U.S Foreclosures Filings Sets New Record High

The second wave of foreclosures has arrived. Is the American economy ready?

The tide of potential foreclosures has been rising for quite some time. The U.S. economy had a brief respite while banks and lenders tried to decide which way the political winds were blowing. This may have briefly delayed many of the recent filings.

Now that the new administrations policies are clear, the cleansing of the banks balance sheets begins anew. Combined with holdover filings from last year, we are beginning to see the start of the ‘second’ wave of foreclosures.

This so-called second wave is caused by the Alt-A and Option ARM loans that are scheduled to adjust or come due between now and November of 2009. Many of the resets on these loans will cause real estate investors and laid off workers to default.

A recent article on MarketWatch.com (http://www.marketwatch.com/story/us-foreclosures-reach-record-rate-in-april ) suggests that the delay was caused by the moratorium on the industry that were recommended by regulators. Some believe that the recent stabilization in overall values across the nation may hold steady even though there is this new round of repossessions hitting the books.

Opportunity abounds for real estate investors with the means or the creative drive. With multiple options available, investors can still invest in real estate and with rising rents and low prices real estate investor activity in the market place appears to be increasing again.

While many thought that greed and over zealous real estate investors were partly to blame for the bubble in the economy, some economist have argued that prudent and professional real estate investors need to be active in the market in order to truly stabilize home values.

There are many lenders that have started to lend to investors again. Cautiously these lenders have entered the market and are lending to those that can prove experience and credit worthiness. Still other real estate investors are slowly testing the markets using creative strategies that skirt the traditional lenders and allow them to access capital that allow them to build and manage large portfolios of rental properties.

The time is ripe for real estate professionals. These are the times when fortunes in residential real estate are made and many people are seeking out the abundant opportunities in this market. Is the time right? Is America ready for the second wave? Only time will tell…

Ready To Refi? Here is the 411

Normally I reserve this blog for comments on residential real estate investment strategy, but today I'm going to stray from my normal regimen.

Interest rates are at all time lows. So far the only people that could refinance were those with a lot of equity in their home and perfect credit, but all that is about to change.

Many of us pay our bills on time and are responsible and we have bemoaned the fact that it seemed that all the help was only targeted at those who were irresponsible and didn’t pay their bills. Well now we are getting some help.

The issues facing many responsible home owners may be two fold.

1. The value of most property has dropped more than 25% and some as much as 50%. Refinancing for many people means they would have to add PMI at inflated premium prices. This means the savings from lower rates is wiped out by the addition of higher priced PMI.

2. Many responsible homeowners owe more on their home than it is actually worth.

The governements solution is the Making Home Affordable Program. This program has it’s own web site with details about checking to see if your home will qualify under the program.

The program allows lenders to refinance your home up 105% of it's current value. This means that even if you owe more than your home is now worth, you can still refiance at much lower rates without taking any penalty to the rate.

With regard to the PMI, if you do not currently have PMI then your new loan will not have PMI. And if you do have PMI then your new loan will have PMI but it will not be higher than what you currently pay! Now that's relief we can believe in!

If your loan was sold off to Fannie Mae or Freddie Mac in the secondary market it will qualify. But, there are separate rules to follow depending on which company bought your loan.

If your loan was purchased by Fannie Mae you will be eligible to complete a rate and term refinance of your 1st mortgage at the new lower rates with any lender or mortgage broker of your choice as long as the new loan is underwritten to Fannie Mae.

If your loan was purchased by Freddie Mac you will be eligible to complete a rate and term refinance of your 1st mortgage at the new lower rates with the lender that currently holds your mortgage. However, in order to keep your current lender honest and competitive you can seek out a mortgage broker that will take your loan to your lender through their wholesale channel.

All this may sound a little confusing so I’m offering up my email address and phone number and will assist you with any questions you may have free of charge. If you have specific questions or need more information please contact me at:

Michael Gross
Office Phone: 770-350-7373
Email: mgross@dividendamerica.com

I also have the web site where you can look up your loan to determine if you have a FannieMae or FreddieMac loan. Shoot me an email or give me a call. Happy to help in any way I can.

Michael D. Gross
President
Dividend America Mortgage
770-350-7370
http://dividendamerica.com/

5 Reasons To Buy NOW

Recently I read a great article on MarketWatch written by Amy Hoak. http://tinyurl.com/dx9wjb She believes that the signs are right and buying now may be a very smart decision.

The reason that a lot of people are choosing not to buy right now is because of all bad news in the media. However, it is exactly times like that the people need to break away from the pack and buck the trend.

Warren Buffet says that when markets are greedy he is cautious but when markets are cautious, he is greedy! In a nut shell, the housing market is very cautious right now, you should be greedy.

Amy’s article goes on to point out 5 reasons why you should buy a home right now!

