As many of you have seen on TV or in print, our financial markets have had an upheaval lately. A lot of this has to do with the real estate market and its current cycle of self-correction. Over the last 5-6 years real estate prices have sky-rocketed, lenders have relaxed lending standards, and millions of homeowners refinanced into generally riskier mortgages in order to try to get "the lowest rate".

This trend is something that could not truly sustain itself and has subsequently started correcting itself. Consequently, in some areas appreciation has slowed, in some it has flattened out, and in the most inflated areas a process of depreciation has occurred. So, now here we are....and what do we do?

Well, first of all, let's dispel the myth that there is a "one-size-fits-all" solution for everyone. Every day I see commercials from Ditech, Greenlight, and a host of other lenders about how they can get you into the "perfect" loan program for you. Just a few years ago, they were pushing tons of 2-year ARMs (adjustable rate mortgages) because of the LOW starting interest rates. Now, they are promoting the "cure" to the ARM as their fixed rate loans.

These loans are being solicited at rates that are near impossible for the average person to get without either having the perfect situation or paying points at closing. For more information on the contributing factors that go into setting your interest rate and whether you fit the "perfect" situation, see this blog I wrote on the subject.

Adjustable Rate Mortgages

Some homeowners got into these low-rate ARMs to qualify for either a bigger house, or because their credit was too low to qualify for other products. A lot of those 2-year and 3-year ARMs are now recasting to the fully indexed adjustable rates. This leaves the homeowner with one of two choices. They can either pay the new payment which are increasing by as much as 60% or possibly refinance. The problem is that some of these homeowners' credit situation may not have improved, or with the new restrictions lenders are now imposing, find that they are in the same situation as when they first refinanced or purchased. The worst of all situations is that their ouse value has declined. So, now they are stuck with either a high interest payment, or a high closing cost refinance.

The worst part about this scenario is that higher LTVs (loan-to-value...see blog link) are now costing a lot more in interest rates and points. So, even if the homeowner has some equity and tries to refinance, lenders are putting severe restrictions on how much of your equity they will allow you access to. If you go too high you will find that the closing costs or rates could be astronomical.

Fixed Rate Mortgages

Other homeowners decided to try to get into more "traditional" fixed interest programs while the rates were lower. This was generally considered a good idea, but, that really depends. If you were lucky to get enough to get a 4.75% interest fixed-rate mortgage, you still could have problems. In today's market, if you need to access your equity (debt relief, college expenses, house repairs, tax issues, or divorce) yet don't want to get rid of that nice low interest rate first mortgage, you have a problem. Second mortgages have been seriously restricted now. In almost every case, it will COST you to have a second mortgage. You can expect to pay, on average, a minimum of two points for your second mortgage and that would still be for a rate somewhere around 12% or more depending on your situation. If you have a more complex or higher risk situation, this could trigger a combination of points as high as six and/or interest rates as high as 14% or more as laws allow.

Purchases

The BAD news is that right now with purchases, you want to be prepared to put down at least 5%. If you try to do 100% financing, you will trigger those severe restrictions and fees I mentioned earlier. The GOOD news is that the market is flooded with a bunch of houses to sell and not a lot of willing or capable buyers. So, most homeowners are more than willing to make concessions and contributions to the total purchase cost. By law, sellers are allowed to contribute a total of up to 6% of the sales price towards closing. That means that with a house costing $300,000, a maximum of $18,000 is allowed to be credited back to the buyer for closing costs and fees. This can seriously mitigate how much has to actually be brought to the table. For the crafty and creative negotiator, this may completely eliminate the need to bring money to the table. But, you will still have to have show to the bank that you actually HAVE the money to put down, if necessary.

There are Positives (The "Secrets")

The fact of the matter is that the mortgage system, as it is set up, was not designed for the average person to win at all. As a matter of fact, most people lose most when they think they have made the "right" conservative and "safe" decision.

When you are making the decision about what mortgage programs to go with, understand that no matter what choice you choose, it will take you until the 20^th year in your mortgage to actually pay as much of your payment to principal as you are paying in interest. It will take until year 22 before you have actually paid off HALF of what you originally owned. You will repay a total of 215% of what you borrowed. That means that on a $300,000 home, you will pay off the original $300,000 and an additional $315,000 by the time the loan is paid out. Most of this interest is really paid up front. So, if you are buying in today's market, when appreciation is slowed or even negative, if you sell before the trend changes or before maybe 8-9 years, you will have nothing to put down on your next home. So much for an "investment", eh?

Understand this:

In Europe, gas prices are almost 3-4 times higher than ours. Real estate is almost twice as expensive. And there has been a history of employment issues. Yet, with these factors, a good many homeowners are still able to pay for their homes and even find time and money to vacation and still gain some enjoyment in life. Why is that?

The difference is the method of amortization. There are different types of amortization available to homeowners. If these methods of amortization are used effectively, then, it actually is possible to pay off mortgages in 7-12 years. Or, at worst, greatly reduce your principal quickly and give you equity you can use according to your own financial needs and planning. This mitigates, and in some cases, renders moot interest rate movements, up or down. ***NOTE- These methods DO NOT include dumb things like paying twice a month or one extra payment per year. That is only reducing your mortgage time by MAYBE 4-5 years. Yet, you would pay someone $30-$70/month for someone to do something you can do yourself.*** There are strategies that can allow you not to have to "rate shop" any more because you are not dependent upon only the $200/month principal payment your $1900 mortgage payment buys you.

