Khash Saghafi Mortgage Loan Officer's Blog

What I learned from my mom today (besides she's always right)...

Sun, 12 Apr 2009 17:56:48 -0500

I was talking to my mom today while she was leaving for work. She is 74 years old, just retired from working for the government after 20 years and she started her new job today (she's a nurse, by the way). She asked me how business was (as she always does) and I gave the normal canned response -- business is great, I'm busy and things are moving forward. I mean, what else are you supposed to tell your mom?

Every time she sees something on CNN about the housing crisis, she calls and asks if I need money and that she's bringing over groceries. I'm a first generation American and my parents came over to the United States in 1959. My dad still speaks broken English and still speaks as if Nixon, Carter and Reagan are still in office. My mom speaks very good English, but still has a very pronounced accent.

Today, my mom asked me if she is allowed to give me some business advice. How can I possibly say no? She's mom for godssakes! Truthfully, though, I'm sitting here thinking, what in the world can she possibly tell me about running a mortgage company?

She tells me that she has seen my television commercials and she knows that I have done my seminars all over the country. She goes on to say that I need to try to talk to fewer people more times. That statement scared the life out of me! For a few months now, I have been telling people that I used to believe that if I simply talked to more people, I would do more business. I have since changed my philosophy to speaking to fewer people more times.

It is that exact philosophy that I have been focusing in on -- speak to fewer people more times as opposed to more people fewer times. How in the world does my mom, who is a nurse, who I have never explained my business plan to or method of getting business know the exact thoughts that I have been thinking for the last 6 months?

It is moments like that which makes me want to put my head in a vice and seek professional help. It seems that I have spent more of my life trying to learn on my own and prove my parents wrong than simply accepting the fact that they know more than I do and I need to just shut my big mouth and listen to them (even if they do speak with accents). The greatest lessons I have learned in life have come from my parents first, my wrestling coaches, my school teachers and my friends (with my friends, it's kind of like the blind leading the blind though (lol)). The sickest thought of all is that none of them have ever charged me a nickel for their worldly advice.

Mom's words have, once again, only cemented my thoughts on business and sparked the fire inside of me to again keep traveling down the road I am traveling. Thanks again mom!!!!

Motivation - Page 1

Sat, 11 Apr 2009 12:54:57 -0500

Especially in these times, sometimes keeping your chin up and re-confirming your confidence and belief in what you are doing is more important than reading guidelines and going through your to-do list. Four weeks ago, I decided to visit the same 10 real estate offices once every Tuesday and drop off something in their office with my name and/or picture on it. I simply walk in, "litter" at the front desk and walk out. Each time, it has only been an hour-and-a-half of driving around (not a lot of time out of my day). Suffice it to say, this past Tuesday, the 'ole engine was just not firing up. Here were my thoughts why I did not want to do this:

1) I didn't have time this week because I was too busy. I have 2 seminars this week and I just didn't have the time.

2) There is barely anyone ever in these offices and I know that the lady at the front desk is just throwing my stuff out so this is just a waste of time.

3) I'm sick of the grind and chasing people and who knows, it's about hitting the "right" people so maybe I have picked the wrong 10.

4) This industry is dead and who am I fooling thinking that this is going to work.

So I'm laying in bed and I remembered this story, I think of it all the time and it never stops firing me up:

I graduated from Normandy High School, a nice high school on the south side of Cleveland where I wrestled. I was never anything great, but I believed that I could achieve more and that I wanted to be around other people who shared my goals, so I decided to go to the #1 wrestling school in the country -- Oklahoma State University. In the first couple of weeks of practice, I'm working out with my teammate T.J. Jaworsky (who, by the way, ended up winning 3 NCAA titles (you could say that he was decent)).

So I'm working out with T.J. just getting the daylights beaten out of me. I was never beaten this bad in my life and he was hammering me. I was laying on the mat feeling sorry for myself, my eyes were welling up with tears, I was questioning whether or not everyone was right and maybe these guys were out of my league and boy, was I feeling sorry for myself. The whole time, TJ is using my face as a mop just cleaning the mats.

Suddenly, Kenny Monday, one of my coaches, throws TJ off of me and grabs my whole body and picks me up, standing me on my feet. Kenny, by the way, won an Olympic Gold medal in 1988 and an Olympic Silver in 1992 and was a 3-time world champion along with 8,000 other awards. Kenny stood at about 6' tall, 210 pounds with, god knows, no body fat -- he was chiseled out of stone.

He smacks me in the face and tells me to look at him in a very authoritative, stern voice (I was terrified and yes, I was getting ready to cry my eyes out). The whole wrestling room stops and it's dead silent. Coach Monday says this to me -- he says, "Get your chin up! You have 2 choices right now...RIGHT NOW! You can quit and go back to Cleveland and get the hell out of here OR you can stop feeling sorry for yourself, get your a** up and do something about it! You fight damn it! NOW WHAT'S YOUR CHOICE!".

Honestly, what were my choices? Quitting was simply not an option -- it simply wasn't. I put my chin up, stuck my chest out and marched back onto the mat. I was ready to run through a brick wall and I was gonna' pound TJ. TJ and I slapped hands, I was fired up and here I come! Coach Monday said, "Wrestle!". In about 2 seconds, TJ proceeded to pick me up and slam me on my head again and the beating continued...BUT -- I fought. I fought. I fought. I fought. Ever since that day, ever since that moment, I have never felt sorry for myself again.

Today, when the chips are down, I look at my options: there are only 2 -- I can quit and go home, but that is just not an option...it just isn't; OR, I CAN GET UP AND DO SOMETHING ABOUT IT.

This past Tuesday, I went to 8 offices (2 closed (lol)). I hit all 8. And this is the best part -- The broker from one office with 80 agent licenses sat me down and told me that he wants to get an "in-house" lender for his company. He proceeded to tell me that he was impressed that I have been back every single week and he has seen me coming and going every time. We spoke for over an hour. We are meeting next week to discuss options. How's that? I didn't want to go. I had every reasonable reason why I didn't have the time and should not go, and now I might be able to be the "in-house" for a very large office.

