Adjustable rate indexes (daily)

Mortgage Indexes:  04/06/10  10:30am EST
LIBOR- 12 month 1.030
LIBOR-  6 month 0.550
LIBOR- 1 month 0.330
CMT- 12 month 0.440
Prime 3.250
10 year bond note yield 3.410

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STOP telemarketers and junk mail

Before you let someone pull your credit report for anything, it is highly recommended you register with optoutprescreen.com and donotcall.gov.  Believe it or not, when you have your credit pulled, the major bureaus actually sell your info so that you may be solicited!  You become a lead called a "mortgage trigger", and many companies are willing to pay top dollar to get your information.  It is outrageous...and hopefully change to this will come soon. 

We never authorize the sale of your personal information without your permission.  Unfortunately, we can't stop the credit bureaus from selling your information.  Protect yourself and stop receiving these unsolicited offers of credit and insurance (think of all the junk mail you'll stop getting), by going to www.optoutprescreen.com.

Next, join the Do Not Call registry by going to www.donotcall.gov.  After registering at optoutprescreen.com and donotcall.gov, make sure you report any solicitors if you are still being contacted.  The good news is that Legislation is just starting to be enacted...  Minnesota signed a bill that prohibits consumer reporting agencies or anyone else from selling info obtained from an application for a mortgage.  This will take effect August 1st, 2007.  Also, Massachusetts has a pending bill that would allow consumers to place a security freeze on credit reports that would prohibit credit bureaus from releasing any information.

Who is covered by the National Do Not Call Registry?
The National Do Not Call Registry applies to any plan, program, or campaign to sell goods or services through interstate phone calls. This includes telemarketers who solicit consumers, often on behalf of third party sellers. It also includes sellers who provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. The National Do Not Call Registry does not limit calls by political organizations, charities, or telephone surveyors.

What about an established business relationship?
A telemarketer or seller may call a consumer with whom it has an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment - even if the consumer's number is on the National Do Not Call Registry. In addition, a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. And if a consumer has given a company written permission, the company may call even if the consumer's number is on the National Do Not Call Registry.

One caveat: if a consumer asks a company not to call, the company may not call, even if there is an established business relationship. Indeed, a company may not call a consumer - regardless of whether the consumer's number is on the registry - if the consumer has asked to be put on the company's own do not call list.

  1. Why register my phone number with the National Do Not Call Registry?
    The National Do Not Call Registry gives you an opportunity to limit the telemarketing calls you receive. Once you register your phone number, telemarketers covered by the National Do Not Call Registry have up to 31 days (starting January 1, 2005) from the date you register to stop calling you.
  2. Who manages the National Do Not Call Registry?
    The National Do Not Call Registry is managed by the Federal Trade Commission (FTC), the nation's consumer protection agency. It is enforced by the FTC, the Federal Communications Commission (FCC), and state law enforcement officials.
  3. Why was the National Do Not Call Registry created?
    The registry was created to offer consumers a choice regarding telemarketing calls. The FTC's decision to create the National Do Not Call Registry was the culmination of a comprehensive, three-year review of the Telemarketing Sales Rule (TSR), as well as the Commission's extensive experience enforcing the TSR over seven years. The FTC held numerous workshops, meetings, and briefings to solicit feedback from interested parties and considered over 64,000 public comments, most of which favored creating the registry.

    How Does Registration for Do Not Call Work?

  1. How soon after I register will I notice a reduction in calls?
    As of January 1, 2005, telemarketers covered by the National Do Not Call Registry have up to 31 days from the date you register to stop calling you.
  2. How long until it shows up on the National Do Not Call Registry?
    After you register, your phone number will show up on the registry by the next day. Telemarketers have up to 31 days to get your phone number and remove it from their call lists.
  3. Can I take my number off the National Do Not Call Registry?
    You can delete your phone number only by calling toll-free 1-888-382-1222 from the telephone number you want to delete. After you contact the registry to delete it, it will be removed from the National Do Not Call Registry by the next day. But telemarketers have up to 31 days to access information about your deletion and add your number back to their call lists, if they choose to.
  4. If I registered by phone, will I receive a confirmation?
    No, but you can verify that your number is on the registry online at www.donotcall.gov or by calling the registry's toll-free number (1-888-382-1222) and following the prompts for verifying that your number is on the registry.

