Friday, December 29, 2006

Real Estate Today! 710 KNUS AM - In the News

This week the Real Estate Today radio broadcast recieved media exposure in the following:

Rocky Mountatin News,2777,DRMN_23916_5239112,00.html,

Denver Post

Denver Business Journal (12-29-2006 Edition)

We appreciate the exposure as we continue to grow our radio community. Please tune into our show heard in Colorado on 710AM KNUS or on the internet at Saturday afternoons at 2:30 PM MST .

Saturday, December 23, 2006

Notes and Comment from our Radio Broadcast 12-23-2006

We had a great radio show today. I was joined in the studio by Bruce Deffler, Certified Relocation Specialist and Broker for Benchmark Property Advisors a Keller Williams affiliate. Here is an overview of the topics discussed and a few added comments.

2006 Housing Slump Dampens Economy

Homebuilding declined by a rate of 18.7% in the third quarter, which translates to the largest cut in 15 years. This contributed to a 1.2% reduction on third quarter growth, the sharpest cut in 25 years. Economic growth slowed to an annual pace of 2% in the July – September quarter according to the commerce department. Although not a positive sign, not quite the 2.2% annual rate estimated a month ago.

Economist estimate that the Gross Domestic Product (GDP = The value of goods and services produced within the United States) for the October – December timeframe with fall in the range of 1.7% – 2.5%, or slightly higher. Looking ahead the estimates are in the same range for the first quarter of 2007.

Home Prices the Number One Business Story in 2006 among Business Editors

I am a big fan of Rob Reuteman, Business Editor for the Rocky Mountain News. Although I do not know him well, we are members of a business leadership group that meets quarterly – I know his work very well and he excellent at his craft. Reuteman was among a group of business editors asked to chose from a list of 35 business stories from 2006 and choose the top 10 where shared in Reuteman’s Saturday 12-23 column in the Rocky Mountain News.

The number one story both at Reuteman’s judgment and that of his colleagues was the decline in home prices. The editor is exactly right when he characterizes the use of home equity by many homeowners as “the nation’s piggy bank.” Equally, his interpretation of our soft landing is also correct, Denver experienced double digit appreciation in the period between 1999 and 2000. He also reports that the expected drop in appreciation Is expected to be an additional 3.6% in 2007.

Job Creation Continues in 2007

Given the announcement of new job creation in Colorado for Lockheed and the announcement this week that Rio Tinto Minerals will locate their division headquarters in Greenwood Village bodes well for the continuation of job creation in the year ahead. The division of London based Rio Tinto PLC, signed a lease for 104,500 square feet valued at 25 million dollars.

Bottom Line: Both of these stories underscore my belief that we are in a tremendous buyer’s market and anyone thinking of buying a home or acquiring investment real estate will benefit from doing so in 2007. The conditions are perfect for the buyer: 1.) Rates are low. We are offering several programs with rates below 6.000%. 2.) Inventories are high both in the resale and new build market segments. 3.) Savvy investors recognize that very few people buy at the bottom of an investment market and the best place to buy is on the way down. The one caveat is that there are concrete reasons to believe that we are near the bottom and there is a recovery on the horizon. They then ride the wave back to the top.

Should a non-selling or non-refinancing homeowner invest in an appraisal?

We welcomed a caller into our conversation today with a question concerning engaging an appraiser to determine property value. The caller does not plan to sell or refinance and was simply interested in knowing the value of their home. We have been advocating over the past few weeks that homeowners obtain a Comparative Market Analysis (CMA) from an experienced Realtor knowledgeable in their market. A real estate appraisal will cost $300 - $350 in most markets and the report carries a “use by date,” as the market data is subject to Uniform Appraisal Standard to be used for underwriting a mortgage loan – typically six months.

The caller also asked about the value of obtaining a property inspection. Bruce advocated that a seller obtain a pre-sale inspection and address major items prior to placing a home on the market. In addition, we recommend that a seller look at their property in the same manner as a fix and flip investor. Seek advice from a Realtor when considering high return investments when improving a property prior to sale.

Bottom Line: If you are a property owner interested in knowing the value of you property, contact Bruce Deffler or Bob Speaker by accessing our website at and click on the “Ask James” button request our free CMA at no obligation. Also feel free to visit to reach Bruce and Bob directly.

Tune into our radio broadcast "Real Estate Today" on KNUS radio 710 AM in Colorado, or via live audio streamby logging onto and clicking "listen live."

Wednesday, December 20, 2006

LandAmerica Title Guilty of Poor Judgement

Ok, let me see if I have this correct. LandAmerica Financial Group, Inc. known as LandAmerica Title Insurance Company among other entities in Colorado is under investigation by the Colorado Insurance Commission in part resulting in a Cease and Desist Order on March 4, 2005 and a Stipulation for Entry of Final Agency Order on August 23, 2006. Rather than looking inward at business practices present in violation of RESPA Section 8, the company endeavors to pursue a smear campaign against Erin Toll who at the time served as Colorado Deputy Insurance Commissioner. Ms. Toll presently serves as Colorado Real Estate Division Director.