There are a few different methods of doing this. It can be done, in some cases, without refinancing. In other cases, it may require changing loan products. But, overall in most cases, it can be done without spending any more money a month than what you are currently spending on principal and interest. So, why not spell it out here? Each situation is different and requires a more specific look at each person's situation and goals.

The "Anti-Sales" Pitch

So, now this is the part where you are figuring I am going to hit you with my sales pitch on how I have miraculously discovered the answer and cure to all these financial woes....and it all can be yours for $2999.99 (or insert your own high dollar figure). Sorry to disappoint you. This information isn't for sale. Why? Because its FREE. This blog is NOT a solicitation for my new tell-all book or the latest get rich gimmick. (Though, I should think about that. The tell-all book...not the gimmick)

I am just tired of hearing inaccurate and misleading information filling the airwaves. I feel that everyone has the right and deserves the opportunity to take control of their life and finances. Every thing most lenders and banks will tell you is the RIGHT thing, actually, is not necessarily true. They count upon the fact that you have been taught over and over how to do things the "right" way. Buy a decent home and PRAY it appreciates.

The bottom line is this: There is no golden pill! Most things that can set you free can also enslave you and do MORE damage if you don't have the discipline to stay the course of your financial plan.

In the interest of fairness, I have included some general guidelines on picking your own mortgage professional. Feel free to take whatever knowledge and advice I may give and go to your mortgage professional of choice. But, as with any advice you hear, DO YOUR OWN RESEARCH! I can explain as much as possible, and I am very willing to help with any situation I can. But, each person needs to take any advice and research it to double check it to make sure you understand the ins and outs of any choices you may make.

Finding a good Mortgage Professional

There are a few key things you want to look for when searching out a real estate or mortgage professional. I am going to list these in no specific order.

•1.       Honesty. If you have a feeling like something is being kept from you or you don't understand...ask until you understand or move on to someone who can explain it better.

•2.       Options. Your mortgage professional should always present you with options. Even though some programs may seem to have obvious drawbacks, there may be hidden benefits. As well, some programs that seem to have obvious benefits have hidden consequences. Make sure you read and understand all disclosures to any loan program and then refer to Rule 1.

•3.       Reality vs. "Pie-in-the-Sky". If it seems too good to be true, sometimes it is, sometimes it isn't. Often times, it can be true, but, with restrictions, conditions, and/or rules. Again....refer to Rule 1.

•4.       Availability. A mortgage professional can sometimes get very busy, but, if you can't get in touch with him/her on the phone, try email. If you are still not getting the level of attention you think you deserve, you may need to find another professional.

•5.       Overall Financial Picture. Your mortgage professional should have an eye towards your overall financial picture and not just selling you a loan. Hopefully, they have some sort of relationship with reliable financial planners and can keep your overall financial health in mind. If your chosen mortgage professional doesn't provide a referral, you should definitely seek out an independent party to review your financial situation with you.

•6.       Ditech/Greenpoint. Whatever you do, do NOT work with either of these. Go to consumeraffairs.com and see the tons of complaints and note the nature of them. The complaints are fraught with hidden fees, bait and switch tactics, hidden clauses and an overall lack of full disclosure. Are they capable of making an honest loan? I am sure they can, but, I can't say why they don't do it more often. Do the research on your own. It is definitely worth the extra time.

Take some time and give us a ring and see if we can help you reach your goals.

As many of you have seen on TV or in print, our financial markets have had an upheaval lately. A lot of this has to do with the real estate market and its current cycle of self-correction. Over the last 5-6 years real estate prices have sky-rocketed, lenders have relaxed lending standards, and millions of homeowners refinanced into generally riskier mortgages in order to try to get "the lowest rate".

This trend is something that could not truly sustain itself and has subsequently started correcting itself. Consequently, in some areas appreciation has slowed, in some it has flattened out, and in the most inflated areas a process of depreciation has occurred. So, now here we are....and what do we do?

Well, first of all, let's dispel the myth that there is a "one-size-fits-all" solution for everyone. Every day I see commercials from Ditech, Greenlight, and a host of other lenders about how they can get you into the "perfect" loan program for you. Just a few years ago, they were pushing tons of 2-year ARMs (adjustable rate mortgages) because of the LOW starting interest rates. Now, they are promoting the "cure" to the ARM as their fixed rate loans.

These loans are being solicited at rates that are near impossible for the average person to get without either having the perfect situation or paying points at closing. For more information on the contributing factors that go into setting your interest rate and whether you fit the "perfect" situation, see this blog I wrote on the subject.

Adjustable Rate Mortgages

Some homeowners got into these low-rate ARMs to qualify for either a bigger house, or because their credit was too low to qualify for other products. A lot of those 2-year and 3-year ARMs are now recasting to the fully indexed adjustable rates. This leaves the homeowner with one of two choices. They can either pay the new payment which are increasing by as much as 60% or possibly refinance. The problem is that some of these homeowners' credit situation may not have improved, or with the new restrictions lenders are now imposing, find that they are in the same situation as when they first refinanced or purchased. The worst of all situations is that their ouse value has declined. So, now they are stuck with either a high interest payment, or a high closing cost refinance.

