen Credit Restoration Specialist — Mon, 02 Mar 2009 11:45:13 -0600

My first post on this subject outlined the main challenges we'll be facing in the next 5 to 10 years. Now I'm going to start focusing on each of these challenges one at a time. I enjoy reading the responses by my readers, and one exchange in particular spurred me to write this follow-up.

Homes of the future may begin resembling homes of the past. In other words, if you've ever traveled through older neighborhoods, look at the home sizes as you progress through the decades. 1930's-40's you see cottage style floor-plans, 2 bedrooms, 1 bath, kitchen, living area and basement of similar size. It's rare to see more then 2 bathrooms in these type of homes. Then in the 50's and 60's, floor plans became slightly bigger and the ranch style floor plan came into style, with 3 bedrooms, 2 bath's on the main-floor. Multilevel homes began to surface again, but actual average square foot above grade was not much different then your ranch style single level home.

The 1970's and 80's brought the multi-level plan into vogue. Designed to fit within the footprint of a ranch or rambler, these new designs added bedrooms and utilized basement space more efficiently. I think part of the attraction to this design was that actual above grade square footage was less then the traditional two story home. Then in the late 1990's and early 2000's, homes sizes began to increase. Custom homes became the rage, with designs expanding beyond the basic ranch footprints.

Then land speculation hit it's zenith in 2004, and lot's were developed at record rates. Every increasing building costs, coupled with ridiculous land speculation, and builders were almost forced to build bigger and bigger homes. These were not necessarly better designs, but they were filled with "extra's" which would allow the builder to actually make some type of profit. I don't think the small builder/contractor necessarily became rich in the mid-2000's, but were forced due to the market to produce these giant homes that no one wants now.

So where do we go from here? The reality is going to be a tough one for many to accept. Luxury homes are a thing of the past. Yes, your mega-millionaires will still be buying these homes, but the average Joe is done paying the mortgage, the huge utilities, and excessive taxes. The impact on communities is going to shattering, with reduced property tax revenue, and future planning that will have to be modified.

Environmental concerns are not going away with reduced demand. In fact you will see energy efficient designs become even more desired as we progress into the next decade. "Green" living is becoming more in vogue, and not just for the environmental impact, I think many will see this as a more efficient way to keep utility costs down. I also envision future developers also including "alternative power" options as ways to help bring costs down for builders and home owners. I wouldn't be surprised to see future neighborhoods that partner with Wind Farm's, Solar farms, or other future alternative energy coops. Your also going to see local governments clamp down on landscaping, especially in the drought Southwest.

I also wouldn't be suprised to see that builders add many high end conservation features to homes in the future. Recycleable water, alternative energy with optional supplementation from the normal power grid. I can imagine that wood and coal burning stoves will come back as an industry, especilally outside major metropolitian area's where smog controls rule these out.

Therefore, instead of Granite counters and huge cathedral ceilings, your probably going to see tightly designed square foot homes, designed to save money in regards to heat, electricity, and maximize water conservation. I'm sure aesthetic value will still be necessary, but the Japanese and European home designs will now become a staple in the US market. Build them smaller, build them cheaper, build them efficient will be the new motto.

How to change your business and thrive in the upcoming depression

Karl Christen Credit Restoration Specialist — Sat, 28 Feb 2009 21:36:08 -0600

I am constantly reading and researching for myself and the clients I serve, and I've come to some rather grim conclusions, sprinkled with some hopeful solutions. Currently we are witnessing the greatest financial meltdown in world history. It's not just a maybe anymore, it's a guaranteed certainy. Those whom have stood like a deer in the headlights need to start moving towards where the money is going to be.

First let's establish some salient facts before we all drive off the edge of the cliff.

The US dollar is going to collapse in the near future. The Dollar has been severely overvalued, and the flight into US Bonds is soon to reverse. When China and the other large bond holders begin liquidating, this will cause a catastrophic loss in the US dollar. Which means food and energy costs are going to shoot through the roof. Therefore energy friendly communities, farming communities will be the new hot markets for jobs. With jobs come needs such as housing and financing. The big question is how solvent will US banks be in this crisis, and counting on wholesale banks is a thing of the past. We're either going to have to encourage private funds (like real estate opportunity funds) or we're going to have to rely on smaller regional banks. The big banks are dead or nearly dead, and if you want a government job, then perhaps CITI will be still hiring. But underwriting times will probably be outrageous, and smaller banking entities may turn out to be the real winners.

Interest rates are about to explode. Will it be considered hyper-inflation, like a third world country. That depends on what the federal reserve does when the dollar begins its fall. If they react with higher rates, despite the fact that the economy is in decline, then we may avoid the excesses of hyper inflation. But if they leave the rates where they are, or they continue to use government to buy up mortgage back securities, and keep rates at 1.00% or lower, then watch out! What are we going to do if rates go up to 1981 levels, 18-21%? Your going to have to sell real estate in non-traditional ways. Private seller financing will not be the option of last resort, it's going to be the option of first resort. Thousands of home owners that have capitalized on lower rates stand to be in a good position when hyper inflation hits. It's going to be important to have extensive data bases of home owners with 4.5-5.5% rates. These home owners will still need to buy and sell homes, and cooperative enterprises that can transact exchanges will be the hot real estate networks of the next 10 years.

Green Housing will now become economic housing. In other words, energy efficient housing will be more valuable then gold. Energy costs will skyrocket, forcing homeowners to shut off their power for long periods of time. Electrical and gas companies will continue to reward consumers for buying energy efficient products, and consumers will be looking as solar, wind and other ways to decrease consumption. Builders will be building small efficient homes, and luxury items will truly be just for those whom can afford them. No more jetted tubs, expensive tiles, wood floors, or other excesses you see in many American homes.

Community Housing will also become more common. Generational housing will be the thing to do, where grandpa and grandma move in to help reduce costs for both families. Many immigrants already practice this to some degree. Now you will see the majority populations whom have been used to one family living now consider ways to decrease costs through community living.

Real Estate will evolve with the market and I imagine that will be a difficult adjustment. But in the end I still am optimistic that America will eventually pull itself from the ashes. The current form of consumerism has not worked. The idea that you can simply spend and spend and spend without consequence will soon shift to a more conservative public policy of savings and thrift. The key to survival in the real estate industry is creating the strategies that will take advantage of these ever changing economic conditions. Those who capitalize now will be the great successes of the future.

If you love end of the world movies...then I'm sure you'll like this story...

Karl Christen Credit Restoration Specialist — Fri, 27 Feb 2009 10:36:24 -0600

End of the world predictions have been around for years. From War of the Words, to global environmental collapse, you've probably watched one recently. I've always loved these movies, even though the premise is often ridiculous and unrealistic. Now that the economy is crashing, millennial and end of the world stories are picking up in frequency. Do any of these stories hold a shred of validity? If the end of the world (as we know it) is at hand, then should we be getting ready? Is it too late? Is 6 months food storage, and 10% of your asset's in Gold and Silver going to forestall the bitter end?

