2011: The Year of Big Decisions

If we think 2010 was a tough year, then hang on because 2011 is going to be fast and furious. With all of the legislative and regulatory changes coming within the next 18-24 months, we will not be able to sit back and hope it all works out for the best. Yes, there is some good news … all loan officers, no matter who you work for, are now going to be paid on an equal compensation program. Unlike in the past, either one side or the other had an advantage, but now compensation becomes one set of guidelines starting April 1, 2011. Loan officers, effective April 1, 2011, will be paid off the loan amount only, plus any bonuses developed by companies, with nothing involving fees, programs or interest rates. The broker/owner is going to have to plan for all of the following: 1. How is my company going to be paid? 2. How much is my company going to make on the loan? 3. How much does it cost for me to originate the loan? 4. What is my compensation program going to look like? 5. Am I going to have a bonus program and how is going to be structured? 6. Is my company going to be a broker, banker or a hybrid? 7. How do I attract good producing loan officers? 8. Can I stay competitive? 9. Am I going to be able to meet all of my deadlines on my own, or do I need outside help? 10. How do I make sure I keep my loan officers within Nationwide Mortgage Licensing System (NMLS) timelines and requirements? 11. Have I met all of the minimum wage and labor requirements? 12. What is your mortgage origination projections for 2011? Now that you have answered these questions, you are ready to sit down and develop your own business plan for 2011. In the past, we have never had to experience the number of challenges in developing a plan for 2011. It may be overwhelming, but as the old anecdote says, “How do you eat an elephant … one bite at a time.” The year 2011 may one of the most challenging years to date, but it is going to be one of the most exciting and fun years as you develop your company into the fighting machine it has to be to survive. Don’t give up. As you look at the overall market, in 2006 there were 1,800 mortgage companies in the state of Illinois alone and a total of 18,000 loan officers. In 2011, we will see less than 700 companies and approximately 5,000 loan officers in Illinois. How does that make you feel? It should make you feel fantastic as you are a survivor who has less competition to deal with and you will have a greater opportunity with the right plan to gain increased market share. Everyone predicts that the banks are going to take over the market, I can assure that has been said at least five times since 1986. Mortgage brokers and mortgage bankers continue to survive and develop their own market and niche. Why, because they are innovative and are filled with an entrepreneurial spirit. So, let’s be aware of what others are doing, but let’s develop our own plan for survival and increase our presence. Remember, no matter what the market was doing, good or bad, the mortgage customers came to you, the mortgage broker and mortgage banker, because you were more knowledgeable, persistent in getting a loan and more economical. As a mortgage broker and a mortgage banker, we also one other thing that no financial institution can sat and that is we are licensed professionals … be proud of that. Once you have figured out how to navigate your business through what lies ahead in 2011, I hope you’ll ponder what you can do in terms of helping the industry at large. The greatest opportunity to make a far-reaching impact comes when many small companies band together as one. Whether that’s through getting involved in a trade association, making an appointment with your legislator, taking continuing education classes or attending industry events, we all have many opportunities, and the responsibility, to not only see to it that our companies endure, but that our industry thrives as well. So as we enter the year 2011, we have a lot to look forward to as long as we are willing to make the difficult decision and put together a plan that is real and obtainable. We will continue to be under attack, but we have survived 15 years of new regulations and we continue to be here, so they cannot do much more to hurt us.

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5 Strategies to Rebuild Your Credit after Foreclosure

If you’ve been through a foreclosure, you may wonder if there is hope for you to become a homeowner again. The answer is yes, but it will take a while. “It doesn’t mean you’ll never be a homeowner again,” said Linda Davis-Demas, director of housing at Consumer Credit Counseling Service of Greater Dallas.

But you’ll need to examine what caused you to fall behind on your mortgage and take steps to fix the problem. “You have to look at what were the reasons you didn’t make the payment,” said Davis-Demas. “Was it budgeting? You can modify that type of behavior.”

