What the hell happened?

As the dust of the collapse of the 10th largest mortgage company in the United States starts to settle (http://money.cnn.com/2007/08/03/news/companies/american_home.reut/index.htm) the mortgage industry is being faced with its greatest change in lending policies in years. As fast as you can hit send/receive investors are sending out e-mails with changes for their product guidelines. Rate locks are being cancelled as investors realize there is no one who wants to buy the loans that they want to sell or if they want to buy them they don’t want to buy them for the price the investor has agreed to pay the originating lender.

So what loans are changing and disappearing? It is the liar loans. For years the mortgage industry has fed its growing appetite for originations with increased products for people who don’t make the taxable income needed to qualify for the home they wish to purchase or refinance. Now I am not saying that some of these people don’t have the cash flow to handle their obligations, but what I am saying is that they don’t declare taxes on that income or they are self-employed and find ways to write off expenses so that they don’t have to pay taxes. What happens when a self-employed person has a rainy day, they start robbing Peter to pay Paul and then their mortgage and other obligations become jeopardized. The same has happened to the mortgage companies that make these loans.

Countrywide, the self proclaimed largest lender in the United States has now fallen on the same woes as the rest of the industry, http://www.iht.com/articles/2007/08/17/business/mortgage.php

The entire industry has been built upon the hope that there never will be a rainy day. Now that is has started to rain we can watch as the poorly built straw houses wash away. When it is all over what will be left is a base of traditional lending values, Income, assets, collateral, credit and equity. In the meantime, for those wanting to borrow that don’t have all of the previous 5 keys, you will pay a significantly higher interest rate than the market if you can find a loan at all.

For more discussion on this topic, please feel free to add comments to this or any of my other blogs.

Sales Assitant Position

FIRST INTEGRITY MORTGAGE SERVICES

Job Description 1/2007

Job Title: Sales Assistant

Reports To: Senior Tenured Loan Officer

Department: Mortgage

Summary: The primary duties of this position involve handling routine tasks so that the salesperson has more time to focus on direct selling activities.

Essential Duties and Responsibilities include the following. Other duties may be assigned

• Manage all databases, Encompass, Mortgage Returns, Act.
• Prepare letters and other mailings from databases including birthday and thank you cards.
• Organize and maintain excel and word files on server in individual loan officers folder.
• Print guidelines for loan officer to read daily.
• Ensure that all pre-approvals are on touch campaign and manage that campaign.
• Assist with application input as needed including running credit on pre-qualifications.
• Run automated underwriting as needed.
• Copy documents, create application packages and mail out when loan officer is not meeting with client.
• Register and lock loans within approved pricing guidelines.
• Develop and maintain lead tracking system.
• Develop and maintain lead distribution tracking system.
• Follow up with appraisal values with both agents and customers.
• Assist loan coordinator gathering of missing documentation, getting verifications, making copy packages, and any other needed functions.

Additional Responsibilities: The employees talent will enable them to dictate additional responsibilities.

Competencies:

To perform the job successfully, an individual should demonstrate the following competencies:

Analytical, problem solving, customer service, interpersonal, team work, visionary leadership, ethics, strategic thinking, adaptability, dependability, initiative, motivation, professionalism, planning/organizing, quality, quantity, judgment.

Qualifications:

To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions.

Education/Experience:

High school diploma, or general education degree (GED), or one to three months related experience, and/or training or equivalent combination of education and experience.

Language Ability:

Ability to read, analyze, and interpret general business periodicals, professional journals, technical procedures, or governmental regulations. Ability to write reports, business correspondence, and procedure manuals. Ability to effectively present information and respond to questions from groups of managers, clients, customers, and the general public.

Math Ability:

Ability to work with mathematical concepts such as probability and statistical inference, and fundamentals of plane and solid geometry and trigonometry. Ability to apply concepts such as fractions, percentages, ratios, and proportions to practical situations.

Reasoning Ability:

Ability to solve practical problems and deal with a variety of concrete variables in situations where only limited standardization exists. Ability to interpret a variety of instructions furnished in written, oral, diagram, or schedule form.

Computer Skills:

To perform this job successfully, an individual should have knowledge of Word Processing software and Internet software.

Work Environment:

The work environment characteristics described here are representative of those an employee encounters while performing the essential functions of this job. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions.

The noise level in the work environment is usually moderate.

Physical Demands:

The physical demands described here are representative of those that must be met by an employee to successfully perform the essential functions of this job. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions.

