Blog with MAE Capital

The Mortgage industry has long been a confusing industry not just for a customer trying to get a home loan but it has been a bit esoteric in the way it operates. Top producing Loan Officer have always been reluctant to share their secrets. Interest rates have long since been an area where most people in the industry still are not sure how they are derived. The industry has tried for some time to create a disclosure that average person on the street could understand. Now there is the government imposing more rules and regulations on the industry and further confusing not only those of us who are and have been in the business for years. With the onset of the Nation Mortgage Licensing System (NMLS) every loan originator in the country must pass a test to enter this trade, and in some case must also hold a Real Estate license. We have seen a dramatic decline in loan originators over the last 5 years due to the road blocks that have been put in place by the government.

What is the answer? More regulations that not only affect the industry it also affects the consumer in their ability to get a home loan in a timely manner. With less loan originators you get less people doing more work, which is good for those that have the work but if you desire to reach an originator it might be a little tough to get a hold them as they are doing more work. To compound things times are slow and the demand for loans is low right now, what happens when real estate heats up again? Will it take 3 to 6 months to get a home loan? That could be detrimental to an already fragile industry.

If you want to start a mortgage company in today’s world you will need first to hold a Real Estate license or a Consumer finance lender license, and that will require going through the hoops to get those designations. Once you have a Department of Real Estate Broker license, for example, you will then need a name to operate under, you will have choices to do a DBA (doing business as) by paying a fiee to the county and publishing your name you desire for 30 days and after that you wait another 30 days to get the actual name to use. Or you can incorporate, at which time you must chose what type of corporation you want to be (i.e. “S” corp, “C” corp, or LLC) and pay the applicable fees for incorporating. Then somewhere along the way you had better take and pass the NMLS test and pay the fees, a process that will take about 60 days if you are fast. After you have these items you then must get your company or your sole proprietorship a NMLS number then the regulator has to sign off on it another 30-60 days. Oh did a forget the fees for each step, and if you don’t feel comfortable doing all of that yourself you will pay someone to do it for you, for a fee. Once you have you and your company fully licensed then you will have to find a company to sponsor you as a mortgage broker and if you have no experience there will be a limited amount of wholesale lenders that you can do business with.

So if you think markets can and will always equalize like we are taught in our basic economic class, you might have forgotten the barriers of entry argument. So where does that leave the consumer? Well basically with less choices and higher prices which is basic economics of demand and supply. People may believe in regulation and I do but to a point and the argument will always be that the good businesses have to pay for the poor ones that came before them. If there is an answer to this conundrum I would love to hear it as always give your commets.

I am not sure how many of you out there have ever been online to search for Real Estate but the world has changed. A little know company called Zillow used to be driven by the local Multiple listing services (MLS) and today in some parts of the country it might still be but in others it is not. So if you are trying to get an estimate of the value of your home Zillow may not be the best place anymore. I know in Northern California they don’t pick up all the listings, some agents are having to enter them in manually. Some agents don’t even realize this so the inventory is not accurately depicted on Zillow or other search engines. I can only guess it is a money thing as it costs to host an IDX powered web site from each MLS across the country. Others such as Redfin, Tulia, and the hottest new comer to the Northern California market www.CribClick.Com uses the local MLS to drive its search engines. In Fact, at CribClick.com you can customize your searches and become notified when new listings hit the market so you can first at getting your hands on the really good deals.

Online Real Estate, with $4.00-$5.00 a gallon gasoline, is becoming the intelligent way to shop. The way it works is you figure out where you want to buy and enter your criteria into the search engine and boom! All the houses in the MLS show up just like it would for a Real Estate Agent. You can get as detailed as you wish down to the number of bedroom and bathrooms, to granite in the kitchen. This is truly the new way of starting your search instead of having an agent do this and then put you in his or her car and drive you all over looking at homes you would have eliminated if you did your own search criteria. You will get to see all the pictures of the home as well as detailed descriptions of all the amenities all right on your computer screen. You can even explore areas that you originally did not think you wanted to move to. You also can do the research on the schools, crime statistics, number of other houses for sale in that area as well as how many foreclosures may be in that area, all kinds of details that sometimes your agent is not allowed to tell you. Try CribClick.com it is a well thought out site you won’t be called by 10 different real estate professionals the site is a service and if you do want to see one of the homes the site can direct you to a showing agent at no cost you, how cool is that. Investors love the site as they can put in specific criteria of the house or houses they are looking for and the system will keep them updated 24 hours a day 7 days a week so they can jump on the deal when it first hits the market, just as fast as an agent would be able to or faster as it shows up in your email and you make the decision to see it or not, no pressure. This is truly the future of Real Estate sales.

