Originally Published at The Motley Fool


Read Thread

One idea I had was to refi- cash out my current mortgage and use the cash to buy ourselves a new home, while retaining our current home to rent out. There are advantages here, but the more I look into it the more I am confused. Is this method just as simple as it sounds? Some sources say that it is, but I have also been learning that I may get into trouble with my current lender if I don't disclose the new use of my current home as a rental.

As long as your refi your primary residence WHILE you still have a legitimate & non-fraudulent INTENT TO OCCUPY for at least the future 6-12 months, you should be fine.

"Intent" is the legal issue here.

Else... doing the "crab-shell shuffle" is a great way to begin building a rental portfolio... as long as you acquire rentable places along that path. Its exactly how I did my 1st 3 places.

Luck
Dave Donhoff
Leverage Planner

Originally Published at The Motley Fool


Read Thread

In response to the following article: http://www.bankrate.com/elink/news/financial_literacy/investing_money/negative_equity_a1.asp

Wow... I am so surprised and disappointed in these Certified Financial Planners'® answers (although I know I shouldn't be... most CFPs never acquire a professional working knowledge of the leverage side of finance.) All three missed the actual facts presented, and how they play for this family.

FIRST OFF, I'll channel SeattlePioneer to say "1,500 sf for 2 adults and a child is a SUPERDOME of room!!!" Truly their complaint appears to be a bit of a spoiled-child complaint at its surface....

HOWEVER... let's look at it from perhaps a perspective of a "Brady Bunch" new family literally busting at the seems...

All ships are sailing on the same tide in Florida (and everywhere else.) If they have to sell at 45-50% off 2005 prices, they are also going to be BUYING at roughly 45-50% off 2005 prices. They MAY have to bring cash or credit into their sale to get it closed (and maintain their good credit...) but it will be offset by their relative acquisition position, relative to time, on their next purchase. They are neither losing nor gaining "equity per foot" in the transition... it is a lateral move.

They don't have to cover BOTH mortgages either, in order to move up to a more fitting family home. If our hypotherical larger family WAS liquidity-challenged, they COULD approach their lender and request that their shortfall be released as an unsecured debt (very highly likely approvable in Florida markets to borrowers with worthy credit histories and income!) This would mean instead of having to bring $50k of cash into their sale, they may have a $50,000 unsecured debt, with a monthly payment in the low $400's. This is VERY justifiable when considering the depth of buying DISCOUNT in the current Florida markets.

The article states that their new 2-income position affords them better digs... so the implication is they also either have the liquidity to bring in to close out this sale... and/or the capacity to include the smaller payments on an unsecured loan to cover the marginal shortfall on the sale.

YES... if they simply sit still and suffer maybe (VERY maybe) that is better off for them... but if it is not, they don't have to do so.

The "annointed ones" missed it.

Cheers,
Dave Donhoff
Leverage Planner

Dems Target Private Retirement Accounts

By Karen McMahan

November 04, 2008

RALEIGH -- Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers' personal retirement accounts -- including 401(k)s and IRAs -- and convert them to accounts managed by the Social Security Administration.
<><><><><><><>

The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”

Lauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families — and none whatsoever for families too poor to owe taxes.”

GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.

In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.”


Dave here;

Clearly, whether these ideas are loony-bin "trial balloons" sent out explicitly to be shot down so that "lesser demons" will later be accepted (a "good cop, bad cop" kind of theory,)... or whether the new regime would actually go so far as to confiscate the savings of those who were diligent enough to perservere and gather them over the years....

IN EITHER CASE, the writing is on the financial planning wall! NOW is the time to get your funds OUT of the jaws of any potential confiscation, and into protected accounts least likely to be unilaterally "modified" by legislators.

I believe that the private insurance industry will be the safest place for tax-sheltered retirement accounts. Many members of Congress are directly and personally heavily funded in their own private cash-value insurance contracts, and the private insurance industry stands as a "safety net" that relieves the Federal Government of a great deal of support to retirees and others. IF the private insurance industry is attacked for confiscation of funds, it has many defenses (not the least of which is its world-wide expanse of inter-woven banking systems beyond any single country's jurisdiction,) it will be the last target any government will seek to take on.

Now is the time to aggressively play defensively!

