BradyLoan.com

January, 2008 Issue of YOU Magazine

SUBSCRIBE to YOU Magazine. If you received this message from a friend, you can subscribe online. 

YOU !  Magazine compliments of Brian Brady   

Budgeting Basics: How to Keep More Cash Congratulations. You have kept the U.S. economy afloat by opening up your wallet for everything from cars to candy bars. But, if stuffing cash into the nation's economic cracks has swollen your credit card balances or depleted your savings, it may be time to turn your attention to your own economic stability. Keep Reading »
Improving Your Relationships: A New Way of Thinking Tim Sanders has an unusual perspective when it comes to values, both in business and in personal relationships. Through his work with companies such as Yahoo!®, he has identified strategies that lead to greater happiness and success for everyone, regardless of their position. Keep Reading »
Attack of the Killer Fees: Why Credit Repair is All the Buzz Not too long ago a credit score of 620 was considered acceptable. Not anymore, says Fannie Mae and Freddie Mac. After suffering major losses stemming from the high foreclosure and delinquency rates in the mortgage market last year, Freddie and Fannie have redefined risk, and are now charging serious fees for borrowers whose credit scores don't quite add up. Keep Reading »
Feng Shui: Filling Your Home with Positive Energy Just about everyone has heard of Feng Shui (fung shway), but how many of us actually know what it is? The editorial staff at YOU Magazine decided to take a closer look at this popular yet misunderstood practice. Feng Shui is half science and half art form. Developed in China over 3,000 years ago, it is an intricate discipline meant to create harmony and balance within our lives... Keep Reading »
Pet Insurance: Health Plans for Fido and Fluffy Do you think of your pets as members of your family? Considering their propensity for affection and devotion, it's rather hard to feel otherwise. So, it's safe to say that you want the best for your animals, with the hope of ensuring their well-being for as long as you possibly can. Did you know that health insurance might be the key to making that happen? Keep Reading »
Cooking at Home in 2008: A Recipe for  Keeping Your New Year's Resolutions By Kirk Leins Over the next few weeks, countless Americans will assemble their list of resolutions for the New Year. It's safe to say that many of us will choose goals like losing weight, saving money, or spending more time with family and friends. But what if I told you there is an even greater resolution, one that will not only help you to accomplish the aforementioned resolutions, but several others as well? Keep Reading »
Seasonal Affective Disorder: The Truth Behind the Winter Blahs Winter can be a trying time of year. Between the harsh weather and the demands of the holidays, spring may seem like an oasis. Commonly referred to as the "winter blahs", symptoms during these months can include fatigue, general malaise, and depression, just to name a few. If this sounds familiar, you may be suffering from... Keep Reading »

      

 

Beating Stagflation

Stagflation is a period of economic contraction amidst commodity-push inflation. It is a term from the 1970's to describe the economic phenomenon of rising unemployment and inflation.

I kind of dug the 70's.  I remember driving with my mother to the roller skating rink, listening to The Trammps on the 8-track, and praying that we had enough gas in the tank to make it to the even day.  The 70's were that time where a gallon of gas broke a dollar, mortgage rates were at 14.75%, and President Carter introduced us to the word malaise.  It wasn't a pretty time for the American economy.  How did my father respond to the malaise of the late 70's?

He bought a vacation house at the Jersey Shore.

Why?  It was cheap.  You see, Jersey Shore real estate had gone through a period of price decline in the late 70's and my father had a plan. He always wanted to have a home "Downashore" and he had figured out a way to deal with the stagflation of the 70's.  He understood the difference between Core CPI and inflation and he had a solution.

Stop eating and driving.

I'm not kidding, he really laid down that law.  His thoughts were:

1- We ate too much anyway.  As long as food prices were high, he wasn't going to waste food.  No snacks, no junk food, no crap; three squares daily of healthy food.

2- The whole nation had become a bunch of "gas-asses" and our family was getting less healthy because of it.  No unnecessary driving.

If I wanted to go to the Mall, to hang out with my friends, I could take the damned bus...only if I picked up a dozen day-old bagels on the way home.  No kidding.  Papa Joe actually laid down that law.  Our Church was three blocks away.  Our family had gotten into the habit of 2-3 Masses, each Sunday (three teenagers).  Papa Joe mandated that we all walk to Church, together as a family, ONCE, each Sunday.

