MortgagesUndressed

The trend is taking out equity through refinancing. Of course that is good for mortgage companies like ours, however, for a moment I will preach.

My wife says be careful here Larry, as we have done what I will now preach against. The situation you may be in may be devastating to you. You think, “if you can only pull out some equity you will be fine.”

You may be worse off is the case I ask you to consider. Especially if you refi into a loan with a prepayment penalty.

As I write this article my mind goes back to the two years I bought foreclosures. I was amazed at the situation people were in. I purchased one home on acerage for $200.00 as the owners were pulling out of the driveway never to return. We sold it 4 months later for a $30,000 profit. I can tell you of many other similar stories.

What amazed me was how unnecessary this was. The husband in the story above was a sophisticated real estate person. He had a large business at one time. Later I found him back selling real estate. He was no dummy.

However, he was crushed. The common denominator. The pressue of the bill collectors, the problems, the overwhelming situation caused him to walk away.

This didn’t happen in a day or a week. It happened with one bad decision after another. It happened because of pride. It happened because of lack of being real.

What I would rather see, than having more business of this kind, is to have people move down in value rather than lose their homes. Take the equity into something you can afford. Of course the reasons you snub this idea are legit:Kids changing schools, the hassle, and the dream of recovering.

You gamble your home coupled with the loss of your equity if not careful. I just remembered an attorney that did this, a client from long ago. Except he did it 3 times and out. He got himself into a business problem. He refused to give up. He refinaced 3 times. He ruined his credit. The fees to refiance plus the prepayment penalties ate his lunch and his equity.

Sometimes it works out fine. It just troubles me I see so much of it already. Larry Cragun, your friend.

Reason 1: This is simple - when your balance goes over 20% of your approved credit lines your credit score will start to fall. The closer you get to tapping out your credit limits the greater the negative impact.

Reason 2: Money. Many people do not REALLY understand the impact of compound interest and the effect of an interest rate. The banks understand and prey on it.

What is the out of pocket cost to you from going to 9% to 18% on your balances? I have had many people say double. It is much more than double.The answer is not even close to correct. Way off. Wrongo. Horribly wrongo.

Paying twice the interest in fact cuts the time the bank doubles their money. WHAT DID I JUST SAY? (it in fact cuts the time the bank doubles their money)
Let me explain: If you secured a $10,000 second mortgage to pay off a $10,000 credit card you might pay around 9% interest. It isn’t hard to find people paying 18% interest on their credit cards.

So follow the money. If you were the bank and loaned money at 18% compound interest you would double your money in four years. If you loaned it at 9% it takes twice as long, 8 years to double your money.

Now, suppose you could do that for 16 years. (Some people always carry balances on their cards.) Using $10,000 doubles as follows in this example:
4 years = $20,000

8 years = $40,000

12 years = $80,000

16 years = $160,000

At 9% the 16 year profit is $40,000 profit - big difference wouldn’t you say?
Now you see why they love credit card balances and are impossible to deal with when you ask them to lower your rate.

It is their hope they can enslave you to balances on your cards.

You were born to be free, so set yourself free. Pay off those credit cards, even if it means a second mortgage. Larry Cragun

Many are found by bloggers. Here are two for today.

From Real Estate Snippets Click Here

and CondoDomain Click here

Barbara Walters of Televisons 20/20 did a story on gender roles in Kabul, Afghanistan several years before the Afghan conflict. She noted that women customarily walked 5 paces behind their husbands.

She recently returned to Kabul and observed that women still walk behind their husbands. From Ms. Walters vantage point, despite the overthrow of the oppressive Taliban regime, the women now seem to walk even further back behind their husbands and are happy to maintain the old custom.

Ms. Walters approached one of the Afghani women and asked, “Why do you now seem happy with the old custom that you once tried so desperately to change?”

The woman looked Ms. Walters straight in the eyes, and without hesitation, said, “Land Mines.”

BEHIND EVERY MAN IS A SMART WOMAN.

“So Sad They Were Bad”

Exotic mortgages bring higher stakes

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Kirstin Downey | The Washington Post
January 16, 2007

WASHINGTON — At 64, and looking toward his retirement next year, Willie Lee Howard agreed to refinance his duplex in Washington, thinking that a fixed-rate loan would help stabilize his finances.
What Howard got instead was a mortgage he did not understand. Baffled by the loan documents he was mailed after the closing, he consulted an AARP lawyer and learned that he now had an interest-only loan, a new and controversial kind of mortgage. Howard was told that under its terms, his mortgage balance will rise instead of fall and that he will need to refinance in 10 years, when he may be too old to work.
“This is a bunch of junk they done to me,” said Howard, a construction worker.

