Chat with Charles

Gas prices are astronomical, companies are closing down, prices on everything seem to be going up and you, your buddy at work, your sister or your minister needs financing or refinancing for their home. Mortgage companies have been colored “evil” in the media for the past year, responsible for everything from the current recession to foreclosures to the neighbor’s dog crapping in your yard. Who can you trust?

You can trust Rivercrest Mortgage Services.

You can trust our 27 years’ experience. We’re constantly researching our industry to make sure our clients’ loans are being placed with secure lenders, companies who are going to be around longer than next week. To date, not one of Rivercrest Mortgage Services past clients have lost money or mortgage to either lender fraud or lender implosion. Not one.

You can trust our integrity. Part of the Rivercrest philosophy is and always has been to listen to our clients, find out what their financial plans are and help them into the product that best suits their needs. Sometimes that means telling our clients that we don’t think a particular loan is right for them, or that we’re concerned they won’t be able to handle the payment on this loan, or remind them that just because they can qualify for a particular loan amount, that doesn’t mean they should go out and spend beyond their reasonable capacity to repay.

You can trust our honesty. No “Bait and Switch.” Ever. No junk fees. Ever. No padded fees. Ever. No getting to closing and finding the rate is different than you were told or that the fees are two thousand dollars higher than you were quoted. We’ll tell you what our origination fee is and what our processing fee is, and those are the only two fees we’ll ever charge you. We’ll estimate your other closing costs as closely as we can and we’ll stand by our estimates. No surprises at closing. You don’t do that to your friends.

You can trust our relationship. I cut my teeth in the mortgage industry with some of the big boys: Norwest, GMAC and Bank of America. When we started Rivercrest Mortgage, our emphasis was on bringing a level of customer service to our clients that these corporate behemoths couldn’t match. I am proud to say that I believe we’ve accomplished that. If you have a problem after your loan closes, we’re going to help you take care of it. If your cousin is having credit issues, we’re going to help her, too, because you’re our client and you asked us to. Sometimes we’ve even referred clients to other lenders when we know they have a deal that can help that client.

When you call our number, you become part of the Rivercrest family. We take care of our family. So if you’re buying a beach house on the Oregon coast, a ski cabin in Washington, a condo in Hawaii or just refinancing your place right here at home, we’re going to take care of you. When you review your financial portfolio, we’re only a phone call away and we want to help you make sound decisions with your future.

We hope you’ll continue to have confidence in Rivercrest Mortgage, and when you talk to friends, colleagues and relatives, we hope that you’ll feel confident about referring us to them, too. We’re here for you and we’re not going anywhere. Not today. Not tomorrow. Not next year. Rivercrest Mortgage – your mortgage broker for life.

We have reached an unprecedented period in our economic history. Skyrocketing gasoline prices have stopped folks from venturing out, the backlash from which is causing huge deficits in sales for the retail, restaurant, entertainment and financial sectors. It’s a vicious circle: the more we worry about a recession or depression, the more likely we are to find ourselves deep into one.

Many economists define recession as any period where the country’s Gross Domestic Product rating (GDP) drops for at least two consecutive quarters. Since the beginning of 2005, we’ve experienced five such two quarter drops, none more dramatic than between the third and fourth quarters of 2007. While there was a slight increase in the first quarter of 2008, the continuing slide in the second quarter is reflective of one of the slowest periods in U.S. economy since the millennium.

A Depression is defined as any economic downturn greater than 10%. The good news is that the last one happened in 1938. The bad news is that times can be really tough without our going into a textbook “depression.”

The GDP is not the only indicator of economic slowdown, nor can it alone be the sole indicator of recession. Employment, industrial production, real income and wholesale-retail sales must also be included in the mix, as should real estate sales and consumer confidence. The bottom line, however you stir it, folks, is that our economy may not have stalled, but certainly has slowed waaaay down.

