Even if you think you have the best mortgage, it's now obsolete.

Even if you think you have the best mortgage, it's now obsolete.


This innovative and powerful loan uses the power of your income to slash thousands off the total interest you pay and chop years off the time it takes to pay off. All without changing your spending habits, or your access to the cash you earn.Here is what others are saying....


"....harnesses the money sitting in a checking account for the borrower's benefit instead of the bank's." -- San Francisco Business Times,6/10/05


"....designed to help borrowers accelerate their principal payments as painlessly as possible." -- San Francisco Chronicle,5/26/05


"....a one-of-a-kind tonic for people who want to keep their balance sheets healthy in a time of skyrocketing house prices...." -- Contra Costa Times,6/10/05


"....could revolutionize the way Americans pay for their homes...." -- East Bay Business Times,6/10/05 How it works.
Bank your money in your mortgage. With the Home Ownership Accelerator, you direct-deposit your entire paycheck into your mortgage, instead of your checking account. This immediately reduces your principal balance. Since interest is based on your daily balance, you start saving interest immediately compared to traditional loans!

Access your funds just like you used to. You pay all of your expenses out of your mortgage, just like you would with a traditional bank account -- using the unlimited checks, free ATM/Debit card, and free online bill-pay that comes with the account. Until you need the money, though, it's in your mortgage in the form of a lower principal balance, saving you 5-6% in mortgage interest, instead of earning 1% in a bank account. Less interest means that more of your take-home pay goes towards principal, and you pay off sooner. With no change to spending habits!

If you haven't already, play The Movie: How it Works to find out why this loan is so powerful. ( Need Flash player? )


How effective is it?
If you're an average borrower with good cash flow, you could pay off an average sized loan in as little as half the time – with no changes to spending habits.

Let's look at an example:

Imagine you have net pay of $100,000 annually, saving 15% of your net income after expenses, and you have a $400,000 30-year fixed-rate mortgage at 5.5%. And, let's even assume that mortgage interest rates are climbing on a "reverse course" that mirrors their recent decline (APR 8.19%)! A 'worst case' rate scenario!"

Saves interest, pays off sooner.

In this example, refinancing to the Home Ownership Accelerator roughly doubles your mortgage efficiency. You could pay off in as little as 17.3 years and save nearly $89,000 (21%) in interest, compared to the 30-year fixed rate loan at 5.5%. In fact, to save that much interest, you'd have to find a 30-year mortgage at 4.4%, which is very unlikely.

But what if rates go up even more?

In this example, the adjustable rate on the Home Ownership Accelerator would have to average 9.6% over the entire 17.3 years for the interest payments to equal that of the 30-year fixed rate mortgage at 5.5%. That's not likely to happen either.Read more!
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30-year mortgage rates fall to 6.14%

Rates on 30-year mortgages fell to the lowest level since mid-December as investors scrambled to the safety of bonds following last week's stock market turmoil.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.14 percent this week, down from 6.18 percent last week.
The decline pushed 30-year rates down to the lowest point since they averaged 6.13 percent the week of Dec. 21. Other rates dropped as well.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 5.86 percent, down from 5.92 percent last week. Five-year adjustable rate mortgages edged down to 5.90 percent, compared to 5.93 percent last week. - The Associated Press Read more!
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Options for Subprime Borrowers: Better then FHA

If you can't do FHA, this could be another option to avoid the high interest rates of subprime. This is a little about how My Community Mortgage Works.

My Community Mortgage is available to help you buy or refinance a single-family home or condo, or a two- to four family
home that you will live in as your primary residence. It is not credit score driven. Flexibility on credit histories and nontraditional credit accepted.


Income that can qualify you for mortgage approval includes many sources besides wages, such as boarder income
from relatives or nonrelatives.

Proof that you handle credit responsibly can include rent payments; payments for electricity, water, or other utilities; or other payments you make on a regular basis.

My Community Mortgage includes several options that can make it even easier to buy a home. For example,Community Solutions is an option for public service employees such as teachers, police officers, firefighters, and health care workers. Community Home Choice is for borrowers with a disability.

My Community Mortgage is available throughout the United States.Read more!
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How to Make $125K Tax-Free in Addition to Rental Income

If you are an avid real estate investor who likes to keep rental properties for a reasonable period before selling, then there is a way for you to make $125K tax-free over and above the rental income you receive. For this scenario, we will assume you are single simply because those that are married (even though you could double your tax-free income potential) would not want to do what is required.

If you are a real estate investor and single, then you could incorporate a strategy that allows an extra tax-free income, up to $125K annually, in addition to the rental income you receive already. This program takes time to set up, but you may already be in a position to get it started. The only drawback is it requires you to move every 2 years, which is why it is likely that married couples do not want to do this, especially if you have children.

