Comments on: The Pre-Payment Penalty: Gold mine or equity Quicksand? http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/ Seattle's Leading Resource for Real Estate Information Sat, 21 Nov 2009 06:01:18 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Lynlee & Tim http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180677 Lynlee & Tim Sat, 15 Sep 2007 20:27:26 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180677 Greg, Sounds like good words of wisdom. Greg,

Sounds like good words of wisdom.

]]> By: Greg Perry http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180655 Greg Perry Sat, 15 Sep 2007 19:13:13 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180655 Good times are intoxicating.....we never think they'll end. The trouble with holding seminars around books like Missed Fortune, is that "professionals" read the book once, buy into it and start teaching it to others. Good CFP's should know and understand the "cycles" of the economy and set up their clients in relation to their current wealth, age, and risk tolerance. What I can do for a client is to let them know, from my experience, if a house or property is a reasonable value for the market. I am very conservative with real estate investors. I talk them out of more properties than we make offers on and purchase. I've seen many investors with stars in their eyes want to make an offer, only to have me sloooooow them down to analyze the numbers. Many investments seem to make sense on the surface (especially flippers), but when everything, including the cost of sale, holding costs, and real improvement costs are analyzed, they don't make any sense at all. Good LO's are the same way with their clients. In this industry we all need to be the voice of reason with our clients. We need to lay out the risks objectively so that the client can make good decisions. Personally I've lost a lot of money taking short cuts in the sequence of financial success. Stability must be maintained at all times in every economy. People get in trouble when they attempt to straight from survival or stability to significance. Good solid foundations need to be in place. I've learned from past mistakes and have an appreciation for financial defensive positions. Good times are intoxicating…..we never think they’ll end.

The trouble with holding seminars around books like Missed Fortune, is that “professionals” read the book once, buy into it and start teaching it to others. Good CFP’s should know and understand the “cycles” of the economy and set up their clients in relation to their current wealth, age, and risk tolerance.

What I can do for a client is to let them know, from my experience, if a house or property is a reasonable value for the market. I am very conservative with real estate investors. I talk them out of more properties than we make offers on and purchase. I’ve seen many investors with stars in their eyes want to make an offer, only to have me sloooooow them down to analyze the numbers. Many investments seem to make sense on the surface (especially flippers), but when everything, including the cost of sale, holding costs, and real improvement costs are analyzed, they don’t make any sense at all.

Good LO’s are the same way with their clients. In this industry we all need to be the voice of reason with our clients. We need to lay out the risks objectively so that the client can make good decisions.

Personally I’ve lost a lot of money taking short cuts in the sequence of financial success. Stability must be maintained at all times in every economy. People get in trouble when they attempt to straight from survival or stability to significance. Good solid foundations need to be in place. I’ve learned from past mistakes and have an appreciation for financial defensive positions.

]]> By: Tim http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180643 Tim Sat, 15 Sep 2007 17:58:24 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180643 Rhonda, It's not off track. Do you want me to stop a meeting with friends over coffee and say, "Hey! Keep on topic!." That's why I love blogs. Other people chime in and it strikes a chord and then the topic changes or gets more color. Comments are never off track! LOL. Rhonda,

It’s not off track. Do you want me to stop a meeting with friends over coffee and say, “Hey! Keep on topic!.” That’s why I love blogs. Other people chime in and it strikes a chord and then the topic changes or gets more color. Comments are never off track! LOL.

]]> By: Rhonda Porter http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180640 Rhonda Porter Sat, 15 Sep 2007 17:54:13 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180640 BTW, I would love to work with some CFPs who are truly interested in helping clients get on the right track with their finances. Specifically, those who are just starting off and needing a plan. (sorry, I know this is off track with your post, Tim). BTW, I would love to work with some CFPs who are truly interested in helping clients get on the right track with their finances. Specifically, those who are just starting off and needing a plan. (sorry, I know this is off track with your post, Tim).

