mortgage :: value

by: Richard Gandon

People are losing their homes and many more will lose their jobs before the mortgage meltdown works its way through the system.

To paraphrase Alan Greenspan's remarks on March 17th, 2008, “The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War. The crisis will leave many casualties.”

How many casualties? Experts are predicting that in the next few years, between 15 and 20 million homeowners could have homes worth less than what they owe. Walking away from a bad situation may actually make sense for people who mortgages that are 'upside down' considering the fact that refinancing is out of the question and home equity is nonexistent.

It seems quite easy to point fingers at greedy Wall Street titans for causing the sub-prime mortgage crises. They after all, put together the deals that allowed banks to underwrite mortgages and then offload these liabilities to investors. What many fail to realize is that there is no shortage of blame to go around from homeowners buying more home than they could afford to real estate agents looking for more commission dollars. Mortgage brokers and bankers, the banks themselves, ratings agencies such as Moody's and Standard & Poor's, Wall Street, the Fed and last but certainly not least, the Federal Government.

Let's start with the homeowners--the people who are now in the process or soon to enter the process, of losing their homes. Some of these people had never before owned a home and as such, may not have been prepared for the costs associated with homeownership. Basic financial literacy is sorely lacking in this country despite there being no shortage of budgeting and tracking programs readily available such as Quicken and Microsoft Money. The lack of financial literacy does not absolve these buyers of their responsibility. Every borrower receives a truth in lending disclosure statement. Here is a portion of what the act covers:

The purpose of TILA (Truth In Lending Act) is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit. Rather, it requires a maximum interest rate to be stated in variable-rate contracts secured by the consumer's dwelling. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and mortgages that are subject to the requirements of Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer's principal dwelling.

Much of the subprime mortgage crisis can be traced directly back to variable-rate mortgages. As is clearly stated above, “TILA does not regulate the charge that may be imposed for consumer credit. Rather, it requires a maximum interest rate to be stated in variable-rate contracts secured by the consumers dwelling.” It also clearly states that TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling. One has to wonder whether or not these homeowners:

1. Bothered to read the truth in lending act disclosure at all.

2. Understood what the truth in lending act disclosure meant.

3. Chose to ignore the information printed clearly the truth in lending act disclosure.

A number of months ago, just as the subprime mortgage crisis was beginning to unfold, The New York Daily News ran an article about a family in New York City, who had bought a home and were now faced with the prospect of foreclosure. The article was sympathetic to this family, highlighting the fact that they're living the American dream and that this dream was about to come to an end. What I found to be distressing was the fact that clearly visible in the photo that accompanied this sympathetic article was a very expensive flat screen television hanging on the wall. Perhaps I'm naïve, but I can assure you that if I were faced with the prospect of losing my home and having my family put out on the street, there is absolutely no way that I would still have that expensive television hanging on my wall. It would have been one of the first things to be sold and some financial relief would be found by jettisoning what I'm sure was the expensive cable bill.

Clearly the public needs easy access to financial literacy courses. Too bad we don't see the need to make this a mandatory course of study in our educational system.

Mortgage bankers and brokers have in the last four or five years been raking in cash by the bucket load in the form of commissions paid when mortgages they've originated, close. Many of these people have not needed to do much in the way of prospecting. Instead, their phones have run off the hook as people have jumped on the homeownership and refinancing and take out extra cash bandwagon, despite their ability to pay for their home. No-document loans were readily available without the borrower having to produce documentation that backed up their income. Clearly this practice can and indeed has, lead to substandard loan underwriting processes. Were some of these mortgage bankers and brokers dishonest? Sure. Were all of them dishonest? I think not. To have a massive nationwide conspiracy, where thousands and thousands of people involved in the mortgage banking and mortgage brokering profession got together to create this situation is simply not feasible. Yes, some of the blame does belong with those in the mortgage industry, but they were simply a small cog in the huge machine that created this mess.

Let's discuss real estate agents. In 2007, we bought a home, and also sold a home. The agent we used to purchase our home was absolutely fantastic. In our opinion, she went above and beyond to make our deal happen. She answered every phone call, followed up on every concern and was the epitome of professionalism. We consider this individual to be a friend, and we have sent referrals her way that have resulted in her earning additional commissions. We will continue to recommend her to all who ask or mention that they'd like to buy or sell a home in our area.

The real estate agent, we used to sell our home, could not have been more different. We got our old home ready to sell prior to closing on our new home. We decided to list it as “For Sale by Owner.” In the event that we didn't sell this home on our own, it was our intention to list it with an agent as soon as we had closed on the purchase our new home. Literally, from the day we put the sign in front of our home and listed it on a “For Sale by Owner” website we were inundated with phone calls from real estate agents. We were told many lies and were constantly harassed; although we had already made it quite clear to every agent who called, and there were more to 60 who did; that we were willing to pay half the commission-the same as they would have received had they sold another agent's listing. We also told every agent that called that we had already lined up an agent to sell our home in the event that we chose to no longer sell it ourselves. Our deadline was the closing date of our new home purchase. We did have an interested buyer who shortly after our closing date decided to keep looking so we listed our home with a local agent so that we could concentrate on getting our new home ready for our moving date at the end of the school year. This agent showed our home a maximum of two times and got an offer which we accepted. We ended up getting $1,000 less than we had wanted in a declining Real Estate market. The agents who had called many times to harass us called our listing agent on a number of occasions and he lied telling them that the house was under contract when in fact it wasn't at that time-clearly a breach of our agent's fiduciary duty. Quite frankly an ethical agent would have continued to show our home until closing in the event that the deal fell through.

But wait, there's more. Our agent also acted as the buyer's mortgage broker. At the closing table, we learned that he had signed documents from the buyer stating that he (our agent) represented them and we had signed documents stating that he represented us. We also learned that the buyer had effectively put down approximately 2-3% of the purchase price when financed closing costs were factored into the equation. Their first mortgage had what we thought was a high fixed rate and their second mortgage came with a rate in excess of 8.5%. Because the closing happened in August, literally in the midst of the first wave of the meltdown, if they didn't close on the day they did (August 31st, 2007), Citibank wasn't going to extend their rate. When my wife & I have bought houses in the past, it had always been a very happy day. These people looked absolutely shell-shocked at the closing table. I'm not convinced that they knew just how much their monthly payment was going to be until closing day. We knew down to the penny well in advance having budgeted and planned everything on a spreadsheet. Were these people stupid or just inexperienced and mislead by a greedy combination of real estate agent & mortgage broker? I'm extremely confident that they are intelligent people but inexperienced and taken advantage of by an unscrupulous agent.

The banks are also culpable. Prior to bank deregulation, Savings and Loans provided mortgages to home buyers and kept these loans on their books. Non-performing loans had a negative effect on the S&L's profitability which of course caused tighter lending guidelines such as job stability and decent down payments in order for prospective home buyers to be approved for a mortgage. Way back then, a home buyer had to actually save up enough money for a down payment 10 or even 20% before a bank would ever consider underwriting a mortgage. The checks & balances kept banks solvent and borrowers responsible. Although this approach worked, some cried foul stating that the regulated system was racist and discriminatory-and there certainly was some truth to this. Skipping forward to the present, banks made a bundle on mortgages over the past five or six years. For the most part, they allowed their underwriting criteria to be stretched so far out of alignment that almost anyone could and indeed did, qualify for a mortgage despite their ability to pay. Some folks even applied for and received mortgages for more than the property was worth. Sometimes for as much as 25% more than their property was worth!

Under the prior system, 125% mortgages would not have been possible because of course these loans were held on the banks' books and could have led to losses that would have had to have been absorbed directly by the bank.

So what went wrong? Under the current system, these loans were sold to the big Wall Street investment firms who repackaged them as collateralized mortgage obligations (CMO's), Mortgage Backed Securities (MBS's) and other similar acronyms. These instruments were then sent to the ratings agencies for their blessing and more importantly a letter rating. Many of these structured finance deals receive AAA ratings-the highest ratings available meaning that in theory, these instruments were least likely to default. How does one create a 'triple A' or AAA rated financial instrument out of sub-prime mortgages? Herein lies the magic. These Asset Backed Securities (ABS) are made up of different tranches or slices, each carrying a different risk and reward level. The first dollar of principle and interest is applied to the securities with the highest rating, and the first dollar of loss is applied to the tranche with the lowest ratings. The lower slices are designed to provide a security blanket that in theory protects the higher-rated securities. The investment banks that package or 'structure' these securities in order to earn fat fees when they sell them to investors are the same entities that pay the ratings agencies to rate these instruments. Clearly the possibility for conflict of interest is present. If investors and not the investment banks that stand to rake in millions in fees were to pay for the rating, the potential for this conflict of interest would be negated. Furthermore, the investment banks have a vested interest in convincing the ratings agencies of the credit worthiness of these securities.

