Here’s a mortgage primer on which loans are no longer the flavor of the month on Wall Street. They’re the Michael Vick’s of the mortgage world, they were once very popular on but now nobody wants to be associated with them. Okay, that’s a little bit too harsh since these loans didn’t kill dogs. Then again, these loans have put families in dire straits so lets keep the Michael Vick analogy.

Loans the Wall Street doesn’t like:

• THE LOANS WITH THE REALLY REALLY REALLY LOW RATE AND LOW MONTHLY PAYMENT

Also called: 1%, NEGATIVE AMORTIZATION, NEG AM, OPTION ARMS, PAY OPTION ARMS or

“A CAN OF WHOOP ASS WAITING TO HAPPEN”

• THE LOANS FOR BORROWERS WITH REALLY REALLY REALLY BAD CREDIT HISTORIES

Also called: SUBPRIME, NON PRIME, POOR CREDIT, 2/28s, 3/27s, or

“I GUESS THIS IS WHAT I GET FOR NOT PAYING MY BILLS”

• THE LOANS FOR BORROWERS WHO HAVE GOOD CREDIT BUT WHOSE OVERALL LOAN APPLICATION DOESN’T MEET FANNIE MAE OR FREDDIE MAC’S STANDARDS

Also called: ALT-A or

“SO I’VE GOT GOOD CREDIT AND A GOOD JOB BUT I’M PENALIZED FOR NOT SAVING ANY MONEY”

• THE LOANS FOR BORROWERS WHO CAN’T REALLY REALLY REALLY SHOW HOW MUCH MONEY THEY’VE MADE OR HOW MUCH THEY HAVE SAVED UP

Also called: STATED INCOME, STATEDSIVA, SISA, NO DOC, or

“DON’T THEY HAVE LOANS FOR PEOPLE WHO DON’T HAVE JOBS?”

• THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY DON’T WANT TO PUT ANY MONEY DOWN

Are called: 80/20, 100% Financing, NO MONEY DOWN, 103%, 107% or

“I WANT A LOAN WHERE I GET TO KEEP MY MONEY IN CASE MY JOB GETS OUTSOURCED TO INDIA”

• THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY DON’T WANT TO PAY AN AMORTIZED PAYMENT

Also called: INTEREST ONLY, IO, or

“IF I LIKE PAYING DOWN PRINCIPAL MY PAYMENT GETS RECAST TO A LOWER PAYMENT EVERY MONTH”

• THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY WANT TO BUY A HOME THEY HAVE NO INTENTION OF LIVING IN

Also called: INVESTMENT PROPERTY LOANS, NON OWNER OCCUPANCY, NOO or

“I’M GOING TO BE THE NEXT DONALD TRUMP”

• THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY MAKE A LOT OF DOUGH

Also called: JUMBO, NON CONFORMING, SUPER JUMBO, MILLION DOLLAR LOANS, ANYTHING OVER $417,000 or

“THAT’S PRETTY LOW FOR A RATE OF RETURN AND PRETTY HIGH FOR A MORTGAGE INTEREST RATE”

It remains to be seen if Wall Street still likes:

• THE LOANS FOR BORROWERS WHO REALLY REALLY REALLY HAVE NO INTENTION OF LIVING IN THEIR HOMES FOR 15 to 30 YEARS

Also called: ADJUSTABLE RATE MORTGAGES, ARMS, 3/1, 5/1, 7/1, 10/1, TEASER RATE LOANS, HYBRID LOANS, BALLOONS or

“THE AVERAGE PERSON MOVES EVERY 5 to 7 YEARS, SO WHY SHOULD I GET A LOAN FOR 30 YEARS?”

Wall Street will always like:

• THE LOANS WITH REALLY REALLY REALLY NO RISK

Also called: FHA, VA, CONFORMING, FANNIE MAE, FREDDIE MAC or

“THE LOANS THAT MAKE UP THE MAJORITY OF THE AMERICAN MORTGAGE LANDSCAPE”

With the Democratic National Convention looming, Hillary Clinton is making a splash. The former Park Ridge, IL native and now NY Senator (I still don’t know how New Yorkers voted for her instead of Rick Lazio) wants to protect people from going into foreclosure.