1. Affordability – Home prices are now at 1999 levels! That’s a huge discount and since the profit I real estate is generally made when you buy, now is the time.

2. Large Inventory – There are many homes to choose from, pick the one you want and name your price! More than likely, it’ll be yours.

3. Builders Discounts – Builders have finally figured it out. Shedding the dead weight is the only way to get cash flowing and business moving again. And their giving huge discounts to move those empty houses.

4. Low Interest Rates – Interest rates on residential mortgages haven’t been this low since the early 50’s! If you miss this move, it will likely be another 5+ decades before you see them this low again.

5. Federal Tax Credit – While this doesn’t affect investors directly, it can in the future. The last time we had a housing slump it was this exact credit that helped pull the country out of it.

The bottom line is that now is a good time to buy. Using a buy and hold strategy could mean huge windfalls when the economy turns around so get out there and make some offers. Now is the time!

Roller Coasters and The Ride

http://strategysessions.blogspot.com/

Remember those really great roller coaster rides you experienced as a child? After zooming around several twist and turns and being jerked from side to side, your cart would slow as it approached the really large hill.

You hear the chu-chunk of the hook as it locks onto your cart and then you experience a slight jerk as you are pulled reluctantly forward. Clink-clank, clink-clank; you here the ‘song of the chains’ as they grown to pull the weight.

It’s just the carts, you and 50 others behind you, anxiously awaiting what comes next. The exhilaration, the anxiety …your breathing is no longer rhythmic but comes in big gulps of air and wind. Sweat on your temple as you near the top!

You can’t see over the edge, you feel as if you are dangling in space with nothing but this flimsy bar strapped across your thigh. You notice a loose bolt and the bar jiggles. You think, oh my, that’s not good!

Suspended in time, animated at the top, you wait. And then it happens. You roll over the precipice and you are staring straight down! Sky above and earth below! God I hope this thing has breaks or a parachute is the only thought rushing through your head!

Before you know it your flying, heart racing, down, down, and down, faster and faster! Everyone’s screaming bloody terror, a few fools have their hands in the air, you hang on to the bar for dear life praying that the loose bolt doesn’t unscrew any further!

Then you are at the bottom! Whew, everything levels out. You are still moving faster than the speed of light and you are still being jerked from side to side but you know the ‘ride’ is almost over! There is hope! Whew!

That’s how I felt the first time I ever rode the Scream Machine at Six Flags Over Georgia. I’m sure everyone has experienced their own Scream Machine in their own town and hopefully my description evoked the same sensational memories I have.

I give you this experience as an example of what has happened in the real estate industry. We’ve heard the cha-chunk, we’ve experienced the ringing clink-clank and we’ve endured the precipitous fall to our inevitable doom!

But now we are in the jerky part of the ride. It’s still a little scary, we have some more hills to climb and fall from and we have a few more harrowing hair pin turns to endure, but the end is near.

If you are an investor you should be prepared. Get ready so that when the cart pulls into the station you can hit the ground running. There are new rules and if you can figure out what they are and prepare yourself to operate in the new environment the opportunity will abound.

Stay tuned for what the new rules are, changes are coming fast and furious again. But this time it will be for the good.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Window of Opportunity

Americans are receiving an opportunity we haven't seen in over 30 years! That opportunity exists today, right now!

Like many Americans I was taught that saving was important but I never really 'got it' until now. We all thought that Social Security would be there for us. Many government officials have also touted the virtues of Medicare and Medicaid to take care of us when we are older.

The Nanny State ....This utopia that would save us all and give us comfortable lives has been tried elsewhere in the world. France, Spain, Italy and to a greater extent the former Soviet Union. Guess what? It DOES NOT work.

Look at our current economic situation. It was caused by many things but the main cause is to much spending. Now look at our politicians, many who either have been in Washington for a very, very long time or who embrace the tired old thinking of their traditional 'party' lines.

While I truly believe that more government and more spending are NOT the answer to our current economic problems, there is an opportunity in all of this! That opportunity is the lower interest rates.

These lower rates give all of us the opportunity to consolidate debt. These lower rates give people the opportunity to change 30 year debt to 15 year debt or take 15 year debt and accelerate the principle reduction to pay it off in 10 years.

Debt repayment and becoming debt free is the opportunity that exists before us today. That opportunity will not exist for long! All the money the government is printing and bonds that are being sold to fund the huge omnibus spending packages will eventually cause higher inflation and higher interest rates.

Your window of opportunity is now. And whether I sound like Paul Revere or the The Little Boy That Cried Wolf! is not important. This window of opportunity to change your life and your families future is what is important.

I look at Washington and see the boondoggle. I see a government that constantly believes that spending is good and that getting us to spend is the way out of this mess. I say NO! The way out of this mess is savings, debt repayment and a taxation system like the Fair Tax that promotes a society that spends responsibly and saves, saves, saves.

