Building Wealth Magazine

By Elizabeth Razzi • Bankrate.com 

As concerns about subprime mortgages plague the nation’s leaders and lenders, America’s homeowners are confused and worried about their own mortgages, according to a recent poll commissioned by Bankrate.com.

What type of mortgage do you currently have?   Source: Bankrate.com 2007

In the survey conducted by Gfk Roper, homeowners with mortgages were asked what type of mortgage they had. A stunning 34 percent of the homeowners had no idea.

“That’s a symptom of the complexity of the mortgage market today,” says Ken Wade, chief executive officer of NeighborWorks America, a nonprofit organization that provides financing and training to neighborhood-based housing organizations.

A generation ago, mortgages were made primarily through banks. Today there are many more types of organizations making mortgage loans, some of which are less regulated than banks. Adding to the confusion is the variety of loans now available to borrowers. “There is a proliferation of new products that come on line just about every week, and I think it creates confusion among consumers,” says Wade.

Read the rest at Bankrate.com

By Jody Shenn

March 22 (Bloomberg) — The subprime credit crunch is beginning to ensnare even borrowers with better credit.

Lenders are increasingly refusing to lend to homebuyers who can’t make a down payment of more than 5 percent, especially if they won’t document their income. Until recently such borrowers qualified for so-called Alt A mortgages, which rank between prime and subprime in terms of risk. Last year the category accounted for about 20 percent of the $3 trillion of U.S. mortgages, about the same as subprime loans, according to Credit Suisse Group.

“It’s going to be very difficult, if not impossible, to do a no-money-down loan at any credit score,” said Alex Gemici, president of Parsippany, New Jersey-based mortgage bank Montgomery Mortgage Capital Corp. Companies that buy the loans “are all saying if they haven’t eliminated them yet, they’ll eliminate them shortly.”

Read the full article at Bloomberg

Failure is the opportunity to begin again more intelligently.
- Henry Ford

As I have walked with thousands of families through hope-robbing financial problems, I have realized there are reasons we lose our hope. Our mind and spirit have believed lies in order to lose the most precious item called HOPE.

One big hairy lie that we allow to steal our hope is: Failure is permanent. If we see failure in our past as an indicator of our future, it will rob our hope. Winston Churchill, the great British prime minister, said, “Success is going from failure to failure without loss of enthusiasm.” When we believe failure is here to stay, we lose enthusiasm and the ability to head back toward success.

Hope is stolen when we misunderstand failure. Failure is natural, normal, and is going to happen. If we take all the lessons learned from failure and stack them, we can easily get the breathtaking view that hope gives. The trick is to avoid making short-term decisions, based on loss of hope, that have worse long-term effects.

When people are in financial difficulty, they often make stupid short-thinking financial decisions. If you really believe you can never save enough money to pay cash for a car, you lose hope and borrow the money. If you got laid off from a job or your small business went under, you may think the rest of your life is doomed. Debt, which robs your ability to build wealth, is usually the result of lost hope. We have been sold debt so thoroughly that it has stolen our hope. People who have hope, grown from vision based in values, are savers and investors; they think long term. Where there is a lack of hope, we cripple our ability to build wealth and long-term relationships of value.

Read the rest of this article at DaveRansey.com 

Stated Income loans were originally created for self employed or individuals who had sufficient income to service the loan but had circumstances that made it difficult to show the required documentation for traditional underwriting.  In exchange for a slight increase to the origination cost of the loan, borrowers were given a free pass from this documentation requirement.

The downside is this has become a way to raise the amount of loan for employed people to qualify.  Wait, why is that downside?  This was another log on the fire fueling housing appreciation. During the heyday more than 80% of loans in the Bay Area were stated income, thus contributing to 300% housing appreciation since 2000.  If I make $4,000 per month but am able to “state” I make $12,000, this can greatly increase what a bank is willing to lend me.  However in a society where an ever increasing number are living paycheck to paycheck it is easy to see how overstating how much one makes can lead to mortgage lates and even foreclosure.

Joan and Sarah are sisters in Daly City.  When they bought their 2 bedroom condo they had a combined income of $5,500 per month.  The loan application they signed at closing stated their income as $10,500 with loan payments of $4,300 PITI.  When they pointed out the error to their Realtor^® they were told,”Don’t worry, you’ll refinance out of it.”  6 months later they are a month behind, out of savings and out of options.  “We can’t make the payments even if we refinance at a lower rate and only pay interest.  I wish we had stopped everything at signing, but we were afraid to lose our deposit and didn’t really understand what was going on.”
 

What goes up must come down…
As this type of lending comes under greater scrutiny, the market will tighten up and lower what people can “afford”.  When people can no longer qualify for these loans it lowers purchase offers and possibly housing prices. 
This may be a necessary part of normalizing the lending standards as lenders become more fearful of getting caught cheating.  Loan reps will be required to act in their client’s best interest instead of focusing on commission checks.

Bay Area homes continued selling at an 11-year low in February as the region logged its seventh month without significant price appreciation, a real estate information service reported.A total of 6,305 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 2.2 percent from 6,168 in January, and down 7.9 percent from 6,844 in February last year, according to DataQuick Information Systems.

