Franklin Financial Group Blog

We live in a society where a large percentage of our population lives "below the line" as I heard from a recent business coach. My perception of what this means is that when bad things occur the tendency is to look outward at others and fault them for what has happened, rather than look inward at what we ourselves might have done to contribute to the problem.

If there were more "above the line" thinkers we most certainly would be in a different position. Recently I met with a customer who was certain she needed to refinance, and needed it done quickly. Prior to our meeting I presented a program that was going to combine two mortgages into one, with the rate being higher than the the rate on her current first mortage, and her payment being more than she was paying on her present first and second mortgages. It was initially thought that the rate was about to adjust and even though she was going to get a rate slightly higher than she presently had on her first mortgage, she wanted the comfort of knowing whe was locked into a fixed rate, and was willing to pay the closing costs to do so. At our meeting I looked at the documentation from the original closing of her present first mortgage. Upon review we realized that she had two more years before her present loan adjusted, and that if the index, for which any adjustments would be based, were the same in two years as it was that day, the interest rate on her first mortgage would actually go down. It therefore did not make sense for her to refinance at this time. While I would have liked the income from originating a loan for her, I liked more knowing that the absolute right decision was made and that she was going to save money by not refinancing at this time. She was "above the line" because she was not comfortable with having to refinance quickly, and wanted to thoroughly examine all the facts before proceeding. I was "above the line" because I could see that what was best for her was not to refinance and would otherwise add a potentially non-beneficial loan to the system that may not perform well, should she at some point not be able to make payments since they were higher than she was presently paying.

Being "above the line" is not the easiest thing to do. It requires that you analyze yourself and take responsibility for your actions which takes additional time and effort. It can also appear to yield less reward in the short-term. The reality however is that in the long-run there are greater rewards, much more satisfaction and the comfort of knowing YOU chose the outcome. At times when you realize a mistake was made, as they will occur along the way, being "above the line" enables you to avoid making the same mistakes again!

I am proud to announce that I have been approved as a Lending Integrity NAMB Member. What does this mean?

For the first time ever, homebuyers have a simple legitimate way to assess a mortgage professional – a sign that they can look for before they even step foot in the door. It’s called the Lending Integrity Seal of Approval, and those who display it have been through a rigorous validation process. They’ve pledged to adhere to a strict code of ethics, a best business practices policy, and an ethics grievance review process. They also receive ongoing education, and they’ve submitted to criminal background checks. Make sure you’re working with a responsible lending professional. Ask to see your mortgage originator’s Lending Integrity Seal of Approval. Visit lendingintegrity.org to find a qualified mortgage professional near you.

Identity Theft has become the number one white-collar crime in America. The statistics are staggering! According to the Federal Trade Commission, one out of every five Americans will be a victim this year. That’s up from one in seven just a year ago. At the rate this crime is growing, it’s virtually not a question of “if” you’ll become a victim; it’s a question of “when.” And yet most people have maintained the attitude that “it will never happen to them.”

Consider the following statistics:

• 1 in 5 people will have their identity stolen this year.
• Every 9 seconds another identity is compromised.
• The FTC estimates that as many as 10 million Americans have their identity compromised every year.
• Since January of 2005, over 220 million records containing sensitive information have been lost or stolen from databases across the country.
• If this crime continues to grow at its current rate, virtually every American will become a victim.

Information about us is gathered and spread around from the day we are born. Computers and the Internet have only increased the amount of personal information about us that reside in far-flung databases. They make it quick and easy to spread our information globally. What happens to our information remains very much unregulated.

In spite of the epidemic proportion of this crime, it remains mostly misunderstood. There are 5 types of identity theft which are Financial, Social Security, Medical, Driver's License and Character/Criminal. Any one of these can be financially devastating. Most people are only familiar with credit ID Theft, when in fact, 70% of all ID Theft is non-credit related. The FTC has concluded that a large portion of the information is stolen from the workplace. In order to slow down these occurrences, old laws have been revised, and new ones created, that require businesses to be responsible for non-public information in their possession.

Whether you are a business or you simply wish to protect yourself, having some form of Identity Theft Protection that includes a Restoration Service is essential. It only takes a few minutes for criminals to steal your good name.

