Cash for Cottages, Castles and Condos: NO TRADE-IN REQUIRED!

August 8, 2009

by Brian Short, CMC, CRMS, GMA – Certified Mortgage Professional

            The US Senate just approved another $2 Billion for the auto industry’s stimulus program referred to as “Cash for Clunkers” after the first $1 Billion was used up last week in only 3 days.  It seems, at first glance, that this auto industry bail-out program might be havingCash for Clunkers some positive affect on another ailing US industry.  At least the players are allowing the program to work.  The Feds are giving away money (whether you agree with this approach or not), the dealers are accepting the qualifying vehicles and giving a $4,500 trade-in allowance toward a new qualifying car, and US consumers are using up the allowed funds to work this program.

            The housing industry has witness many attempts by the Feds to “jump-start” the stalled industry for the past 12-18 months.  One of the first was the FHA Secure Program with “impossible to qualify” underwriting guidelines for those who had made late payments on their adjustable mortgages.  Most of the national wholesalers were not participating and none of the FHA participating lenders would approve these borrowers for this program. 

            The Troubled Assets Recovery Program (TARP) initiated by then Treasury Secretary Henry Paulson and President Bush and expanded by the Obama administration attempted to infuse cash into the ailing national and regional banks so they would be more willing to free up credit to business owners, home owners and borrowers.  However, with the expansion of this TARP program came the announcement that the Feds could jump into the books of any bank who received these funds to determine if they were “financially solvent enough” to avoid a federal government take over.  Some banks refused the money, others returned it and most who received it held on to it to bolster their bottom line figures.  Either way, no credit was freed up and no home owners, home buyers, home builders or Real Estate industry players have received any relief from such a misguided and over funded Federal effort.

            The recent announcement by President Obama to design a federal loan modification program has been met with delays and unresponsiveness by Bank of America and Well Fargo – the nation’s two largest remaining banks holding the largest number of servicing rights on most of America’s residential mortgages.  On the one hand, these banks appear very unwilling to work with their customers to write down loan balances or interest rates to keep the existing home owner in the home, and yet on the other hand, they are all saying that they do not want any more foreclosed properties and the process of foreclosing on US homes is causing home values to dive bomb unlike anything we have ever experienced.

8000 dollars The one program still being promoted – “$8,000 tax credit of first-time homebuyers” – is far too limited in its scope.  This author was calling for this approach long before the Feds rolled out their version.  However, we were calling for a tax credit for any down-payment and closing costs used to buy a house by ANY buyer.  Only this breadth of a program which would include Real Estate investors, buyers of second homes and “move-up” or “move-down” buyers will truly have any effect of the most critical industry in our downward spiraling US economy. 

            Again, I am calling for the inclusion of those solid borrowers, experienced buyers and business owners to be enticed to get off the sidelines and risk THEIR capital (rather than the future Federal tax revenues for generations to come!) to help get the housing industry out of the dumps. 

            The average first-time homebuyer is still too scared and too inexperienced to be a major player in rescuing the ailing housing industry.  They are fearing for their own job security and seeing house prices plummet causes them to be squeamish about investing what little cash they can scrape together to buy something which may be worth less than what they paid in 2-3 years when they might be ready to sell and buy something bigger or in a different location.  This group of buyers does not have the “staying power” to be the key to a housing industry recovery.  Bring in the Pros!  We need the seasoned home buyers and investors to be encouraged to buy up the housing inventory busting at the seams so builders will be enticed to start building again.

            In the meantime, those who desire to take advantage of the $8,000 tax credit have less than 4 months to get their first-time home purchase selected, financed and closed.  This is not much time in light of heightened underwriting requirements, appraisal delays and turn times in wholesale approval processes.  Those who can benefit from this limited time tax credit must move quickly to get the benefit of the $8,000 “give-away” by the Feds. 

            If you or someone you know has not owned a house in the past 3 years and desire to buy a house before the end of the year to take advantage of this $8,000 refund of all tax withholdings during 2009 and an outright rebate of whatever the difference is between what has been withheld and $8,000, they must get into the game quickly by contacting a Certified Mortgage Professional to get pre-qualified before going out to shop for houses with a Realtor.  The clock is ticking.  There is no promise that the Feds will extend or revamp this program once it expires on December 1, 2009, regardless of how many housing experts, like this author, call for a program which will really help the struggling housing industry.  Sellers are motivated to sell, there is a record-breaking level of houses included in the existing home inventory, and Realtors and Certified Mortgage Professionals have time to give a first-time buyer the time and attention they need to make a great choice to get into (or back into) the housing market.