We will come out of this recession. We are Americans so we will find a way to thrive. And whether the next economy is a growth economy or a further sinking recession, if you take advantage of this window of opportunity it won't matter to you. You'll be prepared for both!

So take my advice (for whatever that is worth...LOL) and make a decision soon! Choose to save, lower your interest rates, consolidate debt or shorten the term to pay off your debt, even if that means you have to roll in a few points to get that really great rate! In 5-10 years, you'll be glad you did!

Michael Gross is the President of Dividend America Mortgage. He has been a Realtor, a builder, an appraiser and has been a consultant in the field of Real Estate to Fortune 500 Companies. Today he uses all of his experience to help home owners and investors get the best rates and the right mortgage for every situation. Call Mike at 770-350-7373 or email him at mgross@dividendamerica.com

Fannie Changes The Rules Again!

Confused by all the rules and regulations coming out of banks these days? Well here's on piece of news that makes a lot of since!

But this time it's a good thing! If you are a real estate investor specializing in residential you are getting ready to receive relief!

Many residential real estate investors have had their businesses stalled because of Fannie's 4 financed properties rule. But the game is changing, on March 1st Fannie Mae will start allowing investors to have up to 10 financed properties.

As always, the devil is in the details. Here's a short list of what you need to know.

1. You must have a 720 or higher credit score.

2. This is a Full Doc loan - be prepared to prove income.

3. 75% Loan To Value for rate and term refinance on Single Family but only 70% on Multi Family.

4. You can cash out SFR but only up to 70% and only after 6 months to 1 year seasoning.

5. Here's the kicker - You must prove cash reserves of 6 months PITI on the property being financed plus an additional 6 months PITI for all other investment properties and/or 2 months PITI for a financed primary and second home.

I know, I know, that seems like a lot and some of you still don't qualify. But the good news is things are beginning to loosen up and the brainiacs in D.C are finally realizing that to stabilize home values and get the economy moving again they have to include Real Estate Investors in the equation!

Michael Gross is President of Dividend America Mortgage and is an expert in investment property financing. His vast 20+ years as a builder, appraiser, Realtor, mortgage broker and active investor gives him the knowledge and experience to help anyone seeking a mortgage for the purchase or refinance of any type of real estate. Call Mike at 770-350-7373 or email him today at mgross@dividendamerica.com.

I Want My Four Point Five!

...Okay folks, get ready for a long one, but hopefully worth the read! :)

I want my Four Point Five, interest rate that is… That’s right, we’re all sitting around waiting for that 4.5% interest rate that the Feds promised. After all, it’s the only thing that will get our economy turned around right?
Well, that and the new pork belly stimulus package, but that’s a different subject all together.

We’re here today to try and understand why interest rates haven’t dropped to 4.5% like the Fed promised. The answer is in something called the Mortgage Backed Securities (MBS) market and the Treasury Bond (TSY) market.

I wish the explanation of how these markets work was simple but it’s not so I’ll try to summarize using visual analogies.

Imagine a table covered with stacks of little square crackers. All the crackers look the same but their not. Some have a little salt on them, some have no salt on them and some, well, they have a whole lot of salt on them.

Now imagine that you live on a diet of crackers and salt. Sometimes you need more salt and sometimes you need less, BUT! you always need crackers. On days when you need a lot of salt and you have to compete with others that need the salt too, you’ll pay more for the very salty stack of crackers and pay less for the unsalted stack.

Supply and demand comes into affect. There is a limited supply of stacks of very salty crackers and everybody wants them, this drives the price of the very salty cracker stacks way up!

This is what is supposed to happen in the MBS (Mortgage Backed Securities) market. There are pools of securities called Stacks. A share of a stack, one cracker if you will, starts out worth $100.

These stacks come with different layers of salt or interest rates. So you’ve got a stack that pays a 4% rate, 4.25% rate, 4.5% rate, 5% rate and so it goes. Because of the varying returns on each of these stacks, the price of the share (the cracker) in the stack will vary based on the number of buyers for that stack.

So, if nobody wants a 4% return, the $100 share might be sold for $98. If everybody wants a 5% return then a cracker …uhumm, I mean share, in that stack might sell for $102 dollars. Why is this important?

Well, it’s important because these interest rates represent a yield to the owner and that yield affects the interest rates that you and I pay on a long-term mortgage. Get the picture?

The higher the price above $100, the lower the actual yield or return to the owner is. When the price of the shares in the stack increases the yield decreases and the net result is lower interest rates. In simplified terms this is the way the MBS market works and it is how banks determine the interest rates we pay on our loans.

