America's #1 Mortgage Broker

I suggested that the real estate brokerage and finance industries stop devouring flesh, as a means for survival.  That idea generated close to 150 comments.  I was surprised that nobody called a hyprocrite for advocating smaller government while funding government-guaranteed home loans.

Carl Schumacher called me out:

I also happened to notice that in the title of your blog here you're claiming to be "America's Number 1 VA Home Loan Broker." Interesting ad for a guy that feels the government shouldn't be involved in housing. Last I knew, the VA lending program is a "government guaranteed" loan program. Based on your analogy then, I'm guessing you feel it should be eliminated because the government created it?

Just sayin' . . .

Carl, this conundrum confounded me daily until...

I found the answer.

When I pleaded for our industries to stop the practice of devouring our children's flesh, I made a few references to the fact that we have never lived in a free market economy.  Historically, the march to Collectivism started in the 1930s with FDR's New Deal.  FDR introduced hundreds of Socialists into the Government and started the concept of a planned economy with the New Deal.  Chesly Manly outlines this in The Twenty Year Revolution:  From Roosevelt to Eisenhower (just read Chapter 3 and 4 for the meat of his argument).

While this wasn't a complete Marxist transformation, it introduced the concept of crony capitalism or, as Greg Swann calls it, Rotarian Socialism:

We are apt to think of Communism as being Capitalism’s natural enemy, but there is another, perhaps more insidious foe to unfettered laissez faire. I call it Rotarian Socialism, just to give it a name. Rotarian Socialism is legislation written by and for the membership of a politically-powerful elite. Most of the criticisms you hear about Capitalism are in fact criticisms of Rotarian Socialism.

Adam Smith warned, in Wealth of Nations, that when businesspeople get together, they are likely to collude against the populus for their benefit.  It is when they enlist the aid of the State, to conspire to defraud the populus through legislation towards price-fixing and protectionism; that crony capitalism has a more insidious effect than Marxism.  

The NAR's shameless push for Congress to extend or expand the home buyer tax credits are just that; crony capitalism.  This video, produced by the Acton Institute does a nice job outlining how far we've regressed since the Reagan Era:

The crony capitalism practiced by the NAR (and MBAA, for that matter) is a conspiracy to defraud the public by "rigging the game against the little guy".  It "devours the flesh" of our children because it adds to the federal budget deficit, saddling them with bills they can hardly pay.  When their flesh is eaten, the carcass will be a nation of indentured servants, cowering to a political class.

The moral relativist's argument is "the Government is spending all this money, why not give it to buyers so I can earn some commissions ?".  Please know that I understand the short-term rationalization that comes with an increased paycheck but I beseech you to wonder how much better our industry would be if we didn't have to rely on the Government anymore.  In short, theft is theft; ask Duke Cunningham what happens when the rationalizations come unglued.

You have most likely NEVER truly lived in a free market society (unless you're 90 years old).  Please consider what could be if you did, before commenting.

Please stop this zombie behavior.  Government doesn't create wealth, it devours it like a zombie devours all that is living.  Do you know what happens to zombies?  They devour everything living until there is nothing living anymore....then they die, too.

Government home buyer tax-credits are bribes.  They're bribes to get unwilling and unsophisticated home buyers to purchase assets which may be artificially inflated.  Haven't we learned enough from the mistakes of Government's social engineering in the mortgage markets?  The social engineering associated with the Community Reinvestment Act inflated a real estate bubble which popped and ruined families' opportunity to create a reliable nest-egg from equity in their homes.  It started off slowly and accelerated when expanded to encompass most any sub-prime loan.  The Government-provided backstop for losses encouraged market participants (banks and non-depository lenders) to make mortgage loans with complete disregard for the borrowers' abilites to repay those loans.  

Government intervention to entice asset purchases creates a pyramid scheme which ultimately leaves someone holding the bag.  Like Bernard Madoff did with unsuspecting investors, the National Association of REALTORs attempts to start a new Ponzi scheme based upon a Government incentive.  Someone's gonna get left holding the bag for this scheme; most likely our children.

