The lending industry has observed a strange phenomenon in recent months: Adjustable Rate and Interest-Only mortgages are becoming more popular, not less, as rates remain historically low. The percentage of borrowers opting for ARMs nationally doubled between last summer and this summer. Thirty five percent of borrowers chose ARMs in the second quarter, the Mortgage Bankers Association (MBA) reported. "They should be doing just the opposite," Richard DeKaser, Chief Economist at National City Bank, told the Cleveland Plain Dealer. Rates are expected to continue to rise and people will have missed their chance to lock in a low, fixed rate. "When rates are around six percent, ARMs should not be popular," Steve Roth, mortgage product manager at Third Federal Savings in Cleveland, also told the paper. The allure of bigger, more expensive houses and, some say more importantly, the psychology of what that first payment is going to be, are attracting people to ARMs in record numbers. Four out of 10 homebuyers nationally are expected to pick an adjustable rate by next summer, according to the MBA. Roth described it as "a trend we see across all kinds of consumer products, such as cars. [Borrowers] shop by monthly payment, not necessarily the total price of the car or home loan." How do you take advantage of the popularity of these programs -while ensuring that your borrowers aren't in for a shock in a few years when their payments nearly double? First, be up front about the details. Federal and state laws require you to provide, and borrowers to sign, pieces of paper with disclosures and examples of payments under adjustable rates. But be frank, and explain it to your customer while looking him or her in the eye. Tell them that after a certain number of years their payment could go up drastically. Explain that if they put away what they're saving off the first few years' monthly payment, they'll be in great shape to make the higher payments or to refinance down the road. Tell them property values go up, making higher LTV refinanced loans likely if they choose to go that route, but that not even property values are guaranteed to rise. Finally, tell them if they plan on staying in the home until their kindergartener graduates from high school, an ARM and especially an Interest-Only loan might not be for them. The reward of being seen as an honest broker, with their interests at heart, is an investment in future business. From your borrowers, if they do need to refinance in a few years, and from referrals. Don't cash that equity in for the immediate gratification of a commission on an ARM or I-O to a borrower who likely can't afford it. It can't be stressed enough to a borrower considering an I-O loan that they need to bank some of the savings. Explain that money market funds are better than Certificates of Deposit for what could end up being emergency reserves, because they're more liquid. Tell them that with mortgage interest being tax deductible, they should see a tax adviser about possibly re-doing their W-4 forms to allow for less withholdings. Tell them that if that turns out to be a viable option for them, to use this additional money in each paycheck to save for the future. Finally, explain that a 5-year Interest Only loan really becomes a 25-year mortgage after five years, and tell them what they would pay if they got a 25-year mortgage for the amount they want to borrow now. Explain that that's what they're facing in five years - only with possibly higher rates than are prevailing now. If they plan to sell or refinance at that time, this might be a great way to get into a bigger house for less of a monthly payment. But if this "sticker shock" dissuades someone who really can't afford it from opting for an I-O loan, you've given them good advice - and a reason to trust you and give you referrals and repeat business.   Read more...

Beginning January 1, your state may hold up a stop sign if you try to apply for certification with an affidavit, and may audit you to ensure your CE affidavit is true.   Read more...

Both American homeownership and debt have never been greater than they are today. Although 69.2 percent of Americans own a home, consumer credit debt is in the trillions, a boon to the growing number of credit counseling companies your potential clients will use to help them out of debt so they can buy a home. In fact, the Cambridge Consumer Credit Index, a monthly poll of American consumers that tracks attitudes towards consumer credit, reports that one of the top three reasons consumers called for credit counseling services this month is to improve their ability to "achieve future financial goals like buying a house or saving for retirement." Many mortgage lenders and brokers who were traditionally suspicious of credit counseling organizations are beginning to welcome them because it eventually brings better business their way in the end. But not all credit counselors are credible and some are downright criminal. The Association of Independent Consumer Credit Counseling Agencies (AICCCA), an organization that helps set national standard for quality credit counseling, provides some potential red flags consumers should avoid when deciding to work with a credit counseling firm:   Read more...

With two hurricanes down and one on the way, Florida real estate agents are worried the once-record breaking real estate market will face a slowdown due to damage clean up and apprehensive consumers too scared to put money toward a home that may be wiped away. Hurricane Charley pushed the closing of 10 to 15 percent of transactions on existing homes from August into September, and that number is expected to be even more significant in the aftermath of Frances, Ron Acker, owner of Winter Park's Re/Max 200 Realty, told the Orlando Business Journal.   Read more...

