Florida's #1 Mortgage Planner

If you have been reading the Florida Mortgage Report for a while, you undoubtedly have read some of the posts about home equity and how easily it can be wiped out in a disaster. Every year as hurricane season approaches, I inform readers to make sure their home equity is prepared and protected, something that is not on any other emergency preparedness list out there.

Yesterday, just prior to jumping on the airplane to return to Miami, Florida, I learned that a Captain I flew with last month lost his home to Hurricane Ike. His home WAS located in Galveston, Texas. The reason I learned of his loss was through a company wide email. Now, I have not talked with him, but the email was to solicit assistance for him and his family, so I can only assume he was not fully prepared.

The truth of the matter is he and his family are not alone. The vast majority of Americans are ill prepared to deal with a disaster which causes the loss of one's home. Living under the false belief that home equity is a safe investment can yield financially disastrous results, a point seen after every disaster from fires, earthquakes, tornadoes, hurricanes, and the list goes on.

Insurance is not the only way to protect your home equity, in fact it may be of least importance to you. Most Americans, especially those focusing on paying off their mortgages the fastest ways possible, are placing themselves dangerously close to financial ruin. The reason is they are not prepared for the financial crisis that follows a disaster that takes their home.

I am only going to focus on hurricanes in this post, but every type of disaster requires its own planning and your mortgage needs to be an integral part of that plan. In hurricanes, you have two types of damage, windstorm and flooding. In this Captain's case, his home was located on the barrier islands and likely got more flood damage than windstorm, which presents a virtually unknown problem for those with homes over $250,000.

In the aftermath of every hurricane, you will find a large number of foreclosures, many due at least in part to this unknown fact. That fact is that flood insurance only pays out up to $250,000 and that leaves homes like this Captain's with a huge loss. Even if he has enough money to live, which is another problem most Americans are ill prepared for, he is going to take a major loss, a perfect example of home equity wiped away in a moment.

Adding to this family's problems is the fact they had a business that was lost as well. Many families that have businesses fail to plan ahead for the loss of income, or even destruction, of the business as well. As a result, when the business is lost in a disaster, they are hit twice as hard as they need to deal with not just the loss of their home, but a loss of income as well.

Most families that have their homes lost will struggle to find a new place to live, which is on top of their emotional loss associated with the destruction of their home and "memories". Most families that lose their home to a disaster, such as this family did, will have a mortgage that needs to be paid in addition to a new rent payment, and without an emergency plan, they will likely be faced with a choice, pay for their rent and have a place to live, or pay for their mortgage on an uninhabitable home. Sure, they can have their mortgage payments waived, however that time period will only be a few months and the rebuilding of their home will take much longer, even years.

Are you prepared for such a situation?

Take the time now, before it is too late for your own family, and make sure you have an appropriate plan to protect yourself, your finances, and your home's equity in case of a disaster. Having your equity trapped in your home actually places you in greater danger of losing it all, which is especially true if you do not have a sufficient enough emergency fund in place. Develop your comprehensive plan and incorporate your mortgage into that plan to maximize your protection.

Also, do not fall into the trap of believing a HELOC (Home Equity Line of Credit) can be used as an emergency fund. I have seen many financial advisors recommending them for exactly that reason, with families finding out the hard way that during disasters, they cannot access the funds. If your money is in the form of home equity and not cash, you will not be able to access it if your home is damaged or destroyed, so tap into now, before it is too late.

In the meantime, please pray for those affected by the hurricanes this season, especially for Hurricane Ike victims.

Unless you have been asleep or not paying attention to the news today, you have undoubtedly heard about Lehman, Bank of America (B of A), Merrill and AIG. With the news sending the DJIA down over 500 points today, traders are comparing the move to Black Monday of 1987, dubbing this as Black Sunday.

The good news for homeowners, or homeowner wannabes, is that mortgage rates drop when bad things happen in the stock market, or bad news develops surrounding the economy. That is, except for news of higher inflation, which causes mortgage rates to climb. Today is a good day for mortgage rates to say the least, and is probably a good day for you overall (more on that later).

Lehman filed for bankruptcy protection, essentially killing themselves. Since the government has stepped in to save Bear Sterns and recently bailed out Fannie Mae and Freddie Mac, it only seems right for them to continue their bailout program and save Lehman as well. After, the Fed cannot play favorites, right?