As usual any comments or remarks are appreciated.

Well just as we thought the small mortgage brokerage shops were done a new niche has opened for them. It seems with all the rules and regulations that have been imposed on the mortgage industry over the last several years it was looking like the local mortgage broker was on the way out of the mortgage delivery system. Then HUD who oversees FHA announced that they would allow mortgage brokers to originate FHA loans it came as a surprise to the industry. About this time loan officer licensing came into play, then loan officer compensation reform hit the industry so it still was looking rather bleak for the traditional Mortgage Broker. Now that the onslaught of rules and regulations from Big Brother has slowed to a dull roar it has provided a vision through the smoke if you will to see that the Mortgage Broker has a niche and rather good for that matter.

Traditionally the mortgage Broker shops were small and local, that provided for Loan officers to serve the local markets where the big banks could not. It appears this is looking like the new trend as the big banks can’t serve their own customers in a timely manner and big Mortgage Bankers that have arisen from the consolidation of the industry are having the same delivery problems as well as the lack of local underwriters to underwrite mortgage product. The mortgage broker can find those sources that will provide great pricing and great service levels for local clients. The consumer has been the loser in all of this regulation over the last several years in that they have to provide for more documentation and get less service from the dwindling pool of loan originators available to write the loan for them. With this knowledge it is possible to provide a service for the consumer that actually takes their best interest into consideration (novel concept).

The Mortgage Broker was blamed for the mortgage industry debacle of the last decade, and has been on the down low since. It is looking like the consumer will once again be served by the small local guy or gal that can walk the client through the painstaking process of obtaining a home loan in today’s market.

Today was the worst day for interest rates in 2 years. Why you might ask? We are not out of the recession yet, the economy is not good, but one thing has happened if you have been paying attention to the news. The Stock Market has hit records for the year and that is where the money is flowing. So you ask why would a good stock market create bad interest rates? Well I will give you the simple explanation then I will get a little deeper into the economics of money.

The Stock Market is where you bet that companies will be profitable or not by their traded market value or stock price. Put simply, you invest traditionally in company that you think will go up in value or down in value and the Stock Market is the place where those companies stock is traded publically. The Bond market works in reverse where if you bought a bond and the yield is say 6% and you bought it for $100 and the face value of the bond is $100 for a 6% yield then you bought that bond for even money. Now lets say the bond yield or interest rate drops to where you can buy a $100 bond now for 5% your 6% bond you bought yesterday might be able to be sold today for $110 simply because somebody wants the higher yield on their money over time. This may sound confusing but if you think about it for a while it will make sense.

So if more people want get into the stock market because they think it will yield higher returns than bonds then people sell those bonds to get liquid to buy stocks. This is exactly what we are seeing in today’s interest markets and equity markets (the bond market and the stock market respectfully). From an economic point of view there are more sellers of bonds and that will push prices lower and rates or yields higher. To use the example from above if the same 5% bond has more sellers than buyers instead of being able to sell the %100 bond for $100 at 5% the seller may have to lower the price to say $98 to sell the same 5% bond and possibly the 6% $100 move back down to a even or par price for $100. This is the simple economics of interest rates. When you are listening to the radio or watching TV and you here the bond market was higher today that usually means that rates are going lower and conversely if you here the bond market went down that generally means the interest rates have gone up.

So today March 14^th 2012 the bond market sold off to create more capital to go into the stock market. Will this trend continue? I don’t think so as I am not a believer that the economy is going to be on a long term improving trend. I think gas prices going up will slow the economy even more, and with any bad news of the economy the stock market will sell off and people will take their capital and invest in bonds and interest rates will again go lower. A factor I did not cover in the blog is the government part of this whole talk. At any time the government may step in and do things to stimulate the stock market or the bond market. I am not saying the two market are inverse of each other but a lot of time they do work that way. The government aspect of this economic talk will be discussion for another day.

