Wednesday, June 25, 2008

Housing Aid Bill Clears Key Senate hurdle

I found this article on the Drudge report titled: "$300b Mortgage rescue" and the article was from My Way. Sorry, the article does not provide the authors name or I would provide it here. You need to read it.

Here is a quote from the article:“The Senate voted 83-9 to speed up work on the $300 billion mortgage aid plan, putting it on track for a final vote as early as the end of the day”.

Chris Dodd, D-Conn., and friend of Angelo’s (the Banking committee chairman), calls it a gift on independence…. What a play on words! Independence means Sufficient income for comfortable self-support; a competence.

This is nothing more than election year idiocy to buy votes. This bill provides $300 billion in new, cheaper mortgages for distressed homeowners that don’t qualify for government insured, fixed rate loans.

They were financially risky when they obtained their mortgage and in a lot of cases have no investment in their home. Credit guidelines were relaxed and loan programs were created to make home ownership more affordable. Home ownership has been at an all time high and more than 95% of homeowners pay their mortgage on time.

Mortgage rates have been low for a long time. Low rates naturally brought high appreciation in real estate and higher home ownership. Wall Street had a growing appetite for mortgage-backed securities. Lenient programs were created to feed that appetite.

Your comments are welcome!


Monday, June 23, 2008

Rates and Points of FHA Mortgages Versus Conventional Mortgages

What are the rules for FHA mortgages with respect to charging and setting interest rates and points on first lien owner occupied mortgages?

How does the FHA regulations prevent the FHA mortgage from having super high APRs like you find with subprime conventional mortgages?

While 30% of conventional mortgages showed high interest rate spreads, less than 5% of FHA mortgages had reportable interest rate spreads in the 2006 HMDA data.

There are a number of reasons for higher interest rates spreads on conventional loans versus FHA.

As for FHA, the loan origination is limited to 1%, but that is not the sole reason. FHA does owner occupied full doc loans only and does not have a rate adjustment for high loan to values or cashout.

Conventional on the other hand has a lot of different programs that have point cost. Examples are:

Cash out can cost as much as 2.5 Points
Loan to values exceeding 95% Cost 1.75 Points
Interest only Options cost as much as 2. Points
Subordinate Financing can cost as much as 1.5%
Stated Income cost additional Points

Those are just some of the reasons for the APR range on Conventional speaking from a Fannie Mae or Freddie Mac standpoint.

Subprime are conventional loans.

Hope this helps,


Wednesday, June 18, 2008

What Has Caused All The Forclosures?

I received a foreclosure question from my site, and ... I really don't know if it was from a consumer or a loan professional. Most of the questions I get are from people in the industry.

The woman wanted to know what I think has really caused all the home foreclosures in our real estate market today. You know, that is not a simple question to answer, and I am usually pretty up to date on the market and the politics involved.

So, not wanting to offend I sent off a short list of the things that contributed to our housing crises:

  • Politics, and politicians using the market to further their agenda. They have made it look much worse than it is and that media B.S. should clear after the election. Please understand, it is not good, but the market is not nearly as bad as they are blasting out to the consumers.
  • The normal real estate cycle
  • Depreciation of value which was sort of caused by mortgage backed securities which are tied to Allen Greenspan's over exuberance.
  • "Interest Only" programs
  • Teaser Rate Adjustments
  • Over speculation by investors
  • Job loss, divorce, and over extended borrowers

There are more reasons I could add to the list and please note that these are not in any kind of priority order. I know people will say I forgot to include fraud. I did not forget it. Fraud played the least amount of cause and is only significant to the point that it is the primary place where people want to point the finger of blame because is not politically challenging or threatening.

I started wondering about the politics and the bail outs and the federal reserve so I did some research for my own peace of mind. I was Googling everything.

I ran across this video on Google. It starts out talking about income tax but then it gets into the federal reserve and it's history and position in politics today. It is a long video but I was spell bound and watched the entire thing.

I am neither Democrat nor Republican so my putting it on this blog has no political intentions. In fact, I am still researching some of the stuff in the video. It did open my mind and I have many more questions now.