A foreclosure is a major hit to your credit history and stays on your credit report for seven years.

“Foreclosure is one of the FICO seven deadlies,” said credit expert John Ulzheimer, referring to the dominant FICO credit score. “It’s considered a major derogatory item, regardless of the back story”— whether it’s a job loss, rate reset, underemployment or other reasons.

Your credit score will also suffer “the minute the foreclosure process begins,” said Ulzheimer, founder of 2StepCredit.com, a credit education website. “It doesn’t have to be completed for it to be very damaging,” he said. “The damage will vary based on your scores, but it can damage the score as much as 200 points, especially if your scores are very strong to begin with.”

So, after a foreclosure, your priority has to be rebuilding your credit. You’ll have some time to do so, because mortgage giants Fannie Mae and Freddie Mac impose strict rules on how long it will take before you’re eligible for another mortgage.

For example, borrowers with a prior foreclosure and extenuating circumstances—such as a job loss, divorce or medical issues—must wait three years before they can qualify for a Fannie Mae-backed loan, said spokeswoman Amy Bonitatibus. For all other borrowers, the waiting period is seven years.

At Freddie Mac, those who can prove extenuating circumstances must wait three years before applying for a new mortgage; everyone else must wait five years. But that will change in February, when the waiting period for those whose foreclosure was caused by their own financial mismanagement will increase to seven years.

Fannie Mae and Freddie Mac also have strict rules on the credit score and the size of the down payment required of borrowers with a prior foreclosure.

Here’s what you need to do to rebuild your credit to qualify again for a mortgage:

Pay your bills on time: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time. “Stability is the key,” said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. “Have you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?”

Review your credit report: You’re entitled to a free credit report once every 12 months from each of the three national credit bureaus—Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.

To get your free credit report, go to http://www.annualcreditreport.com. “Make sure it is about you and only you,” said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “If you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily.”

Check your mortgage: You want to be sure that you don’t still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren’t enough to cover what’s owed on the mortgage, which would leave you owing the difference.

“Make sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance,” Cunningham said.

Many lenders are willing to settle that “deficiency judgment” for less than what’s owed because “it’s better than getting no money at all,” Jarrell said.

Apply for credit: In particular, apply for different varieties of credit. “Credit scoring models value having different types of credit,” Cunningham said. “Having some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score.” But don’t apply for too much credit at once. “This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you,” Cunningham said. “Further, too many credit inquiries can have a negative impact on your credit score.”

Don’t fall prey: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job—after paying a fee for the service. “The truth is, that no one can remove accurate, negative information from your credit report,” according to the Federal Trade Commission. “It’s illegal.” Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.

When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.

“Know that time is your friend, as the farther you move away from the financial distress, the less negative impact it has,” Cunningham said. “Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.”

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An Update on Home Foreclosures

Lately, very few things have been in the news more than the topic of home foreclosures. Depending on the source, it is estimated there have been over 4 million homes entering foreclosure over the past four years and about 300,000 are entering the first stage monthly.

Recently the attention has turned from the sheer volume of foreclosures to the procedural flaws in foreclosing that are threatening lenders' rights to foreclose because legal "ownership" of the mortgage may not be readily determined or because paperwork related to foreclosing was improperly executed.

The net result is that several major lenders have announced a moratorium on their foreclosure process to allow them time to review their documentation and to determine that they can legitimately move forward.

This means that the natural flow of homes through the pipeline is interrupted. Instead of having a predictable timeline, buyers must sit in limbo with respect to the actual availability of a particular home for purchase.

Except for the national attention and anxiety caused by the media saturation of this issue, the real economic effect will likely be very localized and concentrated. In communities with a large number of foreclosures where the mortgages on those homes are owned by lenders who are temporarily halting the process, it means those homes can't go on the market. So in turn, the decline in the amount of inventory being offered for sale could result in an increase on home prices in that area, until the foreclosure freeze is thawed out.