So we've already pointed fingers at homeowners, some greedy, many more I suspect, naïve or uninformed, real estate agents-one out of more than 60 in my experience was a gem, mortgage brokers & bankers, banks, Wall Street and ratings agencies so who's left? The Federal Reserve and the Government of course.

The Fed as its known is responsible of the country's monetary policy and for supervision and regulation of banks. This is the definition of the Fed's roles in their own words:

Monetary Policy

The Fed is best known for its role in making and carrying out the country's monetary policy-that is, for influencing money and credit conditions in the economy in order to promote the goals of high employment, sustainable growth, and stable prices.

The long-term goal of the Fed's monetary policy is to ensure that money and credit grow sufficiently to encourage non-inflationary economic expansion.

The Fed cannot guarantee that our economy will grow at a healthy pace, or that everyone will have a job. The attainment of these goals depends on the decisions of millions of people around the country. Decisions regarding how much to spend and how much to save, how much to invest in acquiring skills and education, how much to spend on new plant and equipment, or how many hours a week to work may be some of them.

What the Fed can do, is create an environment that is conducive to healthy economic growth. It does so by pursuing a goal of price stability-that is, by trying to prevent inflation from becoming a problem.

Inflation is defined as a sustained increase in prices over a period of time.

A stable level of prices is most conducive to maximum sustained output and employment. Also, stable prices encourage saving and, indirectly, capital formation because it prevents the erosion of asset values by unanticipated inflation.

Inflation causes many distortions in the market. Inflation:

· hurts people with fixed income-when prices rise consumers cannot buy as much as they could previously

· discourages savings

· reduces economic growth because the economy needs a certain level of savings to finance investments that boost economic growth

· makes it harder for businesses to plan-it is difficult to decide how much to produce, because businesses can't predict the demand for their product at the higher prices they will have to charge in order to cover their costs

Bank Regulation & Supervision

The Fed is one of the several Government agencies that share responsibility for ensuring the safety and soundness of our banking system. The Fed has primary responsibility for supervising bank holding companies, financial holding companies, state-chartered banks that are members of the Federal Reserve System, and the Edge Act and agreement corporations, through which U.S. banking organizations operate abroad.

The Fed and other agencies share the responsibility of overseeing the operation of foreign banking organizations in the United States. To insure that the banking system remains competitive and operates in the public interest, the Fed considers applications by banks for mergers or to open new branches.

The passage of the Gramm-Leach-Bliley (GLB) Act in November 1999, was the culmination of a multi-decade effort to eliminate many of the restrictions on the activities of banking organizations.

Some of the main provisions of the GLB are:

· Repeals the existing limitations on the ability of banks to affiliate with securities and insurance firms

· Creates a new organizational form that allows banking organizations to carry new powers. This new entity called a "financial holding company," (FHC) and its non-banking subsidiaries are allowed to engage in financial activities such as insurance and securities underwriting

The Fed's enlarged role as an umbrella supervisor of FHCs is similar to its role in supervising bank holding companies. The Federal Reserve Banks will supervise and regulate the FHCs while each affiliate is still overseen by its traditional functional regulator.

The Fed has to delineate the financial relationship between a bank and other FHC affiliates. Its primary goal is to establish barriers protecting depository institutions from the problems of a failing affiliate. To do this efficiently the Fed has to ensure increased communication, cooperation, and coordination with the many supervisors of the more diversified FHCs.

The Fed has access to data on risks across the entire organization, as well as information on the firm's management of those risks. Regulators will be in a position to evaluate and presumably act on risks that threaten the safety and soundness of the insured banks.

It would appear that the Fed has failed to curb housing inflation which played a role in this entire debacle then made matters worse and in their efforts or lack there of, to properly supervise banking institutions.

Finally the government, a.k.a. Uncle Sam, the big Kahuna 10,000 pound elephant etc. Where do we begin? How about with: 'Where were they?'

It now appears that after millions of horses are out of the barn (some horses ran, others were foreclosed upon) the government wants to step in with a bailout to save the rest. While nobody wants to see people lose their homes, the question that must be raised is this: What about all those of us who were responsible? Those of us, who scrimped and saved up a decent down payment, bought less-house than we could afford and who live below our means? Many of us drive older cars and keep them longer. We don't run out and buy the latest and greatest at inflated prices, we watch, wait and budget.

When the World Trade Center was attacked, families who decided not to sue received government payouts and we certainly don't begrudge them as I'm sure that given the choice, they'd prefer to still have their loved-ones over the money. The problem, in typical government fashion is that those who were responsible and had insurance policies in place received less than those who were irresponsible and didn't plan ahead. I'm not talking about dishwashers at Windows on the World and blue collar workers; I'm talking about executives, traders and people who should have known better.

Now our government, the same government that sat by idly watching as this bubble got bigger and bigger despite many warnings, wants to step in and bailout people who are in danger of losing their homes. There has been no talk about educating people, let's not teach people to fish, rather, let's give them a fish and bail them out once again at the expense of those who are responsible.

Clearly, by keeping the majority of the population financially ignorant, there is a lot of money to be made by the poverty industry.

by: Tim Maliyil

The stock market is in a tumult. Actually, it has been for about a year, ever since the subprime fiasco (anyone take a look at Moody's performance over the past year?) Now that that particular issue has been beaten to death, other mortgage related issues are cropping up. Most of the stuff covered in the media is financial in nature, but some of those mortgage related issues do concern information security.

It's no secret that there are plenty of companies in the US that discard sensitive documents by dumping them unceremoniously: leave it by the curb, drive it to a dumpster, heave it over the walls of abandoned property, and other assorted mind boggling insecure practices. In fact, MSNBC has an article on this issue, and names numerous bankrupt mortgage companies whose borrowers' records were found in dumpsters and recycling centers. The information on those documents include credit card numbers and SSNs, as well as addresses, names, and other information needed to secure a mortgage.

Since the companies have filed for bankruptcy and are no more, the potential victims involved have no legal recourse, and are left to fend for themselves. In a way, it makes sense that companies that have filed for bankruptcy are behaving this way. (Not that I'm saying this is proper procedure.) For starters, if a company does wrong, one goes after the company; however, the company has filed for bankruptcy, it is no more, so there's no one to "go after." In light of the company status, this means that the actual person remaining behind to dispose of things, be they desks or credit applications, can opt to do whatever he feels like. He could shred the applications. He could dump them nearby. He could walk away and let the building's owner take care of them. What does he care? It's not as if he's gonna get fired.

Also, proper disposal requires either time, money, or both. A bankrupt company doesn't have money. It may have time, assuming people are going to stick around, but chances are their shredder has been seized by creditors. People are not going to stick around to shred things by hand, literally.

Aren't there any laws regulating this? Apparently, such issues are covered by FACTA, the Fair and Accurate Credit Transactions Act, and although its guidelines require that "businesses to dispose of sensitive financial documents in a way that protects against 'unauthorized access to or use of the information'" [msnbc.com], it stops short of requiring the physical destruction of data. I'm not a lawyer, but perhaps there's enough leeway in the language for one to go around dropping sensitive documents in dumpsters?

Like I mentioned before, inappropriate disposal of sensitive documents has been going on forever; I'm pretty sure this has been a problem since the very first mortgage was issued. My personal belief is that most companies would act responsibly and try to properly dispose of such information. But, this may prove to be a point of concern as well because of widespread misconceptions of what it means to protect data against unauthorized access.

What happens if a company that files for bankruptcy decides to sell their company computers to pay off creditors? Most people would delete the information found in the computer, and that's that-end of story. Except, it's not. When files are deleted, the actual data still resides in the hard disks; it's just that the computer's operating system doesn't have a way to find the information anymore. Indeed, this is how retail data restoration applications such as Norton are able to recover accidentally deleted files.

Some may be aware of this and decide to format the entire computer before sending it off to the new owners. The problem with this approach is the same as deleting files: data recovery is a cinch with the right software. Some of them retail for $30 or less-as in free. So, the sensitive data that's supposed to be deleted can be recovered, if not easily, at least cheaply-perhaps by people with criminal interests.

Am I being paranoid? I don't think so. I've been tracking fraud for years now, and I can't help but conclude that the criminal underworld has plenty of people looking to be niche operators, not to mention that there are infinitesimal ways of defrauding people (look up "salad oil" and "American Express," for an example). An identification theft ring looking to collect sensitive information from bankrupt mortgage dealers wouldn't surprise me, especially in an environment where such companies are dropping left and right.

The economics behind it make sense as well. A used computer will retail anywhere from $100 to $500. The information in it, if not wiped correctly, will average many times more even if you factor in the purchase of data recovery software. Criminals have different ways of capitalizing on personal data, ranging from selling the information outright to engaging in something with better returns.

