Mortgages

Builders Fight for Value Recognition for Energy-Efficient Homes

Last week, HUD Secretary Shaun Donovan and U.S. Department of Energy Secretary Steven Chu met at an energy auditing company on Long Island to announce the launch of the FHA’s new PowerSaver pilot program.

Working with 18 lenders across the country, the program will allow homeowners to borrow up to $25,000 to finance energy improvements in an existing home, including improvements to insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems. Terms can go up to 20 years, and rates will be lower than standard. The FHA will guarantee up to 90% of the loan.

The idea is to generate interest in the private sector, which Donovan is hoping will get on board by providing these types of loans more readily.

Fannie Mae recently came out with a similar offering, a new Energy Improvement feature for mortgage loans. Fannie had already stopped offering its Energy Efficient Mortgage feature, which could have been used to finance the purchase of a new energy-efficient home. The replacement program can only be used to make energy improvements to an existing home.

The financing will cover energy improvements deemed cost-effective by a RESNET home energy rating, and amounts can go up to 10% of the post-improvement appraisal.

Unlike Fannie, the FHA still has a program for buyers of energy-efficient new homes intact. Its Energy Efficient Mortgage program can be used to help home buyers finance energy-efficient features in a new home as part of an FHA insured mortgage.

However, the increasing shift in emphasis toward improving the energy efficiency of existing homes rather than new homes is symptomatic of the disconnect between what government entities see as the market reality and what builders are seeing in the field.

According to a Fannie Mae spokesperson, the company feels that private lenders are meeting the needs of buyers of energy-efficient homes, suggesting that lenders will value energy-efficient features appropriately.

Shaun Donovan agrees. When Builder questioned Donovan after the PowerSaver announcement about why the government seemed to be moving its focus to existing homes, Donovan emphasized that the benefits of energy-efficient building are being recognized by private sector lenders and appraisers.

“We’ve seen greater progress in the new-home market through local building codes,” Donovan told Builder. “What we’ve seen more and more are appraisers and Realtors who see the value in [energy-efficient construction], and lenders are recognizing that.”

But that’s not what builders are saying.

About two years ago, Meritage Homes decided to go all-in with energy efficiency. “We took the approach that we were going to start over and change the way we build,” C.R. Herro, vice president of environmental affairs at Meritage, told Builder. “We frame different. We build different. We use different appliances and features.”

As a result, Herro reports that Meritage can build a home that uses half the energy and half the water of a traditional home with only a 10% increase in the cost of construction. The energy-saving upgrades Meritage includes can save the homeowner between $1,200 and $3,600 a year in utility bills, depending on the home (some of Meritage’s homes achieve net-zero energy efficiency).  

But when asked if appraisers and banks recognize the value of the energy-efficiency benefits Meritage includes, Herro replied emphatically, “Absolutely not! We’re building a lot of significant improvements into our homes. We’re doing net zero. We’re doing solar. And we’re struggling to get a penny out of it.”

“Conventional construction is leaky,” Herro said. “A traditional home will have to recondition all of the air in the entire house 70 times a day. When you rebuild [to high energy-efficiency standards], you can cut that down to five.” According to Herro, such a reduction would cut heating and air-conditioning costs down by 60%.

The trouble, Herro said, is that the people consumers look to when trying to gauge the value of a home—appraisers and lenders—are failing to recognize the value in the energy-efficiency upgrades the homes include, and as a result, the builder is forced to absorb that additional cost.

Despite these challenges, Meritage has been able to make energy-efficient building work as a business model, largely because of customer awareness that sees the value in it. Also, as one of the largest builders in the country, Meritage is able to achieve economies of scale by building all of its homes to energy-efficient standards. “But the average builder is incentivized to build a less energy-efficient home,” Herro said. “It’s ridiculous that you can build to [a high] level of efficiency, but it has a negative effect on your income statement.”

In an effort to remedy the problem, Herro is promoting the Sensible Accounting to Value Energy (SAVE) Act, a proposal supported by Sen. Michael Bennet (D-Colo.) that would require federal loan agencies to take into account the expected energy costs of a home when assessing a mortgage loan application.

