No Bull BLOG

Originally Published at The Motley Fool


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If you're curious about property eligibility for the Zero Down USDA home loan programs, you can check out the maps here;
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

The programs are very borrower-friendly... no monthly PMI (even at zero down,) and rates the same as A-paper 20% down Fannie/Freddie.

If you have no lates or collections in the last 12 months, they'll even IGNORE your CREDIT SCORES ENTIRELY!

Too bad you can't qualify if you own any other homes... I'd be tempted to go find a nice one in one of the nearby qualifying areas.

Cheers,
Dave Donhoff
Leverage Planner

NEW LAWS MAY ASSIST HOMEOWNERS

THREATENED WITH FORECLOSURE




Two recently enacted laws have substantially changed the landscape for homeowners at high risk of defaulting on their home mortgages and losing their homes through foreclosure. The most recent is The Hope for Homeowners Act of 2008 (the “2008 Act”) signed by the President at the end of July. The 2008 Act implements a voluntary program designed to help struggling homeowners restructure their current mortgage loans. The second is The Mortgage Forgiveness Debt Relief Act of 2007 (the “2007 Act”), which provides a new income tax exclusion for the mortgage principal reductions often associated with the restructuring of troubled mortgage loans.



Summary of the 2008 Act. The 2008 Act created a voluntary program designed to encourage lenders to restructure the mortgage loans of distressed homeowners in exchange for FHA backing of the restructured loans. The benefits of the 2008 Act are only available if the mortgage lender agrees to participate in the program, and then only if all of the following conditions are satisfied:



· The borrower occupies the residence secured by the mortgage (second homes and investment properties are not eligible for the program) and certifies that (1) he has not intentionally defaulted on his loan to qualify for the program; and (2) he had a mortgage debt to income ratio greater than 31% as of March 1, 2008. The lender, in turn, must document and verify the borrower’s income to the IRS.



· In exchange for receiving FHA insurance on the restructured loan, the lender writes down the existing loan to the lesser of the amount the borrower can afford to repay, as determined by the current affordability requirements of the FHA; or 90% of the current fair market value of the home. The restructured loan must be a 30-year fixed rate loan, and the borrower must pay a premium for the FHA insurance provided to the lender.



· To prevent a windfall to the borrower, the borrower must share with the FHA any equity and future appreciation created by the write-down of the old loan balance. The amount payable to the FHA is determined on a sliding scale, with 100% going to the FHA if the loan is paid off or refinanced in the first year, decreasing in annual steps to 50% in year 5 and thereafter.





Summary of the 2007 Act. Prior to the enactment of the 2007 Act, a homeowner who was fortunate enough to be able to restructure a troubled mortgage loan was generally subject to ordinary income tax on any reduction in the principal owed on the loan. The 2007 Act addressed this problem by permitting taxpayers to exclude from income up to $2,000,000 (on a joint return) of home mortgage indebtedness that is discharged on or after January 1, 2007 and before January 1, 2010. Accordingly, the benefits of the 2007 Act should be available to any taxpayers that are able to restructure their mortgage under the 2008 Act.



The benefits of the 2007 Act are limited to “qualified principal residence indebtedness,” which is acquisition indebtedness on the taxpayer's principal residence (second homes and investment properties are excluded). Qualified principal residence indebtedness is indebtedness secured by the taxpayer’s principal residence that was incurred to acquire, construct, or substantially improve the residence. For these purposes indebtedness will be considered to have been incurred to acquire, construct or improve the taxpayer’s principal residence if:



· the loan proceeds were used to buy, construct or substantially improve the residence;



· in the case of a purchase, the loan was originated within 90 days before or after the date the residence was purchased; or


· in the case of new construction or improvements, the loan was originated no more than two years before or 90 days after completion of the construction.

To avoid a windfall to eligible taxpayers, the 2007 Act requires them to reduce the basis of their principal residence by the amount of discharged indebtedness eligible for the exclusion.



The 2007 Act also permits low and moderate income taxpayers to treat any premiums paid for mortgage insurance (which should include any premiums paid to the FHA in connection with a loan restructuring covered by the 2008 Act) between January 1, 2007 and December 31, 2009 as qualified residence interest and deduct them, subject to certain restrictions. This deduction is subject to a phase out when the taxpayer’s adjusted gross income (on a joint return) hits $100,000, and is eliminated when AGI exceeds $109,000.

Conclusion. The enactment of the 2007 and 2008 Acts has provided homeowners unable to keep up the payments on their current mortgage loans with an alternative that may be more attractive than letting the lender foreclose or entering into a short sale.