Now, on to the problem at hand! Why aren’t rates going down? Rates are not decreasing because everybody has figured out the game. In order to make rates go down, the Fed has to buy up stacks of Mortgage Backed Securities.

In order to fund these purchase the Fed did two things. They sold Treasury Notes (TSY) and they printed money. When this happened ‘the jig was up’ on many levels.

First, foreign governments saw us diluting our dollar and flooding the bond market so they stopped buying our debt. Big problem! This caused the price of TSY to drop and the yield to increase, it also caused the Fed to have less buying power.

Second, many banks spied an opportunity! If they could get some extra stacks out in the market, maybe the Fed would buy them and pay a premium. Bonus time, right?! Not so much.

What ultimately happened was the ‘Market’ (that’s right, with a big M) figured out what was going on. The MBS market was flooded with stacks. Everybody want a piece of the Feds action. i.e. all the banks wanted some more of our tax dollars, like the bailout funds weren’t enough!

When these stacks flooded the market the Fed could not absorb them all and the price on the stacks dropped sharply. This increased the yield and ultimately increased the interest rates we are offered on mortgages!

Now the markets are starting to settle again and the overload of stacks is being slowly absorbed. Here's the $64,000 question, when will rates dip below 5% again?

I’m not sure, but my guess is as soon as the government stops tinkering with it all. If they would just let the markets work, rates would have come down naturally. Every time the Fed does something like this it seems to put us 30 days farther out.

I want my 4.5 and I know you want yours too. My suggestion is to get out there, choose a lender and get approved and then be patient and wait for the rate that is right for you. When you see it, grab it! Chances are it won’t be there for long….

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Paying a Discount Can Set You Free!

I was tooling around the web the other day and I was looking for new strategies to maximize the use of a mortgage. Many of you know that I see the mortgage as a financial tool and I’m always looking for new angles to use this tool!

A mortgage helps an individual employ one of Kiyosaki’s main principles of using OPM, other people’s money. In recent years as the banking and real estate industries have collapsed, it’s getting harder and harder to get a loan and use these principles.

If you search this blog or my web site at ttp://dividendamerica.com/DAM/html/learningctr.asp you will find many articles about how to effectively use a mortgage. Many articles discuss the proper use of a No Closing Cost loan or how to get sellers to pay the closing cost for you with the main theme always being focused on how to minimize your investment in the use of OPM.

You real estate investors understand this terminology and it is music to your ears, but for others who may be new to investing or who may just want to know the best way to get and use a mortgage, these terms are a little foreign. Suffice to say, usually I preach to invest as little in the mortgage as possible in order to get the biggest bang for your buck!

Sometimes that means paying full closing costs to get the absolutely best rates (like in the case when you’ll be in the home for more than 3 years). While other times I say, lower your costs when in the home less than three years and in the case of a purchase, get the seller to pay your cost for you.

Well my research has led me to advise my readers and customers to do something I never thought I would agree with! In this day and time, in this turbulent economy, in this time of record low interest rates, yes… here it goes…. it DOES make sense to pay some discount points to lower your rate.

Hold on now! You must read on. There is a condition to all this….

It makes sense if you believe as I do that this economy will lead to a ‘new’ economy of stagnant growth, tepid value appreciation in real estate and maybe even higher interest rates with some inflation. America is tapped out. We can’t spend anymore and we can’t spend our way out of the current mess.

The strategy we should all use is one that helps us to become debt free. The fastest way to -0- for some people is to refinance their 30-year fixed rate mortgage into a 15-year fixed rate.

I know, many of you instinctively understand that this type of significant change in your mortgage structure will result in a higher payment. But wait! it doesn’t have to.

Here’s where it might make since to buy down the rate by spending some equity on closing cost. The 15-year mortgage includes a higher principle reduction portion with each payment so you’ll recoup the lost equity in a very short period of time.

Think about it this way, if you can change your term from the current 28 years you have left by converting it to a 15 year mortgage and buy down the rate to level that doesn’t significantly change your payment, then why not make the change?

Here’s an example I recently did for a customer. He has 28 years left on a 30 year mortgage and his payment is $1,620 per month. We are refinancing the loan into a 15 year fixed and he’s paying 2 points to lower the rate. The new payment on the 15 year mortgage is $1,665!

The new payment is only $45 per month higher but we shaved 13 years off his mortgage! He just spent $5,570 to create a savings of $245,700 and recoups his current equity position in less than 14 months. That makes a whole lot sense.

My conclusion is that in this economy and the next we all need to be debt free. Spending some equity now in order to create a faster pay off of your mortgage is the best way to achieve a debt free goal!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Its the Economy Stupid

After a fairly frustrating week of hyper active rate fluctuations I collapsed on Saturday, tired, worried and spent. Interest rates are at their lowest level in years yet nobody is willing to pull the trigger on a refi to lower their rate.