            The good news is – no “clunker” trade-in is required to participate in this cash give-away.  You can buy anything you want and still get the $8,000 tax credit – a cottage, a castle or a condo!  COME ON DOWN!  You’re already a winner!

Leave a Comment » | $8000 tax credit, Federal Government Intervention, Professionalism in the Mortgage Industry, Reviving the Housing Industry | Tagged: , , , , , , , , , , , , , | Permalink
Posted by Brian Short

Homeowners Make Long-term & Happy Employees

July 5, 2009

By Brian Short, CMC, CRMS, GMA  – Certified Mortgage Professional

As a business owner who has hired and trained many employees and who has worked closely with hundreds of business owners during my career, I have come to a very critical conclusion: Business owners must hire and cultivate “happy employees.”

empty deskI have heard trainers working for Sandler Sales Institute claim that it costs an average employer over $10,000 to hire, train and “on-board” an employee. Yet, according to the US Bureau or Labor Statistics (http://www.bls.gov/news.release/tenure.t05.htm) the average employee will stay at his or her job less than 4 years. As a business owner or manager, you could be spending over $10,000 every 4 years just to keep a body at that desk or covering those accounts or keeping your customers happy.

In this day of cutting costs and trimming budgets I believe that it is imperative for all employers and managers to look at ways to find, nurture and keep employees who will give your company stability, productivity and profitability. One very simple strategy is to help your employees become homeowners. How does this simple strategy develop “happy employees” who will come to work and work hard for you for long periods of time with a strong work ethic? Let’s explore some of the answers to that question.

1. Employees who are homeowners will work harder for you.

Homeowners take pride in their homes and are reminded that they are building equity in their homes EACH MONTH when they make their house payment. They are investing in their largest asset when they send in their house payment and are motivated to do all they can to keep that asset and pay it off over the term of the loan toward which they are paying.

2. Employees who are homeowners will work longer for you.

These employees are putting down roots, raising their kids, contributing to a community and contributing to a local economy. They are developing an identity with the locale when they own their house. They are becoming part of the fabric of their neighborhood and will not easily uproot themselves or their families because of short-lived work-related set-back or for a couple of additional dollars per pay-period. Your competition across town or across the country will find it more difficult snatch away your top dollar producers if they own their home and are part of the community where they live.

3. Employees who are homeowners will desire to see your company grow.

Those who are set on making a long-term contribution to a job and a community will more likely share the same goals as the owner or manager than a “short-termer”. Your home-owning employees will more quickly demonstrate that they are on your team and desire to see you and your company succeed if they have come to accept that their identity is wrapped up in their long-term employee for you.

4. Employees who are homeowners will miss less work and be more willing to work occasional overtime.Craig

Those who are making their house payments to pay off or pay toward their largest investment will want to make sure that they are keeping a steady stream of dependable income to meet their obligations and pay their bills. They will not miss work if they can avoid it and will be willing to work extra in order to continue to get ahead in their house payment or to make improvements to their house.

5. Employees who are homeowners will see the long-term value of their work.

An employee who has big goals and is making steady progress toward meeting those goals – outside of the workplace – will be happier employees. They will see that their work and your company are making a contribution to their wealth, happiness and success. These employees have come to accept that life is full of trade-offs: they work hard for you and your company gives them the rewards to move them toward the financial security and independence that they treasure.

6. Employees who are homeowners are more honest and dependable.

Employees who are making monthly payments on their house will be less likely to participate in any behavior or action to damage their company, their reputation or the likelihood of their continued status as your employee. They need your continued favor, your pay and the possibility of any advancement at their job. Some have called your employee’s house payment as your “golden chain” which will ensure that your employee stay loyal to his or her job. Again, it should be a mutual dependence between the grateful employee and the appreciative employer – both benefiting from the arrangement hard work and fair pay.

Do you need to cut your employee-turnover costs? Do you have current employees who are making a valuable contribution to your company, branch or office but are not homeowners? Do you or your employees need some professional advice on how they could become homeowners? Download and complete this Pre-Approval Request Form and return it for a free homeownership consultation.

