Interest Only Loans: Dangerous for Avg. Consumers

March 27, 2018

For those of you who were in Real Estate during the 2006-2008 timeframe, you remember the fall-out of all the ARMs, interest only, high loan-to-value and low document style loans. When home prices go up, and applicants can’t be approved for more traditional products, we see folks turn to riskier alternatives. These products are great for savvy investors who want to use their cash for investments with a better return than real estate–but they present the average buyer with a risky proposition. Let me tell you a story about Dan and Jan…

-Dan and Jan wanted to own their first home after the got married. Yet, they really couldn’t afford a payment including principle and interest.

-They decided they could afford a 5/1 Interest Only ARM product where the first 5 years have them just pay the Interest portion of that payment

-Dan and Jan were busy with their careers, and since traditional rates really hadn’t changed much, they didn’t bother to refinance out of their original loan.

-Year 5, BAM!!!! The full payment comes into play and they can no longer afford their mortgage payment

-They struggle to sell their home because there are many other homeowners in the same situation on the market

-To get out of the home they will either have to bring cash to the table (which they don’t have) or foreclose

-The End.

It’s the same story we saw ten years ago, and it’s come full circle. Clients getting into risky loan products can hurt their ability to buy up when they really need to (e.g., growing family), damage their credit or ruin them financially. I view my relationships with my clients as life-long. I don’t want them to get themselves into a situation that will bring unneeded financial turmoil to their lives and not let them live a financially robust life.

If you have clients who are considering these products, I would be happy to discuss with them what they need to do to qualify for more financially stable loans. Sometimes a few changes can make a big difference and can put our clients in a better position for long-term success.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

Click here to Apply


The Rate Hike Struggle

March 13, 2018

Chairman Powell in between a Rock and a Hard Place

So, you’re the new kid on the block and your job is to drive a strong U.S. economy. It’s not an easy gig and Powell is faced with three major problems.

Problem #1: Doing what you say you will do…

The markets hate it when things aren’t predictable, and they rely on financial leaders to be able to adequately forecast what they plan to do next. This is especially important when Trump and the Republican party are at odds because this presents a wild card scenario. Throw on some tariffs that create opportunities for trade wars and the markets cringe at the potential impacts. Powell needs to position himself as a leader who knows what’s happening, how to manage key issues and demonstrate he can deliver.

Problem #2: The data doesn’t squarely support raising rates

We are still seeing the effects of unraveling quantitative easing (where Fed invested in Bond market to pull rates down) which has moved rates steadily upward. Meanwhile, the economy is doing well but we’re starting to see some financing program changes that feel similar to what happened prior to the mortgage collapse ten years ago. This includes the loosening of Underwriting guidelines (e.g., you can have more debt than you used to) and an increased use of ARM products. It makes me wonder if people are making desperate moves to get into a home and that can put clients (and Banks) in a risky situation in a downturn.

Problem #3: Lack of consensus among Fed Reserve

There are several cooks in the kitchen, among them the Regional Presidents who make up the voting body of the Fed Reserve. Powell has to herd the cats and gain alignment on both the long, and short-term, agendas. This is not an easy task, especially when financial data is mixed, and economic stability varies by geographic area.  In public statements, everyone is saying rates need to go up, but the how and when vary by voting member. I do think rates are posed to go up, but I would forecast no more than .125 to .25 at each opportunity the Fed has to do that.

Photo credit: https://en.wikipedia.org/wiki/Jerome_Powell

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034


How to handle minors and credit?

March 2, 2018

This is a question I was asked the other day so I did some research.  As a member of LifeLock so that was my first stop.  We have been members for years and so far so good and have never needed them but they are a great resource of information when it comes to this topic.  They have a Junior product for kids, costs $5.99 a month and has many benefits included, 2 being Identity alert and Dark Web monitoring.  https://www.lifelock.com/products/lifelock-junior/

I don’t know about your kids, but mine are “on-line” either on phones, tablets or computers a good amount of time each week.  And as I view the home computer, seeing a few programs they have mistakenly downloaded, they don’t always make the best choice on-line.  So that $5.99 a month might be money well spent.

