Mortgage by Randy

monthly update to our clients, colleagues, family & friends 

By: Randy Mitchelson, December 2008

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In This Issue We Touch On:

My Early Stocking Stuffer

Refi Boom?

Is The Bank Closing Your Credit Card Account? 

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I received an early gift this holiday when I earned the Lending Integrity Seal of Approval from the National Association of Mortgage Brokers. The Lending Integrity Seal of Approval helps homebuyers find hardworking, ethical mortgage professionals. To earn the Lending Integrity Seal of Approval, professionals undergo a rigorous process-complete continuing education, pass a criminal background check, and pledge to adhere to a strict code of ethics, best business practices and an ethics grievance review process.  This means that I have met the Association's high standards for ethics, integrity, professionalism and knowledge in the mortgage industry. I couldn't buy it or receive it just by joining the Association; I had to earn it, and my pledge to you is that I will keep earning it every day.

Smart consumers will look for the Lending Integrity Seal of Approval when seeking a mortgage professional.  The seal represents an ongoing commitment to the mortgage industry and practicing with the highest level of ethics and professionalism.  Hundreds of thousands of mortgage brokers across the country have the opportunity to earn this accolade, but less than 2,000 (less than 1%) have. To find a broker in your area, enter your zip code in the search box at this link:

                      Search For Lending Integrity Mortgage Brokers 

 The current newsletter and all prior newsletters are archived at our blog space mortgagebyrandy.spaces.live.com.  Bookmark it and share with your friends and family.  You can enter your own comments and feedback as well.  Time for the news...

Mortgage Market: Interest Rates Reach 50 Year Lows - 4 Things To Check If You Want To Refi

Mortgage rates below 5%?  It is true, but as lenders continue tightening the leash on underwriting rules, it remains difficult for some homeowners to qualify.    If you want to investigate whether a refinance is right for you, consider the following:

1) Employment: if you are self-employed and cannot fully document your true income like most business owners, be prepared for extreme scrutinization of your tax and income records.

2) Equity: If the value of your home has dropped significantly since you did your current mortgage, there may not be enough cushion for you to qualify.

3) Costs: Mortgages are not free and require either out of pocket expenses or an increase to your mortgage balance if you roll in the costs.

4) Rate: The general rule of thumb is that you need to lock a rate at least 75 basis points lower than your current rate to make the refinance worthwhile.  However there are other factors that a good mortgage professional will factor in like the number of years you plan on living in the property.

A good mortgage professional will always conduct a break even analysis for you to help justify whether a refinance is appropriate.  If your mortgage person does not do this, run, don't walk.  Then pick up the phone and call me and even if you are outside of Florida, I am happy to help you perform a proper analysis....free of charge!

If you are among those considering purchasing or refinancing, this recent rush of mortgage activity makes it very important to start preparing now. Put your paperwork (recent pay stubs, bank statements, last tax return, insurance policy, etc) in order and search for a licensed mortgage broker (preferably one that has earned the Lending Integrity Seal of Approval) -- you might even complete a mortgage application as best you can ahead of time.  The increased activity will cause backups in the loan-approval system, and it will take time for lenders to hire experienced help (if even temporarily) to move things forward more quickly.

Personal Credit: Avoid Wasting Precious Time & Money Disputing Zero Balance Collections

Paying off a collection account or judgment will not eliminate it from your credit file. Paid or satisfied negative credit items will show a zero balance. They will appear in your credit profile for seven years. A late or collection account will still be reflected in your credit file even if it has been paid off recently. The repository must accurately report how each credit transaction was paid.

Economy & Financial Insights: Inflation Fears Dissipating And Demand For US Debt Increases

Why such a drop in mortgage rates when just last month we were doubtful of near term rate drops?  There are two reasons.  First, on November 21, the Federal Reserve announced yet another new program to buy good credit quality mortgages.  This influx of $600 billion had an immediate effect on mortgage rates.  Then, last week the Fed trimmed the Federal Funds rate to 0.25% (the rate the banks pay to borrow from the Fed) prompting banks to cut their prime rate accordingly.  Although this move has a minimal financial impact to consumers, it is a positive psychological item which is sparking national news and banter for the water cooler. 

