LIBOR is going away in 2021!


A series of fraudulent transactions connected to the LIBOR first reported

Here are 5 things to know about LIBOR:

  1. LIBOR stands for Intercontinental Exchange London Interbank Offered Rate, the world’s most widely used benchmark for short-term interest rates.
  2. LIBOR rates are published Monday-Friday at 11:30am London time.
  3. Banks commonly use LIBOR as the benchmark rate to charge each other for short-term loans.
  4. LIBOR is used for debt instruments including student loans, credit cards and Adjustable Rate Mortgages.
  5. Adjustable Rate Mortgages adds the LIBOR rate + ARM Margin rate to calculate the variable interest rate portion.

Adjustable Rate Mortgages are 30-year mortgages with an interest rate fixed for 5, 7 or 10 years. For example, a 7-year adjustable rate mortgage is a 30-year mortgage with a fixed interest rate for first 7 years with a variable interest rate for the remaining 23 years.

The ARM margin rate is determined by the bank and is fixed for the life of the loan. A common margin rate is 2.25%. Today, the 1-year LIBOR rate is 1.73%. Based on these rate, ones adjustable rate mortgage would be 3.98% today.

“This date is far enough away to reduce the risk and costs of a more sudden change”, says Andrew Bailey, chief executive of the Financial Conduct Authority in Britain. “By having a date by which transition will need to be complete, however, we give market participants a schedule to plan to, and make it easier for them to engage as many counter parties and Libor users as is practicably possible in that planning.”

How will the outstanding $1.33 trillion of mortgages affected once LIBOR goes away? Nobody knows yet.

 

 

The Secret to Making Collection Agencies Stop Contacting You


A little known fact is that collection companies have to abide by a set of laws when collecting debts, which are laid out in the “Fair Debt Collection Practices Act.” If you want a collection agency to stop contacting you, the next time you are on the phone with them, politely say: “Per the Fair Debt Collection Practices Act, I formally request you to stop calling me. Please contact me in writing from this point forward. Good bye.” And voila, the phone calls will stop immediately.

Next, here’s how you make the collection letters stop. Copy and paste the following template into a Word document, and fill in your own details as applicable. Print the letter and send it via registered mail. The collection companies will be forced to stop contacting you. This works guaranteed. Email me your success story!

“Today’s Date

Attn: Collection Manager/ Legal DEPT.      VIA USPS Registered mail # 123456789

XYZ COMPANY and FAX (555)555-5555

RE: Alleged Acct# 123456789 – Cease and Desist”/Formal Dispute

Your name and address

To:  Collection Manager/ Legal Dept.

In reply to your letter, dated 01/01/0101 and received 02/02/0202, and your daily phone calls, please be advised of the following:

I. I am disputing the above alleged account in its entirety in accordance with the FTCPA. Please provide a copy of all relevant documentation, including but not limited to, signed contract/agreement, itemization/ account history, communication log, etc., to validate this alleged debt.

II. Please “Cease and Desist” all collection activities immediately.

III. You are hereby notified NOT to contact me at my home, place of employment, or by phone.

IV. You are hereby notified that any adverse credit reporting will result in extreme legal actions against your company and the alleged original creditor.

V. For the record, I have been in direct contact with the police department to assist in a pending case of identity theft, which I have been a victim of.

Please check the facts before “jumping” to any type of illusive conclusion that may cause your company and the alleged original creditor to face a vigorous lawsuit. This will serve as a “formal dispute” in reply to your attempt for collection.

Best regards,
Cc:  Experian, Equifax & Trans Union
BBB, FTCPA/Sacramento, CA”

How to Qualify for a Home Loan IMMEDIATELY Following a Short Sale, Foreclosure, Bankruptcy, or Loan Modification


Qualifying for a home loan IMMEDIATELY following a short sale, foreclosure, bankruptcy and loan modification is now possible. Waiting periods have plagued home buyers looking to qualify for a home loan following a credit issue ranging from 2-7 years. If the credit issue was related to severe medical issues, acts of god, or for reasons that were truly not your fault, obtaining financing without a waiting period has always been possible with shorter waiting periods.

 

Today, buyers have the option to potentially qualify for a home loan IMMEDIATELY following a foreclosure, short sale, bankruptcy and loan modification. Larger down payments are mandatory along with a good reason why this credit issue occurred.

Tell me your story! Email me what your credit issue is, and I will let you know if financing is available to you.