The other day I ran across and essay written by Martin Armstrong, I've linked to it, because it's a prime example of what I referred to as "end of the world" scenario's. If you do a google search on Martin Armstrong, you'll find that he's currently serving time for some Japanese stock scam. Now once you get past the initial (well he's a criminal so why believe him), you'll find that his arrest and detention is controversial. You'll also find that his predictions about where the market is heading is spot on.

The question I have is that Martin is one of many who are issuing the alert that we're in troubling times. The fact that the talking heads on CNBC and Fox Business are wringing their hands and have no answers. Politicians are flailing about and think pouring good money into bad debt is the answer to our problem. The reality is that this latest stimulus package is going to do nothing.

Is Armstrong correct, are we in the midst of a 26 year bear market? Are other doom and gloomers correct, is this the last gasp of the "American Empire", much like Rome in 300 AD? I won't say that I know anymore. I've attempted to be positive and claim this is only a temporary bump in the road. The bump is now a large hill, and could become a mountain soon. But is the end of the world at hand? Who can say for sure, but I'm hoping for an Economic recovery in early 2010, BUT I'm going to stop being an idiot, and begin preparing for the worst case.

Even if you are prepared for the worst case, can you really survive for long? Actually the best action would be to take a proactive role in stopping the insanity. Many of Armstrongs suggestions in his essay are ones we could get behind politically. The one that makes the most sense to me is the concept of a National Sales Tax. The reailty is that we can't borrow for ever as consumers, we can't borrower forever as goverments.

Call your congressmen, ask their staffers why they don't support a national sales tax? As them why they think taxing the top 1% of income earners is fair or even prudent? Ask them why we're providing corporate welfare to GM, AIG and the banks? Ask them why don't they form a public trust for all the toix mortgage debt? It's time to take these people to task! We elected them, we can hold them to account. So Google your Senator and congressperson and CALL THEM! Then get invovled in your community, save some money, get some food storage, and pray that we figure it out in time. American's can do some amazing things when the chips are down, and I believe that this isn't any less true then anytime else in our history.

Where should real estate values be in Salt Lake County

Karl Christen Credit Restoration Specialist — Mon, 29 Dec 2008 11:17:40 -0600

Often you hear different theories in regards to where real estate values should be. The reality is often different then what one may hear. For years I've been under the impression that real estate is a function of supply and demand. You have a certain number of homes, and a certain number of buyers, and that will dictate value. There may still be some truth to this theory, especially when you look at over built Florida, California, Nevada and Arizona. But is it really just an issue with supply and demand?

Could the real issue be income? That's right, what you claim on your taxes each year. Income pure and simple is the barometer of what housing values should be in the United States. Until the late 1990's and early 2000's, income had been used primarily to determine a borrowers ability to pay their mortgage. With the advent of stated income loans, this barometer was chucked out the window, and we're now dealing with the aftermath of this mistake.

So how do you determine values and what should be a red flag when looking at real estate? Good questions, and there of course is more to evaluating a house then this simple formula, but this you may want to use as a baseline in evaluating real estate in the future. Most experts agree that one should take the median income in a particular region, and then find out what the median real estate values are for that same area. If the real estate values is greater then 2.8 times the medium income, then the property is in what most would consider a real estate bubble.

Example, in the state of Utah, 2008 real estate values in October were $218,000 for the state of Utah. However, the median income level was just below 59,000. If you take the income level, and times it by 2.8, you come up with $165,000. This would suggest that values are 25% higher then income levels in Utah as a whole. This of course is statewide, and each region in the state is going to be somewhat different, but as a whole you can see that values are still not in line with income. The other factor that has not been computed yet into these raw numbers is the shift in income that will occur in 2009. Many Utah jobs were related to the construction, real estate and mortgage industries. The median income number will most likely fall again from it's high in 2007 of $63,000.

So what does this mean? It means that Salt Lake and Utah values may continue to slide in 2009. I wouldn't be surprised to see an adjustment of 15-25%. The closer you get to the 2.8 factor in relationship to income will determine which housing values will drop the most. Those homes that are 5 to 6 times median income levels may suffer the most. I think Salt Lake's employment situation may save it from dropping 25%, but a 10-15% further adjustment maybe in line before normal real estate conditions can take place.

Would you pay the lowest price posted for a Breast Implant?

Karl Christen Credit Restoration Specialist — Fri, 12 Dec 2008 13:28:14 -0600

My wife and I have 5 children, and at this point we've decided that this is enough. As many women know, breast feeding children can have debilitating effects on their breast tissue. Breast augmentation is one of the more popular solutions to this issue, (one that I endorse!!). But if you do a Google search on breast implants or augmentation and you'll be besieged with a plethora of procedures and options. I've noticed that prices vary from $2000 to $6000 dollars, some doctors want the money all up front, there are a few that will take payments. Some of the Doctors spend copious time explaining the process and educating their client, others it's just a cut and tuck procedure. This is starting to sound familiar isn't it?

Yep, the mortgage industry is much like getting implants. But it can have a much higher impact on your financial health then breast augmentation. One cost's you 2-6k total, the other could put you into foreclosure or bankruptcy. The problem is that most consumers think it's not any different than buying a box of corn flakes. And if you ever have been to a car dealership, clothing boutique or Wal-Mart, you know why this is the case. Retailers have been notorious when it comes to putting product on "Sale", or "Discount". The oldest trick in the book is to set the regular prices at one point and drop the real price by 20%. You don't believe me then go to Kohl's; I don't think I've ever not been there when there hasn't been a "special sale".

So if finding the right doctor for implant's is so important, then why don't consumers spend more time finding a mortgage professional that will make the same effort to educate their client. I lay the blame squarely on the mortgage industry! If you've watched TV or listened to radio it's pretty obvious that my industry is causing its own problem. They're selling "RATE"..."RATE"..."RATE"... The problem is rate is such a small part of the overall mortgage process. What about fee's? What about affordability? What about liquidity? What about resell ability? These are all factors that are strangely vacant from most mortgage advertising. We're no better than the Viagra pitches you see in your Spam account!

The reality is that there are a number of mortgage professionals that are changing the status quo. I've met a number of these professionals on active rain. Brian Brady, Jeff Belonger, Tom Burris, Jeff Sardi, and many others. The problem is there are plenty of others whom seem to think that "RATE" is the solution to their borrower's troubles. Much like recent dialogue concerning the purchase of mortgage backed securities.

Would you pick the cheapest plastic surgeon if you needed breast augmentation?

Karl Christen Credit Restoration Specialist — Fri, 12 Dec 2008 12:15:34 -0600

Are we really headed for a deflationary spiral?

