Archive for January, 2007

Only you can help stop email spam.

January 26, 2007

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A post or two ago I reveled at my (seemingly) successful attempt to thwart the “Congratulations your loan request has been approved” emails.  After I nervously clicked on the link and filled out the opt-out information, the emails did stop . . . but only for about two days.  Now, it appears (one would guess from the flood of additional junk mortgage emails) that the site that I opted-out from must have sold or given my email address to 43 of their closest junk-mailer “Congratulations your loan request has been approved” buddies and now I am getting between 5 and 20 of these emails per day.  And to think what could have been, at $368,000 in loan money (which they are offering me), I could have about $7 million per day.  The most annoying part of it all, especially for a mortgage broker, is that the titles of the emails, if only for a second, continue to fool me (you would think that I would know better). 

Loan Request, Information for Loan Request, etc. continue to fool me into believing that a potential client is looking for mortgage advice.  It’s a similar feeling to the one we created in my daughter the other day . . .

I had purchased a small $10 reading lamp for her so that she read at night in bed without disturbing her big sister.  Abbey, my youngest is an intelligent, high-energy, dramatic, goofy, comedic, sweet little girl.  When I told her that I had bought a gift for her, she started jumping out down (intentionally exaggerating) and yelling, “What did you get me?!  What did you get me?!  What, dad?!  What!  A new car (she’s 6 by the way)!?  What?!  What?!  Tell me!”  My wife, who had been watching the whole overly-dramatic thing, said to her (equally exaggerated), “Daddy bought you a pony!”  And without hesitating, and as much as she tried to resist, Abbey’s eyes glanced in to the backyard and for a split-second, her face went serious . . . when she saw my smile, she knew that it was a joke.  It was funny, in a sad, make-you-lean-your-head-to-one-side and say, “Aww” kind of way.

So when the “Request for Loan Information” junk email arrives in my Inbox, if only for a split-second, my eyes quickly glance to the bottom of my computer monitor, only to disappointingly see that the email is from a wretched junk-mailer, “Thank you for your loan request, which we received yesterday . . . blah, blah, scam, scam, identity-theft, identity-theft.”

Where was I?  Yes, of course, stopping email spam. 

Here is some advice on how to protect yourself, and the ones you love, from (mortgage) spam:

1. Use the blind-carbon-copy feature (bcc:) when sending out emails to large groups of people.  Using this feature hides the email addresses of the recipients, protecting their email address from spammers.

2.  When you forward an email (IF you forward an email, assuming of course that you have verified that it is not a hoax – www.truthorfiction.com and www.snopes.com are both good sources of info), use the bcc: feature and delete the addresses in the body of the email. 

3.  Create a not-so-important email address.  I have a yahoo! email address that I use anytime I am randomly required to give an email address — for a store rebate, special offer, registering to read the newspaper, etc.

4.  When publishing your email address on a website or group, proceed with caution.  Unfortunately, I learned this lesson the hard way.  Spammers have computer programs that scan websites for email addresses; so if your email address is out for the world-wide-world to see, then it’s official, “Congratulations, your loan request has been approved.”  ha.  Some alternatives to publishing your email address are to use a web-form on your website for potential clients to make the first contact, or using a disposable email address on your website such as jpinkerton2007@hillsidelending.com, or to even list your email address in an alternative format.  For example, jpinkerton(at)hillsidelending.com, or jpinkerton @ hillsidelending.com (remove spaces). 

I’ll let you know how long it takes for me to start getting junk email to the jpinkerton2007@hillsidelending.com address.  Maybe we could start a pool?  Anybody for 24 hours??

More on small print . . .

January 18, 2007

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I know that I have already posted on the small print of the mortgage business and about some of the ridiculous things you will see in TV mortgage commercials and other advertisements, but one advertisement sent to me by a customer last week and the one I saw on TV this morning are worth knowing about (and the laugh).

One of my past clients, had received an interesting fax, boasting of interest rates from 3.25% to 3.97% in really big, bold letters.  He emailed me a copy of the fax so that I could take a look at it and let him know what the deal was.  He guessed that the offer was too good to be true, and he was right.  Well, I take that back, maybe not too good to be true . . . just too good to be of any good. 

Problem number one: the offer had 3.25% – 3.97% listed as the APR (or annual percentage rate).  Because some closing costs are factored into an APR, the APR is higher than the actual interest rate — which if I had to guess, would put the interest rate on this advertised mortgage, say, at 1%.  Which would probably mean an MTA type loan. 

Problem number two: the offer said that the loan was a “FIXED TERM MORTGAGE” not to be confused with a fixed rate mortgage, I guess.  Wouldn’t all loans be fixed term mortgages?  Or are their loans out there with an indefinite term?  Hey, this way you could pay back what you wanted, when you wanted.  ha. 