Even as I type this, my adrenaline is flowing, I'm fired up and I'm ready for today! I have a seminar today and this is going to be the greatest day for me. I can't help but say this to Coach Monday -- Thanks Coach for helping me. It has been 18 years since that September day in 1991, but I could still feel the smack on my chin and I could still hear your voice like it was yesterday. I didn't know it then, but you were giving me something that helped way above and beyond that practice on that day. I will not disappoint you and I will not let you down. Business might be slow. The industry might be dead; but today, I am getting up and I am going to do something about it. Thanks Coach!

Are you considering refinancing? 3 important questions to remember.

Sun, 29 Mar 2009 07:54:29 -0500

Everyone today asks me if I am busy with refinances. The truth of the matter is pretty much, no (lol). The media is creating a frenzy much in the same way that they helped with the frenzy of homebuying 3-4-5 years ago.

If you are considering refinancing, there are 3 very important aspects to the process which must be taken into consideration:

1) Will the house appraise properly in order to make the transaction work?

Of course, this question can only be answered by paying an appraiser to come out and do an appraisal. Does the appraisal cost money and can you, in the end, pay for something that does not end up working out? Of course; however, relative to what you are looking to save, it is a very small cost to pay in order to get a solid answer.

2) How much money are you saving monthly?

Ask yourself this question -- does the amount of money that you are saving help your overall lifestyle and make sense for you to do? Every single dollar counts, but be sure to measure your savings vs. your fees. This will help you calculate your break even point. Don't forget that if you have had your mortgage for 3 years, you are going back another 3 years again. I had a customer recently tell me that the loan officer who she was speaking with told her that she was saving $18,000 over the next 30 years.

Ok, now $18,000 is a ton of a money, but let's do some quick math. $18,000 over 30 years? That is $600 per year, $50 per month. To save $50 per month while adding another 4 years to your mortgage (she had already paid on her home for 4 years) does not seem to add up. Also, how many people today keep their mortgages for 30 years? As you can briefly see, the numbers do not always add up when you start scratching below the surface.

3) How much longer are you planning on staying in your home?

Now I understand that no one can guarantee that they are even here tomorrow; however, you do want to ask yourself this question since it will, when coupled with your break even point, help you to determine if the refinance makes sense.

If you are looking at refinancing so that you can run around your neighborhood and brag about your 4% interest rate, you are refinancing for the wrong reason. If you are interested in thinking through a very important financial decision, taking your time and understanding what you are doing, then you should definitely consider refinancing.

I can be contacted anytime at 1-440-838-5291 to help answer those questions for you.

Good Faith Estimate: Fact or Fiction?

Sun, 29 Mar 2009 07:03:25 -0500

Every single person out there, no matter what they are buying, wants the lowest rate, the lowest fees and the lowest payment. When it comes to mortgages today, they would typically like a 30-year fixed interest rate. In order to properly compare different lenders, a customer needs to get their hands on a Good Faith Estimate.

We all know that there are mountains of papers to sign for a loan application, very few (if any) ever read every single page and the same number do not even know what they are signing.

There are 4 basic questions every single homebuyer has on a loan:

1) What is the interest rate?

2) What are the fees?

3) What is the payment?

4) Is this fixed or adjustable?

Through all of the mountains of papers, there is 1 single sheet of paper which answers all four questions -- the Good Faith Estimate.

At the time of loan application, every single client should received a Good Faith Estimate. They should also ask the following question -- is every single fee that I can expect to pay estimated on this document?

As an example, are all title fees, state taxes, escrows & impounds, lender fees, surveys and any others listed? I cannot tell you how many Good Faith Estimates I look at in which the Loan Officer has left out the title fees and the escrows / impounds.

Now to be fair about it, at the time of loan application, there is no title / escrow company picked out; however, those fees can still be ESTIMATED. This, of course, is the reason that they call it a Good Faith Estimate.

If you are not receiving a Good Faith Estimate immediately, call someone else. If you are beginning a transaction and have questions which are not being answered, call me at 1-440-838-5291 and I will walk you through the only document that you have to pay attention to -- the Good Faith Estimate.

Hope For Homeowners

Sat, 28 Mar 2009 19:48:46 -0500

1 out of 752 applications when it was slated to help 400,000! Yes, the most sweeping housing rescue plan in world history signed into law by President Bush which was supposed to help 400,000 homeowners from being foreclosed on only helped 1 family (they should write a book - seriously (lol)). That is the latest statistic of how many this worthless program has helped. What a joke! So how great of a job did you do to help solve the housing crisis Mr. Frank? I would like to hear Barney stutter his way through the answer to that question. A spokesman for the FHA stated, "...the program isn't working terribly well." Call it like it is -- it failed miserably and those who took credit for that legislation should voluntary tender their resignations for being miserable failures at their jobs.

It was crafted by a bunch of people who were more interested in getting elected than getting the job done.

It was signed into law by someone who could not care less about what happens with housing in this country.

It became a theme for a political 'change' in America which has thus far done nothing to help housing.

It has helped mislead homeowners into believing that the Government is actually doing something to help.

The Congressional Budget Office now estimates that the program will help up to 25,000 homeowners over the next 10 years. Where in gods name do they come up with these statistics? Let's see --- 1 homeowner in 6 months is 2 per year. 2 x 10 years = 20 homeowners. Ok Harvard graduates and young einstein's, where did you get 25,000 from?

Senator Chris Dodd, one of the chief architects of this failed program, still wants to keep HOPE in any future bills since it could still 'possibly help someone'. If any of these politicians worked for a private company, they would be fired. Oh, wait a minute, I forgot -- they would receive million dollar bonuses for running the company straight into the dirt.

FHA Appraisal Changes To Potentially Hurt Market Even More -- Ouch!