“I don’t think families should be lured into buying homes they can’t afford,” Clinton said.

Clinton blames adjustable rate mortgages as the culprit for all the foreclosures. She must be getting her data from all the housing bubble blogs which show advertisements from the mortgage companies they rail against.

There’s really no substantial way to protect people from getting sick, losing their jobs, or dying. These are some of the REAL REASONS why people go into foreclosure.

I’ve never been a verbose writer. I took a high level Shakespeare class during my last semester in college and the professor wrote on my final paper – “You understand quickly, you write even quicker.” I asked him what his comments meant and he said, when you write, you get right to the point.

Here’s my view of what happened to the mortgage industry. (If you want a more verbose, simply google Mortgage Collapse.)

The subprime mortgage world has fallen flat on its face. Loaning money to people who have proven that they can’t pay back a credit card let alone a mortgage was bad business. These loans started off with a 2 year introductory rate and now we’re seeing those two years expiring and now we’re getting into the adjustment phase. The mortgage entities that bought these loans are filing bankruptcy en masse. As as a result, borrowers who need these loans can’t get them anymore. The effects of these loans are moving up the risk ladder with “ALT-A” companies (the risk level between PRIME and SUBPRIME) starting to close their doors as well. It’s a mess right now and it may take years for all this to get straightened out.

Here are two videos worth watching regarding the mortgage mess:

Jim Cramer (rather calm):

Jim Cramer (going ballistic):

I got an email from a reader that was one line – “Are you dead?” Every now and again I get similar emails when things slow down on my blog.

I’ve been busy, extremely busy….

On Wednesday I spent most of the day at a Blogger Fiesta. The boys from Sellsius were in town and as an ex-pat New Yorker, I had to meet them. Rudy and Joe are two of the coolest mofo’s in the blogosphere.

Spending the mornings with my daughter. Rather than shuffle her off to daycare first thing in the morning, we’ve enjoyed watching Sesame Street before heading out the door.

Loans. Rates are in a holding pattern and people want to get those ARM’s fixed!

Software development. What can I say, once a geek always a geek so I have a side gig as a software developer/contractor. Microsoft Access database projects always seem to be in abundance.

Remodeling my bathroom. I told my wife I’d have it done in a weekend. Then a week. Now it’s looking like 2 weeks. So much for milestones.

August should be a fairly slow month. I hope!

I enjoy reading sports columnist Mike Lupica of the NY Daily News. His column “Shooting from the Lip” interjects his many different view points and thoughts. Bold words are used to highlight the theme.

Here’s my version:

The enemy of greatness is mediocrity. When discussing the San Antonio Spurs over the last nine years their “enemies” in the championships have mostly been mediocre. The face of the NBA are the Spurs. A team that flops and whines. Congrats David Stern, Bud Selig’s steroid ridden league looks better than yours right now.

Barry Bonds is about to break Hank Aaron’s record of 755 home runs. A few years ago I rooted for Barry to break the record simply because I thought his rookie baseball card would be worth something. Even though he’s on the cusp of an asterisk, his rookie card is worthless.

When I was in college, one of the guys in my dorm was on the juice. He denied it but we all knew it. One day he got really drunk and put his fist through a window. The cops picked him up and threw him in the slammer. When we visited him in his holding cell, he was sobbing. Jail is a scary place unless you play for the Cincinnati Bengals.

Despite graduating from college over a decade ago, I finally had my bachelors degree framed. It’s an eternal reminder that once upon a time I went to college, had fun, and ran 7 minute miles.

A few months ago I hurt my foot. The doctor took x-rays and said nothing was broken. Yet each time I’ve gone for a run, even at a slow pace, my foot has been in pain. With my main form of exercise on the shelf, I altered my diet. No fried foods. No pork. No beer. Limit my intake of sweets. What do you know, what do you say: No weight gain!