“Homeowners who spend less on energy will have more money to make mortgage payments and to maintain and repair their homes,” SAVE Act press materials say. “A person will be less likely to have to choose between paying the utility company or his or her lender.”

The materials also point out that the average U.S. household will spend more than $2,300 in energy costs over the course of a year, “more than the average cost of property taxes or homeowners insurance, two expenses that are routinely underwritten in a mortgage loan. Energy costs are not accounted for in this process.”

“If you take all the things out of a home that waste resources and money, that innovation costs a little bit more,” Herro said. “The problem is that building better, until the average consumer recognizes the benefits, is disincentivized by the establishment.”

This article was written by Claire  Easley

To visit the full article, click on the link: http://www.ecohomemagazine.com/news/2011/04-april/builders-fight-for-value-recognition-for-energy-efficient-homes.aspx

CFL Bulbs, Why and How to Recycle

In my profession, one of the most common questions that I get is do CFL bulbs really make that much of a difference and why should I switch? This can be looked at in many different ways but here are some points that I feel are key.

• Saves 40.00 in electricity costs over its lifetime
• Uses 75% less energy than incandescent bulbs and lasts ten times longer
• Produces 75% less heat

The important thing is to recognize where to install them to get these benefits. It’s recommended to install them in heavy traffic areas such as the kitchen, living room and recreational rooms. Also, to make them the most effective they should be left on for a minimum of 10 minutes as frequent turning off and on will shorten their life span. Typically a CFL bulb costs 5.00 and lasts 10,000 hours whereas, the cost of a regular incandescent bulb is in the area of 0.75 and lasts 1,000 hours. Over time, you will save some money on buying the bulbs but also the energy savings as well. If you aren’t convinced yet, then maybe our friends at Energy Star can help because this is staggering, “If every American home replaced just one light with a light that’s earned the ENERGY STAR, we would save enough energy to light 3 million homes for a year, save about $600 million in annual energy costs, and prevent 9 billion pounds of greenhouse gas emissions per year, equivalent to those from about 800,000 cars.”

Finally, one of the most important things to remember is how to recycle them because they do contain a little bit of mercury. First and foremost, don’t put them in your regular trash can instead take them to Home Depot of you can use this friendly website to locate a place near you. www.earth911.org  Another fantastic site that can help with safe containers for recycling in the home, office or commercial sites is personal friends of mine at www.buschsystems.com

Phantom Loads

A phantom load is simply described as the unintentional use of electricity by electronics, even when they are shut off. Examples include cell phone chargers, laptops and entertainment components.

Combating this problem is simple if you are willing to take the extra time. All you have to do is turn off your computer, monitors, printers and other devices when they’re not in use. Whereas, if your charging units are not being used, be sure to unplug them from your outlets. Power strips are definitely a better solution.

Eliminating wasteful draws on electricity can have a big impact:

• Devices that draw around 20 watts in stand-by mode may add up to a couple of dollars a month to your utility bill.
• A typical U.S. home has thirty to forty products constantly drawing power.
• Phantom loads equate to approximately10% of residential electricity use.

Be especially conscious of these wasteful culprits:

• Digital picture frames
• Large screen televisions
• DVD players, video game systems and other home theater components
• Microwaves and toasters

It might not seem like a large amount of money at first but remember these are the simple steps that you can do on a daily basis that help reduce energy usage and put a few extra bucks back into your wallet.

The Importance of Insulation

What is insulation?

 Insulation is defined as a material or combination of materials which impede the flow of heat. The materials can be adapted to any size, shape or surface. The term ‘insulation’ refers to materials which provide substantial resistance to heat flow. When these materials are installed in the ceiling, walls, and floors of a building, heat flow into and out of the building is reduced, and the need for heating and cooling is minimized.

 Insulation is the most effective way to improve the energy efficiency of a home and building. Insulation of the building envelope helps keep heat in during the winter, but let’s heat out during summer to improve comfort and save energy. Insulating a home can save 45–55% of heating and cooling energy.

