Here's the skinny on the recently touted Stimulus Package.

It's been introduced and voted on in Congress.

"Jan 29, 2008: This bill passed in the House of Representatives by roll call vote. The vote was held under a suspension of the rules to cut debate short and pass the bill, needing a two-thirds majority. The totals were 385 Ayes, 35 Nays, 11 Present/Not Voting."

This bill hopes to send one-time rebates to 111 million families, provide tax breaks to businesses, and ease mortgage loan limits. (in this case easing means raising the Conforming Loan Limits).

See: "They Raised The Conforming Limit!"

The bill now must be approved by the Senate. There is a looming deadline of Feb 15 and they are trying to speed things along with a minimum of debate.

There is some concern being voiced in the Senate about the increase in the conforming loan limit without a comprehensive set of new rules for OFHEO.

Don't forget, it was OFHEO's director James Lockhart
(Office of Federal Housing Enterprise Oversight, the body that oversees Fannie and Freddie)who issued the statement saying,

"We are very disappointed in the proposal to increase the
conforming loan limit as we believe it is a mistake to do so
in the absence of comprehensive GSE regulatory reform."

FICO is an acronym for the Fair Isaac Company, but you knew that right?

FICO was an independent company a long time ago.  They developed the mathematics that reduces us all to mere numbers.  It doesn't sound wonderful does it?

Actually, being reduced to a number was a good thing.  For the first time, that number translated into the realistic odds of you either making all your payments on time or defaulting on your loans.

A LITTLE HISTORY

This was powerful information for lenders.  Instead of making long drawn out lending decisions based on lengthy financial statements, the lenders now had a streamlined process at hand.

The fine people  at FICO had created a great product.  In the greatest of capitalistic ways they sold the company to TRW (one of the three credit reporting bureaus).  TRW then sold their newly bought product to the other credit bureaus (Equifax and Transunion), packaging them under slightly different names - The Beacon and Empirica Score.

When you have a good product the next thing to do is change it.  Redefine and refine it.  If the FICO score helped home lenders understand the chance of mortgage defaults, what about other lending institutions?  How about the car guys?  So FICO came out with something called the Auto FICO.  This number predicts how well the auto loan (or lease) they make to you will perform.

The car guys liked it.  They still like it.  If you listen to the fast talking lawyers at the end of commercials you'll hear the words "Auto FICO".

Well FICO is at it again.  This time they are going after the medical community.  You are about to get your MedFICO Score.  As you would guess, it hopes to better guess at how apt you are to pay your medical related bills.

Can you see it coming?

"Well Mr. Mueller, based on your MedFICO score we're going to treat your illness with an alternative therapy.  We know your very ill but you just didn't qualify for our best therapy."

Does that make me a Sub Prime Patient?

Supposedly, hospitals will check the score, which will be based on the patient's medical bill payment history, only after the patient is discharged.  Yeah right.

If almost 80% of credit reports have errors - I'm not so confident this is a good thing.  I'm going to keep taking my vitamins.

This weekend I was at my local lumber yard picking up a door for my bathroom remodel.  Dolan's Lumber employs some of the most knowledgeable people in the industry. 

I'm a weekend warrior when it really comes to it.  I know the right end of the nail, maybe more than most, but I am far from an expert.  Between Jeff, Tammy and Lorn there isn't much about doors and windows left uncovered.  When I have door question, a problem, or a need - it's not Home Depot or Lowe's, there's only one place to go, it's Dolan's.

There is no substitute for correct information, products and services.

While I was in the sales office I couldn't help but overhear a conversation going on between a counter person and a customer.  They were chit chatting about the Feds and how the government was going to fix the housing crunch. 

Unfortunately, they had it all wrong.  It wasn't the time or the place to get into a heavy discussion but I started thinking about how many other conversations were happening with the same flawed information.

THE FED'S, THE ROGUE TRADER AND CONFORMING LOANS

Friday night I met with a small group of local real estate professionals.  I'm meeting with yet another group this morning.  We'll probably cover many of the same topics with one important difference - our conversations will be based on correct and accurate facts.  This isn't about us being smarter or better than anyone else.  It's our business.  It's vitally important to us.  It's what we do.

Want to make your real estate professional's day?
Call them up and ask them their opinion.

"Hey Mike, what's up with this conforming loan limit I keep hearing about?"

The point I'm trying to make is this.
Go to the right people for the right information.

BTW: I highly recommend you read a great post I found: "Simple Acts of Kindness and Caring". 

It's not related but Wow!

Not just yet...

Yesterday I had a Mortgage Broker come in and proclaim the good news!

I don't sit around glued to the TV, Radio or internet all day long, I have actual work to do.  I do stream CNBC into my office, and I do read a lot of quality blogs (early in the morning).

I don't pretend to know everything but I do know where to get the real information.  I pay attention.   So when he came in and was positive he heard the limit was raised I objected. 

It was true because he heard a story on the radio.  So Mark, this is for you.  Listen carefully.  They didn't raise the limit.  But they are working on it.

Here's what did happen

Now pay attention.  

One story reported that Congress and President Bush have agreed, (but they haven't voted yet) on a 1-yr increase in the conforming loan limit to $730K.  That was one story.

Nancy Pelosi said on her official blog at 1:57 PM, 

"Today, Congressional Democrats and Republicans and President Bush reached an agreement on a bipartisan stimulus package to immediately jumpstart the slowing economy."

"The House will move quickly to approve this stimulus initiative that will provide broad-based help to the American people and effectively invigorate the economy. We hope the Senate will do the same."

"To address another critical issue affecting American homeowners, the package includes mortgage lending reform- including a one-year increase in Fannie Mae's and Freddie Mac's conforming loan limits (from $417,000 to $625,500), and other changes that immediately help families facing foreclosure refinance their loans and get the housing counseling they may need."

