The Real Estate Sage at The Real Estate Investment Institute - REII

In order to protect the consumer in mortgage origination the following changes shall be made:

1. The states shall licence all mortgage brokers and their agents. Standards shall be set by the individual states, but records shall be maintained so that the public may be made aware of individual complaints. Agents fired for cause shall not be re-licenced without review. Agents may only work for one broker at a time.

2. Brokers, and corporate owners (et. al.)  controlling 10% or more of the voting interest, shall be joint and severally libel for the actions of the brokerage and their agents. Agents shall be joint and severally libel with their broker for their actions.

3. Brokers shall maintain a fiduciary with the consumer. Bankers by their nature owe their fiduciary to their bank. Fiduciary shall be disclosed to the consumer.

4. If found guilty of any crime involving their professional fiduciary in addition to any other punishment fines shall total at least three times the gross revenue from the crime.

5. No mortgage brokerage or mortgage bank shall have common ownership with a real estate brokerage, builder, or any entity selling real estate beyond their personal properties.

6. The "Good Faith Estimate" shall be amended as follows:

A. All brokers and non-depositary bankers shall disclose all fees to be collected or anticipated, regardless of source as "Origination" no other fees shall be allowed. (Anticipated fees, shall be included in the total and disclosed individually.) Once disclosed their Origination fees may not be increased, regardless of changes in the market, bankers receiving more than the disclosed anticipated fees shall refund the difference to the borrower.

B. "Good Faith Estimate" shall quote rates that can be locked for at least 30 days.

C. Pre-paid interest, used solely to adjust the due date of the first payment, shall be disclosed in an amount equal to 30 days interest. Said pre-paid interest shall not be included the pre-paid finance cost, pfc.

D. Third party fees shall be marked as to whether they are known and accurate or estimates. Those fees that are out of the lenders control and always estimated shall be totaled separably.

7. "Truth in Lending" form shall be amended as follows:

A. Pre-paid finance cost, pfc's, shall not be listed as PFC's, escrow charges shall be included only on refinance loans.

B. When calculating Annual Percentage Rate, APR, the term shall be adjusted to the lesser of 7 years or the term of the loan.

C. When calculating Annual Percentage Rate with regard to refinancing, all cost on the existing loan relevant only to the early payoff shall be included in the PFC's.

The break even term, cost of the new loan divided by the savings in principal and interest shall be determined. Long term savings or cost shall be determined, total payments of the new loan less total remaining payments on the existing loan less cash proceeds.

D. Adjustable Rate Mortgages, ARM's shall be disclosed to the worst possible scenario. ARM's that have a reduce starter rate shall declare so and included a notice that "Your rate will go up."

8. Loans including a "Pre-payment Penalty" shall prominently display the term and terms of the penalty on the "Truth In Lending" form and if the penalty can be bought out including the cost of the buy out.

9. Brokers, bankers, and their agents having a prior and higher duty to promote civile rights shall not be libel for the consumer accepting a less than desirable loan provided that they have meet all required disclosures.

10. The states shall be encouraged to promote an "exclusive right to finance" contract between consumers and lenders.

These changes only affect the smallest part of the total crisis, the point of loan origination. The major problems are at the intermediate and lender level, but if left alone these will self correct.

Bill

William J Archambault Jr

The Real Estate Investment Institute

You want to buy a bargain! You know all about the real estate crises, you watch the TV news.

Maybe you even took a ride on the "Foreclosure Express" bus where the REALTOR® on the loud speaker pointed out a nice looking house with brown grass, and told you, "it sold for a Billion Five, 3 years ago, but you could buy it today for $163,535.00!" (They don't tell you what today's comparables are selling for!)

You watch the REALTOR® adds, you know that it's a buyer's market!

The remaining (The news would have you believe these vile institutions all failed.) lender's adds remind you of "Frosted Flakes"* because like Tony T. Tiger, said "They're Greattt!!"

*(Mr. Tiger, and Frosted Flakes, are a reference to Kellogg's fine breakfast food, not to suger coated mountebankcos! There was no punn intended.)

Remembering your Grandfather taught that opportunities and problems are like heads and tails on a coin. You know that amongst all those problems there must be opportunities.

So here you are sitting across from a REALTOR® and you ask: "What's your best buy?" "What's your biggest opportunity?"

What you're likely to get are a list of reasonable buys, many with the seller providing incentives to you the buyer and separately to your REALTOR®! Good properties, but hardly great bargains! You try another REALTOR® or two with the same unproductive results. You assume the news was right, it can't be done!

Like your Grandfather's coins you and your REALTORS® went looking for the "heads!" Like Grandpa's coins, all coins, the heads side shows the dollars!

