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Alan Blinderis an American economist, on the faculty of Princeton University. He has served as the Deputy Assistant Director of the Congressional Budget Office, on President Bill Clinton’s Council of Economic Advisors, and as the Vice Chairman on the Board of Governors of the Federal Reserve System. Sounds like a government conformist right? Wrong

He has recently wrote a controversial column for the Foreign Affairs magazine about globalization in which he opined that globalization could cause more disruptions in service jobs than originally believed. He says that he still believes that globalization would be a net plus for the United States. This analysis has not been published in a peer-reviewed journal of economics. His views on this issue is not widely accepted by economists.

Then comes this gem: Six Fingers of Blame in the Mortgage Mess

Who’s the first finger? Everyone who has a mortgage.

The first finger points at households who borrowed recklessly to buy homes, often saddling themselves with mortgages that were all too likely to default. They should have known better. But what can we do to guard against it happening again?

Not much, I’m afraid. Gullible consumers have been around since Adam consumed that apple. Greater financial literacy might help, but I’m dubious about our ability to deliver it effectively. The Federal Reserve is working on clearer mortgage disclosures to help borrowers understand what they are getting themselves into. (“Warning! This mortgage can be dangerous to your family’s financial health.”) While I applaud the effort, I’m skeptical that it will work. If you have ever closed on a home, you know that the disclosure forms you receive are copious and dense. Should we add even more?

Fewer words, and in plainer English, might help, especially if they highlighted the truly important risks. (“In two years, your mortgage payments could double.”) But the truth is that there is much to disclose, that complicated mortgage products are, well, complicated, and that people don’t read those documents anyway.

He does go on to blame Lenders, bank regulators, and countless others. If you don’t read the New York Times, you should. Real estate is local, mortgages are national.

Here’s a press release for Universal REO. What’s my connection to Universal REO - my buddy Dan is the CEO.

LOCAL DENVER COMPANY RELEASES NATIONAL WEB-BASED FORECLOSURE EDUCATION WEBSITE FOR REAL ESTATE AGENTS.

UniversalREO.com, a Denver-based company, is reaching out to thousands of real estate professionals across the nation by providing a ‘Resource Center’ for those trying to make a difference in the foreclosure epidemic. According to founder and CEO, Daniel Waterman, “UniversalREO.com is an unparalleled stratagem designed to unify the real estate foreclosure industry. Through the shifting of the REO (Real Estate Owned by Lender) paradigm to meet a more streamlined business model, professionals are enabled by technology and informative resources. Our objective is to elevate the standards by which REO professional operate on every level.”

By offering thorough education on the valuing of properties, the resources and tools on how to determine values, marketing tips, as well as where to obtain new REO business, UniversalREO.com is providing a service that not even real estate colleges offer. After spending years as an REO Specialist for the top REO Real Estate Marketers in the nation, Mr. Waterman realized his true calling as a teacher. His trial-by-fire education in technology was what gave him the foresight to provide this knowledge to the masses via the information highway.

In this “Web 2.0” universe there exist many one-offs offering overnight REO Business success schemes on the web. UniversalREO.com offers more. Education, Valuation, and Marketing are the keys to success in a real estate market flooded with properties for sale due to default mortgage payments. Cutting-edge concepts on moving these properties into the appropriate hands while maintaining value to companies like Countrywide Home Loans who recently took out an $11.5 billion dollar loan to aid their default mortgage deficit is the only way this country will ever jump back on track. By conveying knowledge through on-line video courses, eBooks, blogs, podcasts, certification, and connecting REO Management companies and direct lenders with the educated real estate agent, as well as the end consumer, UniversalREO.com is blazing new trails throughout the nation. UniversalREO.com currently covers over 50% of the nation for Real Estate Agent and Vendor clientele.

The headline is much better than the article:

“Quick action by Erin Toll, state Division of Real Estate director, kept lenders from pulling out of Colorado because of new laws.”

In June, some major lenders (OptionOne Mortgage, IndyMac, SunTrust Mortgage and Aurora Loan Services) threatened to stop making home loans in Colorado after they disagreed with new requirements the state placed on mortgage providers.

The lenders were beefing about this law:

Mortgage providers must show that loans are reasonable and benefit borrowers, and they must also disclose more about how they are compensated.