Pre-Approval Documentation Essentials


If you are interested in purchasing a home and qualifying for a mortgage, it’s always a good idea to get pre-approved before shopping for a property. Here are the pre-approval documentation essentials to complete a pre-approval:

  • Completed loan application
  • Last two years’ personal federal tax returns, complete with all schedules attached
  • Last two years’ W2’s and 1099’s (if applicable)
  • Last 30 days’ consecutive paystubs
  • Two consecutive months’ bank, savings, checking, money market, stock, pension, and IRA accounts – include all numbered pages. Documents must be copies of your paper statements or downloaded as PDFs from your bank’s website (there is usually a link to download your statements). Webpage printouts are not acceptable
  • For retirement accounts, your most recent quarterly statements

Self-Employed Borrower’s need to provide these additional documents:

  • Last two years’ K1’s (if in a partnership)
  • Last two years’ corporate federal tax returns, including all schedules

Home Owners need to provide these additional documents:

  • Copy of current mortgage statement
  • Copy of current insurance statement (declaration page which shows premiums)
  • Copy of property tax statement
  • Copy of HOA statement (if applicable)

Tip! During the loan process, you will be required to print, sign, and provide many documents to your loan officer. Instead of faxing them, scan them. Scanned documents provide the clearest copy and allow you to keep better track of all documents you provided. Even if you have to buy a $60 scanner for this purpose, it will be some of the smartest money you’ve ever spent!

The Truth Behind Pre-Approval vs. Pre-Qualification


If you don’t know the difference between pre-approval vs. pre-qualification, don’t feel bad. Many loan officers and realtors don’t know the difference either. Technically there is a difference, although most of the time it’s just semantics.

What is Pre-Approval?

Your loan officer received and reviewed all income and asset documentation. A loan application was input in the system, a credit report ran, and a thorough review completed. A determination was made by your loan officer with little uncertainty as to whether you will or will not qualify for a mortgage.

What is Pre-Qualification?

You provided verbal information only regarding your income and assets. No loan application was received, and no credit report was necessarily pulled. The loan officer determined (with more or less uncertainty) whether you will or will not qualify for a mortgage.

A verbal pre-qualification is essentially worthless. Instead, work with an experienced loan officer, provide all requested documentation, and complete a true pre-approval.

It is best  always to get pre-approved first. Then go shopping for a home.

Top 5 Ways to Raise Your FICO Score


Having excellent credit comes down to following 3 simple rules: Use your line of credit regularly, make at least the minimum payments, and make your payments on time. Borrowing money and paying it back on time increases your “good” credit points and raises your FICO score. Late payments, collection accounts, liens and judgments increase your “bad” credit points and lowers your FICO score.

Here are The top 5 Ways to Raise Your FICO Score:

1. Keep your Credit Card Balance Below 30% of the Credit Limit

Make sure that each of your credit cards carries a balance of no more than 30% of the total limit. If you feel the need to borrow more money than that, try to use another credit card. It is better to spread out credit card debt over multiple cards than to have a large balance on one card

2. Remove “Late Payments” Reported on your Credit Report.

Many creditors (though not all) will remove one 30-day late payment record upon request. Call the customer service phone number on your monthly statement and ask to speak to the department in charge of adding and removing late payments. Tell them the late pay was an honest mistake, and ask if they would remove one 30-day late payment record as a courtesy to you. If they say no initially, don’t be too proud to beg a little.

3. If You Have to Make a Late Payment, Make Sure It’s Less Than 30 Days Late.

Pay the minimum payment no more than 29 days after the payment due date. You will not be reported 30-days late if you do so, and your FICO score will not be negatively affected.

4. The 3-Credit-Card Rule: Use 3 credit cards on a monthly basis.

The more you borrow money and pay it back on time, the more your FICO score will increase. You do not need to carry a balance, and you do not need to buy large ticket items.

5. Pay Off or Settle “Derogatory” Accounts.

Derogatory accounts are unpaid collection accounts, tax liens, and judgments. Unless you pay off or settle these accounts, your score will never improve.

If even if you have a low FICO score, the good news is that the past need not equal the future. Starting today, make every payment on time, and watch your credit score start to skyrocket!

Top 5 Non-Allowable Funds


Coming up with the down payment and closing costs can be challenging enough, but did you know that not all of the money you plan on using to buy a property can necessarily be used? Here are the top 5 non-allowable funds (with few exceptions) when financing a property:

• Cash
• Funds coming out of a business bank account
• Credit card cash withdrawals
• Non-payroll checks
• Sale from jewelry or random items

Keep in mind that your lender will review every single deposit you have made on every single bank statement. All instances of non-allowable funds will be “backed out” of your total account balance.

Tip! Move ALL funds used to purchase a property into one bank account for two months and make NO deposits or transfers in and out of the account before buying a property.

