Real Estate Financing...

Through some research and conversations with our credit reporting account executives, I've culminated an overview of individuals rights when dealing with situations where their credit starts to take a turn for the worse. 

Many people fall prey to life circumstance that puts them in a chaotic & sometimes unmanagable financial position.  This can be caused by many factors not limited to a victim of job loss, medical emergency or other cause of income loss, identiy theft, and this can put you in a similiar boat shared by millions of individuals facing a pile of debts that they cannot cover. Miss one or two payments and you can expect to get a call from a debt collector.

Calls from debt collectors trying to find you at your place of employment can be humiliating and extremely distracting. You may already be screening your calls, your chest tightening as you realize it's them - again.  Never a good feeling.

While not every debt collector is unsympathetic and berating they likely do have to practice a ceartain empathy themselves for many of the sad stories given to them as explanations for past due debts. They are also frequently rewarded for their efforts in collecting the debt with a commission based on the amount obtained. It is easy to see why it is not uncommon for individuals who are already in a desperate state to fear encounters with the more aggressive collectors who are determined to get their fees.

"What Are They Allowed to Do?"

Debt collectors are allowed to contact you by in person, by mail, by telegram, by fax and by phone; at home or at work - unless they know your employer would disapprove. They however, may also not contact you before 8 a.m. or after 9 p.m. unless you have agreed to the contact at that time.

They must contact your attorney unless you don't have one. They may then contact other people to find out your telephone number, work place or address, but in most cases they are not allowed to inform them that you owe money or contact them more than once.

"What If I Don't Want to be Contacted?"

Whether or not you actually owe a debt you can write a letter to the collector telling them to stop contact and make sure it is certified. They may then contact you only once to inform you that they will make no further contact or to tell you what action may be taken against you.

Stopping contact will not clear the debt. If you do not believe you owe the debt make that clear in your letter.

"What Can I Do If I Am Harassed?"

The FTC (Federal Trade Commission) has a Fair Debt Collection policy to protect consumers. Knowing your rights will put off even the most determined collector since they already know the law and are pressing you on the assumption that you don't.

Debt collectors are NOT allowed to harass, abuse or oppress you or other individuals on your behalf - that includes obscene language, threats of violence or repeated calling in an effort to annoy.

They are not allowed to misrepresent themselves as government agents, attorneys or representing a credit bureau if they are not. They cannot imply they are sending legal documents if they aren't or that you've committed a crime, if you haven't.

They cannot imply legal action, including seizing property or garnishing wages unless they are legally allowed and intend to do so.

You can find out more about your rights from the FTC. If you want to report an agent you can do so by contacting the FTC or your Attorney General. If they are breaking the law you have the right to sue.

 By in large, it is best to stay in contact with creditors, ideally before the whirlwind of financial disarray arrives.   Usually individuals realize as bills come due that they will be unable to pay.  It is best in these cases to contact all the creditors and explain the situation and work out an alternative option.  Most creditors, especially if you've had a long history of on-time payments with them, will be willing to work something out with you.  This step could save you a lot of angst and perhaps a lot of negative credit reporting as well.

Should you offer commercial loans even if you have a heavy & steady influx of residential loans in your pipeline?

  More and more people are using commercial real estate as a means of investment over stocks and bonds.  That means for you an even wider client base to originate loans.  While some may purchase a duplex to manage, the trend is fast moving towards income-generating properties like apartment complexes and mobile home parks, for example. We are seeing a steady growth of smaller investors: recent college graduates, middle-class couples, single women, even baby boomers are moving money into investment property as a means to generate residual income.  Small commercial mortgages are the most common loans done by mortgage brokers.  Especially those loans that are bank fall outs because either the property doesn't debt ratio, the credit or LTV doesn't fit into the bank parameters, unique properties, or borrowers who may be self-employed and not be able to prover their income.

  Offering commercial services not only helps you capitalize on your current client base, it opens you up to another segment of the property-purchasing market, which in turn can take your brokerage to higher levels.  The income can be much greater on these and with several of these wholesale commercial lenders, the approach & process to close these loans is as simple if not simpler than many residential transactions.