Housing prices are at their lowest level in years and no one is willing to make an offer to buy. Rents are rising, foreclosures are rising and the only good news is gas prices are falling. So what's the problem. It's this economy!

I remember talking about this day way back in December 2007. Back then I said we were in a recession and back then everyone, including my wife, just about clobbered me saying I didn't know what I was talking about.

But as it turns out, this stupid hick with a high school education from the southside of Atlanta was right! http://www.marketwatch.com/news/story/US-Q3-GDP-down-05/story.aspx?guid=%7B282E197A%2DAE1C%2D47AE%2DB0EB%2D7C9F6C8C951F%7D
As reported on MarketWatch.com, a division of The Wall Street Journal; " Economists now say that a recession began December 2007..." Boo-ya! Sorry for the glee, but I love it when I'm right.

So why my glee? Not just because I'm right, but because business is cyclical. Once business and government realizes and admits that there is a problem, solutions begin to happen. We've been through a tough year and may have a little longer to go, but ultimately our economy will turn around.

Between now and the summer of 2009 we will hit true bottom. After that the economy should begin a slow rise out of the doldrums. We should remember our history. Other than The Great Depressiona, no other ecomomic downturn has lasted more than a couple of years including the huge recession at the end of the Carter administration.

So after some thoughtful introspection I've come to a realization. It's the economy stupid, that's why business is slow and that's why people make some of the poor economic decisions they make. But the smart players, the ones who don't let fear guide their decisions, will be happy that they refinanced their homes and made offers and bought new property for their portfolios during these scary times.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Ding Dong Your Debt is Calling!

Ding Dong is the universal written symbol for a doorbell. It's also the universally understood name for someone that isn't quite right in the head ....if you know what I mean.

Will, I'm not afraid to admit it, I've been a Ding Dong more times in my life than I care to remember! :) But I don't have to be that person any more, at least where debt is concerned, and I'm helping others shake that moniker as well.

Listen to this story: A client, we'll call him Bob Smith, comes into my office. Old Bob has a ton of credit card debt and the minimum payments have been climbing lately. The credit card companies are lowering the available credit, raising the interest rate and increasing the minimum monthly payment!

So Bob comes to me for a solution, what can he do? Well first he can use some of the equity in his home to pay off the credit card debts. We turn his 6.5% 30 year fixed rate mortgage into a 5.375% 30 year fixed rate mortgage. The debt consolidation saves him almost $700 per month!
Good right? Yes, but it gets better. Next we tell Bob he still has a problem. You see, the equity in the home was a safety net and we need to get that back as quickly as possible. We show Bob how to use a portion of the payment savings to build his equity back up rapidly.

With our software we run a scenario using his regular income and the $500 in payment savings as discretionary income. The program tells Bob how to pay his bills and if he follows the instructions Bob will pay off his new 30 year mortgage in just 8.5 years!

It gets better. You know that equity we used up paying off those credit cards? He gets that back in 2.75 years! Bob's life is changed and he's DEBT FREE in just 8.5 years.

Ding Dong your debt is calling! and it doesn't have very nice things to say. Do you want to know how to tell your debt to take a hike? Give me a call, interest rates are low, low, low and with our special debt repayment software we can have you debt free in no time!

Michael Gross is President of Dividend America Mortgage. He has been a builder, a Realtor and a real estate appraiser. He uses all of his expertise to show others how they can use a mortgage to create wealth through home ownership and now he's helping people get out of debt in 1/3 to 1/2 the time. Contact Michael at 770-350-7373 or mgross@dividendamerica.com.

Debt Free as easy as 1, 2, 3!

In my last post I talked about the seriousness of debt in America. I was ...and still am... incensed that the Treasury and our government think that the only way out of our current economic crisis is to have Americans spend more! It's craziness!

I have taken a new approach and it is unbelievabley exciting. I am using technology to get myself out of debt. If you have a moment I want to tell you a little story about my own situation.

You see, I own a mortgage company, and we're not doing so well right now. LOL. But that's okay, I'm blessed with a beautiful wife, good health and the God given talent to know when I have to change my business and my life to succeed.

I own a home in the burbs and two investment properties. I have about $20K in debt associated with my business. Total all the money I owe and it is over $750,000. That's three quarters of a million dollars! It's a little daunting to think I owe this much money, especially since I'm not wealthy by any stretch of the imagination.

My rentals break even every month, my mortgage biz is in the tank and my wife got laid off from her architecture job. Thank the good lord above for the severance package. Anyway, we would love to lower the interest rate on all of our mortgages, but with an income equal to our debt payment every month, we don't qualify.

So I sat down to try and figure out how I could get out of debt. Sell the rentals? Not in this market, I'd take a huge loss. Sell the primary, same thing, and I lose all that equity. Then I found a better answer....