On the very next post, on the same day, at 6:06 PM, she posted what was labeled as a FACT SHEET for the Bipartisan Economic Stimulus Package:

"One-Year Increase in GSE Housing Loans. To enhance credit availability in the mortgage market, particularly in high-cost areas, a one-year increase in the loan limits for single family homes from Fannie Mae and Freddie Mac from $417,000 to $729,750."

Why the difference?  There is talk about having a slightly higher limit for HIGH COST AREAS - Like here in California. 

SNAAAAAAP!

Somewhere in the day, OFHEO's director James Lockhart (Office of Federal Housing Enterprise Oversight, they are the ones who oversee Fannie and Freddie) issued a statement saying,

“We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform."

BICAMERALISM

Don't forget, we've not yet mentioned the other guys.  Those 100 lawmakers in the Senate get to have their way with everything before it hit the President's desk. 

Is it time for a little refresher course?

So there is your Cliff's Notes version of what happened and maybe more importantly what didn't happen to the Conforming Limit yesterday. 

Here's a short bibliography:

• Pelosi 1:  http://www.speaker.gov/blog/?p=1070
• Pelosi 2:  http://www.speaker.gov/blog/?p=1071
• The White House Statement:  http://www.whitehouse.gov/news/releases/2008/01/20080124-4.html
• Henry Paulson Statement: http://www.whitehouse.gov/news/releases/2008/01/20080124-6.html
• Lockhart Statement: http://www.ofheo.gov/newsroom.aspx?ID=410&q1=1&q2=None
• All the news stories on Google:  http://news.google.com/news?hl=en&tab=wn&ned=us&q=conforming+limit&ie=UTF-8&as_drrb=q&as_qdr=d&as_mind=24&as_minm=1&as_maxd=25&as_maxm=1

So now you know.

Forbearance or more accurately, a Forbearance Agreement is exactly that.  It's an agreement between you and the lender.  It generally allows you to stop making payments now, (temporarily)  and add those payments to the end of your loan.  Some forbearance agreements allow a gradual payback.

Unlike other loans you might have, if  you fall behind on your mortgage, in order to catch up you'll have to completely catch up.  Your Visa card will gladly take any money you send them.  Your mortgage servicer will actually return your incomplete payment.

Got Examples?

You bet!  Here's two. 

Joe vs. the Volcano

You probably know Joe.  Maybe not by name but you remember him.  He worked on a fancy cruise ship.  Joe's job is to light the Baked Alaska.  He's a highly trained and well respected person.  It's a dangerous job.  Very few can do what Joe does. 

Unfortunately, Joe lost his job.  Out of respect to Joe's privacy I can't go into details here.

He found a new company almost immediately.  On another ship, with another cruise line that would hire him, but because of the nature of his job he would have to wait almost six months to set sail.  He was out of work for almost six months!

Joe looked at Craigslist but to no avail.  Joe used all his savings and tried to keep up with his payments.  He was more than 3 months behind.  Now that he had his first paycheck in hand, it was time to make his mortgage payment.  Joe called his Lender.  His Lender said he needed to pay all the missed payments, plus all the penalties.  Joe didn't have that kind of cash.  Joe called his Lender again and this time they were very rude to him.  They told him to just make his payments.

Joe was distraught.  He was ready to walk away, to let his home go into foreclosure.  He wanted his home, he had a job, and he had a mortgage he could pay, he just couldn't catch back up.

Joe was talking to the wrong people.  He was talking to his lender's collection department.  It wasn't his fault, it's where they sent him.

Enter the Forbearance Agreement.  Joe finally got to the correct people (not the collections dept).  Together they worked out a Forbearance Agreement.  He would start making his payments again and, because he could, he would also start catching up on the amount he was behind.  Joe was now back in good standing with his lender!

Don't Stand by Kathy

Kathy didn't lose her job.  Poor Kathy was having the time of her life!  She was enjoying yet another cruise off the Sicilian Coast. 

Marvin and Melissa had never been on a cruise.  They were a young couple honeymooning from Paducah, KY.  They were seated at the table next to Kathy.  Marvin wasn't feeling so good.  Maybe it was the tequila shooters at lunch, maybe it was the seasickness.  Whatever it was, just as the waiter started to Flambe their dessert Marvin's stomach decided to return it's contents to the dinner table.  Remember the pie eating contest in "Stand By Me"?  Keep that thought. 

The unfortunate waiter, who was a highly trained professional and had thought up this moment that he had seen everything, suddenly realized he had not (seen everything).  In his surprise, the dessert cart went flying! 

Poor Kathy.  She suddenly found herself an integral part of the Baked Alaska, lactose intolerant as she was.  The caramelizing sugar, estimated to be at 320 degrees Fahrenheit, caused 3rd degree burns over much of Kathy's arms and legs.

Always proactive, she called her lender from the helicopter.  Kathy faced a month in the hospital.  It would be two months before she could return to her job as an exotic belly dancer in Vegas.  She initially talked to many of the same people Joe did.  She also got many of the same answers.  Luckily she finally ended up talking to the right person.  He arranged a Forbearance Agreement that put off her payments for the next two months and added them to the end of her loan.  Kathy was back to being good with her Lender.

So there's two fine examples of how a Forbearance Agreement could help.

The key to your success is to talk to the right people.  If you need help getting to those people, or don't know what to say when you do - give me a call.

(925) 288-9977 Ext 104

To be honest , I had read just a couple of the interviews but it wasn't until I was asked for my interview that I realized the who's who that I am following. 

Here's a link to my interview: LINK

My name is now amongst some of the most influential and respected bloggers out there.  I'm certainly not worthy.

Previously Grilled:

Now, there's some great reading!