We are in the midst of the largest "right pricing correction" of our lifetimes.  The existing housing decline, driven by the failure of the unsustainable, poor lending practices (foreclosures) is healthy.  Free markets reward prudent use of leverage and punish the irresponsible.  Many people trusted mortgage consultants and real estate agents to advise them to eschew bad business practices and make prudent purchase decisions.  Instead, we nursed on the milky teat of a Government-sponsored Ponzi scheme destined to fail.

Fail is what the extended tax credit will do.  The initial first-time home buyer tax credit was an interest-free, loan from the US Treasury.  While still immoral, it provided for the repayment of that loan to the Treasury.  We descended down the slippery slope of "jump starts", expanded the size of the credit, and forgave the repayment of those "loans" with the sole purpose of giving the housing INDUSTRY, not housing market, a boost.

To request further Government assistance for our industry is deplorable.  We need a housing market that relies on the principles of supply and demand rather than some cheap, two-bit hustle.  More foreclosures are coming and that will be tragic for millions of American families.  One man's tragedy, however, is another man's opportunity.  If we, as real estate agents and loan originators are to support the principles of private property ownership, free markets, and real estate as a reliable vehicle to build long-term security, we MUST do what is moral, regardless if it won't allow us to line our pockets.

Please say, "No Zombies!  I won't allow you to devour my children's flesh" and encourage your elected reprsentatives to act like sober, prudent people...

...not zombie enablers.

PS:  If you're a first-time home buyer, by all means take the tax credit but make no mistake about it, this credit REALLY wasn't for you, it was for us, the zombies in the housing industry.

Why Devouring Flesh Is Morally Wrong (and how you can stop doing it)

Here we go again!  It's time for our second season at MaggieBrady.com.

Maggie Brady is raising money for her school through a magazine drive.  Last year, she won the iTouch for superior sales efforts.  Here's Maggie congratulating Linda Davis for being the "smartest REALTOR in Connecticut".

Won't you consider purchasing or renewing a magazine subsciption here?  Close to half of the subscription fee supports St James Academy and maggie receives double points for online subscriptions.  Magazine subscriptions start as low as $15.00.  

Browse your options here.

From the Active Rain wayback machine.  The first ever "Active-Rain affiliated" Real Estate Bar Camp", written January 7, 2007:

A light rain couldn't spoil the excitement and enthusiasm I felt this morning as I drove into the heart of the City of Phoenix. Papa Joe Brady, my able seminar assistant, retired sales executive for First American Real Estate Solutions, and proud Luddite negotiated the streets of the boom town as we headed to the first Arizona Real Estate Bloggers Roundtable.

 
The Roundtable was a trial balloon post here at Active Rain.  I had planned to be in Phoenix this first week of the new year to write some loan applications and visit my family.  I had hoped I might convince a few AZ Realtors from Active Rain to allow me to buy them some donuts and have a collaborative discussion.  Yes, boys and girls, you heard that correctly, America's Most Opinionated Mortgage Broker broke marketing to Realtors rule #1; I bought them donuts.

Many things contributed to the excitement I felt.  Nostalgia was one of them because I spent 12 years in Phoenix.  The compelling reason for my excitement was the Roundtable, an historic event. Today reinforced my earlier declaration that Phoenix is the epicenter of real estate blogging.

The huge draw was the presence of three accomplished webloggers:  Greg Swann of BloodhoundBlog (accompanied by the lovely and articulate Cathleen Collins) . Jonathan Dalton of Phoenix Arizona Real Estate Blog, and Jay Thompson of The Phoenix Real Estate Guy.

READ:  The Bloodhound's post about this event complete with a picture and follow-up action item (BLOGINAR) 

The excitement was further driven by budding blogging superstars, Tony And Suzanne Marriott, Adam Tarr and Sharon Kotula, Ken Spencer, Mario Romero,  and "Doctor" (check his profile) Kaushik Sirkar.  The enthusiasm was apparent in newer entries to the Real Estate 2.0 world, Lorine Lovett, Brian Cross, Rich Pieropan, Nicole Whitman, Sandra Heredia, and Blake Mata.

I tried to gently moderate the Roundtable by asking three questions:
1- How did you get here?
2- Why are you writing?
3- Where do you see the future of Real Estate 2.0?