]]> By: Rhonda Porter http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180639 Rhonda Porter Sat, 15 Sep 2007 17:53:05 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180639 Just last week, I had an interesting conversation with a CFP trying to convince me to set up "missed fortune" seminars. He was shocked that I was not interested...he was certain that I just "don't get it"! He asked, "haven't you read Missed Fortune?" "Have you seen Doug Andrew's presentation?" I answered yes to both...however...I'm still not interested! Just last week, I had an interesting conversation with a CFP trying to convince me to set up “missed fortune” seminars. He was shocked that I was not interested…he was certain that I just “don’t get it”! He asked, “haven’t you read Missed Fortune?” “Have you seen Doug Andrew’s presentation?”

I answered yes to both…however…I’m still not interested!

]]> By: Greg Perry http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180636 Greg Perry Sat, 15 Sep 2007 17:39:09 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180636 Rhonda, OUCH! Piranhas are in the river! Missed Fortune was very popular with a segment of the mortgage community to churn refis. As you said, there are some good points in the book, but I wasn't comfortable with the way some LO were hawking the concept. I know of a couple of LOs that were holding monthly seminars and getting alot of refi bus from them convincing people to tap their equity. The thing that I know about pre-pays is that going in, 3 years seems like a short time especially when things are stable and going well. However ANYTHING can happen in that period of time.......and in fact we're smack in a liquidity crisis. I'ts heartbreaking when a good client goes elsewhere, only to get burned. I'm sure you'll do your best to repair as much damage as you can. Rhonda,

OUCH!

Piranhas are in the river!

Missed Fortune was very popular with a segment of the mortgage community to churn refis. As you said, there are some good points in the book, but I wasn’t comfortable with the way some LO were hawking the concept. I know of a couple of LOs that were holding monthly seminars and getting alot of refi bus from them convincing people to tap their equity.

The thing that I know about pre-pays is that going in, 3 years seems like a short time especially when things are stable and going well. However ANYTHING can happen in that period of time…….and in fact we’re smack in a liquidity crisis.

I’ts heartbreaking when a good client goes elsewhere, only to get burned. I’m sure you’ll do your best to repair as much damage as you can.

]]> By: Tim http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180634 Tim Sat, 15 Sep 2007 17:34:47 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180634 800 scores....and going into an Option Arm. Don't even know what to day. It tires me to no end listening to the garbage rhetoric out there about all the "what if" scenarios in investing money etc. There are so FEW instances where a Neg. Am. loan makes financial sense. Er, let me rephrase that: there are very few cases for a BORROWER obtaining a neg. am. loan. that makes financial sense. 800 scores….and going into an Option Arm. Don’t even know what to day. It tires me to no end listening to the garbage rhetoric out there about all the “what if” scenarios in investing money etc. There are so FEW instances where a Neg. Am. loan makes financial sense. Er, let me rephrase that: there are very few cases for a BORROWER obtaining a neg. am. loan. that makes financial sense.

]]> By: Rhonda Porter http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180617 Rhonda Porter Sat, 15 Sep 2007 16:29:09 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180617 Tim, I'm so upset over seeing what happened to one of my past clients who I helped yesterday. He went thru another LO who suggested he refi (he recently divorced and wanted to remove his x's name from the mortgage and title) into an option ARM; make the min. payment and invest the difference into an insurance fund. He did not realize until at signing that there was a 3 year prepay. He has 800 credit scores. If I could find the LO who did this to him...I'd probably punch her in the nose! :( This LO gave him a copy of "Missed Fortune" by Doug Andrews. Doug travels the LO and financial planner circuits to promote "equity harvesting" and reinvesting. There are points to his book that I agree with. However, I never believe that "one size fits all" with a financial strategy. Having an Option ARM kept this single Dad up at nights worrying what his rate was doing. Now we're refinancing him back into a 30 year...and this ARM has eaten his equity not only be the deferred amortization...paying off the prepayment penalty of 6 months interest. Tim, I’m so upset over seeing what happened to one of my past clients who I helped yesterday. He went thru another LO who suggested he refi (he recently divorced and wanted to remove his x’s name from the mortgage and title) into an option ARM; make the min. payment and invest the difference into an insurance fund. He did not realize until at signing that there was a 3 year prepay. He has 800 credit scores. If I could find the LO who did this to him…I’d probably punch her in the nose! :(

This LO gave him a copy of “Missed Fortune” by Doug Andrews. Doug travels the LO and financial planner circuits to promote “equity harvesting” and reinvesting. There are points to his book that I agree with. However, I never believe that “one size fits all” with a financial strategy.