The mortgage industry has been one of the hardest hit sectors of the current recession. Since late 2006, 264 major lenders have shut their doors. I’m not talking about the little “mom and pop” brokerages. I’m talking national lenders, multi-billion dollar players like Washington Mutual, Chase, Bank of America, Countrywide and Citi, all of whom have lost at least a portion of their residential mortgage lending divisions in the past year and a half.

If you're a Rivercrest client, chances are you've heard Miska talk to you about the virtues of cleaning up your credit and keeping it clean.  Since I'm a firm believer in positive reinforcement, I'm going to give it to you again.  Yesterday's financial news has an excellent article on credit repair.  Rather than trying to reinvent the wheel, I thought I'd just copy it for you:

The Top 10 Ways to Repair Your Credit and Boost Your Score

(Why pay for help when you can do it for free?)

Wednesday, January 23, 2008

By Ilyce R. Glink

When it comes to repairing your credit, you're the best person for the job.

Credit repair scam artists will charge you anywhere from $500 to $1,500 or more upfront, and promise you everything from a new Social Security card to perfect credit.

But these companies can't do anything for you that you can't do for yourself -- for free -- and they might ultimately do more harm than good.

What should you do if you have bad credit? Here are 10 tips that are designed to improve your credit history and raise your credit score:

1. Pull a copy of your credit history from AnnualCreditReport.com. Sponsored by the three credit-reporting bureaus, Equifax, Experian and TransUnion, AnnualCreditReport.com is the only place you can go to get a truly free copy of your credit history. Each credit-reporting bureau is required to give you one copy once a year. You should pull copies from each of the bureaus, since they sometimes collect different data.

2. While you're there, buy a copy of your credit score from Equifax.com. Equifax offers a FICO score, also known as a Beacon score, which is from Fair Isaac, the company that created the concept of credit scoring. Most creditors will pull a FICO score, so you should see what they're seeing. Your credit score will give you a snapshot of what your credit information means to your creditors. The FICO score runs from 350 to 850. The higher the number, the better. Your target should be to have a credit score of at least 720.

3. Check your credit history thoroughly. You're looking for errors, misinformation and negative information that might count against you. File a dispute with the three credit-reporting bureaus if you spot any errors. Some credit reports have serious errors in them, so fixing these will boost your score.

4. Understand what kind of debt you're facing. Make a list of everything you owe, the interest rate each debt carries, and the minimum payment due each month. Then, prioritize your debt: mortgage, real estate taxes, credit cards and medical bills should be paid in that order.

5. Negotiate with your creditors for a lower interest rate. Paying less in interest means more of your payment each month goes toward paying down your balance. If you have a good credit score (over 720 is a starting point), you should be able to find other credit cards featuring zero percent to 5 percent in interest for the first year, or for the life of a balance transfer (check out sites like CardRatings.com and CardTrak.com to compare credit-card offers.) Just be sure you read the fine print: Some credit cards require you to charge on the new account each month or face a stiff fee.

6. Pay down the debt with the highest interest rate first. Pay your mortgage and home equity loan and lines of credit in full each month. Then, make sure you have enough cash to make all of the minimum payments due on your debt each month. Then, throw any spare cash at the debt that carries the highest interest rate first. Once you've paid down that debt, transfer all of the extra cash you're paying each month to the debt with the next-highest interest rate, and so on.

7. Pay everything on time, even if you can make only the minimum payment. The most crucial component of your credit history and credit score is your ability to pay your bills on time each month. Paying on time shows your creditors that you take your debts and obligations seriously. Even one late payment can seriously damage your credit history and credit score, even though it can take a year's worth of on-time payments to start to heal your credit history and raise your credit score. It doesn't seem fair, but that's how the credit industry works.

8. Don't charge more than 25 percent of your maximum available credit limit. If you carry a credit-card balance that is a higher percentage of your available credit limit, your credit score will go down. Why? Because creditors believe if you charge the maximum on your credit cards, it means you can't properly manage your credit. You're better off spreading out your debt between three or four different cards than having it all piled on one card.

