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I’m suddenly excited by the prospect of a “Subway Series” here in NY as the Yankees continue their rocket launch into the post-season. The other NY team leads the National League. Woot! October, here we come…!

And, as George Will and so many others have learned, there is much wisdom to be gleaned from the game of baseball that we can use in our daily lives.

I came across two quotes today that I’m certain can be applied to the [tag]homebuying[/tag] experience and the [tag]mortgage[/tag] business.

The first, from a NYTimes.com article about A-Rod and Warren Buffett, features mighty words from the world’s second-richest man about investing:

“The most important thing in investing,” Buffett said, “is what (Red Sox hitting star, Ted) Williams said was the most important thing in hitting” — waiting for the right pitch.

“What’s nice about investing is you don’t have to swing at pitches,” Buffett said. “You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out. You can wait for the pitch you want.”

Those folks familiar with my viewpoint on [tag]negotiating[/tag], including the ability to get up and walk away from the bargaining table, will see where I’m going with this.

The “[tag]dream house[/tag]” exists in your mind. You can make just about any house into that [tag]dream home[/tag]. Therefore, you should never “fall in love” with any given [tag]house[/tag]. The bottom line of negotiating the purchase of your home should be your comfort level with the [tag]monthly payment[/tag], and that’s based on the price you pay. If you can sit tight and wait for “the right pitch” then you will find not only that your negotiating skills have improved, but you will find the right house.

The second baseball bit is also from NYTimes.com today. Mariano Rivera, the famed closer for the Yankees, is still going strong after 13 years in the majors. And he’s still confounding hitters with his brilliant “cutter” pitch.

And ever year fans and journalists and other Major Leaguers speculate on whether or not “Mo” still has what it takes.

Here’s his response: ” “It happens every year, so I don’t get offended,” Rivera said. “People have the right to say what they want to say. That’s not what I feel, but I cannot tell people what to do or what to say about me. I always know who I am and what I’m capable of doing.”

I LOVE that! Confidence in your abilities is what brings any professional to the top of the field.

Often I have met resistance from folks on the ‘net for my opinions on things like recommending 30yr [tag]Fixed rate mortgage[/tag] loans instead of [tag]ARMS[/tag] and other “exotica.” I’ve stood my ground no matter the weight of popular opinion against me—especially from other mortgage professionals.

That’s difficult to do when the business world around you is moving fast and furious with crazy loan offerings like Neg-Am I/O 2/28 [tag]ARM loans[/tag] and potential clients focus on what they want to hear instead of advice that has their best interest at heart for the long term.

In the end, like Mo and his cutter, I managed to keep coming back and closing loans. Where are the other mortgage pro’s now?

Go Yankees…!
[tags]WordPress, WordPress Plugin[/tags]

Blatant scamming by a mortgage professional. I don’t care how the correspondent for the Times reads it, I see it for what it really is: a scam.

This is my opinion, of course—my IMHO—but one based on what I know of this biz in which I work and the many less-than-scrupulous “pros” who’ve been prowling like hyenas these past couple of years.
The article at NYTimes.com focuses on the despicable ARM loan, specifically those short term fixed ARMS (2/28’s being the most notorious) with low teaser rates fixed for a while before a conversion to an adjustable rate. Many, many, many of those loans are adjusting now. Many more will adjust in the fall according to statistics cited in the article.

But, I digress; back to the scam part.

The blatant scamming mortgage slimebag part is the story of the California business consultant who, when contacted by the Times correspondent for a background interview with homeowners with ARM loans, doesn’t even know she has an ARM loan! The Times correspondent received this woman’s name from aforesaid scamming mortgage slimebag when queried as to a list of ARM customers.

Sorry, but I don’t believe the mortgage person for a second when he responds sheepishly that she just didn’t realize the fact she had an ARM not a fixed rate mortgage.

WHAT!?!

How could a business consultant misunderstand something so basic, so important and so apparent in the black & white of the closing documents?

By way of answering that question, I provide the following background:

I heard a story recently from a paralegal who closes loans for banks. The story was of a closing where the borrower was signing docs for an Interest Only ARM loan. The borrower asked the paralegal if what he was reading on the Note was correct because he was told by his mortgage “professional” that he was getting a fixed rate, regular amortizing loan.

When the paralegal acknowledged the truth apparent to the borrower’s own eyes, the mortgage person put his boss on the phone with the paralegal. The boss proceeded to tell the para to “shut the hell up.”