 Benefits of Insulation 

• Comfort is improved year around
• There is less need for heating and cooling
• Can help reduce noise

Scams with insulation

As a homeowner the only way you can truly have your insulation tested for effectiveness is having an audit performed or by having someone climb into your attic to visually access your insulation. First, you must identify the failures before determining what to install and second, it might be best just to fix the failures.  Plus adding more insulation on top of the current insulation which is not performing will only help you little. Another recommendation would be to ask the company to take pictures of their findings so you can see where improvements can be made.  Be careful as a lot of companies will sell you more than you need.  Most homes have plenty of insulation, but it’s poorly installed or has been knocked out of place. Reattaching it to the floors, ceilings and walls it’s meant to protect could save you a bundle of money – both on replacement product and on energy bills.

Tips to Avoid Energy-Efficiency Scams

We’re all trying to save money on energy bills these days. Plenty of people who sell energy-saving products are willing to take unfair advantage of you in your quest to save a buck. You won’t save any money or energy if you buy products from people who make false claims. When it comes to purchasing air-conditioners, insulation, roofing and even AC services, we homeowners have to do our homework before we start writing checks. Don’t let a salesperson mislead you into spending too much or buying an ineffective product because you don’t have the facts.

 Here are a few ways homeowners get scammed when it comes to energy efficiency because of actions by sales reps.

 1. They sell you more than you need. As we gear up for another scorching Arizona summer, there are a lot of ads for companies that want to over-insulate your attic to a level of R-60, which won’t save you any more money on air-conditioning bills than the recommended R-38. In fact, there’s a good chance you don’t even need new insulation at all. Most homes have plenty of insulation, but it’s poorly installed or has been knocked out of place. Reattaching it to the floors, ceilings and walls it’s meant to protect could save you a bundle of money – both on replacement product and on energy bills.

 2. They convince you that high-tech is better than common sense. The least-expensive way to slash your energy bills is to reach for the “low-hanging fruit” in your house – small, low-cost improvements. Instead of getting hooked into buying an expensive package of multiple new systems, start your energy campaign by sealing your air-conditioner’s ducts, caulking windows and doors and checking weather stripping. Have an energy audit to determine if your attic is properly and passively ventilated and that your insulation is well-installed. That will help you more than investing thousands of dollars in optional equipment.

 3. They can’t prove the claims. It’s illegal to say a product will slash energy bills, insulate your attic or reduce heat gain without tests to back up the claim. Ask for the research….if the product has passed these tests, you can be sure the manufacturer will have that information all over its website. Bottom line, if you can’t find it? Don’t buy it.

 4. They insist bigger is better. This is a common claim when it comes to buying an air-conditioner. It used to be that bigger homes needed larger AC units. Newer homes are so tight, however, that they need far less powerful systems than older homes with lots of air leaks. Find an AC rep that will get a lot of information about your house, the weather and your family’s lifestyle – and use a computer to calculate the size of your new air-conditioner. If that’s not happening, find a different contractor.

Energy Audits

Are you spending too much on your energy bills, do you deal with rooms that are warmer than others, or do you feel like you have to dust all the time? If so, then we can help and here is a recent comment from a customer of ours.

Last week I had a home energy audit conducted by REEis on the recommendation of a colleague in the sustainability/”green” field here in Phoenix. I had some idea of what to expect but the care and detail in the explanation of the process that they went into to ensure that I knew exactly what was happening was extraordinary.

The process involved diagnosing the home using a blower door test and thermal imaging to find areas where there are:

• Leaks in the A/C duct system
• Penetrations which allow air exchange and connection between the attic and exterior of the home with the conditioned space
• Insulation failures
• Room pressure imbalance and heat island which cause uneven air temperature and comfort issues
• Unsealed windows and doors  

After the blower test they go up into the attic where the real proof for issues are found.  In the case of my home, penetrations, room pressure imbalances and a return air-handler that was completely disconnected were causing some serious issues. Our major complaints have been comfort — one side of the house barely cools — and high utility bills. 

This entire process costs $99.00 and since we are regulated by APS/SRP and the energy star program there are multiple rebates available for what we do. Our goal is to save you up to 35% a year on your energy bills and show you how rebates can reimburse you up to 75% of the total costs.

Appraiser Independence?

Federal Reserve Proposal Comment regarding Docket No. R-1394 and RIN No. AD-7100-56:

Post your own comments to the Fed:  http://bit.ly/fJ3lkW

Just because someone has an appraiser’s license does not mean they are knowledgeable, ethical or moral nor good at what they do.  Therefore, the “judgments” of these people are not infallible and Appraisal Management Companies (AMC) seem to just be another revenue stream for the Big Banks and provide no benefit to the consumer whatsoever.