Fri, 27 Mar 2009 04:48:43 -0500

Well, just as the President and ALL of our beloved politicians go onto television and tell everyone that they are going to force banks to start lending and helping homeowners and our economy get back on track during this time of crisis, I guess someone forgot to mention all of this to the Secretary of HUD while coming up with this little present for homebuyers / homeowners:

This is a brief summary from Mortgagee Letter 2009-09 which takes effect April 1st, 2009 -- HOLD ONTO YOUR HATS EVERYONE!!!!:

Here are the 10 things your appraiser must do or provide for all FHA appraisals done after April 1st, 2009:

1. The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71)

2. At least 2 comparable sales within 90 days of appraisal date

3. A minimum of 2 active listings or pending sales in addition to the 3 closed comparables

4. Bracketed listings using both dwelling size and sales price when possible

5. Adjust active listings to reflect the List To Sales Price Ratio

6. Adjust pending sales to reflect contract sales price when possible

7. Include original list price and any revised list prices

8. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales

9. Absorption Rate Analysis

10. Known or reported sales concessions on active and pending sales This update includes an often stated warning that..."Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA." If the above appraisal guidelines look foreign to you, that's okay, because this update is intended for Appraisers and Underwriters. I sent this to you so you can take the following actions below to make yourself an FHA resource in your market.

If you have any questions on this, please feel free to contact me at 1-440-838-5291 for additional reasons why this is really, really bad for everyone.

The Police, Society and Life

Sun, 22 Mar 2009 18:51:32 -0500

I just came home from one of my best friends house who is a police officer and we were talking about the four Oakland Police Officers who were fatally shot by a loser in every sense of the word. Those 4 officers were John Hege, Sgt. Daniel Sakai, Sgt Ervin Romans and Sgt Mark Dunakin. This post has absolutely nothing to do with real estate, but you know what -- it just might.

First of all, God Bless those officers. I have a lot of friends who are police officers and put up with more trash and garbage in a weekend than I will listen to for the rest of my life. They are good men. They are like me -- they lose their temper sometimes a little too quick, sometimes they say the wrong thing, they don't always make everyone happy, but all-in-all, their good guys. I read an article which said that while the initial manhunt was beginning, there was a crowd of 20 people gathering around where the first 2 officers were robbed of their lives. And do you want to know the disgusting aspect of this? "About 20 bystanders taunted police" stated the Associated Press's article off of the newswire. Let me state that again, "About 20 bystanders taunted police"!

What kind of sick b*stards taunt police after some disgusting cockroach shoots and kills another man? Here are some other words which describe the fallen officers -- father...husband...brother...friend...coach, and many others that I am sure I am missing. This stuff absolutely pisses me off. Ok fine, your a loser and your life is worthless because of your pathetic choices YOU decided to make. But why do you have to take someone else into your pit of hell?

Worst of all, who were the 20 cockroaches milling around the scene who were 'taunting' the police? Those people need to learn the meaning of respect and authority. And if you do not like that, tough. I am so absolutely disgusted about this, I could not help but write something. I think, to an extent, I still have to refine my language skills for blogging and sometimes have to correct my neanderthal ways of talking; having said that, screw those losers who were 'taunting' police. Take them to jail and let them live behind prison walls for the remainder of their insignificant lives.

It is stories like this that remind me to watch my tongue when I say that I have it "tough". I get somewhat "depressed" about where this industry is going and it's sometimes "difficult" to get up and face the day. You wanna' know something -- God bless the families of those four MEN. They have it "tough". This year and the years to come will be "difficult". There is no amount of financial stress in my life which compares to the tragedy in Oakland. I can be in foreclosure, dead broke, bankrupt and do you wanna' know something -- I am blessed by God to be here. I'm not even religious, but I am blessed by God to be here.

By the way, when I left my buddies house, I told him to make sure that he is safe tomorrow while he's at work. I don't always say that to him and it's sad that it took this story for me to remember to tell him that, but I did. God bless those officers and their families...

Back To The Basics...

Sat, 21 Mar 2009 06:27:26 -0500

Back in 1985, I attended my first wrestling camp put on by St. Edward's High School, a very storied high school wrestling program in Cleveland. The name of the camp was "Back To The Basics".

In 1991, I entered college at Oklahoma State University. My wrestling coach, John Smith, was the biggest name in the sport at the time. At that time, he had already won 1 Olympic Gold and 5 World Championships. He later won his 2nd Olympic Gold in 1992. I would constantly call my friends back home at the end of everyday and they would ask one question -- did he show his super duper secret move yet? About a month into it, here was my conclusion to everyone -- he just keeps it basic, he has no super duper secret move and he does the same things that Coach Flores showed us in 7th Grade.

Today, it's a battle every single day and it's hard to keep your chin up and smiling all the time. For the last four years, I have exhausted my savings and everything that I have saved to try to find the 'secret' that is going to break through in this market. Thanks to a $50 wrestling camp back in 1985, my junior high and high school wrestling coaches and my College Coaches, I have arrived at this conclusion for my business -- it's Back To The Basics.

There were so many customers four years ago, I treated everyone like a number. I was definitely preparing for a decline, but not bomb hitting. I have now re-analyzed my method of business and this is where my focus has been for the last year and this is my focus more and more everyday as I move forward (with my chin up and looking ahead).

1) Talk to fewer people more times as opposed to more people fewer times. Instead of doing seminars all over the country, I have circled the wagons here in Cleveland and I am pushing harder on the attendees at those venues.

2) Focus in on my existing database and work them more. I joined sendoutcards.com and created 7 campaigns to mail my existing database this year in 2009. It costs $1.03 per card mailed out and now my old customers will see my grill 7x this year. Hopefully, in one year from now, I will be at the top of their mind when someone they know is buying or refinancing. Right now, I have 493 people loaded in which will cost me approximately $3600 this year. I am going to pay $3600 to mail 493 people 7x this year. I used to pay $5,000 for one hotel, one time in Southern California (by the way, I put on 5 seminars a month out there). This campaign will brand me better, last longer and be much cheaper.

3) I am speaking slower, breathing deeper and looking to position myself in smaller and smaller places as the expert in my market.

4) I definitely believe that the 'old school' ways of sales are the way to go; however, they must be woven in with the technology of today (ActiveRain, blogging, email drip campaigns, etc.). Those who do not transition into today will be pushed out of the market.