*Information included in this message was obtained from Majestic Security, LLC, a provider of identity theft protection and restoration services. For additional information please visit their website at www.majesticsecurityidsafe.com

As of Wednesday, January 31st 2008, the Fed has reduced rates twice in 30 days.  The total reduction has been 1.25%.  After the first 0.75% rate reduction my phones started to light up. After this second 0.50% reduction, my phones started to blow up!  The single most predominant question was where are mortgage rates. Many people are under the misconception that rates should have dropped by 1.25% as well.  While that would be wonderful for mortgage professionals nationwide, this has not been the case. Often you will actually see mortgage rates rise when the Federal Funds Rate drops.

Let me first explain what the Federal Funds Rate is. The Federal Funds Rate is the interest rate which a depository institution lends funds to another depository institution, or simply the interest rate on overnight loans between banks. This information was obtained from http://www.econmodel.com/classic/terms/fedfunds.htm. The Federal Reserve mandates that banks must keep a certain amount of cash, or reserve balance, on deposit at their local Federal Reserve branch office at all times.

An example of how the Federal Funds Rate works is that when the Federal Funds Rate is decreased banks lend more money, businesses expand, home loans are cheaper, the housing market improves, and homeowners take out home equity loans. These loans are often used to pay for things such as home improvements and new cars, stimulating the overall economy. This information was obtained from http://useconomy.about.com/od/monetarypolicy/a/fed_funds_rate.htm.

So the question many people have is why haven't mortgage rates dropped to match the reduction in the Federal Funds Rate?  The answer is that the two are NOT directly related to one another. The Federal Funds Rate applies to short-term rates, while mortgage rates are tied to long-term rates. These long-term rates are often influenced by much emotion such as greed or fear. If investors believe a reduction in the Federal Funds Rate is certainly going to boost the economy, then you might see the Stock Market (riskier investments) experience a rise as money is moved from the Bonds and/or Mortgage Backed Securities (more conservative investments) into the Stock Market.  This is also often true when inflation becomes a concern. Conversely, if news hits Wall Street creating feelings that the economy may not be suffering or may suffer in the near future, or that inflation is not as much of a concern as may have been thought, then you often see money transferred from the Stock Market back into Bonds and/or Mortgage Backed Securities. When money flows out of Bonds and Mortgage Backed Securities the price of mortgages (rates) will rise. The opposite is true that when money flows into Bonds and Mortgage Backed Securities the price of mortgages (rates) will fall.

Hopefully this clarifies some of the questions that are out there about how mortgage rates are influenced by the Fed's moves as of late. There is no way to guarantee what rates are going to do. If the recent moves do what they were intended to, and the economy starts to experience growth, you should not be surprised to see mortgage rates rise. 

In conclusion, mortgage rates are currently FANTASTIC!  There is a lot of inventory with regards to homes that are on the market to be sold. Buyers can not only obtain tremendous financing rates, but also may be able to purchase the property at an amazing value. If you already own a home, now may be the perfect time to look into refinancing in order to take advantage of these great rates.

Well the holidays have come and gone for another year, and we are now a bit into 2008.  As is typical from Thanksgiving through the New Year, things were slow. The current mortgage and real estate industry status didn't help things much either. Once the New Year began, I think people began to look past all of the holiday activities that can take their toll on our lives. The New Year seems to spark some thoughts and activity every year as people begin to plan for the time ahead. Investment property activity is picking up as folks look to possibly purchase some homes that are great deals as far as value is concerned. With some slump in the economy, and less people being able to purchase homes, investors can find this to be a good time for their business as they can rent to those who can't purchase their own homes.

While we are in the middle of winter, spring is not so far away. I am seeing some people taking out home equity loans or lines of credit to do the work on the inside of their homes (such a finishing basements) and preparing for work to be done on the outside of their homes (such as roofs, decks, patios, landscaping, etc.)

Also with the New Year comes a new fiscal tax year. Some customers are looking to make their moves into new homes now that they have the time and energy to focus on this next step in their lives. With property values being advantageous for buyers, it makes sense for many to enter the purchase market. Rates are still very attractive for those looking to purchase a new property.