Your welcome to leave comments but I'll tell you right now I am still not sure how I feel about it.

Food for thought I guess. Enjoy.

If the video is not loading here for you, go to:

Or, search google videos for: America: freedom to fascism - directors authorized version

The one you want to view is 111 minutes long.

Friday, June 6, 2008


I found this great video on You Tube and I think anyone thinking about selling their home "for sale by owner" should view it.

I agree with the video on many aspects. You need to be ware of "For Sale By owner Companies", especially if they are charging large fees up front.

On the other hand I do believe you can sell it yourself if you have a good plan and know where to get support.

Listing your home on the internet is a good thing but not if you are contracting them to do the work for you, they are charging high fees, or are trying to persuade you to pay to be put in an "MLS". Many of those on line "MLS" services are internet only and used as lead generation for Agents. They capture the information on buyers looking at homes and then solicite the buyers with offers or other homes on the market. It is not a good thing for you.

However, you should list you home with pictures on lagit or free sites. One good free site is There are others too I am sure. You can also take a short video of your home yourself and put it on You Tube and google video. That is also free.

The best thing that you can do is team with a Mortgage Broker that has a free FSBO program. Many people don't realize that after the contract is signed it is the lender or broker that controls the rest of the transaction.

Many Mortgage brokers are happy to work with you and pre-qualify your potential buyers so you don't get stuck in a contract with people that cannot get financed. They will usually provide you with signs, contracts, and disclosures you may not know need to be signed by buyers and sellers. They can teach you the ins and outs of the contract and explain things you may not understand.

They can show you the best financing options to use in your advertising, teach you about seller concessions and how it can impact your selling price. They can show you how much more you will pay in closing cost if your buyer gets a FHA loan or VA loan instead of a Conventional loan.

Well, whatever. This is a great video put together by a news station in Atlanta.

You may also want to view the video I have on For Sale By Owner Manual if you are a broker.



Tuesday, June 3, 2008

Federal Trade Commission Cracks Down on Credit Repair Violations

I just read an article on Originator Times about the FTC cracking down on credit repair violations. You can read the article HERE. I have included a quote from the article below.

The Federal Trade Commission was concerned with these federal law violations:

  • illegally charging an advance fee for credit repair
  • falsely claiming that they can remove negative information from consumers’ credit reports, even if the information is accurate and timely
I have to admit that it amazes me that people continue to attempt to remove correctly reported information from their credit report. My mind can't sort out which is more wrong, the company for making false claims or the consumer trying to game the system.

According to the complaint, consumers are led to Home Buyers Consulting Network,Inc. (HBCN), which is based in Raleigh, North Carolina, through its Web sites and by a company that sells lists of foreclosed properties and suggests that it's customers call HBCN if they need credit repair or access to zero or low down-payment home financing. In sales pitches for its credit repair services alone, and in conjunction with pitches for its home-buying consulting services, HBCN makes claims such as: “Our program offers the ability to REPAIR, RESTORE, or ESTABLISH your credit so that you may be able to qualify for 100 % home financing, lower interest rates and better quality credit.” HBCN also offers a “money back guarantee . . . to increase your credit score by 50 to 100 points or delete six derogatory items (from a consumer’s credit report).” HBCN also promises consumers help with finding a home to buy, through a referral to its purported network of realtors and lenders, the complaint stated.

Obviously this company had set up a rather elaborate system to take advantage of people in a state of need and ignorance. I still don't understand how people can fall for this. The following is another quote and advice from the FTC. It's pretty easy to understand and really supports the consumer.

The FTC advises that only time, a conscious effort, and a personal debt
repayment plan can improve your credit report. The first step is to learn what
information is in your credit report. If you find errors or mistakes, federal
law gives you the right to have them corrected – free of charge. Federal law
requires that the nationwide consumer reporting companies – Equifax, Experian,
and TransUnion – provide you with a free copy of your credit report once every
12 months, if you ask for it. To order your free report, visit, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form. Other credit repair information is available at

If it sounds to good to be true, it probably is. It's not hard to get your credit back on track and it doesn't take long to do it. You just have to make that decision and commit to it.