Kerosene Heater
I’ve been stressed out lately by my Pepco and Washington Gas monthly bills.  They have been sky high now that winter is here.  I first bought a couple of oil filled plug-in heaters.  They take about a half hour to really get the room warmed up, but once they do, they work great… and it’s not the hot air you get from a central air system that blows hot air like a hair dryer.  These oil heaters were doing a fair job, but then I get my Pepco bill, and wow, I didn’t realize how much electricity these things suck up!  So I ended up lowering my Washington Gas bill slightly but more than doubling my Pepco electric bill.

I found a kerosene heater at Home Depot for $93, and purchased a 5 gallon kerosene/diesel fuel container as well…  next step was to find a gas station who sells K1 Kerosene fuel.  So far the only place I’ve found it (in Montgomery County, Maryland) is at the Free State Gas stations.  The one on Viers Mill Road near Wheaton Plaza has it, and the one in Burtonsville where 198 and Old Columbia pike meet has it.  It’s $3.49 a gallon.  The Kerone heater holds almost 2 gallons and this 2 gallons will last 9-12 hours of constant burning.  I can’t emphasize how well this Kerosene Heater warmed up our house.  It’s instant heat unlike the oil heater, and it’s moist heat unlike the central air system.  I have a 30+ year old home that can be a little drafty and because of this the central heat would run ’round the clock.  After firing up the Kerosene heater, the WHOLE house (not just a room like the oil heater) gets nice and toasty.  In fact, it gets so warm that I’m able to turn it off for an hour and save fuel.  ONE heater is plenty for our entire single family home.  I highly recommend this route to save you money and to actually heat your home better if you have an older home that isn’t built like the newer energy efficient homes.

Randy…
I would have to make the new loan approx $335K  (to have you come to the table with $88K)  At 5.875% your P&I payment is $1982 per month…..at 6.125% you are at $2036 per month….. plus taxes, insurance, HOA etc……So it is costing you $3,350 up front for a $54 per month lower payment….62 months to recoup…. If you are going to stay put for another 5 years it makes sense to pay the point.  Let’s talk on Monday.
Have a good weekend!!
Thanks
Mitch C. Jacobs
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Let’s do it.  I would like to move forward since I am just pissing away money with the current mortgage that I have.

Let me know what the monthly payment would be on a 30 year fixed with both interest rates.  I will come to the table with $88,000.00 to pay down off the $411,900 (estimated) that I owe.  Please work in the closing costs so that I only have to come with $88,000.00    I am leaning towards the 5.875% with 1 Point.
Thanks!
Randy
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Mitch C. Jacobs

Yield Spread Premium YSP, good for homeowners and buyers
I am glad you have been paying attention to the news about the shake-up in the mortgage industry. I am certainly happy to answer your questions concerning yield spread premiums and I strongly refute Rob K. Blake’s postings of the “mortgage industry’s dirtiest secret”.  He hasn’t “discovered” anything and in fact if you browse his site long enough, you will see he is ultimately selling you books and software!  I am a Loan Officer and I have nothing I’m trying to sell you other than a loan because that’s what I do for a living.  Contrary to what you read and see right now from certain politicians and talking heads, yield spread premium is not a kickback, not dishonest and not anything evil. 

YSP is sometimes the profit for a company when placing a loan. I don’t know anyone that works for free and I don’t know anyone that would expect someone to do that. Mortgage professionals are compensated one of three ways.  Either from you, the bank, or a combination thereof.When I am placing a loan, I give my clients plenty of options, with and without points, no closing cost loans, etc.  Each situation is unique and so is each client. I listen to them and then make recommendations based upon what they tell me.
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Here are three reasons that YSP is very beneficial to the client.
1. A no closing cost loan. If there was no yield spread premium paid, how would anyone ever get a no closing cost loan?  The 3^rd party fees such as an appraiser are paid from the yield spread premium.  Further more, since we know that the yield spread premium is the profit on the loan, what would happen if it was banned?Well, then EVERY loan originated after that would have points and fees. You can sugarcoat it and call it 20 different things but doesn’t it make sense that the person who spends hours, weeks and sometimes months will be paid for his or her services. Doesn’t it also make sense that if the bank can’t pay them, you will?

Without ysp would mean the end of no/low closing cost loans because some people don’t really understand what yield spread premiums are and how they can be used to HELP home owners/buyers.