See the Documents: LandAmerica Title (Commonwealth Land Title Insurance Company, Lawyers Title Insurance Company, and Transnation Title Insurance Company)
Cease & Desist Order
Stipulation for Entry of Final Agency Order
You may contact LandAmerica at 866-526-3264 for more details on eligibility in relation to captive reinsurance.
(Sources: and )

This is troubling and calls in to question the integrity of a company who is entrusted with the funds of property owners and home buyers across Colorado. According to a story published in the December 20, 2006 edition of the Rocky Mountain News, the House Committee on Financial Services concluded in its 37 page report that LandAmerica Financial executives threatened to get “real stinky real quick” in referenced to an effort to discredit Toll and members of her family. The allegations were investigated and found to have no merit according to David Rivera, Colorado Insurance Commissioner.

Read the full Report:

Our firm (Private Mortgage Banking Branch of Cherry Creek Mortgage, Inc.) had been approached numerous times during the period August 2004 and January 2005 by companies seeking a title reinsurance controlled business arrangement. I investigated one such offer carefully concluding that such an arrangement would be a violation of RESPA Section 8 and declined to participate.

Bottom Line: I applaud the efforts of Erin Toll with support of the Colorado Division of Regulatory Agencies. She did an outstanding job in cleaning up illegal practices in the title industry and she aims to do the same in the appraisal industry. Rather than attack her personally, the collective real estate and mortgage industries should band together with our support.

Sunday, December 17, 2006

Mortgage Insurance Premiums Tax Deductable for 2007

The 109th Congress has granted an early holiday gift for new home buyers who purchase a home or take out a mortgage utilizing Mortgage Insurance in 2007. For transactions that fund between January 1, 2007 and December 31, 2007, borrowers will be able to deduct mortgage insurance premiums paid on their 2008 Federal Tax Return.

Once signed by President Bush, this new law will have a dramatic effect on piggy back mortgages and may cause borrowers to delay closings scheduled for December 2006 in order to benefit from the law.

A borrower taking out a $175,500 loan amount in the 25% tax bracket would pay an estimated premium of $86.50 per month or $1,038 per year. The estimated tax deduction would be $260.00 for 2007. (This is not intended to be tax advice, dollar amounts rounded up and assumes premium payments made 12 months in 2007).

Bottom Line for Buyers: The full text of this Bill has not been released pending signature by the President. It appears that you will benefit from this law when purchasing or refinancing a home. Buyers would benefit by delaying the closing of a mortgage loan with mortgage insurance until January 1, 2007 or later. I would caution against delaying a closing prior to considering the full impact of this action, such as your contractual obligations, expiration dates for interest rate locks, moving schedules for both buyer and seller, cost savings from the deduction vs. expenses created by delaying your closing date, etc. Consumers should consult their lender or other real estate professional prior to altering a closing date. Borrowers should also consider that private mortgage insurance can be removed at the point when the property value and loan balance achieve an equity position of 20% or more. Higher rates on piggyback loans remain until they are paid in full.

Bottom Line for Sellers: If your sale is scheduled to close in December 2006, be prepared for the buyer of your home to request an extension of the closing date. Based on the terms of your purchase agreement, you may not be required to grant such an extension.

Bottom Line for Builders: If your sale is scheduled to close in December 2006, be prepared for the buyer of your home to request an extension of the closing date. Based on the terms of your purchase agreement, you may not be required to grant such an extension. The challenge for builders will be weighing your desire to add another transaction to the books for 2006 and making the best customer service gesture for your buyers. One strategy I recommend would be to calculate actual tax savings for the buyer and offer to credit an equal amount at closing in exchange for a closing in 2006. There is the possibility that the deduction could be extended by Congress beyond 2007 and the buyer would need to consider this possibility and the resulting loss of future deductions.

Bottom Line for Lenders: Research all of the available information concerning this law and become knowledgeable on the impact on your borrowers and real estate agents. Be prepared to receive calls from your clients and be proactive by contacting any client that could be affected by the new law. I recommend that you develop tools that will allow you to accurately compare the use of loans with mortgage insurance as compared to combo (piggyback) loans. It is likely that many borrowers will benefit from refinancing to maximize the benefit of converting their adjustable rate mortgage to a fixed rate. I strongly caution that you do not provide specific tax advice and refer your clients to their tax advisor for clarification of how the law relates to their situation.

Bottom Line for Mortgage Insurance Providers: Congratulations, the playing field has been temporarily leveled and you should see an increase in transactions utilizing mortgage insurance in 2007.

According to an analysis conducted by Bankrate, there are four caveats to consider.

Caveat No. 1: The tax deduction applies only to mortgages that are closed in 2007. If you have a loan with mortgage insurance in 2006, you won't be able to deduct the premiums in the 2007 tax year unless you refinance in 2007.