5) Every single time I speak to someone, I ask for a referral. Not in a pushy way and the conversation has to be in the right place at the right time to do that, but I am now "asking" for the business. I have been told for years by agents that I need to "ask" for business. I never believed that I should have to "ask". For as dumb as it sounds, I always figured that people know what I do and if they know someone, they will send them. I was wrong. I was wrong. I was wrong.

Today, it's Back To The Basics. It only took over $400k in Southern California (some of which was spent at Fashion Island and South Coast Plaza), $200k in Florida and the liquidation of my 401k to remember the $50 that mom spent in 1985 (I love you mom :-) ). If you know of anyone refinancing or purchasing a home, I would love an opportunity to answer their questions and work with them. 100% of my business is referral business. Call me ANYTIME at 1-440-838-5291. (By the way, I had to force myself to type those last few sentences (lol))...

Appraising your home on a refinance -- The Sales Comparison Approach

Fri, 20 Mar 2009 22:16:05 -0500

Are you thinking about refinancing? One of the most important things that it takes to get a new mortgage loan is getting your home appraised. Now before you say that your neighborhood has not experienced a decline in value and you just put $20,000 into upgrades of your home, you must first understand how the 'value' of your home is determined for your transaction. How a Bank perceives the 'value' of your home is SIGNIFICANTLY different than how you perceive the 'value' of your home.

There are 3 approaches which an appraiser can use to determine your property value (I am sure the appraisers on Active Rain can add more specifics to these approaches, but these are the basic, eeeeeeeasy to follow ones):

1) The cost approach -- how much does it cost to re-build or replace the house? This is where your fancy windows, countertops and other indulgences will help you out. Unfortunately, Fannie Mae does not use this approach when determining value, so throw this one out the window.

2) The income approach -- This approach is used to determine the value of a home using market rent and some other fancy schmancy words. Again, Fannie Mae does not use this approach (so do not waste your time telling me that this would be a great "income" property). Toss this one out the window.

3) THE SALES COMPARISON APPROACH -- ding ding ding. This is the approach used by Fannie Mae to determine the 'value' of the home.

The guts of the Sales Comparison Approach are these 4 key factors. Here is my disclaimer -- there are definitely other factors involved also, but these are the most important, blah blah blah.

a) Comparables 'should' be within 20% of the square footage of your home

b) Comparables 'should' be the same style as your home

c) Comparables 'should' be within a reasonable distance of your home relative to where you live (urban, suburban, rural)

d) Comparables 'should' have SOLD within the last 90 days even though it is possible to use sales from 6-12 months back. Due to the sharp decline in home values, sales from 90-180 days ago are not considered accurate sales relative to today's 'values'.

Notice that I keep using the words "should". There are no absolutes and every single person can always find an exception to the rule. As for 99% of America, those are the 4 main criteria to help an appraiser determine your property "value". On refinances, everything pretty much rides on the appraisal. Understanding the basics of appraising can help you better understand the refinancing process.

If you have questions or are wondering how home improvements help the 'value' of your home, feel free to call me anytime at 1-440-838-5291!

Pre-Approval: Fact or Fiction? Part I

Fri, 20 Mar 2009 19:50:27 -0500

This is something that I am asked constantly -- is a Pre-Approval any good? Let's first start with me stating this -- you, as a buyer, want to make sure that you are as solid as possible without going through the whole process only to be declined later. As a realtor, you want to make sure that you are not driving someone all over the place only to find out that they are not qualified to rent! SO, a Pre-Approval or Pre-Qualification is going to give you the best 'idea' whether or not the borrower is qualified. Now let me state a couple of simple FACTS:

1) There is no difference between a Pre-Approval or Pre-Qualification. Maybe in 1975 there was, but there is not today. The word "Pre" is latin for "before". Knowing this, Pre-Approval or Pre-Qualification means "before" approval or "before" qualifying. Many times, loan officers will tell realtors and buyers that there is a difference because it makes them feel warm and fuzzy, but in the world that I live in (called reality), there is no difference.

2) In order to truly know whether or not a borrower is qualified, an UNDERWRITER needs to review the file. By the way, the underwriter is one individual who makes the final decision on whether or not you win the biggest debt of your life. The underwriter is ONE individual. It is not a board, a group, or a committee. There is not a bunch of people sitting around the 100th floor of some skyscraper smoking cigars debating over your $70,000 dream. Typically, underwriters are sitting in desks that you can buy at Office Max for $150. Their desks are cluttered with papers and files.

3) In order for an ACCURATE decision to be made in regards to a borrower, these are the documents which must be reviewed -- recent paystubs, 2 years of w-2's, 2 years of tax returns (in many cases), 2 months of bank statements, full verification of employment from current and previous employers, verification of rental payment history, "acceptable" explanations and verifications of any and all derogatory accounts which show up on the credit report. Oh, did I mention divorce decrees, bankruptcy papers and child support verification? Now you tell me -- when I get called on a Sunday from a buyer who needs to make an offer on a home because there are five other offers about to come in (even though the house has been listed for 3 years), do you think that I have time to do all of those verifications?

If a Pre-Approval was worth the paper it was written on, then why do I typically pick up 2 loans per month in which a Bank or Mortgage Company Pre-Approved the borrower only to find some reason to decline them which they could have figured out on day one? I will give you the reason -- THE LOAN OFFICER SCREWED UP AND THE PRE-APPROVAL NEVER SHOULD HAVE BEEN GIVEN.

If you are an agent, I would love for you to share your horror stories of Pre-Approvals that went bad.

There are very specific questions that one can ask in order to 'best' ensure that you will not be declined following a "Pre-Approval"...I will list those questions in Part II of Pre-Approval: Fact or Fiction?

By the way, if you are currently having problems getting answers from your current lender or have been declined and you are in contract -- call me today, tonight or whenever -- 1-440-838-5291.

Fannie Mae Streamlined Refinance For Self-Employed Borrowers?

