TEAM EMPOWERMENT MORTGAGE CHATTER: May 12; News & Headlines; How Much Money Would You Deposit In This Investment; Google Wants Your House To Be As Smart As Your Phone; Global Open House; Banks Less Likely To Budge On Home Prices; The Dollar and Impact

“If you don’t like something, change it. If you can’t change it, change your attitude. Don’t complain.” – by Maya Angelou



HUD announced a conference call for today. FHA Office of Lender Activities and Program Compliance Conference Call/Live Meeting from 2-3 EST. “Topics of Discussion: Audited Financial Statements, Investing Mortgagee Requirements, Third Party Originations.” E-mail your questions both in advance of and during the call to OLAPC@HUD.GOV and to join use the conference dial-in number: (800) 260-0718; Confirmation/Participant Number: 201997.

In Northern California, Walnut Creek to be exact, FHA will conduct a 1-day class on June 7 on “recent changes, highlights of underwriting the FHA appraisal, recap of underwriting & documentation requirements. This training is for Underwriters, Processors, & Loan Officers. It is free but registration required at FHAClass.

HUD also reminded FHA/VA producers that “claim-related payments to HUD must be made through the ‘Claim Remittance’ feature in the FHA Connection. This feature can be accessed through the FHA Connection by selecting Single Family Servicing, Claims Processing, and Claim Remittance. Banking information can be entered securely using one of two methods: (1) the one-time cash flow account setup process, using the Cash Flow Account Setup module in FHA Connection, establishes a banking account that can be used for frequent and recurring remittances, and (2) banking account information can be entered at the time of each remittance. By request to allow a longer transition period, the closing date for the Single Family Claims Lockbox has been extended to May 31, 2011. There will be no further extensions. Any checks received after May 31, 2011, will be returned to the sender and mortgagees may incur interest and – or penalty amounts on delinquent debts. Guidance on this can be found at: HUD.

Wednesday the volatility in our markets continued to pick up slightly. Treasuries and other fixed-income securities opened lower but buyers came into the market and prices gained steadily through the day. Equities sold off sharply on lower commodity prices and increased economic worries. When all was said and done the new 10-year note rallied about .250 in price and down to a yield of 3.16%. Mortgage banker selling was in the mid-to-upper end of its range of $1 to $1.5 billion, and agency MBS prices finished better by .125-.250, resulting in some intra-day price improvements.

Sales increases in building materials, gasoline stations, and restaurants, Retail Sales rose .4% in March. Today we learned that Retail Sales for April were +.5%, due in part to my purchase of SkyMall’s “Teach Your Cat to Use Your Toilet” Program. We also learned that last week’s Jobless Claims dropped from 478k to 434k, with continuing claims about unchanged but the 4-week moving average heading higher, and that the Producer Price Index was +.8% with the core rate +.3%. For the year producer prices are +6.8%.


Conventional wisdom does not always apply. Consider this investment:

  • You determine the length of time and monthly amount you want to contribute.
  • You can always contribute more, but never less. If you do contribute less, all previous contributions will be forfeited.
  • The monies you deposit are not safe from a loss of principal.
  • The monies in the account are not liquid.
  • Your income tax liability actually increases with every contribution.
  • Your money earns a 0% rate of return.
  • When the investment is fully funded, there is NO income paid out.

On these terms, I have yet to have a customer be eager to put money into this investment. As a matter of fact, most are shocked to find out that they have been encouraged to put a large portion of their income in this exact investment! You see, the investment described above is Home Equity – whether it be through a larger than necessary down payment or through pre-payment strategies or even the regular amortization created by taking a shorter term.

Let’s look at the terms of the stated investment one more time:

  • Take a 15, 20 or 30 year loan
  • You can always pay additional money towards your outstanding balance, but if you pay less, and get foreclosed upon, you lose all your payments to reduce the principal.
  • As home values have declined, the monies invested (either from your down payment or other equity reducing strategies) have declined, and your cash has been lost.
  • Home equity is not liquid. You cannot just go get it when you need it. As a matter of fact, usually when you need to access it most (a job loss, disability, or worse) you can’t get it at all, as you won’t qualify for a loan.
  • With each payment on an amortizing fixed rate loan, you are paying more principal than you did in the previous payment. That means you are paying less interest. Since interest is the deductible portion of your payment, with each payment you pay less interest; therefore, less tax deductibility.
  • Home Equity has 0% rate of return. Ask yourself, “What interest rate will the bank give you on your down payment?” The answer is “Zero”. The same holds true for any reduction in principal. Any money used to increase equity (defined as the difference between the home’s value and its outstanding debt) will have a 0% rate of return.
  • When your home is paid off, there is no money paid to you. You are left with a large equity investment, gaining no rate of return.

Bottom Line

There are many factors to consider when deciding what mortgage fits your personal situation. You need to completely understand your individual, short and long-term goals. The “conventional wisdom” is not always the wisest solution. You should seek out the counsel of a good loan officer who understands your goals.