Karl Christen Credit Restoration Specialist — Thu, 20 Nov 2008 13:11:10 -0600

This is a good question if you read today's headlines. Jeff Belonger also wrote a great article about Deflation and Inflation and why we should be worried about a deflationary depression. The big difference between 1929 and today is who will be in charge of the government over the next four years.

My worry right now is that we're actually going to see a inflationary spiral that we haven't seen except in third world countries in the 1980's. When I was a teenager, I remember news reports of Argentina or Mexico going through incredible inflationary spirals. I also remember studying post WWI Germany, and how some people had wheel barrels of worthless money at one point in that crisis.

The problem is we're heading that way ourselves. Massive spending increases are fore-casted in the next few years. Obama has an aggressive spending agenda, and then we're pouring Billions upon Billions into banks, auto makers and I have no doubt the government will continue to pump billions into this shaky economy. But where is all this cash coming from? It's not going to come from me and you, it's mathematically impossible due to the shear amount of obligations that are piling up each day. The reality is they are going to PRINT the money and continue to PRINT until it finally catches up with us.

When you have an over supply of money you get inflation. The difference between the Great Depression and today is that the government didn't spend massively until they were in the middle of the depression. In this case we've been pouring trillions into the economy right from the onset. Deflation will continue to exist until the American people feel more secure about lower prices, but then we need to be worried. The MASSIVE public debt is going to be so overwhelming that we will be printing even more money to just pay the interest payments, and that's at all time interest rate lows! Then inflation begins to bite down hard, because when things begin improving world wide, the the dollar becomes worthless!! We don't have a manufacturing base anymore in this country, so low cost Walmart items will skyrocket, oil will sky rocket, and energy will skyrocket o nce again because of the lack of a long term energy policy.

My worry is we're setting the table for massive runaway inflation. Recently I spoke to my father who's locked into his home in Boise Idaho, due to the declining market values. At one point he thought he'd made a mistake buying instead of renting, but because he's a student of history he's now thinking he's in good shape for the future. He has a 30 year fixed loan below 6% and if we do go through this hyper-inflationary spiral, then he's sitting in a good position in 3 to 5 years, and renters will be getting hammered with extremely high rental payments.

If I'm wrong and this economy degresses into a deflationary collapse, then I guess the result is not much different. The problem is the public debt will not decrease, and we'll only have to pay it back with fewer tax revenue dollars. The only difference is that you don't want to own a home until the deflationary collapse is hit rock bottom. My bet however is that the media is going to do everything in their power to keep their president in power, and will make the classic mistake of painting a rosy economic picture, which in turn will get consumers to begin spending again, which for a brief period of time will seem like a strong recovery, and then we'll see all Hell break loose!

The new Republican Party.....what type of changes do we need to see

Karl Christen Credit Restoration Specialist — Wed, 05 Nov 2008 16:46:38 -0600

As I lick my proverbial wounds, I'm realizing that politics is 90% marketing and 10% real ideas. Look at Obama's rise to power. He's young, vibrant, and for some reason he's convinced allot of voters that hope is all that matters. Now like most politicians he's going to have to do something about it and time will tell if he can make good on his promise of hope.

Anytime you lose, especially in a sporting event, the object is to figure out what went wrong and what the other team did right. In the case of this Obama win he did a number of things right, and here they are in order.

#1 Keep your message simple, sweet and ambiguous. In other words, you find a good catch phrase and you beat it into the ground...."Change" and "Hope"....

#2 Learn how to communicate with those segments of the population that are normally not engaged. Obama learned that the Internet and it's social communities are perfect goldmines to spread his message. He was able to utilize this medium in way's that haven't even been thought of until recently. A majority of these young voters we're spoken to through the medium of face-book and My-space. The next Republican candidates need to understand these forums and be able to use them more effectively then their counterparts.

#3 Republicans need to redefine the issues. Arguing about Abortion, gun rights, lower taxes, etc.. is boring! Sorry my friends, but listening to long toothed old men ramble on about issues that they've been unable to change even when they had complete control of the congress and presidency is outdated and boring! We need to redefine the debate, and jump on "new" issues that will be tomorrows challenges.

Example,

Abortion - it's an old argument that has been hammered into the ground. Yes it's a great one to get Evangelicals engaged in the South, but it's one that has been repeatedly beaten down by Congress and the Supreme Court. Why beat the dead horse, why not focus on other future concerns like cloning, gene therapy and stem cell research. These issues will be more of a concern to Americans in the next 10-12 years then Abortion.

Energy Policy - It needs to be progressive but sound. Why not admit that Oil and Gas are not the future, but are necessary in the transition. Drill now and drill often, but have a game plan to eliminate fossil fuels in the next 20-30 years. Encourage the growth of alternative energy but through private enterprise by offering tax incentives and credits for successful breakthrough's. Explain to the American people the necessity of relying less on foreign oil and the need for energy independence now (which means drilling for our own oil), so that in 20-30 years we won't need another drop from the Arab's ever again.

Defense spending - Focus on technological advancements in our ability to defend the homeland and wage war with minimal casualties. Get rid of waste-full defensive spending (pork barrel) and define what our military's roll is going to be over the next 50 to 100 years. Don't cut for the sake of cutting, unless it's pork. Those republicans that have districts straddling military bases need to being focusing on legislation that will provide high-tech jobs to their constituents by creating factories and manufacturing that will supplement this new military. In other words, quality and technological superiority over quantity.

Social Spending - Focus on social programs that spur science and math skills in our youth. Encourage local retraining centers that will offer high-tech programs to unemployed workers. Work with the Democrat's to modify current unemployment and welfare programs into aggressive re-education and re-training programs. If we're going to give people money, then we can direct them in regards to how to spend this money. No sense giving anyone a blank check.

Economic Policies - Depending on the damage caused by Obama and his administration, we need to focus on way's to restore less government. Republicans need to spend more time offering "enforcement" solutions to regulation, rather then giving away WELFARE MONEY to these financial institutions. If there would have been better enforcement of banking, SEC, and other business regulations, this problem with the housing industry would never have been as severe. Furthermore, we need to focus on re-establishing manufacturing in our great lakes region. But this manufacturing needs to be focused on HIGH-TECH and not trinket's or low cost items. The Chinese and 3rd world is always going to beat us in terms of labor cost's, but we have always had an advantage in "IDEA's" and "INNOVATION". We need Republicans that understand the global economy, and have a working knowledge of the economy...something John McCain was woefully lacking!

