Mortgage Maverick

According to BusinessWeek: 

Countrywide Financial (CFC) says it need to rely on a $11.5 billion credit facility to fund its operations. Moody's and Fitch Ratings cut their credit ratings for Countrywide. The stock fell another 13% and hit a new 52-week low.

Remember all the noise about the "Housing Bubble"?  There was quite a bit of hype over what turned out to mostly be a return from 25% appreciation to 2-5% appreciation.  Actually, such Bay Area counties as Santa Clara, Marin, and San Mateo have seen strong appreciation in the last few months.  But now mortgage lending guidelines are getting tighter and lenders are filing bankruptcy and shutting down operations.  What is really going on?

What is happening is a liquidity crisis.  The problem is the source of all the money mortgage brokers like myself have helped lenders to lend to homeowners, setting all-time national home-ownership and mortgage origination dollar volume records.  You have to ask yourself where all the money came from to fund this historic amount of mortgage debt.  The answer is investors.  Investors who invested with about as much due diligence as occured during the heady early days of the dot-com boom.  Now they are realizing that the way Wall Street firms graded their mortgage-backed securities was sketchy at best.  It has been the Wild-Wild West, a Brave New World of mortgage securitization.  We are on the bleeding edge, and the market is trying to figure out what has never been done before. 

I asked my 8 year old son if he would want to buy a video game sight unseen, without knowing the game title, seeing the package, or having a chance to play the game.  He tilted his head, looked at me like I was nuts, and declared "no" with an incredulous laugh.  Then I asked him if video games got to be so cool, might he do that?  He responded, "you mean like 3D better than PlayStation 3 and it doesn't crash?"  I replied, "Better, like if someone could invent 4 dimensional games."  My son's eyes got real big and he said, "Wow, that would be coooooool!"

The problem is that my son would not know how to evaluate those cool 4D games, because he has never experienced it.  Just like no one could properly evalute the iPod or the iPhone before it was first released to the public, because no one has experienced the technology.  Likewise, Wall Street and the mortgage industry had not experienced the scale and depth of mortgage securitization as seen in the last few heady years.  The "beta" period occured during phenomenal home appreciation. 

But now that the real estate appreciation is temporarily gone, the extra equity that everybody counted on, from mortgage securites investors, to ratings firms, to Wall Street investment firms, to mortgage lenders, to mortgage orginators, to homeowners, the other elements of risk finally have a chance to rise to the surface and be seen.  Those elements of risk include income, assets, and credit.  And until now, there was no market motivation to closely analyze those elements.  Now there is.  So the market is scrambling to do just that.  It is a messy process, and it may take months or even years.  But just like the dot-com industry recovered, the mortgage-backed securities industry will recover.  And given the growth and popularity of private equity over SEC-regulated securities in the investment world, I suspect the enormous amount of homeless capital around the world will be rushing in to fund new innovative mortgage products.

More later, but check out my page on the Mortgage Meltdown and Liquidity Crisis here.

Just because you close escrow on a mortgage, does not mean your mortgage was planned. 

• If you did not receive an Identity Theft Analysis, your mortgage was not planned.
• If you never got a copy of your credit report, your mortgage was not planned. 
• Were there errors on your credit report?  If so, were effective letters written on your behalf to sign and mail to the credit bureaus?  For free?  If not, your mortgage was not planned.
• Did your mortgage loan agent weigh the interest rate and tax deductibility of your non-mortgage loans and calculate the Blended Debt Rate?  No?  Your mortgage was not planned.
• Did you recieve a College Funding or Retirement Funding Analysis?  If not, your mortgage was not planned.

But it is not too late.  If you were referred to me by one of my clients or professional partners, I can help.  Even if you closed escrow yesterday, I am happy to adopt you as a new mortgage planning client.  You deserve all seven steps of my Mortgage Checkup.  Contact me for details.

Amid the yellow journalistic fever pitch of late, Lou Barnes sets the record straight on stated income loans and those who demonstrate their ignorance by saying "Liar Loans". 

Scroll to the end of the article on housing for a 101 course on stated income loans and those who malign them.  Money quote: 

"Liar's Loan" is a gratuitous insult to both borrower and banker, and exposes an ignorant author piling on in a tough situation.

Here's an initial list of yellow mortgage journalists (some of whom really should know better) who employ the LL word:

• Ken Harney
• Jeanette Pavini of CBS 5
• NPR
• Chris Isidore of CNN Money

These people are writing articles to capture eyeballs to sell ads.  Unless they profit from your financial success, take their opinions with pound of salt. 

My clients who state their income on mortgage loans are not "liars".  They typically have stellar credit with diverse assets in real estate, equities and business.  Perhaps they have a higher net worth than the jealous journalists who maliciously misinform the general public. 

As always, I am available to answer your questions about what you may hear in the news about the mortgage industry, to separate the truth from the tabloid.  More importantly, I can answer your questions about your individual situation, helping you to make mortgage plans for a prosperous future. 

Friends don't let friends sacrifice their financial future based on half-baked headlines.  Don't keep Mark Nehls and HomeWealthy.com a secret from those for whom you care!

Unless you've been living under a rock, you have no doubt heard all over the news, especially the financial press, stories about difficulties in the mortgage industry.  Fraud, foreclosures, and sub-prime.  While there are some legitimate issues, there has also been quite a bit of sensationalism, confusion, and misleading information delivered by our friends in the media.  While I don't have the time at the moment to write the book this subject richly deserves, I have posted a brief article here. 

If you have any questions about what you've heard and how it may affect you, there is no better time than now to contact me.  As your Senior Mortgage Planner, I am here to answer your questions.  I've enjoyed helping my referred clients for over a decade and look forward to doing so for quite some time.  I am here to stay.  I believe the current events will weed out some of the worst in the mortgage industry.  I couldn't be happier.

In the end I think we will have better products and a more mature secondary market to give us the money we need to lend.  Let us not forget that our population continues to grow and homeownership hit an all-time high last year . . . nearly 7 out of 10 Americans own their home.  Rates are still at historic lows.  Unemployment dropped to 4.5%.  Inflation isn't as low as the Federal Reserve would like, but 2.3% PCE is not far from the 2.0% they like.  Just as the stock market was overdue for an adjustment a few weeks back, the mortgage market is now experiencing its own needed recalibration.  With the exception of those who engage in criminal activity, those who don't pay their bills, and those who consistently make foolish financial decisions of their own free will, life for the rest of us is not that bad. 

It is tax season, a good time to identify the many tax benefits you may be able to claim as a homeowner. Now, I am a mortgage planner, not a tax professional, so you certainly want to check with yours regarding your own tax situation. That said, here are a few articles you may want to read and consider on the subject:

• Homeowner Deductions
• CNN/Money:  10 Don't Miss Tax Breaks
• IRS Pub. 530: Tax Information for First-Time Homeowners (good for seasoned homeowners, too!)
• 10 Real Estate Tax Breaks You Should Know
• Forbes: Ten Reasons Landlords Pay Too Much Tax
• IRS Pub. 527: Residential Rental Property