Look for more on this in the future as this is my one of my passions, and as always give your input.

Well here in California it is starting to look a lot like spring. This weekend we had a booth at the Sacramento Spring Home and Garden show and I think it well all things considering. The signs of a slow economy was evident in that there were a bunch of people that went to the show but there were not the usual full bags of give-aways people always tend to cart around at the show. The outside temperature was in the mid 70s and I think most folks were just out to see if there was anything new they had not seen in the last few years. Of course, holding a booth open for home loans we were really hoping to get the first time buyer types out talking with us. Astonishingly we only talked with a handful of folks that said they might be interested in buying a home in the next few years. This was a little unsettling as the Real Estate Markets are cyclical and first time buyers will always follow investors into a depressed real estate market. There are still plenty of investors in the market today but not the first time buyer yet.

The first time buyer is probably the single best thing for our economy. Why you ask? Well a first time buyer will have to move into the house and fix it the way they want it to be. These buyers are in the prime of their spending lives and the more people spend the more products are produced and the more product produced the more jobs to produce them, ship them , stock them, and sell them. That spells good things for our economy. So when I go out to a home show and see mostly retired folks walking the isles I know that we are still in the grips of a very poor economy.

At our booth the main topic of conversation was the Home Affordable Refinance Program (HARP). This is the program designed to help home owners refinance their home when they owe more than it is worth. As I write this it is still unclear if we will even be able to write the new HARP 2 program as there are no aggregators our there willing to buy this product. In addition warehouse banks are not opening their arms to lending more than a home is worth either, so it goes a bomb that could be and probably won’t be. I don’t like to be negative but until the middle class American can feel comfortable with their finances they just are not going to be buyer of goods and services that are not absolutely necessary for their family. So all I can say is buy a house and help the economy.

As always your input is important to me.

Home owners that are underwater on their homes have heard that our wonderful government has promised to help them refinance to lower their interest rate may fall not happen at all. Here is the deal, President Obama announced in October of 2011 that the Government would start a new HARP 2 program allowing home owners that have been current on their mortgages and owe more than their house is worth to refinance to lower interest rates. Well the real deal here is that Obama made FNMA and FHLMC (Fannie Mae and Freddie Mac) amend their loan securitization guidelines allows lenders to securitize loan with them with no loan to value limitations. This sounds great, but unless a big bank/ servicer of mortgages will service (or collect the payments) these loans cannot be done. We have been told that this program would go into effect March 17^th 2012. As of yet there has not been a bank or institution willing to purchase the servicing of these loans so as this date approaches there is still no resolve in who will buy these loans in the secondary markets. This is opposite of what happened during the sub-prime years where the government told lenders to lend and they did and well you know the rest. This time lenders are not falling into the government deception of telling the private sector to make loans the private sector knows are bad before they fund those loans.

So here in lies the rub, the Government (FNMA FHLMC) can buy the underlying security but the lender who funds the loan has a bad loan they cannot sell to another lender to recapitalize their funds. Thus lender are a little hesitant to originate these loans when both barrels of the gun are pointed at them. The first barrel is a loan that has no security meaning if the home buyer loses his or her job and cannot make the payment and goes into foreclosure the lender cannot even sell the house to pay off the mortgage as the house is significantly less in value than the loan amount. The second barrel is that if they needed to sell the servicing rights to that loan who will buy it when the loan amount is higher than the house that secures the loan is worth significantly less? So although we would all love for this program to come to fruition the likelihood of it really happening has to be slim to nil. The banking crisis is still bad, what would this look like to a bank where their book assets are less than their loans outstanding. Politics have no business in the business of business as the individual is the one that will be hurt by this in the long run both as a home owner and by the economy it creates.

Again comments are much appreciated.

First you need a great deal of patience, as no matter how much you have or how little, you will be questioned on every aspect of your financial situation. The two biggest things that are stumping people when trying to get a home loan are their tax returns and large deposits in their bank accounts. In the old days of 5 years ago we only needed tax returns when the client was self employed or had rental properties now tax returns are required on all borrowers and transcripts from the IRS are pulled on every transaction. What this means to the average tax payer is that if you are one who like to write off everything to get a bigger tax return or owe less, then you are going to be penalized when you try and get a home loan as your income will appear less than it really is. The following line items on your Federal tax return are ones lenders will be looking at;

1. Line 7 W2 wages: must provide lender with last 2 years W2s to support this income and all W2s in the year of the return must add up to line 7.