The Sopranos ending was perfect despite the deluge of criticism from disappointed fans. I often wondered if you really see your life flash before your eyes of if everything went pitch black when you died. According to the Sopranos finale, it was the latter. We followed Tony’s journey to the bitter end.

Journey saw a 500% increase in sales of their single “Don’t Stop Believing” on iTunes. I liked Journey when I was younger and pleaded with my older brother to take me to see them in concert. He didn’t take me but redeemed himself when he took me to a U2 concert. As usual someone in our section yelled “play Freebird!” Bands must really dislike that phrase.

I really dislike the phrase Short Sale and the word Foreclosure especially when the word Profit is tied to the story.

There’s nothing more discouraging than seeing a borrower with good credit, income, and reserves who happens to be upside down on their mortgage and on the verge of a rate adjustment.

Rates are taking the stairs.

A borrower calls me after finding my blog and starts the conversation with “OK Einstein, where are rates headed?” I usually expect an opening line like this from friends or just about anyone with a New York accent. Although the caller was sans the accent he could’ve easily been one of my wise-ass friends so I responded with a sarcastic “What’s it worth to you?” The person on the other line paused for a second and said “Seriously, do you think rates are going to go up any higher?” I paused for a second and said, “so let’s step back for a second, you really found my blog on the web, called me and started your call with OK Einsten…. wow!”

For the next ten minutes we discussed remortgaging which is a fancy term for refinancing. I explained to him that many people who have a 5 year ARMS have extremely low rates so their extremely hesitant to refinance. Luckily he had all his documents, I asked him to take out his NOTE so I could go over how his ARM will adjust.

His current rate: 5%

His current margin: 2.25%

His current index (12 month LIBOR): 5.49%

His caps: 2/2/6

• His first year adjustment has a maximum adjustment of 2%
• Each subsequent year can adjust a maximum of 2%
• With a lifetime maximum adjustment of 6% above the original rate of 5% or 11%.

His adjustment will take place sometime next year. Unless his index drops significantly, his rate will probably adjust to 7%.

After talking to the caller, somewhere along the line we became friends. We discussed golf. We discussed houses. We discussed 529 plans. He was looking for advice, not a loan. At the end of the call, he thanked me for my time. I added the caller’s name to my rates watch database and hope to hear from him when he’s ready to either purchase his next home or refinance when rates drop.

The Sopranos is coming to an end. So far the final season has been a massive bloodbath with several key characters getting whacked. I’ve enjoyed the Sopranos mainly because I’m part Italian and I like how the cast is mostly Italian-American.

The portrayal of the Sopranos as a typical Italian-American family has been very accurate. The family dinners. The passionate discussions with lots of hand gestures. The butchering of the Italian language. How in the world does gabagool = capicola. (Yes, I know it’s the southern Italian dialect.) However, the Sopranos has received a lot of flack for portraying Italians as mafia. I think Hollywood with movies like Godfather, Goodfellas, Casino, et. al. had more to do with this stereotype than the Sopranos. Most Italian-Americans I know don’t have any ties to mafia. My paternal grandfather hails from Sicily, a hotbed for mafia, and despite the many years I’ve worked on my genealogy I can’t find any link between my family and the mafia.

I am looking forward to the last episode of the Sopranos which airs on Sunday for two reasons:

One, the writers were building the storyline to one final showdown between the Soprano crew based in Jersey and the Leotardo crew based in Brooklyn. Incidentally, I have roots in both places. Two, I can’t wait to get rid of HBO. Other than the Sopranos there’s no reason to get HBO. Who really wants to watch reruns of Cheaper By the Dozen 2 and Pride and Prejudice?

By the way, the Sopranos had their fingers in real estate:

In Episode 38, Carmela studies for the real estate exam.

In Episode 46 Tony and the crew used bogus real estate deals to con money out of the Federal Department of Housing and Urban Development. Subsequent episodes, 50 and 51 focused on this scam.

Carmela begins a spec house with her father that is wrought with numerous delays. Episode 71, 75, 76, 77 follows her ordeal.