The worst part about this scenario is that higher LTVs (loan-to-value...see blog link) are now costing a lot more in interest rates and points. So, even if the homeowner has some equity and tries to refinance, lenders are putting severe restrictions on how much of your equity they will allow you access to. If you go too high you will find that the closing costs or rates could be astronomical.

Fixed Rate Mortgages

Other homeowners decided to try to get into more "traditional" fixed interest programs while the rates were lower. This was generally considered a good idea, but, that really depends. If you were lucky to get enough to get a 4.75% interest fixed-rate mortgage, you still could have problems. In today's market, if you need to access your equity (debt relief, college expenses, house repairs, tax issues, or divorce) yet don't want to get rid of that nice low interest rate first mortgage, you have a problem. Second mortgages have been seriously restricted now. In almost every case, it will COST you to have a second mortgage. You can expect to pay, on average, a minimum of two points for your second mortgage and that would still be for a rate somewhere around 12% or more depending on your situation. If you have a more complex or higher risk situation, this could trigger a combination of points as high as six and/or interest rates as high as 14% or more as laws allow.

Purchases

The BAD news is that right now with purchases, you want to be prepared to put down at least 5%. If you try to do 100% financing, you will trigger those severe restrictions and fees I mentioned earlier. The GOOD news is that the market is flooded with a bunch of houses to sell and not a lot of willing or capable buyers. So, most homeowners are more than willing to make concessions and contributions to the total purchase cost. By law, sellers are allowed to contribute a total of up to 6% of the sales price towards closing. That means that with a house costing $300,000, a maximum of $18,000 is allowed to be credited back to the buyer for closing costs and fees. This can seriously mitigate how much has to actually be brought to the table. For the crafty and creative negotiator, this may completely eliminate the need to bring money to the table. But, you will still have to have show to the bank that you actually HAVE the money to put down, if necessary.

There are Positives (The "Secrets")

The fact of the matter is that the mortgage system, as it is set up, was not designed for the average person to win at all. As a matter of fact, most people lose most when they think they have made the "right" conservative and "safe" decision.

When you are making the decision about what mortgage programs to go with, understand that no matter what choice you choose, it will take you until the 20^th year in your mortgage to actually pay as much of your payment to principal as you are paying in interest. It will take until year 22 before you have actually paid off HALF of what you originally owned. You will repay a total of 215% of what you borrowed. That means that on a $300,000 home, you will pay off the original $300,000 and an additional $315,000 by the time the loan is paid out. Most of this interest is really paid up front. So, if you are buying in today's market, when appreciation is slowed or even negative, if you sell before the trend changes or before maybe 8-9 years, you will have nothing to put down on your next home. So much for an "investment", eh?

Understand this:

In Europe, gas prices are almost 3-4 times higher than ours. Real estate is almost twice as expensive. And there has been a history of employment issues. Yet, with these factors, a good many homeowners are still able to pay for their homes and even find time and money to vacation and still gain some enjoyment in life. Why is that?

The difference is the method of amortization. There are different types of amortization available to homeowners. If these methods of amortization are used effectively, then, it actually is possible to pay off mortgages in 7-12 years. Or, at worst, greatly reduce your principal quickly and give you equity you can use according to your own financial needs and planning. This mitigates, and in some cases, renders moot interest rate movements, up or down. ***NOTE- These methods DO NOT include dumb things like paying twice a month or one extra payment per year. That is only reducing your mortgage time by MAYBE 4-5 years. Yet, you would pay someone $30-$70/month for someone to do something you can do yourself.*** There are strategies that can allow you not to have to "rate shop" any more because you are not dependent upon only the $200/month principal payment your $1900 mortgage payment buys you.

There are a few different methods of doing this. It can be done, in some cases, without refinancing. In other cases, it may require changing loan products. But, overall in most cases, it can be done without spending any more money a month than what you are currently spending on principal and interest. So, why not spell it out here? Each situation is different and requires a more specific look at each person's situation and goals.

The "Anti-Sales" Pitch

So, now this is the part where you are figuring I am going to hit you with my sales pitch on how I have miraculously discovered the answer and cure to all these financial woes....and it all can be yours for $2999.99 (or insert your own high dollar figure). Sorry to disappoint you. This information isn't for sale. Why? Because its FREE. This blog is NOT a solicitation for my new tell-all book or the latest get rich gimmick. (Though, I should think about that. The tell-all book...not the gimmick)

I am just tired of hearing inaccurate and misleading information filling the airwaves. I feel that everyone has the right and deserves the opportunity to take control of their life and finances. Every thing most lenders and banks will tell you is the RIGHT thing, actually, is not necessarily true. They count upon the fact that you have been taught over and over how to do things the "right" way. Buy a decent home and PRAY it appreciates.

The bottom line is this: There is no golden pill! Most things that can set you free can also enslave you and do MORE damage if you don't have the discipline to stay the course of your financial plan.

In the interest of fairness, I have included some general guidelines on picking your own mortgage professional. Feel free to take whatever knowledge and advice I may give and go to your mortgage professional of choice. But, as with any advice you hear, DO YOUR OWN RESEARCH! I can explain as much as possible, and I am very willing to help with any situation I can. But, each person needs to take any advice and research it to double check it to make sure you understand the ins and outs of any choices you may make.