The employee must regularly lift and /or move up to 10 pounds and occasionally lift 25 to 50 pounds. While performing the duties of this Job, the employee is regularly required to sit; use hands to finger, handle, or feel; reach with hands and arms and talk or hear. The employee is occasionally required to stand; walk; climb or balance and stoop, kneel, crouch, or crawl.

Please fax resume to Chris Scheer 314.878.5636 or e-mail to chrisscheer@firstintegrity.com.

Are you ready for a Mentor?

No matter where you are in your career, until you have hung it up, you need a mentor. When you first enter any industry everyone has ideas of how they should be a success, but if you take the time to look around you, you will find people who are doing things right and who are seemingly doing things right but having no success. Seek out those people that are doing things right with success and let them know you have noticed their success and you are looking to learn from them. Tell them initially you just would like to e-mail them a question once in a while and when they are ready to invest quality time, start by buying them a cup of coffee or lunch and pick their brain on what makes them successful. If you are having success, look to more successful people either in your industry or others and approach them about developing a mentor relationship. In the meantime, find someone new to mentor. By finding someone to mentor, you will rekindle the energy and passion you had when you entered your field, be reminded of you successes as you help the new person overcome their challenges and still have the opportunity to learn how others view and want to solve challenges. If you find yourself at the crossroads of not having anyone to mentor you, find a coach or mentor that will work with you for a fee. The nominal fee is often recouped in the first sale and often you are reminded of the reason that you are a success in the first place.

For more information about my mentoring program, please send me an e-mail at chrisscheer@firstintegrity.com.

The Dark Side Part 2

So how do you avoid the “Dark Side?”

Let me first say that I believe that everyone should have the opportunity to make money. The Mortgage Industry is a great place to earn a living, provide for your family and help people make dreams come true. However, with every industry there are always people who are in it only for themselves. These people prey on others who are less educated, less intelligent and sometimes less qualified. When they do, they usually abuse the system, creating large incomes for themselves while staining the reputation of their entire industry. Not to mention that the people who are usually their prey are the people who need to have a lender who will treat them fairly as opposed to taking advantage of them.

Once a “B” always a “B”. When the sub prime lending market was in its beginning, there were borrowers who would not qualify for the “A” paper loans. On more that one occasion I would hear an account rep say that “B” borrowers don’t change their habits and they don’t learn their lesson. That may be true about some people, but I believe that people can learn to manage their credit and they can learn to manage their finances. All they have to do is have an honest chance!

So what is an honest chance? Well it is putting someone into a loan program so that they can develop a budget off of. It is creating a mortgage solution that will not penalize the client in a short period of time. It is not gouging them in fees when they do come back to you eating all of their equity up with refinance fees. It is treating people the way that you would want to be treated.

As we see mortgage delinquencies rise and foreclosures happening at an alarming rate, there is a change that must take place. But it is going to have to be consumer driven. Legislation is not the key. Education of both the consumer and of the mortgage sales people will be the basis of this revolution. The consumer must learn not to fall into the trap of working with people who spend tremendous amounts of money on advertising. Mortgage originators need to learn that if you are going to stay in this business for a career, relationships are a necessity. To nurture those relationships you must take care of people so that they want to come back and refer other clients to you.

Thank you to Tracy Nolan for referring Andy Revelle.

Thank you to Andy Revelle for referring Joshua McDowell.

Thank you to Klaus Bank for the referral of Sarah Stroup and Pete Wilkens.

Thank you to Libby Emmer for referring Rob Steinkuehler.

The Dark Side

The Dark Side

If you have read any of my previous writings you have seen where I have referenced someone giving in to the “Dark Side.” What is the “Dark Side” you ask? Well the answer is the lender; you pick them, who prey on the uneducated borrower. They spend a lot of money on advertising, radio, print, television, even the internet to attract the borrower with promises of a lower rate, lower payment, and no mortgage payment for 3 months, anything that they can say to make the phone ring. Enticements such as a free cruise or vacation if you close your loan with their company. Anything to get the borrower in the door and take advantage of them.

Now what do I base this on you ask? Here is the simple truth; we are all getting the money from the same place. It really comes down to who has the lowest overhead and who has the least amount of people getting a commission out of the origination of the loan. 95% of the time the loan is backed by a mortgage backed security that was put in place by Fannie Mae or Freddie Mac. When you go into the sub prime mortgage market, their loans are securitized also and a premium or value is place on the note at a certain rate. If the loan is sold at a higher rate, then more value is placed on the note or the seller of the note receives more money. On occasion a lender will secure a block of loans at a rate that is slightly below the market rate. In this instance they have guaranteed delivery of a package of loans that meet the secondary guidelines at that interest rate. When this occurs, the lender is making less than the normal premium for the sale of these loans and will use this as a loss leader to generate phone calls. Those loans that don’t meet the criteria of the loans for the package are the loans that the lender then makes their money on by selling their other products at a premium price or with additional fees.