Campaign's - We need to focus on the grass roots. We are always more successful when we do. Democrat's can be good at this as well as demonstrated by Obama, but Republicans have always in the past been able to rally the vote through grassroots efforts. One of these grass roots strategies should be how to utilize social networks like My-space and Face-book and use them to their advantage. These forums are amazing in regards to the number of people they could connect with each day. These social networks are the future and present, and people love using them. We also need to focus on using alternative media outlet's to get our message out. You cannot count on the mainstream media as a Republican. John McCain thought he was their darling, and they turned on him like no other candidate. The Democrat's are going to try hard to control the public airwaves and possibly the Internet. We need to fight hard as Republicans to defeat these efforts and spend any amount necessary to keep them from accomplishing this task. One last factor is getting political contributions through

Finally, we need a youthful leader to step up in the Republican party. Someone in their early 40's, someone who isn't afraid of email or computers. Someone who has their own Facebook account and knows what "twitter" or "Facebook" means. We need someone who isn't afraid to let their hair down (or has hair). I like Sara Palin, but she does need to improve her game. Perhaps she could be a viable candidate in 2012, but I'm hoping we see some other fresh faces as well.

That's my suggestion in regards to the "New Republican party"

PNC purchase National City....someone's making money on my tax dollar!!

Karl Christen Credit Restoration Specialist — Fri, 24 Oct 2008 12:22:58 -0500

PNC purchases National City

You want to know why the average citizen is to the point of not caring anymore about politicians promises. Just look at the financial headlines today. PNC just purchased National City Mortgage, and guess what they used to do it? Yep, that's right...your money folks!! Now I'm sure the devil is in the details, and some nice spokesman from PNC will assure the world that this is only a temporary use of bailout cash, and that this will now make PNC feel secure, and allow them to offer better loans to consumers and small businesses. Yeah right!!!

The problem is that we just gave a blank check to these banks, and there is no reason for the banks to move the money back into the market by offering loans. So banks are going to conserve and hoard cash, keep their stock holders happy at this point, and the cycle will get more vicious!

The federal reserve and Poulson need to start thinking about the root of the problem and stop worrying about saving their buddies jobs at Goldmen Sach's. The "mortgage loan" is the key to this financial crisis, and until they address it in a bigger way, we'll continue this downward slide into oblivion.

I heard this morning that they are just now starting to consider giving money to banks to stem foreclosures on main street, but this should have been the focus of the bill all along. Now we're going to need two or three times the $700 billion estimate to calm the jittery bankers and take care of main street.

Now I don't think the banks are the bad guy's in the equation. Far from it, they are just trying to keep the lights on while their asset values plummet. The problem is your throwing good money at the symptom instead of the root of the problem. The problem now is that we're in a vicious circle of deflating real estate values. As long as the values continue to drop then any money you invest in these banks will be lost in value as well. Because the banks will be still unable to buttress their asset values because their portfolio's continue to hemorrhage due to deteriorating real estate values.

The answer is to help stabilize homeowners by going directly to them at this point. I gave a perfect example of how to do this and I don't know why anyone with a MBA can't figure it out as well. Please people, call your congressmen and Senators and share with them that the solution lies with the homeowner!!!

Possible Solution to this mortgage Mess ( yes they're maybe some problems with my simpleton solution, but it could be a good framework)

Whats at the heart of this economic crisis?

Karl Christen Credit Restoration Specialist — Thu, 23 Oct 2008 12:01:24 -0500

Interesting to watch the financial guru's thrash about in relative surprise at recent developments in the credit market. Greenspan appeared before a congressional committee this morning and feigned his great surprise at the collapse of free market principals in regards to the credit markets and real estate. Many of the current problems are a direct result of his direction as Federal Reserve Chairman.

But what is at the heart of the problem? Why will the federal government surely fail if it doesn't address this issue now. The big issue is the real estate market!! It's been the case since 2007, and will continue to be the case for the immediate future.

The reason banks cannot determine value is that real estate is in a deflationary spiral. You now are to the point that even borrowers who can make their mortgage payments are now abandoning their loans because of their depreciating home values. This vicious cycle is out of control at present, and unless checked by government may in fact destroy our economy for many years.

I mentioned it in an earlier post, but the answer to any federal bailout is making the banks and homeowners responsible. "One possible solution to this mortgage mess"

The big problem right now is that homeowners need to understand that their homes are not worthless. The reality that these homes cost hundreds of thousands of dollars to construct, and that eventually when things settle out in the credit market's, that their property will then begin appreciating once again. The problem is that emotionally people feel that they are all alone, whereas the banks are receiving bailout cash from the federal government!

Until we assure home owners that the government is concerned about their welfare as well, then we're not going to see this crisis abate. I again wish to restate, we need to help home owners and banks right now. But just giving either party cold hard cash is a big mistake. We need to react to the depreciation of asset values, and that's by checking the free falling market values.

I also like the goverment offering tax incentives to more then first time home buyers. Anyone in 2009 who buys a home should get a $7500 dollar tax credit (not loan). This of course would spur purchases from those sitting it out at this juncture, or those whom were forced to move in with family in 2007-2008, and perhaps they would be encouraged to get back into the market.

If we're going to plug holes in the dam, then we better make sure we're plugging the correct holes.

Are sorry but there needs to be a voter litmus test on issues

Karl Christen Credit Restoration Specialist — Thu, 23 Oct 2008 11:07:04 -0500

I'm sorry, but if your going to vote, you need to know who the candidates are and which views they subscribe to as well. These people could speak complete sentences, so they can't be that stupid. But they know NOTHING about the issues or who's actually running. And they are going to help decide the election in a couple weeks...WOW!!

I'm sure there are some back-water rural voters whom are supporting McCain, but come on folks we've allowed this travesty to matriculate in our education systems for years!

Howard Stern Harlem Interviews

Should sports figures give up their Salary's for non-performance?

Karl Christen Credit Restoration Specialist — Tue, 21 Oct 2008 20:23:56 -0500

I know this question seems odd in a real estate blog, but with the recent chatter about the bailout bill and irresponsibility on Wall Street, this question came up tonight as I watched one of CNBC's nighttime market shows. They were talking about CEO compensation and how unwarranted it is when the company is mismanaged. Furthermore the Democrats have made this an issue to incite class warfare within the voting populous.

But let's compare apples to oranges. Dwayne Wade of the Miami Heat (NBA BASKETBALL TEAM) made over 14 million dollars last season. His team was horrible, they won only 15 of 82 NBA games, and had the worst record in the entire NBA. So if we're evaluating salary's based on performance, shouldn't Dwayne Wade refund some of his salary back to the Miami Heat fans? It's not as ridiculous a question as it may seem. Isn't the current government bailout asking banks to do the same thing to their employees.