Finding a good Mortgage Professional

There are a few key things you want to look for when searching out a real estate or mortgage professional. I am going to list these in no specific order.

•1.       Honesty. If you have a feeling like something is being kept from you or you don't understand...ask until you understand or move on to someone who can explain it better.

•2.       Options. Your mortgage professional should always present you with options. Even though some programs may seem to have obvious drawbacks, there may be hidden benefits. As well, some programs that seem to have obvious benefits have hidden consequences. Make sure you read and understand all disclosures to any loan program and then refer to Rule 1.

•3.       Reality vs. "Pie-in-the-Sky". If it seems too good to be true, sometimes it is, sometimes it isn't. Often times, it can be true, but, with restrictions, conditions, and/or rules. Again....refer to Rule 1.

•4.       Availability. A mortgage professional can sometimes get very busy, but, if you can't get in touch with him/her on the phone, try email. If you are still not getting the level of attention you think you deserve, you may need to find another professional.

•5.       Overall Financial Picture. Your mortgage professional should have an eye towards your overall financial picture and not just selling you a loan. Hopefully, they have some sort of relationship with reliable financial planners and can keep your overall financial health in mind. If your chosen mortgage professional doesn't provide a referral, you should definitely seek out an independent party to review your financial situation with you.

•6.       Ditech/Greenpoint. Whatever you do, do NOT work with either of these. Go to consumeraffairs.com and see the tons of complaints and note the nature of them. The complaints are fraught with hidden fees, bait and switch tactics, hidden clauses and an overall lack of full disclosure. Are they capable of making an honest loan? I am sure they can, but, I can't say why they don't do it more often. Do the research on your own. It is definitely worth the extra time.

Take some time and give us a ring and see if we can help you reach your goals.

After you have negotiated your best deal, you can still get up to an additional $10,000 Cash Reward when you work with one of our approved Real Estate agents. This is in addition to and ouside of any seller help or cash back you may receive from the sales transaction.

To find out what agents are on our list, give us a call right away!

After you have negotiated your best deal, you can still get up to an additional $10,000 Cash Reward when you work with one of our approved Real Estate agents. This is in addition to and ouside of any seller help or cash back you may receive from the sales transaction.

To find out what agents are on our list, give us a call right away!

If there is one thing that this recent real estate and mortgage slump has silently underscored, lower-income and credit challenged consumers are being dealt a bad hand.

It seems that fortunes are made on the backs of those who can least afford it. Why do you suppose that is?

I understand that there should be some sort of reward for creditworthiness and stability. But, if a homeowner or prospective is in a lower income bracket or doesn't have alot of assets, is it fair to saddle them with a considerably larger payment?

Sometimes I think this is a setup for failure. Think about this. The way credit is scored, if you have higher payments, then, yor debt to income ratio is higher. A person who has limited income or credit will have a higher payment on their car, credit cards, any credit lines, and these will add up to a higher mortgage when their DTI is factored in.

How can this be balanced? If we can't find some balance to our credit scoring system, we continue to alternately victimize and then "aid" our less fortunate borrowers.....and then victimize them again.

According to an article posted on RealEstateJournal.com, Fannie Mae and Freddie Mac are set to start buying subprime loans from major lenders.

Theoretically, this will allow subprime lenders to offer a better selection of loans to credit challenged borrowers. Instead of the 2 or 3 year ARMs, there should be a full compliment of loan selections.

This has been widely seen as a good manuever and a boost to the image of these two pseudo government agencies after their widely publicized financial scandals, recently.

The question is what effect will this have on the other segments of the mortgage market? The subprime fallout did not just affect subprime loans. It had a trickle up effect on Alt-A and even A-paper and convetional lending guidelines.

Now, I don't personally believe that this alone will cure the ails of the sagging real estate market. But, if you couple this with likelihood of declining prices, this could end up evening things out a bit.

Right now, the average home in alot of markets is really unaffordable for the average blue collar worker. If the housing prices rescind some so that its again affordable to buy and the mortgage industry gets I boost from this new move, then we may see a return to a more promising market.

I doubt, however, that we will have a return to another housing "boom". But, I think there is a possibility of an even-handed market with a reasonable rate of appreciation.

Stability.....hopefully.

How many of us have seen these commercials care of Ditech, Greenlight, and Quicken?

More and more people are being seduced by these commercials. Just this week I had two clients relay to me horror stories of dealing with these type of companies. So, I went out to look and see what other stories I could find.

I ran across the financial complaint section of Consumer Affairs. On this page I found eerily similar complaints to the ones relayed to me earlier. If you scroll down to the middle of the page where the complaints are listed, you will see several different company names.

Now, from time to time anyone in any business will have a complaint by a not-so-happy consumer. But, when you look at the complaints for these three particular lenders, as well as the now-defunct Ameriquest, you will see a pattern emerging. There is a history of bad customer service, upfront (non)refundable fees, costly errors, and bait-and-switch techniques. They promise alot, show little documentation upfront before asking for some "deposit", and shockingly won't refund your "refundable" deposit if you decide to cancel.

Take a moment and review some of the complaints. Hmmmm. They sound an awful lot like they are completely contrary to what their commercials preach. With these Internet loan mills, they have so many people comimg through because of their national advertising, they don't care if they lose 20 or 30% because of fallout. They are making tons and count on the fact that if they wait until the last minute, they will only lose those who can afford to walk away. A small minority. if you are locked into a contract and at the end of the alloted time, you are almost forced to take their adjusted deal.