 

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Who is the Federal Reserve

(This article is a detailed look at the Federal Reserve... things you probably didn't realize. It is considered an editorial item and no representations or guarantees of fact are made.)

(1) Who owns the Federal Reserve System?

 If it's a private bank, presumably it's privately owned.

 And, if its privately owned, its private owners presumably profit from their ownership.

 So, who owns the System, and how do they profit from it?

The System is owned, or can be owned by three sets of stockholders:
(1) Banks in the System must contribute 6% of their contributed capital and retained earnings on an ongoing basis in exchange for stock.
(2) The public can buy stock in $100 increments up to $25,000 per individual.
(3) The US Government can buy stock if the System is in need of additional capital.

Categories 2 and 3 are non-voting stock.T

The System isn't in it for the profit.It was established in 1913 and operates under the authority of the Federal Reserve Act, as amended.  It's four responsibilities include;
(1) establishing the System
(2) to afford a means of re discounting commercial paper
(3) establish the supervision of banks in the US
(4) Other duties

Think of it as a trading company in the Japanese tradition.  It provides banks with the liquidity they need to stay open daily.  The System buys up the commercial paper (90 day maturity) banks issue that tie up their liquidity.  The System provides new cash for old, lends money to banks in a liquidity bind and requires banks to charge off bad debts and holds them accountable to strict accounting standards.  It also insures deposits, operates as a bond trader for the Treasury and a myriad of other duties such as buying up commercial debts and replacing cash in the market via its open market committee and setting rates on short term debt transactions between banks. 

(2) Is the Federal Reserve System owned by other private banks who are system members?
Yes
Do private banks, for example, purchase equity interests in the Federal Reserve System?
Yes

If so, does the System pay them dividends or interest or what on their equities in the System?

The System pays a dividend of 6% established by law.  After paying its expenses, the System turns the rest of its earnings over to the U.S. Treasury.

(3) From whence does the Federal Reserve System get its capital?
Capital is obtained from the three categories of stockholders discussed above. 

Does its capital stem exclusively from member private banks purchasing the System's equity issues?

It does but it doesn't have to.  It can go to the public or the US Government.

Or, as I suspect, does the System get much or most of its capital from the U.S. Mint's printing presses?

No it does not.  It serves as a conduit to introduce fresh cash into the system in exchange for cash retired by its members.

(4) When the System "pumps billions of dollars into the financial system", whose dollars is it "pumping"?
It is exchanging debt for cash. 

Presumably, these "pumped" dollars aren't the dollars of the System's private member banks, because its private member banks are the recipients into whose capital the "billions of dollars" are equired to be "pumped".

The money is not being given away it is exchanged for debt which is then repaid.  I seriously doubt the first real dollar is used, it is all done electronically.

So, whose "billions of dollars" are being "pumped"?
If push came to shove it would be the capital of the members.

Is it "billions of dollars" from the U.S. Mint's printing presses?
No.

And, if so, what's the functional relationship between the U.S. Mint devaluing the dollars in my pocket and the dollars which wind up either in the Federal Reserve System's pockets or the pockets of its private member banks?

The US Mint does not devalue the dollars in your pocket.  The market price of goods and services simply goes up and your dollar buys less.  The System turns over its profits to the Government, the private member banks make 6% on their investment.

In other words, who really profits from whatever Holy Money Machine is increasing the Nation's money supply (either because it's grown too small to conduct the society's business or because private banks have screwed up and need the Government to "pump" their liquidity)?

Profit is not the intent from open market transactions, stimulating the economy without triggering inflation is the intent.  Inflation, by the way is not so bad.  If you are in investments, such as real estate you can do real well.  The value of your home will go up and conversely the amount you owe will decrease.  Rich liquid investors don't worry about inflation, they simply change their strategy to constantly reinvest at the higher interest rates.  People on fixed incomes or those who cannot raise their own prices (or wages) to keep up are the ones that lose big time.  If we had a bout of 15% inflation your house would go up 15%, your debt would drop 15% and your inflation adjusted income would go up 15%.  Not bad.  Also the national debt would go from $6 trillion to $5.1 trillion without paying a dime. 