This prompted two hours of lively discussion which is not limited to but highlighted in these points:

1- Transparency is clearly working.  Consumers love to "get to know" a future real estate professional by reading about them online.  Jay Thompson shared the story of the Vanilla Pepsi buyer, I related how quickly I've built relationships with Realtors, and Greg Swann cautioned us that transparency is a double-edged sword; lie and you die.

2- Real estate bloggers blog to find business,  Adam Tarr was unabashed in his declaration of this goal as was Tony Marriott (I stipulated),  The "Old Guard" of the epicenter  Greg, Jay, and Jonathan were somewhat circumspect in the desired results of that goal but were quick to offer practical solutions to those who felt it possible.  That discussion led to...

3- The Solution; linking to local blogs for your "farm" area.  Note that we concluded you should link to local blogs, NOT local real estate blogs.  An example might be for Kaushik Sikhar to find a city council race in Chandler, AZ and link to the candidates weblogs as a mode of setting himself up as the expert in Chandler, AZ.  Rich Pieropan proudly claimed the title of #1 for Luke AFB, AZ.  When the group chuckle died down, Greg Swann ebulliently offered a detailed plan for taking advantage of the long tail by writing about topics relevant to the communities surrounding Luke Air Force Base and thereby establishing yourself as the expert.

4- The Long Tail versus SEO rankings.  Fancy words for getting ranked high on Google search versus establishing yourself as an expert online for a specific community or market.  I attempt to do this with my articles about hard money.  Thoughts steered to the conclusion that The Long Tail might indeed be the future versus SEO rankings.   One only has to look at the creation of Localism.com andMyHouseKey.org as examples of how some of the big thinkers in Real Estate 2.0 believe this war can be won.

5- Active Rain is the absolute best place to learn how to become a real estate weblogger.  The environment is friendly, supportive, and very instructive.  Newer or hesitant authors should attempt and hone the craft here.  I will personally reinforce this thought by stating that the Active Rain community doesn't care if you suck.  The members want to give constructive advice because we are grateful to have a forum to explain our views and improve our writing skills.  Newer authors MUST take the leap here and MUST do it today.  

In 13 years of lending and 22 years of financial services, I have NEVER seen a cause more exciting, a group of people more supportive, or a time more relevant.

Today was the epitome of that conclusion.  Thank you to everyone working in the epicenter.

Related posts include:

Jonathan Dalton's  Meeting at the Epicenter of Phoenix Real Estate

Jay Thompson's The Power of the Long Tail and Local Content Blogging

Suzanne Marriott's A Bloggers Blowout Blast!   

Adam Tarr and Sharon Kotula's GREAT BIG THANKS to Brian Brady - ARIZONA'S FIRST BLOGGERS ROUND TABLE

From fellow San Diegan, William Johnson.  The "Blue Bombers" of Chula Vitsa brought home the WORLD title!

Most mortgage companies offer a VA no down payment option up to $417,000 but did you know that VA loans can be for much more?

The Veterans Administration works off of a "guaranty", meaning that they pay the lender 25% of the loan amount should the veteran default on her mortgage.  Pragmatically, it would make sense that the borrower be allowed to invest 25% of the difference between the purchase price and the VA loan limit.  That's just what the VA jumbo mortgage program allows.

Some high-cost counties have higher loan limits until 2012.  In San Diego, that loan limit is $593,750.  For Los Angeles and Orange counties, that loan limit is $737,500.  Some Bay Area counties go as high as $1,094,750. That's over a million bucks for a zero-down VA loan.

What's a veteran to do if she doesn't live in a high-cost county but wants to buy a $700,000 home?  Normal jumbo loan programs require as much as 30% down payment (in distressed markets).  That high down payment prevents many buyers from owning a luxury home, offered at a healthy discount.  Veterans, however, have another option.  Use this formula to determine the down payment requirement for a VA jumbo mortgage.

In the aforementioned case, the required down payment for the $700,000 home purchase, for a property that is not in a high-cost county, is just over $75,000.  That down payment requirement is just about 11%; far below some of the higher down payment conventional loans.

What about mortgage insurance?  VA home loans don't require mortgage insurance; they charge a funding fee (which can be financed).

