New Flood Insurance Rules October 1st, 2013.

 On October 1st the Biggert Waters Flood Insurance Reform Act of 2012 has big changes affecting Real Estate in Flood Plains. The first thing to learn is that ALL Real Estate is in a flood plain, just some are rated with higher risk than others. For our purposes in Real Estate we use the 100 year flood plain as the standard, it spreads the risk of a flood effecting it at 1% per year, but there is no guarantee it won't happen in back to back years, that is simply the risk pool.

1. What is the Biggert Waters Flood Insurance Reform Act of 2012?
2. What does it do?
3. What does this mean to you as a REALTOR and to your clients on buying and selling homes?

What it is an increased attention to flood insurance rates and the elimination of Federal subsidies of flood insurance in flood plains.

 What it does, is any property in a 100 year flood plain will starting this year have a 25% per year increase in flood insurance premiums EVERY year until the premiums reflect full risk rates. To assess full risk rates, the property owner will be required to produce to their insurance agent an Elevation Certificate to show the level of risk the property faces. In other words, that 25% rate increase annually will continue forever until that Elevation Certificate is produced. That is what happens to someone who continues to live in or own their home.

If there is a change of ownership, the policy lapses, there is a change in risk, or there is substantial damage or improvements on a building the policy rate will be required to immediately go to full risk premium instead of the 25% per year increase. This will require that Elevation Certificate to be produced at that time. So if you have a client who is selling or buying a home in a 100 year flood plain, it would be advisable to get the Elevation Certificate done so that you don't have the deal blow up in the 11th hour due to cost of flood insurance policy.

Flood Insurance Rates in a High Risk Zone (a zone beginning with the letter A-V) are based on a building's elevation above, at, or below the BFE (Base Flood Elevation).

These costs could prove to be a very big deal, so you want to be prepared for them. For instance under this law, if you have a 250,000.00 one story single family home building only no contents with a standard National Flood Insurance Program deductible in a moderate to high risk zone depending upon where the first level begins in comparison to the Base Flood Elevation or BFE (100 Year Flood).

• Built 4' below Base Flood Elevation = 9,500.00/year.
• Built at Base Flood Elevation            = 1,410.00/year.
• Built 3' above Base Flood Elevation  =    427.00/year. 

Generally, in high risk zones, the higher above the BFE a building is located, the lower the insurance premium. The Elevation Certificates provides the documentation necessary to make that determination. In moderate to low risk zones (those beginning with letters B, C, or X, rates are not based on elevation, so an Elevation Certificate may not be needed to determine your premium.

How do you get your Elevation Certificate?

1. Many municipal governments keep elevation information on file. Talk to local floodplain manager if your properties elevation information is on file. If so, the community floodplain manager is authorized to complete the Elevation Certificate for you.

2. If your information is not on file, you might need to hire a State-licensed surveyor, Architect, or engineer to complete an Elevation Certificate. Depending upon your location and the complexity of the job, the cost of a surveyor can vary from 500.00 to 2,000.00 or more. You might want to shop around to find out what they offer.

3. Once you receive your Elevation Certificate provide one copy to your insurance agent and keep a copy for your records.

This new law can and will be something you will be dealing with, hopefully this blog will help you understand better what you and your clients will need to do.

For more information from an insurance specialist on this topic you can reach out to insurance@abilityplus.com or to their website at http://www.abilityplusins.com/ .

Links you can go to for more information:

National Flood Insurance Program Help Center: 1-800-427-4661.

www.fema.gov/fema/csb.shtm

http://www.fema.gov/flood-insurance-manual (May 13 Full Version)

http://www.nfipiservice.com/Stakeholder/pdf/bulletin/w-10345.pdf (October 2013 Flood Insurance Manual Revisions).

http://www.fema.gov/media-library/assets/documents/34620 )October 2013 Specific Rating Guidelines and Actuarial Assumptions.)

Are You Unstable or Stable In All Your Ways?

Often I find that I gain spiritual insight while reading or listening to motivational or sales training, and just as often find great sales training insight while listening to spiritual training. When I was doing a lot of public speaking, I often found seminars in nearly everything, movies, sporting events, watching people rise to the occasion. However, once I was thunderstruck by the power in James 1:8 "A double minded man is unstable in all his ways."