However as a national economic issue, the overall impact will probably not have a measureable or lasting effect on the housing market. That assumes, of course, that lenders move expeditiously to determine their ownership and identify steps necessary to deal with the process and documentation problem – such as, resuming the foreclosure process or indentifying loan modifications and workouts.

I will continue to monitor this situation very closely, and would encourage you to call or email me so we can discuss what this might mean to you.

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Eat well while conserving your energy

For people living with COPD, or chronic obstructive pulmonary disease, getting proper nutrition is crucial. But, it isn't always easy to do. COPD can make daily activities tiring — that includes planning and preparing meals. Even eating can make people more short of breath. Why is it so important? COPD makes the lungs and heart work harder. A nourishing diet can help these vital organs keep up with their workload. It can improve a person's breathing and stamina. It's also vital to weight control — and can help prevent infection and illness, too. On the other hand, being undernourished can make the condition worse. The muscles used for breathing can get weaker. 3 easy-does-it tips There's no special COPD diet. What's important is eating a variety of healthful foods. To do this — without using up too much of your energy — you may find it helps to: 1. Consider prep time. Make a list of a variety of nutritious foods and dishes that are easy to prepare. Build your daily meals around these items. 2. Take it slow. Rest before and after eating. And, take your time. Don't rush a meal. 3. Break it up. Try to eat six small meals every day. Large meals can fill up your stomach, pressing against your diaphragm and making it harder to breathe. Help to eat well and stay well Whether or not you're having difficulty preparing or eating nutritious meals, talk with your doctor. He or she may be able to refer you to a registered dietitian who works with people who have COPD.* Depending on your condition, you may need more intensive nutritional help.

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11 Year End Tax Savings Tips

This time of year, now through the first quarter of next year, you will see articles offering year-end tax planning tips. Tax planning tips can increase income in future years, so be careful. Many tax tips often involve accelerating deductions, deferring income, or last-minute charitable deductions (the first three following tips).

For example you may be compelled to make a large charitable contribution this year by December 31st. However if you could be in a higher tax bracket next year because your income is going up because of a substantial raise or bonus, you would have been better off to make the contribution next year. Some may say this is heartless, but I say just the reverse. If you pay less in taxes because of good planning, your will be better off financially and able to give more in the future.

If you have volatile income, before you use the tax savings tips here and in other articles, you may want to run projections for this year and next. A good accountant will run these calculations for you, but understand that tax law changes from year to year and from one administration to the next can often make predicting tricky.

1. Defer income

If you are able to defer income, such as commissions and bonuses until next year, you might be able to pay lower income taxes this year. However, you must consider what your income and taxes will be next year to be sure that you are not actually increasing your taxes.

2. Accelerating deductions

Accelerating major deductions such as state income taxes, property taxes, and mortgage interest may help anyone, especially during a high-income year. If you don't think your personal income tax bracket will be higher next year, and you're not affected by the alternative minimum tax, you can make state and/or local tax payments before the end of this year so you can take a deduction this year.

3. Charitable Contributions

Consider making charitable deductions before the end of the year to receive a deduction. You must make the contribution by 12/31/2009.

Donate appreciated property such as real estate or stock instead of the proceeds of the sale. You may be able to receive a deduction for the value of the contribution without paying tax on the growth portion resulting from a sale, then a gift. If you intend to transfer appreciated property, begin early since it will take several weeks to make the change.

4. Alternative minimum tax traps

Many people face large AMT bills compared to previous years. Be warned if you have larger than usual medical expenses, non-federal income and real estate taxes, or miscellaneous itemized deductions; or if you have exercised large stock options, to name a few.

Year-end tax planning strategies can backfire under AMT. Be very careful accelerating some deductions and exercising stock options at year end. See a tax professional for information on your specific tax situation.

5. Be careful when investing new money in mutual funds at the end of the year

Call the mutual fund and find out when the distribution date is. You may want to purchase after the distribution date to avoid owing taxes on fund shares that you owned only for a short period of time and had little to no gain.