Next on our list is the announcement that Bank of America (B of A) will buy out Merrill Lynch, putting an end to 94 years of independent trading. Bank of America did make a bid to buyout Lehman, but walked away from it, favoring the bull of Merrill instead. Barclays also bid and balked in regards to purchasing Lehman, proving that none in their right minds would touch Lehman with a ten-foot pole. That means the Fed should be all over it, possibly next weekend.

Oh, and how can I not mention AIG, the world's largest insurer, struggling to stay afloat as well. AIG is looking for someone to lend them $40 billion and they may face insolvency today if the S&P cuts their rating and causes nearly $18 billion in collateral calls and swap payments. AIG has asked for Bernanke's help and, believe it or not, Bernanke and his gang turned their backs on them. I guess they will play favorites after all. Wait, I figured it out. They will go to great lengths to bail out financial institutions, but when it comes to insurance companies, they just let them fall.

You can bet these moves will not be good for the job market, or the economy in general, but it will help to lower mortgage rates, at least for the short term.

So, why is this all potentially good for you?

Besides the fact mortgage rates are ticking lower as a result, allowing you to potentially (still rather difficult, but doable) to access cheap money to buy a home or other investment, you likely have a great opportunity. As the "herd" heads for the hills, now is the time to buy up the solid leftovers and take advantage of when the herd comes back to the feast.

Remember, not too long ago, I warned of the effects of letting emotions enter into your financial decisions. Well, don't let your emotions rule you now, develop a plan of attack and get investing while the getting is cheap.

Many have inquired about my take on the government's takeover of Fannie Mae and Freddie Mac, even some in the media. I had been sitting be the wayside, actually taking care of business, and had set the issue on the back burner, until now.

Just why in the heck did the government take over Freddie Mac and Fannie Mae? And is it all for the better,or worse?

The obvious reason the government wanted to take over these two mortgage behemoths was to calm the markets, even to indirectly send mortgage rates lower in another feeble attempt to spur the housing market. After all, all other attempts failed, why not calm the mortgage backed securities market's fears by backing the money by the government?

...Read More Over at the Florida Mortgage Report...

I was honored when Jeff Belonger asked me to write this week's Mortgage Pro Week in Review (Sept. 1-7, 2008). With the week selected drawing to a close, the biggest news to hit the airwaves was released as Fannie Mae and Freddie Mac were essentially taken over by the government, a move long time coming, I am going to leave those posts for Tom Burris to handle in next week's week in review as there should be plenty of good ones if you mortgage pros are up to it.

I did a mortgage week in review a long time ago and made an effort to find new talent amongst the ActiveRain community. Alas, I wasted a lot of time to find less than one handful of new authors worthy of being highlighted. I certainly hoped to find some new talent this time around, and found that many members still blog inappropriately despite the multitude of instructional posts available on AR.

Throughout this past week, posts were plentiful and full of crap, such as advertisements, reprints of email newsletters, plenty of misinformation, copies of headline news simply cut and pasted into a blog and blatant point mongers amongst the community, part of the reason I don't venture in here much anymore. Where is the originality and how is a client going to relate to you if you guys keep putting out crap?

But within our realm, there lie some worthy contenders, those that blog with purpose and have posts worth reading. With over 250 pages of blog headlines read over the last week (just so you know how much time goes into these), these were the few that made my selection list.

Conflicts of Interest? OR Wearing multiple hats in a transaction? - Ron Tarvin brings up an interesting "conflict of interest" scenario that occurs when a buyer's agent also does the buyer's mortgage.

Are You Still Unsure About Reverse Mortgages? - Sharon Young breaks down a presentation on Reverse Mortgages which covers the major points on these types of loans.

My take on these - In an overall financial plan, sometimes these mortgages make perfect sense, but make sure you get solid advice before obtaining one.

5 Reasons Why Loans Go Awry at the 11th Hour - David Garcia hits on 5 of the multitude of reasons choosing the wrong mortgage professional can kill a deal.

Why can't your loan close now, the day before closing???? - Jeff Belonger also hits the closing scene. Jeff puts out at least one good blog a week, usually more so keep an eye on his work. In fact, here's another...FHA loans & Real estate - Disclosure, Disclosure, & ??????

A sense of urgency... - Jason Sardi hits on the fact borrowers need to act, not just sit around, as the mortgage process unfolds.

Should Mortgage Brokers Consider Realtors Their CUSTOMERS? - Avery good question presented by Janet Guilbault.

Do Lenders miss the point when working with the Listing Agent? - Antonio & Alexia Cardenas bring up a good point many mortgage pros should think about.

And since it is Hispanic Heritage Month, we must include a post on that, so here it is...