What does that mean? I have heard more than one preacher teach this lesson, unfortunately none really stuck with me, none reached me and got my attention until one day driving down 465 listening to Byrdie Yager speak on this topic. She is a very wise woman, well versed in the scriptures, in business, and in human relationships from years of experience that would be hard to duplicate. When I heard her talk it caused me to do a double take, pull off the next ramp, stop my car and listen over and over again. What she said was "A double minded man is unstable in all his ways," and what that meant to her "You can't hold two diverse and opposing thoughts on any subject at the same time." In other words, you can't as a sales person talk to your clients about how this is the greatest product, home, neighborhood, widget, whatever in the world, and then talk to your co-workers, spouse, friends, bartender, whoever what a dog it is. You can't hold two opinions at the same time. If you try, and many do, then you are double minded, and unstable, and your clients will instinctively know it. They feel it at a subconscious level, it is if they smell it on you.

My belief has long been that sales is nothing but the transference of emotions. I believe a sale is made in every meeting, either they are sold to believe about your product just as you do, or you were sold to believe their reason for not buying just as they do. The first part of that is what we are going to discuss here. Do you want your prospect to believe the same way about your product as you do? Do you? I hope so, if not maybe the next sale you need to make is to you, or find something else to do. Unless you have the emotional disconnect of a con-man, which I hope you don't, what you really believe is what will be the guiding force in each transaction.

The reason this hit me so hard was it was the end of a story that I had told and taught for years, but in my telling it, I missed the most important part. I took a job trying to revive a community that had so many mistakes made in the launch that it was almost like asking Lazarus to come forth. It was a beautiful community called Lake Charlevoix. It had been languishing for 6 years with only 3 sold homes in it, with 7 specs that were 5 years old. Our next door neighbors were morning drive time radio personalities, Bob and Tom on WFBQ, who often would speak of the sun rising over the for sale signs at Lake Charlevoix. I am not sure that I could have survived the first few months of trying to turn it around, if not for all my friends in the building, Real Estate, and mortgage business that would laugh out loud at me when I told them where I was. There is no better motivation than being laughed at! It took a while, but we turned it around to where one day I was called by the sales manager from a custom community on the West side and wanted to meet and discuss marketing ideas for his community. I agreed, but asked how he heard of me. His response blew me away, that both BAGI and MIBOR told him that I was the best at marketing high end communities. I didn't laugh while he was on the phone, but thought if that was true, it might be scary since I was winging it by the seat of my pants. All I really did, was what I always did to turn around communities that were slow, was to "change the attitude." In other words, no one heard anything about my community but great news, I would employ the 3' rule, where anyone who came within 3' of me was going to hear about the "great news" of the new and improved, exciting, successes that either had just happened or were about to in my community! It didn't matter if it was someone who was lost looking for directions, the print shop, the Subway shop, every one of the 1,100 Realtors that I handed out a flier to their desk every week, every builder I tried to convince to come and build in Lake Charlevoix.

What I thought the moral of the story was the story of concentric circles in a pond, when you throw in a pebble and the circles go out, and then bounce back from the shore to where the pebble was thrown. I believed this was the story, I had told so many people that I was the best (that was the marketing campaign, everyone knew nothing else had changed so I sold me in partnership with the community) that it came back to me. I have taught this over and over, how you must put the positive message out everywhere, with everyone and it will come back to you.

When I heard Byrdie, and the double minded man, and realized I missed the point of my own story. It dawned on me, there was someone in everyone of those encounters who heard that positive message, who heard how great it was, it was me. I never heard my voice say anything but edifying, positive things about my community and product. No one on the planet believed in my message as dearly as did I, so when my clients heard it they were able to catch my belief in the transfer of emotions.

If you are not satisfied with your sales, you might consider thinking this idea through. I swear by it for myself. You can do it!