The para was then asked to leave the room. After a fifteen or twenty minute conference behind closed doors between the borrower and the mortgage “pro” the documents were signed and the closing completed. Apparently the mortgage pro convinced the borrower that he was in fact getting a fixed rate loan, NOT an I/O ARM!

What do you think of that? I’d say it is pretty obvious how that business consultant “didn’t realize” she had an ARM loan. She was told by her trusted mortgage advisor that she was signing for a fixed rate loan.

The Times correspondent puts the whole mess down to an “…honest misunderstanding in which the broker believed that he had explained the terms of the loans more clearly than he had.”

Oh, rubbish!

The borrower has her closing documents, including the Note. Did she not ever READ the Note at the closing? Or was she just told, “Sign here, here, here, and HERE.”

I’ll bet dollars to donuts she didn’t have an attorney representing her at the closing. Oh yes I would.

I’ve just read a funny article at NYTimes.com written by a self-confessed “information addict” and her quest to discern—several times a day, apparently—the value of her home and thus her potential wealth (or lack thereof) at any given moment in time using a myriad of internet resources. (I know that sentence is cumbersome, but so are the activities of our information-seeking heroine!)

At one point she likens the activity to party tricks, “… by announcing to our friends all kinds of delicious snippets that once were considered intimate, known mainly to brokers or people with enough time to drive to the courthouse to flip through musty files.”

IMHO, I’d have to agree with the party tricks bit, but I’d have to disagree with the notion that this information was “known” to brokers.

Certainly property value information has long been available to brokers, but that doesn’t mean they were either aware of it or using it on a daily basis. I don’t know how many times in my 18 year career I have seen a house listing that was beyond the scope of reasonable or how many times I’ve had to explain to a broker that the house didn’t appraise only to be met with a blank stare (on the other end of the telephone).

While this information has been more readily accessible to real estate and mortgage professionals, that doesn’t mean we all walked around accessing the info; certainly not to the degree the NYTimes.com correspondent does for her own home using the ‘net.

As for the “party tricks,” yah, that’s about the best way to categorize such an activity. I mean, what else can you possibly hope to do with this information? How does this help you unless you are about to make a serious decision about whether to sell your home or buy one?

I don’t even think it helps you in determining whether or not to refinance. As the correspondent points out, “After looking at the most recent comparable sales, Mr. Raful said my house was worth $100,000 more than the highest online estimate.” Mr. Raful is the appraiser who appraised her house when last she refinanced.

Read the article and have a good chuckle. And keep your “slightly-cynical” hat firmly positioned on your head as you read: this “readily available” information isn’t useful to most folks on most (if not ALL) days of the week, most of the time, most every year. Like a lot of stuff on the internet, there’s accurate and then there’s just plain silly.

My favorite quote from the article is by a Professor Shiv, an associate professor of marketing at Stanford University: “The Internet makes it easy to get too much information, from too many conflicting sources, and all it’s going to do is to give you ecstasy on some days and pain on others.”

Here, here.

Anyone have any better party tricks?

I haven’t written for awhile as I’ve been busy searching for, and making a transition to a new company.

Lots of NEW things soon to happen, and I’ll keep you posted when they do.  So, watch out for NEW!

You spend enough time chatting on the Craigslist Housing Forum, and you get to “know” the regular folks by their handles. There are a lot of smart, decent people who contribute to the many and varied conversation threads there.

Here are some witty Limericks from one of my Craigslist pals, “Pelham Bay.” Enjoy.

There once was a man from Hempstead,
Who was known as a real Bubblehead.
He held on to his money,
Which was really quite funny,
Cause the house he lived in was rented.

*****************************************************
A lady named Cindy MaGee
Sought an apartment without any fee.
The broker said okay,
But first she’d have to pay,
$2500 up front for the key.

******************************************************
A friendly young guy named Bert,
Wanted to buy without getting hurt.
An ARM zero-down subprime,
From the lender, I.M. Slime,
And now our friend Bert is eating dirt.

****************************************************
FSBO she read in the ad.
“Well”, she thought, “This can’t be all bad”.
So she went out and bought,
Without giving it a thought,
She’s now living in a condemned leaky pad.

***************************************************
Housing prices are falling each day.
If you wait, then the less you will pay.
I decided to wait,
For the very perfect date,
Now I sleep in a barn on the hay.

**************************************************
Old-world charm, a real “must-see”.
Hurry now and you’ll get it “no fee”.
Leaky windows and doors,
Chipped paint on the floors,
How lucky can a poor renter be ?