David Donhoff
Financial Advisor
Certified Mortgage Planner
Private Real Estate Banker/Investor
Licensed Life, Health & Annuity Agent
David@NoBullFinancial.com
www.LeveragePlanners.com
www.NoBullFinancial.com
425-652-1001 Cell
425-223-4520 Desk
888-662-8551 Toll Free
425-822-5305 Secure Fax

Originally Published at The Motley Fool


Read Thread

I have a Libor based ARM that resets in January but the rate was locked in mid October when Libor had just about topped. Now with Libor coming down, is there a way to have [my lender] reset it at the lower rate?

[Your lender] will reset it at the 5th year anniversary of your closing in January 2004, indexed to the then-current value of the LIBOR index you are tied to.

Or am I stuck and should look to refinance? It's based on the 1-year libor and resets every 12 months.

Pointless to refinance, the indices are all settling back down from the temporary chaotic drama of the credit siezures,
http://www.economagic.com/em-cgi/PW_MChartOmni.exe/save:econ...
and quite unlikely to rise significantly until after the world economies have begun recovering from the impending recessions we're heading into.

Double check your NOTE for the specific margin you've got above the index, and check the ongoing trends of rates of the 12 month LIBOR... and compare to currently available alternative interest rates (and keep in mind the additional round of closing costs.)

MOST likely, you're in just fine shape.

Cheers,
Dave Donhoff
Leverage Planner

Slow Mortgage Start

<snip>

The federal government's latest effort to help financially distressed homeowners is getting off to a slow start.

Lenders filed just 42 applications to refinance troubled mortgages under the federal Hope for Homeowners program in the two weeks after the program's Oct. 1 launch, according to the Federal Housing Administration. Some estimates have suggested that it could eventually help as many as 400,000 homeowners.

The program allows mortgage companies to refinance delinquent borrowers into affordable, government-backed loans, provided the mortgage company writes down a portion of the loan balance. To qualify for a new loan, homeowners must agree to share future appreciation with the federal government. In addition, the new loan amount -- including a 3% upfront mortgage insurance premium -- can't exceed 90% of the current appraised value, which is likely to mean a significant reduction in the loan balance.

<snip>

Read More

Homeowners Wait as Relief Plan Drags

<snip>

WASHINGTON -- Disagreements over how to structure a federal foreclosure-prevention program are complicating and potentially delaying what is likely to be the Bush administration's last attempt to forestall sliding home prices.

The White House and the Federal Deposit Insurance Corp. are at odds over basic questions about the effort's size and breadth, several government officials said. The expectation that a new president could immediately redraw the design and scope of any plan has further delayed matters.

<snip>

Read More

Here is the good news and bad (delaying) news...

The good news, the government is 'considering' various ways to get better 'traction' in the attempt to solve the problems of trapped and desperate homeowners... by various potential methods of supporting or requiring the lending banks to cooperate.

The BAD news... its all still just 'theoretical'... nobody knows for sure what the government is or is not going to do, so the bankers are all sitting on their hands in a "wait and see" mentality.

Feds may guarantee 3 million loan mods

The Bush administration is said to be considering a $500 billion government loan guarantee program that could provide lenders with the incentive to modify up to 3 million troubled mortgages, at a potential taxpayer cost of $50 billion.

(Follow link for more)

http://www.inman.com/news/2008/10/30/feds-may-guarantee-3-million-loan-mods

Government Said to Be Discussing Plan to Aid Homeowners

Senior Bush administration officials are discussing a plan that could help up to three million homeowners struggling to pay their mortgages to stay in their homes, three people briefed on the proposal said Wednesday.

The initiative could be the most sweeping government effort directed at mortgage borrowers since the financial crisis began last year. Under the plan, the government would agree to shoulder half of the losses on home loans if mortgage companies agreed to lower borrowers’ monthly payments for at least five years, according to the people briefed on the plan who asked not to be named because details were still being negotiated.

(Follow link for more)

http://www.nytimes.com/2008/10/30/business/30homes.html?_r=3&hp&oref=slogin&oref=slogin&oref=slogin

Banks Promise to Use Rescue Funds for New Loans

Some U.S. banks, facing rising political pressure, are promising to use capital infusions from the federal government's bailout program to swiftly make new loans.

Deploying the flood of cash dispensed by the Treasury has been a contentious issue, following the agency's move earlier this month to pump $250 billion into financial institutions. Some banks initially said they didn't expect to quickly use the capital, leading lawmakers to question the effectiveness of the government's Troubled Asset Relief Program, or TARP.