If You Help Enough People Get What They Want You Will Always Get What You Want

Would you know anyone who has an aging parent or grandparent living in a small town far away from their kids and grand kids who would like to move closer but it is difficult to find a house for the same money, and they cannot afford to increase their monthly expenses? How about a parent or grandparent who has all their assets tied up in the equity of their home, but has other needs, maybe concerns about upcoming long-term care, or ongoing income over Social Security. Maybe you know someone who would bought and paid cash for a condo and the value dropped, maybe a lot of the condos sold to investors and are being rented, and moving is blocked by not having the money now to buy again after a loss. Or maybe you know someone who is doing well financially living in a big home someplace like Chicago, but the grand kids are here and they want to move close, but also want to have that vacation home they have always dreamed of, but cannot afford cash for both and don't want payments? Maybe it is you that has one of the needs above.

My in-laws were both the first and second questions above. We kept trying to figure out a way to help them move to Indy or Fishers but couldn't make the math work. This caused us to delay until other choices were out of the question, and we had to play catch up and choose between options after the best choices were already off the table each time. If someone would have shown us what I am about to tell you we would have built a statue of them on our front yard. It didn't exist then, but it is here to help all of those people now.

There is a project that I am working on that I believe will accomplish several things, help our agents create an ongoing new source of income, as well as several of our vendor partners, but most importantly greatly enhance and make some lives much more comfortable. This fits our company's Mission Statement of "Inspiring our Agents, Creating Opportunities for our Agents, Supporting their Dreams."

 What I am speaking of is a HECM loan, or a Reverse Mortgage Purchase. I know I have just lost you, I am sure that you have heard all kinds of horror stories. However, if America was introduced to electricity by an electric chair no one would have it in their homes. The old Reverse mortgages had problems, as did annuities, heat pumps, and slab foundations, but things change and get better when they work out the bugs. Today's HECM is basically just an FHA loan, that at the end is sold and any equity in the house stays with the owner or their heirs, and if it is upside down it is a non-recourse loan where you simply walk away and nothing touches you.

 You can purchase a home with a HECM depending upon your age, 62 is the minimum, and when a couple buys it is the youngest person that has to be 62 and that is the age it is amortized. CAUTION, if a couple wants to do this, ALWAYS have both people on the loan, that protects against one of the few downsides of this loan. If both people are on the loan, and one dies, the other can stay in the house as long as they live, are not in a nursing home for more than a year, or simply want to still live there. If only one is on it and they die, the other has no right to the house, only the equity balance if that is willed to them. The older you are the lower the down payment requirement. For purposes of this figure 50% down for the 62 year old, because that is the highest down payment.

 Let's say that couple living in the small town sold their home and netted 60,000.00, they could move to the city where their family is and put down 50,000.00 on a 100,000.00 home, and use the 10,000.00 for moving expenses, maybe some new furniture. They would not have to qualify for a mortgage because they would never have a payment, they might need to prove income sufficient to pay the taxes and basic upkeep. They would never make a payment on the mortgage and the loan would start out at 50,000.00 and increase each month with the added unpaid interest. When they sell the house they would keep the balance of the equity.

 How about our friends who need to access that cash for upcoming long-term care? My previous insurance agent, before I changed my policies to my son's company, when I taught him about this he used it with his mom. She was living in a condo that she loved, the payment was 1,500.00/mo which was difficult for her. She sold a small commercial property and had 70,000.00 which she put down on the condo paying about half of it. He then sold her a top of the line insurance policy with a strong long-term care rider that guaranteed her if she ever needed it full-time nursing on site so she would never have to leave the condo. Her monthly costs went from 1,500.00 to 300.00/mo with true peace of mind. Of if income was the issue, maybe she could have bought a guaranteed income annuity.

 Even our well to do friends who sold their 500,000.00 house in Chicago and moved down to be near their grand kids and bought a 300,000.00 home in Indy with 150,000.00 down leaving 350,000.00 to pay cash for a home in Florida. As long as they keep the Indy house as primary residence they never have to make a payment.

 We are putting something together with insurance, mortgage, REALTORS, financial planners, Senior Specialist attorneys to help guide people into the best opportunities for them. Again, this wasn't available when we needed it for my in-laws. If you have ever dealt with the financial issues that face so many seniors, you can be a tremendous blessing to them and their families with this, as well as create an outstanding additional business line for yourself.

 As my wife Jodi, who is an evangelist on this topic having lived through it, says to anyone who crosses her path, "If you don't know what your parents financial situation is because you don't think it is any of your business, you better because it will be."