Thu, 19 Mar 2009 06:07:11 -0500

I have received many calls on the upcoming Fannie Mae enhancement to its underwriting system beginning April 4th. The details are still not out yet; however, in reading about these upcoming changes, Self-Employed Homeowners need to pay attention to this because it would appear that this refinance program will be much like an FHA streamlined refinance where:

1) No appraisal is required

2) No credit check is required

3) No income verification is required

4) You must have a good mortgage payment history and cannot currently be delinquent

SO, for all of the threads that I read in which people state that self-employed borrowers are being pushed to the fringe of society, no loans are available for people who pay their mortgage on time and no one is there to help, this program would appear to be something significant.

This will apparently allow many to refinance into lower, fixed interest rates -- especially those who are self-employed and whose incomes have been hurt over the last couple of years due to a down market. I will re-post this after the April 4th changes. Banks and lenders will have to adjust their underwriting systems accordingly, so it could very easily take well past April 4th before hitting the "street"; however, I will keep everyone updated accordingly. I am confident that there will be some people on AR who find this beneficial.

So when will we hit bottom in the housing market?

Tue, 17 Mar 2009 20:18:03 -0500

I get asked this question all the time by people. Where is the bottom at? The worst part is talking to buyers who are sitting on the fence and trying to time it perfectly.

There is a great study out there by Credit Suisse which calculated the "bottom" using the ratio between the Median Sales Price of home in the United vs. the Median Household Income.

I hate to use the word average when using the word median because they are not the same, and my college statistics professor would puke with what I'm about to say, but to hell with it -- generally speaking, homebuyers have purchased homes for 2.9x their income (at least since 1981 -- we all know the historical significance of that year...the birth of MTV!!!).

In October of 2005, we peaked at median homeprices being 4.3x the median household income. In July of 2007, we were at 3.9. As of January of 2009, we were at 3.5x.

The U.S. census bureau estimates the median household income today to be approximately $50,233. The median sales price of a home today is estimated to be $170,300 (from NAR housing stats).

With historical rates being approximately 2.7x, this would mean the median sales price of a home must be approximately $150,000 (give or take a little). This is approximately a pullback of approximately 11% from where we are. Credit Suisse projects the bottom somewhere in the Spring of 2010. Based on these numbers here, I would estimate that based on a NATIONAL outlook, we have to pull back another 10-15%.

I know that all markets are local, blah blah blah, but as long as more loans keep coming off of the table, fewer people will be qualified to buy, thereby causing sellers to further decrease their sales prices and thus pulling the numbers down farther. The Midwest is relatively already there (median price in January of 2009 was approximately $138,000 (yaaaaaay for us!!! too bad all of our manufacturing jobs are being shipped to China).

I feel that the methodology used by Credit Suisse is our best gauge for trying to see where the bottom is. Government programs and bailouts will artificially prop up the numbers. In the end, however, the numbers are the numbers.

Building a network of referrals to last through any market -- Volume I

Tue, 17 Mar 2009 05:30:48 -0500

Ok - the most consistent message that I am hearing today is how sick and tired people are of chasing customers, how home values are too far down, and the 'grind' is just not worth it anymore. I had an agent tell me yesterday that she is 'physically' burned out. I told her that she is not 'physically' burned out, she is 'mentally' burned out. The body can withstand stresses that are unbelievable. The mind quits loooong before the body does. By the way, if this interests you, call me TODAY and I will help you develop it. In the end, if I can help you, I will help myself. Here is a model that can help drive referral business in (1) consistently and (2) under any market condition:

1) Identify who your client is -- let's say a seller

2) Ask yourself this question -- who works with your client everyday as part of their daily business routine? Answer -- Divorce attorneys

Now, how might a Divorce Attorney work with a seller every day? Easy. 70% of America owns a home. That means that for every 10 people who that attorney speaks to about getting divorced, 7 of them own a home. You show me someone getting a divorce who owns a home and I will show you someone who needs to buy a new home, sell their existing home or refinance OR do 2 of the 3.

3) Ask yourself this -- how can you get a Divorce attorney to send you business?

To answer this question, we ask one more question -- what can YOU offer THEM to enhance THEIR business? Easy...your guidance, your professional knowledge of the market, your expertise. Just think of today, how many people are going to call an attorney and say we are getting a divorce and we need to sell our home OR we are getting a divorce, I want half of the equity in this home? How many attorneys know the ups and downs of a short sale? How many divorce attorneys know what the seller net will be? How many know about market times?

4) Now how can you get to a divorce attorney? Simple. Start with people you know who have been divorced or are going through a divorce. Do not ask them to get you in the door -- TELL them! You must believe that they NEED you. Are you going to sell the first one you sit down with? Probably not. That is why you do not go and talk to ONE, you keep kicking in every single door until the damn breaks and you get through.

You can apply this to any "pool" of people -- estate attorneys, heads of human resource, long term health care facilities where the senior has to move out of their home sell their home to be able to have medicaid pay for the care. I have a laundry list of this stuff.

By the way, where does my experience come from? Why should you listen to me? 5 years ago, I asked myself those questions and there was born my seminar:

1) I asked who is my target customer? Homebuyers

2) I asked -- who works with my customer everyday as part of their daily routine -- Realtors

3) I asked -- what can I offer THEM to help THEIR business? CEU's

5 years later, I have been doing 5 seminars per month in Cleveland every single week for about 50 agents per seminar. I lecture for 2 straight hours. If I do a good job, they send me the business (by the way, Kool-Aide is served instead of water & coffee (lol)). Think about having a captive audience who has YOUR customer in their hands and can send that person anywhere -- that's me at my seminar. In that 2-hour lecture, my knowledge, my skill, my level of education shines through. Go to my website at www.cardinal-banc.com to see the upcoming schedule (by the way, you have to watch the inspirational sayings on the "seminar" page and the inspirational videos on the "in the news" page -- I am very proud of those 2 things on my site). I call it the Greatest Show On Earth (or cheap hotel carpet at least). I shower, brush my teeth, clean myself up and go lecture 1 time per week for 2 hours. That is how much time I take out of my day. I spend 2 hours, once per week to get business. Last year I did 132 transactions.