I will also come to your company to make an onsite presentation to your employees or a group of them about the possibility and benefits of homeownership. Many of your employees will qualify for an $8,000 refundable tax credit if they buy a house by December 1 of this year. Contact me today (BCShort@bellsouth.net)  to set up an onsite presentation at your company or office.

Leave a Comment » | $8000 tax credit, Advice to Employers | Tagged: , , , , , , , | Permalink
Posted by Brian Short

First-Time Home Buyer Tax Credit

June 27, 2009

 The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

 The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

Frequently Asked Questions About the Home Buyer Tax Credit  

 1. Who is eligible to claim the tax credit?

First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

  2. What is the definition of a first-time home buyer?

The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

 For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

 3. How is the amount of the tax credit determined?

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

 4. Are there any income limits for claiming the tax credit?

Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

 5. What is “modified adjusted gross income”?

Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phase-out limits.

 7. Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phase-out range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

 Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phase-out range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

 Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

 8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?

The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

 9. How do I claim the tax credit? Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

 10. What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

11. I read that the tax credit is “refundable.” What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

 For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?

Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

 13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

 In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

 14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

 15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?

No. You can claim only one.

 16. I am not a U.S. citizen. Can I claim the tax credit?

Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.

17. Is a tax credit the same as a tax deduction?

No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

 A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

 18. I bought a home in 2008. Do I qualify for this credit?

No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.

 19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment.

 Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

20. The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?

It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain down payment and closing cost expenses.

 Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.

 The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.

 Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% down payment requirement.

 In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and down payment costs above the 3.5% down payment that is required for FHA-insured homes.

 More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.

 21. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

 Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

 22. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

 NAHB is providing the information on this web site for general guidance only. The information on this site does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of the tax information on this web site is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. 

1201 15th Street, NW, Washington, DC 20005  202-266-8200 800-368-5242

Copyright © 2009 National Association of Home Builders. All rights reserved.

For a PRINTABLE VERSION click here.

1 Comment | $8000 tax credit | Tagged: , , , , | Permalink
Posted by Brian Short

Choosing Your Mortgage Professional

June 20, 2009
 
“Shopping for a Mortgage Professional is much like shopping for a medical doctor or an attorney. Choosing your medical or legal care based on “who is the cheapest” may not really be the best strategy. You want you choose a professional who is trained, certified, experienced and has a good reputation.” 
 
Often times, this is my response to those asking for me to give them a detailed list of all their closing costs if they select me and my company to provide the financing for their upcoming home purchase or refinance of their current home.
 
I have heard of real estate industry partners telling their customers that choosing a mortgage professional is as simple as getting a “Good Faith Estimate” and comparing the costs contained on those documents.  This sets up the borrower to work with the “best liar”, too early in the 30-60 day process of finding a home, rather than getting the most professional financing help to get the deal closed correctly.
 
How can this be?  Aren’t all “Good Faith Estimates” accurate?  Aren’t all mortgage professionals the same?  Aren’t all mortgage companies the same? 
The truth is: the numbers on the “Good Faith Estimate” given too early in the process are RARELY CORRECT!  You see, the numbers on that document are affected by one or more of the following 13 variables below:

-> Sales pricegood-faith-estimate

-> Appraised value

-> Loan amount

-> Borrower’s employment status and history

-> Credit scores and payment history

-> Amount and source of down-payment

-> Date of closing

-> Immigration or citizenship status of the borrower

-> The housing type and location (Single family dwelling, Duplex, Condo, Townhouse, PUD, suburban, rural, urban, etc.)

-> The county where the home is located

-> Mortgage Interest Rate

-> The Term (length) of the Loan

-> The Title Company being used to close the loan

I have worked for several mortgage companies during my mortgage career and even owned my own company for 5 years. I know that some “loan guys” will “low-ball” the initial estimate, only to pull out the “surprise” at the closing table when your options for making any changes are very limited.  Of the 21 separate line-item fees on the “Good Faith Estimate” I give to my borrowers when they sign their loan application forms and disclosures, only one of those fees is the same for every loan and is not dependent on any of the variables listed above.

Mortgage interest rates change daily (sometime, even more often!). I could simply print off a “Good Faith Estimate” with made up numbers as some customers request (as other ”loan guys” may do) but it will not be accurate because of all of these variables I have mentioned.  That process of collecting “Good Faith Estimates” prior to having all of the above variables identified will very time-consuming and wasted effort by the borrower and “loan guys” passing out worthless forms with inaccurate numbers.