Caveat No. 2: There are income limits. You get the full deduction if your adjusted gross income is $100,000 or less. The amount you can deduct phases out rapidly after that, and no mortgage insurance deduction is available if you make more than $110,000.

Caveat No. 3: This is a one-year deal, and Congress would have to renew the deduction to make it apply for the 2008 tax year and beyond. Congress probably will extend the deduction, but you can't know for sure.

Caveat No. 4: If you take the standard deduction instead of itemizing deductions, the new law makes no difference to you. "You need to have a mortgage of about $130,000 or so to even pay enough interest to hurdle the standard deduction," says Bob Walters, chief economist for Quicken Loans. In practice, he says, this means that the deduction is available to households with incomes between $50,000 and $100,000.

Please visit http://www.privatemortgagebanking.netand click "Free Reports" to download a complete summary including the full text of the Act and Section when it becomes available.

The Tax Relief and Health Care Act of 2006 Section 419:

Section 6050H of the Internal Revenue Code of 1986 (relating to mortgage interest) is amended by adding at the end the following new subsection:

In general.--Premiums paid or accrued for qualified mortgage insurance by a taxpayer during the taxable year in connection with acquisition indebtedness with respect to a qualified residence of the taxpayer shall be treated for purposes of this section as interest which is qualified residence interest.

Saturday, December 16, 2006

Can a Borrower Obtain a Mortgage While in Consumer Credit Counseling?

If your goal is to purchase a home in 2007 and you have credit issues needing to be addressed now is the time to structure a “game plan” to ensure that your goal can be accomplished. When consulting with credit challenged clients we often engage with individuals who either are considering or are presently working with a Consumer Counseling Agency such as CCCS. The decision to enter into a modified payment agreement should be carefully considered to ensure that all of your goals can be met.

How do mortgage loan underwriters view borrowers currently working with a credit counseling agency? This week I sought the opinions of two experts on the subject and here is an overview:

I spoke with the Sr. Underwriter for Cherry Creek Mortgage Company to gain perspective from the mortgage loan underwriter’s point of view.

FHA and VA Borrowers – If a borrower utilizes an FHA or VA loan product, the borrower is eligible to receive a mortgage if the following three requirements are met.

1. The borrower has been in an approved consumer credit plan for a period of at least 12 months.
2. The borrower has a satisfactory “paid as agreed” record with the agency as set forth in the agreement.
3. The borrower has obtained written approval from the counseling agency to enter into a mortgage loan agreement.

Conventional Borrowers – For borrowers seeking a Conventional loan such as a Fannie Mae or Freddie Mac program the situation is quite different. The guidelines for these programs require the underwriter to view a consumer credit plan the same as a Chapter 13 Bankruptcy plan, which must be fully paid prior to entering into a mortgage loan agreement.

I spoke with a program specialist with Consumer Credit Counseling Services which is a HUD approved counseling agency and ask the question, “what are the factors that effect the decision to allow a borrower to enter into a mortgage loan agreement?”

There are a number of consumer driven factors which include the following:

1. Is the agreement with the existing creditors for full or partial payment of the credit balances?
2. Can the borrower’s adjusted debt to income ratio support the addition of a mortgage payment?
3. Has the borrower made the consumer credit plan payments as agreed?

Additional factors to consider before entering into a consumer credit plan:

1. If the consumer budget results in a plan for partial payments to creditors, many report “payments not as agreed” on the consumer’s credit report.
2. The consumer’s present credit report will impact Alt A or Sub-Prime underwriting decisions.
3. After the payment plan has been paid as agreed, the reporting agencies will remove all references to consumer credit counseling, etc.

The Bottom Line: Whether you are currently enrolled in a consumer credit plan or considering doing so, your dream on purchasing a home is still a possibility. I recommend scheduling a private consultation with a knowledgeable mortgage professional in order to make an informed decision. I also recommend avoiding the tendency to be steered into a sub-prime mortgage, which usually calls for higher rates, pre-payment penalties, and less favorable terms overall than the options noted above.

Saturday, December 09, 2006

Missing Your Fortune?

I have consulted with hundreds of homeowners and real estate investors during my twenty years in the mortgage banking industry. It is disputable that a personal residence is the largest appreciating asset for the majority of Americans and as a result the foundation of their financial security. As such the appreciation in your homes value coupled with a “proactive” strategy for managing the associated debt may result in the accumulation of wealth and a hedge against volatility in the financial markets. The idea of securing a 30 year fixed interest rate mortgage at the time of purchase and simply making the monthly payments is no longer the best means of creating financial security – you may in effect be missing your fortune.

In recent years a number of new mortgage products have been introduced to the marketplace including interest only loans and loans tied to a variety of indexes with varied rates and repayment terms. In my practice, I routinely have more than one potential solution for addressing our client’s short and long term needs. So where should you begin? I encourage all of my clients to participate in an annual mortgage review, consider this an annual physical for your home mortgage. Through this process we are able to measure our clients’ current interest rate against the market, determine what life changes have occurred that might affect the type of loan presently in place and make recommendations to ensure that we remain on course.