9. Don't open and close a lot of accounts. Again, a credit score tells current and future creditors how likely it is that you won't pay back your debts. It assesses how risky a borrower you are today. Every time you apply for a new credit card, that creditor pulls a copy of your credit history from the credit-reporting bureaus. That "inquiry" gets reported on your credit history. Too many inquiries in a short period of time signals that you may be getting low on your available credit and need more cash. Even though you might be interested in getting 10 percent off your first purchase for opening a new account, it looks different to a prospective creditor.

10. Don't share credit (except with a spouse). It's easy to tell someone that you'll "co-sign" a credit card, student loan or a mortgage loan application, especially if it's someone you've known for a long time. But it's also easy to wind up in a situation where that friend or relative stops paying his or her bills (for whatever reason) and your credit will take a big hit. Once you're a co-signer for a loan, you're legally obligated to make those payments -- whether or not you can afford them. So think carefully before you agree to co-sign a loan, and nip the problem of bad credit before it begins.

A New Way to Think About Your Mortgage

About five years ago, Rivercrest Mortgage Services began test-flying a new kind of mortgage loan product. This loan, initially created in Australia in the late 80’s, combines the flexibility of a credit line with an easy, effective means of reducing your principal balance each month, resulting in a significant savings in the interest you pay on your mortgage and the ability to pay off your mortgage years faster than with a conventional fixed rate mortgage. The loan has two names for the two companies that offer it: The Asset Manager and The Homeownership Accelerator (HOA).

Nine clients in Oregon and Washington accepted the challenge. Two of these clients sold their homes within a couple years. Two others refinanced. The remaining five held onto their HOAs and every one of them is now reporting amazing results.

If you have a fixed rate mortgage right now, you owe it to yourself to check out the HOA. This isn’t a “gimmick” loan. It’s not a negative amortization loan, nor is it some newfangled product with a reduced start rate. It’s a very simple, tried and true product that asks you to do two things:

1. Change your checking account

2. Consider what is more important to you: Interest Rate or Interest Saved?

If you can do those two things, I promise you I can show you something that’s going to knock your socks off! Not only that, but you’ll be getting that credit line I told you to get months ago, providing you and your family with a measure of financial protection in the event of job loss or disaster that no other product in your portfolio can match.

Best of all, you do all of this with absolutely no change to your current spending habits. You pay your bills with checks, your ATM/credit card or free online bill pay and save thousands in mortgage interest while you do it.

Interested? I think you should be. Call today and I promise you I won’t waste your time!

Rivercrest Mortgage Services (503) 557-9145

Don’t Panic!  While the mortgage industry continues to get worked over by secondary market investors both here and abroad, the foundation is still solid and Rivercrest Mortgage Services continues to make great loans for all our clients in Oregon and Washington. 

The biggest changes have hit the Jumbo and Subprime loan arenas.  Jumbo loans are any loans exceeding $417,000.00.  Subprime lending encompasses a vast array of loan products for a wide range of borrowers.  Clients whose credit is limited, poor or just plain lousy are subprime clients, as are the folks whose credit is stellar but are buying a property that Fannie Mae and Freddie Mac won’t approve. 

Rivercrest Mortgage still has products for both Jumbo and Subprime clients.  We just funded a 100% deal for a client who has a fairly recent bankruptcy as well as a loan for a gentleman buying a manufactured house in Manzanita as a vacation home.  The point is, we can still do deals for credit challenged clients and clients buying properties other than the standard, stick-built detached house. 

Perhaps the biggest restriction I’ve seen on the marketplace has been the reduction and near elimination of “Stated Income” loans.  Stated income loans are just as the name implies: you state the amount of money you earn per month and no verification is necessary.  There are a variety of stated income type products, all of which were originally created for the borrower who is either self-employed or earns commission income and writes off as much as possible from his/her tax returns, so can’t show enough income to qualify for the home they want. 

Unfortunately, lenders relaxed restrictions on stated income products to the point where virtually anyone was allowed to “go stated.”  This became a problem when the couple who earned $40,000.00 per year between them went stated income and bought a house at a price more suited to an income of $100,000.00.  If your net income is $2,000.00 a month folks, and your house payment is $1900.00, you’re going to have problems.  A lot of people took out loans whose payments were way beyond their means.  A lot of homes went into foreclosure.  The secondary market investors looked into their portfolios and discovered that a vast majority of the problem loans were stated income deals.  Surprise! 