Why are you applying for this position?

What is it about you that makes you get totally involved in your work to a point where you lose track of time?

Why would anyone do more than is necessary? When have you done more?

What contributions have you made to other companies that you worked for?

How did you prepare for this interview today?

What is your most significant accomplishment?

Describe a situation where you had to handle an irate customer and what you did about the situation?

What are two strengths you bring to this position? Why are they important?

How do you manage your time? What tools do you use?

What would make you successful in a job?

Why would you hire you?

How would you handle a customer who's complaint is price & that they can get or have been offered a better price for the same product elsewhere?

Why should we hire you?

What two or three things are most important to you in a job?

How does this job fit in your professional career?

What motivates you?

How would your friends describe you?

What are the most important rewards you expect in a career? 

What do you do differently than other people in the same position?

What do you see yourself doing in 5 years?

Any other ideas or questions would be very much appreciated.

While my expertise in the real estate business is in the financing end of residential & commercial propterties, I thought I would point out a few helpful hints in regards to Homeowner's Insurance.

-   Loyalty does serve you justice.  Staying with the same insurer for 3 to 5 years can earn a discount & you will get an even bigger discount if no claims are made during that time -

-  Perhaps the biggest discount is insuring your car and home with the same company.  Also, if your credit has been an issue in getting turned down for other policies, often times they won't even run a credit check if you've been with the same car insurer for awhile. -

-  Alarms, Smoke Detectors, Fire Extinguishers, & Dead Bolts are a big plus in your favor.   Outfitting your home with these will in tune afford you the ability to pay less for insurance on your home.  The more sophisticated the system, the bigger the discount...generally 15%. -

   Of note, no matter what you are shopping for (mortgages, insurance, car loans, groceries), remember that a good shopper is a smart shopper.  Educate yourself and make sure those professionals you are dealing with are continuing your education through their honesty & expertise.  Shopping isn't about waiting to hear what you want to hear, it's about education and knowing what is out there that you can actually get.

Here are just a few reasons clients benefit from your expertise as a Realtor;    

1)  Realtors Save You Time and Money -  Extensive knowledge of the real estate market and excellent negotiation skills can save you time and money.  If you're buying, a Realtor can help you get the right house at the best price.  If you're selling, they can often reduce the time on the market and get you a higher selling price as compared to selling by owner.  

2)   Realtors Lower Your Risk - Working with a Realtor can assure that you're buying a home that is safe and priced fairly.  When a Realtor lists your home you can be sure your asking price has been well researched in advance.  Let's face it: with so much that can go wrong, a Realtor increases the chances of smooth "sale-ing" ahead!  

3)  Realtors are Real Estate Specialists - There are a number of licensed real estate professionals, but only members of the National Association of Realtors (NAR) can call themselves Realtors.  This association provides a strict Code of Ethics and educational programs to standardize their services.  

4)  Realtors Do What You Can't Do Alone! - Because Realtors network with one another, you have the opportunity to find out about properties that will soon be on the market-even prior to their listings!  You get a heads up on current inventory before it ever hits the system!  Talk about an advantage!!  

5)  Realtors Understand Complex Real Estate Transactions - Realtors know what is required to efficiently complete and accurately interpret complex real estate forms.  Working with a Realtor protects you from potential legal exposures and long, drawn out time delays.  After all, they are highly trained, skilled experts.        You may think you can save thousands of dollars selling by owner.  However, compromising your asking or purchase price, dealing with potential lawsuits or unplanned delays can end up costing you a lot more than a Realtor's well-deserved commission!!

Pay Off Your Mortgage Faster Without Refinancing!