With the rough year of 2007 now behind us, and a full year of promise and excitement in front of us, let's hope mortgage and real estate activity pick up and stay up!

Today I received notice that Bank of America has agreed to purchase Countrywide Financial Corporation. This merger is historical as it will create the largest U.S. mortgage lender and servicer.  I have also heard rumblings that Washington Mutual is possibly going to be purchased by JPMorgan Chase.  In 2007 Citifinancial purchased InterFirst Wholesale Mortgage Lending, a division of ABN AMRO Mortgage Group, and Argent Mortgage.  These three massive corporations show how mortgage operations have been impacted nationwide. In addition to other mergers that have taken place, there have been many lenders who have gone out of business entirely. Since late in 2006, 214 major U.S. lending operations have imploded.  That is a staggering figure to consider!

Looking at the figures mentioned above, the number of lenders who are willing and/or able to lend in the residential market has dropped considerably. I deal mostly with the wholesale divisions of the lenders I am approved to broker loans through. Many of these divisions have either pulled out of the market, or have revised their product offerings to a much more conservative approach than either they were offering previously, or still do through their own retail channels.  It is hard to predict the future but what I foresee is certainly more loans originated through fewer, larger lenders to start. This may be good or bad. It may be good because the larger lenders will have the financial backing or stability to continue to offer necessary mortgage programs and products to the public.  It may be bad because fewer lenders means less competition, which can also reduce the programs and products offered to the public.

While much media focus is placed on what is happening with the larger lending institutions, you do not hear much about the "small guys" still lending on mortgage related transactions. Lately I have researched some smaller banks operating maybe only one or two branches, which have been willing to lend on some properties that the larger lenders would not touch. These smaller banks portfolio the loans and service the loans themselves. This enables them to keep additional profits in-house. Of course profits are attractive, but the deals have to make sense and not be too risky in order for the smaller banks to lend their money on these deals.

It is going to be interesting to see how things turn out. The mortgage industry was destined to suffer at some point, which it obviously has and still is. As always I remain positive due to the fact that our population is constantly growing, which means so is the number of people who will be looking to obtain financing on real estate. 

It is a well know fact that the mortgage industry is experiencing great turmoil. Many people are finding it difficult or impossible to get a program that offers a lower interest rate than they currently have, or one that enables them to reduce their minimum monthly payments, in order to create an excess to pay down their loans, and thus build equity at a faster rate. Imagine if you were on track to have a 30-year mortgage paid off in under 10 years, without paying out more than you currently are per month. What a safe feeling you would have, regardless of what is going on in the mortgage and real estate realms!  There are software products available to many consumers that often work with a homeowner's Home Equity Line of Credit (HELOC) to pay off a first mortgage at a much faster pace.  This is accomplished by making larger payments against a first mortgage balance using available funds from the HELOC.  As the HELOC funds are applied to lower the principle balance on the first mortgage, the interest that accrues on the amortized first mortgage is reduced. Mortgages have their interest accruing from the date the last payment on the account was received, so they are essentially paid in arrears each month. Knocking the balance down at a much faster rate therefore contributes to less interest being required on the remaining balance.

The question you may ask is that if you are using the HELOC to pay down your mortgage and thus reduce the balance on that loan, how do you ever pay down the increasing balance on the line of credit?  In order for this to work you must deposit (or pay in) income on or against the credit line, as you receive it. Many households have dual incomes paid every other week. With this in mind, payments are being made to pay down the credit line sometimes every week, or more often every other week. It is like you are using the HELOC like a personal checking account. A credit line is an open-ended account that has interest calculated daily on the balance. If a household income is reducing the balance every week, or every other week, the credit line does not have the time to accrue as much interest month to month. The software products mentioned use the household income input by the homeowners, and the mortgage balance and terms (along with other possible debts) to be paid off at a faster rate. The software guides the homeowners when to make the payments for the mortgage and debts to be paid off, and in what amounts. When the balance on the HELOC is reduced to a certain amount, the software signals the user to make a larger payment against the mortgage and/or other debts to be paid. The monthly income pays down the HELOC balance over time until another larger payment is cued to be made.