Are the rates really high?  That depends on your definition of "really".  VA jumbo mortgage and FHA jumbo mortgages are typically about .5% higfher than the loans under the county loan limits.  Most of the VA jumbo mortgages we've funded this year are in the 5.5%-6.0% range.

Consider offering your property with a fiancing proposal drafted by a VA jumbo mortgage expert.  Sometimes, showing that low down payment option could be the thing that attracts the right buyer for your luxury home.

Solid real estate agent relationships are the cornerstone of any professional loan originator's business plan.  While the mortgage industry has done an excellent job at consumer direct marketing, home buyers still consider the real estate agent the "gatekeeper of the transaction" and even rely on them for advice on financing.  This is especially true in the first-time home buyer market.

The value, however, of each individual agent relationship has waned in the past 6-7 years.  When I first started originating, each agent in my "Rolodex" averaged three transactions annually.  An originator looking to close 100 purchase loans annually needed to be marketing to about 30-35 agents. 

Fifteen years ago, the primary method of marketing was to show up at the agent's office and "panhandle" for business.  Successful transactions begat baskets of flowers to the agent, followed up by visits with hopes of being introduced to "office mates".  Three things changed that model:

1. Lower margins in real estate brokerages left owner-brokers seeking affiliated business relationships.  Originators found the "in-house mortgage guy" greeting them at the reception desk and escorting them back to the agent's desk.  That guided visit served as a deterrent to visiting originators and a reminder to the agent of the responsibility to their employing broker.
2. The early-decade real estate boom swelled the ranks of real estate agents and loan originators offering customers far more "friends in the biz" than they had before.  This commoditized our business and caused home buyers to "shop" better.  With greater "hidden" competition, the professional loan originator found the move-up buyer less loyal even after all the personal marketing he did.
3. Technology moved real estate agents out of the office and into their homes.  No longer could an originator show up at an office right after a sales meeting, to meet agents, because there were far fewer sales meetings.  Voice mail made floor time extinct. 

Today, originators have an extraordinary opportunity to work with large numbers of real estate agents.  The internet expanded our reach and reduced our marketing costs to near zero.  Today, a simple GOOGLE search can tell you who the active real estate agents are in a micro market, along with contact information.   The value of that agent relationship, however, is severly diminished.  In addition to Affiliated Business Arrangements, listing agents are requiring a "mirrored" pre-approval with a lender of their choice, often at the behest of the seller.

The value of a real estate agent relationship is about half of what it was ten years ago.  Each agent relationship can be expected to produce about 1.5 transactions annually.  The loan originator then must be marketing to about 75 agents to produce 100 purchase loans annually.

Today, it's never been easier to earn that business.

Our ranks have contracted and only the knowledgable originators are surviving.  That badge of honor, worn properly, is a magnet to real estate agents.  The internet has expanded our reach so that we can find, communicate with, and remain in a "top of mind status" with real estate agents all over the country.  Here are some ideas that have worked for me these past 18 months:

1. Get rich in niches.  Agents will identify you with your area of expertise just like we do with lenders.  California agents know me as the VA expert.  Specific knowledge has allowed me to market that expertise with testimonials from customers and agents.
2. Touch those agents weekly with a good e-mail marketing program; I use Contant Contact.  It is important for you to be able to track "opens" to discover who really pays attention to your content.  Follow up calls, to the agents who "open" your e-mails blasts, have a higher probability of converting.  You can "prune' the list by deleting agents who have left your last five e-mails unread.  Use content from the Mortgage Rate Watch , MBS Commentary, or MND newsletter as your weekly newsletter (if you can't write).  Properly cited, with a link back to the article, a truncated introduction can be used as content.  The important thing is to find agents who appreciate your emails.
3. Don't forget the old postcard mailer.  I mail agents a cheap yellow postcard, with my name, phone number and URL, about every 5-6 weeks.  Timed to deliver on a Thursday, that postcard has prompted many agents to call me on a Friday to ask if I'll be available to pre-qualify a buyer over the weekend.
4. Use webinars and teleseminars as tools to educate agents about new loan programs or guideline changes.  I host one monthly using Lenders Insight.  I schedule them in the evening so that I can get agents' full attention.  Whether you have three agents or thirty on the call is immaterial; you'll get the reputation as the "educating originator".
5. Call them.  Set aside two hours daily to call ten agents to see of they need anyone pre-qualified.  This will keep you in front of your 70-100 "targeted agents" every two weeks.  Consistently done, you'll be contacting them more often than their "favorite originator" and position yourself to earn the business.