 Be a Blessing  to these families, keep in mind 10,000 people turn 65 every day.

How Do You Enjoy A Blistering Hot Market And Keep Your Sanity?

 We are enjoying one of the hottest Real Estate markets in decades, the pent up demand, low interest rates, and still affordable pricing is creating a perfect storm of activity. It makes for a very exciting time indeed. However, it also comes with a price.

 It is clear that many agents are truly feeling the stress that comes with physical fatigue, and the emotional drain of the ongoing roller coaster of feelings that you must help your clients ride through. Then it compounds with a sense of guilt for feeling stressed, grouchy, and maybe even a bit resentful of all that is pulling on you each day, especially coming from the toughest market we had seen in our lifetimes and knowing we should be happy and grateful. When I am speaking with agents from any and all firms I am hearing tell tale signs of the above, also from the tone of several agents posts on Facebook you can hear it as well.

Does this sound at all familiar to you?

It is all very understandable after all, even Super Agents are also human, they have lives outside of Real Estate, families, and other obligations that also pull at them competing for their time, and their emotions. During a Real Estate transaction we often see people at their best and worst, excited, fearful, happy, sad, giddy, angry, optimistic, depressed and that might all be before breakfast. They may love you one minute and are screaming at you the next as they are pulled to and fro with their emotions raw as they embark on selling and or buying, moving, and dealing with the stress that puts on their lives.

 This requires you to be their consultant, coach, friend, trusted advisor, counselor, mom and/or dad, cheerleader, and sometimes shrink. You will be the one who maybe several times a day is their emotional battery charger. Compound that with a blistering hot market multiplying the amount of people going through all these emotions daily for you to recharge. It is going to take a toll on you if you don't take care and make the time to recharge your own emotional batteries.

Okay, so everything I have said so far you already know, what should you do about it? How do you improve it? Or at least improve how it touches your life, and the life of your family?

 It reminds me of the story of Lumbermen. It seems that the logging crew hired this young, strong, big athletic young man to be a logger. He looked like a Greek god had stepped off Mount Olympus to cut trees, and had the confidence and swagger to match. His first day, he asked his foreman who was the best lumberjack on the crew and was pointed out an middle aged man half the size of this new kid. He knew he would be number one at day's end after seeing the competition. However, at the end of the first day he cut down 18 trees, the older logger cut down 20. He figured that he was just learning, and by tomorrow he would blow by the older guy. All day long he worked as hard as he could and was dragging back to the bunk where he found out that the old guy did 20 trees and he had dropped to 15. He was furious, and decided that tomorrow he would give it all he had and pass this old dude. The next day he worked like he had never worked, he worked through lunch and all his breaks, he gave it everything he had and could barely walk back to the bunk where he learned that he had cut 12 trees and his nemesis had cut 20. He just couldn't believe it and screamed at the old logger, "How do you do it? I am giving everything I have, I am working as hard as I can, taking no breaks, working through lunch, and every time I look over at you you're sitting under a tree resting, how can this be true? Then the older logger asked him, "Did you ever notice what I was doing while sitting under the trees? I was sharpening my saw."

 What are you doing to sharpen your saw? What are your doing to recharge your emotional batteries so that you can keep giving to your clients without coming up empty yourself? Too many of us live our lives like a smart phone with all the apps running draining our energy dry.

 You must recharge those emotional batteries. Listen to positive CD's, DVD's, and videos. Get the TED app for your phone, iPad, or get TED.com for your computer to listen to positive input while you are doing paperwork, that is the type of multitasking that will pay the most dividends. I know you are likely saying you don't have time, I would suggest you don't have time not to. Read positive books, put them in your bathroom if you must. If you read 15 minutes a day you will finish an average book in a month. Look for authors like Norman Vincent Peale, Robert Schuller, Dennis Waitley, Zig Ziglar, Charlie Tremendous Jones, and many more. These are old names but their work stands the test of time.

 Understand that you cannot load a wagon from an empty wagon, and you cannot keep giving emotional support to those clients who need support from you, as well as your family and loved ones, if you allow your own emotional tank to run dry. Most agents will not heed any of this advice, most agents will say "that motivation stuff doesn't work, I am self-motivated." Most agents don't last long in the business. Most only seek motivation when their businesses are slow, if then. Most agents push aside all their marketing and follow up on their database when things are busy and then are surprised when the market tightens and they have no pipeline.