But what are the other options and maybe you are just realizing their identity might have been compromised?  A Police Report is that 1st step, get them involved early!  Then check out this Identity Theft website the Government has: https://www.identitytheft.gov/ It gives you a step by step plan towards a resolution!

Looking to learn a bit more about kids, credit and identity theft?  Experian has a wonderful page dedicated to it: https://www.experian.com/blogs/ask-experian/category/credit-advice/life-stages/kids/

As always, please let me know what of this report was useful and other tips you might add to my list.  Thanks for reading and your feedback.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034


Is the Fed turning a Blind Eye?

February 27, 2018

This week the Federal Reserve released the notes from their January meeting where the majority of members said we’re going to see increased inflation due to stronger economic growth. This assertion will continue to support their very gradual increase of rates over time and I would still expect to see two upticks within this calendar year unless we hit a very obvious economic bump. It’s a bit frustrating because while the Fed is touting our economy’s strength, I don’t believe the data is stacking up on the Real Estate side.

Year-over-year home sales and application volumes are dropping and I’m seeing softening in the market rather than ongoing strength. Buyers seem less confident whether they’re worrying over unpredictable “Trump Economics” or current housing prices–It’s hard to say. Regardless, I don’t agree with the Fed when they say we’re on an upward trajectory. I think we’re flat and raising rates is going to make things worse over time, not better. I can’t decide if the Fed really believes what they’re saying, are just trying to convince the public things are OK or if they’re operating in an alternate reality. I guess only time will tell…

Now check out the Case-Shiller Home Price Index below, wow!! This index tracks Real Estate across the country and shows appreciation has remained solid!!  That is great news for possible on the fence sellers.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

Click here to Apply


Do you Echo?

February 20, 2018

I don’t know about you but I’ve had my share of experiences with Amazon’s Alexa–who’s been renamed Echo at our house–as to not be confused with my daughter’s friends Alexis and Alexa. Overall, we find Echo an enjoyable product especially for our younger children (who don’t have their own devices) and when we’re doing something else (e.g., dishes) that makes it hard to stop and look at your phone/tablet.

Recently, I came across a Realtor who is using Amazon’s technology to provide room-specific information in a seller’s home. For instance, there’s an Echo unit when you arrive welcoming you to the home and providing a brief overview. The Echo Dot in the kitchen provides details around the recent kitchen renovation. The Master Suite Eco Dot highlights the new nylon Karastan carpet, closet square footage and large walk-in shower. And so on…

The challenge? You have to tell Echo to play the overviews rather than her detecting motion–which many buyers might find odd. There’s also the fact that Alexa talks at a pace that is annoying slow at times. I really like the idea of providing relevant buyer information while they’re in each room but think we’re a few years away from this technology being spot-on for showings. Meanwhile, it’s a fun idea! I’d love to hear about your experiences with Alexa and what you love/hate.

Meanwhile, here’s one of my favorite links with things that Echo/Alexa can do.

50 most useful Alexa skills


The American Flag and Frisco Sunrise Rotary

February 18, 2018

Have you started to see American Flags going up around your neighborhood and wonder how you can join the Movement? Frisco Sunrise Rotary is the developer of the program and we would love to have you sign up! For only $75 a year, and with the help of Boy Scout Troop 77 we place a flag in your yard, business or HOA for 7 US Holiday’s.

Sign up today so we can get your Flag ready!! http://www.friscosunrise.org/page/flag-program-subscription #frisco #rotary


Working Saturday?

February 17, 2018

“Well, um, actually a pretty nice little Saturday, we’re going to go to Home Depot. Yeah, buy some wallpaper, maybe get some flooring, stuff like that. Maybe Bed, Bath, & Beyond, I don’t know, I don’t know if we’ll have enough time” Will Ferrell

But if your Saturday is home shopping with you finding that perfect home and you want to make an offer – call me, I’m working!!  Geoffrey Davis, 214-529-9622