Technology has greatly impacted the mortgage banking industry by providing a number of tools to better allow professional mortgage bankers to more effectively manage mortgages over time. I utilize a number of tools to monitor interest rates relative to my clients present rate, hedge interest trends for clients with adjustable rates, determine when to convert an adjustable rate to a fixed rate mortgage and to monitor appreciation in property value to identify opportunities to put their equity to work. This method of value added service is known as professional mortgage management, which I created elevate the entire process of financing your home to more meaningful level.

To ensure that you have the most cost effective mortgage program and one that maximizes your ability to create long-term wealth consult a professional mortgage banker; preferably one who carries the CML designation from the Colorado Association of Mortgage Bankers. Utilizing a CML designated banker will insure that you are dealing with someone who is committed to continuing education and who is held to the highest professional standards in the industry.

Reverse Mortgages: Financing the Golden Years

Until recently, seniors 62 years of age and older have not had the best choices when it came to getting cash from their homes. Traditional home loans only offered the option of either selling one’s house or borrowing against its equity.

With reverse mortgages coming on the scene, seniors now have some additional cash-flow alternatives. This type of loan allows mature borrowers to convert their home equity into tax-free income without leaving their current home or making mortgage payments - and they do not need an existing income to qualify.

How a Reverse Mortgage Works

Reverse mortgages are probably best understood when compared side-by-side with traditional home mortgages, otherwise known as "forward" mortgages. The following table shows the differences between the two:


Uses income to pay debt
Monthly mortgage payments
Falling debt, rising equity


Uses home equity to get cash or credit
No payments; debt is due when the borrower(s) pass away or relocate.
Rising debt, falling equity

Both loans incur debt against your home, and both affect equity, but they do so in different ways. Traditional home mortgages require making monthly payments to a lender. With a Reverse Mortgage, payments are made to you.

What a Reverse Mortgage Involves

Here are some important points to know when considering a reverse mortgage:

Eligibility: To qualify for a reverse mortgage, you must be at least 62 years of age. All owners who are on the title deed must meet this age requirement. You must also have paid off all, or most, of your home mortgage. Lastly, the home you reside in must remain your principal place of residence.

Mandatory Counsel: In order to ensure that homeowners are fully aware of the financial ramifications of obtaining a reverse mortgage, you must undergo counseling with an unbiased third party before completing a loan. HUD and AARP oversee a network of counselors who can provide this service, and it should be offered for either a nominal fee or at no charge.

Tax-Free Income: One of the advantages of a reverse mortgage is that the money you receive will not be taxed. The amount you’ll obtain depends on several factors including the plan you select, the type of cash advances you choose, your age, and the value of your home. Typically, the older you are the larger the loan, as you will have more equity in the house.

Cost: The cost of a reverse mortgage varies considerably from one type to the next. However, you can typically use the money you receive to offset the loan fees. The costs will be added to the loan balance and must be repaid with interest once the loan terminates.

Repayment: Reverse mortgages do not require any payment as long as the borrower(s) remain in the home. Should the borrower(s) pass away, sell the home, or permanently relocate, then the loan would be due in full, along with interest and additional costs. If two borrowers are on the loan and one dies, the loan would not be due since one of them still occupies the home.

Home Equity Conversion Mortgage - The Federally Insured Loan
The most common type of reverse mortgage is the Home Equity Conversion Mortgage, otherwise known as a HECM mortgage. This is the only reverse mortgage program that’s federally insured and backed by the U. S. Department of Housing and Urban Development (HUD). This type of reverse mortgage is popular for a few reasons:

• Ability to choose your own interest rate.
You can select one that changes annually or one that changes every month.

• You have several payment options.
You may receive monthly loan advances for a fixed term or for as long as you live in the home. You may also choose to receive a line of credit or combine monthly loan advances with a line of credit.

• The loan can be used for any purpose.
With a HECM, you don't have to designate the loan to a specific use; you can apply the funds to anything you choose.

• Protection.
This is one of the most attractive features of a HECM. This plan protects you by guaranteeing continued loan advances even if your lender defaults.

Sell or Stay?

The main reason people choose a reverse mortgage is to gain financial independence and maintain an adequate standard of living without leaving their current home. The best way to decide if a reverse mortgage is right for you is to compare it to the other option of selling your house. To do this, ask yourself these three questions:

1. How much cash can I get by selling my home?
2. How much will it cost to buy or rent a new place?
3. Is it worth my moving now, or do I prefer to do something else with the

Perhaps you'll confirm what you knew all along, where you now live is the best place to be.

We have utilized Reverse Mortgages to address very specific goals of our clients. One such case

Wednesday, November 29, 2006

Understanding Interest Rate and APR is Critical

It is vital to understand the differnce between "Interest Rate" and "APR" when shopping for a home loan. We partner with CNBC contributor Barry Habib who offers excellent guidance to assist you in understanding these terms.