You know something?  It worked.  He lost weight, our family started acting like one, and he rewarded us by buying that vacation home, in 1980.  Now, I doubt that the little Core CPI product restrictions really saved enough money to carry a vacation home mortgage but Papa Joe was making a stand...and he was right.  In the 1980s, Core CPI was under control and the real estate market took off.  The irony of it is that we drove 200 miles, each summer weekend, and loaded up on junk food , throughout the whole next decade.

Want to beat stagflation?  Stop eating and driving.

January 30 Fed Meeting Affect on Mortgage Rates

"Should I refinance my mortgage now that the Fed has lowered the overnight lending rate .75% or should I wait to see if they cut rates more, when they meet on January 30, 2008?"   

That question was asked of me today by one of my favorite borrowers.  I met Jim, a sales representative in Paradise Valley, Arizona, in 1994.  Jim was one of my first customers, responding to a mailer I sent about VA Interest Rate Reduction Loans (VA IRRL).  We reminisced about the 8 loans I funded for him, these past 14 years. Jim traded up, in 1995, to a home in Ahwatukee.  He traded again, in 1998, to a home in Paradise Valley. He has turned a $83,000, zero-down home loan, purchase into a seven-figure home, with a $400,000 mortgage.  He's four years into a 5.25% 5/1 ARM and wondered if it was time to pull the trigger.

Here's what I told him:

"Jim, you've always done well by seizing opportunities when they came.  You bought a home in Ahwatukee because it was affordable, not because you were greedy.  You stretched to get into the Paradise Valley home because you felt it was affordable, not because you were greedy. So, I'll ask you to be consistent here and make this decision based on affordability rather than greed.  You've had your eye on the 5.25% rate for a few weeks; today it became affordable.  I think mortgage rates could come down a smidgen more, in the next week.  Maybe I'm being greedy by suggesting that you hold out for that last little drop"

I shared this chart from Loan Toolbox, with Jim:

I don't believe this chart is omniscient BUT I have been wrong about the short-term trend for mortgage rates.  Remember readers, I worked as a securities broker so I can get caught up in the trading patterns of mortgage rates.  I'm generally biased towards locking mortgage rates when indecision prevails.  In Jim's case, he can get that 5.25%, 30 year fixed-rate mortgage, for about $6800.  While I think he could save about $2,000 in closing costs if he held out a few more days, the mortgage bonds market could reverse course and add two or three thousand dollars to his closing costs quickly.

Sometimes, a bird in the hand is worth more than two in the bush.  In Jim's case it was about balancing affordability and greed.  Affordability won out; we locked Jim's mortgage rate today.

Would you like to have this kind of conversation about your mortgage refinance?  I can be reached at (858)-699-4590.  I think we have about two days to talk.

VA IRRL Home Loan Refinance: Convert ARM to Fixed Rate

The VA offers loan guarantee programs that have made housing more affordable for so many veterans of our Armed Services.  If you have a VA home loan, we might be able to save you some money.

Introducing...the "streamlined" VA Interest Rate Reduction Loan.  If you have a VA home loan, you can refinance without an appraisal or income verification.  From the VA website:

WHAT IS AN IRRL?

An IRRL is a new VA-guaranteed loan made to refinance an existing VA-guaranteed loan( thus VA Streamline Loan), generally

• at a lower interest rate than the existing VA loan, and
• with lower principal and interest payments than the existing VA loan.
  

Generally, no appraisal, credit information or underwriting is required on an IRRL, and any lender may close an IRRL automatically.

INTEREST RATE DECREASE REQUIREMENT

An IRRL (which is always fixed rate) must bear a lower interest rate than the loan it is refinancing unless the loan it is refinancing is an Adjustable-Rate Mortgage (ARM).

The principal and interest payment on an IRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:

• The IRRL is refinancing an ARM
• the term of the IRRL is shorter than the term of the loan being refinanced, or
• energy efficiency improvements are included in the IRRL
  

A significant increase in the veteran's monthly payment may occur with any of these three exceptions, especially if combined with one or more of the following:

• financing of closing costs
• financing of up to 2 discount points
• financing of the funding fee, and/or
• higher interest rate when an ARM is being refinanced.
  