February has averaged 6,600 sales since 1988. Last month’s sales were the lowest for February since 1996, when 5,940 homes sold. January sales were also at an 11-year low. On a year-over-year basis, Bay Area sales have fallen for 25 consecutive months. The declines have generally eased each month since sales fell 32.4 percent last July.

Full Article [DQNews]

I am often asked about subprime loans for purchases of properties and I have a simple answer.  Subprime loans should NEVER be used for a purchase of a home.  And only be used in a refinance in rare and temporary cases.
Subprime loans are generally given to borrowers with a credit score below 620 who are “qualified” primarily on income.  5 years ago subprime loans were made to folks with big down payments and new jobs that were used to help get out of past financial woes.  The aim was to use these loans as part of a strategy to raise credit scores, decrease other debt and prepare for traditional financing in a short period of time, usually 24 to 36 months.
The recent subprime feeding frenzy led to sketchy qualification practices, interest only loan options, 2 - 3 year prepayment penalties, 100% financing, twice the origination cost

Read the rest of this entry »

SACRAMENTO, February 26, 2007 – Local government agencies can now apply for low 3.5% deferred interest loans to promote affordable housing projects in their communities through the California Housing Finance Agency’s (CalHFA) award-winning program, Housing Enabled by Local Partnerships (HELP).
The CalHFA HELP Program is offering $7.5 million in low deferred interest loans to California cities, counties, housing authorities, redevelopment agencies, and community development commissions to assist with the acquisition, development, rehabilitation or preservation of affordable rental housing. In addition, this program also provides financing to facilitate the construction or rehabilitation of ownership housing, as well as making funds available for the implementation of subordinate loan programs for eligible home buyers. Applications must be submitted to CalHFA by 5 p.m. on Friday, April 20, 2007.
                
“Through the HELP Program’s nine years, CalHFA has partnered with 105 local government agencies, awarding $167.5 million in financing statewide,” said Theresa Parker, CalHFA

http://www.calhfa.ca.gov/

Know Your Target and Hit the Bull’s-eye

When evaluating the different advertising formats that are available to you, it’s important to define the best approach to reach your target market. Advertising representatives are quick to brag about “reach” and impressions,” but their demographics can be misleading when taking your objectives and budget into consideration.Direct marketing guru, Karen Deis, feels that it is critically important to maximize your advertising dollars in an effort to have qualified customers call you first.For example, if your target market is people who are considering a home purchase, then it makes more sense to advertise in your local, freely distributed home-shopper magazine than in your local newspaper, even if it costs more. The 100,000 people reading the newspaper are looking for news, and may not be looking for Real Estate at all. On the other hand, the 1,000 people reading the home-shopper magazine are specifically looking for homes. Focus as tightly as possible on your target market and consider the following questions Read the rest of this entry »

Fear is a natural part of our existance.  For those who reach their peak it is a tool.  One that drives them forward as it holds others back.  Whether it’s to initiate conversation with someone you want to meet or take the risk in your business that moves you to the next level.  Fear is within us all and it can be friend or foe.  It can lead us to our greatest achievements or leave us with regret for challenges untried.

You don’t have to be a snowboarder to know God…but it helps. Check out this video of Terje Haakonsen in the Movie First Descent as he conquers his fears in the steeps and deeps of Alaska.  Three words: A-Ma-Zing!!!

glumbert.com - The Great Descent

Make a Great Impression with the Right Body Language 

Practicing scripts is a wonderful way to perfect what you say to clients. It’s also important to study how you look when you deliver your speech. Body language can account for up to 90% of the impression you make in a conversation, and it can enhance or undermine the point you’re trying to make.Here’s one way to find out whether your gestures are telling customers you are desperate or self-confident. Set up a video camera and practice your pitch to your spouse, siblings, or co-workers in a role-play scenario. Talk to them just as you would a new client. Then watch the tape and see what your body language is telling people. Here are some key things to look for:

Do you make appropriate eye contact, without staring down your client? An intense stare makes people uncomfortable, and can even make them feel you’re a little off balance. On the other hand, if you avoid eye contact, the person you are speaking to will probably think you’re lying. Be attentive and smile. This tells them you’re a winner!

What is your posture saying? It’s important to look relaxed, but don’t overdo it. Slumped shoulders give a negative impression; on the other hand, leaning back and clasping your hands behind your head tells people you are quite full of yourself. If the bottom half of your body is covered by your desk when a new client is sitting across from you, they’re missing half of your body language. So the way you position yourself in your chair is very important. Relax and lean slightly forward with one shoulder as you tilt your head just a bit. This shows you are captivated by what they have to say.

In business, we often have to remain positive even in a negative situation. Being attentive to your own body language can make an incredible difference in how others perceive you. This is one area where practice really does make perfect. Rest assured, if you’re not practicing, your competition probably is. 

Setting Salaries and Bonuses for Your Assistants

A good assistant can make all the difference in business. It can be the difference between doing fine and doing great, between breaking even and being profitable.So what’s the best way to get (and keep) someone good? Make sure they’re well compensated. Here are a few tips to make sure that the good ones stick around and stay properly motivated:

Pay good money for good people. According to Payscale.com, the median salary for an administrative assistant is $29,500, and the median salary for an executive assistant is $39,000. That pay is for those who do a median job. Better performers could get paid five to ten thousand dollars more - even higher, depending on the cost of living in your area. Always err on the side of overpaying, assuming you can afford it. Read the rest of this entry »