What about the really low interest rates or the Option A.R.M.’s you ask? The Option A.R.M. is a fantastic product for the right person. However for most borrowers this is too complex of a loan for them to comprehend or to manage effectively. This loan starts with a low teaser rate, but that rate is only good for as little as one month, and then the rate starts climbing monthly. When the rate has fully adjusted it is usually about 1.5% higher than the current 30 year fixed. The catch is that the payment is set off of the initial interest rate and they give you 4 options on what payment to make every month. You can pay the minimum payment, which covers the interest only at the initial rate, you can make an interest only payment, you can make a principal and interest payment on a 30 year amortization schedule or you can make a principal and interest payment on a 15 year amortization schedule. The sales pitch teases you with the low rate and the idea that you can pay off your loan in half the time of a normal loan. What they gloss over is the fact that if you don’t pay the 15 year payment schedule every month and only pay the minimum, then you end up adding to the principal owed and create a negative equity position. In addition, this loan has origination fees and a pre-payment penalty which make it expensive to get and even more expensive to get out of when you realize your mistake. Now, if you are diligent and pay the 15 year schedule you can pay down the principal quickly, but most people do not do that. They see the minimum payment every month and only pay that. At the end of a year, the minimum payment adjusts 7.5% while the rate has increased and the negative equity gets worse each month. If you are someone who gets large bonuses each year and can pay down the equity balance, this loan will work for you. Pay the minimum each month and at the end of the year, recoup your losses by paying down the principal balance of the loan. However, if you are not one of these people, run from this loan.

More on the “Dark Side” next week.

Special thanks to Peggy Kohl for the referral of Mike Kitson.

Thank you to John and Jessica Doll for returning to me for a refinance.

Congratulations to Melanie Cooper and her team for joining Keller Williams Realty. I wish you the best of luck on your growth path!!!

What is bugging me?

What is bugging me?

As I continue to write pre-approvals for people who have no intention of using my services to purchase a home I am faced with the dilemma of playing the game or playing my own game?

One of the services realtors expect now is for lenders to offer free pre-approvals and then once the client gets their pre-approval they go shopping for a perceived better offer. I don’t want to prevent people from shopping and getting a good deal, but I also don’t want to provide my service without some expectation of getting a chance at earning their business. Within the last 2 weeks I have provided this service to the realtor and their client when both knew that they would never use me for their loan, but because I am more available, i.e. nights and weekends, they called on me to get the pre-approval done so they could get their contract accepted. Once the contract was accepted the clients would not even return my phone calls to attempt to give them an interest rate quote. Aside from being rude, it is poor business practice for the Realtor to expect a lender, one that they should consider a business partner to work for free.

If I decide to play the game by my own rules, then I run the risk of chasing off the potential client and Realtor. But am I better without them? I am not ready to answer that question, but for now I will take my chances with Karma and believe that when I do good things for people, good things will happen to me.

Special thanks to Mary Brown for the referral of Mathew and Jill Cobb.

Reverse Mortgages

Reverse Mortgages, who Cares?

5 years ago I was uninformed and ignorant of the advantages of a reverse mortgage. I thought they were another exotic product designed to take advantage of the consumer and did not have a large potential for proper use. Notice the key words in the first sentence, uninformed and ignorant. Now I understand that the reverse mortgage can be the savior for the person who has lived with the mentality of having no debt, but in doing so owns their house and has no other assets. At age 62 or older they are faced with a fixed income that is no longer meeting their needs due to inflation or failing health. They own a home and want to be able to stay there, but no longer can afford to maintain the house or meet their financial obligations. There are other creative reasons to get a reverse mortgage, but for most of the population, they will allow people to keep their home and have some additional income to live off of.

Here is the information provided by the brochure created by First Integrity Mortgage Services.

A HECM — Home Equity Conversion Mortgage — is commonly

called a Reverse Mortgage. Reverse Mortgages were created in

1989 through the cooperative efforts of Fannie Mae, Federal

Housing Administration (FHA) and AARP. It is not coincidental that

these mortgages have gained in popularity as a larger portion of our

nation’s population has reached or is nearing retirement age.

What makes Reverse Mortgages so popular? Other mortgage loans

require payments from the borrower for the principal and interest.

A Reverse Mortgage provides payments to the borrower in the

method he or she chooses.

First Integrity’s Reverse Mortgage is insured by the Federal

government through FHA. First Integrity is an FHA Direct Endorsed

Lender, the highest certification FHA gives to any lender.