Is there a better way to protect oneself? Whole disk encryption is a way to ensure that such problems do not occur: One can just reformat the encrypted drive itself to install a new OS; the original data remains encrypted, so there's no way to extract the data. Plus, the added benefit is that the data is protected in the event that a computer gets lost or stolen. However, commonsense dictates that encryption is something ongoing concerns sign up for, not businesses about to go bankrupt. My guess is that sooner or later we'll find instances of data breaches originating from equipment being traced back to bankrupt mortgage dealers.

The stock market is in a tumult. Actually, it has been for about a year, ever since the subprime fiasco (anyone take a look at Moody's performance over the past year?) Now that that particular issue has been beaten to death, other mortgagerelated issues are cropping up. Most of the stuff covered in the media is financial in nature, but some of those mortgagerelated issues do concern information security.

It's no secret that there are plenty of companies in the US that discard sensitive documents by dumping them unceremoniously: leave it by the curb, drive it to a dumpster, heave it over the walls of abandoned property, and other assorted mindboggling insecure practices. In fact, MSNBC has an article on this issue, and names numerous bankrupt mortgage companies whose borrowers' records were found in dumpsters and recycling centers. The information on those documents include credit card numbers and SSNs, as well as addresses, names, and other information needed to secure a mortgage.

Since the companies have filed for bankruptcy and are no more, the potential victims involved have no legal recourse, and are left to fend for themselves. In a way, it makes sense that companies that have filed for bankruptcy are behaving this way. (Not that I'm saying this is proper procedure.) For starters, if a company does wrong, one goes after the company; however, the company has filed for bankruptcy, it is no more, so there's no one to "go after." In light of the company status, this means that the actual person remaining behind to dispose of things, be they desks or credit applications, can opt to do whatever he feels like. He could shred the applications. He could dump them nearby. He could walk away and let the building's owner take care of them. What does he care? It's not as if he's gonna get fired.

Also, proper disposal requires either time, money, or both. A bankrupt company doesn't have money. It may have time, assuming people are going to stick around, but chances are their shredder has been seized by creditors. People are not going to stick around to shred things by hand, literally.

Aren't there any laws regulating this? Apparently, such issues are covered by FACTA, the Fair and Accurate Credit Transactions Act, and although its guidelines require that "businesses to dispose of sensitive financial documents in a way that protects against 'unauthorized access to or use of the information'" [msnbc.com], it stops short of requiring the physical destruction of data. I'm not a lawyer, but perhaps there's enough leeway in the language for one to go around dropping sensitive documents in dumpsters?

Like I mentioned before, inappropriate disposal of sensitive documents has been going on forever; I'm pretty sure this has been a problem since the very first mortgage was issued. My personal belief is that most companies would act responsibly and try to properly dispose of such information. But, this may prove to be a point of concern as well because of widespread misconceptions of what it means to protect data against unauthorized access.

What happens if a company that files for bankruptcy decides to sell their company computers to pay off creditors? Most people would delete the information found in the computer, and that's that-end of story. Except, it's not. When files are deleted, the actual data still resides in the hard disks; it's just that the computer's operating system doesn't have a way to find the information anymore. Indeed, this is how retail data restoration applications such as Norton are able to recover accidentally deleted files.

Some may be aware of this and decide to format the entire computer before sending it off to the new owners. The problem with this approach is the same as deleting files: data recovery is a cinch with the right software. Some of them retail for $30 or less-as in free. So, the sensitive data that's supposed to be deleted can be recovered, if not easily, at least cheaply-perhaps by people with criminal interests.

Am I being paranoid? I don't think so. I've been tracking fraud for years now, and I can't help but conclude that the criminal underworld has plenty of people looking to be niche operators, not to mention that there are infinitesimal ways of defrauding people (look up "salad oil" and "American Express," for an example). An identification theft ring looking to collect sensitive information from bankrupt mortgage dealers wouldn't surprise me, especially in an environment where such companies are dropping left and right.

The economics behind it make sense as well. A used computer will retail anywhere from $100 to $500. The information in it, if not wiped correctly, will average many times more even if you factor in the purchase of data recovery software. Criminals have different ways of capitalizing on personal data, ranging from selling the information outright to engaging in something with better returns.

Is there a better way to protect oneself? Whole disk encryption is a way to ensure that such problems do not occur: One can just reformat the encrypted drive itself to install a new OS; the original data remains encrypted, so there's no way to extract the data. Plus, the added benefit is that the data is protected in the event that a computer gets lost or stolen. However, commonsense dictates that encryption is something ongoing concerns sign up for, not businesses about to go bankrupt. My guess is that sooner or later we'll find instances of data breaches originating from equipment being traced back to bankrupt mortgage dealers.

By: Vincent Dail

The prospect of mortgage debt elimination is something that many Americans are dealing with today. If you are concerned about your current debt situation, constantly trying to eliminate debt from your life, you are not alone.

In fact, over half of all American households have trouble meeting their minimum monthly obligations, driving them further and further into debt.

Only apply for the loan when you are ready. Refinance your current home mortgage. If current mortgage rates are below the rate you are now paying take advantage of the lower monthly mortgage payment.

Mortgage loans will be secured by your house.

Secured debts usually are tied to an asset, like your house for a mortgage. If you stop making payments, lenders can foreclose on your house.

Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Morgage Debt Elimination shows that if you fall behind on your mortgage, you must contact your lender immediately to avoid foreclosure, dont wait 2 or 3 months. Most lenders are willing to work with you if they believe you're acting in good faith and the situation is temporary, please tell the truth.

Some lenders may reduce or suspend your payments for a short time, mortgage debt elimination shows you that when you resume regular payments, you will only have to pay an small additional amount toward the past due total.

Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free mortgage debt advice to any homeowner who's having trouble making mortgage payments.

If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt managements plan (DMP). A DMP alone is not credit counseling, and are not for everyone.

Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.
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Two Ways To Start Your Own Mortgage Company From Someone Who’s Been There And Done That
by: Rob Lawrence



One of the most frequent questions I get asked from loan officers is, “How can I go out on my own and start my own mortgage company?” Often times, the person is sick and tired of low-commissions, office politics, too restrictive a time-schedule, etc. There are hundreds of reasons why they want to get out.

They see the money other loan officers are making, and wonder why they aren’t making that kind of money too? After all, they are doing the SAME work. The difference, very often, is just in the commission payout. Branching out on your own, is an instant pay-raise and can often double or triple the amount of commission you are currently earning.

There are two ways to start your own mortgage business.

1. Get your own broker license from the State.

2. Join an existing regional or national company as a “net branch”.

There are advantages and disadvantages of each. First off, getting your own license from the State isn’t easy. There are certain financial and experience thresholds that regulators look for before granting a broker’s license. Also, the capital requirements and start-up costs make this option extremely cost prohibitive. And, you’d be responsible not just for bringing in business and selling loans, but also hiring a processor, doing all the accounting and back office tasks, auditing, renting office space, etc.

Not to mention, that you have to go and set-up relationships with each lender you want to do business with. And some of them are pretty picky about who they deal with. If you’re a one-person company, you can forget about incentives and low pricing. You’re simply not worth their time.

By going entirely on your own, you can see quickly that your time would be exhausted with “chores”, leaving little available time to sell loans—unless you plan on working around the clock! And how long would a mortgage company last without new business?

But, getting your own license would give you 100% commission. Isn’t that what you want? 100%?

Another option is join an existing net branch company. Net branches are very popular in the industry and give you a number of advantages over going it alone.

A net branch is simply of way of doing business. You create your own personal branch, but under and existing mortgage company. You have freedom to do what you want and have all the benefits of being a large corporation.

Firstly, when you join a net branch, you are joining a ready-made structure with back-office support in place. That means they handle all the auditing, the compliance checks, the follow-up etc. Some even do processing. For this, they take part of the commission. So, instead of 100% (from going solo), you might just get 70% to 80%. Not bad, considering what you are earning currently. And you don’t have all the other regulatory headaches to contend with.

Net branches are typically 1 to 2 person shops, mostly professionals operating from their own home office, and selling on the road. In today’s digital age, this is entirely possible as most work is submitted electronically, or done over the phone and fax. Location is irrelevant.

By freeing-up your time--not getting bogged-down in the details--you can focus on bringing in new business and earning more money.

Remember, each net branch is different, and each has their own set of processing rules, guidelines, commission splits, fees, etc., and all should be examined closely before making a final decision.

Whether you decide to get your own brokers license or join a net branch is up to you, it depends on what your long-term goals are. Some people want 100% control over their destiny and want to create something new. That’s fine. That’s how entrepreneurs succeed. But, others don’t want the hassle of starting an entirely new business—they just want a higher paycheck to reach their goals.

by: John R. Blakefield

Unfortunately bad credit can haunt you for the rest of your life. If there are bankruptcies or foreclosures on your credit report, you know how hard it is to get any line of credit. Lenders and creditors simply look to as a too big of risk to loan money to.