That is why Zig Ziglar gave us all this advice.

"People often say that motivation doesn't last. Well, neither does bathing - that's why we recommend it daily."

Zig Ziglar

 

Don't be most agents, it only takes that little extra to go from ordinary to extraordinary!

Try it you might find you will really like it.

Change: Love it? Hate it? Motivated by it? Paralyzed by it? Get Used to it.

 Change.... Love it? Hate it? Inspired by it? Paralyzed by it? Terrified? Motivated? What is your reaction to change in your life? The one thing that is a virtual guarantee is that Change is going to be a constant in your life, and that of everyone you know.

 Our company at RE/MAX Ability Plus is going through many changes, it seems like daily. That is to be expected when you are growing like we are from 32 agents in 1 office doing about 100 million in business in 2008 to 130 agents in 6 offices on track for more than 400 - 500 million this year. REAL Trends 500 Magazine ranks us as the 37th fastest growing company by percentage of volume in America. Our biggest CHANGE currently is a Dream coming true, we are moving our Carmel office from one that has housed RE/MAX Ability Plus for the last ten years. It has been home to many of the areas top agents, but we are moving to a Brand New office in Carmel's Arts and Design District in the beautiful Indiana Design Center, the first Real Estate company ever housed in a Design Center in America. This new office is a physical presence of the Dreams we have been dreaming for years.

 Even exciting change can make people feel uncomfortable, but sometimes feeling a bit uncomfortable is the very best thing for you. For years when I have been coaching people I challenge them to change things, even if it is the route the drive to work, maybe the parking space, something, mix it up get your brain reengaged. Far too many people are in such a rut they find themselves driving to and from work the same way, the same time, every day. Have you ever driven through a traffic light and then wondered if it was green or not? We often get up the same time every day, do the same routine, drive to work, drive home, over and over and over until we have become mindless in our actions. The only difference between a rut and a grave is that the ends are not closed. Jump out.

 One of the most impressive athletic feats I have ever seen during my life was when Tiger Woods, who was the best golfer in the World, decided that to get better he had to completely relearn his swing he had been using all his life, and he did. He could have messed his old swing up and never learned the new one as well, but he took the risk to get better to push through a barrier his old swing had created. Whatever you think of Woods, that was courageous.

 In our own company I am thrilled to witness some of our top agents challenging themselves in that same way as did Woods. They hit the biggest year of their long celebrated careers last year, but now have looked from the peak of the mountain they had climbed across to peek at the top of yet a higher goal and are dissecting their business to make changes to double their business once again. It is inspiring to watch and it is clear that those goals will be accomplished.

 You must understand, CHANGE is going to come, you can choose to embrace it, become an agent of that change, or you can resist and be buried by it. With the advances of technology change is coming faster every day, we need to learn not to just keep up, but to jump ahead. The technology of the day used to dictate the very economic age they came to be known as, the Stone Age, Iron Age, Agrarian Age, Industrial Age, Technology Age. They used to move so slowly most people were born, lived their lives and died in the same economic age. That is no longer the case, adding to the stress many people feel.

 For instance, in 1930 there were about 30 million American farmers, barely producing enough food to feed the 100 million Americans, by 1980 there were only 3 million American Farmers producing so much food that they were feeding the World and were being paid by the government to not produce on much of their land. What happened to those 27 million farmers? Many retired or died, their kids were forced to move to the city to find jobs, but since it happened over a 50 year time frame it made little disturbance until the last few years when we saw things like "Farm Aid" trying to help the ones who couldn't pay the banks.

 Many of those first generation off the farm went to work in the Midwest working in the auto industry, in fact in 1980 there were 250,000 people making carburetors in Indiana and Michigan, however by 1985 almost all had lost their jobs because their skills were not compatible to building the Fuel Injector Systems that overnight had replaced the carburetors. Many of those displaced people found work in the vinyl record industry in Indiana and Ohio alone more than 150,000 people were working making records in 1990, the next year they were gone, as RCA and Sony had revolutionized the industry with Compact Discs.