Correspondingly, who really picks up the tab?
There is no tab and quite possibly a benefit.

The devalued dollars in my pocket?
Cash investments, like money in your pockets is a bad investment in inflationary times.

The lending community in general (which, functionally, is to say the borrowing community in general)?

The Government (which, functionally, is to say the taxpayers)?

(5) Who pays the System's expenses and by what market mechanism is its officers' remuneration determined?
The System pays its own expenses and reports annually to Congress and to independent auditors concerning its salary structure.

Presumably the System has no competition, so what determines its operators' rewards?
See above.

(6) Why is a central private bank, rather than the U.S. Treasury, the prime abiter of the Nation's financial destiny?
It isn't, it reports twice yearly to Congress on its strategy.

Who elected the members of the System's Board of Governors, and why are they in control of the Nation's financial destiny?

The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office.

The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman.

They do not control the Nation's financial destiny.  The Nation's financial destiny is controlled by Congress.

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1031 Starker Exchange, reverse 1031 exchange

Our Loan Officers are very familiar with the coordination of the 1031 exchange. Let us have a Loan Officer put you in touch with an Attorney who can thoroughly explain and handle your exchange. **We highly recommend you talk with one of our recommended attorneys (Craig Parker of Gemini Title, email) and your financial advisor and CPA before moving forward. Below information is only to inform you, and Choice Finance is not giving advice.**

1031 STARKER EXCHANGE

A 1031 Exchange (tax-deferred exchange) is one of the most powerful tax deferral strategies remaining, available for taxpayers. Taxpayers should never have to pay income taxes on the sale of property if they intend to reinvest the proceeds in similar or like-kind property. To qualify for an Internal Revenue Code 1031 tax-deferred exchange, you must trade equal or up in both price and equity. Anyone involved with advising or counseling real estate investors should know about tax-deferred exchanges, including Realtors, lawyers, accountants, financial planners, tax advisors, escrow and closing agents, and lenders.

The Advantage of a 1031 Exchange is the ability of a taxpayer to sell income, investment or business property and replace with like-kind replacement property without having to pay federal income taxes on the transaction. A sale of property and subsequent purchase of a replacement property doesn't work, there must be an Exchange. Section 1031 of the Internal Revenue Code is the basis for tax-deferred exchanges. The IRS issued "safe-harbor" Regulations in 1991 which established approved procedures for exchanges under Code Section 1031.

REVERSE 1031 STARKER EXCHANGE

A reverse exchange occurs when a taxpayer arranges for a Exchange Accomodation Titleholder (usually is the intermediary) to take and hold title to replacement property before a taxpayer finds a buyer for his/her relinquished property.

Sometimes the exchange accommodation titleholder will take and hold title to the relinquished property until a buyer can be found for it. Reverse Exchanges have been common and have been preferred in circumstances where a taxpayer has been compelled to close on replacement property before a relinquished property could be sold and closed or where the taxpayer desired ample time to search for suitable replacement property before selling a relinquished property which started the well-known 45 and 180-day clocks for Delayed Exchanges.

Reverse Exchanges have also been common where a taxpayer wanted to acquire a property and construct improvements on it before taking title to the property as replacement property for an exchange. The Reverse Exchange gave the taxpayer extra time to get the improvements constructed in addition to the 180-day clock referred to above.

Talk with a competent attorney (Exeter 1031 Exchange Services, LLC at http://www.exeterco.com/  or Craig Parker, of Gemini Title http://www.geminititle.com) regarding the following:

  • 5-Day Rule. A "Qualified Exchange Accommodation Agreement" must be entered into between the taxpayer and the exchange accommodation titleholder (qualified intermediary in most cases) within five business days after title to property is taken by the exchange accommodation titleholder in anticipation of a Reverse Exchange.
  • 45-Day Rule. The property to be "relinquished" (the relinquished property) must be identified within 45-days. More than one potential property to be sold can be identified in a manner similar to the rules of delayed exchanges
  • 180-Day Rule. The Reverse Exchange must be completed within 180-days of taking title by the exchange accommodation titleholder.

