Charity Never Faileth

"Let your heart feel for the affliction and distress of everyone."
~ George Washington

Suze Orman, financial guru, appeared on Oprah today. She is a no-nonsense expert on personal finance and I almost always agree with her, even when it challenges my own beliefs about money and makes me uncomfortable with the way I handle it. She has been appearing on Oprah for 10 years, as she pointed out on today's show, and took everyone watching to task for not following her advice, which has led to the condition of the economy and the problems we are facing.

People are losing their homes, their life savings and their retirement funds all over the country. If you aren't affected, I'm sure you know someone who has been or will be. I've been listening to news reports and analyses and carefully reading articles on the Internet for the last several weeks, trying to figure out who or what is responsible.
Ms. Orman says that WE - 'Main Street America' as pundits call us (as opposed to the professionals running banks, credit unions, insurance agencies, etc., and especially the current political administration...) - are responsible. We wanted things (i.e. homes, furniture, clothing, etc.) beyond what our incomes allowed and the so-called professionals - especially credit card companies, banks, loan companies - were willing to fund those wants for a price. Oftentimes, our credit scores didn't matter and we were approved in spite of our future ability to pay.

Everytime we overextended ourselves and bought merchandise or homes using credit cards or loans, the stock in those holding companies went up and the CEO's at the top of the companies made more money, so, of course, they were more than willing to extend more and more credit. BUT, eventually, it all had to crumble, because, at some point, we found that using one credit card to pay off another, or to pay our mortgage, pushed us further and further into debt and left us with less and less expendable, spendable cash. In the last few months, it has all come crashing down.

This was the most down-to-earth, logical explanation I have heard or read. The word that she used to explain it all was GREED. We all wanted more - from Main Street (again, meaning you and I) to Wall Street. It was the 'American Dream' to have it all and have it all NOW.

Our parents were exponentially more well-off then their parents. They were raised during the Depression and saw their parents struggle just to survive and raise them. Our parents learned the value of work early and worked hard to have what they had. We were raised with nice things and we expected to have those things when we became adults. We didn't see how hard our parents had worked or how long it had taken them to accumalate the things we had and the homes we were raised in. We expected to have all the nice things immediately and we went into debt to achieve it - rarely realizing that this was a dangerous and foolish thing to do. Always with the hope and dream in our hearts that everything would work out all right. Americans are known around the world for our optimism. 'Looking at the world through rose-colored glasses' is a phrase that seems especially coined for us.

The one thing that Ms. Orman said today that I take exception to is that she has no sympathy for those of us in this situation. She has been advising us and warning us for 10 years and because we didn't listen and take her advice, she doesn't necessarily feel sorry for us.

I agree with George Washington when he said, "Let your heart feel for the affliction and distress of everyone." This is the true definition of charity, as defined in the Merriam-Webster Dictionary as: "a. benevolent goodwill toward or love of humanity; b. generosity and helpfulness especially toward the needy or suffering".

These are challenging times. The financial future of the United States is facing peril and could take a long time to recover. We can't rely on the government to buy our way out of trouble in the future. We have to learn from our mistakes. In fact, to become the most responsible citizens we can, we MUST NOT repeat our mistakes. We can't let this be our legacy to our children. By turning our lives around, it will be an example to them of living responsibly. We have to follow Suze Orman's advice and not rely on credit cards or live above our means. It won't be easy, and we probably won't be as comfortable for a while as we have been. So, we have to learn to be financially self-reliant.

Friends and family all around us are suffering not just from financial depression but emotional depression. We shouldn't be criticizing each other. We have to support each other. The time for benevolent goodwill toward others is NOW. The one thing we must have for each other is charity, because "Charity never faileth".

Explaining The Fannie/Freddie Takeover

From Ryan Halldorson at Smart Mortgage:

Interest rates took a nice drop this week and are sitting at some of their lowest levels of the year! The reason for this is the government’s takeover of Fannie Mae and Freddie Mac.



A little background on the way the mortgage world works will explain why the two events are tied together. Banks and lenders do not lend out their customers savings account money for 30 years to cover the mortgages they produce. Instead, they fund loans with their own assets, underwrite it to Fannie/Freddie guidelines, then sell the loan to Fannie/Freddie for a small profit and then typically service the loan (collect the payments) for a small monthly profit. Fannie/Freddie buy the mortgages that the lending world produces, package/bundle them, and then they sell them on Wall Street as Mortgage Bonds. Investors of the world can either put their money in stocks (risky) or they can buy Bonds if they want a safer investment.



With the US government now running Fannie/Freddie these Mortgage Bonds are viewed as a safer investment and therefore the demand for these Mortgage Bonds has increased. The way that the lending world satisfies this increased demand is by lowering interest rates to produce more mortgages.



For real estate or loan information, call Angela McDonald at (602) 369-6409.

What is a Short Sale?

What is a short sale? I hear this question every day from clients, customers and even people in the real estate industry. Recently, because of the current real estate market, homeowners find themselves in a situation where they can no longer afford their payments or they cannot sell their home for what they owe.

When people find they can no longer afford their mortgage payments and get behind on their mortgage, the bank or lender will consider taking less than they are owed on the loan. This is called a short sale. A short sale is a pre-foreclosure (the period after the loan is 30 days behind - in default - and before foreclosure) where the bank agrees to take less than what is owed to them on a home.

In this situation, they can contact a realtor and start the short sale process. The realtor will contact the bank (or lender) and order a short sale package, which the homeowner fills out to show they have circumstances that warrant the sale of the home for less then they owe. The package includes a hardship letter (stating why they can't afford to stay in the home), and a list of documents such as: personal tax information, pay stubs, job termination letter and any other relevant documentation. Circumstances leading to the short sale request may include divorce, job loss, loan payment increasing because of an adjustable rate mortgage, job relocation, etc. This is something the homeowner can choose to do as a 'for sale by owner' as well, but it a difficult process even for realtors who do this on a daily basis, so be forewarned.

What are your thoughts on 'short sales'? Please leave any questions or comments and we will address them. You can also contact me for more information: angelamcdonald@qwest.net or call Angela McDonald Real Estate at (602)369-6409.

Weekly Mortgage Update

From Ryan Halldorson, our friend at Smart Mortgage, comes this week's mortgage update...

"Interest Rates held steady again this week. This may say sound like a broken record but this will be the last time you hear about it because………

Next week is the last week that you can register buyers to use FHA Down Payment Assistance programs such as AmeriDream. Once registered, the borrower needs to have final loan approval by September 30 at the absolute latest. This leaves a very, very small window of time to get buyers into homes without needing a 3.5% down payment from their own funds. Gifts from family members and loans from a 401k will still be allowed as acceptable down payment money after October 1. Also, sellers will still be allowed to pay for the buyers closing costs and prepaids."


Ryan also reminds us that:


"HOPE established a temporary housing program within FHA to assist distressed borrowers that are unable to make their mortgage payments. The voluntary HOPE Program is authorized to insure up to $300 billion in mortgages.


Eligibility Requirements:

*Mortgager must be the owner-occupant and the residence must be the principal residence and the only residence in which the mortgagor has any present ownership interest.

*The mortgage being refinanced must have been originated on or before Jan 1, 2008.

*Maximum loan amount is set at $550,400 (132% of the 2007 Freddie Mac conforming loan rate).

*Current mortgagees must waive or forgive any prepayment penalties and delinquency fees that are associated with refinancing the mortgage."


If you know of someone who is at risk of default or facing foreclosure, please have them call Angela McDonald at (602) 369-6409 for more information on how this program can help them.