But we know that even though mistakes were made in the past, your financial situation and behavior can be reformed. Some lenders understand this as well, and the sub prime lending market has grown and become very competitive. The lending market can be broken up into two main segments, the prime, those with average to good credit who are not huge financial risks. Then there is the sub prime market, with those who have poor to very bad or no credit.

Lenders can give ratings to a certain sub prime client giving them a rating from A-D: A being the best rating and D being the worst. When you fall into the C or D category, you are considered very high risk and more likely to default on a loan than that of a person with an A or B rating.

Sub prime lenders generally give loans to even the highest of risk cases. They look at the same information that a prime lender would look at to evaluate the type mortgage you can have. They look at credit history, income, expenses and long term debt. If you do have foreclosures, bankruptcies, delinquent payments, and outstanding debt, they will take all of this into consideration. If you can show steady employment, a good income, an effort to pay back the money you owe and are doing it in a timely fashion, you are more likely to get a better rate than that of someone who is not taking any steps to fix their credit.

Sub prime lenders can loan the money you need by protecting themselves. They do this through higher rates and fees that prime lenders would not charge. Be careful, because some sub prime lenders will take advantage of your poor credit history and charge a ridiculous amount in fees and charge you a too high of interest rate even for a poor credit case.

Fortunately for the consumer, this sub prime market is extremely competitive and you do not have to accept the first lender who offers to loan you money. You actually have the luxury to shop around and compare rates, even for the worst of credit cases! So check online for tools that can aid you in finding and comparing sub prime lenders. The internet is a good place to start your research. You can also ask for referrals from family, friends and even local bank.

Don't allow credit mistakes in the past to dictate how you live your life today. Buying a home is still an option regardless of your credit history. And, as long as the sub prime market continues to be competitive, you, the consumer is at a huge advantage.

It is always a good idea to take steps to repair your credit, and buying a home can aid in this. If you make you mortgage payments on time every month, then you can watch your credit grow! Sub prime lenders specialize in this area, so allow them you help you make your credit score even better! Be sure the sub prime lender you use is trustworthy and qualified. There are sharks in the industry, so be sure to ask for referrals and look at licenses.

So go buy your home and repair your credit at the same time! Take advantage of the opportunities you have at your fingertips.

by: Shane Brooks

Mortgage Broker strategies are important as you very well know, but have you considered all the marketing you can do on a day to day basis. This is not the type of marketing where you put an ad in the paper or hire a call center. These are the little things you can do to make sure that your mortgage business continues to grow. These are the things that cost very little but are huge in terms of keeping business as well as high customer satisfaction.

First Tip
Whether you are sending out a letter, a card, or even an ad for the paper, make sure you use effective writing techniques. First among these is to make sure that you have a headline on everything you do. Whether people realize it or not, the headline grabs the reader. Once they see a headline, they are way more likely to read the rest of the piece of text. Always make sure that the headline has a benefit in it so that your client has a reason to keep reading.

Second Tip
Keep writing! For many people, the thank you note has raised their income by large percentages. Every person, customer or friend, loves to show appreciation. They like to know that you are happy for them and that you realize what they have done for you. When you thank them you are connecting with them and helping to cement a future relationship.

If you make it a point to write thank you notes every day, you can really help your return business. Thank people who didn't even work with you on a mortgage. You can thank those who did something for you: your mechanic, mailman, or even the teacher your kid has at school. Whatever you do, just make sure you send those thank you notes. It will definitely pay off for you.

Third Tip
Be a braggart. When you do something for a client, make sure you tell them. You want to make yourself valuable to the client for a couple of reasons: so that he or she understands why you are getting paid, and so that he or she would refer you to someone else in the future. This can be very valuable down the road. Even though bragging seems harsh normally, so be humble and just point out the things you accomplished because in business you want to be valued.

Fourth Tip
This is a strange one for many, but make sure that if you have a phone person, that he or she always suggests that you are with a client. If he or she says "I'm sorry but he is working with a customer right now, give me one second to see if he can take a call right now".

This allows you to look busy and confirms that you are worth the effort to work with. It also gives you an out if you don't want to talk with a certain person for one reason or another.

Last Tip
Though there is an unlimited amount of advice that could be given about mortgage marketing techniques, there are some that are certainly more important. One of those is this: never stop marketing. Even if you are the best mortgage broker that ever walked the planet, if you cannot market then it won't matter. Nobody will know you are great, you will have no business to close, and you will not make any money.

Above everything else, mortgage is about getting clients in your door. The rest is just paperwork and learning the ropes of the loan biz. With that in mind, there is one other thing you should consider:

Form realtor partnerships whenever you can. If you can find a program that will help you hook up with realtors the right way, you should jump on it. By giving yourself that extra advantage, you are enabling your business to grow without making yourself do more work.

With a partnership with the right realtor, you may find yourself with a large number of renters turned buyers on your desk each day. What a great way to run the mortgage business huh?

So no matter what you do, implement a new marketing tip each day. Try to send out thank you notes, thank people in person, look for times to brag about your self, and even try to keep marketing. Above all, find ways to form those partnerships. Getting hooked up with a realtor and with changing renters into buyers, you will grow your business faster than you ever imagined.

by: Joel Teo

Investment property refers to any real estate asset, which is Non-Owner Occupied. The key intent of such an investment is the rental income that is accrued from it, along with the appreciation in its value over a period of time. Those who possess the necessary funds often look for profitable investment properties. In order to cut down the initial expense, by lowering the down payment, people usually acquire an investment property mortgage for financing their purchase.

An investment property mortgage refers to a loan or lien on an investment property that has to be paid over a specified period of time. In essence, it’s a personal guarantee that you would repay the money you have borrowed to purchase your investment property. There are several types of investment property mortgages, each with its unique features, benefits and pitfalls.

Fixed-rate mortgage – This is the most prevalent mortgage type because the monthly payments are stable. The interest rate throughout the life of the mortgage is the same as that at the outset. The major benefits of a fixed-rate mortgage are inflation protection and a relatively low risk.

Adjustable-rate mortgage (ARM) – This type of investment property mortgage has variable interest rates and monthly payments throughout the life of the mortgage. This scheme is popular because it often starts with lower monthly payments and a lower interest rate. The interest rate, however, can change during the life of the mortgage, which means that your monthly payment would change subsequently. It is imperative that you are aware of the nuances of an adjustable-rate mortgage prior to applying for one.

Balloon/reset mortgage – This has monthly mortgage payments based on a 30-year amortization schedule (mortgage repayment schedule). In general, the borrower has an option to pay off the arrears or reset the mortgage at the end of a 5-year or 7-year term. Therefore, this investment property mortgage type offers the advantage of a low payment but the mortgage must be completely paid at the end of the specified term.

Investment property mortgage can be availed on several property types, such as an apartment, a condo, any commercial property, or a plot. It can be acquired from leading banks and financial institutions, which typically verify your credentials (income source, savings and credit score) prior to offering mortgage. Selecting an investment property mortgage is as crucial as selecting a property. Therefore, decide on what amount of interest and monthly payments you are capable to mete out, and then select a mortgage accordingly.

Copyright © 2006 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author's information with live links only.)

by: Jim Olivero



If you where told by a lender you where going to have to pay a high interest rate for your loan, say 12 interest for 30 years on his home with a payment of $750.00 per month. John's friend Bill is renting a house, but he is paying $750.00 per month in rent with no interest (I am using these numbers for illustration purposes). Now, it's a funny thing, but both men live in their homes for the full 30 years and guess how much money both paid out in that 30 years?

Do you think John would have paid more money in the 30 years then Bill did because John was paying a mortgage? The answer is no! Thirty years equal 360 months of payments and if you multiply 360 X $750.00 you get $270,000.00. That means both men paid the same amount of money over the 30 years with one BIG difference! John now OWNS his home but Bill is still paying rent and does not own the home. In fact Bill's rent more then likely paid the mortgage off for the owner of the house he is renting from.

As you can see, even though John was paying a mortgage payment of $750.00 per month, the total amount of dollars paid in the same time period of 30 years is the same. Now Bill has nothing to show for all the rent payments he made except for 360 rent receipts. So you can see how the interest rate does not change the total amount paid over the time period because $750.00 per month is $750.00 per month. No matter what you call it a mortgage payment or rent payment, the bottom line is the same.

So whatever type of mortgage you can qualify for has to suit the payment you can afford and are comfortable with. Of course; the amount of money borrowed, the interest rate, and the term or years the money is borrowed is what will determine your payment.

So the bottom line is: if you get a mortgage that is comfortable for you payment wise... let's say equal to what you were paying for rent, the major thing you changed is the fact that you own the home now and you are not just paying rent or paying off someone else's mortgage.