You don't spend your day behind a desk - but many of your potential new customers do, and that's when they're contacting you. Short of hiring a personal assistant, how can you connect with them and still work with your current clients? You automate it.   Read more...

Stop us if you've heard it: The mortgage boom is almost over. Yes, it's been almost over since about November, 2002, but who's counting anymore? Home sales are in record territory, Freddie Mac's benchmark 30-year fixed mortgage rate hit a five month low last week, and August, though down from July, saw an amazing 1.379 million transactions pass through our Mercury servers, a leading indicator that there continues to be a robust mortgage pipeline.   Read more...

Nowadays, e-mail users are successfully navigating their way through the waves of spam and viruses that fill up their inboxes daily. However, the need for better management of e-mail-based collaboration and content remains a top challenge, according to IDC, an advisory firm in the information technology and telecommunications industries. E-mail has become one of the most important marketing and communications tools for real estate agents, allowing them to contact potential clients, build relationships with customers, and keep those customers up to date on their transaction. In fact, more than 77 percent of REALTORS® use e-mail for business purposes, according to the National Association of REALTORS®.   Read more...

The Office of Federal Housing Enterprise Oversight (OFHEO) released its quarterly House Price Index last week and said the 9.36 percent jump in property values from second quarter 2003 to second quarter 2004 was the largest one-year increase ever. For the quarter, prices were up 2.21 percent, an annualized rate of 8.83 percent.   Read more...

Appraiser offices have grown from one or two person shops to five or six or more during the recent boom. And rarely are all of those people in the same room. Making being spread out, in the field, in the office, en route to the next inspection or at the county building, an opportunity for efficiency rather than a contributor to inefficiency is the goal of a la mode's new Mobility Product Manager, Alonso Portillo.   Read more...

Agents take notice: Buying a home in California just got a little easier for first-time buyers. New price caps, being implemented in 56 of the state's 58 counties by the California Housing Finance Agency (CalHFA) are the highest allowable price caps under federal law, agency officials said. The most significant increases were in the counties of Alpine, Calaveras and Tuolumne. Real estate agents are wise to advise their potential customers that the additional financial wiggle room from the CalHFA gives them a leg up in one of the most expensive real estate markets in the U.S. The median price of an existing, single-family detached home in California during July 2004 was $463,540, a 21.4 percent increase over the revised $381,940 median for July 2003, according to the California Association of REALTORS®. There are four price points under the revised sales price limits, including one for new housing in areas the agency labels targeted and one for new housing in nontargeted areas. Similarly, there are targeted and nontargeted areas for resale properties. The targeted areas are considered economically distressed. For example, the price limit for new housing in Los Angeles County is $482,912, up from $448,259, in nontargeted areas, while it is $590,226 in targeted areas, up from $547,873. For resale housing, the nontargeted limit is $416,106, up from $371,153, and the targeted limit is $508,754, up from $452,409. "We're thrilled to be able to increase the advantages for many first-time homebuyers in our state with our revised sales limits," says CalHFA Executive Director Theresa A. Parker. "Homeownership continues to be one of the most solid and durable investments a California family can make. And, our recent revisions give even more strength and versatility to our homeownership programs." A good investment, indeed, but the soaring home prices in California - especially the southern parts of the state - have made buying a home seem like a pipe dream for many people. Statewide, the 10 cities and communities with the greatest median home price increases in July 2004 compared to the same period a year ago were: Seaside, 82.8 percent; Laguna Beach, 65.7 percent; Loma Linda, 63.9 percent; Montebello, 63 percent; Santa Paula, 56.2 percent; California City, 55 percent; Adelanto, 54.8 percent; Rancho Santa Margarita, 51.1 percent; Yucca Valley, 50 percent; Oceanside, 48.4 percent. Instead of opting for interest-only loans or other types of risky financing, the CALFHA aims to provide affordable housing opportunities by offering below-market interest rate mortgage loans to very low-to-moderate income first-time homebuyers. As a completely self-supporting state agency, bonds are repaid by revenues generated through mortgage loans, not appropriated taxpayer dollars.   Read more...