Casey Fleming

Small Town Silicon Valley Mortgage Lending

Having lived through both boom times and the mortgage industry Great Depression, I was asked recently why I thought the industry collapsed so dramatically. In Silicon Valley nothing is supposed to collapse, even mortgage lending...

Those of you who know me know that I do have strong opinions about this. (Then I have strong opinions about everything, but never mind...) In my humble opinion the root cause was that the people making the rules weren’t lending their own money, or even money they were responsible for.

In contrast, my Grandmother didn't live in Silicon Valley and didn't get her mortgage from a Silicon Valley mortgage broker. I can still remember Grandma talking about her mortgage. I remember when my Grandparents had a mortgage-burning party after they paid it off.Back then things were much simpler.

You went to the bank to talk to the loan officer who knew you from church or the coffee shop or because your kids went to school together.

There were two things about this loan officer that differ greatly from today’s loan officer / loan originator / mortgage planner, etc. (When business is really slow you think up fancy titles for yourself to make you seem more important than you are, and help yourself fee better. Oops, back to our story…)

Grandma’s loan officer: 1) knew all about her and whether she could and would pay back the bank, and 2) was held accountable for making bad loans. Small town, old-fashioned lending.

Consequently, there was really one product, one rate and one fee. In fact, interest rates were often posted on permanent signs outside the bank. Today they often change several times a day.

There was no refinancing, option ARMs, rebates from lenders or stated income loans. You got a mortgage, paid it off, and threw a party to burn your mortgage papers. (You can't even burn today in Silicon Valley -- it's a Spare the Air day...)

To be sure, creative financing product help millions of people buy homes who would not have been able to do so without them. (Have you seen the prices in Silicon Valley? The mortgage are huge, too.)

But as we found out (and believe me when I say this was completely predictable) it also artificially inflated values and put honest, well-intentioned folks into untenable situations, and in some cases wiped them out.

I like having some options for my clients, and I like using the options to help my clients lower their cost as far as possible. After all, Silicon Valley engineers understand finances, and get how much I can save them on their mortgage with intelligent strategy.

We save money by playing with lock strategy, waiting for a dip in rates to lock. We save by either paying, or not paying points, depending on the cost and your plans. We save by using the product that will cost the least depending on your plans. We even save by making a plan after close of escrow with a pay-off strategy. Did you know you don't need to buy expensive software to pay your loan off early? Silicon Valley engineers do...

But back to the point: I believe that consumers in general would save even more if your loan officer took the time to get to know you, and was held accountable for bad loans. I would vote for that, and I believe we should operate as if that were true.

To find out more about my practice visit my web site at www.loanguide.com.

Casey Fleming

Mortgage Planner / Loan Officer / Financial Consultant...Oh, heck, I find loans for you...

(408) 348-3442

Silicon Valley Mortgage Refinance Advice

Because rates have stayed lower than most of us expected I'm getting a lot of calls from fence-sitters who are now wondering if it is time to refinance. The answer depends on why you are considering it, and on how it would work out for you. Because I work in Silicon Valley, when someone calls to ask if they should refinance they are usually extremely astute with numbers, and they're working with large loans -- a thoughtful approach makes a BIG difference. My analysis and my advice have to be right; these guys check my work!

I got a call from a couple I'll call Gerry and Judy. Judy was told she could lower her rate from 5.500% to 4.875% at no points, and it sounded like a good deal to her.

Gerry, on the other hand, was a typical Silicon Valley engineer who had refinanced once too often, and knew that in the first few years very little of the payment goes to principle. They had been paying their current loan for five years, and so were beginning to make significant progress on the principle balance.

When I did an analysis it showed that for a cost of only $3000 they could refinance and lower their payment by $378 per month. A no-brainer? No, if you have a brain...A simple illustration should help.

If they financed the loan cost and held the loan for ten years before selling the property, they would save $12,300 in payments, but they would owe $36,033 more on their loan! That's not a deal!

You can see why I'm not the highest-producing salesperson...

However, there was another way of looking at it. What if they refinanced and made a larger payment each month on the new loan? Their current loan would be paid off in 23.5 years. What if the refinanced but made a higher payment each month so that they could pay off the new loan in 23.5 years?

If they paid an extra $257.80 per month on the new loan - still $120 less than their current payment - they would save $21,129 in interest cost over the holding period and have a loan balance $3,731 lower than they would on their current loan at the end of the holding period.

This refinance now makes sense. While Gerry's concerns about "recycling" the loan. were perfectly valid, that doesn't mean there's no opportunity for savings. To the contrary, managed properly Gerry and Judy can save almost $22,000 over the next ten years. Would you do this?

Gerry and Judy decided to move forward. The "rules of thumb" said no, but a thoughtful look at it showed a way to save BIG money.

The job of a good mortgage planner isn't just to plug you into a loan program. If you live in Silicon Valley and want to refinance, you want a thoughtful analysis and smart advice, and you're smart enough to now the difference. I have built a number of tools, all of which can be customized to your needs, to help you decide if you should refinance.

Casey Fleming / Signet Mortgage / (408) 348-3442 / loanguide@sbcglobal.net

Http://www.loanguide.com