My goal is to take the worry and uncertainty out of the process of originating, processing, underwriting and closing the loan.  I help guide my borrowers through their negotiations with their seller by providing honest numbers as they become available rather than simply making up numbers to get “my hook set”.

I have been in the business for over 11 years and nearly 100% of my business comes from referral and repeat business. A businessman can not build that kind of business by being a con-man, cheating others or participating in the bait-and-switch tactics that have riddled this industry for years.

This helps my my borrowers understand how I have built my business and how I provide a level of confidence and professionalism which will make my borrower’s Real Estate purchase a very smooth and cost effective transaction over the next.

So, you ask, how should I select the Mortgage Professional to close my loan for me?  I’m glad you asked.  Allow me to give you a few guidelines for starters:

1. Choose a Mortgage Professional who is EXPERIENCED.  Was he selling shoes or washing cars last week and then some buddy of his talked him into “trying out the mortgage business”?  Does he really know what he’s doing?  Has he been originating mortgage for 5-10 years?  Does he do this full-time or this just a hobby or part-time gig? 

NAMBCertified2. Choose a Mortgage Professional who is CERTIFIED.  Has proven to anyone that he knows the laws, the process, the programs and theory and mechanics behind the mortgage industry.  Has he taken courses and exams to measure his competency?  Is his certification a national designation? Is his certification from a professional association who can objectively measure and monitor his expertise or from some mail-order outfit looking to make few bucks?

3. Choose a Mortgage Professional with a GOOD REPUTATION.  Is your selection a true professional who is respected and well-known in his industry.  Who knows him and what kind of work he does?  Who has ever closed a loan with him?  Who can speak for his level of trustworthiness, honesty and attention to detail?  What do you know of his character and personality?

4. Choose a Mortgage Professional who is a PROFESSIONAL.  Does your choice know the market, the industry, the community, the history, the trends and your desires?  Is he a member of his professional association?  Has he been awarded and recognized by his peers and fellow business associates for his contribution to the industry and community?

During the month that your loan is supposed to close it is the most important transaction in your Mortgage Professional’s office.  “Getting it cheap” doesn’t mean much when your “loan guy” drops the ball and makes a mess of the whole deal simply because  he has “never seen anything like this before.”  That stack of bogus ”Good Faith Estimates” collected 30-60 days prior to your closing will mean very little when you find out that returning phone calls, diligently following up on underwriting conditions, and working long hours to insure that all of the bases are covered on your deal are not his priority or part of his work ethic.

Paper is cheap, and ink toner to print fictitious loan estimates is even cheaper.  Experience, Certification, a Good Reputation and Professionalism are priceless life-long attributes and qualities you want in your Mortgage Professional.  Leave the spreading of such worthless papers to those lying, low-balling, bait-n-switching, short-termers who do not deserve to work with someone like you who, understandably, expect it to get done right the first time.

1 Comment | Professionalism in the Mortgage Industry | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Permalink
Posted by Brian Short

New Appraisal Rules Bad for Consumers and Recovery

June 9, 2009

By Brian Short, CMC, CRMS, GMA

Beginning on May 1st of this year (2009) any home buyer or homeowner getting a new mortgage on their house will be up-charged $150-$250 for their appraisal and generally charged an additional $968 to close their new loan!  You mean, you never heard about this?  You thought the government was doing all it could to stimulate the struggling housing industry?  Guess again!

A year ago, one attorney general in New York, with a famous last name,

NY AG Andrew Cuomo

NY AG Andrew Cuomo

Cuomo,  struck a deal with Fannie Mae and Freddie Mac to keep them out of a potentially very ugly and very public law suit because of blind eyes they had been turning to a now bankrupt bank, Washington Mutual. 

You see, WaMu (as they are known in the banking world) had a side business they were operating where they started an Appraisal Management Firm where they required their loans to include an appraisal only from those “independent” appraisers who would join their firm and work for 3/4 of what most professional-level appraisers would work. 

Keep in mind, this did not lower the cost to the consumer.  Their appraisals still cost the same.  It was simply another income stream for the bank and a way to control who did their appraisals.  These appraisers soon learned who “buttered their bread” and were very careful to give the federally chartered bank the value they needed to get their loan closed.  Sounds fishy, huh?  YOU BET IT DOES!