2. This foolish plan would actually make the housing market worse with an increase in foreclosures.  How you ask?  Very simple, I recently had a client that refinanced out of an ARM at 9.9% I placed her in a 30 year fixed at 6.5%.  She paid off some credit card debt and saved $788 per month.  Without yield spread premium this loan would never have taken place. Why you ask?  Because she had no room in her loan to pay any points.  She was up against her limits on LTV and DTI.  She barely qualified for the loan in the first place.  It took me 7 weeks to talk the bank into doing the loan and getting her to the closing table.  I spent nights, weekends and part of my Thanksgiving holiday while out of town on the phone with her, the bank and my processor making sure everything was as it should be.  Again, let me be clear, she would not have had the loan without YSP.  Even if points had been available, all that does is make a client spend thousands of dollars in a higher loan amount.  Where do you think the points go?  They get added right into your loan amount, so you are paying them off for years.  Fewer people would be able to purchase and refinance properties if yield spread premium was suddenly gone.
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3. First time homebuyers with 95%-100% loans. There are still plenty of good hard working people who deserve a shot at home ownership but they can’t afford a down payment.  Now common sense will tell you that if they don’t have a down payment what are the odds that they have 5-10k sitting around to pay points? It’s so simple I honestly don’t know how people can’t see it.  Without YSP and the inability of a customer to pay points why would anyone place a loan for them?

Again, I can’t think why someone works for free… do you know anyone?  Do you do it yourself?  So the next time you hear/read someone saying that yield spread premiums are somehow a kickback or dishonest, you will at least be well armed with the truth.  My last thought, all mortgage brokers must disclose YSP on the HUD-1 settlement statement so you can know down to the last penny what we all make on a particular deal. If you were fair and honest with the clients, you should have nothing to fear or hide.

I welcome your thoughts and comments below.  Contact me anytime…
Brent Mendelson
888-475-0700 x123

You can file a petition with the state of Maryland and appeal the value or classification of your property.   The form can be found here, http://www.dat.state.md.us/sdatweb/petitnrv.pdf

Your real estate Agent will always push for “their” title company when you purchase a home.  We, as the lender, definitely prefer you use our preferred Title companies.  We have absolutely no financial gain by doing so, we just try to stick with those title companies who pull through for us in the clutch.  When it comes down to the wire, we have no pull if anything comes up when we work with a Title company for the first time.  If something comes up on title, the company that doesn’t know us says “sorry it will take 48 hours and you’ll have to push settlement a day”…  the company that does know us and gets business from us says “we’ll get our abstractor down there at lunch today” and insure that we get to settlement on time.  I knew a situation where a title co. would not settle a loan that got pushed to a later time in the day on a Friday and had to go in the evening.  The title co. would not stay to close it.  The buyers had to keep all their things on a moving truck over the weekend, and sleep in a hotel. 

What is Mortgage insurance?
Why am I paying mortgage insurance?  If you originally mortgaged more than 80% of the purchase price of your home, you are either paying mortgage insurance (PMI), or you used a combination of two mortgages.

What is mortgage insurance?  It is an insurance policy to protect your lender in the event you default on your loan and force the lender to foreclose.  Through foreclosure, the lender will seize your property and sell it at auction in an attempt to recoup their money.  Foreclosure is an expensive legal process, and by the time the lender can actually sell your home at auction, there are legal fees, past-due fees, and accrued interest added onto the principal balance of your loan.  Based on national sales, the average amount the bank will receive is 80% of the value.  If the balance owed is greater than the amount the house is sold for, the lender takes a loss.  This loss can be quite substantial and, when such losses are compounded nationwide, will drive up the cost of mortgage transaction for lenders.

In order to off-set such costs, lenders require mortgage insurance on any mortgage over 80% of the home value.  Mortgage Insurance reimburses the lender for their losses, should it become necessary.  Since the risk comes from the homeowner in the form of payment default, the cost of the insurance is passed along to them, as well.

The cost of mortgage insurance is determined by your Loan to Value – how much you owe as a percentage of your home value.  The higher this percentage, the higher the lender’s risk that they will experience a loss in the event of a foreclosure.  As with any insurance, the higher the risk, the higher the premium.  The loss risk and insurance premiums are pooled nationwide by the mortgage insurance companies.  So, the money you pay each month with your timely payments is used to pay for the losses caused by the delinquency of others.  Furthermore, this portion of your mortgage payment is not deductible on your taxes.

There are ways to avoid paying Mortgage Insurance.  The most obvious way is to have 20% equity in your home.  The other way is to take out a first and second mortgage, where the first mortgage is equal to or less than 80% of your home value.  Unlike Mortgage Insurance, the interest you pay on your first and second mortgages is tax deductible.  The interest rate on a second mortgage is usually higher because of the increased risk to the lender, but the lower overall cost of a two-piece mortgage makes them attractive.

If you currently have two mortgages or you are paying PMI, it is a good idea to consider refinancing.  Many homes have appreciated to the point that they have at least 20% equity.  By consolidating a first and a second mortgage and/or by getting rid of Mortgage Insurance, you may find significant monthly savings. 