Since the implementation of the Home Valuation Code of Conduct (HVCC) and the “forced” use of AMCs, I have seen more errors in appraisal reports than ever before.

Some examples include:  Omitting an entire bedroom (making a 3 bedroom SFR into a 2 bedroom) from the report and their sketches even though county records and the home itself clearly showed 3 bedrooms.  On several occasions I have seen appraisers using comparable home sales from bisecting neighborhoods that should not be used to determine a home’s value, in most cases, deflating the subject home’s value AND consequently deflating that property’s adjacent home values for all of its neighbors.

I have seen AMCs send an appraiser who lives in Sedona, AZ to do an appraisal in Mesa, AZ (about 150 miles apart).  They might as well have sent him from another state like Oklahoma to Arizona; it would provide the same poor results.  And in about 80% of all reports that I have seen there are poor comps in the report, incomplete reporting and even multiple spelling errors that forces underwriters to condition for clarification or additional comments on their loan approvals which have led to unnecessary increases in closing times, lost revenue and increased stress for the consumer.

But even in those examples listed above, appraisers still got paid for their shoddy work which in some cases derailed the hard work that was provided in good faith by the real estate agent and the loan originator.  All this does is ultimately hurt the consumer with artificially lower home values (in many cases), increased stress and anxiety, in addition to forcing the consumer to pay (30% more than in 2009) for poor service.  (Appraisals went immediately from $350 to $450, $650 with a rent schedule, in 2009 when HVCC was implemented.)  The appraiser MUST be held accountable to the consumer who is paying for the report!

Local business people and residents know who the good businesses and bad businesses are in their local area and that includes appraisers.  The Federal Reserve, Fannie & Freddie, Big Banks located thousands of miles away have no realistic expectation as to what is a good or a bad appraisal or who is giving good or poor service.  It is those people on the ground (real estate agents, loan originators and local, reputable appraisers) and in the field who know what the expectations should be and it has always been that way.

Homeowners must be allowed to say, “I do not want that person to appraise my home.”  You must see the unfairness of forcing a homeowner to pay a vendor that they have had problems with in the past.  HVCC gives appraisers too much power once an appraisal has been assigned to them and with no accountability.  They are paid regardless of the accuracy or competency of the report and that is just wrong.

The only people who truly know that the appraisals might be flawed (the mortgage originator who interviewed the homeowner, the real estate agents and the homeowners themselves) are the very people who are prohibited from talking to the appraiser.  Does that make any sense?

You must understand that for low to moderate income homeowners, an appraisal fee of $450-750 (the standard fee range since HVCC was adopted) can easily represent 25 percent or more of their monthly income.  That is a lot of money to spend on a gamble with no accountability.

Prior to HVCC, my conversations with appraisers about value prior to completion of the report were not intended to coerce a higher than fair value but they were to determine if we should proceed from the standpoint of consumer protection.

For example, let’s say I have a consumer with low to moderate income (that’s 90% of my book of business) wanted to refinance their primary residence.  If they owe $100k, in order to successfully refinance, they would need an appraisal that shows that they have a certain amount of equity right?  Prior to HVCC, if my appraiser advised me that the homes in that consumer’s neighborhood were selling in the $90k range, then I could advise my client not to waste their $450 on an appraisal.

Ethical appraisers and originators liked this because ethical appraisers and originators don’t want to see a consumer pay for a product that does not benefit them.  Now, HVCC forces the consumer to lose $450 to find out that they cannot refinance.

The large majorities of mortgage brokers doing business in their communities have been and still are ethical, honest and upfront people.  Like any business, if consumers receive poor or unethical service, word gets out and that business eventually goes away.  It’s called a “free market”.  It has worked great for centuries…

“Concentrated power is not rendered harmless by the good intentions of those who create it.” - Milton Friedman

A free enterprise system is the fastest way to put a bad company out of business, NOT government interaction.  All that government interaction has done is made things worse for the consumer.  It has not protected them and has directly increased costs in the form of over-priced appraisals, extended closing times with daily late fees and lock extension fees in some cases.  HVCC was unnecessary for those of us who never used our positions to coerce, bribe or threaten an appraiser.  More importantly, those actions are illegal and immoral already and were committed by a very small number of originators and we didn’t need HVCC to tell us that.  As a matter of fact, if the current laws that we had on the books prior to 2005 were simply enforced, then there would not be this need for legislators to create more new and complicated legislation that ultimately hurts those people they intend to protect!