I do not have some mega-company with a huge staff or some gigantic company name behind me who has been in business for 150 years. No one has ever heard of my company and no one has ever heard of me -- but I don't really care. You watch me go one time for 2 hours and you will walk out of that room knowing who I am. I have 1 full time employee and 2 part-time employees helping me. And last year I transacted 132 loans. After March 31st this year, I will have done more business in the first 3 months of this year than the first 5 months of last year. Business is good.

In my Volume II post, I am going to explain how I took the traveling circus on the road to Columbus, Florida and Southern California and lost everything I had (lol)!!! I will detail my mistakes and what I have learned and what I have changed during the most financially brutal lesson in business that I have learned to date.

CALL ME TODAY AT 1-440-838-5291 IF YOU WANT TO BEGIN YOUR ADVENTURE (I should be like Vince selling the Sham Wow with this stuff!)...

The reason for the crash...

Sun, 15 Mar 2009 20:30:48 -0500

I have recently been reading many posts over President Obama's handling of the economy thus far and the problems with President Bush, etc. etc. etc. My January seminar topic was the 2009 Economic and Real Estate Outlook. At that seminar, I had pointed out a few things and had strongly urged all attendees to google some of these terms to help gain a little more insight as to the "why". I have heard it was the executives at AIG, etc. etc. etc. In my very unprofessional opinion (my undergrad degree is in biology), here are the reasons for the crash.

Google these titles and read for yourself

1) Glass-Steagall Act of 1933 -- Senator Carter Glass & Henry Steagall built walls between the types of activities that banks can take. HOLD ONTO YOUR HATS -- they determined when the same entities wore multiple hats in regards to the packaging and selling of securities, there was a huge conflict of interest which could lead to lies, deception and fraud (hmmmmm....that doesn't sound like anything familiar).

2) The Gramm-Leach-Bliley Act of 1999 -- This overturned Glass-Steagall and tore down the walls created by the Act in 1933 thus allowing institutions from different segments of the industry to merge and, you guessed it(!), start doing the things that Glass-Steagall prevented

3) The Net Capital Rule of 1975 -- This law prevented financial institutions from over-leveraging their debts vs. their assets. In 2004, 5 institutions were given an exemption by the SEC from the Net Capital Rule -- Merrill Lynch, Lehman Brothers, Morgan Stanley, Bear Stearns and Goldmann Sachs. Has anyone heard of those companies before?

4) I am including a quote from Paul Volcker. Please guess when this quote was said:

The Federal Reserve Board votes 3-2 in favor of easing regulations under Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker. The vote comes after the Fed Board hears proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities. Thomas Theobald, then vice chairman of Citicorp, argues that three "outside checks" on corporate misbehavior had emerged since 1933: "a very effective" SEC; knowledgeable investors, and "very sophisticated" rating agencies. Volcker is unconvinced, and
expresses his fear that lenders will recklessly lower loan standards in pursuit of lucrative securities offerings and market bad loans to the public. For many critics, it boiled down to the issue of two different cultures - a culture of risk which was the securities business, and a culture of protection of deposits which was the culture of banking.

By the way, that was said in the SPRING OF 1987!!! I love the, "Volcker expresses his fear that lenders will recklessly lower loan standards in pursuit of lucrative securities offerings and market bad loans to the public" (LMAO). He was opposed to the lifting of Glass-Steagall for the stated reasons.

5) How could I end without mentioning the beloved Community Reinvestment Act. I could not find it, but I have it somewhere, there was an article in the New York Post(?)/Times(?) in 1999 that said that Fannie Mae in order to comply with the CRA will begin approving loans for those who would otherwise not qualify under 'normal' loan guidelines due to poor credit and re-payment histories. But due to the pressure from Washington to push the CRA, Fannie Mae would loosen standards.

Anyone who thinks that this mess was caused by Countrywide, George Bush or lowering taxes is simply wrong. Countrywide is one of my competitors. Here's a quick history lesson (forgive me if I am slightly off in numbers). Countrywide was started by 2 men in 1968(?). They grew it to over 62,000 employees over the next 40 years. Hmmmm...I've been in business for 7 years, I have 3 employees and I am fighting like a dog to stay in business. Call me nuts...call me nuts, but I'm thinking that Countrywide might not be the Evil Empire lead by Darth Vader.

In my humble opinion from the little research that I have done, I conclude de-regulation of good laws created by people who never knew what an I-phone was or a blog coupled with big money and dirty politicians from both parties tumbled our economy. It was a slow bleed, but we are seeing the result today.

By the way, it is generally agreed that there were 3 reasons for the fall of the Roman Empire:

1) Overtaxation of the people

2) Overextended military

3) Deterioration of moral values

Thank god none of that describes the United States today...

Local vs. Non-Local Lenders Volume II

Sun, 15 Mar 2009 17:16:46 -0500

As a followup to my previous post -- Local vs. Non-Local Lenders, I wanted to do a follow-up with some additional points:

1) Real Estate agents DO need to be local. They DO need to know the subtle differences between one street from another street They DO need to know whether a particular development has children in it. They DO need to know what areas of a city have good accessibility to highways, malls or similar. The only way to gain that kind of experience is to physically live and interact in the market. I believe that agents DO need to be local to properly advise their clients. When I travel to California to partake in the Greatest Show On Earth, do I know the Irvine, Orange County market even though I am there for 12 days out of the month staying with my friends off of Jamboree & the "5"? Of course not (I could tell you how to get to Fashion Island and South Coast Plaza (the shopping is incredible -- anyway, I digress)).

2) Fortunately for me, I am not an agent, I am a mortgage lender and guess what, I deal with -- numbers. I loan people $100,000, $600,000, $18,000 (yes, I do small loans also). Those are all numbers. I give people interest rates -- 5%, 6%, 7%, etc. -- those are numbers. There are monthly payments (numbers), fees (numbers), escrows & impounds (numbers). We lend based on credit scores (numbers). I'm not all about numbers, but the rules that govern me are. Unfortunately, it's pretty much black and white, you either make the cut or you don't, period. Does a lender have to be local? NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO.