The software programs mentioned above have been around for many years and they work! The key is to enter the information accurately for each person's situation, and then follow the software's instructions. They require an initial investment for up to $3,500 or more, and also require time and attention to be paid to one's monthly finances. With the return often being in the tens to hundreds of thousands of dollars of interest saved, they are definitely worth every penny! Keep in mind, the initial investment can be paid using the HELOC, with the software figuring this amount to be included in the calculations as a debt to be paid off. So it is possible to accomplish the entire program goal without actually paying out any initial money straight from your cash at hand. Obviously if you can afford to pay the initial cost up front rather than financing it, you will save additional money in interest. Either way, this can be a far less expensive way to become debt free than if you try to refinance a home and attempt to do this on your own.

Feel free to contact me should like additional information on how to become mortgage free in less than half the time. You may contact me at kary@franklinfinancialgroup.com .

Merry Christmas and Happy New Year!

Unless you never watch any news, financial or otherwise, or you never read any newspaper or listen to any talk radio, you are well aware of the mortgage and real estate industries state of affairs.  Things seem to be Gloom and Doom wherever you turn. Well, not everywhere.  Lately we have noticed an increase in our business.  Part of that is attributed to new homebuyers ready and able to get a good deal on a home currently listed for sale.  With it being a "Buyer's Market" there really are plenty of good deals to be obtained when buying a home.  Investors who were not hit hard by the downturn in the market are out there looking to purchase homes that may have been foreclosed on due to many different reasons.  Additionally, people will continue to outgrow their current homes and are out there looking to upgrade.

Another area we are seeing an increase in business is people doing some improvements to their property.  Whether it be to finish a basement, add a room or rooms, or update areas within the home, improvements are under way. This possibly may be to avoid selling at not the most desirable time, to work on getting maximum value for the property down the road, or to simply do some things that have been put off and now that we are heading into winter are going to be enjoyed more with additional time being spent indoors. Whatever the reasons, activity is being seen.

The last major area (and what we believe to be the most important area) we are seeing the increase in our business is from our referral network. In these unstable times, people are coming back to us since we have helped them in the past, know their situation, and can save them money the second (or even third, fourth or fifth) time around.  They trust us to do the right thing, over and over again for them. It is our belief that dealing with possibly the largest investment that people will ever make, should be handled correctly each and every time.  Much care is needed to make sure that not only is the financing the best for the present situation, but also that it will not harm someone down the road, as many of today's mortgage products are turning out to have done.  Loyalty goes a long way and its benefits are felt not only by the handling the financing, but also by the people looking for the financing. 

If you are looking to become part of a lasting and beneficial relationship, feel free to contact us at any time. Take a look at what others have to say about us in the Testimonial section on our website. Go to www.franklinfinancialgroup.com .  You'll be glad you did!

With the mortgage industry going through some tough times, services provided by mortgage brokers are extremely valuable.  Mortgage brokers have the ability to shop among multiple lenders for the best programs available to borrowers.  Instead of borrowers trying to do this on their own, and possibly encounter much confusion as to why differences exist and what they mean, a mortgage broker can handle this for them. 

Borrowers first need to find a mortgage broker that they can trust, preferably one that works mainly on a referral basis.  A mortgage broker that has built their business on referrals shows that they must be doing things right for their customers, or they would not continue to be referred to others. Secondly, borrowers should find out the level of experience and any credentials or designations that mortgage broker has obtained.  Someone who has been working in the mortgage industry long enough can tell you that it is very cyclical.  Understanding these cycles is key to helping borrowers get the best financing available to them now, and how that may affect them in the future.  Third, and maybe the most important of all is that borrowers must seek out as much information as they can before and during the loan process so that they are giving themselves the highest chances of understanding the financing terms and programs they will be choosing from. 

With the key factors mentioned in place, borrowers can now put their chosen mortgage broker to work.  With many lenders no longer in the industry, mortgage brokers can search the lenders still offering their services, and choose which of these lenders has the best programs and rates for the borrower.  Borrowers simply cannot keep track of the day to day changes that occur within the mortgage industry, while a mortgage broker can.  It is part of a mortgage broker's job to keep current with these changes so that they may do the best job for each borrower they work for.  As rates fluctuate, a mortgage broker can monitor these changes, and if rates take a turn for the better, they can then move the loan over to the lender offering better rates for their borrowers.  If a borrower goes directly to a bank, often if rates drop, the borrower may be stuck with a higher rate than they could otherwise obtain.