Now enters the young Cuomo, called Andrew, with his eyes on bigger political prizes.  He uncovers this corruption and sues WaMu, Fannie Mae and Freddie Mac – who all seemed to know that WaMu was doing this.  (Countrywide/Bank of America STILL own their Appraisal Management firm – Landsafe!)  To head off this embarrassing high-profile lawsuit they struck an “out-of-court” settlement which goes far beyond the jurisdiction of the state attorney general.

He asked for, and received, assurances that no Fannie Mae or Freddie Mac loans would ever be accepted by federally chartered banks who required that their appraisals were done by their own appraisal management firms?  Right?  Wrong!!  Wrong!!  Wrong!!

This new agreement which went into effect on May 1st exempted ALL FEDERALLY CHARTERED BANKS!  The new agreement, crafted in Albany, NY was never approved by Congress or any state legislature. It was drawn up in some back-room to avoid a trial against a corrupt bank doing corrupt business with a corrupt Appraisal Management firm they owned – most likely known about by both corrupt Government Sponsored Entities (GSE’s) Freddie Mac and Fannie Mae!  And to top it off, ALL FEDERALLY CHARTERED BANKS are exempt!  This new “back-room agreement” only affects mortgage brokers and bankers who are generally supervised or chartered by state banking regulators.

WaMu is NoMoIf that was not enough, it now requires all appraisals to be ordered through APPRAISAL MANAGEMENT FIRMS!!!  This very same corrupt system that WaMu used to artificially inflate their appraisal values to ensure that their loans would close – making sure that no independent third parties were involved in the process of assigning values to the properties under consideration!  What?!?!? 

I thought it was the corrupt Appraisal Management Firm model of business that had proven itself to be untrustworthy in the New York back-room in that courthouse in Albany?  Why is it that Mr. Cuomo would wrongly insist that ALL APPRAISALS now be ordered and up-charged by centralized corporate middle-men who do not know local property values, local building standards, and local business practices.  This new layer of New York mandated bureaucracy is required all across the country without a single vote or hearing from industry insiders on how it would negatively affect the struggling mortgage and Real Estate industries. 

These “middle-men” are unregulated by any federal or state agency but have been given the task of arranging for 70-80% of all mortgages being closed in the country and up-charging the cost of that appraisal by $150-$250 per order and passing that cost on to the unassuming buyer or homeowner.  Those $300 appraisals are now costing $400 – $500 for someone outside the state to assign the work to someone with whom they have a working agreement who may or may not live in the area, ever work in the area, or have ever researched the housing market in the area of where the appraisal needs to be done. 

What is their qualification for getting to do this appraisal for this Appraisal Management Firm?  They have promised to work cheap and fast!  Is that who you want to do your appraisal?  Cheap and fast?!?  Who benefits from this arrangement?  The host of newly formed unregulated and unsupervised Appraisal Management Firms are making out like bandits!  Everyone else in the transaction is supervised by a state or federal agency or governing board – Realtors, Mortgage Professionals, Home Inspectors, Insurance Agents, Surveyors, Builders, Title Agents, Appraisers – they’re all tested, licensed, and regulated.  Who tests, licenses or regulates the Appraisal Management Firms?  Why should they be making any money in this transaction?  What are they professionals at doing?  Looking at the next name on a list of random appraisers who have agreed to work for what they will pay them – even if they are not local professionals themselves.

It is reported that this new layer of middle-men have added another 5-10 days on the already very slow loan underwriting timetable causing delays in loan closings which cost the borrower an additional $500-$1,000 to extend the rate lock so they still receive the rate they agreed to receive at the time of the loan application.  Some have estimated that this new over-reaching agreement will cost Americans $2.8 BILLION EVERY YEAR and cause weeks of delays in closing Real Estate mortgages!

Let me make sure I get this right – the consumer is paying anywhere from $650- $1,250 to get an inferior appraisal done which takes longer to get back simply because a nationally chartered bank had an Appraisal Management Firm in their “back pocket” and they were so corrupt that they are no longer in business.  That was the punishment put on all American borrowers by one attorney general in one state up in the northeast because he had dirt on some crooks at Fannie Mae and Freddie Mac?  This can’t be good! 

Would you like to join the thousands of housing industry professionals in calling those who forced this on you and your neighbors without a single vote or hearing?  CLICK HERE to see who you can call and make your voice of protest heard.

3 Comments | Federal Government Intervention | Tagged: , , , , , , , , , , , , , , , , , , , | Permalink
Posted by Brian Short

It’s STILL All About CREDIT!