While your goal maybe to make the most dollars by putting the dollars first you never find them.

To find the biggest bargain, look not to the dollars, but to the problem! Ask not "What's your best buy?" "What's your biggest opportunity?" they are the most often asked questions and the least productive!

To find the biggest bargain ask: "What's your biggest problem?" The bigger the problem the bigger the potential bargin!

When you ask a traditional question you'll get a traditional answer and predictable results! Ask an exceptional question if you want exceptional results!

Bill

William J Archambault Jr

The Real Estate Investment Institute

A highly respected friend writes: "I'll grant you that prepayment penalties aren't the cause of the foreclosure "problem" but they indicate where the problem may lie: Bad lending practices."

I just wrote about prepayment penalties, The Evil Of Ignorance / Is The Pre-payment Penalty Evil?

My concern is at the origination level and while there have been many abuses I don't accept the idea of

Where is the logic to back this up?

Just because so many keep repeating it doesn't make it so! Just because the ultra-left want it to be so, doesn't make it true.

We've been talked into a problem, we've allowed it to become very serious!

The svengulies have mesmerized us just like the charmer does the snake! We the masses, are like those deadly snakes, we should smite the charmer, strike out and end their evil! But, like the snake we're intrigued beyond logic!

This was written for my Pod-cast at The Real Estate Sage the individual link is http://realestatesage.info/2008/04/02/httpwwwgetthemoneyus.aspx

The Evil Of Ignorance / Is The Pre-payment Penalty Evil?

During the current mortgage crisis every news pundent, every former home owner, every politico, every fool with little or no lending or banking knowledge has pontificated an opinion as to the reason for proliferation of foreclosures! We have been forced fed a virtual cornucopia of unsupported illogical sound bytes all of which are both individually and collectively pro-ported to be the cause of the problem.

With no research and only selective anecdotal testimony cures are being proposed and implemented with all of the though and effectiveness of the "snake Oil" from the mid 1800's! To make matters worse three related but dissimilar problems are being treated as one ailment! With the same attitude as the doctor who says "take two aspirin and call me in the morning" The President and Congress both wanting to be seen as doing something are proposing massive changes. Like the aspirin, hiding the real symptoms until the problem, hopefully can cure it self.

The mismanagement of major financial institutions has little or nothing to do with fraud and scheming at the interment level, and nothing what so ever to do with deception and fraud at the loan origination point. Indeed the symptom "prolific foreclosures" yes "prolific!" Never in the known history of mankind has it been acceptable, even a badge of honor to default on your debts and specifically to default on your home. Until recently those blessed few who could own their own homes would sacrifice every thing often including their first born to protect their home, and many a first born has sacrificed to protect the family home. Between changing fortunes and seeking an easy out, how many of the current foreclosures have anything to do with the systemic lending problems?

One of the inane excuses used to justify defaulting, to blame the lenders for personal failures is the use of "pre-payment penalties." The little understood pre-payment penalties are simply a tool used by lenders to lower the borrower's closing cost, just like the much maligned yield spread premium. Both these lending tools reduce the borrower's cost, the buyer normally has a choice weather to accept or reject these tools, assuming that the borrower has and is willing to spend sufficient cash to close the loan!

These two powerful tools allow borrowers to pay less at the closing table, they do added to the lenders gross profits, not as so many think by allowing them to charge more but by allowing many more consumers to buy more. When pre-payment penalties are included in a loan or the lender pays the broker YSP it doesn't raise the value of their service it simply lowers the amount they would other wise have to charge the applecart at the closing table.

When the borrower tells the lender they will keep a loan 1, 2, 3, 4, or 5 years to induce them to lend money at a lower rate the lenders often included a pre-payment penalty in order to maintain their profit leveal if the borrower should pay off early! It's that simple the pre-payment penalty simply secures the borrower's promise to the lender. Pre-payment penalties don't cause foreclosures defaulting borrowers cause foreclosures!

To ban pre-payment penalties, is simply to denies future borrowers of a useful tool to reduce their cost.

Those that will argue that debtors could have refinanced or sold except for the pre-payment penalties are out of line. The truth is that the borrowers don't want to keep their word to the lender! They don't want to live up to the obligation they agreed to! The truth is that pre-payment penalties are often the easiest money to get forgiven in a short sale. The fact is many pre-payment penalties are what is called "soft" meaning that it can be waived if the property is sold. The fact is that pre-payment penalties are not so large that they should prohibit serious cost saving refinance.

The fact is that almost all pre-payment penalties call for 6 months interest on 80% of the reaming principal balance.

The truth is there is very little truth in the media and politics regarding the current mortgage and foreclosure crisis!

Bill

William J Archambault Jr

The Real Estate Investment Institute