As with Delayed Exchanges where the exchange must be completed within 180-days, Reverse Exchanges now must be closed under the new procedures within 180-days. This is a new requirement. In the past, since there has been no statutory limitation of time in which to be in title, it has been common for the Exchange Accommodation Titleholder to be in title on the parked property for a year or more during which the taxpayer would find a buyer for his relinquished property or during which time the taxpayer would have improvements constructed on the property being held by the Titleholder.

180-days may be a suitable time for a buyer to be found for the relinquished property. But, 180-days is a problem with respect to construction/improvement exchanges. The 180-day time limit within which to complete a safe-harbor Reverse Exchange is probably insufficient for most large "build to suit" exchanges.

What if the taxpayer has not yet found a buyer for his Relinquished Property by the end of 180-days? In this case, the taxpayer can discontinue his attempt to accomplish a Reverse Exchange and take deed to the replacement property. Or the taxpayer may decide to extend his Reverse Exchange outside of the protection of the safe-harbor procedures. The safe-harbor guidance issued by the IRS is optional, not mandatory. Reverse Exchanges that do not comply with the requirements of Rev. Proc. 2000-37 stand or fall on their own merits and should be considered to have a higher degree of audit risk now that guidelines have been issued for safe-harbor exchanges.

Reverse Exchanges may very well become the preferred way to manage and transact 1031 Exchanges as a result of this new official blessing by the IRS. The 45-Day identification period of Delayed Exchanges and related pressure to find suitable replacement property are often so burdensome that taxpayers are unable to successfully take advantage of the tax-deferral potential of a delayed 1031 exchange. The risks of Reverse Exchanges have been mitigated into reasonable commercial risks with the new safe-harbor guidelines.

REALTORS, REAL ESTATE AGENTS

Realtors are often the first to recognize the potential benefits of a Section 1031 Exchange to a seller of real estate. When a seller is going to replace qualifying real estate with other replacement real estate, a Section 1031 Exchange should be suggested. It is possible for a seller to employ the services of an Exchange Intermediary at any time after a contract is executed up to the day of closing on the contract. It is too late after the closing has occurred.

Accommodation Language in the Contract. Accommodation language is usually placed in Contracts to Buy and Sell Real Estate wherein the other party to the contract is informed and agrees to cooperate with the 1031 exchange. Typical accommodation language might read as follows:

For a Seller - "A material part of the consideration to the seller for selling is that the seller has the option to qualify this transaction as a tax deferred exchange under Section 1031 of the Internal Revenue Code. Purchaser agrees to cooperate in the exchange provided purchaser incurs no additional liability, cost, or expense."

For a Buyer - "This offer is conditional upon the seller's cooperation at no cost to allow the purchaser to participate in an exchange under Section 1031 of the Internal Revenue Code at no additional cost or expense. Seller hereby grants buyer permission to assign this Contract to an Intermediary not withstanding any other language to the contrary in this Contract".

Accommodation language is not mandatory and can be omitted if it puts the taxpayer to a disadvantage for other parties to know about his plan to sell and replace property under IRC '1031 and related closing pressures under the exchange 'time clocks."

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How credit scores affect mortgage approval

This is a question I have been asked a lot during my Loan Officer career. This is a major barometer on which the type of loan you get is determined. Your credit scores are like a report card on your payment history and how much money you are able to borrow. There are two major points of information that I carefully examine from your credit report. One is your DTI (debt to income) ratio, and the other is your payment history. These are factors that help determine your 3 scores, including your FICO score.

Your FICO score is a score that is given to you by the credit bureau. There are three major credit bureaus that report, and the bank will usually pull all three reports.  They will then take your middle score, which is the average of all three scores.  These scores can range between the 400's up to the 800's. As a loan officer this is the starting point in determining what type of loan to price out for you.  If there is incorrect information on your report, talk with me about doing a credit rescore.  This "rapid rescoring" can improve your scores in 72 hours!