Having an Option ARM kept this single Dad up at nights worrying what his rate was doing. Now we’re refinancing him back into a 30 year…and this ARM has eaten his equity not only be the deferred amortization…paying off the prepayment penalty of 6 months interest.

]]> By: Kary L. Krismer http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180179 Kary L. Krismer Fri, 14 Sep 2007 05:01:17 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180179 Jillayne noted that "things happen." I agree with that fully. So far in my adult life I've lived places over 10 years, but I've never gone with a pre-pay just in case I need to move sooner than anticipated. Similarly, I would never go with an 80/20 because I'd be afraid of still owing money on the 20 after the 80 foreclosed. I always think in worst case scenarios, and I'd rather pay $XX.xx more per month than worry about losing my home and still owing $XX,XXX.xx on it! Jillayne noted that “things happen.” I agree with that fully.

So far in my adult life I’ve lived places over 10 years, but I’ve never gone with a pre-pay just in case I need to move sooner than anticipated.

Similarly, I would never go with an 80/20 because I’d be afraid of still owing money on the 20 after the 80 foreclosed. I always think in worst case scenarios, and I’d rather pay $XX.xx more per month than worry about losing my home and still owing $XX,XXX.xx on it!

]]> By: Greg Perry http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180175 Greg Perry Fri, 14 Sep 2007 04:52:42 +0000 http://raincityguide.com/2007/09/13/the-pre-payment-penalty-gold-mine-or-equity-quicksand/#comment-180175 "In regards to the client you’re helping in comment 8, I wonder what the relationship is between the Realtor and the LO." <strike>Jillanye</strike>, Jillayne in comment 8, Rhonda is referring to real estate agent. Of course a Realtor is bound by the Realtor Code of Ethics. It's easy to just automatically refer to all real estate licensees as Realtors. I know, I know, it may seems like I'm slicing a fine hair here, but am I? I'm currently involved in a transaction with a real estate agent (who has admitted that he has a job and does real estate "on the side") and it's been very challenging. I've had problems with communication, procedures and contract timelines. I find myself calling the LO 2-3 times/week for my comfort and the comfort of my client. Of course, not all real estate agents are "bad", and not all Realtors are perfect. There is, however, a difference in training and ethics between real estate agents and Realtors. Less than 20% of all real estate licensees get any kind of advanced education and work the real estate business as a full time professional occupation. Rhonda, It just kills me when buyers stick with LO's or agents who don't follow law, procedures or keep their interest at heart. As for the pre payment issue, yes some are legit. Some people just made more money for their LO. “In regards to the client you’re helping in comment 8, I wonder what the relationship is between the Realtor and the LO.”

Jillanye, Jillayne in comment 8, Rhonda is referring to real estate agent. Of course a Realtor is bound by the Realtor Code of Ethics. It’s easy to just automatically refer to all real estate licensees as Realtors.

I know, I know, it may seems like I’m slicing a fine hair here, but am I?

I’m currently involved in a transaction with a real estate agent (who has admitted that he has a job and does real estate “on the side”) and it’s been very challenging. I’ve had problems with communication, procedures and contract timelines. I find myself calling the LO 2-3 times/week for my comfort and the comfort of my client.

Of course, not all real estate agents are “bad”, and not all Realtors are perfect. There is, however, a difference in training and ethics between real estate agents and Realtors. Less than 20% of all real estate licensees get any kind of advanced education and work the real estate business as a full time professional occupation.

Rhonda,
It just kills me when buyers stick with LO’s or agents who don’t follow law, procedures or keep their interest at heart.

As for the pre payment issue, yes some are legit. Some people just made more money for their LO.

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