Before I delve into a bit of a rant, let's be honest.  You can do this by yourself.  Simply make one extra payment a year and do it consistently or take your monthly payment, divide that 12 and pay that much extra on your mortgage consistently every month.  And if you do this, presto, you will eat into your principal balance faster and pay off your mortgage in less time which is one of the more financially savvy things you can do.  So, why pay to have that service implemented when you can do it yourself?  It's about discipline folks.  Quite frankly, discipline tends not to be a forte of the majority of us.  That being said:

-Did you know that it takes almost 24 years just to pay off 50% of your home?  In fact, most homeowners arent aware that it takes close to ten years to pay off the 7% real estate commission to sell their home.  Conversely, it often takes almost 10 years to pay off closing costs alone.  Add to this the consideration that the average family moves every 7.6 years, most Americans spend over half their lifetime paying just the closing costs and real estate commission.  If it werent for inflation in this country, most homeowners would go bankrupt.  Inflation is the primary factor in pushing real estate prices.  NOT smart homeowners.

There are several ways to avoid this common mistake, especially if you have a strong interest rate in comparison to the market today.  It is called a bi-weekly mortgage.  Very simply by paying ½ your monthly payment every two weeks, you can pay off your 30 year loan in a little over 21 years.  Since there are 52 weeks in a year, you make 26 payments, or 13 months worth, every year.  This extra payment per year (that you didnt know about) will save you about $62,000 if you have a $100,000 loan at 8.5%. 

Weve have merged with an entity to set up this Mortgage Reduction Plan at a special low price designed for former borrowers especially during the holidays.  I should note that if you make one extra payment per year, you can get away with this doing this all on your own if you are disciplined and consistent in doing such.  Bear in mind though that one extra payment per year usually comes during the holidays and most dont follow through with that or simply cant afford to do so.  Consider the following questions:

Refinancing???
Current mood: determined

refinancing that makes sense

When thinking about refinancing your home a few things must be addressed. The number one compensating factor is net benefit.  What is best for you and your financial future?  Refinancing is not free. There are many fees that are involved including what the loan officer charges. So how do you weigh net benefit?

Always start with your current and existing loan scenario. From there evaluate your situation against timeframe. How long do you plan to be in the home? How long do you plan to own the home?

This will help you determine what type of loan products to consider (ARM or FIX). If you goals and outlook for the property are short-term like a possible sell within the next five years - then a 30 yr fix probably won't make much sense for you. The longer the fixed term in your loan the more probable it will be that you'll have a higher interest rate and subsequently a higher monthly mortgage payment.

Always keep in mind as to what you're setting out to accomplish. If you've had credit issues and lower fico scores as a result - acknowledge that you may not have all the options the market has to offer and it make take you more than one refinance to straighten out your current situation. If going into an ARM (adjustable rate mortgage) is your best option for payment and these standard loan programs come with 2 or 3 year prepayment penalties - have your loan officer calculate for the money what it would possibly take to buyout or soften the prepay.

A few things I always tell my clients:

-   Don't be afraid to interview the Mortgage Professional who will be doing the same to you during the application process.  References, Experience, Personal & Attentive Service go hand in hand with a strong relationship that will benefit you most prized asset, your mortgage.  Make sure the Mortgage Professional is a great listener & shares a genuine interest in helping obtain what you would like to accomplish in the mortgage process.  Also of note, it should be addressed that the rate,rate,rate phenomenon isn't the only thing to consider.  Is the Mortgage Professional you are dealing with offering up scenarios to pay off your mortgage faster, perhaps a 25 or 20 or 15 or 10 year mortgage, depending upon affordablity?   There are a lot of variables involved in any mortgage transaction, make sure the person you are dealing with has the knowledge to power you through the transaction to accomplish your goals.

• Don't refinance unless you can recoup the cost of savings within 18 months. If the refinance costs you $4K - $6K and you're saving only a $100/month - understand that it will take you a minimum of 40 months to recoup your costs at $4K. Unless you were paying off debt to increase your credit scores and freeing up money by eliminating out going bills - you would need to seriously consider what you'd be accomplishing by proceeding with this loan.
• Ask questions and be mindful of unecessary prepayment penalties. If the prospective loan scenario that a loan officer pitches you is adjusting monthly - don't accept a prepayment penalty longer than 1 year. If the market turns and rates go up - A prepayment penalty longer than 1 year at this point could further hurt you by having to come out of pocket with additional money to get yourself back to stable ground if your payments are going to be unstable and potentially much higher than you can comfortably afford.
• Make sure doing a loan is in your best interest and not your lenders.  Make sure whoever you are working with is working FOR you!