Larry’s Commentary: At age 64 or 24 a loan can be a bad thing or a good thing. The most condemned product, even by me, the Option Arm or Negative (NEG AM) ARM can be a Godsend. More than once I have sold this product to single mothers, recently divorced, with teenagers that need some stability. Moving means new schools, new friends, and that which is wrapped around moving. The neg am product was the only way they could afford to stay. I would sell it again in these circumstances.

However, some crooks, and I use this word a lot lately, prey on people. A new young hotshot joined a firm I was working for and was assigned the cubicle next to mine. It didn’t take long to figure out he was preying on old people. He would sell the negative AM product as a fixed. He was quickly gone as I exposed his tactics to the owner. The last I heard the feds had him in their clutches.

If you gain anything from this site you will learn to be dubious of miracles. There are products that specialize of course. But the too good to be true quote applies so very much to mortgages.

I will tell you what to do. If it seems too good to be true, email me and ask me. I will undress the facts clearly and bluntly. You can count on that. Larry Cragun

We just deleated our 10,000th spam. Only 2 have made it to the sites.

It was another radio Advertisement.

This advertising lie by the smooth talking voice said, “I can get you a 30 fear fixed mortgage with no closing costs for a low 5 3/8%. No way. Not without trickery. Don’t get sucked into a bait and switch.

First we held a rally. Finding these bugs was going to be a challenge. A job only for a bugger. We hired the President of the United States Bug Corp. He got them going.

We sent the bug corps out into the weather: It was dangerous duty folks.

We went to frigid California and found an Ice Crawler

In Seattle the wind was blowing so hard the Cloud Forest Beetle’s feelers were high in the air instead of close to the gound.

This bug corp was sorta amateur - here is what they brought back as a hot bug. Hey they thought it deserved extra credit: as a hot wheel and a beetle.

Don’t bug me on Saturday. Lar

Our company was fully in place on January 4th, ready for our loan officers to start writing loans. Eight days later we see the evidence of an industry still endowed with crooks.

I use a harsh word crook here, you tell me if it is deserved.

It involves a purchase, of course a milestone event for a family. One week before the contract to purchase has arrived the closing documents are ready to sign. In our state we mostly use escrow companies. We were not the lender in this case but were contacted by the buyers/borrowers in a panic.

The buyer/borrower found out at escrow they were being sold a loan with a pre-payment penalty. This had never been discussed with their loan officer and had never been disclosed. They do not have low credit scores which sometimes causes the type of loan where there is a pre-payment penalty. There is no reason for this penalty, except when one is sold, a rebate can be earned by the loan officer.

Rebates are not always obvious on the closing papers.

The callers were upset and wanted our office to take over the loan. This is a bad idea with a week to go for closing, very risky that it cannot be done in time. They were told there was a back up offer on their house and they had to take this loan or lose the house. Were that true, which it turned out not to be, the house could be lost to the backup offer. We told them to fix the loan and stay with the current loan officer.

Our office suggested they ask the closer if there was in fact a rebate to the mortgage company. There was.

In inquiring about the actual lender etc. it turned out to be one we are approved with, even have had a very close business relationship with. We were able to confirm to the borrower the solution was simple. Remove the pre-payment clause and give up the rebate to the lender.

Here is the secret to how these crooks work. With one week to go, they believe you will cave in. So the crooked loan officer called the borrowers bluff, refusing to remove the rebate and the prepayment penalty. He was banking on emotion and the threat of losing the house to pad his pocket.

The borrower here refused to sign, refused to do business with this loan officer. They walked out, even willing to put their earnest money at risk.

The story has a good ending. The sellers have moved out. It is better for them to take this borrower, give them a two week extension, than to find a new buyer. Extension granted - new loan submitted by us the same day.

So the greedy crooked loan officer lost the bet.

I hope the lessons in this story are obvious. Even to the loan officer. I expect a complaint to be filed against him. Washington State has no tolerance for crap like this. It wouldn’t surprise me, as loan officer licensing is just being started, that this bird loses his license before he receives it in the mail.

Sorry, it even looks nasty. My son Jason, is an owner of a Pest Control company.

The Giant Vinegaroon is a species of whipscorpion that has a very unusual defense! It gets its’ name from the vinegar (actual acidic acid) that it emits to scare away predators! As if that isn’t strange enough, Giant Vinegaroons do not have stingers, they have long whip-like tails that do not sting at all. Sometimes people mistake them for insects because it looks like they have 6 legs and a pair of antennae, but actually, the “antennae” located in the front are just long, modified legs. All whipscorpions do not have venom, so Giant Vinegaroons are harmless when it comes to toxicity. They can be held, although handling any type of whipscorpion is not recommended. This creepy-looking arachnid is seldom seen in the wild due to its nocturnal nature. A note for any arachnid collectors out there, if you don’t have a Giant Vinegaroon, your collection isn’t complete. The Giant Vinegaroon is a truly fascinating arachnid that can be kept by beginners, intermediate keepers, or experienced hobbyists!