Viewing your payment history shows me if you have been late on any of your payments. This is the most important factor in figuring your scores. If you have made late payments, especially mortgage loan payments, and especially ANY late payments in the past 2 years. you will adversely affect your credit scores. It is so important to make your payments on time. Your standard of living will become a direct result of how your treat your bills and how you extend (or do not extend) your credit. If you have to prioritize, the order of importance in paying you bills should be: 1- any mortgages, 2- student loans, 3- installment loans, (auto) 4- credit cards and department store cards.

Acting as your mortgage agent, I will determine what classification borrower you are, which is used to determine what type of loan program you will qualify for. Lenders have different types of loans for different types of credit. An A credit classification will get will get you your best pricing. This is all based on risk for the lender. The higher risk you are to them, the higher rate they will quote you. This risk is not only based on your credit scores, but also on all the details of your full mortgage application.

For a more thorough explanation for YOUR specific situation, I welcome you to contact me directly. Scott Rubin is a Senior Loan Officer with Choice Finance in Rockville, Maryland.

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How to shop when refinancing your mortgage

Let's start with what not to do. Never call a mortgage company and say, "What is your rate?" In doing so, you essentially tell the loan officer that you are not an experienced mortgage shopper, thus opening yourself up to those who would take advantage of an inexperienced shopper. Before you call any mortgage company, you should answer the following questions:

What do you want to accomplish by refinancing? Is your goal simply to save money by lowering your payment on your existing mortgage? Or do you want to change your financial picture by combining your first and second mortgages into one mortgage, consolidating credit card debt, liquidating your equity for investment purposes, or getting cash-out to improve your home?

Will you consider an Adjustable Rate Mortgage or other mortgage type in order to better accomplish your goal, or are you simply more comfortable with a fixed rate?

How much do you owe on your current mortgage?

Do you escrow for your taxes and insurance with your current monthly mortgage payment? If so, you should identify the breakdown of your monthly payment into the principal and interest payment, and the amount collected for escrow.

How much is your house currently worth? It is important to have an idea of the current value of your home so that the Loan Officer can place you into the best program possible. In doing so, you will ensure that you get an honest and appropriate estimate of how the new loan will meet your goal and what to expect as a new monthly payment.

Once you have this information, you are ready to call the mortgage company. Provide the loan officer with the information you have compiled, listen to their proposals, and evaluate how well your goal is met. Make sure you request a copy of a Good Faith Estimate, which will show the proposed interest rate, closing costs, and monthly payment breakdown. Have the Loan Officer explain which costs are to be rolled into the new loan and which are to be paid prior to closing (out-of-pocket). Be wary of companies that require more than $350 (for appraisal and credit report) to be paid up front.

Once you have received Good Faith Estimates from two or three mortgage companies, it is time to make a decision. You should be prepared to review the estimates and then lock in all in one day because mortgage interest rates do change daily. If one company has lower rates and closing costs but you call to lock the day after you receive your quote, that company can say rates have increased, putting you back at square one.

A bit of advice: If two mortgage companies are comparable in rates and costs, evaluate your interaction with them. Who were you most comfortable with? A good loan officer makes all the difference in a smooth refinance transaction. Ask how quickly they can get the Good Faith Estimate to you and hold them to it. You are an important customer, and a good Loan Officer will make sure you are their top priority. Good luck and happy hunting.

David L. Wexler works at Choice Finance Corporation, a full service mortgage brokerage firm licensed in Maryland, Virginia, Washington, D.C., Delaware, North Carolina, and Florida. Choice Finance Corporation is a Lender with in-house Underwriting for fast approval. Choice Finance closes all types of mortgages: conventional, FHA, VA, Home Equity Loans, commercial, B/C credit. You can reach David Wexler at 301-881-8900, ext. 202.

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80-10-10 financing, and 2nd mortgage options

550,000 sales price. to not strap yourself for cash once you close, I would have your Loan Officer structure this into 2 loans. If you want to keep $27,500 in your pocket, do a "80-5-15" loan (15% down payment). If you want $55,000 kept in your pocket, do the "80-10-10" option. You can always repay this 2nd loan as quickly as you'd like, and the interest you're paying on it is tax deductible. This may be a much better option than financing your home improvements and furniture through credit cards (don't do it!) or having to wait forever as you get the cash each month to slowly furnish and fix up your home that you are living in. Take it from a guy who has lived in a property as he was furnishing and fixing it up...IT SXXXS!! Pay the professionals to do the fixing up.. they will do it to code, and they know what they're doing. You will want to kill yourself if you have to make one more Home Depot run.

