You know, I’m pretty skeptical when it comes to most broadcasters.  In my blog yesterday, I noted that  a lot of folks are starting to turn off their TVs and radios because of the way the constant crisis talk makes them feel.

One of the people I do enjoy listening to from time to time is Dave Ramsey (www.daveramsey.com).  He’s smart, he’s funny and I generally find myself nodding in agreement with his thoughts and advice.

A few day ago, a friend of mine forwarded me an e-newsletter that she’d received from the Ramsey organization.  After reading it, I wanted to shout for joy at the common sense that it contained.  Here’s some of what he had to say:

Over the past month, we’ve witnessed the largest bankruptcy in history, the stock market dropping like a rock, and the talking heads on TV freaking out that the world is coming to an end.  I’m here to tell you the truth-we’re going to make it.  We’re going to be fine.  Take a chill pill.

This month I’ve compiled some of the most-asked questions I’ve gotten recently from you:

Are we okay, Dave?

Definitely.  Remember Enron and WorldCom in the recent years?  We survived that.  But much worse than all this was the financial crisis of the ’80s-S&L collapse and 1,000 bank failures in 2 years.  We’re nowhere near this type of thing; that was probably 50 to 100 times worse than all of this.

What does all of this come back to?

Greedy banks financing homes to broke people.  It all seemed to work okay in their minds when the economy was booming, but when the economy slowed a little bit broke people quit paying on their subprime mortgages.  DUH.  No wonder they went out of business.  Stupid decisions.

Is there anything we can do to fix this bailout mess?

YES!  Here’s a quick summary: Companies that had billions in subprime loans were feeling the effects of their stupid decisions to make those loans in the first place, and practically gave them away for pennies on the dollar.  But since no one wants these loans, and they’ve had to mark them down to market value, it has frozen the market.  If we temporarily change the rule that forces companies to do that, that will free the market up.

Will the collapse of businesses and banks affect me?

No, not unless you work there.  Thousands of stock brokers on Wall Street have lost their jobs in the past few weeks, but that happens in other industries across the country in good and bad times.  This time it just happened in NYC where all the national news media is so they made a big deal of it.

Ramsey is promoting an interesting idea which he calls “The Common Sense Fix”, which I would encourage you to check out if for no other reason than to see the other kinds of solutions that are being proposed out there.  (And no, it does not involve giving every American over the age of 18 his or her “cut” of the $700 billion.)

But the main reason that I bring up Ramsey’s ideas and his newsletter is for one reason: his encouragement to stay calm and stay positive.  The stories in the media may not-and probably do not-accurately reflect the economic conditions of your household.

I know that there have been some fairly well-known folks, including those with a lot more money than I have, who have been on the crisis bandwagon.  But here’s what I find interesting: they’re still investing in the stock market.  And these folks aren’t stupid-they know that you buy low and sell high.

It’s the same principal in the mortgage market.  If you’ve got good credit and can afford a home, get out there and find one.  Why wait until home prices head back up?  Take advantage of this market while you can, because it’s not going to last forever.  It never does.  Buy something you can legitimately afford and make your payments, and you won’t get foreclosed on.  It’s basically that simple.

I’m not being flip about the hardships that some people are feeling, and I’m not saying that you will never feel the downside of a lost job or high medical bills or something else.  I’m just saying that most people are not in foreclosure and will not be in foreclosure.  And I’m saying that real estate is still one of the best long-term investments you’ll ever find, provided you choose it wisely, finance it wisely and pay it off wisely.

On that, I believe, Mr. Ramsey and I are two peas in the proverbial financial pod.

This blog is intended for information/entertainment purposes only and is not meant to provide any financial or legal advice.

With all due respect, I have to say that the media sometimes gets on my nerves.  Or maybe it’s the people who take everything that the media has to say as the gospel truth that really gets my dander up.  And in the last year, it’s been worse than ever-and the effect is profound.

Lately, I have spoken with a lot of people who have started to turn off the news, the talk radio commentators and anything else that smacks of a media outlet.  And the reasons have been pretty much the same: With every broadcast, they get angrier, and more worried and even physically ill because, as they put it, “everythig is so bad right now.”

And what’s sad about this is that the people that I’m talking to don’t live in Phoenix, where home prices have tanked, or in Michigan where unemployment is up and there’s a glut of existing homes.  These are folks in areas where there are plenty of jobs, home prices have remained solid, and things are looking good.  But they’re so inundated with the stories of foreclosure, angry politics and name-calling that they think everything is headed into the dumpster.

