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):

Interesting links from the web:

The Denver Post has a great article, Sales surge for digs over $1M, on why the upper end homes are selling like hot cakes. Denver homes in the million dollar range are doing very well because move up buyers have done well with their investments in the stock market. Moving up like George and Weezie!

Speaking of luxury properties, I ran into my friend Dan at the Denver based real estate and mortgage blogger meet up last week. He now works for LuxuryProperty.com, a site that specializes in million dollar homes nationwide. Look for their launch very soon.

Jonathan Miller of Miller Samuel discusses when prices rise, people remodel. Anyone who links to a Roxy Music clip is pure genius in my book!

Just like every kid, I grew up playing soccer. It’s the premier sport in the world. Somehow it just doesn’t have mass appeal in America. Consider that Denver just hosted the Major League Soccer all-star game, did anyone care?

Chinatown real estate is hot according to CBS. This begs the question where is Chinatown in Denver? My best guess is Alameda & Federal area with their wide array of Chinese restaurants.

Growing up in suburban NYC, there was one choice when it came to hardware stores – Pergament. When I went to college in upstate NY, there was one choice as well – Chase Pitkin. When I first moved to Denver, there were several choices including Builders Squares and Hugh M Woods.

Today, these stores don’t exist. They’ve been replaced by two home improvement mega centers: Lowes and Home Depot. These home improvement centers are growing at a rapid pace and leaving a closed hardware stores in their wake.

A few years ago we planned on remodeling our bath room but after getting two quotes from contractors we decided that our money was best spent on a Mexican vacation. This year we revisited the idea of remodeling our bath room but we decided to set a budget and keep things within reason since we’re planning to go to Mexico again next year. In order to keep things within reason, it means doing it yourself and going to Lowes or Home Depot.

To make life easier my wife and I ventured to Arapahoe and I-25 in the Tech Center where Home Depot and Lowes are about a block apart. Plus, if we didn’t like their selection, the Great Indoors, was a stone throw away on I-25 and County Line. We went shopping. I hate shopping but you don’t have to twist my arm to go to a home improvement center. We looked at flooring, vanities, sinks, counter tops, faucets, and just about everything in between.

This shopping adventure brought up a great question: How do you pick between Lowes and Home Depot? You can go with Nick Bakay’s “Tale of the Tape” method:

Number of Locations: Way too many (Home Depot) vs Not enough (Lowes) advantage Home Depot

Location of restrooms: At the Front (Lowes) vs At the Rear (Home Depot) advantage Lowes

Parking: Even on a busy day it’s not bad (Lowes) vs No matter what time you go, it’s just plain bananas (Home Depot) advantage Lowes

Checkout: Self Checkout (Home Depot) vs No Self-Checkout (Lowes) advantage Home Depot

NASCAR driver: Jimmie Johnson (Lowes) vs Tony Stewart (Home Depot) push

So far we’re even 2-2, so here’s the tie breaker:

Closing time: 10 PM (Lowes) vs 9 PM (Home Depot) advantage Lowes

So there you have it, Lowes wins 3-2!

Update: We ended up getting the vanity, sink, flooring and counter top at Home Depot. My wife simply didn’t care for my affinity to Lowes.

Denver usually makes it to the top of the list when it comes to healthy living and educated inhabitants. There’s one list that Denver didn’t make, the most expensive cities in world.

Here are the top 20:

1. Moscow
2. London
3. Seoul
4. Tokyo
5. Hong Kong
6. Copenhagen
7. Geneva
8. Osaka
9. Zurich
10. Oslo
11. Milan
12. St. Petersburg (Russia)
13. Paris
14. Singapore
15. New York City
16. Dublin
17. Tel Aviv
18. Rome
19. Vienna
20. Beijing

I’ve visited a fair share of these cities (in bold) and even lived in the outskirts of the lone US representative (NYC). Personally, I’d rather live in Denver plus we have an international airport, so these cities are only a plane ride away.

Here are some interesting stories around the internet:

• Kenneth Harney discusses Bank of America’s True No Fee Mortgage. Like Pavlov’s dog, everyone salivates when the words “No Fees” or “Free” are bandied about, especially when it comes to your mortgage however, you just need to remember that’s there’s NO FREE LUNCH.
• Real Estate Journal talks about “pimping your lawn mower“. In other words, trading in your push model for a John Deere Zero Turn Radius riding mower. Maybe in surburbia it’s a big deal but mowing your lawn sucks no matter what you use.
• Mark Cuban discusses his colonoscopy. I only find this link interesting because I have older friends who have experienced this ordeal and lived to tell about it in amusing fashion.
• The Transformers movie has an unbelievable trailer. My biggest question is: WHY DIDN’T THEY MAKE THIS MOVIE FRICKIN 20 YEARS AGO! (Yes, I collected transformers)

As a former professor at the University of Pennsylvania Wharton School of Business, Jack Guttentag is well known as “the Mortgage Professor“. He’s also the driving forced behind Upfront Mortgage Brokers or lenders that disclose their fees. Today, he’s a syndicated columnist.