You know the bottom line is we all have to live somewhere and we have to pay for that living space, so why not own what we have to pay for anyway. And don't get hung up on the interest rate to where it stops you from buying your home... just make the payment amount work for you.

Now let me show you what you can do with a mortgage payment that you can't do with a rent payment.

Stay with me now because it is going to get really good! As you have seen from our example above, the total amount of money paid over the 30 years or 360 payments for the mortgage and rent came out to be the same dollar amount in the end. However, did you know you could change the bottom line or the dollar amount paid when you are making a mortgage payment as well as the amount of time it will take to pay the money back?

A mortgage is calculated by the amount of money borrowed, the interest rate, and the amount of time it will take to pay it back. This calculation is called an amortization schedule. I am going to show you an amortization schedule for a mortgage now and show you how to change the total amount of money you will pay and the amount of time it will take to pay it back! Lets say you get a mortgage for $75,000@12% for 30yrs This is what the amortization schedule will look like:

Payment ---- Interest ---- Principle ---- Balance

$771.46 ----$750.00 -----$21.46 ------$74,978.54

$771.46 ----$749.79----- $21.67 ------$74,956.87

$771.46 ----$749.57 -----$21.89 ------$74,934.98

$771.46 ----$749.35----- $22.11 ------$74,912.87

$771.46 ----$749.13 -----$22.33 ------$74,890.54

$771.46 ----$748.91 -----$22.55 ------$74,867.99

$748.68 ----$748.68 -----$22.78 ------$74,845.21

$771.46 ----$748.45 -----$23.01 ------$74,822.20

$771.46 ----$748.22 -----$23.24 ------$74,798.96

$771.46 ----$747.99 -----$23.47 ------$74,775.49

$771.46 ----$747.75 -----$23.71 ------$74,751.78

Totals ----$8,237.84 ----$248.22

As you can see, when you make a payment on a mortgage a large part of the money goes to interest with a small part of the money going to principle. You will notice the principle balance increases with each payment and the interest balance decreases with each payment, but this happens very slow.

Now, let me show you what control you have over a mortgage:

As you can see; in the 11 months of payments we made on this mortgage, we paid $8,237.84 in interest and $248.22 in principle! This is what YOU can do. When you looked at this schedule after your closing, you noticed the figures. If you were to add the total of the principle for the 11 months of payments ($248.22) to your first mortgage payment and told the lender you wanted the extra money to go towards the principle this is what would happen for you: you would reduce your mortgage by 11 months and save $8,237.84 in interest payments! This happens whenever you make extra payments on a mortgage, no matter how much or little you pay. You always have to specify that this extra payment is designated to go towards the principle and this works best if you start right away in the very beginning of the mortgage!

This means that in your first month you have already changed the total amount of money and time it will take to pay back your loan. The more you can do this, the less money you pay in interest and less time it takes to pay the money back.

The mortgage has to have no pre-payment penalties. That happens to be the majority of mortgages that we see today. However, ask and make sure so that you have no surprises later. This is just one simple thing you can do with a mortgage which gives you control of the bottom line as far as money paid back and the time it takes to pay it back.

Visit me at http://www.easymoney-123.com

by: Aubrey Clark

The mortgage crisis has had a negative impact on everyone, not just homeowners. Elected officials are working hard to pass legislation that is designed to prevent future banking debacles. Unfortunately, history has proven that when legislators over-regulate banks that it tightens the reins on lending. This is done by raising the bar on what it takes to qualify for a mortgage or installment loan. Predictably, it’s the middle class that will feel the pinch more than anyone. Specifically, it’s the middle-class, self employed small business owner that be injured the worst.

Most people are aware that you can reduce your taxes by deducting expenses and qualified charitable contributions. What most people don’t realize is that small business owners live and die by those deductions. Tax rates have risen on the self employed more than any other segment in our society. To counter these tax hikes, legislators created more “loop-holes” write off’s and deductions for small business owners to use.

For this reason, small business owners rely on creative CPA’s to maximize their deductions in order to show less income and pay less taxes.There are nearly 23 million small businesses in America and over 35 million sole-proprietors and almost every one of them employ savvy CPA’s to keep them in the black. The draw-back is that by doing this most self employed borrowers are unable to prove enough income on paper when applying for a loan or a mortgage.

Traditional mortgage lending practices of yester-year required that borrower’s prove sufficient income when taking out a loan. Over the years, taxes have risen for small business owners at staggering rates, far above what they have for W2 employees. At the same time the self employed borrower's “provable” income has dwindled proportionately. Under traditional banking rules most of the self-employed people wouldn’t be able to qualify for business loans or mortgages. This would ultimately force small business owners out of business and cripple our would economy.

This new business paradigm literally forced the banking industry to create lending products that catered to small business owners who could not prove all of their income. These products were called “stated” income loans and did not require borrowers who had good credit to prove their income. These products originally required good credit and sufficient assets in order to qualify for them. Responsible guidelines and common sense underwriting kept default rates on these products in line with conventional mortgages. Unfortunately, as competition for this segment of borrowers stiffened between lenders the stringency to qualify for these mortgages softened, thus the mortgage crisis.

It is exactly this type of loan that our law-makers are trying to do away with through legislation. The new mortgage bill being bounced around has specific remedies for irresponsible lending. Meaning, if a bank loans you money and it can be proven in court (attorneys like this law by the way) that the bank was irresponsible in doing so they could be penalized. The definition of “irresponsible” is did the borrower have the capacity to repay the loan, meaning did they prove enough income. This bill will kill stated income loans, period.

So where does this leave the responsible self employed borrowers who needed these loans to live and operate their businesses? This leaves them with higher taxes. Should this bill pass self employed borrowers will be forced to claim more income each year on their tax returns in order to qualify for car loans, mortgages and even business loans. This will negate any of the loop-holes and deductions they were promised in lieu of higher taxes.

This means the government will rake in billions in extra revenue as a result of this bill. For example, let’s assume that a small business owner claimed $40,000 in income last year after deductions and business expenses. If she was in a 40% tax bracket she would pay roughly $16,000 in taxes. Under the new banking guidelines that same business owner may have to claim $80,000 In order to qualify for mortgages, car loans and business loans. Assuming she’s in the same tax bracket, she would now have to pay $32,000 in taxes.

Multiply $32,000 by 23 million business owners and that’s one huge pay-day for Uncle Sam. You can bet that the Senators pushing this bill through congress are well aware of this left handed tax raise. You will never hear them mention it either, I wonder why?. You will hear about the naughty lenders that put good wholesome red blooded Americans in the street through predatory lending practices. You will never hear about the 20 million business owners who paid their mortgages on time and actually need these loans to stay in business.

by: Jay Conners

When a loan officer or mortgage broker purchases a mortgage lead from a mortgage lead company, their very next step is to call the customer.

This is not as easy as it sounds, because we all know you never have a second chance to make a first impression. So you want to be prepared before you make the call.

By being prepared I mean have a few mortgage products you want to go over with the customer that you believe will meet their needs based off of what information you were given on the mortgage lead.

Also, mortgage lead companies will sell their mortgage leads up to as many as five times. So, you may end up running into some challenges if the customer is already working with another loan officer.

Or, perhaps they have even lost their nerve.

Here are a few scenarios you may run into and how you can lessen the impact should you be confronted with such a situation.

Purchasing or refinancing a home is a very big financial deal, so it is understandable if your customer gets cold feet.

Say something to this effect in the nicest voice you have . . .

Oh, I’m very sorry to hear that, after looking at the on-line form you filled out, I was able to fit you into one of our loan programs that I am sure you would have some interest in.

If a prospect says to you that they are working with another loan officer, they either really are, or again, they have lost their nerve.

Say something to this effect . . .

I’m really sorry to hear that. We offer some really nice mortgage products and I only wanted to take a few minutes of your time to go over some of our mortgage programs.

Although these approaches will get the customer talking the majority of the time, there are the times when it does not work.

Here are a few other things you can do . . .

Most mortgage lead providers supply you with an e-mail address, so e-mail them with some attractive mortgage products and tell them briefly about the benefits of working with you and your company.

Also, you can mail them out some flyers with some mortgage products that you believe would meet their mortgage needs along with some of your business cards.

Whatever happens on your sales call, do not give up after one objection. If you have not been having success with your leads, than you need to change your approach.

Also, you may end up having to leave a voice mail which is not at all uncommon these days.

Should you have to leave a message, be sure to be direct and to the point. Let the customer know who you are and why you are calling, and give them a reason to call you back.

Tell them you have a product that you believe they will be interested in and it is very important that they call them back.

To sum it all up, no single mortgage lead is a slam dunk, no matter how good it looks on paper. Nine times out of ten you will be faced with some sort of challenge. So do your homework and be prepared to face your challenge’s head on.

by: Alan Lim

Getting a home mortgage loan but confused which particular type to get? Read about fixed and adjustable rate mortgages through this article.