 The old idea was to learn a skill and be the very best at it for job security. Today, the best is to learn to learn how to adjust and change as change keeps coming. Those who are most adaptable are the winners in this new world.

 At our company, I truly love the culture. It is all about change, all the time. It is about pushing the envelope to find where the newest sweet spot is every day. In other words, If It Ain't Broke Break It, surely there is a better way. Good is always the greatest enemy Great can ever have.

So Change!

The Problem Is Not The Problem, Never Has Been, and Never Will Be.

 

When it comes to not reaching your goals the problem is not the problem, never has been, and never will be. What do I mean? What I mean is that we like to find something, or someone, to blame when we miss our goals. Often we choose not to set goals because too often we have been disappointed by not reaching them in past attempts. So, those "obstacles" we want to believe are our "problems" that keep us from reaching our objectives. Are they really the problem or are they excuses? Or is there something else that is the true "problem" that we have never before identified, to they seem to be the problem?

The truth is that those things can't possibly be the true problem. If they were there would never be anyone who has accomplished similar goals with similar situations. We may say "I'm too young, or too old, too educated, or not educated enough, too this or too that." It might be "If I had more money, more supportive parents, a better spouse, better health", you name it there are at least as many excuses as there are people. So if others have accomplished such goals and dreams with such obstacles, how can those obstacles actually be "the problem?"

It was explained to me in this way in a, let's say we're sitting at a diner and we take a salt shaker and a sugar dispenser and separate them with a napkin holder, (think old school stuff.) Now say you are the salt shaker and your dream or goal is the sugar dispenser but you are too short to see it over the napkin holder, if you can't see it, how can you focus on it? What I am saying is that your dream isn't big enough to keep you focused on it. You need to find something that moves you, something that excites you, and makes your passion come alive. What you need is a big enough dream or goal to be able to "see" it over the obstacles. Your focus needs to be on that dream, and not on the obstacles or problems. They are always going to be there, but what you focus on, you will get more of. If the dream is big enough, the facts simply don't matter.

Consider this, if you are standing at one end of an auditorium full of tables, chairs, and other obstacles, and your goal was a flag at the other end, and all the lights are out, but there is a spot shining on the flag. If you just keep focused on that flag and walk toward it you will run into tables, and chairs, step on conference attendees, maybe even fall down. However, if you never take your eyes off that flag you know that you will reach it. How many times have you heard of stories of people climbing mountains who came just short of the peak, or swimmers swimming the English Channel, because they "couldn't go on" when fog set in? They lost sight of their goal or dream and couldn't go further.

Let me tell you a story of a friend of mine who changed my life forever. Paul Ramsey and I were in a MLM business together in early 80's. Paul had worked his entire life in a factory, but had a dream to own his own business. He was having modest success, but something happened to galvanize his dream into his very being. Paul was diagnosed with a very rapid spreading terminal cancer. He then decided that not only would he fight it, but he would fight to build his business to a level that would take care of his family after he was gone. This was not an easy goal to reach, night after night his wife Peg would drive them to another meeting where they would share the dream with another couple, or group of people. Many nights Paul would be so sick from chemo that he had to lay in the back of the car, holding his head out the window to vomit so she could keep driving to meet their time deadlines. Once they arrived he would clean up in a gas station, the go in and get in front of those living rooms full of people and speak for an hour or so, meet and greet after, help people set their goals and work with them. He would encourage them through their own obstacles that they thought were stopping them, without scolding them with what he had to consider as trivial problems. Then back into the car, Peg behind the wheel, as he collapsed in back once again.

There is a night and image in my mind that will never leave me. It was the night at a convention where Paul and Peg were recognized at the level that he set as his goal. When Paul came up to speak. I can still see how his skin was nearly the same color as was his gray suit and wig that hung on his skeletal body. I was standing next to his oncologist who had to see this speech himself, he too fell in love with Paul's passion and drive. The doctor stood there with tears streaming down his face, as they were on mine, and told me that there was really no way that Paul should be standing there. He told me that Paul had too little muscle left to stand, walk, or even hold his head up, but seemed to be doing so out of his steely will. Paul reached his dream, his goal, he spoke to all of us lucky enough to know him that night. Who could ever make an excuse after knowing and watching a man like Paul fight through something most of us, thank God, could never fully understand? Paul went to be with the Lord before the weekend ended. I miss him, but he will forever be with me, speaking from that stage.