That the jumbo loan market has been severely limited would be comical if it weren’t so tragic.  The typical jumbo borrower is either self-employed, commission income, or they make money from other types of investments that are difficult to prove to underwriters.  So the typical jumbo borrower generally goes stated income.  These clients have the lowest default (foreclosure) rate of any borrowers.  What we’re seeing, however, is that investors cannot differentiate between those folks who legitimately make high salaries and can truly afford a jumbo loan and those who went stated income because their real income wouldn’t let them qualify for the house of their dreams.  The net result is that the borrowers who may well represent the most solid and stable segment of the home-buying populous are being denied loans. 

So what’s going to happen?  Hard to say.  Clearly, the fallout is continuing and it’s anybody’s guess how long the turmoil will continue.  People will always want to own homes, however, and there will always be some way for them to finance those homes.  Whether that financing continues the way it is now is not certain.  What is certain, however, is that I’ll be here to answer your questions, work my miracles and help you have a pretty good time buying and financing your homes. 

Charles

The voice on the radio spouts, “…and we never quote rates with prepayment penalties,” suggesting to the poor listener that if they’ve been quoted a rate with one that they – the borrower – is either inferior or got taken to the cleaners by their broker or banker and that the company advertising on the radio is going to do them a good turn by quoting a rate without the prepayment penalty. Anything to try to get the listeners to call. The advertisers – and there are more than one doing it – are creating a fictitious evil just so they can boast that they’re going to come in and save the day. As an ethical human being and business person, it makes me want to tear my hair out (what’s left of it, anyway…)

Prepayment penalties. What are they and do you need ‘em? Simply put, a prepayment penalty is a way for the lender to offer you a lower rate while guaranteeing that they’re going to get some of that discount back in the form of interest payments.

There are two types of prepayment penalties: hard and soft. A “hard” prepayment penalty means you will pay the penalty if you pay off the loan for any reason within the penalty period (typically 2 or 3 years). A “soft” prepayment penalty means you can sell the house with no penalty, but you must pay the penalty if you refinance it within the penalty period.

The soft prepayment penalty is perfect for investors who are looking to buy a place, do some cosmetic repairs and then sell it again for profit. You get the benefit of the lower rate – and payment – with no issues when you go to sell. One of my regular investment clients saved close to $800.00 by going with the rate that had a soft prepayment penalty versus the rate the guy on the radio was going to offer her. Obviously, in this case having a prepayment penalty was actually a good thing for our client.

Rivercrest doesn’t make many loans with prepayment penalties, but when we do, there’s always a good reason for it. The client that I will typically quote a prepayment penalty to is often the same client I’ve been talking to about increasing their credit scores. Let’s say John and Pat have mid-scores of 576 and 590. Those scores mean they’re not going to qualify for that conforming Fannie Mae or Freddie Mac rate of 5.75% on a 30 year fixed rate loan that you read about in the paper Sunday.

I’m going to go through their credit report with them and make sure there are no errors in the report. If there are, I’m going to help them fix the errors. If not, I’m going to talk with them about what they need to do to increase their scores in order to qualify for the 5.75% rate. Chances are very good that part of the process of increasing their scores will involve the passage of time, say 24 months with a new mortgage paid on time and all other accounts paid as agreed, as well.

So I shop the loan around and I’m able to offer them a 30 year loan that is fixed for the first five years at 6.50%, then converts to an adjustable rate loan after that. The loan has a prepayment penalty equal to six months worth of accrued interest on the balance if it’s paid off in the first two years.

Can I quote the clients the same loan without a prepayment penalty? Absolutely. I can offer them 7.00%, for example, for the same product without a prepayment penalty, but why should they pay .500% higher in rate for 24 payments when there’s a strong probability that they’re not going to qualify for a better rate before that, anyway? When we talk to clients in this situation, we have two goals: 1. get the client into a home now, and 2. make a plan that will get them into a better loan within a specified period of time.