“One of the great mistakes is to judge [government] policies and programs by their intentions rather than their results.” – Milton Friedman

But what HVCC has done is severely increased costs to the consumer (the average increase is about 30%) while simultaneously very much lowered the bar for appraisal reporting.  How is this benefiting the consumer? I have no idea.  Mostly, it seems to be benefiting the bottom lines of those investors (many of them Big Banks) who now wholly or partially own the AMCs that are supposed to be helping the consumer but instead continue to hurt the consumer at every turn.

With the recent discussions about eliminating the mortgage interest tax deduction and compile that with declining home values, in part due to shoddy appraisals derived from the inception of HVCC, our government is taking away the last two financial incentives to own a home in this country, appreciation and tax deduction.

This then begs the question, “Is it truly the government and the Federal Reserve’s intention to really protect the consumer?”

Here are some points for the Federal Reserve to consider before ruling:

Ø  Reasonable and customary fees should be based on appraisal fees PRIOR to the implementation of HVCC.  AMCs add about $175-200 per file leaving the appraiser a reduced income.  If the appraiser should normally get $350 per appraisal then the AMC adds a markup it should increase the burden to the consumer and NOT reduce the appraiser’s income.  This is how competition is reduced to just the appraisers willing to work for less but not give a better report.

Ø  Total fee for the appraisal report should be separated on the final HUD-1 as a fee paid to the appraiser and a separate fee paid to the AMC.  Since the AMC did not create the appraisal report, they should not be listed on the HUD as “appraisal fee”.  It should be clear to the consumer that the AMC fee is a pure markup fee.

Ø  AMCs should not be allowed to “review” an appraisal unless that “reviewer” is a certified licensed appraiser with a minimum of 2 years experience.

Ø  AMCs MUST be whole and separate entities.  The AMC should not be allowed to be owned wholly, partially or in any manner (subsidiary, affiliated business partner, etc) by any financial institution, bank, credit union, etc.

Ø  Appraisers need a contact and a secure site for reporting violations of appraisal independence against AMCs, banks, mortgage bankers, mortgage brokers, credit unions, real estate agents, lawyers, etc.

Ø  Appraisal reports ordered in compliance with Uniform Standards of Professional Appraisal Practice (USPAP) guidelines should be portable and accepted by ALL lenders, banks and secondary markets including Freddie and Fannie.  If the USPAP guidelines are followed and a second lending institution requests another appraisal report, the cost of that appraisal should be at that lender’s expense.  That expense should NOT be taken from the loan originator’s income NOR charged to the consumer.

Ø  Appraisers are currently not “graded” or “tracked” by revision requests from an AMC.  Most revision requests should be tracked and graded to those appraisers that seem to be providing inferior reports.  This “grading” system needs to be publically accessible by the consumer and vendors alike.  Typical revision requests have been for using poor comps from bisecting neighborhoods that are not representative of the subject property’s value, misspelled words, fields with more than 50 characters (if more than 50 then the rest is cut off from the report), UW requesting clarification or comment, no aerial photos of the property or a change in contract price after the report has been completed.

Ø  There is absolutely NO NEED for a geographical market area for each AMC.  Fair competition is always better for the consumer.

Ø  Stop blaming the Mortgage Broker for the financial meltdown. We did not create the risky loans you keep pinning on us.

Ø  Why is the Mortgage Broker the only industry that has to disclose our income?  Banks, mortgage bankers and credit unions should have to disclose their Service Release Premium and their total income as well.  Why the double standard?  All that does is provide less transparency which is always bad for the consumer.