2. Line 8a and 8b interest income: The lender will only use interest income to qualify you if you can prove it will continue and you will not be depleting you interest income by using some money for the down payment.

3. Line 10 Taxable refunds: not used as income as the lender will not be able to prove that it will be on going income.

4. Line 11 Alimony received: The lender can use this as income if there is a 2 year history and it will be on going for the next 3 years evidenced by a court order. Borrower must provide 12 months of a deposit history of receiving alimony or 12 months cancelled checks from the giver of the payments.

5. Line 12 on your form 1040 shows self employed income: This line is the most tricky line on the whole return as this income or loss is from the schedule C in the return. This shows a self employed business’ gross income and all the expenses for that tax year. Here is where it gets tricky, a lender can only use income to qualify a borrower that is shown in the tax returns. In other words if there are cash receipts that are not claimed on the return then the lender cannot use any additional income. The lender can add back in paper losses of depreciation and depletion and a portion of business use of home.

6. Line 13 Capital gain or (loss): This is where a schedule D is filed and will show where the gains. This is not used by lenders as income as it cannot be proven to continue for the next 3 years.

7. Line 14 is the same as 13

8. Line 15 and line 16 IRA distributions and pensions: Lenders can use this income if it can be proven to be on going for the next 3 years such as enough money verified in the respective accounts to distribute over the next 3 years.

9. Line 17 Rental Real Estate income, partner ships, s corps, trusts ect.: This is another complex evaluation of the schedule E. With rental properties most tax payers write off as much as they can as to avoid taxation, a lender can only use income that is put in the schedules and can add back only depreciation and depletion. The lender will only use income on properties if the tax payer has a two year history of being able to mange rental properties. As for other corporations or trusts the lender will ask for the tax returns for them as well. If you file this on your returns it will take longer for a lender to give you a definitive answer on your loan.

10. Line 18 Farm income; This will be treated like line 12 self employed. Be prepared to get additional documentation to your lender if you have this kind of income.

11. Line 19: this line is interesting as some people, such as seasonal workers, will have this on their last several years of returns and can be use to qualify if it can be proven as part of the borrower’s income cycle.

12. Line 20a Social Security income: This income can be used in qualifying for a mortgage if you provide the lender your current Award Letter from the Social Security Administration and proof of receipt such as a bank statement or a pay-stub.

This is what a lender looks at in a return that can help or hurt a potential borrower in today’s lending environment. In addition to the tax return lenders are evaluating large deposits in a bank account and making borrowers explain every deposit over $200 in a particular month. If the borrower cannot explain these deposits the lender cannot use that money towards the total cash use to close the transaction and in some cases leaving the borrower short of verified funds to close and thus not allowing a borrower to borrow based insufficient funds to close. Keep tuned to this blog as I will be bring new information on this and other subjects, and as always please leave any comments.

What is going to happen to the housing markets? This is a matter of opinion only based on 48+ years of life and 28 years in the mortgage business. History is said to repeat itself over and over based on human nature, our current economy is a direct reflection of this phenomenon. We have to first start with some basic economics of the housing markets. The single most important aspect to housing is affordability, simply put if people cannot afford to make a payment associated with the housing in a particular market then there will be a oversupply of homes and thus prices will have to go down to move the supply lower. Conversely if there is a higher demand for housing than there is a supply housing prices will rise. So when analyzing local housing trends the first thing one must look at is jobs and how much they pay. If an area such as the Silicon Valley where there are high paying jobs and not much room for new housing there will tend to be an under supply of homes making prices rise or at least not go down and remain higher than most markets where incomes are smaller.

Let's look at the State of California as that is where I reside and do business in so I understand the local economies well. In California we have a ton things working for the housing market such as the simple desirability of living in a state that you can surf in the morning and snow ski in the afternoon. California also has the 5th largest economy in the world which is good for jobs and thus incomes. California has several high paying industries that are considered based in California such as the Tech industry and the Movie industry. California also has several things working against itself such as high taxation and Regulation that makes it prohibitive for big business to start and do business in this state. That being said California has the potential to be a strong market throughout the state and will remain strong in those areas where the good high paying jobs are. Other places in California where the job market is not so good is directly related to good paying jobs, and those markets have suffered tremendous looses in housing values. These areas we are seeing investors come in and purchase rundown homes for way under market and they are fixing those properties and getting top market dollar for those homes as builders have left those markets. So overall the California Real Estate Market has stabilized and I predict it to stay that way for the next few years. There will be no real big increases in prices as there is still double digit unemployment in the State.