Technology!

There is a lot to be said about technology and what it has done for our country and our standard of living. Now there is a tool that can help me become DEBT FREE in a very short period of time. Under my current repayment structure, I will be debt free in 35-37 years (that's because of some of the interest only mortgages I have.)

However, using this software and paying my bills the way the software instructs me to, I can be DEBT FREE in 16 years without changing my income structure. How is this possible you might ask? I know I did, I couldn't believe it!

Well I did some research. The software recognizes long-term debt in two categories, open ended and closed ended debt. In the closed end debt your interest payments are static and are set on an amortization schedule that gives the advantage tot he bank. You pay them the interest first and the majority of the principal is paid at the back of the loan. Good for the bank, bad for you.

In an open ended loan, an equity line or a credit card, the interest calculation is dynamic. Interest is calculated based on the average daily balance. The software picks strategic times throughout the year and within the am schedule of the closed end loan and uses the open end debt to pay off chunks of principal in the closed in loan.

This strategy is important because the larger the chunks of principal that are paid on the closed end loan, the more principal reduction you will achieve with the regular payments on that loan. Once the debt is transferred to the open end loan, the software has you transfer income into that loan to lower its balance immediately.

At first blush this sounds a little scary, but here's the important part. You pay your monthly bills out of the open end loan. This has a two fold effect on your debt. First, it lowers the average daily balance of the open ended loan. This means that you are actually paying a lower effective rate on the principal balance that was 'in' the closed end loan. Second, it gives the ability to operate your home finances in the same fashion you always have, there is very little change to the way you live your life.

Under this program I will save over $450,000 in interest payments. Even if I sell the investment properties in 7-10 years, I will increase the equity in those properties by more than 10 times the current schedule! That will mean hundreds of thousands of dollars in my pocket.

Do you want to be DEBT FREE? I am so excited about this program I have added it as a product in my company. If you can't refinance and you want to get out of debt, or if you can refinance and create lower payments and you want to use that payment savings to get out of debt faster, I would like to show you what I can offer.

Give me a call and become debt free today.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Don't Play the Rate Game!

Don't playt he rate game, here's why! The chart to the right shows the 10-Year Treasury Yield for October 8th, 2008. The Yield shot up to 3.72%, up 21 basis point from the previous day!

How could this be possible? Didn't the Fed announce that they were dropping the Fed Funds rate by 0.50% today? Didn't that reporter just say that rates were lower and this was being done to heat up the economy?

Now everyone is demanding a lower rate! After all the Fed just lowered the rates and everyone should expect their rate will be lowered too! Correct?

But hold on just a minute. That's no really how it works. You see the Fed Funds rate controls short-term lending. This would be the rates tied to your car loans, furniture and appliance purchases and credit card rates. If you want a lower rate on something, call that credit card company and demand a lower rate from them.

Mortgage professionals deal in long-term rates. These rates are set in the MBS (Mortgage Backed Securities) market and they closely follow the yield on the 10-Year Treasury Bond. (see the chart above) As you can see the yield on this bond jumped drastically. A 20+ basis point jump is unheard of in a market that thinks a 5 basis point swing is volatile.

In layman's terms, this means that the interest rates on long-term debt is increasing today, not decreasing. Let me try to simplify why this is.....

When people buy bonds they are seeking two things; safety and income. When the Fed lowers the interest rate on short-term debt they are trying to stimulate the economy. Essentially there ain't enough consumin' goin' on and they are trying to get the party started .....to coin a line from an old 90's club tune.... let's get this party start right! let's get this party started quickly! RIGHT!

When the econ heats up you get inflation. Inflation eats away at the value and the income of fixed assets like bonds. So investors sell the bonds rapidly because they are better off putting their money under the mattress than having it in stocks or bonds at the moment.

So as these bonds get sold off rapidly the laws of supply and demand come into play. There is an abundant supply of bonds for sale but a lack of buyers. This causes the price of the bonds to decline rapidly. As the price declines the yield increases. Since long-term interest rates are tied to bond yields, BAM, long-term interest rise.

So for the time being rates on long-term debt will rise or in a best case scenario, the will remain unchanged. If the economy continues to deteriorate we may see interest rates ease. The bottom line is that you should lock in gains now. If you feel that the rate you have chosen on your long-term debt is good then lock it down and close the loan.

In this credit crisis it is to risky to play the 'rate watch' game. Make a solid decision about what is right for you, your family and your business and lock it in. Then spend the next couple of years doing all that you can do to eliminate the debt as quickly as possible.

And then let's pray that whoever is the next President of our great nation understands how to get our economy moving again.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

The night was stormy. The wind was trashing and thunder was crashing and trees were falling all around us. It was a horrible storm. The rain was coming down in sheets and water flowed through a gash in the roof filling bucket after bucket with water.

