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Mortgage origination is not a creative endeavor; mortgage planning should be.

A mortgage should be functional as well as stylish.  It's a little black dress or blue blazer, accessorized properly, to make the user comfortable and confident about their  choices. 

It starts with the expected hold time of the mortgage, not the house.  Life events like college for the children, potential promotions, remodeling, major purchases, and anticipated appreciation, all play into the hold time for a mortgage.  While homeowners may expect to live in a home for 20 years, economic and life-style events dictate that the loans can change as often as color choices.  Just like "pink is the new black", fixed rate loans may be the new risk.  Erring towards the "staples" rather than the "latest fashions" is always preferential.  Blue blazers, however, change with the times.  While a suit always seems appropriate, it CAN signify a staid and lazy approach; much like a 30-year fixed rate mortgage.  The ramifications are similar.  Like a nebbish at a dance, the 30 year fixed rate loan can blend into the backdrop and result in missed opportunities.

Flair then, comes in the proper tailoring of the mortgage.  Interest-only and negative amortization loans, attract opportunity (like investment opportunities) like a plunging neckline attracts the admiring glances at a healthy decolletage.  Employment of "exotic" loan choices must be used to accentuate those assets while minimizing unwanted attention.  Intent then, is the driving factor.  We want to attract the "proper" opportunities while avoiding those unwelcome advances.

Enter the professional mortgage planner.  She assesses the environment, like a wardrobe designer would ask about the event.  Environment, economic or social, will dictate what is and isn't appropriate.  She understands the user's tolerance for "risk".  While wardrobe designer would understand that a middle-aged accountant might be uncomfortable in a lemon yellow blazer, the professional mortgage planner understands that a certain loan solution, while stunning for a young bombshell, would make some matrons feel self-conscious.  The creativity lies within the ability to make the right choices for the age, personality, and comfort level of the user.

Mortgage borrowers should not shop on price alone.  While certain financial decisions are akin to "picking up a pair of jeans", a mortgage solution should be approached with the diligence applied to a wardrobe purchase for a gala event.  Quality, experience, and execution applies when selecting the proper mortgage planner; sometimes shopping on price alone can result in a costly mistake.

Creativity, in mortgage solutions, is much like a perfect outfit.  Certainly, some users can make fashionable and appropriate  wardrobe decisions, unaided- the same could be said for mortgages.  The wise individual leaves little to chance,  For a few extra bucks, a knowledgeable fashion adviser can outfit you properly...just like a professional mortgage planner.

The cheapest outfit can often cost you the most money- just like the cheapest mortgage. 

an excerpt: 

What type of loan will the Treasury make to homeowners?

The term can be for the lesser of:

1- the remaining term of the first mortgage

2- 65 less the age of the primary borrower.

The interest rate can be the corresponding term treasury rate, plus .5% (for administrative costs). Maybe we can use some of that “yield spread” to coerce a few mortgage brokers to “originate” this government debt (okay, that was completely self-serving). For a 42 year old, with a 27 year term on his first mortgage, the term of this new government loan (in second position) would be 23 years (65-42=23). If a 23 year treasury bond yields 4.1%, than the note rate for the new loan will be 4.6%.

The borrowers never have to make a payment on this debt; it accrues like a negative amortization loan. In the aforementioned example, the balance would grow to about $168,000, after 23 years. With a first mortgage paid down to $140,000, we’re banking on the future value of the property growing to $308,000, by the year 2031.

When the house is sold or refinanced, the government loan is paid off. We’ve essentially solved the liquidity problem, bottomed the real estate decline, and “helped” real people by using government funds.

How Will We Pay For Such A Hare-Brained Idea? 

The Federal Reserve Bank Cut both the discount rate and federal funds rate .75% today in an effort to stimulate this slowing economy.  While commodities' prices accelerate, the housing market and subsequent liquidity crisis is dragging the economy into a recession. 

We call this phenomenon stagflation and it's REALLY  bad for the economy.  The Fed has been aggressively cutting interest rates and the declining housing market is closing down mortgage companies, investment banking firms, and real estate brokerages.  What more can the Fed do to help?

The Fed can (and will) buy mortgage-backed securities. 

Rather than to buy treasury notes in the open market, the Fed will be buying mortgage-backed securities.  They will want to get those assets off investment banking firms' balance sheets and provide stability to the MBS market.  Remember when I said that only the uneducated pay attention to the treasury note to determine the direction of mortgage rates?  Today is proof.

The spread between treasury notes and mortgage-backed securities has been widening these past six weeks. Why?  America was considered to be a sub-prime nation;  everybody was expected to default on their home loans.  Expect the Fed to prop up the MBS market in the next 4-6 weeks.  That will be bad for treasury notes and good for MBS.

Remember when I compared this to the junk bond crisis of the early 90's and advised you not to panic? Now is the time to take action.  There will be some great opportunities to lock into a low mortgage rates during the rest of this month.  If you're closing a loan in less than 14 days, lock your rate. Otherwise, float and see mortgage rates decline a bit.