If you have any questions about how these Acts apply to your situation, please contact David Donhoff, at 425-223-4520 or Info@NoBullFinancial.com.

Originally Published at The Motley Fool


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A) These are all "ESTIMATES".... 'best-guess numbers' hopefully close to reality,
B) WHY would you want to "shop around" for alternative 'best-guess numbers' that are openly expected to change as you proceed?

(I know that's a rhetorical question, and hopefully provocative of thought... as in truth the idea of shopping for loose "estimates" is a futile process that will do nothing but burn your energy needlessly.)

That basic breakdown is as generically accurate, in a loose vanilla way, as anyone else's could be.

If you DO shop around, and let the people you call KNOW that you will be making your decisions based on their presentations.... THEN you'll get the pleasure of receiving best-guess LIES completely skewed to whatever they think you actually want to hear/read.

BOTTOM LINE; the subjective quality of the specific professional you choose will have more end effect, and determine your actual results, more than any objective "numbers shopping" you can ever hope to accomplish.

I frequently explain that shopping the source of your mortgage work by requesting preliminary numbers is the equivalent of shopping for litigation attorneys by calling around asking who can promise the highest court awards in advance.

Mine is not a popular message... if enough regulars are awake, there will be plenty of "yeah but" denials, rebuttals, and anecdotal stories... but the above is the reality & the truth.

Choose your provider according to preliminary "quotes,"
And you've simply chosen the most successful Liar.

Choose according to character quality, competitiveness,
honesty, and your personal assessment,
And you will set yourself up for the better Experience AND
the better bottom line pricing!©

Luck!
Dave Donhoff
Leverage Planner

Originally Published at The Motley Fool


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I am trying to think of more options than taking out the loan to sell the condo and am willing to listen to any and all advice.

If you are willing to take a look at another way to harvest it, I'd suggest considering putting it out on a Lease-to-Purchase basis.

A) A HUGE number of would-be buyers cannot get regular bank financing currently, but could still afford a mortgage-like payment, and do have some (though not 20%) cash for a down payment,
B) If you put in a properly contracted Lease-to-Purchase (L2P) tenant, they will generally treat the place as a full-equity owner... absolving you of virtually all (or a great deal most) of the typical landlord headaches,
C) You can name a reasonably high-end execution price today, for execution 1 year from today... L2P buyers are not in a haggling position, and payment is more important than end price,
D) You can contract and collect a fairly decent premium ABOVE current regular rental rates, in return for giving the L2P tenant controlling rights of first-refusal of purchase in a year,
E) You can contract and collect a fairly decent non-refundable option fee of typically 3-5% of the final execution price named (not a "down payment" which is otherwise escrowed and refundable if the deal falls out,) in return for providing ownership first refusal, with immediate occupancy as though they are already owners.

Its not wiping the deal off the books..... NOR, however, is it wiping the money out of your net worth (as you would if you simply marked it down to current market to sell it outright.)

Beware. MOST real estate agents operate "traditionally" which means they are excellent at the "established system" (which is a dummied-down dance of listing properties for sale to the MLS, showing bank-lendable buyers homes FROM the MLS, and filling in the blanks (brainlessly) to the association-approved boilerplate forms.) Many salute the fastest path to a commission... and very few are well versed in seller-controlled harvest methods (which a L2P is.)

Your best guidance would come from someone experienced in L2P and seller-financed non-traditional transactions. If your agent hasn't done at least several a year for a while (every deal is fingerprint unique,) you might want to shop around. Good consultants for this kind of transaction DO exist, but they're not your run-of-the-mill agent (and are frequently not agents at all, but rather direct real estate investors themselves.)

Luck!
Dave Donhoff
Leverage Planner

http://online.wsj.com/article/SB121641296022866029.html?mod=djemRealEstate

<SNIP>
Federal officials heap much of the blame for the subprime mortgage mess on lenders, claiming they recklessly made too many high-cost home loans to borrowers who couldn't afford them.


It turns out that the U.S. government itself was one of the lenders giving out high-interest, subprime mortgages, some of them predatory, according to government documents filed in federal court.
</SNIP>


Oops!

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GM to cut salaried workers, production, dividend
Tuesday July 15, 12:44 pm ET
By Tom Krisher and Dee-Ann Durbin, AP Auto Writers

General Motors says it will cut salaried jobs, production, dividend to raise turnaround cash

Several thousand jobs will be cut through normal attrition and retirements, and through early retirement and buyout offers, Henderson said. The company could resort to involuntary layoffs but does not want to, he said.