The bottom line is this: Any loan can be quoted without a prepayment penalty. It’s just not always the best choice for our borrowers. We’re going to help our clients get the best loan possible for their specific situation. Sometimes that will mean quoting with a prepayment penalty, sometimes not.

Prepayment penalties aren’t evil! If there’s evil in the room, it’s the guy on the radio who misleads you into taking a loan that costs you more than it should. As always, we’re here to answer all your questions. Knowledge is Power!

If you have a radio in your car, chances are you’ve noticed a huge increase in the amount of mortgage ads you hear over the airwaves these days. If you believe what you hear, then you might think the banks and brokers advertising there are not only going to make your rate 3.0%, they’re going to pay all your closing fees, give you a new refrigerator and put your children through college, too. Well, my dad (and yours, too, I suspect) always said that if it seems to good to be true, then it probably is. In the next couple weeks, I’ll explain the truth behind the claims you’re hearing. I hope it will help sort “the wheat from the chaff,” so to speak.

The first myth is the most prevalent one, that there is a “no fee” loan out there. One particularly annoying spokesperson coos, “I’ll even pay for your home to be appraised.” Ha! Guess what, friends? There is no free lunch and there is no such thing as a no fee mortgage. What there is, however, is rebate pricing.

When I pick up a rate sheet from any wholesale lender and peruse the day’s 30 year fixed rates, I will always find between eight and 15 rate and fee combinations listed there. Today, for example, the rates begin at 5.50% and increase in .125% increments to 7.00% If you want a 5.50% interest rate, the lender is going to charge you a 1.0% fee to get it (that’s $2,500.00 for a $250,000.00 loan.) If you are willing to take a rate of 7.0%, however, the lender is going to pay your broker or banker a rebate (also known as yield spread) of 3.50%. That’s $8,750.00 on that same $250,000.00 loan amount. Do you think that will cover your closing costs? Voila! The “no fee” loan the guy was promising on the radio.

What’s wrong with this picture? Your closing costs for that loan might total $5,000.00, including an origination fee to your loan officer. Where is the remaining $3,750.00 going, you might ask? Into the broker’s or banker’s pocket, that’s where. We’ve all heard the news stories regarding congressional hearings cracking down on “Predatory Lenders.” Excessive rebate, coupled with extra high origination fees, equals exactly the kind of gouging congress is trying to stop.

In addition, the interest rate on a “no fee” loan is much higher than on a typical conforming loan with closing costs. Clients end up paying far more in interest over a few years than if they had paid the costs up front.

So is there a good time to investigate a “no fee” loan? The answer is yes. If you know with absolute certainty that you’re only going to be in a house for three years or less, you won’t be able to recoup closing costs with lower monthly payments because you won’t be in the house long enough to realize the accumulated savings. Go with the higher interest rate, save the closing costs and get the deal done.

Your best bet is to call your trusted broker and let them help you find the loan that fits you best, not the one that pays tuition for some banker’s kid this year! Like the Rivercrest Mortgage motto says, “The right loan at the right price, closed on time, guaranteed!”

The “Triopoly” of the big credit bureaus strikes again.  This time, they are not just charging you more than once for a simple credit report that you already paid for, they are actually selling your credit information as soon as they pull the credit report and before the proverbial ink even dries.  They call these "Trigger Leads," and they're generating huge profits for Experian, Equifax and TransUnion and putting thousands of clients squarely between the crosshairs of scammers and unethical lenders who have just one thing on their minds: ripping you off.

How does this work?  First thing Monday morning you agree to let your loan officer pull your credit and start your loan process. Tuesday morning, your phone rings. It's the sweet-talking, soft-spoken girl from Fly By Night Mortgage, the first of a half dozen lenders, calling to tell you she can beat whatever deal your loan officer is offering.  I have horror story upon horror story from clients who went with an out of state or online lender to save money, only to find out that they'd agreed to 60-90 days of hair-pulling, begging and cursing in their attempt to get their loans closed, then finding out when they walk into closing that the "deal" they were told they were getting is now going to cost them more than their Rivercrest Mortgage loan officer (the hero of the story, in case you missed it) originally quoted.   