A borrower who is shopping for the best mortgage rate can easily be seduced by low rate offers that are accompanied by low Annual Percentage Rates (APR). Federal Law requires that APR be disclosed along side the actual interest rate…this is in order to help borrowers make a more informed decision on their mortgage. The truth is that APR is a very poor way to comparison shop for a mortgage and can cause borrowers to make costly wrong decisions.

APR was created in order to provide a way for borrowers to account for costs associated with the mortgage. This sounds good because it may not be very easy to choose between a loan with a lower rate and higher fees or a loan at a higher rate and low fees. The problem is that the APR calculation makes some very bad assumptions. First, APR assumes zero inflation and that the value or buying power of a Dollar today will be exactly equal to the value of a Dollar 10, 20 even 30 years from now. Next, the APR calculation assumes that the mortgage will never be prepaid or paid off. That means no refinancing or selling the home…highly unlikely since the average life of a home mortgage loan is less than four years. Just think, about your own clients. Is it not rare to see the same loan in place for even 5-years…forget 30-years. The APR calculation does not consider the value of the money used for fees. So if you spent thousands of dollars in points or fees to get a lower rate, the APR calculation does not give any value to the money if it were not spent on closing costs. Finally, APR does not take tax consequences into consideration. This can be significant since higher fees on the mortgage may not be deductible while the higher interest rate typically is deductible. Moreover, APR can be manipulated, making it totally worthless.

So how does APR work anyway? I like to explain it to my clients by using triangles. I often draw two sets of triangle for my clients to illustrate the difference between Interest Rate and APR. The reason for the triangle is because there are 3 sources of input…"Interest Rate", "Mortgage Amount" and "Monthly Payment". If you know any two of the three, you can calculate the third. See the triangle below.

Since any two of the three variables allows you to calculate the third, a $911 monthly payment for a $150,000 mortgage calculates to an interest rate of 6.125%. But the APR calculation uses different information. The APR calculation only keeps the "Monthly Payment" information the same. Instead of the "Mortgage Amount", APR uses "Amount Financed". This is the "Amount Financed" information on the Truth in Lending statement. Amount Financed takes into consideration the fees that are lender imposed. This includes application fees, points, commitment fees…and interim or per diem interest. So, Amount Financed is the mortgage amount less any lender fees, points and interim interest. The more fees, the lower the Amount Financed. The monthly payment is then calculated as a product of the Amount Financed to give you the "Annual Percentage Rate" or "APR". So the lower the "Amount Financed", the higher the "APR" is. Amount Financed can be manipulated by assuming a closing on the last day instead of the first day of the month. That would increase the Amount Financed and decrease the APR.

Here is a real example on a $150,000 fixed rate 30-year mortgage with zero points: Lender "A" (triangle above) is offering a great low rate of 5.875% and lender "B" (triangle below) is offering a higher rate of 6.125%.

A closer look shows that Lender "A" is charging $3,000 more in fees than Lender "B". How do you compare? If you look at APR, Lender "A" (5.875% with $3,000 higher fees) has an APR of 6.149%. Lender "B" (6.125% but a $3,000 savings in fees) has an APR of 6.211%. So according the APR, Lender A is a better deal even though the fees are $3,000 higher…this is exactly what these high fee lenders are hoping you look at.

Let's look at the real story. The payment difference between the two is $24 per month. So is it worth paying $3,000 in fees to Lender A in order to save $24 per month? Hardly. It will take 10.5 years for a borrower to just to get back their investment! A bad choice when you consider that mortgage loans typically are retired within four years. To make the decision to go with Lender "A" even worse, if that's possible, borrowers rarely take the value of today's dollars into account. Rather than giving Lender "A" the windfall of your hard earned $3,000, you should give it to yourself. Reduce the loan balance on your mortgage by the fees you are saving. In the example above that would reduce the loan from $150,000 to $147,000. This makes the payment difference just $6 per month instead of $24 per month! The true time to break even is really 500 months (more than 40-years!). So it is impossible to benefit from the higher fee program from Lender "A" because the maximum period on the loan is 30 years or 360 months. One more thing…when you calculate your tax deduction on the payment difference, it makes even more sense to avoid paying higher non deductible fees. The obvious correct choice is to go with Lender "B" even though the APR is lower with Lender "A".

Bottom line - You should forget APR and think twice about those advertised low rates when they are accompanied by higher fees. Use the above illustrations to help you determine the true cost of a loan being offered to you.

Wednesday, November 22, 2006

Is the Arapahoe County Treasurer-Elect Pulling the Wool?

Is it just me or is the newly elected Arapahoe County Treasurer trying to pull the wool over our eyes? Perhaps he already has. Doug Milliken won the job of county treasurer by approximately 2000 votes; running on a platform which touted his background as a finance expert and promising to “educate residents to make wise decisions to avoid foreclosure” and “Empower you about ways to retrieve a home out of foreclosure” Both of these statements appear on his website as goals and objectives.