In Episode 73, Tony is involved with a real estate agent who’s persuading Tony to sell one of his stores to Jamba Juice.

So their you have it, the Sopranos is tv worth watching especially if you’re Italian and in the Mortgage/Real Estate business.

There are several definitions of the word BILL:

• an itemized statement of money owed for goods shipped or services rendered; as in “pay your bill“
• a piece of paper money; as in “dollar bill“
• the entertainment offered at a public presentation; as in “what’s on the bill“
• player for the National Football League team based in Buffalo, NY; as in “Jim Kelly will always be a Buffalo Bill“
• Nickname for William; as in “Bill Clinton“
• a brim that projects to the front to shade the eyes; as in “bill of a baseball cap“
• beak: horny projecting mouth of a bird; as in “pelicans have big bills“
• a statute in draft before it becomes law; as in “I‘m just a bill. Yes, I’m only a bill. And I’m sitting here on Capitol Hill.”

Bill Ritter recently signed five mortgage and foreclosure bills into law. Here’s a rundown of these BILLS from the Rocky Mountain News:

1. HB 1322, MEASURE TO PREVENT MORTGAGE FRAUD

Summary: Mortgage brokers and others involved in real estate transactions must act for the benefit of the borrower, including making reasonable inquiries into the borrower’s financial situation and using best efforts to obtain a loan that takes into consideration the borrower’s situation.

2. SB 85, PROTECTS CONSUMER REAL ESTATE TRANSACTIONS

Summary: Prohibits brokers from trying to influence the judgment of a real estate appraiser through coercion, intimidation or compensation.

3. SB 203, MORTGAGE BROKER LICENSING

Summary: Brokers must be licensed by the Division of Real Estate and must get adequate training, testing and continuing education and are prohibited from engaging in 24 specific activities, including fraud and conflicts of interest. A broker who has a license revoked for violating this legislation would not be eligible to be reinstated unless he or she provides full restitution to individuals he or she has harmed.

4. SB 216, MORTGAGE LOAN ACTS PRACTICES

Summary: Requires brokers to act in good faith and deal fairly, including: not to recommend the borrower enter into a transaction that “does not have a reasonable tangible net benefit to the borrower, considering his circumstances; to make reasonable inquiry into the borrower’s financial circumstances; not to make loans where there is no reasonable probability of repayment.”

5. SB 249, REAL ESTATE TITLE ESCROW SETTLEMENT

Summary: The Division of Insurance is required to provide annual reports on the number of enforcement actions taken, the market trends with title insurance and real estate transactions, and consumer complaints generated by market analysis, investigation and enforcement efforts regarding title insurance.

While this is a start but there are several areas that still need to be addressed:

What about the borrowers? Aren’t they culpable? If Joe and Jane Borrower buy a house and refuse to pay their mortgage simply because they racked up a lot of debt what’s their penalty?

What about banks? In Colorado, state and nationally chartered banks are exempt from registration: bank, saving bank, savings and loan association, industrial bank, industrial loan company, credit union, or bank or savings association holding company organized under federal law, and subsidiary or employee of the above. This is a large population of the mortgage community.

What about the Account Reps? They represent the mortgage lenders who end up buying your loan. Some will say just about anything to get mortgage brokers to send them business. In other words they’re part of the problem. Somehow there’s no law where mortgage lenders have to police their own employees.

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.

Here are some rankings from JD POWER with respect to mortgage companies:

Home Mortgage Service Satisfaction Ratings: USAA FEDERAL SAVINGS BANK

Mortgage Servicers are companies that receive your mortgage payments. They may or may not have originated the loan.

Primary Mortgage Origination Ratings: SUNTRUST MORTGAGE

Mortgage Originators are companies that initially bought the loan from either a mortgage broker or correspondent lender. They may or may not service the loan.

Home Equity Line/Loan Origination Ratings: WACHOVIA

Home Equity Lines are typically the variable rate second mortgages tied to the prime rate. Loan origination companies may or may not service the loan.