3) Now to Local vs. Non-Local. Anytime an agent tells me, "But Khash, the house has a beautiful kitchen!", I ask this simple question -- Please, mathematically, explain to me the dollar figure of the "kitchen", the "granite countertops", the fancy floors -- what is the exact dollar figure. Keep in mind, no guessing, no stumbling over your words. Keep in mind that the Cost Approach and the Income Approach are not used by FNMA for determining value, so telling me how much the homeowner paid is not allowed (MU-HAHAHAHAHAHA). I always hear this long paaaause or *gasp*. I laugh when I think how many times I know that the agent priced the home based on what the seller wanted + their commission -- way to go, great way to arrive at the 'value'. I realize that the agent who does that does not represent the greater whole, but they do exist.

4) Always keep this in mind -- there are typically 6 opinions on "Value", but only 1 counts -- (a) the seller (their like drunken sailors, so we'll throw them out the window first), (b) the listing agent, (c) the buyer (d) the buyer's agent (e) the appraiser and (f) the lender

Unfortunately, when the buyer needs a loan to get the house, the lender's opinion is the ONLY one that counts. I love it when people say that the value of the home is based on what someone is willing to pay for it. Ok, is a buyer who is going little to no money down really the "buyer"? I say NO. The bank is. We live by the Golden Rule -- he who has the gold makes all the rules. And for those people who do not like that, then only deal with cash buyers and you'll never have to worry about (f).

The biggest problem that I am running into today is that everyone wants it both ways:

1) Blame us lenders for the mess that we are in for giving people loans that they should never have been given based on overinflated appraisals and other factors

BUT

2) When it is THEIR transaction on the line and THEIR commission check, suddenly the questions that arise are WHERE IS YOUR APPRAISER FROM and I HATE OUT-OF-TOWN LENDERS / BANKS.

People, you cannot have it both ways. My side of the industry is driven by numbers. Do not tell me the "value" of something unless you can mathematically justify it. By the way, that is why FNMA uses the Sales Comparison approach.

Now that I am done typing -- I can put my suit of armor back on again as I prepare to be rained down on with spears, flame throwers and other objects...LET THE GAMES BEGIN!!!!

Local vs. Non-Local Lenders

Sun, 15 Mar 2009 09:32:41 -0500

This is something that absolutely drives me nuts and is only one more reason that everyone working in this industry must either step up to becoming knowledgable with lending guidelines or simply lock themselves in their closets and pretend that Jimmy Carter is still in office.

I'll admit it -- I'm still stuck somewhere between 1984 and 1991. I remember when Guns-N-Roses came out with Appetite For Destruction in '87, I remember The Terminator (which historians argue to this day was the greatest acting performance in history by California's beloved governor). I remember watching MTV all day and playing kickball all day with my friends. I miss those days and wish that I can go back to those times (I have been attempting to re-enroll in kindergarten, but I can't figure out why they won't let me). I am not really all that good with computers. I'm not big on all of the gadgets my cell phone has to offer; however, I am not good with that stuff NOT because I am not intelligent enough to figure it out, but because I AM STILL STUCK IN THE 80'S AND I DON'T CARE TO LEARN IT. Period. I'm happy with my 80's clothes. I'm happy with my 80's music. I'm happy. And if people don't like it when I crank up some Poison or Motley Crue or they don't like me wearing tennis shoes and white socks with my jeans, TOUGH.

Here's the catch -- I DO NOT LET MY "TRUE" INNER SELF interfere with my business TODAY. When it comes to tracking the secondary market by surfing different sites, reading blogs, studying history in regards to the crash of 1929, new laws and the reaction to those laws -- I AM AN EXPERT with accessing the internet on my cell phone, tracking the market and using a computer to assist me with all of this.

Too many times I get asked by agents if I am "local". I could not tell you the name of the street that is right next to my office building! Actually, there is set of buildings RIGHT BEHIND MY OFFICE and I still don't know if they are apartments or condos (lol). By the way, I have been at the same address for 7 years now. I would like to see how many agents can name the 5 streets immediately surrounding their home -- so much for local...

Local vs. Non-local lenders means NOTHING. Instead of asking me if I am local, why not ask these questions:

1) Do you know what you are doing?

2) Do you know what you are doing?

3) Do you know what you are doing?

4) How many transactions have you PERSONALLY closed, not your company, YOU?

5) Have you ever Pre-Approved someone and later declined them?

6) Can I get ahold of you outside of 'normal' hours?

7) Can you walk me through the steps of what you are looking at on this transaction?

If you were burned by a "non-local" lender, it wasn't because they were not local -- IT'S BECAUSE THE LOAN OFFICER HAD NO CLUE TO WHAT THEY WERE DOING! Mortgage lending is not done today like it was in 1972, sorry to say and I hate to break your heart.

If you are currently having a difficult time on a transaction and you are not getting answers -- call me TODAY (SUNDAY)!!! 1-440-838-5291.

As I put on my suit of armor and my shield getting ready for the replies, I am looking out my bedroom window at the street quite literally behind my house, and do you want to know the funny thing -- I DON'T KNOW THE NAME OF THAT STREET EVEN THOUGH I HAVE BEEN HERE "LOCALLY" FOR 7 YEARS (lmao)...

So my credit cards are maxed out...

Sun, 15 Mar 2009 07:08:02 -0500

Not that many people run around and waive a big flag about their current debt, but as a loan officer, we see all of the debt, relative spending habits and income of our clients. Today more than ever, I am seeing more and more people with large balances on their credit cards while getting ready to purchase their first home.

Now to be honest, I myself ran my credit cards up to over $54,000 when I opened my business. As dumb as it sounds, I did not realize how much "start-up" money it took just to open the doors to a company. Naturally, when people would ask me how business was, you guessed it -- it was 2 thumbs-up and my response was WONDERFUL (while in the back of my head I was thinking, "Actually I'm drowning to death, I can't afford to turn the heat in my house over 50 degrees, and I have to strategically map out the grocery shopping days of my friends so that I can 'coincidentally' stop over while they're hauling in the groceries that day (lol)". Nonetheless, that is a story which I share with customers contantly to let them know that (1) I've been there and (2) you can fight your way out by making simple sacrifices which do not have to last a lifetime.

