The Mortgage Crisis Can Be Resolved Without a Government Bailout

The Mortgage Crisis Can Be Resolved Without a Government Bailout
Any doubts that we are in a full-blown mortgage crisis have
disappeared. Along with the growing certainty that the
problem is substantial and virulent, a variety of plans
attempting to find solutions is proliferating. Some of
these plans have or will fail because they help too few in
need or simply delay the reckoning day to a few years in
the future when we will have to face the issues again.
Others will face sure difficulties as they lay all of the
blame and ultimate risk on only one party, either the
borrower or the lender. Many rely on the Federal
Government to provide the "bail out", in other words,
taxpayers' dollars to fund poor credit decisions.

There are a series of goals that need to be met for any
plan to be successful. Some are shared by a number of
interested parties. Simply stated, these goals are:
Elimination or reduction of foreclosures; Elimination of
write downs and short sales, Promulgation of realistic
refinancing options; and Stabilization of real estate
values. If these goals are met, the logical conclusion
would be that we would have been successful in solving the
mortgage crisis in the United States. There is, in fact, a
long term solution that is available that avoids all of the
pitfalls enumerated in the first paragraph. This solution
is named the "Appreciating America Plan". Before
describing this plan, it is helpful to review some of the
current plans and their shortcomings:

- Hope Now Alliance ' This is the voluntary program in
which loan servicers attempt to modify loans for borrowers
who are currently in default or have a reasonable
likelihood to be so in the near future. The plan has been
touted because under it servicers modified approximately
one million loans. However, 75% of these "modifications"
were simply payment plans for the borrowers to try to repay
amounts that were overdue even though they could not
afford to pay these amounts when they were due a few months
ago. The remaining 25% of the borrowers saw their interest
rates frozen as low as 5% for three to five years. At that
time, the loans will convert back to their previous
"unaffordable" terms. Not much of a solution.

- Dodd/Frank/HUD proposals ' These proposed plans envision
refinancing the current adjustable rate mortgages with FHA
fixed rate loans at approx. 80% of the current value of the
home. While there is a notion that the FHA and the
borrowers will split some of the appreciation in the
future, the current servicers of the mortgages are required
to immediately write down any unpaid balances. Why
servicers of the 1st mortgages would agree to write off a
large portion of their debt without any chance of future
recovery is questionable, the idea that servicers holding
second mortgages would voluntarily write off the entire
second mortgage to aid the first mortgage holder is
nonsensical. There must be some recognition that there
must be a possible recovery in the future in consideration
of the current reduction of the mortgage.

- Authorizing Bankruptcy Courts to Write Off Mortgage Debt
' This is a tremendously dangerous idea to allow courts to
re-write contract terms and, effectively, write down loans.
All mortgages will become much more expensive given the
uncertainly the owners of future loans will have. No
longer will the mortgage contract control the transaction.
Courts will be the arbiter of each mortgage. Beyond these
issues, the constitutional concerns are real.

This brings us to the Appreciating America Plan. It is a
plan that should be adopted by all of the servicers,
promoted to all of the ailing homeowners and supported by
the US Government, especially the Federal Housing
Administration. FHA has told me that the use of this
solution would fit exactly within the current FHA
guidelines. It is a fairly simple plan which can be
utilized immediately in that it utilizes time-tested
mortgage programs used in the commercial arena generally
described as shared appreciation mortgages. I believe that
this is what Chairman of the Federal Reserve, Ben Bernanke,
was suggesting recently when he stated: "The fact that
many troubled borrowers have little or no equity suggests
that greater use of principal write downs or short payoffs,
perhaps with shared appreciation features, would be in the
best interest of both the borrowers and lenders." I
couldn't agree more.

Appreciating America works as follows:

- Homeowner refinances outstanding mortgages with an
approved "Appreciating America Lender" in accordance with
established FHA guidelines regarding loan to value ("LTV")
and debt to income ratios ("DTI"). The loan is fully
supported by sufficient income, LTV limitations, and tied
to past mortgage payment history.

- The Appreciating America Second mortgage is held by the
current mortgage servicer and defers payments and interest.
The homeowner and lender will share in the future
appreciation of the home to pay off the Appreciating
America second mortgage within five years.

- The new Appreciating America Second Mortgage is a
subordinated second shared appreciation mortgage equal to
the difference between the new FHA Mortgage and the
existing mortgage(s). This second shared appreciation
mortgage will accrue interest at 6%, with payments
deferred, and will not be payable until 5 years after the
loan is made (or the home is sold). At that time, the
homeowner has a choice of refinancing the mortgage(s) or
selling the home.