If you are getting yourself a home mortgage loan, you will most likely encounter a phase where you are torn between choosing a fixed rate or an adjustable type of mortgage. No one can really say that one loan is better than the other. The choice you make is dependent on a number of factors which may include your interest rate outlook, your budget, the number of years you intend to stay in your home, and how much risk you can tolerate. Let us look through these two types of mortgage loans so you can determine which among the two is best for you.

A fixed rate home mortgage loan (FRM), as its name itself suggest, involves loans whose interest rates remain the same all throughout the lifetime of the mortgage. They generally cost more to compensate for the lesser risk and the greater comfort involved. If the current interest rates are low, an FRM will prove to be a good choice as you will be assured of locking in at a low interest all throughout your loan term.

On the other hand, an adjustable rate home mortgage loan (ARM) is that whose rate fluctuates as the interest rates in the market rise and fall. ARMs are given initially cheaper than FRMs since they involve greater risk. They are a great option if the current interest rates are high and you foresee them to lower in the coming years. If you know that you will stay in your home for a relatively short period, you can get a good deal with an ARM.

The downside of getting an adjustable home mortgage loan is that you can run a real risk of having to pay more if interest rates rise sharply. This means that you will need to pay more in monthly payments. The rate of your ARM loan varies depending on your loan agreement terms. Some rates change as frequently as three months, while others change once a year or every three years. ARMs generally come with a rate cap, which limits the amount by which the lender can raise their rate. The cap is usually set to 2% meaning that the rate increase should only be a maximum of two percent for a given adjustment period.

Because of its stability and lesser risk, FRMs are understandably more popular. Even if they come more expensive, getting a fixed rate home mortgage loan will enable you to easily manage your monthly budget so you can have better control of your finances. It is also less risky since you always have the option to refinance in case interest rates drop uncontrollably. Conversely, although ARMs can be risky and confusing, there are good deals provided by many lenders which are actually better than FRMs.

The type of home mortgage loan you should choose depends on various factors. It all boils down to how open you are with taking risks. To help you figure out which one is best, you can try to imagine your worst and best case scenarios. You can calculate and compare your options and determine which one can give you the best deal possible.

by: Leonard Rosen



With the recent upsurge in residential foreclosures nationally, homeowners are finding themselves in a very unusual predicament. Over the last 7, borrowers with less than perfect credit fell into a category called :sub prime borrowers". This class of borrower was able to obtain a mortgage with little or no documentation.

The lenders were all too anxious to lend money to this class of borrower. Consequently, many borrowers took advantage of possibly a once in a life time opportunity to own a piece of the American dream.

Then reality set in. Many borrowers purchased a mortgage with a negative amortization option along with interest only options. Rather than pay the fully amortized 30 year rate, they only paid the interest and in many cases paid the negative amortization rate.

The problem with this scenario is that mother time has caught up and the once easy affordable payment has re-set and the borrower no longer could afford to keep the property and make timely payments when the adjustable rate changed.

The question is, who is at fault? Many politicians and consumer agencies believe the mortgage companies are at fault for funding to this class of borrower. The mortgage companies qualified the borrowers on the teaser rate of 1%, not on the fully amortized 30 year rate. This turned out to be a perfect recipe for disaster.

We now have thousands of borrowers across the country facing foreclosure. So what’s the solution?

A borrower may be able to obtain a hard money loan based on the equity and value of the property. This is called a hard money mortgage or private mortgage. The interest rate is considerably higher than a sub prime loan but the borrower is able to keep their property and develop a game plan rather than lose their home to foreclosure.

Many call hard money lenders "satin" for taking advantage of a homeowner in desperation. I suggest that the hard money lenders who offer this type of hard money mortgage are "angels".

Without a safety net, many borrowers would surely lose their house. Hard money mortgages, when properly used, can be a very useful tool and a life saver.

I prefer to call hard money lenders "Angels".
http://www.pitbullmortgageschool.com/article_leadexpert.htm

by: Rob Lawrence



I get a lot of emails from loan officers who are currently working for a mortgage company, but are looking to advance their career and go out on their own. When they see the kind of money that can be made in this business, it’s no wonder they aren’t satisfied with their 50% commission spread (or even less!).

When I first started in the industry, my commission spread was 20% of the yield spread premium or YSP. And, if that wasn’t bad enough, we worked on teams of three people—two loan officers and a processor. This meant that any commissions I and my team earned, had to be split three-ways amongst us all. I’m not kidding! My commission after all was said and done was a measly 6.5-7.0% of the YSP. So, on a $3,000 loan, I would make about $200 at most. You don’t want to see what it looked like after they took taxes-out. Absolutely pitiful. Being ignorant (of the mortgage industry), didn’t make me stupid.

That was many years ago. You can see why I was eager to get out of there ASAP. Of course, not having any mortgage experience at all, at the time, I didn’t know any better. I had no idea what the “reasonable” commission structure was. I figured this was how the industry worked. How shocked I was when my eyes were opened. And to think on that original $3,000 loan, I could have at least had $1,500 or more (depending on the mortgage company). But, I have no regrets because it gave me my start and is the main reason I am successful today.

I’m sure many of you encountered the same dilemma as I did. You have to start somewhere. You have to learn the business inside and out. You have to put a stake in the ground. So, no matter where you work currently, or how bad you think the pay scale is, think of me and my first loan and my sad paycheck. ;-)

My point is, learn all you can learn. Observe everything. Take lots of notes and ask questions. Be curious. Make contacts with as many wholesale reps as you can. And network like crazy. Yes, there is a steep learning curve to this business. The first 6 months are grueling, but if you keep the faith and learn as you go, your rewards won’t be too far away.

And even if you can’t stand the mortgage firm you currently are with, the good news is that there is always a way out. Mortgage companies are always hiring and bigger commission checks may be only a phone call and an interview away. :-)

by: Brad Stroh

When you first apply for a mortgage, you may feel you’ve stepped into a different culture with a language all its own. More than likely, your mortgage professional is throwing many new terms and expressions your way. It’s the responsibility of that same mortgage professional to make sure you understand everything that’s being explained to you, so you should never hesitate to ask them to stop and clarify. However, if you can approach your application meeting armed with some familiarity with mortgage terms, everyone can be more comfortable from the very beginning. Familiarize yourself with the following and you’ll be a step ahead of the average first-time borrower.

HUD: HUD stands for Housing and Urban Development, and refers to the US Department of Housing and Urban Development Settlement Statement documents pertaining to the house being financed. When your loan officer talks about having you sign the HUD, they are referring to that settlement statement. The “HUD” will detail all payoff information, including any fees associated with your mortgage loan.

LTV and CLTV: LTV and CLTV stand for Loan to Value and Cumulative Loan to Value (or Combined Loan to Value). LTV refers to the percentage of the home’s value that is being financed. Thus an $80,000 loan for a $100,000 home constitutes 80% LTV. Higher LTV loans may carry higher interest rates and mortgage insurance than lower LTV loans. CLTV refers to the combined amount being financed between two loans for the same property. If the $100,000 home mentioned above has a first mortgage of $80,000 and a second mortgage of $20,000, the LTVs of those loans would be 80% and 20% respectively for a CLTV of 100%.

Designation 80/20: Designation 80/20 in the same line of thought, refers to the technique of obtaining 100% financing for a borrower without using a program that offers 100% in one loan. 80/20 refers to the percentage of the home that will be financed with each loan, 80% with the first mortgage and 20% with the second mortgage. 80/15s, 80/10s, and so on are also available and are options you should consider under the advisement of your loan officer or financial planner.

Stips: Stips are stipulations, and they are the requirements handed down by your lender and its underwriting department in order for your mortgage to be cleared to close. Common stips are copies of pay stubs, bank statements, and verifications of rent and employment.

VOR and VOE: VOR and VOE stand for Verification of Rent and Verification of Employment. Both may be required by your lender in order for your loan to be approved. Not all lenders and not all loans require either one of these.

HELOC: HELOC, while not something you will probably hear during your first mortgage experience, is one of the most common mortgage acronyms. It refers to a Home Equity Line of Credit, which is one option borrowers have for taking equity out of their homes. With a HELOC, borrowers can draw up to the full amount of the loan as many times as they choose, paying down all or part of the amount and drawing it back out again. In this way, a HELOC is a loan similar to a credit card, except that the interest paid on a HELOC is tax-deductible.

This is not a comprehensive list of the new terminology you may encounter when securing a mortgage, but familiarity with these terms will help you understand what your loan officer or financial planner is talking about when it comes time to finance a home.

by: Patrick Bedall



Niagara Falls or babbling brook. How is your flow?