You have 2 options with this 2nd mortgage.

Home Equity Line of credit-- With your criteria, you will qualify for Prime + 0. Prime right now is 7.50%. You have the option to pay interest only on your outstanding principal balance for the first 10 years. After that it amortizes for the remaining 20 years. It acts exactly like a credit card, as you pay the balance down, you increase your "available line" and can re-use this line as much as you want. This is an adjustable rate. Prime has been steadily climbing for the past year or so...where it was only 4.0%. Most clients are opting for the fixed rate option in this rising rate environment.

Fixed rate second-- Obviously, this will be fixed. It is amortized for 30 years, but it is due in 15. The going rate right now on a 0 point 2nd is about 7.375%. You can not draw on this loan and you cannot re-use it like a credit card. You are making minimum payments, fully amortized, based on the original amount you borrowed. Whereas, with the HELOC, as you pay it down, you are paying interest only on that which you owe.

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Documentation Needed for Home Loan Approval

When calling a mortgage company to get a rate quote for a mortgage refinance, it is a good idea to have a mortgage coupon or statement available. You probably make a principal & interest mortgage payment each month, along with escrows for taxes and insurance and maybe even mortgage insurance. This information is available on the mortgage coupon or statement. When you talk about a rate and payment over the phone, you want to make sure you are comparing principal & interest payments on the two loans or total payments for the two loans. Don't be fooled into comparing the new principal & interest payment to your current total payment!

No matter what mortgage company you ultimately work with, and whether it's a home purchase, refinance, or home equity loan/line; the lender looks at three categories to determine your risk level, and thus your qualification for the new mortgage loan. The first piece of information the bank will need is income information. If you are self-employed or you own investment properties, you will need to provide the two most years' tax returns. When providing tax returns, make sure that you provide all schedules, addenda, etc. Otherwise, you will need your two most recent pay stubs and two most recent years' W2 forms. If you have received a raise, promotion, bonus, commission, alimony, child support, pension, Social Security or other type of supplementary income, an award letter or other type of verification may also be required.

The second category of documentation is your assets. These consist of bank statements, brokerage accounts, retirement accounts, types of cars and household goods. When giving statements, it is very important that you provide all pages. If your bank statement says page 1 of 6, you must give all six pages. Most lenders require that you document the two most recent months' activity for each account. For bank accounts, you can use your two most recent statements. For brokerage accounts, retirement funds and other accounts with quarterly, bi-annual, or annual statements, only the most recent statement is necessary. If you have made any large deposits you will want to document its source, usually with a copy of the check and deposit slip (if available). You will be asked what type of car you have and how much it is worth, as well as an estimate of the monetary value of the tangible goods in your household. The more assets we can show the bank the better chance of getting the loan approved.

The third item the bank looks at is your credit history. Your loan officer or lender will get a copy of your report, but it is a good idea to go over the report with them to check for mistakes, discrepancies, credit fraud, etc. If you have any late payments or any discrepancies, you will want to address them at that time. A hand written note explaining any problems is usually sufficient. If you have any official documents that pertain to your credit, you will want to provide that as well. Other items you will be asked to provide are a mortgage coupon so the payoff can be ordered. A copy of your homeowner's insurance policy is helpful so that the lender can ensure the proper loss payee is indicated at closing. If you live in a community that has a homeowner's association you will want to provide a contact at the association or management company for the loan officer.

Certainly, there are exceptions that can be made and every loan is done on an individual basis. Every time you have to make an exception it may take a little longer and may make it more difficult to get the loan approved. Providing all of the information up front will ensure that you get the best loan program available and that you get to closing smoothly and efficiently.

Scott Rubin is a Senior Mortgage banker with Choice Finance®. He can be reached at 301-881-8900 x204.

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