How does it work?t is actually very simple. You acquire a reasonable number of properties, you must have at least one rental property to make this work, but the more you have, the easier it will be to implement. The IRS allows for a capital gains exclusion for up to $250,000 in gains on the sale of a property if you are single. The two main requirements are that you owned the property at least two out of the last five years (not a company), and that you personally lived in it at least two out of the last five years.

The plan requires you to move every two years in order to meet the IRS guidelines for claiming the deduction prior to selling the property. You may even be able to get started by purchasing a new home to live in while renting your current residence for the next 3 years. Remember that the IRS does not specify when the 2 years must be, so it could be the first 2 years of the last 5 and you could still claim the exclusion.

Now that you know how it can be tax-free, what are the limitations?

We discussed some of the limitations regarding the exclusion, but there are some others that need to be discussed as well. Remember that the gains are from the difference between the tax basis you kept record of and the proceeds from the sale of the property. If you are like many investors, and you depreciated the property to save on taxes already, you will most likely still be required to pay the depreciation recapture tax on the depreciated amount. Also, there are some other tax related issues for rental properties you will need to factor in, such as how repairs versus replacements work for taxes.

Can you sum this up for me?

Yes, here is the summary of what you can do to receive up to $125K annualized tax-free income while earning rental income as well. You purchase rental properties and earn the rental income while you own them. Remember to maximize your tax deductions using proper techniques during the ownership, but you will have to weigh the benefits of depreciating the property. While you earn this rental income, the property is likely appreciating in value (over time, not necessarily immediately), so in two years you could have a property that appreciated up to $250K and you would be able to sell it and potentially receive that gain tax-free. The main requirement is that you move into one of your properties every two years. Married couples can theoretically double this income following the same strategy, but the requirement to move every two years may be too hard on the family..Read more!
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Make sure you understand your option arm

With college costs looming for their four children, Bryan and Susan Andrews were looking for a way to cut their monthly expenses.

The sales pitch that came in the mail seemed perfect: A mortgage at 1.95 percent, fixed for five years.


Bryan and Susan Andrews of Cedarburg, Wis., sued Chevy Chase Bank, saying the lender misled them into taking a high-interest mortgage. (By Darren Hauck For The Washington Post)

"It sounded like a really good program," Susan Andrews recalled recently.

But after the deal closed, in 2004, the couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. The rate has climbed to 8.3 percent and, because of the way the mortgage is structured, the couple now owe more than they did when they signed for the loan

They went to court, saying they were deceived. A federal judge has sided with the couple and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase.

The bank is appealing, and on Friday, an appeals court granted its motion for an expedited appeal. The bank says the terms were clearly stated in the contract and that if the family has a grievance, it should be taken to the mortgage broker who sent the original sales flier and acted as an intermediary between them and the bank.

Bryan Andrews, 49, a carpenter, and Susan, 51, a nurse, previously had a 5.75 percent fixed-rate mortgage. The couple, who live in Cedarburg, Wis., say they didn't realize what they had done until they got their first payment coupon for the new loan in the mail. They considered refinancing into a different loan but couldn't do so without a $5,700 prepayment penalty. They sued two years ago.

Last month, U.S. District Court Judge Lynn Adelman, a federal judge in Milwaukee, ruled that Chevy Chase had violated the 1968 Truth in Lending Act, which requires lenders to clearly explain loan terms to borrowers. Chevy Chase's disclosures to consumers showed a "lack of forthrightness" and "would both confuse and mislead an ordinary consumer about the cost of the loan," the judge wrote.

Adelman ruled that while the borrowers were not eligible for damages, they could be permitted to turn back or "rescind" their mortgages. Recision would permit borrowers to be released from the loans, receive reimbursement of any interest they paid to Chevy Chase and get back their closing costs, too.

In other words, the ruling may give some borrowers a refund of everything they have paid to live in their houses for years.

The case worries the lending industry because of the potential for hefty losses if other borrowers are allowed to rescind mortgages they claim were misleading.

The Chevy Chase case underscores the rising uncertainty surrounding the kinds of loans that have emerged in the past five years, said Glenn Costello, managing director of Fitch Ratings Residential Mortgage Backed Securities Group. These loans include such variations as interest-only loans and what are known as option ARMs, which allow people the choice of paying less each month than the interest would be. In many of these loans, the amount owed is deferred to keep monthly payments down. The downside is that at some point payments can rise sharply. The amount owed can rise, too.
Banking regulators have only recently begun offering new information to borrowers about these loans and warning lenders to explain them more carefully. In the meantime, the loans have proliferated. In the Washington area, for example, nontraditional mortgages accounted for almost half of the purchase and refinance loans made last year.

"Some percentage of borrowers don't understand the terms of these loans, and it is to be expected that there would be some issues emerging," Costello said.