Ø  ALL Mortgage Loan Originators MUST undergo the same testing and compliance measures as loan originators that work for Mortgage Brokers.  Each individual loan originator at a mortgage broker’s office has to pass a state and national licensing test, complete an FBI background check, national fingerprint recording, 24 hours of pre-licensing education and 8 hours of continuing education annually.  Not to mention all of the new fees and classes to pay for (I spent over $1400 this year to get my license).  If I have to do it, why shouldn’t bank and credit union employees who originate mortgages have to do it?  Isn’t that what’s best for the consumer?

Please feel free to contact me directly for conversation regarding these issues.

Post your own comments to the Fed:  http://bit.ly/fJ3lkW

Spencer Anglin – Licensed Mortgage Loan Originator
Velocity Financial, LLC | NMLS# 226533
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742

A Look At Keynesian Economics

For those of you not familiar with Keynesian economics or what a licensed mortgage loan originator does with their “free time”, then this is for you.  In short, licensed mortgage professionals find ourselves studying economic news and essentially becoming economists in order to try and determine the best time to lock a loan.  As a result, some of us will develop a professional political-economic opinion based on the historical data.  By the way, it is Keynesian economics has been the driving force behind of all of these government bailouts and takeovers of private sector markets.

Many of you may have heard the term “Keynesian economics” in the past but it is now a phrase that is synonymous with the economic policies of the past 20 months.  Look at the way things are right now in our economy and this is what you get when you try to impose that kind of economic policy in a very global market.   In case you have no idea what I’m talking about, this information is somewhat accurate:  Wikipedia: Keynesian Economics

“One of the great mistakes is to judge [government] policies and programs by their intentions rather than their results.” – Milton Friedman

Keynesian policies failed during the Great Depression, and they are failing today, only to a much larger degree.  This economic catastrophe has been caused by very loose monetary policies, crushing levels of debt, and appalling lending practices.  It simply cannot be solved by looser monetary policies, issuance of twice as much debt, and government commanding banks (or, in the case of Fannie and Freddie, “commandeering”) to make more bad loans.

For those who don’t remember, The Great Depression was caused by Federal Reserve expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom.  When the Federal Reserve belatedly tightened in 1928, it was too late to avoid financial collapse.  According to Murray Rothbard, in his book America’s Great Depression, the artificial interference in the economy was a disaster prior to the depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. Government intervention delayed the market’s adjustment and made the road to complete recovery much more difficult.  Have our elected officials simply ignored history?

The parallels with today are uncanny.  Alan Greenspan expanded the money supply after the dot-com bust, dropped interest rates to 1%, encouraged a credit-driven boom, and created a gigantic housing bubble.  By the time the Fed realized they had created a bubble, it was too late.  The government response to the 2008 financial collapse has been to expand the money supply, reduce interest rates to 0%, borrow and spend $850 billion on useless and supposedly “shovel-ready” pork projects, encourage spending by consumers on cars and appliances, and artificially prop up housing through tax credits and anti-foreclosure programs.  The National Debt has been driven higher by $2.7 trillion in the last 18 months because of these actions.

The government has sustained insolvent Wall Street banks with $700 billion of taxpayer funds and continues to waste taxpayer money on dreadfully run companies like Fannie Mae, Freddie Mac, General Motors, and Chrysler.  The government is prolonging the agony by not allowing the real economy to bottom and begin a sound recovery based on savings, investment, and sustainable fiscal policies. President Obama continues to scorn business by creating more burdensome health care, financial, and energy regulations.  Andrew Cuomo did his part by creating HVCC in an effort to save some of his friends in the name of “protecting the consumer”.  That little piece of legislation has cost consumers several millions of dollars in increased appraisal costs and maybe even into the billions when you look at reduced values because of the shoddy appraisals HVCC has helped to produce, but I digress.

I think the message here is there is that the government cannot “create or save jobs” or “lower unemployment” and the government cannot “fix” our housing problem or the economy no matter what John Maynard Keynes and his followers believe.  The proof is in the pudding, so to speak.  In fact, the more that the government interferes with the free market, the worse off we’re all are going to be as evidenced by the events of the past 90 years.  In this excerpt, Niall Ferguson talks about the direct effect of existing failed Keynesian policies in a globalized world:

Globalization has not broken down. In fact the US economy is more open than it has ever been. That means that stimulus; both monetary and fiscal is very prone to what is called leakage. We’ve had an enormous [amount] of stimulus in the US, it’s the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus. What’s been stimulated? Not jobs in Michigan. What’s been stimulated has been commodity markets and emerging markets because the liquidity just leaks out.  And that’s why another round of stimulus would not stimulate in the promised way. It would stimulate the wrong things. And those things, commodity markets and emerging markets, are already over-stimulated to the point of being nearly bubbles.