- To the extent that the value of the home at that point is
greater than the FHA 1st mortgage amount ' the homeowner
will first receive an amount equal to all capital
improvements made to the property since the Appreciating
America Mortgage closed, then the homeowner will receive
30% of the appreciation and the second mortgage holder will
receive the lesser of 70% of the appreciation or the
principal and accrued interest on the Appreciating America
Second Mortgage. All appreciation in excess of the second
mortgage balance including accrued interest shall belong to
the homeowner.

The benefits of the Appreciating America plan are
significant. Families will remain in their homes. With
the promise of shared appreciation and protection of
capital expenditures, the homeowner will be incentivized to
maintain and improve the property. The existing
lender/servicer will not to incur large losses in
foreclosing or agreeing to a short sale in a dropping
market. In fact, the servicer will receive the entire
available proceeds from the new FHA mortgage as repayment
on their original loan and may realize the remaining
balance through future appreciation. Property values
throughout the US should stabilize. Together, these
benefits should have a palpable positive impact on the US
economy while protecting from further property value
erosion. At my company, Refinance.com, we are implementing
the plan now.

An example of this transaction is as follows:

- Original Mortgage(s) $200,000 - Current Property value =
$180,000
- Homeowner qualifies for a new $153,000 FHA first mortgage
(up to 85% LTV, to include closing costs and FHA insurance
premiums), with existing servicer taking a $47,000 (plus
amount of closing costs and FHA insurance premium) shared
appreciation Appreciating America second mortgage.
- Current Mortgage holder(s) get immediate return of
$153,000
- Balance of $25,400 that servicer is owed becomes a shared
appreciation Appreciating America loan, secured by the
property but with no payments due. Interest would accrue at
a reasonable rate (6%)
- Property appreciates 3% per year over the next 5 years
and is appraised at $209,000. Homeowner will qualify for a
new FHA mortgage of approx. $203,000. The appreciation of
$56,000 would be split as follows: homeowner: $16,800 and
second mortgage holder: $39,200. The remaining principal
balance owed on the second mortgage plus any accrued
interest would be forgiven at that time

The time is growing short and we need to act fast. The
Office of Thrift Supervision suggested a variation of this
but included a new, untested feature that will absorb
precious time in rolling out. Appreciating America works
and works well. Debate is a great thing but not when it
comes at the expense of millions of homeowners. Let's not
talk about bail outs until we provide bootstraps and
solutions.

----------------------------------------------------
Nicholas Bratsafolis is Chariman and CEO of Refinance.com.
Refinance.com is one of the country's largest home mortgage
lenders, in business for nearly 20 years. More information
about Refinance.com may be found at
http://www.refinance.com .

Credit tips for college grads of any age

Credit tips for college grads of any age
People always remember their "firsts." Their first
kiss...first concert...first job...first thing they bought
with a credit card. Well okay, maybe I'm the only one who
remembers the first thing I charged to a credit card. It
was a bag of groceries (and I think I paid interest on my
Fruit Loops for six months).

As a whole, we are not that well educated on credit. And we
like to spend. In fact, the government said the personal
savings rate for the nation in 2005 was negative 0.5
percent. That means consumers not only spent what they
earned—they also spent money they didn't have.

Credit cards and loans have a lot to do with that spending
statistic. The thing is, most of us need credit, especially
when it comes to buying a car, a house, or even a new
wardrobe for that dream job. The key is educating yourself
and knowing how to manage your credit.

Whether you're 22 and just getting started or 42 and want
to clean up your credit, understanding the way things work
can be a big help.

Review your credit report As you accumulate credit card
accounts and apply for loans, you build a credit history.
This history is tracked on your credit report, and it
includes everything from the types of accounts you open to
the number of late payments you make. All your information
is broken down into six sections so it's easy to review.

Check for danger signs There are certain things on a credit
report that lenders just don't like to see—and this
could hurt your chances of being approved for loans; or you
could pay higher interest rates. For example, late payments
and maxed-out credit card accounts can damage your credit.
By getting rid of these types of danger signs, lenders will
see you as more credit worthy.

Consider loan consolidation If you have to pay back a
school loan or any other outstanding debt and the amount is
pretty hefty—usually around $10,000—you may
want to consider consolidation. The main advantages of loan
consolidation are being able to lock in on a fixed interest
rate and you'll have just one payment to make (that can
really cut down on paperwork).

There are, however, some drawbacks of consolidation. When
you consolidate during the loan grace period, you have to
begin repayment immediately and may lose possible interest
benefits on subsidized loans. And, if interest rates go
down, you will not be able to take advantage of the lower
rates.

Create a plan When you know what to do, it's a lot easier
to do it, right? By making an effort to improve your
credit, you'll slowly but surely get to where you want to
be.