Seriously, don’t waste your time reading the full article: Regulator keeps money flowing for homebuyers

Yahoo is one of the best websites when it comes to consolidating articles. Want news of Lindsay Lohan’s rehab, they’ve got it. Want news on Kobe Bryant desire to be traded, they’ve got it. Want news on real estate, they’ve got it.

Today there was an article entitled: Mortgage Brokers: Friends or Foes?

The article discusses the fiduciary (a person who occupies a position of special trust and confidence) responsibility of mortgage brokers.

According to the article:

Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price.

Yet the article discusses the inherent flaw of the mortgage broker:

Often the broker’s incentives run counter to the borrower’s interests. Lenders pay YSP to the broker when the borrower is paying a higher interest rate than the best he or she could qualify for, which makes the loan more profitable for the lender. The higher the rate, the higher the payment to the broker. (Some lenders put a ceiling on YSP.) Lenders may also pay brokers a bonus for loans with prepayment penalties, which make it expensive for borrowers to refinance within the first few years.

To counter this flaw, the article advocates shopping:

To protect yourself, one strategy is to shop for a home loan directly at a few lenders and then see whether a broker can find a better deal. When choosing a broker, borrowers should ask tough questions first. Among them: In searching for loans, do you feel obliged to put my interests ahead of yours? Exactly how much will you earn on this loan? And how many lenders do you check regularly for rates and terms?

Are Mortgage Brokers the Enemy? The answer is NO.

There are no enemies in the game of life. People will only take advantage of you if you let them. The only true way to protect yourself is through knowledge. Learn as much as you can about getting a mortgage. It’s a pretty simple process but it’s cluttered with confusing terms and complex arithmetic. Where can you learn about getting a mortgage? For $12 you can get Mortgages for Dummies. It’s the book I got when I bought my first place 10 years ago.

Chances are you’ll need a mortgage broker if your loan doesn’t meet Fannie Mac or Freddie Mac guidelines. In other words, if you’re loan is somewhat unorthodox, you need a broker.

I like to play poker. I almost never play with real money because I play less aggressive when I’m playing with my own dough. When I play for free, I’m more inclined to take more risks. If I go “full tilt” and lose it doesn’t cost me a dime.

Full tilt: full force, all out.

The subprime mortgage world went full tilt the last couple of years by lending to borrowers who have shown that they can’t pay their phone bill, let alone a mortgage. At the time it looked like a solid play and they became the darlings on Wall Street. Now the subprime lending world is going full tilt in the opposite direction. The risks these borrowers posed were greater than anyone could’ve possibly imagined. With loan defaults en masse, these lenders are going bust!

The problem with going full tilt is that being aggressive just can’t be sustained for long periods of time. It’s true in poker and in lending.

COLORADO FORECLOSURE HOTLINE: 1-877-601-HOPE

The Colorado Foreclosure Hotline was launched on October 12th. Finally! Considering that we lead the country in foreclosures, it’s about time Colorado did something to help out homeowners.

Housing counselors facilitate communication between borrowers and lenders to find ways that the borrower can avoid foreclosure. Urban estimates that statewide, approximately 1,200 borrowers who have called the hotline have now been helped either through face-to-face counseling or other assistance over the phone.

The Colorado Foreclosure prevention directs borrowers to local homeownership counselors throughout the state and is supported by a partnership of the mortgage lenders, counselors, Realtors, and state agencies, including JPMorgan Chase, the Colorado Division of Housing, the Colorado Association of Realtors, and the Colorado Housing Counseling Coalition.

Read more from the Rocky Mountain News.

Appraisers are next up on the Colorado foreclosure agenda according to the Rocky Mountain News article:

Erin Toll’s top priority as the new director of the Division of Real Estate for Colorado is to shut down appraisers who are artificially inflating home values, contributing to the state’s escalating foreclosure crisis.