Once again saw a clear reminder at Dave Liniger, Co-Founder or RE/MAX, has had to fight for his life and to once again walk on his own after near fatal MRSA infection. He was in a coma hanging onto life for more than four months last year, and when I saw him walk onto a stage in Denver for the first time on January 30th, there wasn't a dry eye in the house. You can read about Dave's amazing comeback story and with your purchase support The Wounded Warriors, Komen for the Cure, and The Children's Miracle Network where all the proceeds will go.
https://www.remax.net/public-news/Pages/MyNextStepOffersLessonsToAnyoneFacingDifficulties.aspx

Remember, The Problem isn't the Problem. The Problem is that you are focusing on the obstacles not the dream. Focus on your Dreams!

The Dodd-Frank Bill And C.F.P.B. For REALTORS.

 “The CFPB is the driving force behind almost all policy decisions a lender makes today. Far and away the fastest growing division of the company, we are spending more on interpreting and implementing the guidelines in this massive document. For my REALTOR partners, I would want them to know that we have much stricter guidelines for disclosures to the borrower, many of which are automated and seldom make sense, so our client tends to get forms emailed to them before we get a chance to thoroughly review them ourselves.  Every lender lives in fear of being found in violation, as the penalties are huge and meant to be financially devastating.”   Cathy Warga - Movement Mortgage.

 On July 21^st 2010 the 848 page Dodd-Frank Wall Street Reform and Consumer Protection Act became law. As of July 2012 only 30% of the rules and regulations are complete, but they have already expanded to 8,843 pages of law, so every page of the law has created ten pages of regulations so far. This has created the single largest government agency in the history of mankind in the Consumer Financial Protection Bureau or C.F.P.B. and every business transaction large or small that has an element of credit will be touched by regulations found on the 1,099 pages of the C.F.P.B.

 

The stated purpose of the Dodd-Frank Act and the C.F.P.B. was to make markets safer for consumers, to conduct rule-making, supervision, and enforcement. To restrict unfair, deceptive or abusive practices, to take consumer complaints, monitor financial markets, and enforce laws that outlaw discrimination and other unfair treatment.

For our purposes, let’s look at how it will affect home mortgages in the coming months.  A great deal of it will be in place late this summer, and more the following January. Most of all it is going to make the cost of a loan to increase to the consumer and strip them of options that we have long enjoyed.

“As you and I both know regulation in the mortgage lending industry has gone from being very lenient to becoming overly regulated by the Federal government over the last decade.”  Todd Hollingsworth – Midwest Bankers

“Right now the new QM, CFPB has had little to do with impact on the consumer/Realtor. Most of the rules are yet to come. The biggest thing I think we will be seeing will be the new HUD (which comment just recently ended). Even though the comment period just ended, I think there will be minor changes to the proposed HUD. Most of the changes are around verbiage and the way terms of explained to the consumer. Today, you have total of payments or "cost of credit" if you keep the loan open for the entire period. With the new HUD, you will see a new topic called TIP or Total Interest Paid. This will be calculated to show the consumer if you keep the loan open for the entire period and pay $x interest on a $x loan your TIP is X% (example - $100K loan, $60K interest = 60% TIP).”  Mark Etchison – Stonegate Mortgage.

A new rule issued 1/10/2013 defines “Qualified Mortgages” and these rules will be in effect on 1/10/2014. A qualified mortgage would have a maximum of 43% DTI and will be fully documented, there will be no balloon, no interest only, no longer than 30 years, and the maximum lender fees are 3%. This will limit option due to costs of rebuttable presumption litigation is expected to be between 70,000.00 and 100,000.00 per case on any non-qualified loan. A lender has the legal responsibility to know what a borrower is expected to earn through the life of the loan, there is some uncertainty as to what that means, or how they are to look into the future.

“The Qualified Mortgage rule is out now, and basically gives a waiver to agency eligible deals like Fannie Mae, Freddie Mac, FHA, VA, USDA, etc, but only for a limited time – something like seven years for the waiver & then it can be fought over again at a later date (life everything else these days). Since the government is in complete control of the agencies, they DO have the ability to tweak the automated systems at their leisure, which could completely change which borrower profiles will meet the “waiver-eligible” programs. Personally, I find that a bit scary.”