The answer is that no one is going to require Dwayne Wade to return that money. Furthermore, the stock holders at these major companies have entirely in their rights the ability to take back compensation, fire, or reduce a CEO's bonuses. The reality is that the stockholder is affected much more then "joe public", and in reality the CEO works for the stockholder. Therefore the stockholder has ultimate say in terms of what a CEO should get in terms of compensation. One complaint I heard repeatedly is that some of these CEO's worked three or four weeks a year but received huge salary's. The cold hard facts are that some people are more productive in four weeks then others who spend 120 hours a week on the job. These top flight executives should not always be classified in the same light as well. There are plenty of over achieving executives that spend their entire life at the office as well.

What is typical in these troubling times, is that Americans are looking for a scapegoat, when the goat is staring them in the face. We all contributed to this mess, and it's going to take all of collectively to rebuild America once again. I for one am happy that these sports figures are compensated for their amazing talents and I do not for one second wish that they were paid less. The reality is that the Miami heat will make changes to their organization, and Dwayne Wade is an important part of their future success. The fact is that Dwayne wouldn't be recieving 14 million if he hadn't earned it in the past. Most of these CEO's didn't get there because they were idiots either.

Hey...I have the answer to this Credit Crisis...it's actually not difficult at all!!

Karl Christen Credit Restoration Specialist — Sun, 19 Oct 2008 22:34:06 -0500

One question that I've been asking myself is if the federal government really knows what is going on. Allot of misinformation has been floating across the Internet and through households across the country. I think part of it is that "what bleeds...leads..." and personally I think the media in general has this unconscious need to keep Americans in panic mode.

The reality is we're far from what is called the "NUCLEAR" option. In other words, the Federal Reserve through the recently passed "bailout bill" or "TARP", has made great efforts to keep from nationalizing banks. Despite the rhetoric you may hear from the far right, the government doesn't really want to nationalize the banking system. And on the other end, we're not falling quickly into a financial depression, though some left leaning media types think that spreading this rumor is going to get their man elected president.

We're actually several steps away from this supposed "Nuclear" option. There are several options that the congress could and may take to stimulate the economy. The one conservatives want to see is a reduction in corporate and individual income taxes. This would stimulate investment once again into the stock market and would stimulate commerce between banks and businesses once again. The reality is that this is only viable if the current "loss of confidence" is addressed and dealt with in terms of new regulation. This regulation will take months if not years to move it's way through congress. Plus a reduction in taxes are farthest from Democrat congress-men's minds. If Obama is elected we'll probably see a massive increase in public spending.

And that leads me to another option in which to stimulate the economy. One of the other nuclear options is for the government to finance major infrastructure spending bills. I've been hearing for months now how the Democrats have discussed options that would federally fund massive spending on our freeways and waterways. Couple that with alternative energy and you have a cornucopia of spending options. Massive spending will result in massive employment needs for construction and energy related manufacturing businesses. This on paper sounds great, but how much more do we want to jack up the national debt. There is some truth to the Keynesian style economic professors that are making this argument, but what they don't tell you is that even though people we're employed during the Great Depression, the standard of living was not that great and it took 10 years longer to come out of that economic downturn. For one thing has to take place with massive spending, it's called massive tax increases to the wealthy. What most Keynesian economic guru's don't tell you, is that Europe recovered much faster after their economic collapses in the 1930's. Why, because they didn't tax their citizens into oblivion! So unless you can keep the wealthy from moving their money to other countries, you may find that this crisis lingers for years.

I for one believe that we need someone with a deft hand at this juncture. In other words, someone who isn't gong to politicize the issue. In other words we need to stabilize the banking industry and if that requires some bailout money, then so be it. The next step is to pass some serious regulation, ban hedge funds, ban derivatives or make them more transparent. Then we need to reduce taxes, especially corporate taxes. I'm not sure why Republicans are so bent out of shape about individual taxes, because they are at the lowest rates in history. Plus, if your rich and corporate taxes are lower, there are way's to reinvest in your company and pay fewer taxes. This is a win/win for everyone because it will bring in more job's in the long run. Give tax incentives to wealthy individuals like Bo Pickens who want to build wind mills, solar panels or for other alternative energy resources. In other words, cut the political rhetoric and get busy building America!

For this to happen, we all have to become more serious about the issues and who's making the decisions in Washington. We need to put down the sports page and study up on economic and political issues. The more we educate ourselves, the more we take responsibility for our own actions, the sooner this crisis is over.

Hope on the horizon...credit markets unthawing finally....

Karl Christen Credit Restoration Specialist — Thu, 16 Oct 2008 15:34:37 -0500

Are we finally seeing a turnaround in the credit markets. News the past few days is steadily getting more positive in regards to rigid credit markets throughout the world. Everyone is wondering now why stocks continue to slide, but the reality is that these tight credit markets have had a noticeable affect on small and mid sized businesses throughout the world. Even larger manufactures like GM are taking a beating in regards to the lack of easy capital. The world government bailouts are finally starting to take affect though, as we can see in the following articles.

Global News

Signs of life in global markets

US News

US Stocks Jump on Bond Insurer Bailout Plans, Oils retreat

The reality is that we're going to see more turmoil over the next few months. Now we're seeing reality dawn that we're actually in a global recession. Being in the mortgage industry, I realized that we were heading for a recession since August of 2007. The problem is the average man or woman on "main street" hasn't been paying attention until the markets seized up this past month. Now everyone is focused on their money, and unfortunately this may make the recovery more difficult to over come.

Sell fullfilling prophecy is unfortunately a reality of most economic downturns. What we need is the average American to start believing that he's safe. If they continue to feel like they're last pay check maybe their last, then that prophecy maybe fullfilled, as retail sales drag, and major manufacturers and service related companies begin laying off employees. Maybe we're lucky in some ways as well. If everyone nationally had stopped purchasing major items in August 2007, then we would be in much bigger trouble today with the unraveling of many of these financial institutions. Perhaps we dodged the bigger bullet because of the fixation on home values.

Don't have a down payment....why not ask your local town to help?

Karl Christen Credit Restoration Specialist — Wed, 15 Oct 2008 17:27:30 -0500

Traditional down payment assistance is now dead and gone. For years we've all driven by those 100% financing signs. But now lenders and FHA have pulled back from the previous years lending practices and now the landscape has changed. In an earlier article, I mentioned a program for lower income families called, UIDAN, or what is commonly called an IDA.

But what if you income is over the acceptable limit. How do you come up with that down payment if your family can't help. There are some other avenues and some could be as close as driving or calling city hall. Many communities throughout the country have special financing programs to help new homeowners pay the down payment to get into houses in their communities. This money is designated by state and federal officials, and the cities are encouraged to give this money out in the hope that it improves local neighborhoods through home ownership.

These programs range all across the board, but there are sometimes organizations like this one in Utah, that help new home buyers in terms of what to do and who to contact to get these grants or community loans. The Community Development Corporation of Utah is one such organization where I live currently. The CDC of Utahhas an excellent website (CDC Website) that gives buyers, agents and loan officers alike the information they need to help get access to this money.