Google kicked off its annual two-day conference for software developers by launching headline-grabbing movie and music services.

But it also announced a more futuristic project at Google I/O called Android@Home. The idea: To make your home as smart as your phone.

So far Google has used Android as an operating system for phones and tablets. Now it apparently has an ambitious plan to turn the home into one giant connected device.

Google wants consumers to be able to control devices and appliances in their homes with their Android devices, which would basically function like a universal remote.

Want to turn off the lights? Use your Android phone. That’s what Google did during an on-stage demonstration on Tuesday. Lighting Science Group is building wireless lighting products — bulbs and switches that can communicate with Android — that should be available in stores by the end of the year.

Making Google’s vision of an Android-automated home a reality will depend on the 5,000 software developers who are attending Google I/O. Google said it wants them to begin building applications to automate houses.

To get the creative juices flowing, it showed off a new home theater system called “Project Tungsten,” which allows users to stream music from Google’s new service to speakers connected to the Android home network. A user can upload music by tapping a CD case equipped with a near field communication device on a Tungsten device. Tap it again and the music plays.


The 2011 REALTOR® Nationwide Open House will be held on the weekend of, June 4-5, 2011. This event, which began on a local level a few years ago, is a weekend when REALTORS® across the country – and across the globe – are invited to hold open houses in their area. It is designed to drive buyers’ attention and interest to homes for sale and offers opportunities to educate the public about the benefits of home ownership.

Ask your local association for details and information on how you can participate in this year’s REALTOR® Nationwide Open House.


An analysis by shows that bank-owned homes and short sales consistently sell for closer to their list prices than do non-distressed homes.

Redfin trend watcher Tim Ellis writes:

“This held true across every price band, although the volume of distressed sales is certainly weighted toward the low end – we were originally only going to discuss [bank-owned homes] in this post, but the sale-to-list ratios for short sales were so similar that we decided to include them in our analysis as well.”

The study includes homes in 16 markets, including Irvine, where distressed sales were at 42% of total home sales. You can see the sale-to-list ratio in the chart above.

At one point, Ellis cites a Redfin agent in Phoenix, Marcus Fleming, who says:

“Banks are very careful about getting a number of BPOs [broker price opinions] before listing a home. When it goes on the market they are so confident the price is right that for the first 2 weeks they will accept nothing but offers at 100% of list price.”

Fleming says even when the home has been on the market for several months, banks won’t consider offers for less than about 95% of the list price.

Ellis says:

“In general, the more distressed a market is, the bigger the difference between the two sale-to-list ratios. In other words, in a highly distressed market like San Diego, buyers are a lot less likely to get a bank to negotiate on price than they are in a less-distressed market like Denver. Admittedly, the correlation isn’t incredibly strong, but there is definitely a clear trend in that direction.

“In some markets, banks are being especially aggressive with their listings, putting homes up for sale at well below the market value, leading to multiple bids and average sale prices that are higher than the list price. Across the entire data set we analyzed, distressed listings were more than twice as likely to sell for over list price than non-distressed listings.”


The U.S. dollar has been weakening for the past two years and the depreciation could continue for the remainder of the year. The dollar is weaker not only against the major foreign currencies of the Euro, Pound, and the Yen, but also against the Russian Ruble, Polish Zloty, South Korean Won, Thai Baht, South African Rand, Brazilian Real, and Mexican Peso.

Why? One key reason is just an unwinding of the strength of the dollar that grew during the 2008/09 financial crisis. Global financial panic always forces the dollar up as investors search for a safe, reliable haven. Now with the financial market recovering quite strongly, the “panic” impact on the dollar is no longer in play. Another reason for the decline in the dollar is a result of the falling confidence that global investors are placing in the U.S. economy. If you had cash to invest, where would you invest – in a country with strong growth prospects or in a country that could be losing competiveness with the rest of the world?

A final important reason for the dollar decline is that the U.S. has been running up a sizeable trade deficit for quite some time. Americans buy far more imported foreign products in relation to exporting U.S.-made products abroad. To help rebalance this persistent trade deficit, the weakening U.S. dollar – in theory – is supposed to help Americans buy fewer foreign products and help sell more American products abroad. John Deere, as an example, has better prospects to sell tractors to Brazil. Also, many Americans may reconsider traveling abroad since the dollar doesn’t go as far in other countries (such as forking over $10 for a Big Mac meal in Rome, for instance, with ketchup costing extra).

However, the weakening dollar could actually worsen the trade deficit if Americans keep buying foreign products, but now at a higher price. Imported oil is one example where Americans are buying out of necessity even at higher prices.

Whichever way one’s take on the desirability or undesirability of the falling dollar goes, one thing is clear as related to the dollar’s impact on real estate. Right now U.S. real estate is cheap, from the perspective of a foreign buyer, which may mean more international purchases this year. Below is a graph of U.S. property prices in different currencies over time.

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