Our industry funded $4 trillion at the height of the boom (2003) with only 35% purchase business.  2009 origination volume is expected to be about $2.3 trillion with about 70% of that attributed to purchase business.  As interest rates rise, expect that percentage to rise.  While the volume has dropped 40% from the high, the number of qualified originators has been cut by two thirds.

There's a whole lot of business for all of us.  Come get it.

This article is on Mortgage News Daily (opens in a new window)

I'm a Del Mar Race Track junkie.  Actually, I've been a fan of horseracing since I was a kid, playing at the Garden State Park, in my hometown of Cherry Hill, NJ.  When I moved to Solana Beach, I was attracted to the the beach, San Diego, and best of all, the proximity of the World Famous Del Mar Race Track. 

One of my favorite things to do is to take my daughter to breakfast for the morning workouts.  The horses start working out at 5AM and the track opens at 7:30AM.  You can enjoy a delicious breakfast buffett for less than $10.00 (includes coffee and juice).  From the Del Mar Turf Club website:

Early risers have a chance to catch morning workouts and breakfast in the Clubhouse Terrace Restaurant every Saturday and Sunday during the season. From 7:30 to 9:30 a.m., trackside announcer and former jockey Jeff Bloom will provide you behind-the-scenes information while you get an up-close look at many of your favorite horses while they tune up for their next race.  A buffet with many breakfast favorites is offered.

To attend, park in the main lot off Jimmy Durante Blvd., then proceed through the Clubhouse entrance to the second floor. There is no charge for admission to the event, but an $8 parking fee applies. (Those buying two or more breakfasts will have the parking price deducted off the price of their bill.)

Above is the mural Pierre Bellocq painted for the 70th Anniversary of the Track.  When I walk around the clubhouse, I'm reminded that I'm tracing the footsteps of Bing Crosby, Desi Arnaz, and Jimmy Durante.  In fact, all of those men were ushers at St James Church (now in Solana Beach) during the race season.  My daughter Maggie and I "substitute" as ushers when someone goes on vacation.  As you can see below, Maggie always wants to be part of the Del Mar Scene:

The majesty of a thoroughbred race horse awes me:

Workout riders have their hands full.  The success of a horse's next race is often in their hands:

The rider beckons the horse to run a bit as he starts the workout:

Here is nationally-known horse Zenyatta, breezing past the finish line.  My home is just on the other side of the hill beyond the finish line:

When all goes according to plan, your horse will win and you'll be standing in the Winner's Circle, like Maggie. 

The following Mission Valley Condo complexes are eligible for FHA and VA financing (as of 8/6/09):

Friar's Pointe
Friar's Hollow
Friar's Mission
Creekwood at River Run
The Franciscan
Friar Gardens
Union Square
River Scene
Mission Gate
Mission Greens
Mission Heights
Mission Playmor
Mission Plaza
Mission Village
Mission Ridge
Mission Verde
Park Villas North
Rancho Mission Villas
River Colony

This information is not guaranteed for accuracy.  FHA condominium approvals can be searched at the HUD portal and VA condominium approvals can be searched at the VA portal.  It is advised to search at the portal before visiting the complex.

Many conventional lenders are defaulting to the FHA approval as the bellwether approval for Fannie Mae or Freddie Mac eligible loans as well.  While conventional loans aren't subject to the rigorous testing the FHA uses, the credit crunch has caused lenders to usurp the traditiional loan-by-loan approval process and only accept FHA approvals.

Contact me for specific requirements if you are looking to purchase a Mission Valley condo.

REQUIRED READING FOR MISSION VALLEY CONDO BUYERS:

Wondering if there really is a shortage of condos for sale?  Read this.

Want to make sure you don't overpay for that condo?  Read this.

How should you prepare for your loan application?  Read this

Where are mortgage rates headed?  Read the mortgage rates report