Top 4 Things to Know Before Buying a Condo or Townhouse


Home buyers interested in purchasing a condo or townhouse must be aware that not all condo or townhouse projects qualify for financing. The project must meet certain minimum standards to qualify for financing. If you are interested in purchasing a condo or townhouse, here are the top 4 things you need to know about ANY condo or townhouse project:

#1 – Are There Any Pending Lawsuits?

Is there litigation on the property? Condo projects are being sued all the time. Depending on the type of law suits pending, a condo may or may not qualify for financing. If there is litigation, request a letter from the attorney “summarizing the complaint” and give it to your loan officer to see if financing is an option for this condo project.

# 2 – Are There Any HOA Delinquencies?

You would be surprised how many home owners pay their HOA fees late. If more than 15% of the condo owners are delinquent on their HOA dues, banks will most likely not lend on that condo project.

#3 – Is More Than 10% Owned by Just One Entity?

If one person or one entity owns more than 10% of the total units in any given condo project, most banks will not lend on that condo project.

#4 – Reserve Funds in HOA Bank Account

Lenders require 10% of the yearly HOA budget being collected for “reserves” as a line item expense on the actual budget. This is a consistent collection requirement each and every year. If the amount being collected for reserves is less than the 10% minimum requirement, then a reserve study would need to be provided to support the lesser amount being collected. Otherwise, this would likely cause the project not to be eligible for financing.

Fun Fact: A good lender may make exceptions to some of these issues.

Condo projects with more challenging issues may not qualify for conventional financing, but alternative lending options tend to be available for almost any property. A good rule of thumb is the more challenging the issue, the larger the down payment requirement and the higher the interest rate.

Top 3 Things to Know About Your Income


When qualifying for a home loan, a high FICO score and a large down payment are commonly considered the most important factors. In fact, many other factors are equally important, but the #1 factor that affects your ability to qualify for a home loan is income. Income is king!

Here are the top 3 things to keep in mind when calculating your income for a home loan:

1. You need to have received any bonus income, commission income, or overtime income over a 2-year period for it to qualify as “income.” And if your bonus, commission, or overtime income declined from one year to the next, it will not be considered income at all when qualifying for a home loan.

2. Self-employed borrowers qualify using their AGI (adjusted gross income), i.e. the income reported after deductions. If your business grossed $1,000,000 but $990,000 was expensed that year, your income that year, as far as the lender is concerned, was only $10,000.

3. Employee expense deductions. According to the IRS, non-self-employed people are allowed to write-off various employee expenses. Those expenses are deducted from your gross income to calculate the income used to qualify for a home loan.

Not all money one earns will necessarily be considered income when qualifying for a home loan. Complete a thorough pre-approval with your lender so you know exactly what your lender considers your income. Always know your true buying power before starting to shop for a home!

How Does a Short Sale Impact My Credit?


A short sale will negatively impact your credit  in two ways. One, your FICO score will drop, which will affect your ability to acquire new credit and, two, after a short sale, banks will require a minimum waiting period in most (though not all) cases before allowing you to qualify for a home loan..

Standard Short-Sale Waiting Periods:
Conventional loans require a 2-year waiting period when putting 20% down, 4 years when putting 10% down, and 7 years when putting less than 10% down. FHA loans require a 3-year waiting period after a short sale unless the borrower had NO mortgage late payments leading up to the short sale. You lucky folks with NO mortgage late payment can qualify for FHA financing immediately following a short sale.

No Minimum Short-Sale Waiting Periods:
If your short sale was the result of what is called “financial mismanagement,” you will most likely not qualify for financing without a set waiting period. But if you have suffered medical issues or other extenuating circumstances, you may not have to wait to qualify for a mortgage.

 

Here are three real examples of buyers qualifying for a mortgage immediately following a short-sale and foreclosure:

#1 – Buyer co-signed for his goddaughter on her mortgage. The goddaughter defaulted on the loan. Since the buyer was only a co-signer and never lived in the property and was technically not responsible for the short sale, he qualified for a mortgage with no minimum waiting period. The short sale was completed in December and he closed on his property two months later in February.

#2 – Buyers purchased a property that burned down due to a brush fire in the neighborhood. The city would not allow the property to be rebuilt. After 18 months of legal wrangling with the city, the buyer had no choice but to short-sell the property. The buyers qualified for a new mortgage with no minimum waiting periods.

#3 – Buyer had a messy divorce and started paying alimony and child support payments. This increased his monthly liabilities dramatically and he could not longer afford the house payment. His divorce of 17-years was considered a one-time event and he qualified for a new home loan right away.