Strong Warning From CFPB On Misleading Mortgage Advertisments

CFPB- Consumer Financial Protection Bureau

Just last week a warning was sent out regarding misleading mortgage advertisements.  You can read full release here.. What this is saying is they've found some recent advertisements are misleading to consumers and not disclosing all the information about true costs and terms of the loan agreements. 

I actually think this is a good thing.  All the ads out there that show 1% interest rate or super low fees or whatever the case may be is very misleading and I can't tell you how many times customers tell me about these deals and I let them know that those are just bait and switch ads but you won't find out until deep into the process or it's too late and by that time you're pissed off.

Sometimes it works and sometimes it doesn't and they have to go and find out for themselves the truth.  The problem is...now they don't trust anyone and that makes it hard to do business in the future...

...and we wonder why consumer confidence is low with lenders and loan officers in general.  

Now all companies don't do this type of activity but you do see some "creative" advertising to get people to pick up the phone and call.  

I take a different approach because what I have found is people just want you to be real with them.  

They will do business with and buy from people they like and trust and if I can develop a relationship with them; they will not only do business with me but will send referrals. 

Most companies are just in it for the quick buck and that should not be the approach.  

You'll make money and get some business in the short run, but this isn't how champions and professionals do business and it surely will kill you in the long run.  

Anyway...that's my two cents on it. 

I aim to build value and confidence so that customer has a great experience.  And truthfully, if you just explain things to people in plain English; all the terms, go over the benefits of how the loan will solve their problems and have a solution based presentation, people will come chasing you to do business with you.  

I don't really have to prospect anymore I just get referrals from clients, agents, and other sources because they know I'm for real; I don't sugar coat, I know what I'm doing, and I give realistic expectations.  

It's not rocket science here folks...

Just a little warning...for those of you who buy leads from these crap companies, I would stop because they have ads on the web for all kinds of ridiculous things that are misleading to get people to click and give up their information.  

So as the CFPB comes cracking down if you're buying from them ---guild by association.

Plus their sold to multiple people and companies.  The best way is to build your business organic which takes time.  

Check out the release above on the CFPB site and look out for more announcements like this as the CFPB gets up and running on all cylinders inspecting the practices of the all the lenders and brokers out there.  

Get ready we're headed for more changes in the future.  

Who will win in this environment? The Champions will... all the weanies will be pushed out and quite frankly...can't wait to see ya go...

Mortgage Rates Updated

I submitted a post in 2009 regarding mortgage rates and I'm updating it again now.  You'll hear all kinds of different perspectives from financial advisors; mortgage gurus; industry groups, etc, but in my opinion rates may have some ebbs and flows as major institutions involved in the MBS market modify their portfolios, but but we've gone past the point of no return.

The Fed is stuck in QE infinite.  In other words.... rates are on lockdown and they can't let up on the gas now baby.  How can they?

Can you see what would happen if they do let rates rise? Ummm - market chaos.  Some are going to read this and say I'm crazy; I'm a conspiracy theorist; I say bull and open your eyes to what is going on.

$16 Trillion in debt; foreign governments defaulting on sovereign debt obligations; war all over; they can't stop the pumping the cash now baby it's all in,  all or nothing.  Trillions have been spent and trillions more will continue to be spent. 

The housing market is a huge part of our economy and they keep stimulating it through controlling the interest rates and driving demand. Stimulus galore!

You want a stimulus package, in my opinion, I would use renovation financing as this is a viable way to keep goods and services flowing through the economy.  See my previous post - The New Real Estate Trend. I'm going to do a series of posts on this subject but in short; you can finance the cost of the purchase of the home and the cost of upgrades and/or needed or desired improvements to the property all in one loan with one payment.

You'll hire a contractor to do the work after closing and you can include (depending on the program) anything from light to moderate repairs to major renovations such as additions and foundational work; and even luxury improvements like swimming pools. 

Through this loan you're purchasing materials, improving the property you're buying (not to mention turning the home into one you love and not just one you like) and putting people to work, ie contractor and their subs.  This is a stimulus package with a private sector approach that really isn't rate sensitive. 

