Congress Chokes Consumers – Mortgage By Randy Newsletter – June 2010

Mortgage by Randymonthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, June 2010
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In Issue 27 We Touch On:
Congress Chokes Consumers
Credit Freezes
Screwed And Glued

Summer is here.  One way I can tell is by watching the gathering thunderstorms outside my office window each day.  If lightning is your type of excitement, book a room at Hotel Mitchelson for a few nights and enjoy the show. The daily storms are symbolic of current economic events and government action.  Just when you think it can’t get any crazier, it does.  This issue includes some disturbing updates about the mortgage industry and our government actions to “help” revive the economy.

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family.  You can make your own comments and feedback as well.  Time for the news…

Mortgage Market: Congress Choking Consumer Choice
The onslaught of legislation to regulate the financial services industry continues.  The pendulum has swung so far in the opposite direction of reasonableness that it is becoming comical.  Separate bills passed by both the House and Senate are currently in the reconciliation process. One of the most egregious elements of both bills is that consumers will no longer have the option of paying some closing costs up front and some through the interest rate.

Under existing law, consumers have the option of rolling some closing costs into the interest rate and paying some up front instead of the all or nothing approach taken by the House and Senate bills. Consumers have enjoyed the existing options when they want to balance their rate with their ability to pay some closing costs up front.

Many times a borrower does not have enough cash up front for closing costs and fees.  In this situation, they can choose a higher interest rate, which will allow them to roll closing costs and originator fees into the rate.  Many times loan programs require residual cash after the closing in order for a consumer to qualify for that particular program.  For example, some loan programs insist that the borrower still have at least three months of mortgage payments in the bank after closing.  Under the current rules, the consumer can utilize some of their cash at the closing table and pay for other costs in the rate.  The proposed law takes this option away from the consumer.

Consumers should be able to finance closing costs and origination fees as they deem appropriate for their individual circumstances (i.e. cash available at closing, length of time planning to remain in home, refinance, etc.).  Having a one size fits all rule has no logical basis and hurts consumer choice.

Personal Credit: What Is A Credit Freeze? Another Tool To Help Protect Your Identity
A credit freeze locks down all your credit information.  This action prevents the credit bureaus from releasing your credit report to new creditors.  Each state has different laws about placing credit freezes. To learn about the rules where you live, do an Internet search like "Florida credit freeze law" (just insert the state where you live).

Some states allow anyone to place a freeze but others just allow people experiencing identity theft issues to do it.   When you provide an Identity Theft Report (form available on FTC website), the cost of a credit freeze should be free, but again, each state is different.  Worse case, it may cost about $10.

Important Tips About Credit Freezes
-consumers can temporarily lift a credit freeze, but depending on your state law, the credit bureaus may have up to three days to do this
-a credit freeze does not impact your credit score
-consumers using a credit freeze are still eligible to receive one free annual credit report
-if you place a credit freeze you may still use a credit monitoring service
-companies you already do business with (mortgage, credit card, etc.) will still have access to your credit report despite the freeze

Economy & Financial Insights: Massive Government Spending Leading To Fork In The Road
In recent issues of this newsletter, focus has been placed on the events in Greece.  However, massive government spending in virtually all developed countries is creating the risk of a multitude of Greece-like situations. It is the philosophy of many government officials that the reduction in consumer spending (due to job losses, switch in mindset to pay down credit card and other debt and overall conservativeness) should be offset by government spending.

It has been a long time since we have experienced double digit unemployment.  In addition, the unemployment numbers we hear about in the news are false.  Clinton era adjustments to the formula for unemployment result in the figures being understated.  Things are worse than we are lead to believe. Although people are spending a little more these days, it is not enough to offset the huge amounts of government spending.  Our recovery is lukewarm at best.

Continuation along the current course of deficit spending will lead to demands for higher interest rates from the countries that purchase our debt.  We face two difficult choices.  On one hand we can raise taxes to eat into this elephant.  This at least keeps us in control of our fiscal situation.  On the other hand we can roll the dice and see how long we can play until the demands for higher interest rates surface.  If we reach that point, we are at the mercy of those that purchase our debt.  The domino effect of higher interest rates is ugly.  Just ask a baby boomer what their mortgage rate was back in the late 70s and early 80s. Our credit card debt, mortgages, car loans will all cost more and it will be more painful for businesses to invest in their growth. Think about which lesser evil you would rather live through.

Question of the Month: How Are Some Lenders Redefining Screwed Ands Glued?
Screwed and glued. Traditionally, that is the catchy term that has been used by real estate agents, mortgage brokers and appraisers to describe what elements in a house are included in a sale. Anything that is fastened (i.e., screwed or glued) is assumed to be included in sales contract unless otherwise specifically stipulated.

New rules from some lenders are changing the “screwed and glued” guideline. For example some lenders are now claiming that curtains and blinds are not considered fixtures even if the curtains or blinds are built-in or custom for the windows in the property. If the curtains or blinds are not in the contract, then the assumption is they are NOT conveying and nothing further needs to be done.

If the curtains and blinds are included in the contract, then they are treated as personal property. If the appraiser does not include the value of the personal property on the appraisal or is unwilling to provide a value, or determines that the personal property is of no value, an underwriter must determine the reasonableness of assigning no value to the personal property. Custom window treatments can cost thousands of dollars so homeowners should be sure that the value is included in their appraisal.

Giving Back: Supporting Our Communities – 2010 Mitchelson Scholarship Winner Announced
The 2010 winner of the Larry Mitchelson Fine Arts Award is Alexis Semeraro.  Alexis will be attending the Rochester Institute of Technology and will pursue a career in film animation.  Her goal is work for Disney.  The award includes a $1,000 scholarship, funded by the generous tax deductible donations of the Foundation’s supporters.  To learn more about the Foundation and see a history of scholarship winners, and to make a financial gift, visit www.mitchelsonartscholarship.com . We look forward to following Alexis’ progress through school and beyond.

Need volunteers? Do you have a fundraising event upcoming?   Do you have a personal web site where you are raising donations for your cause?  Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.

Next stop is Williamsburg, Virginia for family reunion and some historical site seeing.  Enjoy a safe Fourth of July holiday.

Randy
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Mortgage by Randy newsletter, Copyright 2010 Randy Mitchelson.  All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson.  Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
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You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services.  Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.

As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval.  He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.

He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products.   Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY.  He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc.  He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.