I have honestly felt that there are enough customers and enough business out there for all of us legitimate mortgage professionals, so, it really has never bothered me if someone chooses another company over me. But, what honestly hurts my heart is when someone leaves because they saw the latest rendition of the Ditech commercial.

It doesn't hurt because of the loss of business, because 70% of the time, they come back. It hurts because I know that they more than likely will be financially injured in some way by some of these companies.

Well, what can we as professionals and consumers do about this?

I would implore other mortgage professionals, to be just that....professional. Just that alone will separate you from the likes of some of these lurking sharks. Return calls. Tell your clients all possibilities, good or bad, of their situation and the programs they qualify for. Make sure your clients have a complete understanding of the process and fees from the beginning and update them as things progress and possibly change. When you make a mistake, even a small one, inform them quickly. Give them the respect of knowing now as opposed to later. Allow them the opportunity to stay with it or back out. My experience says that the more honest you are, the more you will earn! That is true even when you have to be brutally honest. People may not like it, but, they will respect you for it and you will flourish.

Real estate professionals...I would ask that you get with your loan officers of choice and learn as much as you can about the lending process, what things are acceptable, and what things should raise suspicions. You don't have to be an expert in all aspects of the mortgage origination process, but, you should be competent enough to be a solid help to your client. This obviously provides added value to your services to your client. 

Consumers, it doesn't matter if you are sitting down with your lender, whether you found them on the Internet, or you only communicate to him/her via phone, fax, and email...You can be taken for a ride by anyone. Yes, even the guy at your local bank or lender.

Educate yourself about the mortgage process. Ask your lender questions and demand understandable answers. Make sure you have an understanding of what your fees and charges are for. Don't be scared by origination or broker fees (unless they are disproportionately high). You get paid to do a good job, let your mortgage person have the chance to earn his/her living. If there are "no fees" anywhere or super small fees, make sure it is what it says it is. No lender does anything for free. If you don't see fees, they are getting paid some how.

So, how do you think that is? It could be undisclosed introductory rates or undisclosed prepayment penalties. These two things by themselves actually can be beneficial, depending on your situation. But, when they are undisclosed or you were misled about them, they can be detrimental. The absolute rule is: If you don't understand it, don't sign it!

Tips. I will list a few hints here on some things to watch out for. This is not an all inclusive list and I hope that others will add more helpful hints.

I have talked with several mortgage companies here in Maryland and the consensus is that the most common upfront fee that is requested to be paid is for the appraisal. Usually, this is paid directly to the appraisal company. If you are paying appraisal fees up front to a lender, this should be a warning flag. A lot of time you are paying these appraisal fees directly to the lender because the lender has agreements with certain appraisal companies that clearly violates the intended objective opinion of an appraisal. You will notice a lot of appraisal discrepancies in the complaints. Ameriquest got into hot water for using internal inflated appraisals in order to facilitate loans that were for more than the value of the homes. Furthermore, if you pay for an appraisal, you have a right to a copy of it by law.

Some companies do charge up front for the credit report, but, this should only be about $12-$25. If you are purchasing a property and need various types of inspections, such as pest, lead, or a general housing inspection, this, again, should be paid directly to the inspecting company of YOUR choice. Just as in the case of the appraisal, if you pay for it, you should get a copy of it.

The moral of the story here is that we all need to be careful when we are being "seduced" by these vixen ads. A lot of time, the gimmicks they use to get your business ends up being a joke where the punch line is you.

What I am about to write here does not constitute tax or legal advice. But, you darn sure better get some if you find yourself in this situation.

My phone rang at 6:30 this morning. It was my father informing me about his latest tax "discovery".

My parents bought a house in Delaware back in 1991 and stayed there until about 2002. Then they bought a house in Maryland and moved, but, kept the other property and rented it out.

My parents grew tired of the rental situation and sold the house last year. When it came time to have their taxes done this year, they ended up owing $11,000 and couldn't figure out why.

Well, after much research he found his answer. Even though they had lived in the house for over 10 years and only rented it for about 4, when he sold his house, the IRS says that the difference between the $80,000 he bought the house for and the $170,000 he sold it for is now taxable income for this past year. WOW.

He had asked his real estate agent about what implications may be out there and he did not know. He talked to his tax advisers. They were very ambiguous and unsure. Even the Jackson Hewitt office who prepared his taxes couldn't tell him why he owed. All they knew was that the program they used told them that he owed this much.

I took him to Staples and we got Turbo Tax Home and Business Edition and ran his tax information through the program. The program gave us information that led him to the proper tax code.

What does this mean to us? As professionals who have influence in our client's financial decisions, we need to inform ourselves. At worst, we need to network and collaborate with other financially-related professionals so that we can be resource of information that can help them make the best decision available.

No decision is ever guaranteed to stand the test of time. But, you do want to have as much information and competent advice that is available, so that you make the best decision at the time.

**UPDATE**

I hate not knowing things. My father is the same way. So, we went out and found a good CPA and reviewed and studied.

Here is what we found:  As long as the house was your primary residence for 2 of the last 5 years, you can skip that nasty capital gains income tax acceleration.