Referrals, referrals, referrals. That’s where business is at.

I get much of my business from referrals, either from previous clients, or from attorneys, accountants, and Realtors.

Every time a new client is referred to me, I feel that someone has trusted me with something special, her word and her reputation.
The time this person took to refer a friend, family member or client to me indicates a level of trust you just can’t get by advertising any other way. I take each referral as a vote of confidence in my experience, talent, forthrightness, and product.

I refer my clients to other professionals, too.

A new client asked me recently, “How does an attorney get on your list?” I confess my reply was lengthier than I thought it would be. I ran down some experiences I’d had with different attorneys on my list; how I came to know them, the quality of their work, ethics and communication. I realized at the end of a rambling monologue the bottom line for me was the fact that I could put my personal reputation on the line and refer my client to these attorneys with complete confidence in their professional abilities.

Listen, if I want a bad reputation, I can do that myself, I don’t need help from anyone else! When I refer my client to any other person for any reason, I do so with the knowledge that my good name will remain intact. Indeed, very likely my reputation will be enhanced through such a referral experience. I love when a client calls me later and says, “Wow, thank you so much for referring me to that accountant/attorney/engineer, etc!” That client’s good experience reflects handsomely on my good name.

I decided to write this week’s article on this topic because of some recent experiences with clients referred to me.

In one case, the client and her daughter are purchasing their first home. They were approved for a mortgage through a mortgage broker. The loan they were approved for was a Sub-Prime loan. Unfortunately, the Sub-Prime bank that approved their loan fell victim to the recent disaster in the marketplace and went out of business. The mortgage broker could not find any other way to approve their loan.

This First Time Buyer was left not only without a loan approval, not only with her dream of homeownership about to be smashed to smithereens, but also with her contract deposit of $22,000 at jeopardy.

I found a way to approve her loan and we’ll be closing in about two weeks. The client had an attorney referred to her by the original mortgage broker. I called this attorney, left detailed messages, and never heard from him until almost a week later.

Now, in any real estate transaction, you hire an attorney to protect your interests, and, in this particular instance, your downpayment of $22,000. To my mind, any atorney who doesn’t respond to a message from a mortgage professional in the way of, “I’ve preapproved your client’s loan, she wont’ lose the house, please call me immediately,” with his client’s dreams and downpayment at stake is an attorney who doesn’t deserve the referrals he’s receiving. He doesn’t seem to really care about his client. Needless to say, that attorney will never be on my referral list.

(The client is now working with a brand new attorney from my list who spoke with the Seller’s attorney within minutes of the client retaining her, then updated me via email and telephone)

The second client recently referred to me is a young woman whose mother passed away recently with no will. This woman lives in the house with her children, but the deed and the mortgage are both in her mother’s name. Her first words to me were, “I’ve been getting a lot of advice and I don’t know who to trust. I just want to work with someone who will guide me correctly.”

I immediately referred this woman to an attorney whose practice includes estates. I also managed to get a preapproval for a mortgage for the client, even though her credit score is quite low.

These two situations inspired me to write about referrals because I feel that my referral “team” is one of the best any finance professional could have. At the best of times, it’s good to be referred to a competent professional for whatever service it is you need. And now, in these very uncertain real estate and mortgage “times” it is more important than ever to get the right referral to a team of professionals who work in the best of all ways: competently and with confidence their work mutually supports their own reputation and the good name of the source of the referral.

When you have a foundation of good moral objectives, clear moral fundamentals, then your business sense of how, when, where, why and the “what” of doing the right thing for your clients falls easily into place.

A good moral compass guides you everyday in how you conduct yourself personally and professionally. In the area of finance—whether it’s mortgage financing, accounting, stock investing, or any other financial endeavor one might undertake—that compass needs it’s own financial indicators, or “points” of North, South, East and West.

I’m proud of the way I work with my clients. I strive to find the best path towards the best loan approval for them. My advice to my clients is always seasoned with that moral sensibility so that I can objectively guide them through one of the most difficult processes of their lives, that of buying a home.

These same clients often rely on me for guidance in other areas of finance and the finances of homeownership. I use my financial “moral” compass to steer them on the correct passage, too. When I know how to advise based on my personal or professional experience, I use that to help them. When I don’t know the proper counsel, I direct my clients to professionals who know better than I, such as attorneys and accountants.

Ben Stein is not only one of my heroes, I consider him to be one of the “points” on my personal financial “moral” compass. Ben gives great advice; his observations on all things financial are clearly rooted in a strength of character that only comes from having a powerful moral direction to do the right thing.