So for local markets in California the are going to vary greatly, from the central valley to to the coastal cities to small mountain communities. The major factor in any market is going to be the availability or proximity to good paying jobs. The obvious areas that will remain strong are the Silicon Valley and cities in the San Francisco bay area and parts of Los Angeles and surrounding cities that support the entertainment industry. As for areas that are in the central valley they are still going to be slow due to the lack of jobs. In the Northern most of the State you are going to see a slow economy as well thus a slow Real Estate Market. The State Government has made it prohibitive for big business to enter our State with high taxation and prohibitive regulations. There is no change in sight for the Government to loosen up taxes and regulation so it could be a long time before these slow job growth areas can recover. One of the biggest problems seen in the central valley is the fact that big companies are being enticed by other states to move their headquarters to other states and they are moving out and that means further job losses. People just are not going to purchase a home if they feel their job is not stable. So if you are a first time buyer in this market and are looking for a home to live in for a while now is a great time to purchase as it will get better over the next 10 years and you will see appreciation in your home if you keep it up. If you are an investor and have the capital to fix homes up you can make money in this market. If you want quick gains on real estate now is not the time. One must remember the fundamental principal of real estate and that is that there is only so much land and they are not make more land so as population increases and new generations enter the Real Estate markets and with normal inflation Real Estate over time will be worth more.

Boy right now is the hardest time ever to get a home loan done for anyone.  I have been in this business for 28 years and started when interest rates were at 12.5% and we did not have computers. It was tough only in the fact that we were doing refinance transactions for people that had 18%,19%, 20% mortgage interest rates and problem was the sheer volume of business we had.  At that time if you qualified and your income made sense we did the loan.  If you needed a gift from a family member no problem get a letter and prove they had received the money.  If you were self employed we got your tax returns and if they made sense we did the loan.  The appraisals at that time were taking up to 6 months and posed a challenge, but as the clients were waiting for the appraisal to come in the interest rates were dropping so most customers did not mind the wait.  We would just update the file with new pay-stubs and bank statements as they came in.  When we took the application we told the client what their payment would be and what it would cost to get the loan and that is what they could count on, if you didn’t provide what you told your client they could go to another lender.  Sure we broke down the closing cost for the client and it was confusing to them, as most people don’t buy houses every day, but they knew the 2 basic numbers that were and still are the most important to a client are; 1 what will my monthly payment be and 2 how much money do I need to get the house or refinance.  We could teach our clients how to pay off their mortgages early, we could put a move up plan together for clients, we could counsel them on their credit and basically not worry about getting sued for giving people our opinions.

In today’s lending world we have moved into the absurd where our “good faith” estimate of closing costs is 4 pages long and reads like a tax return.  When we give the client this form we cannot change it which means that if we have quoted a rate that is what it is and the same with the fees.  In order for us to change this form we need a documented “change in circumstance” to happen, like an act of God.  Currently , in order for anyone from a mortgage company to talk to a client regarding rates and programs that person has to be licensed und the National Mortgage Licensing System the NMLS.  Under this license there are certain rules and procedures that a licensee must do in order to communicate to a client and are culpable for their actions, so you will not get any extra advice from a licensed Loan Officer for simple fear of retaliation if they were wrong.  As for lenders or the companies that actually give out the money they are regulated by the brand new Consumer Finance Protection Bureau (CFPB) and the rules they are stricken with are far too many to even try to name and the biggest issue is that there has been no precedence set for Lenders to follow.  So if they were to try to just lend money on common sense they could be fined, shut down or imprisoned so they are not about to take any risks for anyone.  I have always known that no one loan is worth your license, so for a lender if there is even a hint of funny business that deal will be shut down faster than a hot knife goes through butter.

When applying for a mortgage in today’s environment you must be prepared to have patience of steel, and don’t blame your Loan Officer for asking for crazy things, if they had their way they would not have to ask for crazy stuff at all.  This again is punishment to everyone for the past actions of a very few number of people.  You can write your elected officials but unless it comes with a campaign contribution it will fall on deaf ears.