How do you get clients in the door? Do you have the budget and time to undertake a massive marketing campaign? Could experience with multiple property types and applications increase your value to the commercial market? Where are your deals located? How is the market in your area? Is your referral network bringing you enough business? These are all questions you need to consider when you think about how to increase your deal flow.

Of course every loan you work will not close; that is not the reality of the commercial mortgage industry. You need to be in front of the right people at the right time with the right solution to even be considered. Here are the 5 main factors that affect your deal flow which ultimately affects your cash flow. The first step is awareness; knowing what the issues are will allow you to determine a solution. Rate yourself in each of these areas:

-Referrals: Referrals are king. This is by far the number one way for a commercial broker to get business. This certainly works well for those that have been in the industry for years and have a large network, but what about those new to the industry? Can you survive waiting on someone to refer you when no one knows you exist?

-Marketing: This is how we let our potential clients know who we are and that we can provide them with a solution for their financing needs. The problem is that there are hundreds of other solutions out there all competing for the same client. Without the budget and knowledge to do it right, it is very difficult to get a good return on your marketing investment.

-Expertise: What you know and how long you have been in the business has a dramatic affect on deal flow. Of course, those that have been in the commercial business for 10 years have a greater client base and referral network. You can't buy experience, no matter how much you spend, but what you can get is training. Through continuing training, especially at the beginning of your commercial career, you can build the knowledge it takes to get the deals done. Share that knowledge with your potential clients and you have set yourself up as the expert in the field, despite your lack of experience.

-Geography: It is no surprise that by serving a larger geographic area, you will be exposed to more deals. However, without the support of a large national company this is very difficult and potentially cost prohibitive. The downside of most national companies it that by bringing the deals to you they will expect something in return. Often a big chunk of your commission. It's a catch 22, you get more clients, but now you need even more than before just to break even.

-The Market: Some markets are hot and some are cold that is the reality of the industry. If you are only serving a small geographic area and that area goes cold, what do you do? The key is to ensure that your client base is as diverse as possible, not only by location, but by property type and industry.

What to do? Build your business. Start by looking at the percentages that each of the above are contributing to your total deal flow and set targets for the coming year as to what you want the percentages to look like. For example, if referrals now make up 10 percent of your total business, set your targets for 20% next year and establish the game plan to do it.

For marketing, are you tracking a cost per closed loan? Do you know what you're spending for the revenue you're generating? Begin to cull out the sources that are not generating the returns you require.

When looking at geography, start to examine how you can expand the markets you serve. This will both increase your deal flow and minimize a downward movement in any one particular market. In effect, it is diversifying your portfolio. Look for a partner that can introduce you to new markets and provide you with lead sources into those markets.

In summary, deal flow is driven by your presence. When the market knows you're there and do quality work, your flow will build exponentially. The next step is to formulate your plan to increase that presence and identify the partners that can help you do it.

Copyright (c) 2007 VEC Financial Group

by: Michael Sterios



Prior to 2004 there was little regulation for mortgage brokers conducting business in the UK. Anybody could call themselves a mortgage broker, regardless of whether or not they held the necessary qualifications, and they could source clients and conduct their businesses in any way they chose to.

However the Financial Services Authority introduced a strict regime of regulation on 31 October 2004. Mortgage brokers were forced to obtain industry approved qualifications and conduct their business in accordance with the FSA’s rules and regulations.

One rule that was introduced on that date eliminated the ability of mortgage brokers to source clients through cold calling. Cold calling involves phoning people at random without any prior consent given by the individuals. It is a technique that was used by many mortgage brokers to find new customers prior to the new rules coming into effect.

This meant that mortgage brokers who relied on cold calling to expand their customer base were forced to invent new ways of finding clients. Because of this, lead generation companies began to emerge that generate leads for mortgage brokers who do not have the ability to do it themselves.

The lead generation companies are mostly internet based and gather leads through websites. This type of business activity is mostly unregulated by the FSA as it is not the mortgage brokers themselves who are gathering the leads. Some rules do exist for lead generators including that they are required to advise visitors to their websites that they will be contacted by an independent mortgage broker. The leads must then be sold to an independent broker rather than a tied advisor.

Despite this, lead generation is not considered to be cold calling and would therefore not endure the wrath of the industry regulator with regards to the ban on this activity. Generating leads with the purpose of calling back the clients would be considered a “warm lead” rather than cold calling.

However, mortgage brokers and the general public should be aware that a minority of lead generation companies have used unscrupulous means to obtain data for potential mortgage customers and have sold it to mortgage brokers disguised as qualified leads. If you receive a phone call from a mortgage broker and you did not submit your details online for this purpose you should contact the authorities.

Mortgage brokers who buy such leads will then call the potential clients only to find that the leads are not genuine. This means that the mortgage broker has effectively made a cold call to that member of the public because they have not given prior approval for the mortgage broker to contact them. This is a potentially dangerous situation for a mortgage broker to find themselves in so all efforts should be made to stamp out this practise.

Mortgage brokers should be careful to ensure that any mortgage leads they purchase are genuine. There are several large lead resellers operating in the UK who have excellent methods for filtering out invalid leads. High quality lead resellers will also offer mortgage brokers refunds on all invalid leads.

by: John D. Waller



Recently, I met with a commercial lender who mentioned a problem with one of his projects. Construction had started, but the developer hadn’t closed the construction loan. Thus the lender’s mortgage hadn’t been recorded, but likely would be soon. He wondered how the delay might affect the priority of his bank’s mortgage lien. Attorneys representing secured lenders in commercial foreclosure cases, or contractors in mechanic’s lien actions, should be conversant with Indiana law in this area.

1910: A Draw. The Indiana Supreme Court’s 1910 decision in Ward v. Yarnelle, 91 N.E.7 (Ind. 1910) is the landmark opinion on this subject. At the time, Indiana’s mechanic’s lien statute “failed to address the lien priority between a [construction mortgage] and the mechanic’s liens of those who [completed] the construction.” In Re Venture, 139 B.R. 890, 895 (N.D. Ind. 1990) (excellent summary of the law). The Court therefore announced the equitable “doctrine of parity” in which a “real estate mortgage executed while a building was in the process of construction was entitled to equal priority with the claims of [contractors that] worked after [recordation] of the mortgage and with full knowledge of its purpose and effect.” Beneficial Finance v. Wegmiller Bender, 402 N.E.2d 41, 47 (Ind. Ct. App. 1980) (no parity because contractor completed its work before lender recorded its mortgage); Brenneman Mechanical v. First Nat. Bank, 495 N.E.2d 233, 242 (Ind. Ct. App. 1986) (parity because contractors had knowledge of loan, which helped pay them).

Whether the contractor had knowledge of the construction mortgage was critical to the Ward analysis. In such instances, the Court felt that lenders and contractors were in a kind of “common enterprise.” Ward, 91 N.E. at 15. Under Ward, if funds derived from the mortgage were used in the construction project and if the contractors had knowledge of the loan when they performed their work, then the mortgage and the mechanic’s lien had equal priority. Conversely, if the loan was not for purposes of construction or if the contractors worked without knowledge of the purpose of the loan, then the mortgage had priority over mechanic’s liens for work performed after recordation of the mortgage. Venture, 139 B.R. at 896

1999: Statutory Amendments. I.C. §32-28-3-5 is the pivotal statute. Subsection (b) provides that a mechanic’s lien is “created” when the lien notice is recorded. But the recorded lien relates back to the date the work began, which could pre-date a mortgage. In 1999, the General Assembly added the language now in subsection (d) that says construction mortgages have priority over mechanic’s liens if the mortgage is recorded before the notice of mechanic’s lien is recorded (not created). My reading is that subsection (d) disposes of Ward’s doctrine of parity, at least as to commercial and industrial projects. (Note that section 5(d)(1)-(3) has carve-outs for certain residential and utility projects.) Accordingly, courts should focus on relative filing dates, and not on work dates or contractor knowledge.