6. Contribute the maximum to retirement accounts

Contribute the maximum allowable to employer-sponsored defined contribution retirement plans, such as profit sharing, 401(k), 403(b) and 457(b) plans. This not only provides an excellent tax deduction, but it also helps you to plan for your future retirement.

You may want to contribute to an IRA; up to $2,000 is fully deductible if you did not participate in a company-sponsored retirement plan or if your income falls below certain levels.

If you are self-employed, you can contribute more to a pension plan than into an IRA. You have until December 31 to set up the plan.

7. Investment Losses

If your investment portfolio has stock that has depreciated in value and is worth less than when you originally purchased it, you may want to consider selling it. You may be able to use that loss to offset capital gains and ordinary income.

Be careful though; investment decisions should not just be for tax purposes. Make sure that you do your research before selling any investment. Some people react too quickly when investments lose value; others sometimes hold on too long. If you decide to sell and invest in something new, make sure that you examine your portfolio to ensure that you have the right mix of investments to match your investment profile, risk propensity and asset allocation model.

8. Save for College

Consider contributing to your child's college savings into a 529 plan. The contributions are not deductible on your Federal return, but parents may be able to write off contributions up to a certain dollar amount on their state income tax return. Log on to SavingforCollege.com to find out information about your state.

9. Home Improvements

Here is a great deal. How about saving energy and the environment, lower utility bills, increase the value of your home and save on taxes - all at once. Projects for the home's shell (insulation, windows, sealing) and heating and cooling may qualify for a one time tax credit of $500. However you are running out of time, since they must be in place by the end of 2007. So while crawling around your attic looking for ornaments, think of adding insulation. If you made home improvements over the last couple of years, be sure to dig up your records; you may already be eligible.

Before moving forward on one of these projects, make sure that you get full information about these and other energy efficient tax incentives from The Tax Incentives Assistance Project at http://www.energytaxincentives.org. There you will find more information about Home Shell and Heating & Cooling as well as Hybrid Passenger Vehicles and Solar Energy Systems.

10. If self-employed, buy equipment and supplies

Have you been putting off buying needed business equipment and supplies, or do you know that you will soon need them? Now may be the time to invest in your business and save taxes as well. Business tax can be complex; therefore it may be wise to first call your accountant prior to large purchases.

11. Give gifts to children

When you give to friends and family, it is usually not taxable to the recipient or the giver. Many people do not realize though if that gift exceeds $12,000 per person it is taxable to the giver, and at a high rate. Therefore, if you intend to give anyone more than that amount, you could give some this year and some next. The second tip is that you and your spouse can both give $12,000 per person, doubling the amount not subject to tax. Be sure to consult your legal and tax advisor prior to making all gifts.

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58 Percent of Americans Expect Housing Market to Recover after 2012, According to Trulia and RealtyTrac

Trulia.com, a top site for home buyers, sellers and renters, and RealtyTrac, a leading online marketplace for foreclosure properties released the latest results of an ongoing survey tracking home buyers’ attitudes toward foreclosed homes. Results of the survey conducted online from November 2-4, 2010 by Harris Interactive on behalf on Trulia and RealtyTrac showed that Americans continue to grapple with uncertainty about the housing market, with 58% of U.S. adults expecting recovery to take at least another two years.

As a result of the recent robo-signing debacle, half of U.S. adults expressed that they now have less faith in mortgage lenders, banks and the government. Another 35% believe the robo-signing issue will delay the housing market’s recovery, while only 6% of U.S. adults think the robo-signing issue will have no effect on the recovery of the housing market.

“More and more, American homeowners, -sellers and -buyers are tamping down their expectations for a swift recovery in the housing market and bracing themselves for a long, slow climb back to a healthy real estate market. Fifty-eight percent believe recovery will happen after 2012 and more than one in five U.S. adults believe recovery won’t happen until 2015 or later,” said Pete Flint, co-founder and CEO, Trulia. “Government incentives have come and gone and historic lows in interest rates have done little to spur recovery. Then, as if prospective buyers and sellers needed more to be concerned about, the robo-signing issue caused a ‘what’s next?’ fear to surface in the minds of consumers who, frankly, have lost faith in banks and their government to make good decisions.”