Again I love to get comments.

As a current Branch Manager and a former Mortgage Bank owner I have seen sweeping changes in the mortgage industry in the last 2 years. At times it seems too much to keep up with, but as with anything we must. It seems the dissemination of information has slowed even with the internet, I see this as a simple fact that we in the industry have no idea what the government regulators are asking of us. This becomes more and more problematic as the government implements it’s new Consumer Finance Protection Bureau (CFPB concieved by Chis Dodd and Barney Frank). This is a brand new government agency that is costing the taxpayers Billions to regulate the brokerage houses on Wall Street and the mortgage industry as a whole. The problems arise from the “newness” of the agency and with no precedence being established every mortgage company in the country does not want to be the first on their radar as far as an audit as they would have no idea what they are looking for other than the simple fact of, is the client or borrower being protected by the private mortgage company. With no real precedence to go by all the good mortgage bankers in the country are really going overboard on compliance to the point where it becomes difficult for a borrower to obtain a home loan in today’s lending environment. Again the very existence of this new agency designed to protect the consumer is in fact hurting the consumer as lenders are running scared of the big bad government agency who has already touted to get those bad apples in our industry, with no guidance on which companies are the bad apples. As this haunts small private mortgage firms the biggest offenders are excluded from the scrutiny of this agency, the BIG BANKS. Yes amazingly as the Big Banks are the ones who inevitably are purchasing these loans and servicing these loans are excluded from the very agency designed to protect the consumer. This is another billion dollar government blunder, as the agency’s that existed prior in the industry to look after the consumer , the Department of Housing and Urban Development( HUD) and the Treasury Department , still exist and still have their same budgets in place with less responsibilities.

How does this affect me you ask? Well in simple terms of obtaining a mortgage today it has turned to the absurd. As a consumer it has always been buyer beware whether you purchase a pencil, a car, or a house, you had to do your research to figure out what is best for your needs. You have obtained several opinions on what is good and what is bad where you should shop and where not to shop, but when you do go to purchase that pencil or car or house does the merchant tell you how much they made on the sale of those or any products? No, but when you get a home loan today from an independent mortgage banker they have to do just that, tell you what their profit is. Although, it is very confusing to get to that in the myriad of paperwork that the lender has to provide you, but if you ask your loan officer he or she will tell you, the exception is if you go to a Bank to get your loan as the banking lobby is so large they have made themselves exempt from this practice. Furthermore, the CFPB is making the industry so scared to do anything that might help a consumer actually obtain a loan that the average consumer is being asked to provide items that have never been asked for and the lenders are having to make sure every date, signature, disclosure, document is signed and delivered in the proper time frames and nothing was missed thus is taking at least an extra week to get these audits done. The poor consumer has no idea what is going on and often feel that there are actual problems with their loan when the lender is only protecting their own selves not really the consumer at all. This occurs on every loan in today’s environment due to this new CFPB, help or hindrance the answer should be obvious.

I remember reading George Orwell’s book 1984 in 1979 and at the time I thought to myself that we as a society we would never let our Government take over all aspects of our lives and prohibit the will of the people, I guess I was wrong.

Wow  it's a new year you say What is going to be different this year from other years?  I hope I will make more money, I .  hope I will be healthy, I hope I will lose weight.  All things we put on our list for New Years Resolutions, but the big problem with this is the "Hope" part.  We need to actually take action in life to make a difference in our own destiny.  We can't assume someone or something is going to happen different to my current situation we have to do it ourselves.  This change in actions is what makes people successful in their goals and their lives.  Making the change is one thing but sticking to it is another.  We not only have to identify those things in our lives we wish to change but we need to change our habits with regards to the outcome we wish.  So Lets start at looking at your finances as that is where I am an expert, if you wish to lose weight go to an expert there but the change in habits will be the same.

Step 1: Identify that part or parts of your financial situation you wish to change and write it down.

Step 2: The next step is going to be to set a goal and realistic time frames to get you to that goal.

For example; if you wish to purchase a home this year write down the goal and lets say you want to be in your new home by June of this year write that down as well.