"How in the world is this being allowed to happen?!?" you may rightfully be asking.  Good question.  Probably because the big bureaus have more money to pay lobbyists.  A better question might be, "So what can I do about it?"  Fortunately, your old buddy Charles has the answer:

YOU CAN OPT-OUT BEFORE WE PULL YOUR CREDIT. 

Aside from saving them tons of junk mail, do you really want dozens of random companies to know your credit score, social security number, address and phone number?  It is in the best interest of each of us to keep our most private information PRIVATE.  Each time your credit is pulled by a different originator, it can cause a small ding to your credit score.  That ding can mean ultimately higher costs to you on your mortgage, car loan, credit line... everything.  

Here's all you have to do:  Call 800-5-OPTOUT (1-888-567-8688) or fill out the opt out form at https://www.optoutprescreen.com.   You can finish the whole process in about five minutes.  But be aware. The agencies have up to 5 business days to execute the opt out and remove your information. You need to wait 5 business days before we pull your credit to avoid the fate of the trigger.

Many organizations are working on proving that this is an illegal practice infringing on the rights of both the customer (you) and legitimate and highly ethical loan officers out there (Rivercrest).  Until then, take the few minutes needed to opt-out, and tell all your friends, families and coworkers to do it, too.

Hopefully, lawmakers of our great land will see the insanity in this practice and outlaw it forever.  Until then, it's up to us to help each other out.  I'm here for you, folks.  I've got your back! 

On January 26, 2007, Freightliner of Portland announced it was laying off 800 employees from various facilities, many of which will be long term union employees.  That got me to thinking... "What would happen to my clients if they lost their job?"  The reality of the situation is that many of us don't have much of a cushion, should we fall on hard times. 

Since our clients chose wisely when selecting their mortgage broker(!), many of you have accumulated some significant equity in your homes.  That's great.  What isn't so great is that you have no way to access that equity, should you need it, if you don't have a Home Equity Line of Credit (HELOC) in place. 

"But Charles," I hear you saying, "you told us that credit lines are fast and easy, right?  We can get one when we need it."  Uh, oh.  Not so fast, slick.  That's only partially right.  Rivercrest Mortgage has found some of the fastest, most hassle free credit lines anywhere, and our rates are better than any of these fast talkers on the radio and television, but...

... are you listening...

I CAN'T GET YOU A CREDIT LINE IF YOU DON'T HAVE A JOB! 

That's right.  You have no way to access all that equity once you're out of work and can't show the lender an income stream.  That's why it's critical to have your HELOC in place now!  You pay $50 or so per year to keep it open, but you only pay on it if you use it.  This way, you have access to your equity instantly, for emergencies or when you need it fast.  Is $50 a reasonable cost for peace of mind?  Call today.  You can have your line ready and available inside of two weeks. 

While products and guidelines are constantly changing within the mortgage industry, it is rare to see sweeping changes occur which have the potential to signifcantly affect how the industry does business on a day-to-day basis.  Such lightning struck last week, however, when Freddie Mac revealed they were taking dramatic steps designed primarily to decrease the default rates that have been steadily rising over the past few years. 

Freddie will no longer be buying 100% stated income loans for borrowers who are salaried or hourly (W2) employees.  Many lenders jumped immediately on this bandwagon and dropped their maximum loan to value (ltv) for such loans to 95% of the sale price or appraised value.

There were a number of other major policy changes announced last week.  Some of these precipitated the closings of a number of major players in the residential mortgage lending market, bringing the number of lender closings in the past six months to 33.  I'll write more about these changes next week. 

For now, rest assured that Rivercrest Mortgage isn't going anywhere.  We'll continue to get you the best deals anywhere in the marketplace as long as there is breath in our bodies!  Have a great weekend, everyone!

Charles