The next day we surveyed the damage. After pulling a huge tree limb out of the roof it revealed a gaping hole. Something had to be done so a huge blue tarp was strung across the house. It was a temporary fix but it worked until the roof could be repaired and all could be made right again.

In a way, this is what has happened to our economic system and isn't it appropriate that the government would name the portion of HR 1424 Emergency Economic Stabilization Act that is designed to stabilize home ownership T.A.R.P. (Troubled Asset Relief Program)

Many people ask me what this bill is all about and the answer is complex. You see the bill is about a lot of things. Some of what is in the bill is important, however I am sad to say that there is a lot in the bill that is not. So let's focus on what is important in the bill and for the time being, leave the pontification of what should not be there to the pundits.

One of the most important parts of this bill is the TARP (Troubled Asset Relief Program). The TARP is the portion of the bill that gives the Secretary of the Treasury the authority to purchase non-performing and under-performing loan assets from banks. This huge fund should start to get all of the bad loans out of the credit system so that the real value of the loan pools that are performing can be determined.

The American economy, our financial house, has just been through a really bad storm. The TARP is there to temporarily cover the hole in the rough until it can be fixed properly. It is truly and temporary fix.

However, don't fret, there is a portion of this bill that is designed to permanently fix the hole and put our economic house in order. After the Sec. Tres. buys these troubled assets he has several tools he can use to transform the troubled assets from worthless pieces of paper into valuable streams of income.

First, the bill gives the Secretary the ability to adjust non-performing loans. The secretary can lower the interest rate, lower the loan balance or reset the loan to a 30 year fixed. He can do one or all of these things to help the borrower stay in their home and to make the home affordable based on the current income of the homeowner. This should allow the homeowner to start making their payments on time and should turn a non-performing asset with no value into a performing asset that can be sold for a profit.

Second, the Secretary has the authority to insure the payments on the new loan. If the secretary feels that the new loan would sell faster and for more money in the tertiary market if it were insured, the secretary can add a premium to the payment. This premium would insure the loan for up to 100% of it's payment if it went into default. Essentially this means that anyone purchasing the loan as an investment would have no downside risk.

As I said, there is much more in this bill that can be discussed. Much of it has to do with technical issues relating to how banks lend to each other and how they borrower from the Fed. The bottom line is that the TARP is the major portion of the bill that will help homeowners and that will stabilize the real estate markets.

So we've decided to do something about the hole in the roof caused by the storm. We've put a TARP over it to stop the damage. Now let's hope our politicians have the knowledge and foresight to take the next steps to do the hard work to remove the TARP as quickly as possible and truly fix the gaping hole in our economic house.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Playing The Real Estate Game - The Offer Phase

Today I want to talk about making offers. I often think I should devise a game to teach people how to make offers. I'm not talking about negotiating, just making a plan old, vanilla, down and dirty offer.

Real estate can be a trying business at times. Especially at times like these. With tons of foreclosures on the markets and agents fielding calls from every nare-do-well on the block asking inane questions and basically wasting their time, it's tough to get anyone to accept your REAL offer to purchase a property.

Right now I'm playing the real estate game in the offer phase in hopes that I'll get to up the stakes and get into the negotiation phase. But first I have to get somone to take me seriously.

I've had several conversations with 'duty' agents who promise to call me back but the promise is never kept. I call the office to try and locate the listing agent but they will not accept any calls and will only deal with other licensed agents. Highly FRUSTRATING!

So what do we do? We play the game, and trust me, it is a game. Here's how the game works. Sometimes you are just dealing with inept agents or agencies that make their money off maintaining the listing. They can care less if the property sells, they make a fee to maintain the property.

Other times you are dealing with agents that see opportunity in a particular piece of real estate and they want to squelch offers on the property so that they can buy it for themselves at a future date. Unethical? You bet! Do they care, NO!

So it's a game and I understand the rules. So here's what I do. First, I'm tenacious! I bully, cajole, call-call-call and then call again. I'm relentless, I've got nothing better to do all day than to try and get my offer presented on this property.

I'm calling to gather information. I want to see the inside, I want to know the taxes, the MLS or FMLS number. I want details.

Once I've gathered the details, I call MY agent. I always teach that investors should use an agent. You should have a Team of Trusted Advisers and high on the team list should be a Realtor. Notice I said a Realtor, not just a licensed agent.

So the rules that the listing agent gave me were that they only deal with agents. Fine, I've got one! And she's tenacious just like me! If she feels like I'm offering to high, she gives me a cross look and shakes her head. Okay then, what? Lower! How low? Well, how about 50% of the asking price! LOL You go girl!