Even doing something as simple as signing up for automatic
payment to avoid late payments may cause a positive change
in your credit. Or maybe the first step is creating a
spending plan, there's a handy worksheet that can help show
you how.

If you're just getting started, make a plan to build your
credit history. You'll see doing a little homework now can
save you money and headaches down the road.

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Just What Is The Mortgage Loan Process?

Just What Is The Mortgage Loan Process?
I have a web page that explains the mortgage loan process
and I thought it was comprehensive but I get at least one
question a day about the loan process. Perhaps it is
unclear because many things actually happen in parallel.

First of course, you should shop interest rates and find a
local mortgage broker that you feel comfortable with, is
experienced and reputable.

Application:

You go into the brokers/bankers office and you fill out a
1003 (loan application). You also bring copies of your
bank statements, retirement accounts, 401ks, W2s and tax
returns and what ever else the Loan Officer requested. The
Loan Officer makes copies of the documentation and gives
you back your originals.

An application can be filled out on line but I don't
recommend you do that. Filling out an "on line"
application is ok if you know whom you are dealing with and
they are local. This can save you a trip to the office.
But you should never just fill out an application on line
if you don't know who they are or if they are not local
(even if they are a major branded company). Do not
complete any request that suggest multiple offers as these
companies sell your information over and over.

During the time you sit with the loan officer he will
review your documentation and with most companies he will
pull your credit report while you are with him.

During your conversation the LO will tell you "based on the
information he has" that you qualify for "this type" of
loan. He should also at this time tell you about all loan
types you qualify for. He will also discuss interest rates
and terms. He will have you sign several disclosures.

At this point you guys decide on your course of action. HE
SHOULD AT THIS TIME GIVE YOU A GOOD FAITH ESTIMATE. The LO
then puts all your official paper work in the file and
turns it over to the processor.

Processing:

The processor makes sure all the documents are in the file,
puts the paperwork in order, enters it into DU or LP
(automated systems) and then receives an automated approval
or turn down. This is always "subject to" supporting
documentation including appraisal, inspections, and title
work.

The processor then verifies employment, verifies residence,
orders an appraisal, and orders a title. I won't go into
the documentation requirements here but this is when things
start to happen in parallel.

When the processor has received all these verifications,
the appraisal, and basic title work, they will review the
file again and if it still qualifies they will forward the
file to the lender's underwriter.

Note: At this point she does not have a title policy or
guarantee, but the title company has reported that there
are no clouds on the title. Shame on the processor if she
forgot to order this because it can delay your loan later.
The actual title policy is not issued until later when the
underwriter gives a "clear to close".

Underwriting:

The lender's underwriter then reviews what is in the file,
runs the numbers, and verifies that all of the
documentation is present and that it supports the DU or LP
approval.

They also review the appraisal and the title at this time.
This is part of the underwriting process. If there are
problems in the appraisal review or title they will address
them to the processor.

The processor will communicate with the LO and appraiser
and/or title company to resolve the issues. This is part
of the underwriting process. The processor collects the
requested "stuff" and then forwards all information to the
underwriter.

The underwriter is then happy and gives an "ok to close".
This ok is usually subject to receiving the title insurance
policy from the title company. The title company faxes or
transmits electronically the info to the lender. Then the
Lender sends the closing documents to the closing company.
This can sometimes take two to three days.

You have an appointment to close. You sign the documents
and your loan is closed and you get the keys.

Processing should only take a week after you have provided
all the documentation requested. The underwriting normally
takes about 14 to 28 days. This time includes
communicating with the processor if there are any
deficiencies.

Every loan file is different; each Lender has different
requirements and markets vary, so it is impossible to give
an exact duration for each step.

The Key: Understand the sequence and demand your loan
officer gives you full details about what is going on. If
you don't understand don't be afraid to say so. This is
YOUR investment. Demand the facts. LO's sometimes use
industry terminology, ask what they mean if you don't
understand!

----------------------------------------------------
Connie Sanders is a strong advocate for educating the
consumer about mortgage loans before they apply for a loan.
Connie put together a mortgage information web site at:
http://www.mortgageunderwriters.com and can be contacted
there with any questions you may have.

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Credit inquiries: When does your private information go public?

Credit inquiries: When does your private information go public?
All of us have certain things we don't want others to see.
For me, it's my eighth grade yearbook picture...the video
of my karaoke debut...all the junk under my bed...and the
personal information in my credit report.

While we can keep most of our private stuff private, your
credit report is the one thing some outside parties have
permission to access.

When someone requests a copy of your credit report, it's
called a credit inquiry. But exactly who can look at your
credit report? And, how do these inquiries affect your
credit score?