One thing that you may have to deal with is that many of these communities have restrictions in terms of occupancy and how long you need to live in the home. In other words, if your city gives you $5000 for closing or down payment assistance and you sell the house in a year. The community then may or will ask you to give them back the $5000 from the proceeds of your sale. Most of the time you an consider the assistance a grant, but you may have to live in that home for a specific period of time.

Every community in the United States has similar programs, but they all very in regards to their rules and how much money they give in each transaction. I would search under down payment assistance communities or cities or search the web for community development companies within your state. These are usually not very difficult to find and maybe the difference of getting a home at this time.

Active Rain is gaining credibility with NAMB

Karl Christen Credit Restoration Specialist — Wed, 15 Oct 2008 13:33:10 -0500

Yesterday I attended one of my local association conferences in downtown Salt Lake City. The Utah Association of Mortgage Brokers sponsored the event, and asked Marc Savitt, President of the National Association of Mortgage Brokers to speak to us about recent legislation changes made by congress.

That was an interesting two hour meeting and later during the lunch break I was able to speak to Marc specifically about some of the issues we're facing. I mentioned that I had written a number of articles on Active Rain about the bailout and specific solutions to the problem, and his eyes lit up when I mentioned Active Rain. He mentioned another LO from South Dakota had invited him to join, and he was strongly considering joining our ranks. I also give him some tips on how to get his rankings higher within google, and suggested that he offer a daily blog that could link directly from the NAMB website to his Activerain blog.

Hope to see Marc posting shortly. Marc is a sharp and capable leader for mortgage brokers in this time of trouble and change. I am pleased that we have such great leadership in our organization. When Marc does join Activerain, I suggest we give him a warm welcome!

Worried about saving a down payment...Have your heard of an IDA account?

Karl Christen Credit Restoration Specialist — Wed, 15 Oct 2008 13:08:07 -0500

I highly recommend that real estate agents and mortgage professionals attend their local association meetings. Just found out about a gem of a concept, and now feel foolish that I didn't know more about this program. It's been sitting there right in front of my eyes, but like most I've become lazy in regards to "seller assisted Down Payment assistance", and hadn't realized what kind of programs were available in my community. This next one is fantastic if our looking at purchasing a house in another 12 to 36 months. The problem is that it won't help you buy a house today, because there are some minimal savings requirements that do not allow access to the full power of the program until you've been in it for 12 months.

The program I'm referring to is called, UIDAN, or Utah Individual Development Account Network.

"The Utah Individual Development Account Network (UIDAN) Program is an investment strategy and multi-faceted financial education program designed to help provide low to moderate income individuals and families with the opportunity, incentive, and institutional support necessary for them to save for and acquire productive assets that promise a higher income, new wealth and self-sufficiency" source - UIDAN website.

This program was developed so that big corporations could reinvest within the communities that they serve. The program helps these low to moderate income individuals manage their finances and do what most Americans do not understand. SAVE MONEY!!!

What's great about this program, is that the future homeowner for each dollar saved, will be matched by three times the amount saved. So $1 dollar saved, equals $4 dollars that can be used for their future down payment! Their is a maximum cap allowed on the funds that you can save for the down payment, but there is NO requirement to pay back these funds after closing on your home. Most city and private grant's require have a minimum requirement for living in the home or you have to pay back the grant. You can open one of these IDA's with a minimum balance of $15.00, and you can save up to $1500.00 maximum in an IDA account, which would result in $6000.00 being available for your future down payment!

There are a few requirements though that you have to meet. Here are the minimum requirements listed below.

Must have a SSN or Federal Tax ID number
Must be 18 years of age or older
Less then 10,000 in household assets, cars are excluded
Wages from full-time, part-time or be self employed.
Live in Utah

You also need to meet basic income standards, they do allow you to max 200% of federally mandated poverty levels. But here is an easier way to understand the requirement.

1 Household member - $20,800 or less
2 Household members - $28,000 or less
3 Household members - $35,200 or less
4 Household members - $42,400 or less
5 Household members - $49,000 or less
6 Household members - $56,800 or less
7 Household members - $64,000 or less
8 Household members - $71,200 or less
each additional member add $6960 for each member.

There are some other requirements as well that you have to agree to attend or follow....

Make monthly savings of at least $15.00 a month and no more than $62.50 a month
Minimum of 12 months in program, maximum of 36 months in program.
Attend personal finance and money management workshop series, 8 hours education.
Complete asset training for selected asset goal, prior to purchase of asset.
Support one another through ongoing peer support meetings.
Regular contact with case manager throughout program.
Address any credit issues that could keep you from meeting asset goal.
Agree to follow program rules and responsibilities.

I'm including a link to the UIDAN website, and you can contact me if you have any questions regarding the program.

801-599-4291

Are Derivatives the reason we're in the mess we are today?

Karl Christen Credit Restoration Specialist — Mon, 13 Oct 2008 13:45:54 -0500

Today I've decided to explore a number of the issues that I keep hearing when I watch Cramer on CNBC or Fox Business Network. My last article delt with Market-to-Market accounting practices, and how did Market-to-Market relate to the overall mess we're in now. After education myself in that area, I've realized that I needed some additional information on Derivatives and Hedge Funds.

Not too long ago (several years ago), I remember briefly reading in some news journal that derivatives and hedge funds were risky, and there was a big chance that these funds could implode and cause great havoc in the markets. But Alan Greenspan and his buddies soon assured congress and others that it wasn't a big deal, and these programs were actually needed.

Then I read a blog this morning by Katrina Vanden Heuvel
and she mentions a little remembered bureaucrat named Brooksley Born, who was director of the CFTC, Commodity Futures Trading Commission. She at that time made it known, to then Treasury Secretary, Rubin (Clinton Administration) and Allan Greenspan that these derivatives were volatile and dangerous! When Brooksley Born testified before congress in the late 1990's, she was quickly silenced by Greenspan and Rubin, and they quickly dispelled her concerns before the same congress. Just as a side note, now we have evidence that Fannie and Freddie benefited from some serious deregulation legislation in the 1990's, couple that with the birth of derivative financing models and hedge funds and your creating a toxic stew of the worst magnitude!

So what is a derivative...it sounds like Algebra or Trigonometry, both classes I hated in highschool and college. But a financial derivative is a basic trading strategy. Derivatives are financial instruments that are intended to reduce risk to both party's, but are based on the value of underlying financial instruments. The main type of derivatives are futures, forwards, options and swaps. One of the main uses of derivatives are in Hedging a position between two parties in a transaction. Example, a wheat farmer is worried about future prices and so is the wheat miller. So they agree to a "futures" contract, in other words to exchange cash for wheat in the future. What's important is that it's only agreement between two parties, and other circumstances could still put the deal in jeopardy, such as the weather.