Currently he’s running a series on the subprime crisis:

Subprime Crisis, Part I: The Causes of Default

Subprime Crisis, Part II: The Lender Role

Subprime Crisis, Part III: State of the Market

Today he posted his fourth segment:

Subprime Crisis, Part IV: What Should the Government Do?

Rather than summarize these articles, I just wanted to post the links to these articles for people to discover. For the most part these articles aren’t lengthy diatribes. Enjoy!

I’ll be blogging about the major news regarding mortgage broker registration later today in the mean time I wanted to discuss two recent hip hop flip flops in sports:

Kobe Bryant

I can’t stand Kobe Bryant. Don’t get me wrong, I think he’s the second coming of Michael Jordan (sorry LeBron and D-Wade) I just don’t care for sports divas. He ranks up there with Terrell Owens, Alex Rodriguez, and Barry Bonds. You simply can’t root for these guys because they act more like Diana Ross than Derek Jeter.

Kobe recently said in an interview that he wanted out of the Los Angeles Lakers. That’s right, he wanted out of the marquee NBA franchise on the planet. A few hours later in a different interview he reneged and didn’t want out after all. Kobe is a phenomenal talent but I just don’t think he plays well with others. He could’ve played an individual sport like wrestling, bowling or even poker but he opted for a team game like basketball.

The NBA is a joke. The two worst teams (the Griz and the Celts) got jobbed in the NBA draft lottery. The Suns got jobbed in the NBA playoffs. The referees in the NBA are the most biased in professional sports. If LeBron and the Cavs don’t beat the Pistons their would be no interest whatsoever in the NBA finals. So who really cares where Kobe winds up, the NBA has other problems.

Billy Donovan

On the other end of the spectrum is Billy Donovan, the head coach of the Florida Gators. I like Billy Donovan. As a point guard in college, he led the Providence Friars to the Final Four in the mid-80′s. He played briefly for the New York Knicks in the NBA. He began his coaching career shortly thereafter.

After winning two NCAA championships with Florida, Donovan decided to take an Orlando Magic offer and try his luck in the NBA. However after a weekend to think about it, Donovan reneged and decided to return to Florida.

Donovan is an outstanding coach. He has busted my NCAA bracket many times. Every time I thought his teams would choke, they did well. He’s a legend in Florida. Why in the world would you leave the college ranks for the NBA and the Orlando Magic? It didn’t make any sense when they announced that Donovan was leaving for the NBA so I wasn’t surprised that he had second thoughts about returning to Florida. I hope that Donovan returns to the college game. He belongs there and he makes the college game that much more exciting.

What does this have to do with the mortgage world?

It’s okay to change your mind when it comes to your mortgage. Once the emotion involved with making a decision subsides, you return to your senses and sometimes your senses tell you to back out. There are millions of people who wished they changed their mind regarding their mortgage broker and/or their mortgage. If a deal seems fishy, you can and should back out. On a refinance transaction (assuming it’s not an investment property) you have 3 days to rescind your mortgage. On a purchase transaction, it’s a lot more complex, but you can still back out of the deal.

I’ve never been a big fan of credit cards. Check that. I’m a big fan of credit cards just not a big fan of credit card companies. I use my credit card quite frequently mainly to track my family’s spending habits. It helps us plan our budget each month. As a side bonus, I get points to use on hotel rooms or airlines tickets. Before I signed up for Opt Out Prescreen, the stream of credit card solicitations I received in the mail was endless. The worst offender year after year was Capital One.

You’ve all seen their commercials – Barbarians, Goths, Vandals, Vikings, et. al. are seen pillaging and ransacking until someone “whips out” their Capitol One credit card. The aforementioned savages are tamed at the sight of the credit card. Far fetched? Sure. Catchy? Definitely! Those commercials never sold me on Capitol One. Moreover, the hassle of signing up for a credit card and having to read the fine print swayed me from getting their “No Hassle” credit card.

Art sometimes imitates life. According to Business Week’s article A big lender’s credit card trap, Capitol One has pillaged and ransacked their clients with fees and penalties.

What’s in your wallet?

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.