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