Think about it; most improvement loans you get are tied to high interest credit cards or you already own the home and you secure a second mortgage fixed rate loan or what is called a HELOC (home equity line of credit). The difference is these options look at current equity while the renovation loan uses post-renovation value (future equity). More on these differences in my series of posts to come.

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Does that mean you should buy now or wait? I can't answer that, only you can assess your financial situation and make that decision.  They call owning a home the American Dream but the American Dream is what your make it.  Not everyone is ready, equipped, or can afford to buy right now and that's okay.  When the time is right for you you'll know it.

For right now I think the low rate environment isn't going away.  Aside for some market adjustments I don't think interest rates are going anywhere - I don't see how they can.  The Fed knows this and you can tell when every time ole Benny Bernanke gets in front of Congress and testifies, this guy will not say the pump will stop.  He always makes some comment regarding more tools at their disposal and are ready to provide more stimulus if the need is warranted. 

Yeah buddy! That means it isn't stopping any time soon. 

Until next time, God Bless

The New Real Estate Trend

What is the next real estate trend? You can ask many and you'll get many answers.  As a professional in the business I can tell you that I see renovation as the next trend for the coming years.  Why?

• Aged inventory - many houses are old, have not been updated which includes kitchens, bathrooms, plumbing, HVAC, and could really use a face lift.
• Foreclosures galore! The market is saturated with foreclosed REO properties that need repairs.
• Older homes with outdated floor plans or are too small compared to other homes in the area (by the way part of the renovation process can include adding square footage to the property through an addition to home)
• Can add a personal touch to make it yours - turn a home you just like into one you love
• Many homes with health or safety violations or hazards which can be remedied through renovation
• Many many more reasons.

So what can be done about it? Well you can call it a secret (not really) but a program that has been around since the 80's - the 203k (no this isn't like your 401k) - allows the for the purchase of the property plus the cost for repairs to be rolled into one loan, one payment, and your maximum mortgage is based on the post-renovation value.  This is a little known loan through FHA and 203k is simply just the section of the act (the National Housing Act) for the program just like the 203B is the "regular" or "normal" FHA loan we've all grown to know very well.

Especially since the housing debacle and Conventional financing has tightened up; more people are getting FHA insured loans.

So you can literally turn this

and even this

into this

and even this

Now you're probably thinking..."yea right, that looks nothing like the other houses." But yes you can do this (turn ugly into stunning). 

You can do anything from light to moderate repairs (kitchen and bathroom updates) to more major renovations like foundation work, and even tearing the house down and rebuilding on the same foundation. 

With the 203k you just can't do anything consdered "luxury" repairs in nature like a gazebo, hot tub, or install a swimming pool. The key to this is after-improved value - which is the home will be comparable in it's renovated state to other properties in the area.

This doesn't mean build a 6 bedroom home in a 3-4 bedroom market, however if you wanted to change the design and floor plan of the property and make a major renovation you can. 

There are so many things you can do with this type of financing.  By the way FHA isn't the only one that has this program available.  Very close versions of this are available in the Conventional world through Fannie Mae and Freddie Mac but most lenders do not offer this type of financing. 

I think you'll see that change as this piece of the market explodes over the next few years.

One word of advice that I caution people looking to obtain this financing:

MAKE SURE you are working with a specialist.  The reason is they work with these loans daily and a specialist only originates these loans.  You'll have many originators that "dabble" with these loans and only do a few a year vs a specialist who originates these on a daily basis so they are knowledgeable of the intricacies of the program and have a system in place to take you from application to closing with very few, if any, hiccups.

Don't be a guinea pig and search out a specialist.  This should be your first question to the loan officer.  If they are not a specialist ask if their company has one and if not - move on and don't waste anymore time. 

Not all lenders have the same guidelines; some will have what is called credit overlays, meaning they have tighter guidelines than the published FHA guidelines on the program.

I will do a series of blog posts on this, since it will, and already is becoming, a hot topic.  There is much to talk about, so you can be prepared and armed with information when approaching your lender for a renovation loan request.

God Bless

P.S. if you like this blog check out my other blog http://www.livingwithnolimits.net