If the monthly payment (PITI) increases by 20 percent or more, the lender must

• determine that the veteran qualifies for the new payment from an underwriting standpoint; such as, determine whether the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable, and
• include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20 percent or more.

VA IRRL Home Loan Refinance: Documentation Needed

You are a veteran ,with a VA home loan on your property.  You want to refinance from a variable-rate loan (ARM) to a fixed-rate loan and keep the VA loan you have on your home.  Here's a list of what we'll need to refinance your VA home loan under the VA streamlined refinance (IRRL) program:

1- A copy of the most recent statement for your VA home loan (issued by lender)
2- A copy of your DD Form 214 (aka: your 214 or discharge paperwork)
3- A signed VA Form 1880- request for Certificate of Eligibility
4- The actual Certificate of Eligibility
5- A completed Universal Residential Loan Application (Form 1003)

Call me at 858-699-4590 and I'll help you assemble these documents.

Idaho Property Investors: Avoid These Four Mistakes

Southern California real estate investors are hurting. Specifically, the Californians who bought North Idaho properties with negative cash flow are hurting really badly. The problem? They’re paralyzed and the network mortgage advisers aren’t helping them analyze their investments.

What does  that last sentence mean? It means that if you haven’t talked to the mortgage adviser, who secured the financing for your investment property in North Idaho, within the last three months, you’ve probably been abandoned.

Q: Why would a loan adviser abandon you?

A (1):  He is  out of the mortgage business.
A (2):  She earned her commission and is on to  someone else.
A (3):  He “bought” your business from the network promoter;  see A(2)
A (4):  She has no financial planning background and doesn’t know  how to properly plan an investor’s mortgage portfolio.

Pay close  attention to answer #4. Your North Idaho real estate investments may be suffering because you have the wrong loan on the property. Many Idaho real estate investors are looking at the potential of LOSING money on their investment because the MORTGAGE wasn’t properly planned.

The best approach for California investors is the liabilities portfolio approach. That requires someone who understands how investments perform and matches the mortgages to help you realize your profit targets. It integrates your financial assets into your real estate assets and plans everything with an end goal in mind.

California Mortgage Planner Brian Brady, a 20 year veteran of financial services, will host a conference call this Thursday, January 31, 2008, at 8PM (California time). Mr. Brady will reveal the 4 mistakes most investors make with a mortgage plan and offer creative solutions to problems. The presentation will last 20 minutes and there will be an opportunity for callers to ask specific questions.

This call is limited to 10 people and is by  reservation only.  Contact Christina Ethridge to reserve your spot and obtain  the telephone number and access code.

The Danger of Real Estate Brokers as Loan Advisors

Vernon and Marty Ummel bought a home in Carlsbad, for $1.2 million, in 2004.  They put $900,000 down and borrowed $300,000.  The Ummels moved from the Bay Area to San Diego County to be near their grown children.  They hold the property in a family trust.  Those facts, gleaned from public records, suggest that the Ummels are far more sophisticated than a garden-variety first-time home buyer.  As we used to say in Arizona, "This ain't their first rodeo"

Mike Little, a licensed real estate broker affiliated with RE/MAX Associates and a mortgage originator with Horizon Pacific Financial, represented the Ummels as their buyer's agent as well as originated the loan transaction.  He is being sued by the Ummels for fraud. The Ummels claim that Mr. Little deliberately withheld material information about comparable sales and did not furnish them with a copy of the appraisal report.

Marty Ummel is on a public relations tour.  She touted her case on the Today Show, this morning.  Ms. Ummel believes that Mr. Little should have disclosed that a competing property, closed on the exact same day as hers, sold for $100,000 less.  Of course, there was no way for Mr. Little to know that; pending sales, in escrow, do not disclose terms.  Those terms are disclosed AFTER the transaction has been recorded at the San Diego County Courthouse.

This case stinks, stinks to high heaven.  Greg Swann does the usual excellent job explaining why our industries (real estate and mortgage origination) need to avoid the mere appearance of impropriety:

We say, as a cliche, “Caesar’s wife must be above reproach.” Per Suetonius, what Caesar actually said was, “Meos tam suspicione quam crimine iudico carere oportere.” (”My wife should be as much free from suspicion of a crime as she is from a crime itself.”)

A better way of expressing the same idea: In what light would a plaintiff’s attorney seek to portray this fact pattern?