The 'No Spin' On Mortgage Brokers

"What do mortgage brokers do?"

A mortgage broker is an independent contractor who offers the loan products of multiple lenders/investors who are called "wholesale lenders." A mortgage broker consults you on the loans available from different wholesalers for your particular situation and needs, takes your application and privy information, and usually processes the loan which involves putting together the complete file of information about your transaction including the credit report, appraisal, verification of your employment and assets, and so on. Upon a fully completed file, sometimes sooner, the lender "underwrites" the loan which means inherently deciding whether or not you are an acceptable risk. And it is the lender who shows up at the closing table with the money, not the mortgage broker.  I'm just the middle man, to an extent.

The lenders that mortgage brokers deal with quote a "wholesale" price to the broker, leaving it to the broker to derive the "retail" price offered the consumer by adding a markup. For example, the wholesale price on a particular program might be 7% and 0 points, to which the broker adds a markup of 1 point, resulting in an offer to the customer of 7% and 1 point. (Each point is equal to one percent of the loan amount). But if the broker adds a 2 point markup, the customer would pay 7% and 2 points.  Mortgage Brokers make their money either up front in the form of an 'origination fee' or 'broker fee' that should be disclosed on the Good Faith Estimate provided to you upon your application and/or 'Yield Spread Premium' which is paid directly to the broker by the lender when the mortgage broker charges a higher rate than lender can give the borrower. 

"How do mortgage brokers set their markups?"

The general rule is that they set them in each case as high as they can get away with. An unsophisticated customer who shows no inclination to shop the competition will be charged more than a sophisticated customer who makes clear an intention to shop. Indeed, mortgage brokers often rationalize the high markups they charge some customers on the grounds that these are needed to offset the excessively small markups they are forced to accept on other deals. Some borrowers do turn the tables on mortgage brokers by threatening to bail out of a deal after most of the work has been completed unless the mortgage broker agrees to cut the price.  Personally, on conforming loans (excellent credit, fully documented income & assets, lower loan to values, etc) I charge a total of 1% to 2% of the loan amount between up front fees and the yield spread premium paid by the lender.  On non-conforming loans (poor credit, hard to document income, atypical property types, etc) I charge a total of 3% to 4%.  I price to risk.  And my time being worth money, the harder to do loans I typically charge more for that time.

Probably not . In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker.  65% of the mortgages done in America are done by mortgage brokers and there are reasons for that above and beyond the barrage of solitications to garner your business. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders -- in a typical case, 25 to 30, sometimes more -- they can shop for the best terms available on any given day for your particular situation. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, bankruptcy buyouts, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on.

Bear in mind, though, that the income of mortgage brokers consists of the spread between the price they are quoted by the lender, and the price they can get the customer to pay. While they are motivated to get the lowest possible price from wholesale lenders, they are also motivated to get the highest possible price from you.  Capitalism baby!  Mortgage Brokers are commission based individuals and rarely get paid unless your loan closes.  So, if customer service and follow up are sub-par you may want to re-think who you are working with.  And yes Mortgage Brokers are sales men & women.  Everybody is selling something.  Like other retail merchants, mortgage brokers prefer not to reveal their markups, which can vary all over the lot. If you are a sheep who swallows everything the mortgage broker or lender tells you without question and without checking price quotes with other mortgage brokers and lenders, you are likely to suffer a sheep's fate -- you will be financially sheared.

On a personal note, I once dated a corporate attorney who worked for...well...a corporation.   She asked me what I did for a living and I promptly responded, "I am a mortgage broker."  To which she replied, "You guys are schysters."  To which I retorted, "Laura, you are a freaking attorney."  That didn't work out too well and I don't think we will be exchanging Christmas Cards but it does bring up an interesting point.  There are 'schysters' in every industry.  Those whose actions & incompetence project an overall negative reflection on their entire industry.  Trust should never be given by the consumer to the mortgage broker, it should be earned.  The reality of my experience is you can make money and help people at the same time which is a great way to live life in Capitalistic America.  And when you are shopping for a mortgage, always remember nobody works for free and nor should they.