In this week’s NYTimes.com’s “Your Money” section, Ben quotes Martin Luther King in an article about backdated stock options.

Ben’s quote of MLK: “Somewhere somebody must have a little sense, and that’s the strong person.”

While you may have no interest in stock options, or insider trading or the quirks of the S.E.C.’s dealings with corporate America, you will definitely discover in Ben Stein’s writing a compelling moral message.

I count on just such messages from Ben to help define how I conduct my business, advise and work for my clients. I recommend reading this article and more of Ben’s work: it will help you, too, with your own financial moral compass.

Lo and behold, in today’s NYTimes.com there is an article about how sophisticated software sped up the subprime mortgage boom.

Below is the link to the article, but here’s the paragraph that caught my eye:
“The old way of processing mortgages involved a loan officer or broker collecting reams of income statements and ordering credit histories, typically over several weeks. But by retrieving real-time credit reports online, then using algorithms to gauge the risks of default, Mr. Jones’s software allowed subprime lenders like First Franklin to grow at warp speed.”

Here’s the link: Subprime Loan Machine

Now more than ever, Homeowners will need to work with experienced Loan Officers to find the best solutions to their refinancing needs.

An experienced professional does his homework so the client doesn’t waste time on the wrong loan. A Loan Officer with experience behaves like a trusted advisor, using experience to properly qualify the loan scenario, including checking value and credit. The advisor then looks not for the program he wishes to “sell” to his client. Instead, the experienced Loan Officer recommends the loan program that best helps the client accomplish his goals.

In this way, the Loan Officer is looking far ahead, beyond the loan closing with this client. The Pro is thinking about reputation.

When you do the right thing for your client, you enhance your reputation as that trusted advisor.

Doing the right thing means doing your homework without wasting the client’s time or money (on appraisals and application fees for loans that just won’t work). Doing the right thing means listening to the concerns and goals of your client. You then advise the client on the best loan product for his needs.

You DON’T push some ridiculous loan on an unsuspecting client. You don’t give them a loan that’s going to put them in a worse position further down the line. Instead, you counsel, you advise and you prepare your client for the best possible refinance at this time. You don’t abuse that trust: you earn and maintain the client’s trust.

The client always remembers, whether the experience was good or bad. And when the Loan Officer does the right thing, the experience is always good. The client remembers. And tells friends and family about the excellent Loan Officer who worked on his behalf to find the right financing.

This evening I saw a credit report for a retired homeowner on a fixed income. This client wants to refinance his first mortgage and second Home Equity Line of Credit into one loan. He also wants to take some cash out to put some new siding on his house.

Obviously he has spoken to quite a few mortgage people in the past three months. How did we know this? Because there were 59 mortgage inquiries on his credit report!

Now, it didn’t take long for us to determine this client had a particularly difficult financing situation. So we took the sober, professional approach of experienced Loan Officers.

First, we consulted with our appraisal staff to determine what would be a reasonable value for the client’s house. Next we spoke with the client about the type of financing he’s most comfortable with.

He really seemed to appreciate our professional approach.

Obviously the 59 other numbskulls who had spoken to him (and run his credit) before us, couldn’t find their way to providing the proper counseling. They didn’t know their Underwriting guidelines well enough to consider a wide variety of financing options, then discard those that made no sense for this borrower.

And that’s what it’s all about in today’s market when considering refinancing: working with an experienced professional Loan Officer who takes the time to listen, the time to care about both your financial comfort and the Loan Officer’s professional reputation.

These last couple of years have been really insane in the mortgage business.

Zillions of newbie loan officers jumped on the mortgage bandwagon hoping to make their first million dollars before they turned 21. A Sub-Prime industry out of control with lax underwriting, insanely cheap loan products (armed with timed fuses to explode in the near future), and more of those newbie loan reps eager to create business streams from experienced (and sober) loan officers like me.

Worst of all: consumers seeking to be guided not by the voice of experience, but instead hellbent on finding the LOWEST PRICE regardless of the consequences accepted negatively amortizing adjustable rate loans sure to bring trouble for that homeowner later on.

Whoa. Stop the carousel. I’m dizzy and I want to get off.

Wait a minute. I never got ON the carousel in the first place. But, man, it was difficult to do, avoiding that freak show ride! Think of all the money I could have made!

I kept on quoting 30year fixed rates for regularly amortizing mortgage loans.