Although honorable, I am not sure that Mr. Milliken understands his subject and therefore certain aspects of his new job. As reported in both Denver newspapers, Mr. Milliken himself is facing a foreclosure sale of his personal residence on January 3rd. In my role as a mortgage banker, I speak to individuals facing foreclosure frequently and I am not judging Mr. Milliken or the circumstances he is facing in his personal life. I am calling into question his ability to serve the citizens in Arapahoe County due to his lack of understanding of the foreclosure process and his competence to fulfill his role as treasurer.

In response to questions that have been raised by the media and Bernie Ciazza, the outgoing treasurer, Mr. Milliken has made two statements that are incorrect and are either honest mistakes concerning the facts, which underscores my point, or intentionally false, which of coarse should be of concern to the citizens of Arapahoe County.

First, Mr. Milliken claims that he was unaware that his home was in foreclosure. This is highly unlikely as the foreclosure process is mandated by statute and certain notifications must be made to the homeowner as the process moves toward resolution. Beyond the formal foreclosure process, homeowners are inundated with unsolicited offers from mortgage brokers, Realtors, and investors once the Notice of Election and Demand is filed with the County and the foreclosure is thereby made public. It is hard to accept that any homeowner could be in default for months and not be aware of the collection efforts being undertaken from the mortgage lender.

Secondly, Mr. Milliken claims that his mortgage insurance company is resolving past due payments on his behalf, which is not the purpose of mortgage insurance and further illustrates his lack of understanding. Mortgage insurance is placed on loans that exceed a certain loan to value ratio and the policy protects that lender in the event of default, not the homeowner. Further these policies do not make monthly mortgage payments on the homeowners’ behalf, they cover the shortfall for the lender as a result of a default sale of the property.

We should expect and deserve accountability from our public officials. Mr. Milliken has not demonstrated sound judgment or accountability in addressing what many consider to be legitimate concerns about his capacity to serve.

Saturday, November 18, 2006

Should You Leverage The Equity In Your Home or Pay Off Your Mortgage Rapidly?

There is a great debate within the inner-mortgage circles these days. Should we, as loan professionals, encourage clients to borrow as much money as possible? Or would consumers benefit more if we helped them to understand the advantages of 15-year amortization schedules and pre-paying principal? Let's examine the pros and cons of both strategies.

Leveraging Your Property. In order to understand why you'd want to borrow as much as possible for your home purchase, you must first grasp the concept that equity has a zero rate of return. Here's an example:

If Consumer "A" buys a home for $300,000, and puts 20% down, then they have $60,000 in equity. Over the next 5 years, the property appreciates $100,000 in value. Consumer "A" now has $160,000 in equity.

Consumer "B" buys a home for $300,000, and puts no money down. At the end of 5 years, that same home is now worth $400,000. Consumer "B" has $100,000 in equity, which is the same appreciation as Consumer "A", a net $100,000.

As you can see, your down payment has nothing to do with your rate of return. What becomes important is how you choose to manage the $60,000 you didn't use as a down payment. If you use it for frivolous activities, such as buying toys or going to Las Vegas, it would be more prudent for you to use that money as a down payment. Especially since this will enable you to obtain a lower interest rate.

However, if you were to invest the $60,000 in a vehicle that can out-earn the cost of that debt, then this could be a formula for success. This is why some lending professionals suggest putting as little down as you possibly can, maximizing your tax write-off, and investing the rest. This principle has been applied for many years in the life insurance game. The old saying goes, "Buy term and invest the rest." The key component is taking the money you would have used as a down payment and creating an asset accumulation account. This account should earn a significant enough rate of return to enable you to pay your mortgage off entirely and achieve the ultimate goal of being debt-free.

Paying Your Home Down Rapidly. There are very few times over the course of my career that I have seen a client with zero debt and no financial difficulties. Choosing to pay off all of your debt can reduce stress and help you to gain freedom of cash flow for investment opportunities. A 15-year mortgage or a bi-weekly payment strategy provides structure. It can also put you on track to have your mortgage paid off within a set timeframe. Simply put, it contains built-in discipline.

It's important; however, to understand that regardless of how rapidly you pay your home off, you're not getting any greater rate of return on your investment than if you paid it off slowly.

So how does one determine which scenario is best? The choice depends entirely upon the individual. Savvy consumers who are disciplined, and are comfortable taking chances from an investment perspective, would do well with the first scenario. Over the course of time, it's been proven that your rate of return over the long-haul will be far greater than the rate you'd pay for a mortgage in today's rate environment. It's important to seek the advice of a skilled investment advisor to ensure success with this strategy.

The second scenario is best for those who have a difficult time managing their money or who'll sleep easier at night knowing they have a plan in place to pay their loan off more rapidly. Be sure that your budget can handle accelerated payments. When consumers "bite off more than they can chew" with a 15-year mortgage, they frequently end up having to refinance back into a 30-year schedule.