Hispanic Heritage Month begins with a history lesson from Victor Montalvo

As I said, plenty of posts coming out regarding the FNMA/FHLMC takeover, so look for those next week.

One other note, I am glad to see other mortgage professionals picking up on mortgage market updates, something I started about 2 years ago. While I am glad to see it, these updates appear to be falling into the same paths as other blogs, regurgitation of scripts, newsletters, even others' blogs. For those of you falling into my critical side, take this as a constructive post to help you avoid continued mistakes.

Remember, Tom Burris has the next Week in Review (9/8/08 through 9/14/08), so don't miss it.

Mortgage blogs by loan officers Here is a list of Loan Officers. If you are not listed, please email Jeff Belonger to be added. This way the person doing the Mortgage Pro week in reviewcan try and find most mortgage related posts in one section. ActiveRain is growing rapidly and it is difficult to keep up.... If you think you have been ignored, you have not. This is open to all!!!

All About Mortgages/Mortgage Networking Here is a group that many loan officers post their mortgage related blogs in. A good place to learn more about the type of programs, new industry news, and sometimes some inside tips. Don't hesitate to join.

We really could use some new volunteers for the Mortgage Pro Week in Review. Even if you are a realtor, a title person, or someone else that is related to the mortgage/real estate industry..... please read below.

MORTGAGE PRO Week in Review A repository for the Mortgage Week in Review. Please don't hesitate in joining this group. And any volunteers for the mortgage week in review, please e-mail Jeff Belonger at jbelonger@ihmci.com

There will be no recreations of any type regarding the titles or content of this group or Review without the permission and expressed written consent of the Group's founder

Mortgage Pro Week In Review - Copyright 2008^©

Hopefully, you have not learned this rule the hard way. The bottom line is whenever you make any financial decisions allowing your emotions to enter into those decisions, you will lose money, and usually lots of it.

I know that all of you are likely emotional about your finances. Those of you whom have been divorced were likely separated due to your emotions over your finances. The problem is that emotions cloud your judgement and lead to mistakes, and that fact reigns true in your finances.

If you are currently looking at the stock market being down for a long period of time, or even thought this as soon as it began dropping, chances are you are looking at your investment portfolio and getting emotional over your losses. Most of you (if not all) have probably moved your funds around to try and minimize your losses.

Do you realize that doing so causes you to miss the best opportunities? Do you know that statistics show that over the long term, moving funds around like that almost guarantees you to lose money?

I forget the exact numbers, but if you miss just 3 of the best performing days of the S&P over a period of time, I think the study was five years, then you will have lost money, but the S&P would have a positive rate of return over the entire timeframe. If you really want to make money, do the exact opposite of what everyone else is doing and STOP FOLLOWING THE "HERD".

That statement holds true in regards to your mortgage. Sure, you WANT to have a home free and clear, after all, it is the "American Dream." Sure, there is a SENSE OF SECURITY in having your mortgage paid off and not having that monthly payment looming over your head, easing your FEARS.

When you look at a home without a mortgage payment, lots of emotions arise, don't they? When your planning your financial future, your emotions well up when you see programs like the Money Merge Account from United First Financial, or any other mortgage acceleration product, that show you could have your home paid off dramatically faster and your "dreams" could come true.

I will admit, there are many times when my emotions well up and I wish I didn't have a mortgage payment as well. But then I set my emotions aside and look at how money works and the truths that exist regarding mortgages and home equity. Taking my own emotions out of the equation reveals a different financial planning strategy, one that maximizes the efficiency of how money works.

Sure, using your mortgage as a financial tool carries risk. Everything carries risk, plain and simple, just like everything is 100% financed. Focusing on temporal losses is futile and your emotions will destroy your plan. Long term strategies require a long term commitment, hands down.

When I lose $40,000 or more in my investments in a single month, I do not rush out and move funds around, because I know that is not a real loss unless I react to it. It becomes a loss only when I liquidate my account, sell my property, or even transfer those funds to other investments. Instead, I don't get emotional about it and trust in what I have learned, which is that over the long term, the strategies I employ are shown to always perform well.

Yes, I know that is no guarantee, but history tends to repeat itself, just like charts can predict the future fairly accurately.

So, before you get wrapped around the "focus" of paying off your mortgage through a Money Merge Account, Homeownership Acceleration Plan (CMG), or any other mortgage acceleration product, get your emotions out your thought process. When you can do that, you will likely realize that other strategies provide a better, even faster, path to your financial goals and dreams.

Get the rules of money working for you today!!