What's the big deal? Well it's the following. A merchant banker can "hedge" that a asset he owns on paper is going to be worth more in the future. He doesn't actually have market exposure during this process, because he really hasn't laid any money down at this point. But if the market swings the other way, he could be in trouble because he has to cover the future contract. So if there are allot of investors in a given hedge fund, and the values go the wrong way, they all could be holding the bag and unable to meet the futures call when the final bell rings, and that's why you see these hedge funds imploding.

Compounding the problem is that big banks and financial institutions have put BILLIONS into these hedge funds, banking or (betting) on numerous various factors related to loan portfolio's. The problem is that this industry has been largely unregulated, and there have been numerous investors holding the bag when another investor is unable to meet the futures cover.

So this huge unwinding is the hedge fund market de-leveraging at an incredible rate. It's like we just rode our fast car over a large spike in the road. Instead of the tire deflating slowly the tire actually has blown out! The wildly gyrating market is like your car out of control after the tire blows. If you have ever had this happen to you on the road, it can be outright catastrophic or very unnerving if you happen to gain control of your car once again. I think we're seeing a similar reaction by the government and the federal reserve at this time.

Bernake is trying to ease the economy back into control, after Greenspan and his boy's pushed the accelerator down to hard in the 1990's and early 2000's. I remember how Greenspan was worshiped for such a long time period, now I think he may go down in history as one of the more irresponsible Fed Chairmen in history.

Interesting take on "market to market accounting"

Karl Christen Credit Restoration Specialist — Mon, 13 Oct 2008 11:20:02 -0500

Throughout this banking crisis I've been hearing financial pundits use the term - "market to market" accounting. I figured that it attempted to help financial institutions or businesses understand what their true market value was on paper. However until today, I never really dove into what the actual definition is really.

So here it is;

Mark-to-market is an accounting methodology of assigning a value to a position held in a financial instrument based on the current market price for the instrument or similar instruments. For example, the final value of a futures contract that expires in 9 months will not be known until it expires. If it is marked to market, for accounting purposes it is assigned the value that it would currently fetch in the open market.

So basically, if you buy 1000 shares of GE, and you purchase them at $22.00 and the stock goes up to $30.00 a share, then your 1000 shares are valued at $30,000. If on the other hand you buy at $22.00 and the stock falls to $10.00, then they are worth $10,000. Easy enough to understand, but the devil is in the details.

Now in the stock market you have options, futures, short positions, long positions, margin calls, etc. You also have computer traders who bet on options throughout the day, they'll pour millions into positions that they are in and out the same day. This of course can exacerbate margin calls or short calls when a stock is being pushed downward, example recently has been Merril Lynch and Lehman brothers. The problem is that these values are only determined at the end of the day, and often financial institutions are forced to buttress their stocks position during the trading day, often forcing these companies or investors to cover huge margin positions. It's a wonder that this whole system hasn't already collapsed with hedge funds, derivatives, and the myriad other Wall Street investment strategies or rules.

The problem is that there is a special accounting rule called, FAS 157, and it requires banks to assign fair value or a "market-to-market" value to these mortgage backed assets. The problem is that to have value they need to be trading, and if they are not trading then a fair market value cannot be attached to the asset. For example, Lehman brothers has 100 Billion dollars in packaged mortgage backed debt that they are servicing. 7% of the debt is in foreclosure or default, but Lehman is not the only institution with this problem. Banks across the country are having similar problems with their mortgage loans as well. At this point their is a perception that mortgage backed securities are dangerous. This has a vicious circle effect with all the players in the market and soon no one is purchasing any debt from anyone else. Despite the fact that 93% of the mortgage debt is performing!! Meanwhile, the market value of these companies cannot be determined, and then traders begin bidding down the value of these companies, which forces the companies to dilute their stock further by raising more capital.

Interesting article I read today though suggests that "market-to-market" may have in fact saved our bacon. Read this article called, "New Life".

Basically he's suggesting that this actually could work out for us in the long run. Instead of a long drawn out decline, this may have pushed us to basement allot faster, which will allow us to recover allot faster as well. We can only hope he's correct.

Look, if you still don't understand "market-to-market value" then don't feel bad. Allot of people don't understand how 93% of borrowers can be performing on this mortgage payments, but the bank is taking a beating in the market. Something just doesn't seem right, but perhaps the problem is much bigger, and market-to-market is like a forest fire that is quickly burning up the dead wood.

McCains new mortgage plan will do little to solve problem

Karl Christen Credit Restoration Specialist — Wed, 08 Oct 2008 11:44:58 -0500

McCains Plan Link

Watching the debate or listening to the the drones form MSNBC, Fox and other stations regurgitate the debate endlessly late into the night, and I'm still scratching my head in regards to John's new mortgage plan. He wants to address the real issue...GREAT...but his plan will work for very few borrowers.

If I understand his plan correctly, his plan is not much different then the earlier legislation that Bush and Congress implemented earlier this year. In other words, allow FHA access to $300 billion, to insure those who are already delinquent into new home loans. Sounds great on paper, but who is this really helping.

John McCain, please read the newspaper once in a while. Home values have plummetted in many of these hard hit foreclosure markets. How is FHA going to insure a new loan on a mortgage that is greater then the value of the home. So in other words, FHA will not be able to write a new loan and the borrower still falls into foreclosure.

I wrote about a possible solution last week. There are some holes still with my concept, but at-least it addresses the fundamental issue. FALLING MARKET VALUES!! The other problem, if you do not reduce the mortgage balances at this point, the borrowers will still be unable to pay their payments.

McCain needs to seriously think through possible economic solutions before throwing them out as red meat in a debate.

previous article....one possible solution to the mortgage mess

***UPDATE Now I'm learning that his actual suggetion is that the goverment buy's down the mortgages to market value....but where is the tax payer protected in this situation? This is perhaps more socialist then anything that has been suggested to date! We need some clarity in his position at this point.

Mortgage Merge Accounts....I still think they stink!!

Karl Christen Credit Restoration Specialist — Wed, 08 Oct 2008 01:27:56 -0500

I know some of you are going to be offended, but I'm really starting to get angry with some of these self righteous MMA posters. A post that I wrote more then a year ago is still getting anonymous posts from angry MMA acolytes who dislike the fact I call into question the efficacy of their program.

When the program began, they whole trick was to show home owners how to use their equity in a unique way to leverage down their debt in an eye popping short period of time. They made it sound easy...just get a HELOC (equity line), and our wonderful computer will tell show you the way to debt free living!!

HAH!!! just pay your $3500 and it can be all yours Mr. Homeowner. But not more then a year later they are getting a letter from Wells Fargo or Countrywide. Mr. Homeowner, we are now calling your Equity line due, and you may no longer use the available credit in this line of credit, we regret this inconvenience but according to the terms of the contract you signed, we can now increase your rate and require that you treat it as a second mortgage.