I also think that it’s made a lot of folks in this country doubt anything that either the media or the political leaders are saying.  In the last year, we’ve continually heard the phrase “from Wall Street to Main Street” and how the economy will absolutely tank if we don’t agree to do one thing or another.  There have been so many cries of wolf that Americans can’t discern-or are no longer willing to learn-what constitutes a real crisis and what does not.

In my opinion, the $700 billion bailout bill was not passed, in large part, because politicians were afraid of losing their jobs.  I know a lot of folks who called their representatives in Congress to express their displeasure with yet another D.C. weekend agreement and Monday morning vote.  They had the same questions that a lot of us do-tell us the details, look for other options, and for heaven’s sake, stop the partisan fights and do something that’s right for the people for a change.  The pressure, and perhaps those same partisan politics, resulted in the bailout being voted down initially.

The media then went crazy, and we were kept informed with every downturn tick of the market.  There wasn’t a media outlet around that didn’t have the 700+ point drop as their lead story.  They were a little quieter today, when the market rebounded up over 400 points.

Like I said before, some sort of program is needed to reassure market investors and stem the bleeding.  Now, Congress and the White House have some breathing room that will hopefully result in some form of helpful legislation that will give some relief and some confidence without selling taxpayers down the river.

Now, for all of you like my friends, who are caught up in the media whirlpool and walk around in the doldrums as a result, take heart…and a deep breath.  I cannot stress enough the fact that while there are some downturns in the mortgage and real estate markets, there are still some great things happening out there.  In fact, this is a great time-as I’ve mentioned on more than one occasion-for some people to buy a house.  One of my good friends, with whom I work every day, just bought her first home last week.  Trust me when I say that there is no way I would have allowed, much less encouraged, that friend to purchase real estate if I didn’t believe that things are going to be just fine.

And it’s okay if you don’t want to watch the news or listen to talk radio.  Just check out my blog, and I’ll be happy to tell you the truth about what’s happening in our marketplace.

Questions?  Comments?  Post your thoughts.

This blog is intended for informational/entertainment purposes only and is not meant to provide any financial or legal advice.

All right, all right, all right.  So it’s been a while since I’ve posted anything on our blog.  Needless to say, it’s been a wild rde in the mortgage industry of late.  I promise to do better.

So I’m guessing you’re wondering what my reaction is to the rejection by the House of the $700 billion bailout bill.  Let me put it this way: Wall Street and I have very little in common right now.  Because unlike many on Wall Street, I prefer, to paraphrase Kipling, to keep my head when everyone else appears to be losing theirs.

Like Dr. Mark Dotzour at Texas A&M has written, the idea of a bailout such as the one that was proposed is less than palatable.  As he notes, most American homeowners did buy homes within their means and continue to make the payments on those loans-and those homeowners should not have to pay for other people’s poor choices.

At the same time, however, some form of a bailout is probably necessary.  As Dr. Dotzour indicates, some confidence must be restored in the mortgage bond market in order to keep it moving forward.  As someone who believes in letting the market correct itself-even if that means some bumps in the road-it pains me to say it.

I guess it would be easier, if I believed that a bailout-which I believe will happen eventully in one form or another-would solve the problem.  But it won’t.

People need to realize that, in a free market economy, there are some inevitable things that must occur as part of this market adjustment.  As with anything in life, actions have consequences-both good and bad.  Some areas of the country lived pretty high, as home values ballooned, new home construction exploded and people were making tens of thousands-even hundreds of thousands-of dollars in a matter of a few months as they flipped houses.  There is a natural cycle which now must occur (and is occurring) in those areas.  Property values which increased exponentially must now fall exponentially.  People who bought investment properties with the plan of flipping them don’t always get to make a profit; some of them are going to take a hit.  And yes, people who made $30,000 a year and bought a quarter million dollar home are probably going to end up having to walk away from them.

It will not be until there is absolute transparency in mortgage lending, and better qualification of mortgage borrowers, that the mortgage industry as a whole will begin to rebound and continue its growth the way it should.

And in the meantime, there are many positives that cannot be ignored.  First, the majority of Americans are paying their mortgages on time.  Second, there are many communities in this country that are continuing to grow-even if the rate of growth has slowed.  Texas happens to be one of them.  And third, we just happen to live in the greatest country in the world that has been through tough times before.  We’ll make it through this one too, $700 bilion bailout or not.

What are your thoughts?  Tell me by posting your response here on our website.

This blog is intended for informational/entertainment purposes only and is not meant to provide any financial or legal advice.

Well, it took about 45 days for the bailout bill to open the door for the takeover by the federal government of Fannie Mae and Freddie Mac.  I can’t say that I was particularly surprised at Sunday’s announcement.