You know, the kind that gets you a great rate for your circumstances (credit, income, equity), but doesn’t put you into a potential nuclear meltdown 12 months after closing. The kind of loan that helps you achieve your goals of homeownership or refinancing at a rate that doesn’t change and a payment that actually works over time to reduce your loan balance. The kind of loan that most consumers searching for the BEST QUALITY AT THE LOWEST PRICE should have. The kind of loan that doesn’t put you in jeopardy of losing your home in foreclosure. That kind.

But now, to quote Dylan, “Times, they are a changing.”

Think of the worst car wreck you have ever seen on the highway. You’re in the southbound lane, you’re stuck in bumper to bumper traffic backed up three miles, and then you come upon the scene of the accident after forty five minutes of cursing and steering-wheel-pounding. You see it: the accident in the NORTHBOUND lanes. That car wreck.

And boy, when you see it, it’s a grisly, twisted-metal, rubber-skidmark mess of something that used to resemble a couple of motor vehicles.

Well, that’s what the Sub-Prime mortgage industry looks like right now. These guys are in such a wreck, the programs are literally changing or disappearing every couple of hours. Not to mention the Lenders, themselves.

They have finally stopped counting the commission money and actually started checking the foreclosure statistics. After the fact. Yeah, that’s what I’d call excellent “due diligence” for Bankers!

The owner  made a joke in our sales meeting this morning.

A loan product was outlined. Our Operations Manager said, “Those are the guidelines for XYZ Sub-Prime Bank for that product.”

“Until this afternoon,” said the owner, himself.

We laughed heartily. Jocularity rebounded around the table.

Why were we so mirthful? Because we’re still standing, originating good loans for our customers while all the fledgling-fast-talkers are running away! Because we tend to take a more sober approach to mortgage lending. We actually try to watch out for our customers. We don’t put them into loan products that are timed to explode sometime in the near future.

And when all those newbies are long gone, we’ll still be here, doing the right thing and closing mortgage loans.

Right, that having been said, let me say this: LOWEST PRICE IS NOT THE BEST PRODUCT!

(I came across that blurb yesterday when browsing through a circular from a computer superstore.)

Let’s jump back up top where I talked about how much money I could have made. Yes, I could have quoted low and written a whole lot more loans than I did.

Instead, I banged my head against that (concrete) wall telling prospective clients: “I won’t put you in a loan product like that. It’s not good for you. Let’s talk 30 year fixed rate, that’s the best loan for you!”

And I lost a lot of those prospects. And I didn’t make the money. Boohoo.

But I couldn’t do it. I couldn’t quote low just to write the loan. I couldn’t in any good conscience put my customers into a loan that would increase the loan balance every time they made a payment. Or a loan that would adjust to some ridiculous rate after only one year (Oh, the LIBOR Index is evil incarnate! What, all of a sudden my client’s income is going to increase 150% in twelve months? I think NOT!).

No, I could not do that.

But the folks refinancing their homes wanted to obtain the LOWEST PRICE FOR THE BEST PRODUCT. So they ran off to that 8pm telemarketer, fresh out of the fast-food-franchise-fryer-patrol, who promised a payment substantially lower than the one I had just quoted.

No matter which of a dozen ways I tried to explain how bad those loans were, all the prospective refinancers wanted to hear was: LOWEST PRICE.

Which brings us full circle to the crashing Sub-Prime industry, competition, and joyful, experienced, mortgage professionals in March, 2007.

The industry is a car-wreck. Aggressive loan programs are disappearing faster than Bruce Willis in “Armageddon” when the atomic bomb explodes. Lenders are waking up to analyses of their originations and finally using the term, “Common Sense Underwriting.”

Those youthful Millionaire Wannabee “Loan Officers?” Gonzo! All of a sudden the fast food restaurants ‘round Long Island seem incredibly well-staffed!

What was never real competition for we experienced professionals, only the commission-seeking enemy of consumers is now gone, gone, gone.

That leaves us, the happy, experienced, mortgage folks.

Lowest Prices? Yes, we’ll get that for you if it’s the right loan for you.

Experience is what we bring to the table and we’ll use it by the truckload to provide our clients with valuable loan services that get them where they want to go without any gimmicks, ticking time-bombs, or potential car wrecks.

Bank on our experience to get what’s BEST for you at the LOWEST price that makes sense. Because when the smoke clears from that northbound-lane car wreck, we’ll be standing there waiting to help you navigate the highway with patience, confidence, and a loan product that serves you instead of explodes on you.