So what do they do next, they tell you to use credit cards to leverage down the debt!! Hello, pass the TUMS because I'm really getting agitated. Let's now go from 9-11% HELOC's to 19-28% credit cards! Oh boy, this just get's better and better my friend (had to throw in the McCain reference).

Now the math suggests that this program works. I'm not going to argue that because I've looked at the program closely. Math doesn't lie, and computers are fairly accurate. They don't have an agenda to push, or they are not worried about how much money they are making selling their theories. The problem is that a computer isn't paying the mortgage each month.

Yep everyone, life does happen to all of us. We're flesh and blood, we're emotional and we can make some real bad choices from time to time. Very few are disciplined enough to stay to the task at hand, and this program then becomes a dagger in the heart if you don't follow it religiously. Perhaps this is why it's almost become a religion with some of it's strongest adherents.

One ther reality folks, one that I'm seeing more and more as times get rougher. Many of these programs require the borrower to payoff the mortgage over 5 to 8 years. The problem is we're actually in year's 2 and 3 for most of the early followers of this program. The sad reality is that real estate values have plunged, and some of these people have actually realized very little in terms of paid down equity. The scary thing is many of them still carry mortgages that are several years of being paid off. They could easily lose their job's in the coming months due to businesses getting creamed in the upcoming recession. Main street has yet to feel the full effect of Wall Street's troubles. Don't kid yourself it's coming with a vengeance! So he who holds even a small mortgage, with no income, and a HELOC that has been shut off by the bank is in big trouble.

That's why I ALWAYS suggest my clients put away 6 months income! I suggest they payoff their credit cards, not mark them up in some mortgage merge scheme. If they are still "heck" bent on paying off the mortgage, then great...MAKE DOUBLE PAYMENTS! Look, if you really want to be truly debt free, then I'd save my money and buy one of Dave Ramsey's books. That guy knows how to get out of debt, and it doesn't take some fancy $3500 dollar computer program. It just takes common sense people!

Lest I forget, please read my friends blog, this is much more effective describing the reasons not to get an MMA.

Robert Ashby's Blog

"nothing to fear but fear itself"...historical perspective on current crisis

Karl Christen Credit Restoration Specialist — Mon, 06 Oct 2008 15:28:36 -0500

I attended school in the 1980's and early 1990's. I was a history major, and for years had read in text books about the Great Depression (1929-39). That depression was sandwiched in between two world wars, and still fresh enough that many of our grandparents or parents may still remember those days. What I didn't realize is the number of economic depressions that the United States has gone through since 1819. I found it interesting that in almost every case, there was a general run-up in commodity prices, the stock market or real estate before the bottom fell out. Free market's ALWAYS corrects itself, the question comes down as to how difficult will be that downturn.

Here is a brief synopsis of each of these crisis in the last 190 years, and perhaps it gives us an idea of what is to come. Hopefully this recent crisis does not last as long as the 1929-39 episode, but time will tell.

Panic of 1819 - Credit collapse, precipitated by wild speculation in western lands, followed by sharp contractions in credit, ended up being a six year depression.

Panic of 1832 - Actually a sever recession, caused mainly by the government. Andrew Jackson had some issues with the National Bank of the United States of that time period. The result was that he wouldn't renew their charter, and the president of that bank called commercial loans due across the country. This resulted in panic and confusion. This conflict within the Jackson administration continued his entire administration, resulting in the Specie Act, which created a number of speculative regional banks and financial institutions. In fact there were regional currencies throughout the country, which was brought to a spectacular conclusion in 1837.

Panic and Depression of 1837-1843 - English Banks raised interest rates and reduced credit sending shock waves through credit markets throughout the world. This caused a wild speculative generated collapse in currency markets within the United States. Government battled the previous specie issues that were rampant during the Jackson administration. The result was wide spread collapse of many small and regional banks throughout the country. There was also massive real estate speculation and collapse as well in many of the western states.

Panic of 1857 - Downturn in demand for agricultural exports brought on by the end of the Crimean war in Europe, as well as over speculation in railroads and real estate once again. Severe problem for over extended banks, and resulted in widespread bankruptcy of many banks.

Panic and Depression of 1869-1871 - Finally a depression that was not caused by massive real estate speculation. This one was caused by speculation in the Gold market. At the time are currency was still tied to the gold market, and there were several big financiers that attempted to corner the Gold market. This resulted in a massive collapse when the government dumped over 4 million into the market. Ten of thousands of investors lost their shirt when their investments became devalued. May businesses and banks went under and the result was another depression.

Panic and Depression 1873-76 - Over extension of railroads, one of the biggest railroad magnates of all time goes bankrupt, Jay Cook and Company. Soon within days a major Bank declares bankruptcy, which then spills over, and over 10,000 businesses fail in the next three years. Major reasons this happened were over production, declining markets, and deflation due to less demand.

Panic and Depression of 1893 - Another major railroad collapse, market's flucate wildly, rest of the world feels this one. World wide depression for the next few years.

1901 Market Panic - This was purely stock speculation and overvaluation.

1929-1939 GREAT DEPRESSION - Long prosperity, coupled with political ineptitude and lack of reaction from the federal reserve at the time. Coupled with strange legislative and tax policies in the 1930's, and you have the longest depression in our history. This is the one we're all afraid of going through again and for good reasons.

1949-50 Post War Recession - Probably the most massive adjustment from public spending to the private sector. I'm really surprised we did not have a massive recession or depression.

1974-1979 Carter Malaise - huge changes in oil and gas prices, stagflation, slow growth and higher prices make it difficult to get ahead in the 1970's. Not considered a recession, but inflationary pressure forces one in the early 1980's.

1980-82 - Recession and beginning of Reagan years - 22% interest rates and high unemployment quickly transitions into one of the greatest economic booms in history.

1991-1992 - Bush Recession - A gasp or pause before more steady expansions into the 1990's and the soon to take place Internet boom. Also preceded by heavy real estate speculation in 1987-1989.

2000-2001 - Dot com Bubble bursts, and country goes through slower growth period before real estate pulls us out of the doldrums. Massive real estate bubble in sues which leads us to our current crisis.

Doom and gloom aside, this correction is going to be a sharp or severe one. There is no doubt that massive real estate speculation, coupled with unregulated credit expansion are currently taking massive hits. The fundamental economy will suffer, but the question is for how long. It's historical but it doesn't make anyone feel any better that we're about to go through one of these corrections.

The important thing we should all remember though. The sun will rise tomorrow (guaranteed), and people will still need to buy and sell and barter. The storm maybe a rough one now, but there are opportunities for those who are ready and willing. Franklin D Roosevelt was right about one thing, "There is nothing to fear, but fear itself". The one thing you don't lose in a financial disaster is your will or your mind. Use them effectively and you will not only survive but thrive!