As noted in Tami Luhby’s recent article at CNNMoney.com, interest rates have already started to fall as the world markets responded positively to the announcement.  Now, I’m not going to say that’s bad news-for those who are buying a home, it’s just one more great reason to take the leap.  I mean, home prices are down, there are some great homes on the market, and now the interest rates have gotten more favorable.  Heck, I’m the first one to encourage people to buy a home.

I am somewhat concerned about Luhby’s note that the bailout is “aimed at making mortgages easier to obtain and afford.”  Not so many years ago, Congress encouraged lenders to make mortgages available to more people…which eventually led to the recent market downturn.  I’m not sure that opening that door is necessarily the best way to solve the problem long-term despite the fees and restrictons mentioned in the CNNMoney article.

From the beginning, I have believed that in a free market the housing difficulties we have faced would eventually correct themselves-even if it took some rocky times in order to get us there.  Whether this bailout will delay or derail that natural recovery is unknown at this time.

I guess it comes down to this: our economy has been a lot worse.  Yes, I remember the late 70s (despite my unbelievably youthful appearance).  Six percent mortgages may be higher than the rates we saw two years ago, but they’re a far cry from the 15% or more that accompanied the questionable era that brought us-gulp-Gremlins, disco, perms and Smoky & The Bandit.  It goes without saying that we look better, and the fact is, our economy is screaming along in comparison.

For folks in certain U.S. regions that have been mentioned here before (California, Florida, Nevada, Michigan, etc.) life is pretty tough right now.  But there are a lot of great cities (including many right here in the Lone Star State) that aren’t seeing that kind of downturn.

Again, just keep in mind that there are still a lot of reasons to buy a home and there’s more information available to homebuyers than ever before, thanks to the transparency that’s provided by RateWindow™.  And for those looking for long-term investment properties, now is definitely the time to buy, when home prices have lowered and sellers are willing to negotiate.  After all, history has always shown that real estate is the best way to build long-term wealth, provided you do it wisely.

So for now, I’m taking a wait-and-see attitude, keeping my fingers crossed, my hair unpermed, and hoping for the best.  Now if I could just summon the courage to purge the Bee Gee’s out of my CD collection…

This blog is intended for informational/entertainment purposes only and is not meant to provide any financial or legal advice.

Yield Spread Premium (YSP) is hidden in most transactions until the closing statement is presented and home buyers are ready to close escrow and complete the home buying process. Below is an actual scan of a closing statement is which you can see the YSP among all the other fees that are associated with a home purchase.

In this case the YSP was over $3,800, a hefty chunk of change. When talking to the owner this closing statement, they said:

I didn’t even see it, until you brought it to my attention. Since it was never a direct payment, I must have just glossed over it. Worse thing is, I was really good friends with the mortgage broker, and now that you brought this to my attention, I will never look at them the same way. I thought they got all their fees, but now that I know they got this too… Also, why is the YSP not even in a debit column?

If you are unfamiliar with YSP, you can do some research on it at the YSP wiki

An inherent problem with the Yield spread premium is that it’s anti-capitalistic. Typically, the borrower has no idea or does not completely understand how the broker is potentially compensated on the back end and therefore can’t truly price out the service being provided to the borrower. The definition of capitalism is a willing buyer, knowing all the facts and circumstances surrounding a service the buyer is considering purchasing (including how much the service provider is being compensated) makes a choice to use the service provider. Since the borrower typically has no idea or does not understand that the broker could potentially get paid on the back end, they can’t compare terms between brokers.

With RateWindow.com, that $3,800 would have been a rebate to the consumer. RateWindow adds transparency to the mortgage process and still allows the mortgage broker to make a living by providing their services at a flat rate, honest fee. RateWindow provides the consumer with the ability to see what their YSP is, and choose to obtain a higher rate, and therefore a higher YSP (which is rebated to the consumer), or a lower rate and possibly have to bring money to the table in order to get that rate.

With the housing market in disarray and the economy in a slump as a result, lots of blame seems to be thrown towards the mortgage companies selling their sub-prime mortgages to anyone who could pass the mirror test. Personally I don’t think all the problem rests with the greed of the mortgage companies and their loan officers. It is a three party dance with most of the blame resting on the shoulders of the over exuberant borrower and greedy Wall Street. Thus the title of this post. Too much of a good thing is not always a good thing.