My parents have just bought another house and were in the process of moving and were going to set the previous house up as a rental when all this popped up. Initially, it scared my Dad into thinking of just selling it and moving on. Now that we have properly educated ourselves, we have been able to get the corrected deductions on this transaction and a few other issues. His tax liability has been reduced by about $4000. Just as important, we now know how to proceed more successfully in the future. Living and learning is fun, isn't it?

I was asked to take my original comments on the blog Part II, When is an apology enough? by Aziz Abdur-Ra'oof and post them on their own. For those who read it, I will expand this a little. The expanded portions are in italics.

"Don Imus calls Rutgers basketball team.....blankety blankety blank......."

Sometimes I don't know what to say when issues like this come up. Most times I just want it to pass and simply ignore the ignorant people and carry on with life. But, honestly, its hard to do that.

The media constantly pounds it in your face. You have everyone associated with this incident almost interrogated constantly about there "feelings" or interpretations by the media types. One idiot says a few dumb comments and now everyone wants to know what brand of cereal these young women ate for every morning since they found out what Mr. Imus said.

In all honesty, when I first heard the headline teaser about a radio host in hot water for racial remarks, I thought it would be another ambiguous comment that the press was running with in the wrong direction again. (Sometimes our media is like "pro" wrestling. It's not going to sell without the trumped up drama...even if predictable) I heard and watched the actual tape of it later that day/evening. My jaw dropped to the floor.

Was I disgusted? Offended? Not even remotely. I KNOW there are racists around. I am not surprised by this. I just couldn't believe he said that so easily in public. THAT was the really interesting part. As a matter fact I chuckled to myself. I knew this would be around for a bit. And predictably...it was.

So what is really worse? Mr. Imus' comments or the trained and fashioned responses? First off, you don't see Jesse Jackson or Al Sharpton unless its a photo op or something that could be construed as "big" enough for them to make a political statement. I really think they mean well, but, since when are they "leaders of the community"? I didn't elect them to speak for me. And they are usually full of more hot air than actual useful solutions.

We are a nation of short memories and instant dramas. We always have to find a cause to take up so that we can appear to be on the side of right. As soon as the media stops giving an issue air time or priority, it fades from our memories until the next flare up. (For example, think about this: Where were the lessons learned from the Oklahoma City bombing applied when it came to 9/11? Or did we forget too soon?) What a dumb circular cycle. This is one of the reasons other countries and cultures find us to be so foolish sometimes.

We see this phenomena played out daily with our celebrities, politicians, and so-called reality show melodramas. There is always something dumb said or done and an apology is written (usually by an agent or lawyer....but, its heartfelt...wink, wink, nudge, nudge) and we all either villify the person or swallow it hook, line, and sinker. Either way it won't matter because in 3 months we won't remember the supposed lessons learned.

I say ENOUGH.

In answer to the original question posed by Aziz's blog, an apology of just words is never enough. The measure of a true apology will be found in the future actions of Mr. Imus. It is not upon me to judge him. I think he has a history of being an idiot. The only way that moniker will change is not from any apology, suspension, or meeting with the "victims". That's a personal issue he is going to have to change.

And honestly, I don't care what some idiot says. I don't think all this is really news. WAIT!! NEWS FLASH...There are racists, biggots, and sexist people in the world. Geez, let us stop the press for this new discovery! Get real. This is not original news.

As a matter of fact, let me shock you some more with "new" news....Mr. Imus has a constitutional right to be as ignorant, stupid, malicious, or racist as he may want to be. And, technically, there isn't a thing we could or should do about it. People say that he should not say this sort of thing. Crap. Say it. At least we all know now what's in your heart! I have more respect for the blatant bigot, because then I know where a person stands. Its the back door and sneaky people that I really worry about.

Now that he has been fired I hear some talk of his freedom of speech being violated. Mr. Imus was not jailed, ordered flogged, or in any other way deprived of his liberties because of his words. His employers, however, do have the right to decide, at their discretion, what their public image will be. For the most part I don't care if he stayed on the air, I wouldn't listen to him. And the true measure of what we will stand for as a society is what we will or won't support or patronize.

I don't think we are just a nation of wimps as was suggested before in the aforementioned blog. We are also a nation of sheep. The media tells us what should be offensive and to what degree of offended we should be. I even see the reporters almost spoon feed people on how they should feel or how they should react to something. Offense is as individual as each person's taste in vanilla or chocolate. We all have our own reactions to things that happen.

What is lost is the fact that we allow this type of language to permeate our popular culture. Our kids think its the cool and in thing to talk about certain types of people or women in a certain way. When its blatantly put in front of our face we want to cry foul, but, we don't take a stand in our daily lives or practices. We call it "edgy" or "urban". How many of us have jokingly told an off color joke to someone in confidence just because we thought it was funny? I think we all have. Not that we harbor any ill will towards any particular group, we feel its justified in the name of the instant moment of humor. All Mr. Imus did was hold a mirror up to ourselves as an American society and most of us did not like the view. I know I didn't.

What ever happened to that "Great American Melting Pot" they sang about on Saturday mornings when I grew up? Maybe it was only an ideal, but, it sure could give us something to aspire toward.

There is a huge double standard when it comes to relating to one another. Certain people are allowed to say certain things? What is that crap about? I can say it because I am allowed to slam my own race, but, you can't? Absolutely brilliant thinking.