Almost the entire world is dealing with an economic slowdown.  There are few safe havens left especially now that oil prices have dropped and the dollar has strengthened compared to major foreign currencies.  As a result, there has been a rally in Treasuries since there is a constant demand for a safe-haven parking place for investor money.  This demand has been exacerbated by fresh news that another $50 billion of invested cash has vanished in what is alleged to be a massive Ponzi scheme masterminded by Mr. Madoff.  Inflation is less of a concern so the inflation risk premium built into long term government bonds is decreasing which is helping long term mortgage rates decline (note: short term mortgage rates are now higher than long term).

Question of the Month: Will My Credit Be Hurt When My Bank Cancels My Credit Card Account?

As banks continue housecleaning their balance sheets and exposure to risk, some companies are cancelling credit card accounts which have not been used by the customer.  You know those back-up cards you have stashed away but don't use?  Banks are realizing that if customers suddenly start using a card after not using it for a long time that it might indicate a worsening financial condition for that client or even an act of desperation.

Customers are receiving account closure notifications in the mail.  If this happens to you, look at both the size of the credit limit you have on that card as well as the length of time you have had the account.  If the credit limit is $2000 or more and the account is two years old or more, then you want to consider stopping the account closure.  Credit scores are influenced by accounts that are seasoned (i.e., greater than two years old).  Closing these accounts will NOT negatively impact your credit score.  However, the closure will PREVENT you from increasing your score further.

Remember, credit scores are driven by your behavior.  When you use your credit and then pay the bill on time, this behavior is recorded.  Repeating this behavior month after month establishes a pattern which drives up the credit score.  Cards that just sit dormant in your wallet neither help nor hurt you.  Make a point to use each of your back-up cards just once per month (dollar amount is irrelevant), even to charge just a new DVD or one tank of gas.  If you have them, use them.  Otherwise, close the account and reduce your exposure to identity theft and fraud.

Giving Back: Supporting Our Communities - Year End Tax Tips Regarding Your Donations

Although many of us are distracted by the holidays, this time of year is important to tie up loose ends before December 31 and begin preparing for tax season.  For example, if you have donated used clothing and household items to a qualified charity during the year or plan to do so before December 31, be sure to follow these simple steps to remain compliant with IRA regulations:

1) Document an itemized listing of each article of clothing or other item being donated.

2) Determine either the thrift store or garage sale value of each item and document that figure on your list.

3) When delivering the donations to the charity ask for a receipt and ensure it is signed and dated by a representative of the charity.

4) Attach your itemized listing to the receipt and keep it with your tax records for at least seven years.

Need volunteers? Do you have a fundraising event upcoming?   Do you have a personal web site where you are raising donations for your cause?  Submit the information to randy@mortgagebyrandy.com by the 5^th day of each month and we will do our best to include your information in the next issue. 

Best Wishes For A Healthy and Prosperous 2009!

Randy

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Mortgage by Randy newsletter, Copyright 2008 Randy Mitchelson.  All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson.  Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.

________________________________________________________________________________________________ You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with 15 years experience in financial services.  Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.

As a member of National Association of Mortgage Brokers, Randy educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy, accessible at mortgagebyrandy.spaces.live.com. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.

He is owner of Estero, Florida based National Web Leads, LLC (www.nationalwebleads.com), an Internet lead generation service matching consumer finance lenders with customers.   Through its network of partners, National Web Leads, LLC delivers innovative Web 2.0 software solutions such as lead generation platforms and real time desktop widget and mobile reporting tools for internet marketers.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY.  He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership (www.swfrtp.org) and Strategic Planning Director for The Michelle's Angels Foundation (www.michellesangels.com).  He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.