Bryan and Susan Andrews of Cedarburg, Wis., sued Chevy Chase Bank, saying the lender misled them into taking a high-interest mortgage. (By Darren Hauck For The Washington Post)

Chevy Chase says it has done nothing wrong. The bank complied with the truth-in-lending law, said Thomas H. McCormick, the bank's general counsel.

In its court filings, Chevy Chase lawyers said the Andrewses' loan was appropriate for them because it gave them more "flexibility" by letting them choose what level of payment they would make each month, and that if the family has a grievance, it should be taking it to the mortgage broker, First Mortgage, which arranged the loan.

"Simply put, to the extent that Plaintiffs have a legitimate grievance, they have sued the wrong party," Chevy Chase's lawyers wrote. First Mortgage, which was not sued, did not return calls seeking comment.

At the core of the dispute are some words that appeared on the top right corner of a document the lender must provide under the Truth in Lending Act. One line read: "WS Cashflow 5-year fixed," and the line under it said "Note Interest Rate: 1.950%."

The Andrewses said those words led them to believe the loan was a fixed-rate mortgage for five years, at 1.95 percent interest, and that they were reassured of its meaning by the broker at First Mortgage who handled the loan on behalf of Chevy Chase. In fact, the 1.95 percent offer was a teaser rate that lasted one month, and the interest charged on the loan started rising the next month. And the "fixed" feature had nothing to do with the interest rate. Rather, it meant the lowest possible payment stayed the same -- $701 a month -- over five years, although the interest rate rose, with the additional expense deferred to the end of the loan.

"This statement was confusing because although it is true that the payments on the loans were fixed for five years, the interest rate was not," the judge wrote.

Chevy Chase argued that there were many other places in the loan documents that signaled the loan was not a traditional fixed-rate product, noting that one section had a bold-faced title: ADJUSTABLE RATE NOTE and that another section was titled "Calculation of interest rate changes."

In addition, the same federal disclosure form cited by Bryan and Susan Andrews included another box, labeled ANNUAL PERCENTAGE RATE, which noted that the interest rate was 4.047 percent, and said below that the loan had variable-rate features.

According to Chevy Chase's McCormick, the WS Cashflow reference and the 1.95 percent notation were loan identifiers used by Chevy Chase "for internal purposes," to identify the kind of loan and that the full phrase that was supposed to be on the document was "WS Cashflow 5-year fixed pay," but that the last word sometimes got lopped off when the documents were being photocopied.

"The inadvertently truncated language was found by the court to create the possibility of confusion," McCormick said.

The Andrewses should have reviewed the documents more thoroughly, according to McCormick and other bank lawyers. The couple showed "consistent and stunning lack of interest in reading the documents they signed," Chevy Chase lawyers said. The bank also quoted Susan Andrews as saying in a deposition that she trusted the broker and did not think she needed to "read every tiny word."

Kevin Demet, the couple's lawyer, said Chevy Chase was trying to dodge responsibility. "Chevy Chase's attitude was to blame the broker," Demet said.

McCormick said the banking industry doesn't think the Andrews case will set a precedent. Last week the 1st Circuit Court of Appeals in Boston ruled in a similar case that a lower court "lacked the authority" to give these lending claims class-action status. In that case, according to the judges who issued the ruling in favor of the lender, First Horizon Home Loan, the bank's exposure could have been $200 million.

The ultimate cost to Chevy Chase if it loses its appeal is uncertain; so is the number of loans that could be affected. McCormick declined to say how many loans would be involved, except that it would be much fewer than the 7,000 the judge estimated.Read more!
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Mortgage Defaults Start to Spread

Mortgage Defaults Start to Spread
New Data Show That Nontraditional Loans Are Beginning
To Haunt Borrowers With Midlevel Credit; Prime Still Fine
By RUTH SIMON and JAMES R. HAGERTY
March 1, 2007; Page D1
The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.
At issue are mortgages made to people who fall in the gray area between "prime" (borrowers considered the best credit risks) and "subprime" (borrowers considered the greatest credit risks). A record $400 billion of these midlevel loans -- which are known in the industry as "Alt-A" mortgages -- were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.


The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don't plan to occupy themselves can also fall into the Alt-A category.

BORROWED TIME
Default rates are increasing on so-called Alt-A mortgages, which include the following:• Loans to borrowers with midlevel credit scores that fall between "prime" and "subprime."

• Many mortgages made to borrowers who provide little, if any, documentation of their income or assets.

• Option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance.

Borrowers who take out Alt-A mortgages are considered less risky than subprime borrowers because of their higher credit scores. But as the housing market cooled and loan volume declined, some lenders lowered their standards for Alt-As. Now a rising number of borrowers who took out these loans are running into trouble.

Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. "The credit deterioration has been almost parallel to what's been happening in the subprime market," says UBS mortgage analyst David Liu. The UBS report contrasts with testimony Federal Reserve Board Chairman Ben Bernanke gave to Congress yesterday. "Our assessment is that there's not much indication that subprime issues have spread into the broader mortgage market," Mr. Bernanke said.
To be sure, defaults have remained very low in the prime market -- and despite the uptick in bad loans, the problems in the Alt-A sector aren't as severe as those that have roiled the subprime market. Some 2.4% of Alt-A loans are at least 60 days past due, according to UBS, which looked at mortgages that were packaged into securities and sold to investors. That is well below the 10.5% delinquency rate for subprime mortgages. (During the housing boom, delinquencies were low for all types of loans because borrowers who wound up in trouble could refinance or sell.)

Some borrowers who took out Alt-A loans in recent years are starting to feel the strain. Johnny and Shirley Johnson, retirees in Cleveland, took out an option ARM when they refinanced their $92,700 mortgage in July 2005. The loan carried a 3.5% introductory rate that began moving upward a few months later. The couple, who live on a fixed income, are currently making the minimum payment on their loan. But they are afraid they won't be able to keep up with their loan and other debts once their monthly mortgage payment adjusts upward later this year.

"We don't want to lose our home," says Ms. Johnson. The couple is working with Acorn Housing Corp., a nonprofit group that provides housing counseling, in an effort to refinance into a 30-year fixed-rate mortgage. Though the monthly payment would be higher, the new loan would protect them against future increases.

Housing counselors and bankruptcy attorneys say they are seeing an increase in troubled borrowers who previously had good credit. "We have clients with 720-plus credit scores, and they are in awful products," says Jennifer Harris, executive director of the Home Loan Counseling Center in Sacramento, Calif. Some of these borrowers took out option ARMs with low introductory rates and are likely to fall behind when their monthly payment resets at a higher level, she says.

Thomas Gorman, a bankruptcy attorney in Alexandria, Va., says he is seeing more financially strapped borrowers who "probably bought more house than they could afford and then took on more credit-card debt" to furnish the house and pay for the move. When the housing market cooled, they were "caught in the middle," unable to sell their home or refinance and make their debt load more manageable.

Lenders are also tightening their standards. At a meeting with investors last week, IndyMac Bancorp Inc., the nation's largest Alt-A lender, said it had raised the minimum credit score at which borrowers could finance 100% of a home's value and took a number of other steps to tighten lending guidelines.

This week Lehman Brothers Holdings Inc.'s Aurora Loan Services unit raised the minimum credit score and reduced the maximum amount homeowners could borrower without documenting their income and assets.

Impac Mortgage Holdings Inc., which specializes in Alt-A loans, said recently that it had tightened its lending standards 17 times last year. The company cut back on riskier loans and began relying more on analytical tools to verify a borrower's income and creditworthiness. Other lenders were quick to scoop up many of those loans, but now they are also pulling back, says Impac President Bill Ashmore.

Lou Barnes, a mortgage banker in Boulder, Colo., says a client with a good credit score was turned down this week for a mortgage to buy an investment property with a small down payment and no documentation. That same borrower was approved for a "nearly identical" loan in August and November, he says. Still, Mr. Barnes calls the tightening "modest." Alt-A lenders are "nibbling at the edges," he says.

The UBS study found that the problems are greatest for Alt-A borrowers who took out interest-only adjustable-rate mortgages, which allow borrowers to pay interest and no principal in the loan's early years, with 3.71% of interest-only ARMs originated in 2006 at least 60 days past due. As in the subprime sector, the riskiest loans are those made to home buyers who put little, if any, money down and don't document their income or assets.

As delinquencies rise, some investors who bought lower-rated securities backed by these mortgages are likely to face losses, according to Mr. Liu of UBS. While defaults are expected to be lower than in the subprime sector, so are the reserves set aside to cushion bond investors against such losses.

Defaults are much lower for option ARMs. But the problems with these loans could be "backloaded," says Mr. Liu, because borrowers with these loans are still making the minimum payment.

Glenn Costello, a managing director at Fitch Ratings Inc. in New York, expects the foreclosure rate for Alt-A loans to ultimately be only 10% to 20% of the rate for subprime borrowers.

Yet investor concerns about Alt-A loans are rising, according to Walter N. Schmidt, a mortgage investment strategist at FTN Financial Capital Markets in Chicago. A report from mortgage analysts at Barclays Capital in New York this week pointed to fraud as one reason for early defaults on Alt-A loans. The mortgage industry is battling a rash of cases in which borrowers, loan officers and appraisers collude in providing false information to induce lenders to advance more money than homes are worth.Read more!
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