If you find this subject intriguing and would like to know more, I recommend that you read a book titled, Missed Fortune 101, by Douglas Andrew. It's an outstanding read that is very simplistic and goes into far greater detail than I can cover in this column. Douglas is a financial planner who advises safe-structured investments such as whole life policies and tax-free fixed income instruments.

To ensure that you have the most cost effective mortgage program and one that maximizes your ability to create long-term wealth, consult a professional mortgage banker; preferably one who carries the CML designation from the Colorado Mortgage Lenders Association. Utilizing a CML designated banker will ensure that you are being consulted by a professional committed to continuing education and who is held to the highest professional standards in the industry.

Thursday, November 16, 2006

Renters Have Much to Gain by Pursuing Home Ownership

Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the benefits of home ownership usually out weigh the potential challenges to making this part of the American dream a reality for renters. Purchasing a home is the first stage in creating long-term wealth and financial security; it is an achievement that offers a sense of pride and financial stability.

The numbers are staggering when you consider the following: If you are paying $1,000 per month for an apartment over the next five years you will pay your landlord $60,000 and if you are renting a house, you may be paying much more than that each month. Either way, you gain no equity by paying out this monthly housing expense and you certainly won’t benefit as the property increases in value.

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you will have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you may have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage payment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to create the financing strategy that works best for you.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and which mortgage options can be made available to you. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide from zero to 3 percent of the purchase price as down payment. FHA lenders require that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Regardless if you are renting or buying a home, housing expenses are a significant portion of your monthly budget. If you are renting and feel that “home” is more than just a place to hang your hat, think about the advantages of purchasing a home of your own.

Refinance Your Mortgage for Rate and Payment Reductions

The primary reason homeowners refinance their mortgage is to obtain a lower interest rate and lower monthly payments. By refinancing, the borrower pays off their existing mortgage in favor of a mortgage with a lower interest rate or longer repayment terms. This can often be accomplished with a no-points no-fees loan program, which essentially means at “no cost” to the borrower.

In the no-points no-fees scenario, the mortgage consultant uses rebate monies paid by the secondary market to pay the non-recurring closing costs for the borrower. These are one time fees such as title insurance, document preparation, tax service, flood certification, processing and underwriting, etc. The borrower is still responsible for recurring fees such as insurance and property tax escrow payments.

Refinancing typically occurs when mortgage interest rates drop significantly, but borrowers with recently improved credit scores are often candidates for better interest rates as well. If you haven’t checked your credit score in a while, it’s a good time to call a mortgage consultant to obtain your credit scores.

Another primary motivator for refinancing occurs when a borrower has an adjustable rate mortgage that is near the end of the fixed rate period. We presently are providing financing in an environment were short term rates (adjustable rates) and long term rates (fixed rates) are essentially the same, as a result of an economic phenomenon called the inverted yield curve when measuring the indexes that determine these rates. As a result, borrowers who are scheduled for a future rate adjustment will want to explore refinancing to avoid significantly higher monthly payments as rates continue to rise.

We have many clients who have chosen to refinance in order to pay their mortgage off in a shorter period of time. There are two primary methods used to accomplish this goal and we work hand-in-hand with the borrower to determine what type of mortgage best addresses the goals and objectives of the borrower and if the present mortgage is the best solution.

One approach is to structure a mortgage that allows the borrower to save the greatest amount of interest over time and pre-pay the mortgage by a significant number of years. If refinancing results in a lower monthly payment, the borrower can still continue making the monthly payment amount made on the original mortgage, and the extra money will be applied to the principal balance.

Another approach has been promoted by best-selling author and investment guru Douglas Andrew’s philosophies in the book “Missed Fortune,” which suggest investing the monthly payment savings in an interest bearing account that could earn a better rate of return and grow to the amount of the mortgage in even less time. This method provides excellent liquidity, but having more direct access to this money may be too tempting for some homeowners.

Regardless of the reason for the refinance, the mortgage consultant will need to know what the existing loan scenario entails, review the homeowner’s long-term goals, and provide a comprehensive spreadsheet that compares and contrasts the various loan programs available.

It is important to note that refinancing to obtain a lower interest payment could also result in a lower deduction at tax time. The mortgage consultant and accountant should work hand-in-hand to ensure that the homeowners’ objectives are being met.

Saturday, November 11, 2006

Commentary from Real Estate Today! Radio Show 11.11.2006

The world renowned Pediatrician Dr. Benjamin Spock once said “A human being is happiest and most successful when dedicated to a cause outside his own individual, selfish satisfaction.”

A day in the life of a real estate agent or mortgage banker can be filed with triumphant mountain top moments and at times heart breaking realities – as we assist families in making their home dreams a reality and help many clients work through life’s challenges.