Perhaps we have too short a memory from the glory days of the dot coms when everyone thought that the tech stocks couldn’t go south. In the mortgage arena, borrowers thought that their incomes would always go up, their property values would always go up, their credit scores would go up, their ability to manage their finances would go up and thus everything would be fine. Wall Street obviously felt the same way or they were in it for the quick & big buck hoping that it would work out that way or that Uncle Sam would come and bail them out. Wall Street sent the message to the lender that they had an appetite for higher interest bearing notes (subprime loans & adjustable rate mortgages) and had easy money to loan. The lenders became the messenger boy and the borrower took the bait and now ends up flopping around on the shore without water. Let’s not kill the messenger, but slot them in a significant role to help throw the fish back into the water. (FHA comes to the rescue with higher lending limits)

Everyone who shares in the blame should bear some of the burden. Wall Street should adjust their notes where there would be some loss to the investors which ultimately include a lot of people who own some of these notes in their 401(k)’s, through insurance company portfolios, or pension plans. The mortgage companies should bear some of the loss by lowering interest rates on the loans allowing people to stay in their homes and not putting an overabundance of supply of homes on the market forcing prices down. A lot of borrowers have already shouldered some of the burden by having some of their appreciation evaporate. Also, Wall Street is experiencing some of the blood bath that is now being experienced by the people who were the ultimate lenders (investors in mortgages) in the first place. Peace is sometimes negotiated but in this case the market has placed its demands on those who are now getting slaughtered by too much of a good thing.

Mortgage lenders have always been transparent to mortgage brokers or bankers with their rate sheets. Mortgage bankers/brokers have used the information supplied by the various mortgage lenders (ie: Countrywide, Washington Mutual, Citi, etc.) to price a loan to the ultimate mortgage borrower. Rate sheets are often confusing and difficult to read especially for a borrower and sometimes even for a mortgage broker/banker without a lot of experience. The transparency in the mortgage industry has not been at the lender level but to the borrower.

Even with the transparency from the lenders to the brokers/bankers there still remains an uneven playing field. Broker/bankers with little volume do not get the pricing breaks that large volume lenders receive thus NOT all bankers/brokers are created equal. Walmart is a classic example of volume discounts and it is not different in mortgage pricing to high volume brokers and bankers. Walmart buys in such huge quantities that the producers of the product are willing to work on a smaller margin of profit. Comparing Walmart to a local store trying to sell the same product would end up being more expensive at the small local store because their initial cost is higher. So it is with mortgages. Lenders make larger margins on small volume mortgage producers and lower margins on higher volume mortgage producers (called mortgage originators).

With all of the above being said there are essentially two layers of transparency, one from the lender to the brokers and bankers (not always equal in pricing) and then from the brokers and bankers to the borrower. The layer that has suffered in the past is the transparency from the brokers and bankers to the borrowers.

We built RateWindow for the consumer. So they can now shop the rates from with full rate disclosure.

This post is for the developers that are interested in accessing the RateWindow™ API. There will not be an open developer platform for this widget due to mortgage industry regulations and standards, but we will still give access to core programming functions to extend not only the RateWindow™ widget, but any plugin that accesses RateWindow™.

First of all, RateWindow™ will run on any website, but we think that RateWindow™ will be put mostly on Wordpress blogs as a plugin. RateWindow™ does not create any database tables in a Wordpress blog, and we will not allow access to the raw mortgage rate information that is pulled due to the possibility of exploitation, but we will allow additional marketing plugins to access RateWindow™ widget.

The process to develop for RateWindow™.

1. Contact us, and let us know about your plugin.
2. We will then give you access to RateWindow™ hooks and details how to connect
3. Once complete, contact us again and we will make sure your plugin is working properly.
4. We will then distribute your plugin along with the RateWindow™ widget.

Possible plugin ideas

• blog posts, news sources, twitter posts
• real estate related information such as foreclosure listings
• the real estate agent listings (we already have this, but if you make a better one, we will include)
• credit information
• mapping, images, videos

Most plugins will only need to access the newsletter that is built into the RateWindow™ application. The owners of the blogs in which RateWindow™ is located (installed) will always want to distribute more and more information, and with the co-branding aspects of RateWindow™, it is a good start to interconnecting Wordpress widgets

Mark Warner, CEO of Realespace was invited to discuss the current state of the mortgage industry and introduce RateWindow to the public

http://www.realestateradiousa.com

The window is open (RateWindow™) to the world of wholesale mortgage rates where the public can’t be manipulated on the cost of their mortgage loan. Mortgage bankers and brokers and real estate agents with vision will join in on this first to market rate pricing engine so they can wear the white hat.

RateWindow™ is quickly moving from concept to reality. Over the next couple days we will be putting the finishing touches on our flagship product and release it as the first transparent mortgage tool.

For and example of the product, make sure you check out the demo.