I realize that agents and many others cannot play the role of a financial advisor, nose into someone's business or even come into that information, but I think that it's always good to keep this message to new homebuyers without even learning of that information.

I'm slightly embarrassed to say that 3-4-5 years ago, I would not put the emphasis on these points that I do today, but I suppose that comes somewhat with more age and experience and the current economic climate re-focusing me on what is important. To those clients who are walking into a home with a lot of debt, I always hit these points:

1) Take a deep breath and take your time making your home your own. As long as you realize that you are not going to day-trade your home, time is on your side (to steal a line from the Rolling Stones).

2) You do not need to remodel, re-landscape and furnish your entire home within the first 3 months of living there. Focus your initial dollars on paying off or paying down your debt.

3) Especially in a market which you can put little to no money down (FHA (3.5%) and USDA (ZERO down)), put less down and take your extra cash, income tax refund, and first time buyer credit and wipe out your debt.

4) Give yourself a chance to grow into your new payment. More than likely, you are paying more than you were while renting; SO, cut out the weekend dinners, turn the heat down a little in the winter (for those who know what "winter" is (lol)), remember that 1,000 years ago air conditioning did not exist (was it that long ago?) and come up with a YEARLY plan to accomplish goals -- maybe painting the home in year 1, carpeting or flooring in year 2, landscaping in year 3. Being financially responsible instead of overzealous can be the difference between keeping your home or becoming a statistic.

5) If you make the correct moves with your money, this will be the best investment that you can ever make. If you have to keep up with the Jones', Smith's and everyone else, you will long for the days of renting.

How many people follow these points who are walking into a home with a lot of debt, I cannot really say, but I do think that a little 'pressure' from everyone on being financially responsible never hurt anyone.

Foreclosure, Divorce and the Ex-Husband

Fri, 13 Mar 2009 21:16:19 -0500

I was presented with a loan which was declined by two other lenders that I felt was important to post as a scenario to pay attention to for other agents.

I spoke to a very nice woman today who was divorced in 2005. The home was given to the ex-husband. The ex-husband, in classic fashion, allowed the home to go into foreclosure which was not satisfied until August of 2008. The customer had a 652 middle score. She had stated to me that the other loan officers declined her because FHA required her to be 3 years out of foreclosure.

The loan officers are correct, FHA does require borrowers to be 3 years out of foreclosure; however, if we can verify that the mortgage was paid as agreed BEFORE the divorce and then, through the decree, it was given to the ex-husband, we are good.

After consulting with my underwriter and reviewing the credit, this loan will get done. She is going out to look at more homes this weekend in the $250k range. Hopefully we can shut this one down in April.

Lesson for everyone -- anytime debt is given to an ex-spouse through a divorce, the delinquencies may be ignored assuming that the debt was paid as agreed while the debt was the responsibility of both parties. You simply need two things -- (1) the payment history before the divorce was finalized and (2) the divorce decree which must clearly assign the debt to the ex-.

Interest Rates

Fri, 13 Mar 2009 05:37:21 -0500

Ok -

The next Federal Reserve meeting is next week and on Tuesday, Fed Chairman Ben Bernanke stated that he believed that the recession would be over by year's end. Now, I know that it's hard to buy into anything coming from Washington; however, the market is still controlled by the powers that be, so it is extremely important to follow what they say.

We all have customers playing the 'rate game' causing them to sit on the fence that much longer. Here are some points to keep in mind when consulting with your clients. Now no one has a crystal ball, but here are some factos for the layman to pay attention to.

1) Due to the stimulus package, inflation is projected to be running wild the next few years. Why? Simple. Let's discuss briefly a simple law -- The Law of Supply, Demand & Prices.

When there is an "oversupply" of a product (not that any of us would have known of such a situation in the housing industry (lol)), the PRICE on that product goes down.

When our beloved government is about to spend $1 trillion dollars over the next couple of years, that is going to cause an "oversupply" of 'dollars'. When there is an "oversupply" of the dollar, the physical "value" of the dollar goes down -- it gets weaker. When the dollar becomes weaker, that is called INFLATION.

INFLATION SCARES MORTGAGE RATES. WHY?

Simple, If I am going to give a customer $100,000 at 5% and make $300,000 over the next 30 years, and I know that inflation is going to be higher in the years to come, then my $300,000 that I am going to make will not buy as much "stuff" in 30 years as it will today (due to inflation). Please keep in mind that I am using nice round numbers to keep this simple.

Well, if my $300,000 is going to be worth less in 30 years, then I need to make $500,000 to buy the same "stuff" that $300k will buy. Well how do I loan $100,000 and turn that into $500k instead of $300k? Easy, I raise my interest rate to the borrower. Instead of giving a 5% rate, I will now have to give an interest rate of 6% instead.

Predicting interest rates on a day-to-day basis is almost impossible. I always tell customers this -- if you lock right now and rates go higher, your a genius and your friends will come to you for everything from marital advice to vacations to how to raise their children. If you lock today and rates go lower, your an idiot and you will be shunned from society, social gatherings and your children will be tormented by their peers at their elementary school because of their parents who "locked in too early".

The basic fundamentals of housing right now are this:

1) Home prices are unquestionably pointed higher within the next 3-5 years.

2) A 10% drop in home prices with a 1% higher interest rate actually equates to a slightly higher payment.

3) If you are buying a home because of the interest rate, you are buying for the wrong reason.

4) If you are buying because you want to day trade your home, you are buying for the wrong reason

5) If you are buying because you would like a place to call home, a place of your own, a place where you can put your signature and plant your feet and begin your legacy, this is the opportunity of a lifetime.

I don't know if my parents home is worth more or less today, but I really don't care. It is a place where I have my fondest memories and to this day, my lifelong friends from the 'neighborhood' still reminisce on playing kick ball in the Fodor's frontyard and a grand slam was hitting the front picture window of the house!

Relax, take a deep breath and know that rates are low no matter where you lock right now!