Niche products such as Stated Income, No-Income or many other types of verification products fall under the Alt-A title.  While these loans have been scrutinized as of late, they still have a definite place of value in the market.  Mortgage brokers have access to these products, while local banks may not be able to offer them. 

Successful mortgage brokers not only know how to place and process mortgage loans, but they should also be able to consult a borrower if qualification is not currently available.  Many borrowers have issues that keep them from qualifying for a mortgage loan. These borrowers should know what these issues are, and what to do in order to correct the issues that exist. A mortgage broker should be able to advise you on issues they see that are keeping the borrowers from obtaining financing, and help the borrowers devise a plan of action to fix these issues, so that financing will be available in the future.

Financing and owning a home is an integral part of the American Dream.  Mortgage brokers are key to helping people realize this dream. 

Whether you work in the mortgage or mortgage-related industry, or have recently undergone the mortgage process you are probably now aware of the dramatic changes that have happened and are still going on in the mortgage industry.  Recently there is news of large mortgage companies struggling to stay in business, or unfortunately for some either filing bankruptcy or literally going out of business. Almost daily I receive notifications of guideline changes and/or removal of entire loan programs altogether.  For a while the subprime market was the center of conversation, while now the Alt-A and even Prime mortgage markets are hitting the headlines.  Investors are pulling back or halting their interests in many pools of mortgage funds, and thus lenders are forced to react.  Basic economics teaches us the relationship of supply and demand.  If there is no demand for certain mortgage products due to their past, present and future performance they will no longer be offered, or in supply. 

What does this all mean to consumers? I think it means that consumers may have to change their perspective as to what they may or may not be able to do.  With lending guidelines tightening up, consumers need to take a much more proactive approach at their current situations.  Now more than ever, if you want to receive the best possible programs available, you need to take the proper steps to maximize your borrowing potential.  The very first place that begins is your credit history.  If you haven't looked at your credit in a while, now may be a good time to do so.  Find out if there are any derogatory items reporting on your credit, and if so, take action to correct those immediately.  Do not wait!  One of the primary factors when deciding whether or not to lend to a borrower is their WILLINGNESS to pay back debt.  The better your credit report, the better the reflection is of your willingness to pay back your debt.

Next, I would start some sort of savings plan if one is already not in place.  The more money you have saved, the better off you will be financially now and in the future.  Lenders are offering the best programs to those who can demonstrate not only the willingness to pay, but to those who demonstrate the ABILITY to pay back debt.  Your income may show enough ability to pay back your debts, but if you have some money saved up, you show that you have reserves to further your ability to pay in case of any unforseen occurrences.

Regardless of whether you are looking to purchase or refinance a property, you might be facing some tougher issues borrowing money now than you may have in the recent past.  If you have modest and realistic expectations as to the current lending environment, you are less likely to experience disappointment.

We often hear that history tends to repeat itself.  What we are going through now in the mortgage industry has happened before.  It is going to take some time for those factors contributing to today's tough market to pass.  As a consumer, you should focus on aligning yourself with professionals who understand these changes and who can offer you guidance on how to best position yourself during these times of change.  I am confident things will get better.  Some of the responsibility to help the mortgage environment improve lies with lenders and the programs they offer, which we all know has, and is continually being addressed.  Additionally, mortgage brokers are responsible to educate borrowers on loan programs and market conditions, and work to originate an honest and beneficial loan that meets the borrower's needs. Consumers also need to take responsibility for their part in the mortgage process.  When looking at the financing of a property, borrowers need to be realistic as to whether or not they can truly afford the debt.  Just because you qualify for something, does not always mean you should proceed with it. As we are seeing now, every type of borrower can be affected when times turn towards a more conservative approach.

We must all realize that we cannot change the future, but we can do our best to prepare for and live with it.  Positive attitude, honesty, integrity, professionalism and realistic expectations go a long way. Remember, you can do anything, it just make take a little longer to do it.  Patience IS a virtue, so embrace it, and stop to reflect on what you have to be happy with along the way!