Respect is the operative word. Respect is not refraining from making dumb comments. It is wrapping your mind around the concept that all people deserve the same amount of consideration you would like. It is actually taking a moment to just appreciate and perhaps embrace the differences in each other. Its about understanding that there ARE differences and, quite frankly....so what?!

AR is an ever expanding community of real estate and mortgage-related professionals. Even on here I have seen some "edgy" language and blatant character assasination attempts. But, why? To prove one person or their view is superior to another's? This seems to be the old bully mentality let me try to make myself bigger by tearing you down.

Disagreement itself is actually good. Differing opinions is great for debate and growth. Disrespect destroys families, communities, and eventually, societies.

I am a man of African descent, but, I fail to see where that entitles me to or eliminates me from anything. Its a rich heritage and I am proud of it as I would hope everyone is of their own respective heritages. But, I am an individual that is capable of forging my own paths.

Each of us has to examine ourselves. Where will we draw our own ethical and moral lines? Will we draw them only in public speech or will it actually trickle down to our private actions? 

We have to take responsibility for our thoughts and habits as well as our periodic actions our thoughts produce.

I am somewhat glad Mr. Imus opened his big mouth. It sure has driven home alot of lessons inadvertantly. But, the question is, have we actually paid attention to them all, or just the "sexy" and hot topic of the moment?

Thanks Don. But, will this lesson be truly taken to heart?

Al and Jesse, you can head home now. The camera lights are fading.

*Update*

Aziz has provided a link in the comments that I wanted to add to the original post. This article by Jason Whitlock, who sometimes appears on ESPN's "Sports Reporters". I think this article is telling.

It's title is simple...Imus isn't the real bad guy. Enjoy

As many of you have seen on TV or in print, our financial markets have had an upheaval lately. A lot of this has to do with the real estate market and its current cycle of self-correction. Over the last 5-6 years real estate prices have sky-rocketed, lenders have relaxed lending standards, and millions of homeowners refinanced into generally riskier mortgages in order to try to get "the lowest rate".

This trend is something that could not truly sustain itself and has subsequently started correcting itself. Consequently, in some areas appreciation has slowed, in some it has flattened out, and in the most inflated areas a process of depreciation has occurred. So, now here we are....and what do we do?

Well, first of all, let's dispel the myth that there is a "one-size-fits-all" solution for everyone. Every day I see commercials from Ditech, Greenlight, and a host of other lenders about how they can get you into the "perfect" loan program for you. Just a few years ago, they were pushing tons of 2-year ARMs (adjustable rate mortgages) because of the LOW starting interest rates. Now, they are promoting the "cure" to the ARM as their fixed rate loans.

These loans are being solicited at rates that are near impossible for the average person to get without either having the perfect situation or paying points at closing. For more information on the contributing factors that go into setting your interest rate and whether you fit the "perfect" situation, see this blog I wrote on the subject.

Adjustable Rate Mortgages

Some homeowners got into these low-rate ARMs to qualify for either a bigger house, or because their credit was too low to qualify for other products. A lot of those 2-year and 3-year ARMs are now recasting to the fully indexed adjustable rates. This leaves the homeowner with one of two choices. They can either pay the new payment which are increasing by as much as 60% or possibly refinance. The problem is that some of these homeowners' credit situation may not have improved, or with the new restrictions lenders are now imposing, find that they are in the same situation as when they first refinanced. So, now they are stuck with either a high interest payment, or a high closing cost refinance.

The worst part about this scenario is that higher LTVs (loan-to-value...see blog link) are now costing a lot more in interest rates and points. So, even if the homeowner has some equity and tries to refinance, lenders are putting severe restrictions on how much of your equity they will allow you access to. If you go too high you will find that the closing costs could be astronomical.

Fixed Rate Mortgages

Other homeowners decided to try to get into more "traditional" fixed interest programs while the rates were lower. This was generally considered a good idea, but, that really depends. If you were lucky to get enough to get a 4.75% interest fixed-rate mortgage, you still could have problems. In today's market, if you need to access your equity (debt relief, college expenses, house repairs, tax issues, or divorce) yet don't want to get rid of that nice low interest rate first mortgage, you have a problem. Second mortgages have been seriously restricted now. In almost every case, it will COST you to have a second mortgage. You can expect to pay, on average, a minimum of two points for your second mortgage and that would still be for a rate somewhere around 12% or more depending on your situation. If you have a more complex or higher risk situation, this could trigger a combination of points as high as six and/or interest rates as high as 14% or more as laws allow.

Purchases

The BAD news is that right now with purchases, you want to be prepared to put down at least 5%. If you try to do 100% financing, you will trigger those severe restrictions and fees I mentioned earlier. The GOOD news is that the market is flooded with a bunch of houses to sell and not a lot of willing or capable buyers. So, most homeowners are more than willing to make concessions and contributions to the total purchase cost. By law, sellers are allowed to contribute a total of 6% of the sales price towards closing. That means that with a house costing $300,000, a maximum of $18,000 is allowed to be credited back to the buyer for closing costs and fees. This can seriously mitigate how much has to actually be brought to the table. For the crafty and creative negotiator, this may completely eliminate the need to bring money to the table. But, you will still have to have show to the bank that you actually HAVE the money to put down, if necessary.