Post-1999: One Case. The meaning of section 5(d) has not been tested on appeal, however, and I.C. §32-28-3-2(b)(2) priority, which favors contractors, may to some extent conflict with section 5(d) priority, which favors lenders. For more on this subtlety, read section 2(b), as well as Provident Bank v. Tri-County Southside, 804 N.E.2d 161, reh’g granted, 806 N.E.2d 802 (Ind. Ct. App. 2004), which gives some insight into the potential inconsistency. (Provident Bank also has an amusing result. The opinion dealt with a contractor’s improvement [installation of a driveway] at a residence long after a purchase money mortgage had been recorded. Believe it or not, the majority held that the contractor’s statutory remedy was to remove and sell the driveway.) Anyway, in the dissenting opinion, Judge Sharpnack toyed with Ward and the new I.C. §32-28-3-5. “In 1999, our legislature amended I.C. §32-28-3-5 and specifically addressed the situation before our supreme court in Ward and again discussed by the bankruptcy court in Venture.” Id. at 168. Judge Sharpnack concluded in dicta that I.C. §32-28-3-5(d) applies “where funds from the loan secured by the mortgage are for the project which gave rise to the mechanic’s lien. In such an instance, the mortgage lien has priority over the mechanic’s liens recorded after the mortgage.” Id. at 169

2007: Lender Wins. At least as to a standard commercial project, therefore, the Ward doctrine of parity seems to be a thing of the past. The lender, in the scenario presented to me, shouldn’t be forced to share equally with any contractors that started construction before the developer closed the deal. Instead, the lender should hold a superior lien, assuming the lender records its mortgage before a contractor records a notice of mechanic’s lien. In other words, if the project goes south, the lender should get paid first. Please e-mail me if you know of any recent trial court or unpublished appellate court opinions touching on the 1999 amendments or the doctrine of parity. Because it’s been almost 100 years since Ward, perhaps we’re due for another landmark opinion from our Supreme Court. As the law evolves, I’ll provide updates on my blog.

by: Rob Lawrence



In my last article, I covered the two main ways to start your own mortgage company. One way, was to go it completely alone…apply for your own broker’s license, set-up all the relationships with the various lenders, handle all the back office stuff like accounting, compliance, etc. All of this, giving you your independence, but being extremely time consuming.

An easier and more productive way for the loan officer wanting to go on their own, is to join an existing company and operate their own individual “net branch”. It’s where you are working under a head-office, but operating as an individual with all the perks and privileges that go along with independence, but without a lot of the chores and headaches associated with a start-up company. A net branch is simply a way of doing business.

Net branching is a term that is very loosely thrown around the industry, and not every partnership opportunity a company offers is a true “net branch”. Please be careful.

Mortgage companies net branch because it is a way for them to expand their sales force with very little cost or financial risk. Because you are working solely on commission, they don’t have to pay a salary. And, if you don’t produce, you won’t last. Only the strongest will survive. It’s as simple as that!

Companies also already have the structure, compliance, auditing and lender relationships set in place. To add a new salesperson or branch, takes little time and can mean a new on-going revenue source for the firm.

Since the start of the low interest rate boom, companies have recognized that net branching is a smart and viable solution to expansion, especially when adding new states to their lending roster.

Here are the top reasons why loan officers decide to branch-out on their own:

1. They want more commission. They are sick of doing all the work, and getting a measly pay split. They want financial independence.

2. They want more control over their career. They are sick of being micro-managed and controlled by the boss.

3. They want their time back. They have other life obligations and want to spend more time with their family doing the things they enjoy. They are sick of the long hours and late nights.

4. They are emotionally drained and tired of all the office politics. They want to “choose” the people they deal and work with.

5. They are sick of being a robot. They want to fully use all their skills and knowledge and remain challenged in their career. In essence, they want creative and personal freedom.

Here are the advantages of joining a net branch:

1. Better pricing on rates, due to the volume of loans the company as a whole originates. Remember, although you are a single net branch, you have the buying power of thousands of other net branches that are within the company.

2. Greater depth of loan programs. With access to more lenders, you can offer more programs to the consumer and cover virtually any loan scenario.

3. Higher commission payment, usually in the 70% to 80% range, sometimes 90% to almost 100%.

4. Ability to originate loans in multiple states, even all 50! This means more loans for you! Don’t throw those out-of-state leads away!

5. No accounting or compliance headaches to deal with. The head office has these structures already in place. This leaves you more time for selling.

6. More attention from the wholesale account executive. Account reps know that if they are dealing with a large firm, they will get more business. They don’t want to waste their time dealing with the small fries.

7. Ready marketing materials. You do not have to start from scratch and create your own marketing collateral and brochures.

8. Licensing and start-up requirements from the state are significantly less, because there is an operating mortgage firm already underway.

9. You have the resources of the head office, as well as other local net branches. This forms a significant support network, which should not be underestimated.

10. Freedom to make your own schedule and call your own shots. You are in the driver’s seat and if you want to earn more income, simply work harder. No one is holding you back from your career.

11. You can multiply your efforts by hiring loan officers underneath you, and get a cut of THEIR commission as well.

Disadvantages of joining a net branch are:

1. You still must follow the company’s internal rules. You are technically an “employee” of theirs, and at their mercy.

2. Are they really telling you the whole story upfront? Will you be hit with any company surprises down the road?

3. Once you join a net branch you can’t easily jump and join another one.

4. You can’t choose the mortgage company name, you have to use their name. Also their logo, business cards, marketing materials, etc.

5. You may feel isolated by not having an office to go to, as most net branches are operated out of the loan officer’s home. And, if you do choose to rent an office, that’s an expense you must pay for.

6. People may not always be accessible or return phone calls when you have a question.

7. Some net branches have minimum sales requirements, and will fire you if you do not meet their sales goals.

8. Expect to do a lot of the loan processing yourself. After all, you are working solo now. Or, if you don’t want to do processing, expect to hire someone to do the work. Again, another expense.

9. Most net branches don’t offer health benefits. Some say they do, but when you read the fine print, they have 1 or 2 year timeframes you must be with the firm first. Or, they don’t cover all states. Mostly, it’s just the run around. So, make sure you get on your spouse’s health plan before you make the jump. Or shop around for personal health coverage.

Before deciding to join a net branch, here are some personal questions to consider:

1. Are you financially ready? Can you live off your current savings while your new branch is getting set-up? How much are your personal living expenses? What future expenses are likely to come-up?

2. Are there any business start-up costs? What are the fees upfront that must be paid before you can begin? Things like individual state licensing, setting-up a reserve account, office expenses etc. are costs that are borne by the individual loan office NOT the net branch.

3. Do you have a support network in place? Will your family support your efforts in your new business? Who will you turn to when things get rough?

4. Who is your competition? If you are leaving a local firm, mostly likely your former employer will be your fiercest competitor.

5. Did you sign a non-compete clause with your current mortgage firm? Check you’re your attorney. Although, not entirely legal in all states, companies will use this as a way to brow-beat you into submission. You can’t be stopped from earning a living. Don’t let them stop you from your dream.

Remember, going it alone comes with a price; and one which should be carefully considered. There are advantages and disadvantages of starting your own firm. In the end, a net branch is simply a way of doing business. It’s a conduit by which you can originate and close loans. Net branching is a great way to have the freedom and independence of your own mortgage firm, but with significantly less risk.

So, go ahead and give yourself an instant promotion this year. Consider net branching, but look carefully before you leap.

by: Simon Burgess



While this question should, of course, be the first thing you ask yourself before buying mortgage insurance, many do not even give it a thought. Usually those who give no consideration to the suitability of a policy are those who take it alongside the mortgage at the time of borrowing. Of course, many put trust in the lender – after all, the lender got them the cheapest loan so why not the insurance to protect it?

While the high street lender may get the best deal for the mortgage this does not mean they can do the same for the protection for the mortgage. In fact, buying mortgage cover alongside the borrowing is often the most expensive way of doing so and the most risky. Often very little information is given regarding the terms and exclusions that come with a policy. This means the consumer is unaware of the exclusions and could be buying a very high-priced policy that they cannot claim against if they find themselves out of work.

Some lenders might ask that you do take out some form of protection for the money you are borrowing but it does not have to be taken at the same time. Consumers do have the right to shop around for a policy and your mortgage should not depend on taking the cover offered by the lender. By choosing to shop around for the cover you can make huge savings on the total amount you pay. A specialist lender will give an instant quote for mortgage protection based on the amount you wish to cover and age of the policy holder. Along with this, they provide all the information needed for the consumer to be able to choose whether a policy would be suitable.

While providers of mortgage protection can add in their own exclusions there are some that are common to most policies. Individuals who are self-employed, retired, have a pre-existing medical condition or who are not working in a full-time position could find cover would be useless. This is not black and white; for example, self-employed individuals who had to ceased trading altogether through involuntary unemployment could still benefit from a policy. And those who have an illness that has not reared its head during the last two years could also benefit. It is essential to carefully check the policy details to make sure an exclusion would not apply to you.

After taking out suitable cover the policy holder would have peace of mind if they lost their income through sickness, accident or unemployment. Their policy would provide a tax-free income once they had been incapable of working for between 30 to 90 days. The money received would cover the monthly repayments for the mortgage and related outgoings such as insurance.

Those individuals who think they could rely on the state helping out in their time of need could be in for a disappointment. While the state does offer help, you have to qualify for it. The help the state provides depends on how much money you have in savings; having over £8,000 means you would be expected to use this money to support yourself. Also, if you have a partner living with you who is in full-time work then you also would not be eligible for help, and the help that is given will only pay towards the interest part of the first £100,000 of your mortgage. So a far better solution to relying on the state is to take out mortgage insurance from an independent provider.