I am always available for your question at (858)-777-9751.  March has been a very busy month for us so I may not be able to answer your questions immediately.

I’m fascinated by this whole Ashley Dupree story because the mainstream media came into OUR world, the Web 2.0 world, to break the story. Equally as fascinating is the fact that OUR world, the Web 2.0 world, allows Ash to immediately profit from her art. Ashley Dupree disintermediated the onerous process of a recording contract, studio time, and pre-release marketing and got her product to market in less than 36 hours!

We all talk about the “long tail search” and how we can profit immensely off the consumer niches exposed to us by the internet. What I’m learning from the Ashley Dupree story is that it’s no longer the big who eats the small, it’s the fast that eats the slow…which begets this question…

How will YOU profit when the long tail search becomes your name?

Get the answer here 

How can Martha Stewart’s case study teach Ashley Dupree how to become America’s Next Sweetheart? More importantly, what can you learn from Martha’s PR/Marketing strategy to boost your online marketing efforts?

Who is Ashley Dupree and why do we care about her? Ashley is a budding songwriter and singer with a compelling story. She was cast into the limelight as Eliot Spitzer’s paramour; taking a few large a month for companionship. Now I don’t want to comment on the morality of prostitution; in 49 states, it’s illegal. Whether you’re an Emporer’s Club “provider” or a sex worker trolling Grand Central, the State of New York considers prostitution a crime. The allegations against Ashley have not been proven in a court of law and frankly, I don’t care if she did it or not. Why?

Most Americans view her actions as a private matter; one look at her MySpace profile shows that 5 million people have shown an interest in her. Many well-wishers have sent messages of support. Ash is getting some eyeballs. Let’s look at Martha Stewart’s case study to see how Ash can go from being just another R&B wannabe to America’s Sweetheart.

Read the entire article 

What is the new FHA loan limit for  (insert your area)? 

I was a guest on Real Estate Radio USA, yesterday, hosted by Barry Cunningham and Barry Johnson.  I talked about the impact of the higher conforming and FHA loan limits and how it might shore up the "desperate" real estate markets.  Real Estate Radio USA is a provocative and engaging program for real estate professionals and airs daily from 1PM-3PM (Pacific Daylight Time).  Listen to my interview here. 

If you just want to find out the NEW FHA loan limit, here's a synopsis (click the HUD link, at the bottom of the page, for YOUR new FHA loan limit): 

• As high as $729,750 for one-unit properties (as high as $1,094,625 for one-unit properties in Alaska, Hawaii, and the U.S. Virgin Islands).
• As high as $934,200 for two-unit properties (as high as $1,401,300 for two-unit properties in Alaska, Hawaii, and the U.S. Virgin Islands).
• As high as $1,129,250 for three-unit properties (as high as $1,693,875 for three-unit properties in Alaska, Hawaii, and the U.S. Virgin Islands).
• As high as $1,403,400 for four-unit properties (as high as $2,105,100 for four-unit properties in Alaska, Hawaii, and the U.S. Virgin Islands).

The maximum loan limits vary by geographic area. To determine the current FHA loan limit for your area, visit HUDs Web site at: https://entp.hud.gov/idapp/html/hicostlook.cfm.

Warren Buffett describes his investment philosophy as being fearful when everyone else is greedy and greedy when everyone is fearful.  Today, fear abounds in the mortgage bonds market and that is driving mortgage rates higher.

Rampant fear is why I'm suggesting that borrowers float their mortgage rate. I had been advising borrowers to lock loans, until all hell broke loose, on March 6,2007.  Investors are worried that the mortgage bonds they hold will be worthless.  This market is a lot like the junk bond market of the late 80s.  Those that panicked lost money; those that kept a cool head, profited.

Today a 30 year fixed rate loan is offered at 6.25%, up from 5.875%, and a 7 year ARM is at 6.125%, up from 4.875%. 

Can you see how much panic there has been in less than a week?

I think the market will calm down and traders will pay attention to the economic figures. The Consumer Price Index is due out Friday and that should be the big market mover.  Float your mortgage rates, for now.  Keep alert and keep checking back.

Contact me at (858)-777-9751 with questions or apply for a mortgage online for a quick response.

Zillow announced the professional side of their mortgage offering, last night:

As a mortgage lender (broker, loan officer, originator, bank), you have an opportunity to be one of the first through the door for Zillow's new mortgage offering, launching in the coming weeks. Based on our research, we are certain this service will be enormously valuable to both lenders and consumers. Since the product hasn't launched, we're not sharing specific details just yet. But we can tell you that lenders will receive FREE and unlimited access to Zillow consumers who are in the market for mortgages.

Greg Swann covered the offering in usual detail with Do you want some earth-shaking news? In showing us a first tentative glimpse of its new mortgage lending product, Zillow.com may in fact be reinventing — and perfecting — Capitalism:

This is what Zillow is doing — national, verified reputation management for loan originators. It’s really, really nothing for now, not much beyond a pulse check. And yet it is everything, because it is the free-market asserting its natural right, its sacred obligation, and its uniquely-inescapable power to police itself.