Problem number three: small print — “limited funds available” — any time that an offer claims there are only ‘limited funds’, or it is a ‘special investor limited-time offer’ or the deal at ‘an interest rate so low I had to agree not to advertise it on the radio’, run away as fast as you can.  Please don’t get confused though; this is NOT the same thing as working with a mortgage professional who watches the mortgage-backed securities market and he or she warns you that the interest rate that you are discussing may not be available tomorrow. 

To my client’s credit . . . he knew that the fax was completely suspect (it was one of those “to all employee” type faxes — this one only one rung up the annoying-advertising ladder from the “Dear Human Resources . . . $99 vacation to the Bahamas”).  I can’t blame him for trying to save some money.  I am just glad he emailed me to find out the truth.  

If you saw me on the treadmill at the gym this morning, you probably would have thought I was a nut — “hey is that guy laughing at a mortgage commercial?  what a weird-o?”  (Granted, if you saw me on the treadmill at 5:25 AM, you may think I was a weird-o even without the laughing at a mortgage commercial thing).  Just to set it up, the commercial was nice enough, people smiling in front of a new house, a family playing board-games in their den, children laughing and so on.  There were a few screen-shots of operators (standing-by, I am sure) and office-space, more houses, more smiling, more children, lots of hand-shaking, etc.  And then in really BIG, block letters, “90% of qualified applicants accepted!”  What?!?  What the heck does that mean?  What happened to the other 10% of “qualified applicants”?  It’s not that their loans were denied, right?  It’s not that they were not qualified.  They were qualified; just didn’t make the cut I guess.

Maybe I should add that to the my website, “100% of all qualified applicants accepted!!  If you want a loan, and if you qualify for a loan, then we will accept your loan!” or maybe, “Guaranteed approval of your loan, if the underwriter approves your loan!”

Still can’t figure out why they wouldn’t accept the other 10%???

Finally, the truth about MTA loans.

January 15, 2007

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Amazingly, there is still a lot of interest about MTA loans.  These loans are usually one-month adjustable rate mortgages based on the MTA index (an index based on a 12 month average of actively traded treasury securities).  These loans give customers the “option” (very big air-quotes) of paying a minimum payment, an interest-only payment, or a principle and interest payment.  In cases where the minimum payment does not cover the interest for the month, the interest is added back to the loan amount creating a negative amortizing loan.  Negative AM sounds so harsh and ugly, though, huh?  So, mortgage brokers and investors call these loan Pay-Select loans or Pay-Flex loans, as if to say, “Sure, pay what you want . . . you choose . . . really, we’re fine either way, no big.” 

To read my previous post on MTA loans, click here

The reason that I am writing on this again is twofold:

One, the number one search terms that land people on ‘the Mortgage Blog’ are searches for MTA, or MTA loan or MTA index.

Two, I finally found out the truth about this loan.    

Here is the thing . . . there are companies (wholesale investors as well as retail mortgage brokers) that sell the heck out of this loan.  There is one company who claimed to have 80% of their mortgages originated into this product.  Although they have boasted of increased buying power, consumer flexibility and wiser cash-flow management, I have always (for good reason) been suspicious. 

My simple question . . . why would a consumer take on a one-month adjustable rate mortgage that is not nearly as good as what they could get in a 5 year interest-only ARM?

Here is the math:  the MTA index currently sits at 4.933.  If you were take an MTA loan today, the start rate would be 1%.  After the first month, the interest rate would adjust based on the MTA index and the margin.  For this example, lets say the margin is a friendly 2.5% (accepting a higher margin = more commission for the loan originator).  Fast-forward 30 days, and now your interest rate has gone up to 4.933 + 2.5% = 7.433%.  So why the 1% start rate?  Well, your ‘minimum payment’ (which may not be enough to cover the interest) is based off of your start rate and is usually guaranteed to go up no more than x% per year.  And, for your first payment, in the example above, the minimum payment will come no-where-close to paying for the interest at 7.433%, and the difference will be added to your loan balance.  Ouch.

So my question has always been, why not take a 5 year interest-only ARM at 5.75% (based on today’s rates)??

And, until a few days ago, I have NEVER been able to get a straight answer.

I was talking with a new wholesale lender account rep (they call on mortgage brokers like me, hoping that I will send loans to them for underwriting, funding, etc).  He told me that their MTA loan was by far the most popular product that they were closing . . . like hot-cakes.  So, I asked him the same question that I ask everyone who mentions that loan to me . . . “Why wouldn’t I sell the customer a 5 year interest-only ARM instead?  Why is the MTA loan better than a 5/1 ARM?  Can you even tell me one situation where an MTA loan would be better than any interest-only type mortgage?”

“Well Jeffrey,” he said, “I guess it’s the perfect loan for the customer who wants to buy more house than they can afford.”

And he’s right.  Lasso of truth will get you every time.

Reading the small print.