Under water and out of options
Nearly half (48%) of homeowners with a mortgage admitted that they would consider walking away if their mortgage was under water, an increase compared with May 2010, when only 41% said they would consider walking away if their mortgage was under water. Interestingly, men (57%) are more likely than women (40%) to consider strategic default as an option for dealing with negative equity.

If they became unable to pay the mortgage payments on their current primary residence, two-thirds of U.S. adults with mortgages said they would consider calling the lender and trying to modify the terms of the loan as their first option. The next most popular solution is to have a tenant move in to contribute to the mortgage, but only 10% of U.S. adults would do this.

Interest in buying a foreclosure
Nearly half (49%) of U.S. adults are at least somewhat likely to consider purchasing a foreclosed property, up from 45% in May 2010. Despite the rising interest in buying a foreclosed home, an increasing number of U.S. adults also recognize negative aspects to buying a foreclosure. Over the past six months, the number of U.S. adults who believe there are downsides to buying foreclosed properties has increased to 81%, from 78% in May 2010.

Expected discount on foreclosure purchase
Two-thirds (67%) of U.S. adults would expect to pay at least 30% less for a foreclosed home than a similar home that was not in foreclosure, and one-third of U.S. adults (35%) would expect to pay at least 50% less for a foreclosed home. Overall, 97% of U.S. adults would expect at least some discount on a foreclosed home.

“It seems like consumer expectations and market realities are beginning to align when it comes to foreclosure discounts,” said Rick Sharga, senior vice president, RealtyTrac. “During the third quarter, foreclosure homes sold for an average of 32% less than homes not in foreclosure. It’s also not surprising that we’ve seen an increase in negative sentiment toward foreclosure purchases, where the recent robo-signing controversy has added more confusion to an already complicated process.”

For more information, visit www.trulia.com and www.realtytrac.com.

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A 5 Point Plan: How to Get The Cash You Need Fast!

......by using your mortgage to your advantage in a cash flow or shortage situation......"

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Mortgage regulations have changed significantly over the last few years, making your options wider than ever.  Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.

Get the Right Information - Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you be informed about the factors involved.

Everyday people are in need of cash, and fast. May be it is or isn't time to consider your mortgage loan as an option.  By taking these few minutes to acquaint yourself with the "A 5 Point Plan: How to Get The Cash You Need Fast!", you will know what options to discuss with your mortgage lender and you will be better prepared to make the right decisions for your unique situation..

 

1. A Traditional Refinance

The initial option for most people to consider is a traditional refinance.  This option takes advantage of available interest rates that might be lower than your current mortgage.  The benefit of this option is that you can reduce your monthly payment while getting the best possible interest rate.

1. A Cash Out Refinance

A cash out refinance works like a traditional refinance, except that you’re able to remove some of your equity in the property.  One of the significant benefits of this option is your ability to pay off higher interest loans, make home improvements, or a major purchase, while at the same time qualifying your interest payments as a deduction on your federal tax return.  Always consult with your accountant or tax attorney to determine eligibility in your unique situation.

1. A Second Mortgage

This works very similarly to a Cash Out, except you get a second financing vehicle instead of refinancing an existing one.  A few reasons for a second mortgage are debt consolidation, home improvements, or a major purchase.  If you take cash out to buy a car you may be able to deduct the interest from your taxes, similarly to the last example.  Remember to always consult with your accountant or tax attorney to determine eligibility in your unique situation.

1. Beware of the Quality of Service Provided

You want your refinance to be the least amount of hassle in the shortest period of time.  Ask your mortgage broker details of their service plan and performance guarantee.

1. Not All Mortgage Brokers are Created Equally

Be sure to ask your mortgage broker about available loan products, terms and rates. A subtle difference can save or cost you thousands.

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