I want to share with you two experiences from the past week. We have been assisting a family, a wonderful husband and wife with four children in achieving the dream of purchasing their first home and providing long term security for their family. Opportunities for first time homebuyers have increased dramatically since the American Dream Down payment Initiative was signed into law in December 2003. The American Dream Down payment Assistance Act authorizes up to $200 million annually for fiscal years 2004 – 2007 to increase the homeownership rate, especially among lower income and minority households, and to revitalize and stabilize communities. Our team has become expert in working with first time homebuyers and it was a thrill to assist another family by utilizing down payment assistance – they will close on their home next week.

The second experience was less joyful. I sat down with a homeowner in the final stages of foreclosure and helped her work through the options that remain available to her in an effort to salvage the equity she and her husband have in their home. The most common mistake I see made by individuals facing foreclosure is failing to act as early in the process as possible, which limits the options available to them to resolve the problem. In Colorado the foreclosure process is statutory and there are strict guidelines that must be followed to provide the homeowner a reasonable time to restore past due payments or pay the loan in full trough a refinance -- or the sale of the property. The longer a homeowner waits to act, the more difficult it becomes to achieve a favorable outcome. This family being in the later stages of the foreclosure process will need to consider a sale as a means of solving the problem and getting a fresh start.

One of the primary objectives of the Real Estate Today Team is to educate and to advocate for homeowners, in achieving the mountain top moments and guiding them through the challenges they may face at a given time.

We have assembled a great team whose members bring a wide range of experience and a common passion to serve their clients.

Saturday, November 04, 2006

Commentary from Real Estate Today! Radio Show 11.04.2006

I must admit that I had a Field of Dreams moment last week, you know “if you build it they will come.” I was having lunch with a colleague and he asks me how we are going to build the audience for our new show. I got to thinking about that question and came to the realization that I have no intention of building an audience -- well at least not in the traditional sense.

My objective is to build a community of listeners rather than a traditional audience. Think of a neighborhood, the foundation is put into place by planners and developers, individuals move into the newly created neighborhood one at a time, get to know one another, interact and engage together – forming a community. That is my objective, to put into place a foundation – our show, and invite each of you to engage with us and form a community of listeners.

Talk radio is powerful because it is interactive and a safe place to ask questions, share opinions, and contribute to the knowledge of others.

The “Real Estate Today!” team seeks to add value for you and to do so with Integrity.

As a licensed real estate broker, certified mortgage lender by the Colorado Mortgage Lenders Association and past Chairman of the Colorado Real Estate Appraisers Board, I want to bring my 20 years of unique experience and passion for real estate to our community of listeners.

We have assembled a great team whose members bring a wide range of experience and a common passion to serve their clients.

Today we are launching our new radio show.

Well after a whirlwind few weeks, we launch our new talk radio program "Real Estate Today!" on KNUS Radio 710 AM. We were able to rely on our web team Jim Dittman and Krisit Dittman, our webmaster of W3Now to pull together a new website at which will serve as the portal to our online community.

The show represents the marriage of two passions for me, first my desire to add value to the broadest number of individuals when selling, buying, or refinancing real estate. The second is a return to talk radio, which has been a significant part of my life since childhood. My mom is a huge talk radio fan and I grew up listening to the local legends of talk radio in Denver; Alan Berg, Gary Tesler, Kathy Bradshaw, and Peter Boyles among others.

This is my second bite at the apple. I hosted two motor-sports programs in the period between 1989 and 1996 - the first on KBIG and the later as co-host with the late Ted Douglass on KQXI, our show was called "The Motor Racing Review" and I learned most of what I know about radio from Ted. As our mic goes hot today, I will be thinking of Ted and my first show is dedicated to his memory.

Friday, November 03, 2006

Private Mortgage Banking

Private Mortgage Banking

The Private Mortgage Banking Branch of Cherry Creek Mortgage provides a complete line of mortgage products designed to address the needs of their clients to include first time buyers, repeat buyers and real estate investors. We Offer first mortgages, second mortgages, home equity lines of credit, and construction loans. We work will all credit and income types and provide a free consultation without obligation. Click on the associated link for more details.

Benchmark Property Advisors

Benchmark Property Advisors

Benchmark Property Advisors is a full service real estate firm associated with Keller Williams Real Estate. If you are interested in selling, buying, renovating, or investing in real estate, the professionals with Benchmark Property Advisors can provide you with exceptional service. To access free seller and buyer resources click on the associated link for more details.

Real Estate Today! Radio Show

Real Estate Today!

The Real Estate Today! Radio broadcast can be heard over the internet by linking to the 710KNUS website. To access the audio stream click on the associated link for 710KNUS and select the links entitled LISTEN LIVE and join our program. A free CD can be obtained for any Real Estate Today! broadcast by selecting the “Contact Me” or “Ask James” link on this page and making your request. The broadcast can be delivered to you by CD through the mail or we can send you an MP3 file by email. Please specify with your request.

Saturday, September 30, 2006

Welcome to my blog.

This blog is designed to provide useful infomation to anyone interested in Colorado Real Estate and Mortgage loans.