The Mortgage Manifesto! YOU can still get a mortgage!

Exotic and creative mortgages scare the #@%&* out of the Feds!

Creative and exotic mortgage programs are scaring the H____ out of the feds, Wall Street and consumers alike. Are the lenders themselves liable for the fallout?

Interest-only mortgages, Interest-only adjustable rate loans, Short term one-month and six month ARMS, Optional payment ARMs and negative amortizing mortgages... the list is long and nearly every one of these mortgage programs has a higher risk aspect to them that may prove to be greater than the benefits that are taunted and sold by the lenders.

The federal regulators, Wall Street securities firms and mortgage bankers and brokers know this risk well. Each governing entity has issued guidance concerns to address the risks posed by these residential mortgage products. There are growing concerns with mortgages that allow the borrower to delay, defer  and in some programs, allow the borrower to make payments that don't even pay the amount of  interest due in any given month. read on...

Interest-only mortgages: Buy now - Pay BIG TIME Later!

We have all heard all the advertising and press about interest-only mortgages. All we hear though is the wonderful benefit it is to have a low, low mortgage payment.

But, before you decide to run out and take advantage of these buy-now-pay-later ... and that is pay 'big-time' later mortgage programs, take a moment to enlighten yourself more about these so-called wonderful mortgages. Think about the basic premise: if you pay only the interest due each month, will you ever start paying on the principal and earning equity in your property?

By definition, a mortgage is a temporary, conditional pledge of a property to a creditor as security for performance of an obligation or repayment of a debt. Simplified, that means you borrow money from a financial institution and they essentially buy your house for you and you pay it all back in the future. How can this happen if you are paying interest only? More accurately, interest-only mortgages are a temporary reprieve from paying off a traditional mortgage. You are actually prolonging the inevitable and eventually you will be paying it even more costly to pay off your mortgage. "But wait, there is more..."

Is Free and Clear Home Ownership a possibility?

The dream of owning a home can seem for many, becoming more and more allusive these days. Although everyone would like to have a home that is paid for free and clear, mots of us will have to assume that we will be paying a mortgage for the next 25, 30 and now even as long as 40 years into the future.

Everyone is constrained to a certain degree by their own budget. But, there are ways to pay off your mortgage more quickly and save money in the process.

Almost all mortgages have built into the terms, a payment accelleration clause. This allows borrowers to pay more than the minimum monthly payment: Read on...

Do you make these FATAL credit mistakes?

There are many things we do as consumers that can have an affect on our credit rating and credit scores.  Many of these points will surprise you! Read on:

1. Paying off old collections, judgments, tax liens and other derogatory records: The key is whether they are old or not. If any of these records are more than 3 years old or more, chances are that they have already been discounted, as to their effect on your credit scores. When one inquires about and pays these types of old accounts off, as much as the intent was to make everything look better, the result is actually the opposite. By bringing attention to these accounts with ANY activity, you advance the date of record to today rather than it being an old record. Now that 3 or 4 year old derogatory account now looks like it just occurred. Thus, your credit score drops dramatically due to a recent collection, judgment or other negative account. Sad but true... Continued...

How much money does the mortgage company make?

How much income does the mortgage banker or broker make on my loan? Well, let us briefly outline all the sources first: (Estimated loan of $200,000 as an example)   

1.) Loan origination fees (1% or more of the loan amount) or             $2000.00
2.) Loan processing fee, underwriting fee, doc prep fee etc. or            $  900.00
3.) Yield Spread back to banker/broker after closing (1.25%-2.5%)     $3000.00

And there can often be even more! So how much negotiating can the borrower really do? In most cases, the borrower should be able to negotiate away the loan origination fee and at least half or more of the processing, underwriting and doc prep fees, These are all added gross profit areas for the lender. I have successfully negotiated all the extra fees away and the lender had to settle for the yield spread as their only compensation. Good luck!

Exotic ARMS may be the greatest cause for the real estate bust!

Creative and exotic mortgage programs scare the H#@& out of the Feds, Wall Street and consumers alike! Are the lenders themselves liable for the fallout?

Interest-Only Loans; Interest-Only Adjustable Rate Loans; Short-term Adjustable Rate Loans; Optional Payment and Payment Options Loans; and Negative Amortizing Loans… the list is long and nearly every one of these mortgage programs has as many negative risks to them as they may have positive and beneficial aspects. (continued)

My Bank, Mortgage Banker, or Mortgage Broker?

What is the difference between a bank or credit union, mortgage bank and a mortgage broker when it comes to seeking a mortgage loan? That is a question on the minds of many borrowers when they are getting bombarded by offers, gimmicks and endless advertisers.

What few understand is that the differences any more are very blurred. There is, in most aspects of the mortgage process, little if any difference at all. The tasks and the job being performed by either entity are very similar.

And with interest rate pricing being dictated by Wall Street (mortgage backed securities) and the secondary market, plus the fierce level of competition, the rate differences as well are as little as 1/8th of 1% from lender to lender. So how do you decide? (continued...)

What probably differentiates one from the other most shows up in the approval and closing end of each loan transaction. Most banks and mortgage bankers have the authority to approve your loan, and close and fund your loan internally and with their own funds. Brokers on the other hand, typically have to send your loan file out to a bank or mortgage banker to obtain the approval and have to request funds from that source for closing the loan as well.

That said, that entire process usually takes less than a couple of days, so you may not be affected by the difference other than a bit of time. Now, if there are even the least bit of challenges or problems on a file, having to send a file out for those functions can then be amplified by the loss of control a broker may experience over that of a bank or mortgage banker.

Check too, the closing costs for a transaction. because the broker does not earn any income from the payments or servicing of a loan, their only sources of income are fees. They can at times have more fees than a banker or mortgage banker as well. Some would argue though, that a broker has less overhead costs and the total fees charged may still be equal to or even less than a bank or mortgage bank... so be sure and check the total costs and not just the rates! Beware!