History of

Reverse Mortgages

Understanding

Your Goals

Older Americans have goals regarding how they want to

live their lives. They share common questions on how they

can achieve those goals. How many of the following goals

apply to you?

■ I want to maintain my independence.

■ I want to avoid becoming a financial burden

on my family.

■ I want to maintain the quality of my lifestyle.

■ I need to supplement Social Security and/or

pension income.

■ I need to pay for long-term health care for

myself or my spouse.

■ I need to pay off bills so I can enjoy my life.

■ My house needs remodeling so I can continue

to live there.

■ I want to pay for my grandchild’s education.

■ I want to prepay “final expenses”.

■ I want to retire early, but need a source

of income.

Who Is Eligible

For A Reverse Mortgage?

To qualify for a Reverse Mortgage, you must:

1 Be at least 62 years of age.

In the case of couples and co-owners, both individuals must be at least 62 years of age. If one of the individuals is younger than 62, that person’s name must be removed from the title in order for the older co-owner to be eligible. You should seek legal advice before making any changes to the title.

2 Be a home owner with equity in your home.

You may qualify even if you have an outstanding balance on your first mortgage. Single-family homes and qualified

condominiums, townhouses, manufactured homes, and two- and four-family owner-occupied flats are eligible.

Reverse Mortgages are only available on owner-occupied principal residences.

“I want my money to last as long as I will.”

What Are My Payment Options?

You decide how to receive the money generated by a Reverse Mortgage.

• 1 Upfront cash
• 2 Monthly payments for a term you determine
• 3 Monthly payments for life
• 4 Line of credit
• 5 Combination of any of the above

“My monthly Social Security check seemed like a lot of money when I first retired. Unfortunately, a dollar doesn’t go as
far as it used to.”

How Much Money Can I Get?

The amount of money you can receive depends on several factors including your age, the value of your home, the amount of built-up equity, and interest rates at the time of the loan’s origination. The older you are, the more you can borrow. Another factor includes the type of payment option you choose. A calculator that can help you estimate how much you could receive under different payment options is available at the AARP Web site.

(www.aarp.org/money/revmort).

How Much Does A Reverse Mortgage Cost? What Are My Upfront And

Closing Costs?

Many of the same costs associated with a regular mortgage apply to Reverse Mortgages. You will be charged an origination fee, a mortgage insurance premium by FHA, an appraisal fee, and certain other standard closing costs. In most cases, these fees and costs are capped and may be financed as part of the Reverse Mortgage so you have little out-of-pocket expense. The only fee you need to pay upfront is the appraisal fee.

Do I Need To Get An Appraisal Of My Home To Get A Reverse Mortgage?

Yes. Since the value of your home is a factor in determining how much money you qualify to receive from a Reverse Mortgage, an appraisal is required. We will order the appraisal from an appraiser approved by FHA. You will pay the appraiser at the time of formal application.

“I want to help my children and grandchildren now, not years from now after I’m gone.”

Do I Need An Attorney To Apply For A Reverse Mortgage?

Legal counsel is not required. However, we encourage you to seek the advice of legal, tax or financial advisors, as well as family members, before committing to a Reverse Mortgage.

What Are Some Of The Safeguards Established By FHA?

Reverse Mortgages were designed to be extremely consumer-friendly. There are limits on the interest rate and

the origination fees. FHA limits the interest rate and other costs associated with the loan.

There is a ceiling on the repayment amount. You never have to pay back more than the value of your home at the

time of repayment.

You receive advance disclosures so that you are made fully aware of the cost incurred in obtaining a

Reverse Mortgage.

“We’ve worked hard all of our lives. We want the financial freedom to enjoy our retirement years.”

Am I Required To Receive Counseling Before I Can Get A Reverse Mortgage?

Yes. Counseling is required for the FHA Reverse Mortgage currently available. This session is for your benefit. The counselor’s job is to make sure you are informed about Reverse Mortgages and other options. You can get the name of a qualified local counseling agency or a qualified telephone counselor by calling First Integrity (314-878-7900); The National Foundation of Credit Counseling (1-866-698-6322); Money Management International (1-877-908-2227); AARP (1-800-209-8085); or HUD’s Housing Counseling Clearinghouse (1-800-569-4287).

Is The Money From A Reverse Mortgage Taxable Income, And Will It Affect My Social Security Benefits?

Funds from a Reverse Mortgage are tax-free. It’s your money, not additional income. A Reverse Mortgage does not affect regular Social Security or Medicare benefits. However, if you receive a lump-sum payment from a Reverse Mortgage, any amount retained the month after you get it would count as a resource and could affect Medicaid eligibility. To be safe, consult a Medicaid expert.