June 1, 2009

By Brian Short, CMC, CRMS, GMA

Six months after we were told that giving the auto industries $30 BILLION would save them (in spite of the SCREAMING from nobodies like this author and others! See: http://promortgagematters.com/2008/12/05/are-they-still-clueless-a-time-for-real-ideas-to-move-forward/) GM (now affectionately referred to as “Government” Motors!) has taken our money with them – down the drain!GM

However, that’s not all!  This NEW PLAN to “restructure” GM involves another $50 BILLION from the US Government to this company which is now owned, in part, by the very thugs and shysters (the UAW) who helped bring them to their knees rather than give concessions to keep their employer solvent.  Now GM is owned by the US Government and being run by this Administration (headed by the “Community Organizer in Chief”)  the Unions put in office with the help of  the Black Panther club-toting “poll monitors” and ACORN.

GM stock is now trading at $.70 and has been taken off the Dow 30 but the UAW retirement plan is getting the backing of the US Federal Government.  What about all of those other retirement funds which had played by the rules and bought GM stock when it was selling for $90 at it peak?  Who is backing and guaranteeing those retirees? 

Why does this administration feel the obligation to artificially prop up the union retirees at the expense of the non-union retirees?  Would it have anything about securing future votes or rewarding them for past votes?  Is this really good for our free market economy?  Does this plan to pour another $50-$100 BILLION into GM before the end of 2009 really do anything for 100 MILLION non-union workers who are still fighting every week to make their house payments and keep their jobs?

frozen_credit_marketJust as a reminder, this economic crisis was brought about because of the loss of credit – first in the housing industry, then for business owners, college students, auto dealers, big-box retail chains, etc.  We have now all felt the crash of the loss of credit and free-flowing funds on the secondary banking markets. 

To continue to throw BILLIONS of dollars at each of these failing industries without fixing the PRIME ROOT of this disaster is like trying to use a “Sham-Wow!” to fix a broken dam.  There may be water all over the road but that is not hardly the problem.  Some major concrete reconstruction at the source of the cracks is what is required to keep the water from running over the road.

The issue at stake is shoring up the banking credit markets so the other industries dependent on free flowing credit (i.e. housing, autos, retail, college loans, etc.) can begin to normalize.  Propping up other industries before the banking and credit markets are stabilized is still “throwing good money after bad.” (My dad always said this.  I’m not real sure what it means.  However, I think you get my point!)

During Bill Clinton’s successful run for President against an originally economy%20stupidassumed unbeatable George H. W. Bush, who had become nearly an overnight national hero for a seemingly bloodless war to remove Saddam Hussein from his occupation of Kuwait, was given its momentum from a phrase coined by campaign adviser James Carville in 1992 when he chimed “It’s the Economy, Stupid.”  He turned the debate from Bush’s noble handling of foreign affairs to the faltering economy (which Bush had attempted to fix by caving in on his pledge  – “Read My Lips” – for no new taxes during his administration to pacify an uncooperative Democratically controlled Congress).

The Clinton campaign continued to hammer out it focus on the economy -”It’s the Economy, Stupid!”  – and they changed public opinion away from the foreign affairs hero in favor of a small-town southern Governor who had never lived or worked in Washington, DC.

Once again, the attention of the public must be turned – “It’s the Credit Market, Stupid!” – to get this currently distracted administration away from simply returning campaign favors and shoring up organized gangsterism and thugery shrouded in “labor protection” movements and “community organizations.”  The American public must see through this type of “Chicago Style” politics and demand that our elected representatives quit passing out money they don’t have in order to make promises they can’t keep at the expense of generations they won’t ever meet!

Leave a Comment » | Federal Government Intervention, Reviving the Housing Industry | Tagged: , , , , , , , , | Permalink
Posted by Brian Short

The “New” Rules of Rapid Refinancing

May 23, 2009

By Brian Short, CMC, CRMS, GMA

Many of us who have “survived” in the mortgage business are very busy these days with folks who desire to refinance their homes.  With rates in the range from low 5% to high 4%  for a 30 year fixed for many borrowers, this is an ideal time to consider refinancing to lock in an historically low long-term interest rate on your house.  Maze

However, the rules have changed for many borrowers.  The days of no documentation, high loan-to-value, cash-out, debt consolidation mortgages have come to an end. 