The article also articulates the ABC’s of appraisals:

• An appraiser’s job is to inspect the size, condition and quality of a home and review, verify and analyze market data for the home to determine its value.
• Loan amounts rely on the value calculated by the appraisals.
• Lenders typically require real estate appraisals for both purchases and refinances.
• The appraisal protects lenders so they don’t lend more than a property is worth as well as buyers so they don’t pay too much.
• Appraisers must be independent and should never assign a value just because a lender or real estate agent wants a specific price.
• An appraiser will inspect a home inside and out, as well as use county and other real estate data to compare the house to similar ones that have sold in the neighborhood to determine its value. A good appraiser looks at the comparable homes to make sure they really are similar.
• In addition to obvious things such as the size and condition of the home, the number of bathrooms and bedrooms, an appraiser will add value for things such as a well-done renovation, but will subtract value if the home needs work, such as a new furnace or a paint job.
• A detailed professional appraisal can run 30 to 35 pages.

… according to the new scoring model. I have yet to see a credit report reflect the news scores.

Credit Agencies Aim to Simplify Scoring
Tuesday March 14, 11:55 am ET
By Eileen Alt Powell, AP Business Writer

Three Large Credit Agencies Adopt Uniform Credit Score Aimed at Simplifying Loan Process

NEW YORK (AP) — The three major consumer credit reporting agencies announced Tuesday that they have created a new credit scoring system aimed at simplifying the loan process for both lenders and borrowers.The announcement by Equifax, Experian and TransUnion said the new “VantageScore” was “a direct result of market demand for a more consistent and objective approach to credit scoring.”

The agencies in the past each used their own proprietary formulas to create their own scores, meaning that a lender dealing with a consumer’s application for a credit card or a mortgage might have to reconcile three widely different scores.

With the new system, a single methodology will be used to create the scores.

“Under the new scoring system, credit score variance between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or data interpretation,” the agencies said in a joint statement.

It added that VantageScore “will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply.”

Kerry Williams, group president of Experian’s credit services division, told The Associated Press that his agency was making the new scores available immediately to financial institutions and expected wide adoption, but said he did not expect the scores to be rolled out for consumers until later this year.

Credit scores are important because they measure how much debt a consumer is carrying and how well the consumer keeps up with bills.

The higher the score, the more credit worthy the consumer is considered and the lower the interest rate the consumer is likely to be charged.

The three credit agencies termed the move to a unified score as “unprecedented.”

The scores will range from 501 to 990. The top end is slightly higher than scores currently in use.

Colleen Tunney, spokeswoman for TransUnion, told a conference call with reporters and credit industry representatives that the new score was created by looking at millions of consumer files at the same time to ensure consistent readings across the three bureaus’ data.

She and spokesmen for Equifax and Experian said it was not immediately clear how quickly the new score would be adopted by lending institutions.

“Step one is we’re talking to our credit grantors as we speak,” said David Rubinger, spokesman for Experian. He said each agency was marketing the new score to its own customers.

He added: “For any score to have merit in the marketplace, all parties need to be at the table.”

Many lenders, especially those in the mortgage business, use FICO scores, which are named for the Minneapolis-based Fair, Isaac Corp. which developed them. Others use proprietary scores from the individual credit bureaus or use the bureau data to generate their own scores.

Spokesmen for Fair, Isaac could not immediately be reached for comment.

Rubinger said the new score was expected to reduce the variance in a consumer’s scores by about 30 percent compared with what it was under the old system. He gave no other details.

He said the score would reflect a consumer’s frequency of borrowing, delinquency in paying bills and other “file content,” but had no specific weights for the components.

In a separate statement, Experian said the new scores will be grouped on “the familiar academic scale.” Experian gave these groupings:

A — 901-990

B — 801-900

C — 701-800

D — 601-700

F — 501-600

Experian said it was hoped that “as consumers increase their awareness of the importance of credit scores and credit reporting, the consistency of VantageScore will provide the type of information they need to evaluate their credit standing and make sound financial decisions.”

VantageScore is being independently marketed and sold separately through each of the three national credit reporting companies via licensing agreements with VantageScore Solutions LLC, the joint announcement said. The spokesmen said that VantageScore was jointly owned by the three credit bureaus. They said it did not yet have a headquarters, although an informational Web site had been set up at http://www.vantagescore.com.