Do you understand? Where markets do not self-police — as with Craigslist.com and, more importantly, as with state occupational licensing laws — endemic, epidemic, pandemic corruption is the only possible outcome. These results, which we patiently observe almost without exception, all the while insisting that they are only temporary aberrations — these results are the only possible outcomes of arbitrary decision-making systems.

Todd Carpenter has been following the Zillow Mortgage Offering the longest.  His initial remarks can be found at Zillow Mortgages to give loan originators “absolutely free and unlimited access to consumers looking for a mortgage” :

No matter what sort of product they offer, the one indisputable fact that they have going for them is that they know how to develop traffic to their site. After a conversation with Zillow’s Community Relations Director, David Gibbons, the good news is, they’re going to offer up that traffic to you for free.

“Absolutely free and unlimited access to consumers looking for a mortgage”

He must of told me three times. I’m not surprised either. I asked my readers, and other mortgage bloggers from around the net to predict Zillow’s mortgage play. Then I offered up my own predictions. It still don’t know exactly what they have up their sleeve, but I think I’m more right than anyone else. David did admit to me that he doesn’t think I’ll be to surprised at what they have to offer.

Zillow’s business model is to create conversations between real estate professionals and consumers. They are trying to create as much content as possible to sell adds on. I think the mortgage play will be largely the same.

In typical fashion, Todd's scheming to find a way for originators to hugely benefit by leveraging the Zillow offering and wants to document it in our Mortgage 2,0 world by

I’m looking for a temporary contributor to lenderama that wants to write about their experience with Zillow Mortgages. This would be a six month experiment where you will post monthly or semi monthly progress reports on how the system is working for you.

There’s no money in this, but you’ll get lots of link love, and personal coaching from me as to how best work through their system. I looking for someone with at least two years of experience as an originator, and has a record of writing on the Internet through blogs, Active Rain, Broker Oupost, MBL, etc… Please email me if you’re interested.

Rhonda Porter weighed in, before bed time with Catching Z-Z-Z’s Zillow on Mortgage:

I’m lucky to have been included as one of the Mortgage Professionals getting a scoop before the release. And this has all ready been covered very well at Lenderama, Blown Mortgage and Bloodhound Blog to name a few. What I like the most about this concept (which not all the details have been revealed) is the fact that Zillow is doing background checks by an independent third party before they will accept a Loan Originator to be a part of this feature.

Morgan Brown is cautiously optimistic withZillow Launches Mortgage Lender Sign Ups - Points to a New Way of Consumer Control of Mortgage Process:

Can they do it is the big question. Can the complex world of mortgage lending with it’s checkered past, dark corners and spaghetti-like regulatory, licensing and lending models be Zillow-fied? If Zillow can put the consumer in the driver seat of the transaction while educating and protecting them they will have made a major improvement in the existing mortgage marketing platforms online. This should provide them a massive competitive advantage above and beyond the lead aggregators that attracts mortgage-seeking consumers to Zillow. More consumers, more quality originators, more transparency, and better lending experiences creates a virtuous circle of industry improvement.

I personally hope they can do it. With the fresh eyes, the resources and the brand clout they are uniquely positioned to start a sea change. It won’t be easy but the opportunity is there and Zillow.com seems like the best shot out there to make it happen right now.

Finally, I offered some criticism with Zillow Mortgage: Zoriginators’ Delight or Bane?:

Now, here’s my opportunity to be critical of the Zillow mortgage offering; they may attract the very least talented originators. We’ll see when the consumer offering comes out.  The traditional “order takers” of the mortgage industry ,with time to engage in anonymous repartee with consumers, are not the most talented of our industry.  In fact, they may lack the courage (and financial reward) to properly educate consumers about the appropriate loan product for their financial situation.  Let’s face it; if you create a model that encourages the commoditization of a financial product, you leave little incentive to attract the heavy lifters who educate and monitor mortgage opportunities for clients.

The disincentive for talented originators to compete may very well have Zoriginators fighting to offer the most expensive loan product (for some consumers) at the lowest cost.

Greg reported my speculation about the consumer offering.  I believe it will be a Good Faith Zestimate of loan terms, based on the predicting algorithm they use to create the Zestimate for home prices.  Again, this is absolute speculation on my part.  Sara, David G, and Drew, immediately turn into poker players when I question their offering.  They surprised me (delightfully so) with their mortgage professional offering and could shock me in a few weeks.

Here’s the big thought:  For all my criticism about the speculated consumer offering, there is no way I question the amazing thing they’ve accomplished today.  With one fell swoop, Zillow may have started an irreversible trend towards professionalism and accountability in the mortgage industry.

…and that’s a good thing; we need it.

CONCLUSION:  There's an overriding theme among the Mortgage 2.0 originators; we like the registration process and welcome it.  Our industry has not addressed self-regulation in a an expeditious manner.  There is no doubt that I think that occupational licensing is bunk.  Zillow Mortgage, however, is attempting to provide the equivalent of a user-policed mortgage offering that lauds the best and crucifies the worst of our industry.

This is a victory for the consumer and the good guys and gals who originate loans.