There are Positives (The "Secrets")

The fact of the matter is that the mortgage system, as it is set up, was not designed for the average person to win at all. As a matter of fact, most people lose most when they think they have made the "right" conservative and "safe" decision.

When you are making the decision about what mortgage programs to go with, understand that no matter what choice you choose, it will take you until the 20^th year in your mortgage to actually pay as much of your payment to principal as you are paying in interest. It will take until year 22 before you have actually paid off HALF of what you originally owned. You will repay a total of 215% of what you borrowed. That means that on a $300,000 home, you will pay off the original $300,000 and an additional $315,000 by the time the loan is paid out. Most of this interest is really paid up front. So, if you are buying in today's market, when appreciation is slowed or even negative, if you sell before the trend changes or before maybe 8-9 years, you will have nothing to put down on your next home. So much for an "investment", eh? (see attached spreadsheet)

Understand this:

In Europe, gas prices are almost 3-4 times higher than ours. Real estate is almost twice as expensive. And there has been a history of employment issues. Yet, with these factors, a good many homeowners are still able to pay for their homes and even find time and money to vacation and still gain some enjoyment in life. Why is that?

The difference is the method of amortization. There are different types of amortization available to homeowners. If these methods of amortization are used effectively, then, it actually is possible to pay off mortgages in 7-12 years. Or, at worst, greatly reduce your principal quickly and give you equity you can use according to your own financial needs and planning. This mitigates, and in some cases, renders moot interest rate movements, up or down. ***NOTE- These methods DO NOT include dumb things like paying twice a month or one extra payment per year. That is only reducing your mortgage time by MAYBE 4-5 years. Yet, you would pay someone $30-$70/month for someone to do something you can do yourself.*** There are strategies that can allow you not to have to "rate shop" any more because you are not dependent upon only the $200/month principal payment your $1900 mortgage payment buys you.

There are a few different methods of doing this. It can be done, in some cases, without refinancing. In other cases, it may require changing loan products. But, overall in most cases, it can be done without spending any more money a month than what you are currently spending on principal and interest. So, why not spell it out here? Each situation is different and requires a more specific look at each person's situation and goals.

The "Anti-Sales" Pitch

So, now this is the part where you are figuring I am going to hit you with my sales pitch on how I have miraculously discovered the answer and cure to all these financial woes....and it all can be yours for $2999.99 (or insert your own high dollar figure). Sorry to disappoint you. This information isn't for sale. Why? Because its FREE. This blog is NOT a solicitation for my new tell-all book or the latest get rich gimmick. (Though, I should think about that. The tell-all book...not the gimmick)

I am just tired of hearing inaccurate and misleading crap filling the airwaves. I feel that everyone has the right and deserves the opportunity to take control of their life and finances. Every thing most lenders and banks will tell you is the RIGHT thing, actually, is not necessarily true. They count upon the fact that you have been taught over and over how to do things the "right" way. Buy a decent home and PRAY it appreciates.

The bottom line is this: There is no golden pill! Most things that can set you free can also enslave you and do MORE damage if you don't have the discipline to stay the course of your financial plan.

In the interest of fairness, I have included some general guidelines on picking your own mortgage professional. Feel free to take whatever knowledge and advice I may give and go to your mortgage professional of choice. But, as with any advice you hear, DO YOUR OWN RESEARCH! I can explain as much as possible, and I am very willing to help with any situation I can. But, each person needs to take any advice and research it to double check it to make sure you understand the ins and outs of any choice you may make.

As well, I would invite anyone else with helpful information to report it and it will be shared.

Finding a good Mortgage Professional

Now, I am going to attempt to write this section with as much integrity and impartiality as possible! J

There are a few key things you want to look for when searching out a mortgage professional. I am going to list these in no specific order.

•1.       Honesty. If you have a feeling like something is being kept from you or you don't understand...ask until you understand or move on to someone who can explain it better.

•2.       Options. Your mortgage professional should always present you with options. Even though some programs may seem to have obvious drawbacks, there may be hidden benefits. As well, some programs that seem to have obvious benefits have hidden consequences. Make sure you read and understand all disclosures to any loan program and then refer to Rule 1.

•3.       Reality vs. "Pie-in-the-Sky". If it seems too good to be true, sometimes it is, sometimes it isn't. Often times, it can be true, but, with restrictions, conditions, and/or rules. Again....refer to Rule 1.

•4.       Availability. A mortgage professional can sometimes get very busy, but, if you can't get in touch with him/her on the phone, try email. If you are still not getting the level of attention you think you deserve, you may need to find another professional.

•5.       Overall Financial Picture. Your mortgage professional should have an eye towards your overall financial picture and not just selling you a loan. Hopefully, they have some sort of relationship with reliable financial planners and can keep your overall financial health in mind. If your chosen mortgage professional doesn't provide a referral, you should definitely seek out an independent party to review your financial situation with you.

•6.       Ditech/Greenpoint. Whatever you do, do NOT work with either of these. Go to consumeraffairs.com and see the tons of complaints and note the nature of them. The complaints are fraught with hidden fees, bait and switch tactics, hidden clauses and an overall lack of full disclosure. Are they capable of making an honest loan? I am sure they can, but, I can't say why they don't do it more often. Do the research on your own. It is definitely worth the extra time.

This is an article that was published on MSN that goes into a little detail about some of the hardships going on in the present market conditions.

Homeowners stuck as lenders cinch standards.