I'm playing the game. Now instead of being frustrated, I'm the one doing the frustrating. I'm winning, offers are being accepted. I'm playing the offer phase! When I win this phase of the game its on to the next phase, The Negotiation Phase. Stay tuned........

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

The Value of Time

Many people are worried about their home values. A recent study shows that home values dropped by 1.7% last month in 43 states. That’s the largest drop in recorded history. So what can you do?

First, don’t panic! Remember that real estate is an illiquid asset. In most cases non-liquid markets tend to stabilize faster than liquid markets. After all, you can make a run on a bank and you can dump a stock, but selling a home is a more drawn out process.

In historical terms, real estate has always been a long-term investment. In the final analysis, the home is much more than an investment; it is also a place of refuge, comfort and security for your family. If you are in a neighborhood with good employment, strong schools and low crime, time will heal the financial wounds inflicted on your home value by this economic downturn.

The value of real estate and the ‘investment’ aspect are a product of time. Most people achieve wealth in a primary residence from two forces that create equity and value. Over many years the market will incrementally increase the value of the home and the owner can pay off the loan on the property. This one-two combo punches up the equity in the home and creates a financial windfall for the owner in the distant future.

Homes that are located in good neighborhoods with positive histories benefit from patience and will be the first to retrieve lost value once the market perceives that the economy is okay again.

Focus on reducing the principal balance on your mortgage and on maintaining the quality of the property and the appearance of the neighborhood as a whole. Banding together with other concerned homeowners to maintain the integrity of the entire neighborhood will insure future value growth.

Patience and persistence are important. In this market the key to the return of your home’s value is time.

If you have specific questions or concerns about your homes value, the interest rate on your mortgage or the impact of an economic downturn on your market, please do not hesitate to call. We are here to help.

Credit Crunch! Making It Big In A Tight Market

There is one overwhelming truth about real estate. No matter how many times you hear the ‘no money down, no credit needed’ mantra, it takes money and credit to make it big in real estate. For those investors that have a buy and hold strategy and/or a lease purchase strategy, now is the time to make a move. If you look around you will find that those investors that make the most money and eventually become wealthy are those that buy and control real estate. Look at many of the teachers and gurus of our day and you will see that the truth of their success and wealth belie the facts they tout in their seminars, books, CDs and DVDs. They made their money and are currently wealthy because they bought and or currently buy and control real estate.

In the heady, fast paced market of the recent past where Hard Money and Private Money lenders handed out loans like candy and conventional lenders would provide 100% purchase financing to any human being that could fog a mirror, being a buy and hold specialist was a risky game. No one was renting because everybody could buy. Rents were declining and making a positive cash flow on property was a zero sum game. However the past 90 days have changed the game! It’s a buyer’s market now. The average home sits on the market for 120 days or more, and the glut of foreclosures on the market are dragging home prices down. Add to these facts the glaring reality that almost 50% of people that qualified for a home 90 days ago don’t qualify today and you’ll see that being a quick-turn specialist with an all flip strategy is a dangerous business model.

Hard Money lenders have taken huge losses and are holding large portfolios of homes with rehab projects that are half finished. Non-performing loan portfolios are causing conventional lenders to close their doors daily and large national companies are going bankrupt. The 100% loans of the past have virtually disappeared. There is a true Credit Crunch! And it is here right now!

So how does an investor stay ahead of the curve? You must know the rules and you must be informed about what is going on in the market. Rule one is to know your credit rating and credit worthiness. It is not enough any more to just have a good score, you must have decent scores and a little jingle in your pocket. Cash is king, whether that’s money in savings or your willingness to leave equity in the property. In today’s lending environment, whether the lender is a traditional lender or an alternative money supplier, they want to know that you have the ability to repay the loan or that they have equity in the property if you decide to bail out. Rule two is simple. You must be willing to buy and control property for the long-term. Lenders of all types want to know that you aren’t a quick-turn artist looking for the fast buck. You must be willing to show that you understand that real wealth in real estate is generated over the time and that you have a plan to create a more traditional business. Rule three; show the lender that you have multiple strategies and that all will be successful.

Hard money lenders want to know that you have qualified for conventional financing first so that they can be taken out when the rehab is complete. Furthermore, the conventional lender wants to know that you will own the property for at least a year before you liquidate it. Lease purchase strategies are the best for this market. With a combination of financing from Non-Traditional and Traditional lenders investors can receive some money now from a cash-out finance and some money later from the tenant buyer when they purchase the home. Real cash-flow can be created if investors are willing to hold and control real estate and eschew the quick-turn philosophy. Call and speak with competent professionals and use lenders that have coordinated relationships. You want your conventional lender and your private lenders to work together and have a solid business relationship, communication is the key. Staying ahead of the lending curve in this era of the Credit Crunch is not difficult. It just takes the correct strategy and the right professionals on your team.