Step 3: Next you are going to need to plan how you will get to your goal in detail.  Example; you want to be in a home by June, you are going to have to call a lender to find out how much home you can afford and how much money you need to have saved to get into the home.  You will need to plan how to save for the down payment by June.  You will also need to gather the necessary documents to get approved for a loan.

Step 4: Now the work begins.  You have to do the necessary tasks to get you to your goal in the time you have established to get there in.

Step 5: Stay the course.  Don't give up on your plan no matter how tough it is you will enjoy the benefits of your goal if you follow through.  As for the home example this would be to put your budget together to start or continue to save, or talk to a person who can gift you the down payment.

Step 6: Reaching your goal.  Yes this should not be a surprise, you have taken all the steps in planning and actions so why wouldn't you get to your goal?  So it is time to make sure that everything is in order and complete the goal.  Back to the house example this would be the point where you have the money needed to purchase a home and now with the blessing of your lender you go looking for houses in your price range, make an offer, let the lender appraise the house close on it and move in.

These steps will probably work with most resolutions or goals.  As with anything if you stick to it generally it will work out for you.  I wish you well in the New Year.

The holidays are a time to give back, but in our business we are limited by a little know set of rules and regulations called the Real Estate Settlement and Procedure Act (RESPA).  This little set of rules severely limit what a lender can do for a client before after and during the transaction with respect to gifts and promotion.  It basically says the we as lenders (not banks they have a bigger lobby so their rules are different) can not give gifts of material value to anyone in exchange for any real estate settlement activity.  What this means is that if we want to give any person a gift if they refer business to us we would be in violation of this Act.  Big banks are exempt from this as you can walk into a branch of Bank of America, CitiBank, Wells Fargo, ect. they can hand you a gift for doing business with them.  This time of year you will see the banks giving their customers, bags for groceries, squishy balls, glass, ect.. We as Mortgage Bankers are prohibited from doing such things for our clients (yes the banks would like to see our industry go away so they can rule the world).  However we have been traditionally lower in interest rates than the banks as we carry much less overhead, so we do have a very valid place in the market.  I digress.

All this talk is great for the occupy folks, but we are keeping it positive for the season.  What we can provide is education and information regarding the process, and whatever we see fit to offer.  We have added a little twist by offering a weekly recipe, yes food can always put a smile on your face.  We figure that other than loan information, of which our site is loaded with, we would give you a continuing reason to visit our site and hopefully you refer people to our site not only for this but as our service is second to none in the loan business.  give it a try at www.maecapital.com/recipe . Have happy holidays and a great new year.

The holidays are a time to relax and think of family and good cheer.  We also have created this tradition of exchanging gifts.  This can get people in trouble with credit this time of year.  People also will tend to dip into the savings they have built for the year, that could be used to better your financial situation by purchasing a home or investments that will, in the long run, be better than an Xbox.  Did you know that most wealthy people have vast real estate holdings as it is a hedge against inflation as well as a growth asset. 

So when you are trying to keep up with the Jones or make your kid happy for an hour out of the year think of the long term happiness you will have with financial security.  If you over spend on credit your credit score can go down as well the possibility of getting yourself overextended where you can't pay your bills.  This time of year you should make a plan for spending and paying off debt.  With any good plan you need to know what you have and what you will have in order to plan for holiday spending.  What you need to do is write down your income, your savings, and how much your currently monthly outgo is.  This is where you start, if your income is currently not enough to pay for your current obligations then you may want to seek relief now in the form of Bankruptcy or credit counseling.  If you have income that is left over after you pay your normal bills consider that as savings, look at the savings you have build up from the prior months and determine an amount you are comfortable spending without breaking the bank.  Once you have your number write it down and then figure who you are buying for and then put dollar amounts next to the names making sure not to go over your spending amount.  This will allow you to enter the New Year under control of your finances.

I hope this helps with planning your shopping for the holidays.  If you can master that then you just have learned the are of budgeting and you can use this technique each month to plan for your expenses and your savings.

Budgeting your income and expenses is an important process and should be done once a month as income and expenses changes.  Some basics to budgeting are knowing exactly what you net income or take home pay is monthly, as well as knowing what you are spending your money on. 

This first part of know how much money you are making a month may or should be the easy part of this task.  The trick is to use your net pay or after tax pay.  If you are on commission or self employed you should have a grasp of what your income will look like in the coming 30 days.  Write this number down, be conservative, meaning if you think your take home pay is going to be $3,000 after taxes but are not sure go lower try $2,000 as not to over extend yourself.