January 5, 2007

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In the lawsuit-crazy world that we live in, ‘small-print’ has become a necessary evil.  Originally ‘small-print’ only existed on unusually longer-than-normal-papered car contracts and on the back of credit card statements, but now it is everywhere.  On every store receipt, on most consumer electronics, even on the lids of our coffee, for crying out loud.  There are now entire ‘small print’ booklets that consumers receive included with monthly bills, account statements, etc.  Just yesterday, with my cell phone bill, I received a seven-page ‘small print’ brochure outlining my improved rights as a customer.  Good information? . . . possibly . . . time in the day to read it? . . . not so much.

On television, the ‘small print’ is just plain silly.  For mortgage commercials, when they advertise “NO lender fees” and “NO closing costs” and the like, the small print is so small (and the screen-shot lasts for only a second or two) that no could possibly read what it says.  I actually have trouble focusing on the real purpose and product of most commercials because of the small print.  It always makes me laugh to read what some companies will put down there, “professional driver. closed course. do not attempt.”  Yeah, thanks.  I kinda gathered that as the car raced down a runway, backwards at 70 miles per hour, trying to make itself hydroplane.  The newest automobile ad ‘small print’ that I have seen deserves some recognition.  I told my wife that I might go test-drive the car, just on account of the ‘small print’ making me laugh so hard.  In the new Ford Edge commercial, the new small-size crossover car is driving through a busy city with one wheel on the top of skyscrapers and one wheel floating in space high above the city, and the small print reads (roughly), “Yes.  This is a fantasy.  Cars cannot drive on the edge of buildings.”  ha!  hilarious!

Thankfully, in the normal course of the mortgage business, there is not a lot of small print — although builder-required sales contracts are sometimes full of small print (some specific to the mortgage financing).  If you are the kind of person that would actually read all seven pages of the cell phone companies “Important Consumer Information” pamphlet, then for your mortgage-closing (and for the sake of your Realtor, the seller, the closing attorney, and the people in the lobby who would like to start their closing on time), I would recommend requesting a copy of your closing documents to review prior to your closing.  Some lenders will not release copies of your exact documents prior to closing, but most should be willing and able to provide you with copies of the template-type forms that you will be required to sign at closing.

A good friend of mine is a closing attorney and he tells a interesting story.  At a closing, the purchaser was reading one of the forms (regular size print, I think) and she was not happy with the title of the form, nor the information in it.  The title of the form read, “Waiver of Borrower’s Rights.”  Like most forms in a mortgage-closing package, this form is standard (and required) for a Georgia closing.  Because Georgia is a non-judicial foreclosure state, banks and mortgage companies are not required to take consumers to court prior to starting the foreclosure process (there is a process that they are required to follow, they just don’t have to sue the consumer and take them to trial — they can force the sale of the property in order to payoff the lien).  As part of that arrangement, consumers sign an addendum to their security deed waiving their Constitutional right to a “. . . speedy and public trial, by an impartial jury . . . ”  This (potential) borrower refused to sign the form (for a short-period of time); to which my friend politely replied, “Ma’m, I have no intentions on making anyone sign anything that they don’t want to sign.  However, if you want the money that the lender is providing to you in your loan, I am required to have you sign that form.”

If you do see small print at closing, it is likely on a form that you are required to sign as part of obtaining the loan . . . although there are a few ‘small print’ things to look for when closing on a mortgage:

1. Check your interest rate.  If the interest rate is different than what you were told or promised, stop the closing and don’t continue until you receive a satisfactory explanation (or correction).

2. Double-check to see if the loan has a prepayment penalty (found on the Truth-In-Lending); most “A” credit first mortgages do not have a prepayment penalty.  If your credit rating is low, your loan may contain a prepayment penalty in exchange for a lower interest rate (sometimes a good thing).

3. Make sure that the fees on your closing statement match (or are very similar) to the numbers that you were given on the good faith estimate.

4.  Make sure your cash-to-close is correct.  Your bottom-line “cash required for closing” should be within $100 to $200 of what you anticipated and what you were told by your mortgage originator (sometimes prepaid expenses, homeowner’s association initiation fees, small changes in settlement fees, etc. can make your actual figure slightly higher than even the best estimates).

5.  Less trust = more reading.  If you don’t fully trust the person that you are working with to get your mortgage (especially if you found them randomly through the newspaper, telemarketer, etc.) then you should probably read every word of every page to make sure that you are getting the ‘deal’ that you were promised.

The views of this post are the personal views of Jeffrey Pinkerton, Mortgage Consultant, and should not be relied on as legal advice or legal counsel.  Please understand that this post contains some information concerning how to best protect oneself through the mortgage paperwork process, but the views here are in no way inclusive of everything a consumer should look for or be aware of when comitting to a mortgage loan.  Mr. Pinkerton recommends that all consumers who are obtaining a mortgage in the state of Georgia either to purchase a home or to refinance a current loan, contact him prior to finalizing the details of their financing.