Before you call any mortgage company, you should answer the following questions:
-  What do you want to accomplish by refinancing?  Is your goal simply to save money by lowering your payment on your existing mortgage?  Or do you want to change your financial picture by combining your first and second mortgages into one mortgage, consolidating credit card debt, liquidating your equity for investment purposes, or getting cash-out to improve your home?
-  Will you consider an Adjustable Rate Mortgage or other mortgage type in order to better accomplish your goal, or are you simply more comfortable with a fixed rate?
-  How much do you owe on your current mortgage?
-  Do you escrow for your taxes and insurance with your current monthly mortgage payment?  If so, you should identify the breakdown of your monthly payment into the principal and interest payment, and the amount collected for escrow.
-  How much is your house currently worth?  It is important to have an idea of the current value of your home so that the Loan Officer can place you into the best program possible.  In doing so, you will ensure that you get an honest and appropriate estimate of how the new loan will meet your goal and what to expect as a new monthly payment.
- You should also have a detailed, fully completed 1003 loan application to give your Loan Officer.  If you haven’t had your credit pulled, have him/her pull all 3 scores or at the very least 1 score for now.  It’s just like getting pre-approved for your loan when you’re buying.  You can only expect accurate quotes for rate and fees only if you’ve given this completed application and your credit report.  It would also be irresponsible of the Loan Officer to quote you without having this information.  Once you have your credit report and know your scores, you can use this information with any other mortgage companies you’d like to get a quote from.  This way you don’t have your credit pulled multiple times.

Call the mortgage company and provide the loan officer with the information you have compiled, listen to proposals, and evaluate how well your goal is met.  Make sure you request a copy of a Good Faith Estimate, which will show the proposed interest rate, closing costs, and monthly payment breakdown.  Have the Loan Officer explain which costs are to be rolled into the new loan and which are to be paid prior to closing (out-of-pocket). 

Be wary of companies that require more than $350 for appraisal and credit report to be paid up front.  Once you have received Good Faith Estimates from two or three mortgage companies, it is time to make a decision.  You should be prepared to review the estimates and then lock in all in one day because interest rates do change daily.  Expect to pay for your appraisal and credit report out of pocket, and upfront BEFORE your Loan Officer will lock your rate in.  If one company has lower rates and closing costs but you call to lock the day after you receive your quote, that company can say rates have increased, putting you back at square one.

If the two mortgage companies are comparable in rates and costs, analyze your discussion with the person you spoke with from both companies.  Who were you most comfortable with?  A good loan officer makes all the difference in a smooth refinance transaction.  Ask how quickly they can get the Good Faith Estimate to you and hold them to it.  Also ask for references so you can see a history of this loan officer doing a great job for his/her clients.  You are an important customer, and a good Loan Officer will make sure you are their top priority.  Good luck and happy hunting.

Sheila/Bob – as a follow up to my conversation with Sheila last evening, I am sending this email to summarize our plan.  I am printing applications for refinancing your loans.  You will receive them through the postal system while you are away for the Holiday.  These documents are an application only – the rates and fees are estimates and will be changing depending on market conditions.  You will get updated rate and cost information when we get authorization from you to lock your loan.  We are proceeding with the application process now for the following reason:Rates are priced based on the number of days between locking a rate and closing the loan.  By starting this application now, it will allow us to do the behind the scenes processing work needed to underwrite your application (appraise your home, verify employment, verify asset/liability accounts, etc.).  When the appropriate time comes to lock your rate, we will be able to do it on an expedited schedule thus affording you a lower rate/point structure.

Sheila shared with me your thought of waiting until Bob’s bonus is paid to determine if a buy down in rate would be appropriate.  I too think this is a good game plan.  Please share with us when you believe you will be receiving this bonus so we can determine the best course of action for discussing rate lock options.
Mitch Jacobs

did a great job.  I will recommend Mark Zaidan to my family and friends.
Walter and Katherine Weaver–  Potomac, Maryland

12/19/07
President Bush is expected to sign legislation that will continue to allow low and moderate income homeowners to deduct their private mortgage insurance premiums from their taxes through 2010.  All homebuyers with adjusted gross incomes below $100,000 will be able to deduct 100% of their mortgage insurance costs. 

This is great news for home buyers who plan to put less than 20% down when they buy.  It makes the 1 loan with PMI option a more viable one… in the not so distant past, the majority of financing was being broken into 2 loans.  For instance, an 80% first, and then a higher rate 10 or 15% second mortgage BUT there was no mortgage insurance.  Home buyers should now compare this option with the 1 loan option and see what makes the most sense.