VIDEO:  Niall Ferguson on the Pitfalls of Keynesian Economics

VIDEO:  Friedrich Hayek on John Keynes

VIDEO:  Hayek on Keynes (1977)

VIDEO:  Milton Friedman Remembers Hayek

So simple, yet so incomprehensible by the cadre of false Keynesian prophets (most of the Democratic liberal base including President Obama) who will never admit to this most elegant of realizations. It also means that America can expect more such farces as double stimulus road signs, and oil back at $140 a barrel (or much higher) before even another job is created out of all the excess money sloshing around.  Remember when gas was almost $5.00 a gallon for no good reason at all?

“So that the record of history is absolutely crystal clear.  That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.” – Milton Friedman

So when you head to the polls this November 2nd, please try to look for those politicians that believe in the free market and vote for them.  Moreover, look at those candidates that actually have private sector experience at “running” things…like a business.  History will show that those candidates tend to make much better macroeconomic public policy decisions.

VIDEO:  Milton Friedman on Liberty and Equality

VIDEO: Milton Friedman on Capitalism and Greed

To truly learn more about Capitalism and the free markets, be sure to read Milton Friedman’s book, “Free to Choose” or watch the DVD series of the same name.

Both can be purchased here:   www.FreeToChoose.com

Just for agents:  www.AZRealtorAdvantage.com

A cute little reminder of why consumers should work with licensed mortgage professionals:   Bank Loan Officer vs. Mortgage Professional

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Spencer Anglin.com | NMLS# 226533
Velocity Financial, LLC | Office Map | Phoenix Homeowner’s PIT Stop Blog
O: 480.287.5719 | C: 602.705.6293 | F: 1.866.589.5742
Click here for the HUD Cost Settlement Booklet

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Very Important Update Regarding FHA Financing

Here is the latest information on FHA Mortgage Insurance increases:

FHA publishes MIP changes ( http://bit.ly/acon4I )

Main points:

• • Effective for case numbers assigned on or after October 4^th, the new MIP structure will be implemented.
  • Upfront premium will be 1% for all forward mortgages (purchases and refinances including streamlines)
  • Annual premium
    • Over 15 year terms
      • 90 bps for LTVs over 95%
      • 85 bps for LTVs of 95% or less
    • 15 year term or less
      • 25 bps for above 90% LTV
      • No annual premium for 90% LTV or less

So what does this mean for you and your clients?

On a $200k loan amount at today’s annual FHA MI rate is $91.67 per month in mortgage insurance (MI).

On a $200k loan amount at the new annual rate is $150.00 per month, an increase of $58.33 per month.

On the surface, a reduction in the upfront MI sounds like a nice trade off for the increased annual mortgage insurance right?  Well…let’s take a look at that.  On a $200k loan amount that reduces the upfront MI by $2,000 that was rolled into the loan so it reduces the P&I payment by about $6.00 per month.  Sounds good so far right?

But with the increased annual MI the overall PITI payment goes up by more than $52.00 per month.  Over the next 10 years, before that MI drops off on it’s own, the buyer will pay over $6,000 in additional annual mortgage insurance premiums.

Since mortgage insurance is a pure finance charge that directly increases the APR, it essentially and very directly increases the cost of financing to your buyers.  Not to mention the increase in the debt to income ratio which could have some clients looking for a less expensive house or simply not qualifying to buy.

This basically makes the cost of FHA financing for the buyer more than $4,000 higher in the first ten years.  And if that isn’t a new tax, I don’t know what is.

This change is set to take place for FHA case numbers assigned on or after October 4th, 2010.  October 4th is a Monday.  Make sure your case number is assigned by Friday October 1st, 2010 to avoid the increase.

Please feel free to call me with any questions.  If you find this information to be a great reason to contact your database, I always appreciate your referrals.

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