The credit reporting agencies are operated by Equifax Inc. of Atlanta, Experian Information Solutions Inc. of Costa Mesa, Calif., and TransUnion LLC of Chicago.

http://www.equifax.com

http://www.experian.com

http://www.transunion.com

Here are some reason why you would choose a mortgage broker:

A mortgage broker can shop the banks for you; saving you time and money. A broker has many banks to choose from so you get the best rate!

Mortgage brokers work with wholesale rates rather than retail rates. They can often provide rates lower than what you may get quoted by a bank which uses retail rates.

Mortgage brokers originated over 70% of all mortgage loans originated over the past couple of years. For this reason alone, this should let you know how key the role of a good mortgage broker is.

A mortgage broker has the ability to have your loan approved and submitted at many different lenders. If a particular lender should cause a delay or refuse the loan the mortgage broker can have another lender begin to underwrite the loan. This will insure there are no timely or costly delays in your loan process!

A mortgage broker makes banks compete with one another for your business.

Mortgage brokers allow you to see multiple offers at once. You are given choices on which program best fits your needs. Direct lenders often have higher costs and are forced to charge you a minimum in points and fees. Brokers give you the flexibility to negotiate those fees.

A mortgage broker generally have established business relationships with multiple banks, and therefore has many more loan programs available, whereas a bank loan officer can only sell mortgage products offered by the bank. While a mortgage broker has the ability to shop different lending institutions to find loan programs tailored made for homebuyers in almost any financial situation, a bank based loan officer can only offer the bank’s product, even if that loan product may not be the best for the home buyer. For example, a neighborhood bank may have a “Stated Income” program for loan applicants with credit scores of 700 and above and a “No-Doc” program for credit scores of below 700 at a higher interest rate. Since a borrower with a credit score of 685 does not qualify for the “Stated-Income” program, the bank loan officer would put him in a “No-Doc” loan with a higher interest rate. On the other hand, an experienced mortgage broker can often find another lender offering a lower interest rate “Stated Income” program for the same borrower.

A mortgage broker can quickly determine the best loan program for you, then search through several lenders who specialize in that program to find the best rate and terms for you. A bank, on the other hand, has fewer programs to choose from and must sometimes try to fit your unique situation into one of their programs, whether it is a perfect fit or not.

In addition a good mortgage broker will look at more than just obtaining a loan for you. They will look at your whole financial picture to make sure the loan program fits your short term and long term goals.

A mortgage broker should be used because of the product availability that they have. They can be your one stop shop for all of your home financing needs. They work with hundreds, and sometimes thousands, of different banks and lenders to find the program that is right for you. A mortgage broker, also called a loan officer, can generally assist with all credit types, all income types and all available loan programs types. Having one person or team of people taking care of and familiarizing themselves with all of your financial needs and your specific situation is much more beneficial than utilizing someone to buy your home, then someone else to refinance your home and then someone new to obtain a home equity line of credit. A mortgage broker should be your trusted advisor, an excellent source of information and a link to finding other qualified and trustworthy referral partners such as realtors, homeowners insurance agents, home improvement contractors, etc… Use of a mortgage broker obviously has tons of benefits. Over 75% of all mortgages originated over the past couple of years have been handled by mortgage brokers.

Your mortgage broker can provide you with many more options than a banker in most cases. Having access to all types of banks gives brokers more options. While a banker has to do business based on their specific bank rules.

Using a mortgage broker gives you flexibility in regards to how you can have your mortgage structured. A mortgage broker is no different than a banker in the terms of providing a service, however the difference is what service they can be provided. To go into your local bank and apply for a loan will generally cause you to miss out on some value added programs that are not available to you through that banks product line. The overall time of closing is no different with a broker or a banker, and there is not an approval advantage with going with a bank, and can most times go quicker and smoother with a broker. There are many lenders out there that do not lend directly to the general public and that is where a broker can help you find those programs and terms that will benefit you most.

Mortgage lending is not like it was twenty or even ten years ago. Lenders have split up into niches. Will the bank that you apply at cater to your niche? Maybe or maybe not. Wouldn’t it be better to apply with a full service mortgage broker who can find the bank or lender that has the best program and rates for your situation?

A mortgage broker has to disclose the amount of money that they are making in Yield Spread Premium (also called rebate). Bankers do not have to do this. Would you like to know how much your mortgage professional is making off of your loan, or would you like to be left in the dark?

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