The Moral:
DO NOT rely solely on your Employer's nor your Government's ideas for your retirement security! Plan & prepare for your private security today! There are many ways to guarantee secure income privately, and fund it safely, tax-free. don't be caught unawares.

Dave Donhoff
Leverage Planner

NAMB backs Paulson's proposed commission.
By Jennifer Harmon

DIST. OF COLUMBIA
Wants Oversight of Everyone

Nat'l Assoc'n of Mortgage Brokers are FOR,
Bankers (enjoying longstanding exemption) are still resistant...

<SNIP>
NAMB has long contended that real consumer protection can be achieved by creating a single national registry that includes all mortgage originators, including mortgage brokers, loan officers and bank employees who originate loans at a bank or bank subsidiary, credit union, or mortgage brokerage; and to create national standards that include professional education, and passage of a examination and criminal background check.

For some time, federal financial institutions have been "untouchable" when it comes to enforcing state consumer protections imposed on individuals originating mortgage loans. State requirements for criminal background checks and education requirements for mortgage originators have been pre-empted by federal regulators, according to NAMB. The association believes a uniform standard for individuals in the mortgage origination business should mean "uniform" and also apply to those employed by federal institutions and their subsidiaries.
</SNIP>

Mortgage brokers typically operate in small, client-centric firms, and by definition have nothing of their own to "sell" but their financial services, fulfilled with wholesale bank product. Bankers know that if held to "even playing field" standards, they'll have a massive increase in overhead to achieve the same levels of staff & officer quality the smaller brokerage office niche delivers.

Virtually nobody who goes to the trouble of the continuing education for actual licensing, and the hassle of knowing enough about finance to serve from a client's perspective... is willing to work in the retail boiler-shops. This is ESPECIALLY true when the consumers aren't falling out of the sky into the loan pipelines.

If the National Association of Mortgage Brokers have their way, the individual professional quality threshold of entry to the industry will be raised dramtically.

Cheers,
Dave Donhoff
Leverage Planner

Paul Muolo - "The Chain of Blame"

Paul is a long, long, longtime industry journalist & observer... great insight.


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Great NPR interview... 34 minutes long, kick off the shoes & grab an adult beverage;


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Dave Donhoff
Leverage Planner

WaMu Says It's `Well Capitalized' After Share Slump


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<SNIP>

July 14 (Bloomberg) -- Washington Mutual Inc., after dropping the most since its initial public offering in 1983, said it is ``well capitalized'' with more than $40 billion in liquidity and $150 billion in retail deposits.

</SNIP>

This is like watching a horror flick... the Cinematic style typically has the victims killed off in exact order of which mentions, denies or confronts the idea of "death" in what sequence!

WHEN will the public affairs departments learn that these "All Is Well" announcements are ALWAYS the bad luck precursers to actual failure!?!?!!!

Dave Donhoff
Leverage Planner

Originally Published at The Motley Fool


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While I don't for a minute believe that either of these entities are insolvent or otherwise in any serious trouble(personal opinion, YMMV), I suppose it is conseivable that the idiocy of the market could conceivably cause a run on the bank or similar. Since the conforming mortgage market is the only part of mortgage finance that seems to be functioning something like it normally does (wider spreads aside), I am inclined to believe that the govt will not let either of these entities go down. You have a different opnion, or color to add, as someone in the mortgage business?


Welllll.... non of the GSEs are depositories (they don't offer savings/checking accounts, CDs, or the like, to gather cash deposits,) the only way to have a "run on the bank" on Fannie, Freddie, or Ginniemae would be if shareholders lost faith and sold off the stock (oops... that's exactly what's happening.)

The cash the GSE's use to buy closed loans off the secondary market is, itself, a function of leverage... and they are allowed to 'borrow' (on paper) as a ratio of the liquid value of all the outstanding stock... so, if the public sells down the share price, the GSE's lose leveraging power.

Whether the GSEs are insolvent or not is not a black & white question... it boils down to the accounting rules they are held to (and the interpretations of them... and the loopholes, allowances, and sidebars.)

THUS... our real risks are;
A) The public's buy/sell valuation of the GSE shares, (a minimal risk because,)
B) Our government's treatment of the accounting rules the GSEs are held to.

#B is an issue that is causing the powers-that-be great migraines. It's not at all so long ago that we can remember actually PUNISHING the CEOs of Fannie and Freddie for playing "fast and loose" with their accounting procedures... yet, if we NOW play strictly by the book, the GSEs will almost certainly collapse.