The next part is going to be much more difficult and will require you plan your month expenses out. You want to prioritize your expenses starting with the roof over your head and the vehicle that gets you to work every day.  So the expenses you should list are as follows;

1. Rent or House payment

2. Vehicle payments

3. Electricity and utilities

4. Food

5. Credit card Debt

6. Insurance

7. Taxes

8. Leisure activities

All of these expense items are important to take into consideration when looking at your budget.  These expenses reflect your life style at the present time.  At this point you have to look at your income and your expense and check to make sure that your income or "Net income" covers all of your expenses if it does not then you are deficit spending and you need to cut back on expenses as your credit card debt is probably rising every month. 

This technique of budgeting is as old as money itself however, this is not really ever taught to you in school, it is usually left up to the parents to do so.  The problem is sometimes the parents have never been taught this either and there is a vicious cycle developing of bad credit and poverty.  In order to "get a head" of the cycle you need to be diligent with your income as well as your expenses. 

How do you "get a head" you ask?  Well it is not easy and most of the time require sacrifice of life style.  Let's assume that your net income is more than your rent or house payment, utilities, phone, your car payment, your food, and credit card minimum payments.  The part the is sending you into deficit spending might be your need to have a $4.00 Starbucks coffee everyday, or you have to see the latest movie that comes out every week.  Remember I wanted you to write down all expenses down to the coffee every day as they all add up.  For example that $4 coffee every day is $28 a week and $1,456 a year, the movie just for you is $20 a week or $86 a month and $1,040 a year.  These are just items that average people do and treat themselves to regularly.  Dig deep into what you spend as that is what you can control, generally you can't control your income.  

Now that you can see where your money is going try and cut a little here and there and you will be surprised how quickly things turn around.  If you are one of the lucky ones where your net income exceeds your expenses that difference will be savings.  This is ideally where you want to be as savings is your fall back position or even your retirement.  If you can control this you will find yourself in position to invest and let your savings work for you by making good sound investments.  The ideal savings model has you with 6 months of reserve in savings at all time, meaning 6 months of all your expenses in savings. 

I hope this helps you remember wealth is earned by smart people who budget. 

This is another attempt by the Federal Government to help home owners who are "underwater" on their mortgage.  Meaning that you owe more than your home is worth.  The big "catch" or the condition of qualifying for such relief is that your current mortgage be held (the underlying security) be held by  Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC).  The way you find this out is to go to this page for FNMA:

 http://www.fanniemae.com/loanlookup/

Or this page for FHLMC:

https://ww3.freddiemac.com/corporate/

These look up pages will tell you if either of the agencies hold the security on your loan.  Your loan might be serviced (this means where you send your mortgage payment) by a bank or mortgage company.  In other words so it is clear you may make your mortgage payment to Wells Fargo Bank or Bank of America or any number of different lenders, the loan may still be securitized or owned by FNMA or FHLMC.  The only way you are going to know is to use the above look ups.

If your loan is not held by either FNMA or FHLMC you are out of luck on the HARP program.  However, if you have an FHA loan there has always been a provision for refinancing your loan if you are underwater and that is called a FHA Streamline Refinance where no appraisal is required.  You have to be current on your mortgage payment and have had only 1 late in the last 12 months (No lates are better  but 1 is the max in the last 12 months). 

If you have what in the industry we call a non-conforming loan or a loan that does not conform to FNMA and FHMLC guidelines such as a Jumbo loan these refinance options don't apply to you.  In order to get relief with these types of loans you should call the lender who you are making your payments to and see if they can do anything for you.  Don't forget with all these loans you signed a Promissory Note which is a legal document that says you promise to pay this loan back under the terms of which you took the loan out originally.  The lender does not have to do anything for you, so be nice to them and you might get something done.

In closing the author of this has been in the mortgage business for 28 years and understands the issues faced by Americans with their mortgages and the values of their homes.  This new program will not be in effect until December of 2011 and we will not know the full scope of the final rule until sometime in the middle of November so stay tuned for more updates.

Contact us for more information and help with qualifying for this program we can get your application now so when it come to fruition we will be first on the list to get it done.