Here's looking at you, kid To keep any Joe Schmo from
getting their hands on your report, the Federal Fair Credit
Reporting Act (FCRA) restricts access to your credit
information. Generally, only businesses and parties with
"permissible purpose" can view your credit report. Examples
of permissible purpose include accessing a credit report
for a credit application, the underwriting of insurance, in
connection with determining eligibility for a license or
government benefit, or for a business transaction initiated
by a consumer.

In other words, anyone with a legitimate business need can
gain access to your credit history. This includes
creditors, lenders, insurers, and landlords who need to
review your credit as a part of an application process.
Employers and potential employers can also request your
report, but only with your permission. Anyone who obtains a
copy of your report under false pretenses can be fined
substantially and jailed for up to two years.

Of course, you have every right to know who is looking at
your credit report. There's a section on your credit report
that lists everyone who accessed your report in the last
two years.

Once you know who is looking at your report, you may start
wondering how these inquiries affect your credit score.

Hard vs. soft inquires: what's the difference? There are
two types of inquiries: hard and soft. When you apply for a
mortgage, car loan or other credit, a lender is authorized
to request your credit report. This is a hard inquiry, and
this type of inquiry can impact your credit score.

When businesses do a credit check to offer you pre-approved
offers of credit or insurance it is a soft inquiry, which
does not affect your score. Soft inquiries may also be
generated under other circumstances, such as when a utility
company or a company you already have an account with looks
at your report. Requesting your own report from a company
like TrueCredit is also a soft inquiry.

Let's get back to hard inquiries. These play a part in your
credit score because you initiate the inquiry. If there's a
long list of applications for credit cards on your report,
you may look credit hungry in the eyes of lenders. This
could make you a higher risk, so your credit score may drop.

The story is a little different when it comes to secured
loans. Looking for a mortgage or car loan may cause several
lenders to request your credit report, even though you're
only after one loan. Because of this, multiple auto or
mortgage inquiries in a two to three week period may count
as just one inquiry depending upon the creditor—and
could have little impact on your credit score.

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Asset Search: Ultimate Financial Protection

Asset Search: Ultimate Financial Protection
Performing an asset search will help you in many financial
ventures. The advantage is that you have an idea whether or
not a potential business partner, investor or employee is
trustworthy and capable of making endeavors successful.
There may be a number of laws protecting individuals'
assets but it is always your responsibility to gain
information to minimize possible scams and frauds. In some
areas, you may easily gain access to public records for
confirmation.

There are different packages available depending on how
much information you wish to acquire regarding someone's
assets. Basic searches will most likely include personal
belongings, properties and credit history. There are very
reliable Web sites that offer advanced asset searches which
will provide you more details like past financial ventures,
previous companies the person has worked for, previous
companies the person owned, aircraft and watercraft
ownership, bankruptcy if any, tax liens, corporate records,
enhanced marriage and divorce check, judgments on small
claims, house ownership, estimated income based on average
house value and neighborhood income and other persons he or
she may have worked with in the past.

Online asset search engines will use a variety of
techniques and advanced tools featuring a huge database to
make sure that all figures and details are accurate and
up-to-date. Financial and property assets will be searched,
investigated and verified to prove whether or not the
person is telling you the truth regarding his or her
credibility. When viewing an asset search report, you have
to know how to watch out for bad signs such as:

1. His or her personal lifestyle does not match the
estimated income. The person seems to own so much without
adequate resources so you may question how outrageous
expenses are covered.

2. The person has a number of civil suits filed against him
or her or the person has filed a number of civil suits to
other parties in a financial endeavor. Find out the details
to stay protected from unscrupulous schemes and other
dishonest activities.

3. The person has been bankrupt or filed for bankruptcy in
the past. Although bankruptcy is not immediately a negative
factor, you still have to find out if the cause was
reasonable.

The final decision is always up to you if you consider
someone credible despite some crisis in the past. When
doing an online asset search, you may need to provide some
information about the person such as the first and last
name. It will be easier for searchers to narrow down the
target if you also include the address, approximate age and
current employment. Searches will usually be based on
public records since regulations still prioritize the
privacy and confidentiality of the individual unless you
have legal basis and permission to access other types of
records.

It is equally important to keep your assets protected by
using a number of strategies. Getting a lawyer and
accountant will help you make wiser decisions. Liabilities
and taxes can also be reduced through useful approaches
like insurance and properly choosing the type of
partnership that is most advantageous for you. Keep your
records as private as possible to keep others from
acquiring asset info that may put your business or
financial stability at risk. Also learn about state laws
and regulations that will help boost the performance of
your assets and maximize your security.

----------------------------------------------------
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online investigation website for all of your search needs.
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