What to do, what to do? Be the consistent parent sending out the message that the rules-are-the-rules, and the superiors mean business? OR, rules are situational... and we don't REALLY mean what we say, we'll simply punish you when you look like you're making too much money, yet we'll bend (or completely ignore) the rules if it serves our subjective purposes.

I expect some very fancy dancing to occur...


Cheers,
Dave Donhoff
Leverage Planner

Originally Published at The Motley Fool


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ject: Re: Shop myself? Or pay a broker? Date: 7/7/08 9:48 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
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Which direction is best? Shop myself or pay a broker?

It really depends...

What do you really want in terms of results?
What do you believe about retail lenders? Brokers?
How much do you understand about mortgage finance?
(And do you think it is important to understand much?)
Where do you feel your time is most valuably spent?
Do you normally prefer to pay and shop retail?
Do you normally prefer to pay and confer with specialists, or generalists?
What's most important to you about WHO you select to structure your finance?
Do you trust your own judgment of people more, or do you rely on retail brands and reputation to assure you of 'quality'?
Do you usually believe what you see advertised online and in print?
How willing are you to fully trust an actual advisor if you chose one?
Do you see the loan amount in question as significant to your net worth, or not significant?

Ultimately, there is no "right" answers (but those of each individual.) You'll tend to find one quality of professional in the brokerage division of the industry, and a different quality in retail. The qualities are not necessarily above or below one another, but are definitely DIFFERENT in what they provide the consumer.

Simply thinking "I want wherever the lowest rates are" is a formula for disaster (minor, or major.) HOW you structure your financing (overall, not just the mortgage) can have a much heavier effect on your net worth, over time, than the actual rates & closing costs.

Here's what I can tell you;
A) Some people never seek (and naturally then never find) trustworthy advisors,
B) In general, these people tend to have self-justifying misery,
C) If you DO carefully and methodically seek based on quality, you will find it.

I send you strength and diligence,
Dave Donhoff
Leverage Planner

http://www.frontlinethoughts.com/survey0608_audio.asp

For those unfamiliar with John Mauldin, he is a highly respected economics and markets analyst... I recommend signing up for his e-newsletters...

This is an interesting talk (long at 45 mins....) and the very last comment is that he is expecting 30 FRM to drop UNDER 4%

Of course, that's nothing guaranteed... but it is interesting that another sharp mind sees longterm rates coming back down to (or below) the lows of 2003.

The Past, Present and Future of the U.S. Mortgage Market

By William R. Emmons


The U.S. mortgage market evolved through several distinct phases to reach its current status as the largest, most innovative and most complex home-financing market in the world. Broadly, there were five major eras during the last century. How the mortgage market evolves during the next few years depends in large part on whether the private-label mortgage-backed securities (MBS) market recovers and on the extent and nature of any potential federal government interventions into housing and mortgage markets.

More at the link...

Originally Published at The Motley Fool


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We found a mortgage broker who we like. She seems to be honest, experienced, and on the ball.

Frankly, that's 95% of the game, right there.

DH's boss keeps trying to convince us to also contact his broker. He says that with all of the programs out there it is impossible for one broker to have information about all of them so we should work with several at once.


The bossman is clearly a good salesman... but not entirely accurate (especially now, after the credit collapse.) There really isn't ALL that much variance in qualifiable programs as there was 12-24 months ago, and a good broker would certainly have access to virtually all remaining programs.

Beside, far more important than global program access is being worthy of trust & respect. "Character" in other words. When you have someone that fits that bill, you can count on them to FIND you the best fit, even if its not already in their standard collection of programs.

While logically this makes sense, it seems really underhanded to use more than one broker. On the other hand, if this is the industry standard I don't want to be a sucker just because I'm nice... Should I use more than one person or go with my gut that this is not an ethical way to do business?

Are you uncertain of your current broker's ability (and character) to find the best solution for you if it weren't already in their regular playbook?

I would say (as a broker myself) that there's nothing at all unethical about shopping around to find the broker you most trust and respect... but once you've found one, put THAT one to work. "Dating around" more of them simultaneously won't likely get you anything better at all in the end.

Luck!
Dave Donhoff
Leverage Planner

Finding a decent return in life insurance, with Joe Heider, Dawson Wealth Management; Adam Sherman, Firs-Trust Financial Resources; and CNBC's Dennis Kneale & Sue Herera.

(Only ‘5’ minutes long…)

Here is the video: