Reporting For Duty – Mortgage By Randy Newsletter – May 2011

Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, May 2011
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In Issue 38 We Touch On:
#377413 Reporting For Duty
Perfect Storm For Home Buying
U.S. Slapped For Spending Bing

The Southwest Florida Association of Mortgage Professionals tradeshow was this month and although the mortgage industry has shrunk considerably, there are some interesting new lenders to work with combined with a handful of lenders that survived the mess of the housing crash. By now, anyone that has decided to remain a licensed mortgage professional has completed all the steps. You can go the national mortgage registry yourself and check on anyone to ensure they are licensed. You can even look up my skirt if you click here. My new federal license number is 377413. Keep in mind that mortgage staff that work at banks are required to be listed in the national mortgage registry, BUT they have not completed the licensing testing and other requirements that the rest of us have. Why? Because the banks wrote big enough donation checks to your elected officials to get an exemption from the law.

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: Perfect Storm For Home Buying
A perfect storm for home buying has emerged from the burst of the housing bubble, financial crisis and resultant recession we’ve experienced since 2005. The supply and demand in the housing market remains out of balance. There is a glut of bargain-priced REO (bank owned) homes and new home builders have to try to compete against them. Adding to the glut is a shadow inventory of homes with loans that are 90+ days delinquent, which is 1.96 million, according to Lender Processing Services, and the number of properties that are in the foreclosure process, is 2.18 million. It is going to take a lot more time to work this inventory down to a reasonable level that allows new home builders to resume normal operations. This inventory will keep home prices depressed.

Speaking of supply and demand we are witnessing the rental market go through the same thing. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press. This demand for rental property has consequences. Census data reveals that the median price of advertised rents rose 4.1% between the end of 2009 and the end of 2010. Average apartment rent is likely to rise an additional 3.4% this year and another 4.3% in 2012. It’s cheaper to rent than buy in about 72% of metro areas according to Moody’s Analytics.

In our May12, 2011 Daily Dollar article, we published 5 Reasons Why You Should Consider Buying A Home Now. Check out all five but the one that makes the argument best is that you can lock in your housing expense for 30 years if you purchase a home today. Not only lock it in, but at a historically low interest rate and the home price itself will be deflated compared to 5-8 years ago. Renters face ongoing uncertainty about their housing costs. Landlords raise rents as they wish and with the millions of new renters entering the market, the rental prices will be driven upward. The stars have aligned and a perfect storm is brewing right now that makes it the best opportunity in our lifetime to purchase real estate.

Personal Credit: Lesson For Fred About Overreacting To Identity Theft Stories
We hear disturbing stories on the news about huge files of customer data getting lost or stolen. Credit card numbers, social security numbers, etc. vanish into thin air. Having a real-time credit monitoring service in place is a smart thing to do if you are concerned about your credit and identity. However, there is some common sense to be used when it comes to protecting your identity.

I was reading a letter written by a subscriber (let’s call him Fred) to the Bonita Banner newspaper who was taking the advice not to discard mail containing personal information a little too far. Fred referenced the return address labels that charities like to mail to us in exchange for a donation. You probably have some stashed in a drawer right now. Fred receives more than he can use so he shreds the extra supply and in the process has burned through more than one shredder (shredders don’t like stickers). He has also tried cutting them into little pieces with his scissors.
Let’s take a breath here. We are talking about return address labels, not correspondence from your credit card company or bank. I think someone needs to introduce Fred to the phone book, or whitepages.com, or Google Maps, or the county tax website. Enough sarcasm about Fred and time for the tough love. Public information (call it “phone book” information if you like) such as your name and address, even in the hands of a criminal, has little to no chance of resulting in a stolen identity.

There is no need to obsess over these pieces of information. Rather, be cautious with mail that contains statements from banks, credit card companies, investment firms. Also, be cautious about swiping your credit card. You may have noticed that many places never take possession of your card anymore. Instead, you swipe yourself. Although this isn’t foolproof (just ask shoppers scammed at Michael’s craft stores), it drastically reduces the chance of truly sensitive information from being stolen. Fred, when your grandkid calls you about his emergency and needs you to wire $1,000 through Western Union – it’s probably a scam – hang up and call them back to double check. These are the types of situations to obsess about. As for the free return address labels, if you’re not compelled to make a small donation to the charity, feel free to eliminate your shredder budget and just toss them in the trash.

Economy & Financial Insights: U.S. Spending Binge Leads To Federal Debt Downgrade
I read a transcript of a Bloomberg TV interview with David Walker, head of the Comeback America Initiative and former US comptroller general. He says the US is spending $4 billion a day more than it is taking in! That’s billion, with a “b”. Not exactly a sustainable fiscal policy. Walker continued that “we could eliminate all discretionary spending, including national defense, Homeland Security, the judicial system, Congress, the Executive Office of the President, et cetera and we still wouldn’t have enough money.” Ouch. Even if he is using hyperbole, there’s substance to the message.

I also found some other useful factoids quoted by Walker including that 51% of Americans don’t have any income taxes and the richest Americans are paying just 18% income tax rates even while the top marginal rate is supposed to be 35%. In an interview I saw on television, Warren Buffet confessed that he doesn’t pay his fair share in taxes. All signs point to higher taxes in our future and if you are a firm believer in this then getting your assets into vehicles like Roth IRAs might be a good move – pay the piper now at the current tax levels and let what’s left grow so you can access it tax-free down the road.

The world is taking notice to our federal spending and debt. Standard and Poor’s downgraded the long-term rating for U.S. sovereign debt in April. Other rating agencies may follow suit. S&P’s action is further evidence that the U.S. is following an unsustainable fiscal path and that our elected officials must take action in order to avoid a collapse of worldwide investor confidence. Keep an eye on news from Greece, Spain and Ireland – the events there are foreshadowing what could happen in the U.S. without significant redirection of our fiscal policy.

Question of the Month: I am in a chapter 13, which will be over with next year. How hard will it be to get a FHA purchase loan?
A recent bankruptcy is a disqualifier for FHA so that is not an option for you at this time. Once your bankruptcy is discharged by the judge, and if you wish to begin the process of re-establishing a clean credit history, then step one is to apply for a SECURED credit card. Most banks offer this product. It requires that you place a minimum amount on deposit (these funds are what secure your card). There is usually an annual fee to pay for this product too.

Once you have the card, use it at least one time per month. It does not matter what you purchase or how much – just a tank of gas is good. When the bill arrives, pay it off in full and on time. Repeat this each month. After six months, ask the bank to consider switching you into an unsecured credit card. If they say no, continue using your secured card as described above. Every month, re-ask the bank to switch you into an unsecured card. Eventually they will say yes. When you work your way back into an unsecured card, follow the same monthly process described above. This will put you on the path toward rebuilding a clean credit history.

Read the Daily Dollar article Card That Rebuilds Your Credit for more info. If you ever end up in a position where you have 50% or more of a purchase price to apply toward a home, then getting a private mortgage is an option, but that is a story for another day.

Giving Back: Please Consider A Tax Deductible Donation To Help A Kid Pay For School
High school graduation season is upon us. Once again, the Larry Mitchelson Scholarship Foundation will be selecting an aspiring art student from Fulton, NY to receive a cash award to help them pursue higher education. Since 2004, the Foundation has awarded thousands of dollars to seven deserving art students, some of whom have graduated and started their career in the arts. Previous winners are profiled on the foundation web site and you can also see a sample portfolio of artwork created by our Dad. As the students progress in their careers they can post updates and pictures of their art work. Your generous donations can be made conveniently and securely on the foundation website, Facebook page or use the mailing address found at http://www.mitchelsonartscholarship.org . All donations will be acknowledged with a letter from the Foundation. Thank you for your consideration and support.

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.

Behind the scenes things are in motion to rebrand and relaunch our mortgage channel. Stay tuned for more announcements throughout the summer months. Sue and I attended the Southwest Florida Regional Technology Partnership Awards and had the pleasure of meeting Roger Berry, retired Chief Information Officer of a small company you might have heard of called Disney. Roger gave an instructional lesson on innovation leadership from which we both took practical ideas to apply in each of our workplaces. It is a rare treat to interact with a Global 100 C-level executive in our sleepy slice of paradise.

Randy

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Mortgage by Randy newsletter, Copyright 2008-2011 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 Treasurer 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.