(Follow link for more)

http://online.wsj.com/article/SB122540917004586113.html

We have had a HUGE volume of calls & emails for help with H.E.R.A. note modifications and HOPE-NOW refinances, but the industry has been resistant to cooperate as the government wishfully expected that they should.

We're optimistic that we shall see some breakthroughs soon.

David Donhoff

Financial Advisor
Certified Mortgage Planner

Private Real Estate Banker/Investor
Licensed Life, Health & Annuity Agent


David@NoBullFinancial.com
www.LeveragePlanners.com
www.NoBullFinancial.com
425-652-1001 Cell
425-223-4520 Desk
888-662-8551 Toll Free
425-822-5305 Secure Fax

Originally Published at The Motley Fool


Read Thread

Rate markets are going to do what they are going to do... which (in the 30-90 day future) is mostly going to be volatile. Nonetheless, longterm rates are very unlikely to rise dramatically (and stay high) at all.

I advise not to pay any time premium for a longterm lock... the costs of the volatility will far outweigh the benefit you will get in the rate itself.

I also second the advice to have as much of your cash transaction costs rolled into your interest rate premium (that's another way of saying "pay as little in points and transaction fees, directly, as possible") because your best financial structuring is likely to be something you'll put in place at a later time in the future... perhaps in a year or 3, when the markets have de-gassed from some of their current indigestion.

The loan programs that offer the most rate-premium financing (rolling transaction costs into a higher rate to avoid cash outlays) is the 30 FRM... and in addition, even at "par" the 30 FRM is currently very competitive in relation to many of the ARM options, so that is potentially a good choice to look at (despite the awareness that you will likely refinance in 1-5 years to re-establish a better positioning.)

Lastly, use as little of your safety cash as down payment as possible. If your gross household income is under $100,000, you have the privilege of tax-deductibility of PMI... so don't cut off your nose to spite your face by tying up safety cash in the attempts to avoid PMI.

If your AGI is north of $100k (good for you,) then you have even more reasons to keep maximum liquidity reserves in place.

Luck!
Dave Donhoff
Leverage Planner

Originally Published at The Motley Fool


Read Thread

Is there a good site/book/agency that I should talk to about getting basic information re: buying foreclosed property?

Seemingly endless resources in that regard... but a good place to start would be ww.CREOnline.com

ALSO... some unasked-for advice;
Hopefully you aren't considering taking on this challenge for the purpose of buying a primary residence. Buying anything other than 'vanilla retail' is highly fraught with complications, and it very rarely works out for "nest buyers."

If you wnat to buy a home to live in... and the timing matters, the pricing matters, the specific choice of home itself matters, and the condition of the home at closing matters.... buy a home from somebody actually in a position to directly sell (not a home tied up in the foreclosure process.)

Luck!
Dave Donhoff
Leverage Planner

Originally Published at The Motley Fool


Read Thread

The "state of the economy" is moot in the consideration of your situation...

Rents are rising... but are you REALLY prepared to enter into the business of being a landlord? If you think you can just "swing it" by feeling your way along, you WILL lose time, money and home equity, I personally predict with a strong guarantee.

Cash-is-oxygen, and reserves are critical (THAT is true REGARDLESS of the economy.)

I vote to "stay put." Build up your reserves, and (if you are bound and determined about it) start studying the business of being a rental landlord.

Luck!
Dave Donhoff
Leverage Planner

http://news.bbc.co.uk/2/hi/business/7660409.stm

US debt clock runs out of digits

The US government's debts have ballooned so badly the National Debt Clock in New York has run out of digits to record the spiraling figure.

The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount.

The board was erected to highlight the $2.7 trillion level of debt in 1989.

The clock's owners say two more zeros will be added, allowing the clock to record a quadrillion dollars of debt.

Douglas Durst, son of the late Seymour Durst - the clock's inventor - hopes to replace the Manhattan clock with its lengthier replacement early next year.

For the time being, the Times Square counter's electronic dollar sign has been replaced with the extra digit required.

For its part, the digital dollar symbol has been supplanted by a cheaper version - perhaps a sign of the times for the American economy.

Some economists believe the $700bn bail-out plan for ailing US financial institutions could send the national debt level to $11 trillion.