I want to do what is righteous, always, this before anything. I want to do what is practical, if only to keep all my fat cells fully inflated. I want to do what is marketable — so I can sell even more real estate. But I do not ever want to get sued. Even if the Errors and Omissions insurance underwriter settles out of court, that’s still a huge loss — and not just financially.

For all of me, I think brokers taking kickbacks from — or even ownership stakes in — lenders, title companies, hazard insurance agencies, inspectors, etc., are just asking for it on precisely these grounds — but each man to his own saints.

Greg states the exact reason why I refuse to engage is real estate brokerage.  I never want a client to wonder if the advice I give them is in their best interest or in the best interest of the transaction.  While they "dual function" agent/originator suggest the he/she "can save you a bunch of money", this case explains how their diluted expertise can cost you many more dollars than the few pennies you might save up front.

This case stinks to high heaven.  The Ummels are millionaires, who use trusts as financial planning tools, and have a history of owning California real estate in high-priced areas.  They know (a) California real estate is cyclical, and (b) due diligence is required prior to any investment.  This is opportunism at it's worst.  Their case is frivolous.

This case stinks to high heaven...and it's our fault.  As long as we allow California real estate brokers to engage in the business that is rightfully reserved for licensed finance lenders, we'll always be answering the question, "Was there a conflict of interest?"

PS- Read my satirical article about this case, along with the usual expert commentary, on Bloodhound Blog

San Diego Mortgage Rates Report: January 24, 2007: Party's Almost Over

Mortgage rates are reversing course and headed higher in the next 7-10 days.  Lock mortgage rates for all loans, purchases and refinances at application.

Don't hold out to see if the Fed will cut rates farther; the mortgage lenders have already anticipated a January 30 Fed cut and priced it into the market.  If the Fed doesn't cut rates, mortgage rates are going to skyrocket.

If you were planning on refinancing your mortgage rate, the train is starting to leave the station and will quickly pick up steam.  The opportunity to get a 30 year fixed rate mortgage rate under 5.5% may quickly disappear as lenders try to slow down demand.  The last three days have been hectic with past clients calling me looking to lock-in a low rate.  You have a window of maybe 48 hours to get that great mortgage rate.

Please contact me:

Call me on my cell phone at 858-699-4590

E-mail me at brian (at) californialoanconnection (dot) com

Apply for a loan online at http://www.californialoanconnection.com/apply

Over 700 families trust me to help them with their mortgage so we are incredibly backed up. I will be checking my voice mail every couple of hours  Be sure to leave specific contact information.

DO NOT RELY ON THE E-MAIL!  CALL TO BE SURE  THAT I KNOW YOU NEED TO REFINANCE YOUR MORTGAGE.

San Diego Mortgage Rates Report: Emergency Fed Cut: January 22, 2008

Mortgage Rates Report:  Nationally syndicated from Long Beach to Palm Beach

The Fed cut .75% in an emergency move this morning.  From Bloomberg:

The Federal Reserve lowered its benchmark interest rate in an emergency move for the first time since 2001 after tumbling global stock markets and a jump in U.S. unemployment threatened to push the economy into recession.                  

The central bank lowered the benchmark overnight lending rate to 3.5 percent from 4.25 percent, the Federal Open Market Committee said in a statement in Washington. Policy makers weren't scheduled to gather on rates until Jan. 29-30.

``While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate,'' the Fed said in a statement in Washington. The FOMC took the action ``in view of a weakening of the economic outlook and increasing downside risks to growth.''           

Policy makers set aside concerns about inflation to lower borrowing costs for the fourth time since September after unemployment hit a two-year high and U.S. stocks slumped. Chairman Ben S. Bernanke shifted the Fed's stance to a more- aggressive approach in remarks this month citing a need for ``decisive and timely'' action.

We think this will be positive for mortgage bonds and rates.  We currently reccommend that mortgage applicants lock ONLY purchase loans that are closing in 15 days or less and that all others float the mortgage rate.  No change.

Mortgage Crisis Explained Video

The video below is perhaps the simple best explanation of the mortgage crisis.  Dan Green is a Certified Mortgage Planning Specialist with Mobium Mortgage and author of the nationally-acclaimed weblog, The Mortgage Reports.

I consider Dan both a colleague and a friend and thank him for his permission to rebroadcast this message to the readers at San Diego Mortgage Rates Report.