What Is The Process For Getting A Reverse Mortgage?

The first step is to become informed by doing your research and talking with a Reverse Mortgage specialist at First Integrity. The next step is to schedule the counseling sessions with the FHA-approved counselor. After completion of this session you will be given a certificate of completion. This certificate will be required for the next step, formal application. Now you may fill out an application for the Reverse Mortgage with a First Integrity Reverse Mortgage Specialist. The loan will be processed, underwritten and closed. You will receive your first check the first of the month following closing.

Who Owns Title To My Home While My Reverse Mortgage Is Outstanding?

You! You retain title to your home during the period when you have a Reverse Mortgage.

Am I Required To Pay Anything During The Course Of The Reverse Mortgage Loan?

No. The flow of payments is reversed during the term of the Reverse Mortgage. THE LENDER PAYS YOU! However, you are responsible for keeping up payments on your homeowner’s insurance and property taxes, and to maintain the condition of your home.

“A Reverse Mortgage is an important financial tool in planning for our retirement.”

Are There Any Limits On How I Can Use The Reverse Mortgage Funds?

No. Borrowers have used Reverse Mortgages for any variety of purposes, including:

• Paying health care expenses

• Paying for long-term health insurance

• Supplementing retirement income

• Financing home improvements

• Financing home modifications

• Buying a safer automobile

Others have used Reverse Mortgages to:

• Purchase a boat or RV

• Buy a vacation home

• Pay off other mortgages

• Start a small business

• Pay off credit cards

• Travel

“I have always controlled my life, made my own decisions. I don’t want to stop now.”

What Is The Interest Rate On A Reverse Mortgage And How Is It Determined?

The interest rate varies by the type of Reverse Mortgage you choose. For the FHA Home Equity Conversion Mortgage (HECM) the interest rate is adjusted either monthly or annually (whichever the borrower chooses) and is based on an index called the “One-Year U.S. Treasury Rate” which changes weekly. The rate is published in many financial publications. For monthly adjusting Reverse Mortgages, the interest rate charged on the loan for the next month is equal to the current One-Year Treasury Bill Rate plus 1.5% margin. For annually-adjusting Reverse Mortgages, the interest rate charged on the loan is equal to the One-Year Treasury Bill Rate plus 3.1% margin. The interest charged on the Reverse Mortgage is accrued (added to the amount owed), since there are no payments. This amount is due when the loan is paid off.

What Happens If I Move Out Of My House After I Get A Reverse Mortgage?

A Reverse Mortgage comes due and must be repaid when the borrower dies or permanently moves out of his or her home. Similarly, if you sell your house, the Reverse Mortgage comes due.

What Happens When My House Passes On To My Heirs?

Once your home is passed on to your heirs, the Reverse Mortgage comes due. Your heirs may either pay the balance due on the Reverse Mortgage and keep the home, or sell the home and use the proceeds to pay off the Reverse Mortgage. If they sell the home the heirs get to keep any excess equity from the sale proceeds.

Where Can I Get A Reverse Mortgage?

First Integrity is one of a select few lending institutions in the nation approved to offer Reverse Mortgages. Because we are a St. Louis-based hometown lending institution, the entire process — from application to underwriting to closing — takes place locally.

Why Should I Choose First Integrity?

First Integrity Mortgage Services stands head and shoulders above other mortgage lenders. First Integrity is a Mortgage Banker, not a broker, and has experience in all areas of mortgage lending. First Integrity offers unique benefits on Reverse Mortgages, as well as other mortgage programs, that most other lenders can’t match. We are St. Louis based, so we are your hometown mortgage lender. We offer personal service — when you call us, a “live” person answers the phone, not a machine. We’re authorized to underwrite loans for FHA, VA, MHDC and Fannie Mae® (see www.firstintegrity.com). Where First Integrity really stands out is the quality of service we provide. Our goal is to build long-term relationships with our customers, who give us a 99.38% approval rating. We’ve also received the Better Business Bureau’s Online Reliability Seal.

Thank you for exploring your Reverse Mortgage options with us at First Integrity Mortgage Services. We hope this brochure has been helpful in your financial or estate planning.

For a Reverse Mortgage specialist to assist you in determining your individual circumstances, please contact us at 314-878-7900 or e-mail us at info@firstintegrity.com. Please feel free to include a trusted advisor or family member in the process.

Special thanks to Bill Cooper for the referral of Bob Swanbum and to Brian Kohlberg for the referral of Emily Baumann.