Does that mean it is impossible to accomplish any of these goals in a relatively painless refinance process – absolutely not!  Just take heed of the new “Rules for Rapid Refinancing”:

1.  Get your documentation organized and copied for your mortgage professional.   Employed workers and self-employed business owners will all need to prove their income and their assets to qualify for a new low interest loan.  I remind my customers that they should keep the following documents for the following length of time – just to be safe.

     a. Pay Stubs – Keep these all year until you receive your W-2 and have completed your tax return for the year.

     b. Bank Statements – Keep these 5 years.  The IRS can audit you for the past 5 years.  It your responsibility to prove your case if you would be audited.

     c. Tax Returns and W-2′s – Keep these until you die.  Let your kids throw these away for you and be amazed at how little (or how much!) you made when they were kids.  You never know when you will be asked to document income, deductions, businesses, rental houses, etc.  File a copy away in a cabinet (and scan a copy to your hard-drive in case you need to e-mail a copy for your kid’s college financial aid application, etc.) each year.

2.  You will not be able to pull cash out of your house for more than 85% of appraised value.  If you owe more than 85% of your current appraised value then you will not be able to get any cash to consolidate debt, pay off other obligations or even make improvements to your house.  Trying to get cash out of your rental house will be nearly impossible unless you owe very little on the rental house.  Getting cash out of Real Estate is not something Fannie Mae and Freddie Mac (or FHA or VA) are too interested in doing in this economy.

Does this mean that you can’t refinance your house?  Absolutely not!  You can still lock in a lower rate, shorter term (go from a 30 yr to a 15 yr), longer term (go from a 15 yr to a 30 yr), switch from an adjustable rate to a fixed rate, or combine your 1st and 2nd mortgages into one mortgage payment with a lower payment or a payment which includes principle reduction.

3.  Use this time to focus on getting out of debt and limiting your purchases of “things” to those items you can pay for with cash.  Running up credit card debt and buying vehicles (cars, boats, motorcycles, RV’s, etc), furniture, appliances or TV’s with credit is generally not the way to get or keep your finances under control. 

4. Pay cash.  Use cash.  Save some cash.  Keep some financial margin in your life buy having some cash in the bank to carry for 3-6 months in case your job, your health, your spouse – fail to meet your expectations.  Having a good payment history on your current obligations will get you in the door if you need or want to refinance your house.

5. Anticipate the future – as much as possible.  One of my Dad’s famous sayings is: “No one will loan money to a poor man!”  Once you lose your job, get sick or hurt or get behind on your payments, you’re stuck.  Especially in this current market – the squeaky clean borrowers are getting good loans.  Don’t wait to lock in on historically low fixed interest rates if you don’t have one and could qualify.  Waiting might put you into one of those categories of people who can’t qualify for one.

Is this a great market for quick and painless refinancing – absolutely!  However, there are some new rules.  Some of you are saying, “these are not NEW rules!”   “These are the rules we all used to live by.”  I agree that these rules may be new to this current generation of borrowers but are really time-tested rules for ensuring financial success – even when much seems to be crashing in on those all around us.  Whether these rules are new or old stand-bys they are in place for now.  Knowing them and playing by them will make you a winner – even in this economy!  Now, let’s play!

Leave a Comment » | Uncategorized | Tagged: , , , , , , , , , , , , , , , , | Permalink
Posted by Brian Short

Tax Credit Hoped to Entice First-Time Home Buyers

February 21, 2009

Featured on WKRN.TV News – Tax Credit to First Time Home Buyers

Thusday, February 19, 2009

Another interview with Brian Short (Tennessee Association of Mortgage Brokers Executive Director) by News 2 WKRN TV regarding President Obama’s announcement about the $8,000 tax credit being offered to  first-time home buyers for those who buy a house before December 1, 2009.

(Click on image above to see the video.)

Tax credit hoped to entice first-time home buyers

Posted: Feb 19, 2009 08:46 PM CST

2:24
 

   
 
 
 
 
 
 
 

In an effort to rebuild the real estate industry, first time home buyers or buyers who haven’t owned a home in three years are eligible for a tax credit under President Barack Obama’s newly unveiled housing plan.

“It’s a great incentive to get somebody either back into the market or to enter into market for first time,”  Brian Short, Executive Director for the Tennessee Association of Mortgage Brokers, told News 2.

The tax credit is worth 10% of the value of the home up to $8,000 from now until December 1.

“Those who have been waiting to buy a home, this is an ideal time to buy a home,” Short said.  “You’ve got motivated sellers out there right now and realtors and mortgage professionals have time to help you.”

The tax credit combined with lower home prices, lower interest rates and more houses to choose from makes it a great time to buy.

“It allows people to buy a good quality home at a price they may not have been able to afford in years past,” said Andy Voyles, Director of Operations for Elite Mortgage Services.

Individuals do not qualify for the credit if they make more than $75,000 a year and homebuyers would have to repay the credit if they sold their homes within three years.

Current homeowners can also get a tax credit of up to $1,500 by making their homes more energy efficient this or next year.

 

 

 

 

 

 

 

Leave a Comment » | Federal Government Intervention | Tagged: , , , , , , | Permalink
Posted by Brian Short

Featured on WKRN.TV News – Foreclosure Story

February 19, 2009

Nashville woman battles cancer, now foreclosure
Clip_Summary_Image
Play_Now_Button

Click on photo

to view video.

 Brief interview with Brian Short (Tennessee

Association of Mortgage Brokers Executive

Director) by News 2 WKRN TV regarding

Pres. Obama’s announcement about the

new forclosure prevention initiative being

offered by his administration on

Wednesday, February 18, 2009. 
 

East Nashville woman faces foreclosure while battling cancer

Posted: Feb 18, 2009 10:19 PM CST

 

 
 

   
 
 

 

President Obama Wednesday unveiled a $75 billion plan to shore-up the housing market.

The plan aims to help nine million families keep their homes.

People who owe more than their homes are worth will be able to refinance.

While the plan should lower mortgage payments, the president warns it will not save every home.

Molly Secours lives in east Nashville and is self-employed.  She’s caught in the middle of the housing melt-down.

When Secours bought her house, she secured a subprime mortgage loan with a carefully laid out plan to earn stellar credit and refinance with a different bank.

Things didn’t go according to that plan.

Secours was diagnosed for uterine cancer and out of work for 11 months for chemotherapy and radiation.

Now, with a mortgage rate of 9.8%, she is on the verge of losing her home.

“I go into foreclosure on March 2 unless I take this deal, which is almost higher than what I have,” Secours said.  “It’s devastating, it’s demoralizing.  People aren’t going to put themselves in this situation on purpose.”

President Obama’s plan to help the housing market may help those facing foreclosure stay in their homes.

Some question the “fairness” of his plan.

“Is it fair that I pay my bills and my neighbor who doesn’t, we’re equal and they get the same opportunity to refinance as I do?” asked Andy Voyles, with Elite Mortgage Services.  “I don’t think its fair, but the goal is to keep people in their homes.”

“I don’t understand why people, who are in a good position aren’t supportive of helping those who aren’t.  When you support your community, you help everyone,” said Secours.

Brian Short is the executive director of the Tennessee Association of Mortgage Brokers.

He said neighbors should be supportive of keeping their neighbors in their homes.

“That’s good for you as a neighbor,” Short told News 2.  “You don’t want to see the value of your home go down.”

Secours doesn’t know if she’ll be helped by Obama’s plan but said she’s not losing her home without a fight.

“There’s embarrassment and shame surrounding this, and there shouldn’t be.  What’s shameful is taking advantage of people in hard times. That’s shameful,” she said.
 

The Tennessee Association of Mortgage Brokers said they’re still waiting on the details of Obama’s housing plan.

That plan will dictate how they can help their clients who are upside down in their homes.

 

 

 

 

 

 

 

Leave a Comment » | Federal Government Intervention | Tagged: , , , , | Permalink
Posted by Brian Short

How ‘Bout a Billion Dollars?

February 16, 2009

 

Q: Is there such a thing as a billion-dollar property?stack-of-money

A: Not yet. Of course, there are some who remember when a million-dollar home was a big deal. Even with prices dropping, a million-dollar home is the norm in many areas.

But have you ever thought about how much a billion is?

A billion seconds ago it was 1959.

A billion minutes ago Roman centurions walked on earth.

A billion hours ago was the “Stone Age”.

A billion days ago no one walked on the earth.

A billion dollars ago was only 8 hours and 20 minutes at the rate our government is spending it.

I guess this makes me think…. Owning a house on a piece of land in the right location is still the best way to invest for your family.

Shall I give you a billion reasons why?

Leave a Comment » | A Billion Dollars | Tagged: , , , , , , , | Permalink
Posted by Brian Short

« Previous Entries