Jae Tolliver- University Mortgage

A type of non-qualified mortgage would be what is called a “High Cost Mortgage.” The rules for them were issued 7/9/12 and took effect 1/10/13. The lender must notify borrower in advance with terms and fees identified. Borrowers MUST receive home ownership counseling. Any pre-payment penalties or late charges over 4% are banned. As of 1/18/13 and taking effect on 1/18/14 the borrowers MUST receive a copy of the appraisal 3 days before closing. To address the investor flipping a house a second appraisal is required if home is sold within 180 days and a sales price is at least 10% higher. The second appraisal has to be done at no cost to the buyer.

“Basically, more loans are going to fall into a “high cost” category – which will make them harder to obtain, since doing high cost loans is a little on the dicey side for a lender. There are exceptions for smaller loan amounts, which is good – because otherwise it would result in Red-Lining.” Jae Tolliver

 There will be a brand new Disclosure Form to replace the HUD form; it will be five pages long. When a borrower applies for a mortgage the lender MUST get them the loan estimate delivered within three days of application.

There will be no point in trying to do a quick closing within 30 days any longer, there won’t be  any times where you will be surprised on the closing day that” it is in fact going to close today after all.” The buyer MUST have the closing documents in their hands three days before closing. If any numbers change on the Buyer’s side, there needs to be a new Disclosure issued and the clock starts over on the three days. Those days are Monday –Saturday and not counting Sundays or Federal Holidays.

So bottom-line was summed up nicely by Todd Hollingsworth of Midwest Bankers.

“Dodd- Frank Act:

Pros-

·         Standardized Compensation

·         Required lenders to become more precise and accurate on their overall fees because of the 10% max tolerance.

Cons-

·         Eliminated the flexibility of the lender to accommodate the consumer with their closing costs, pre-paids, etc. at closing table.

·         Made compensation for all loan types the same when in reality all loans do not take the same amount of time or effort. This was punitive for low-income, self-employed, or credit challenged clients.

·         All clients with small loan amounts are being discriminated against.

·         Ultimately increased overall rates and costs to consumer.

·         Borrowers with excellent credit are being offered higher rates and fees.

·         Increased oversight and regulation has caused road-blocks and delays for the consumer.

CFPB:

Pros-

·         Establishes a consumer advocate bureau to bring calmness to the public that the Federal government was addressing any lack of oversight.

Cons:

·         Market had already responded and addressed the matters that the CFPB set out to do.

·         8 required steps for mortgage qualification.

·         Implementation affordability standards at 43% DTI unless approved by FHA, VA, USDA, Fannie, Freddie, creating a misunderstanding in the market place.

·         Redundant oversight.

FHA:

Pros-

·         Will encourage early payoff for FHA loans.

·         Helps keep rates low on FHA loans because of the long-term insurance guaranteeing banks.

Cons-

·         Will worsen the overall quality of loans in FHA guarantee pool by driving higher credit borrowers away.

·         Borrowers will have MI for life of the loan.”

“FHA – Wow! Making it very unattractive for any borrower, really making it a program now for only lower credit scores and little down payment buyers. This is a dramatic shift from just a few years ago. PMI is now more affordable and much easier to obtain than in the worst of the downturn. For my Realtor Partners – credit score is everything! If we can get buyers up to say 700 or higher, PMI will be lower than FHA. There is a conventional program that only requires 3% down.”

Cathy Warga – Movement Mortgage.

“No law will ever ‘fix’ the bad intentions, and we’ve had enough law on the books to prosecute bad guys for years. There’s just not been enforcement. When you do see prosecution these days, you see a lot of ‘wire fraud’ charges, since wiring funds was involved in whatever scheme has been exposed. That law has been there for years and years, so why the need for thousands of pages of new legislation."  Jae Tolliver – University Mortgage

Ultimately, it is going to just make the loan process longer and more difficult. The best thing to do is to prepare your clients expectations that it will be a process but if they work with you, as a professional everything will be just fine.

Now a tip for you as a REALTOR. Be sure to work with professionals in lending and title as never before because C.F.P.B. has an agenda as a regulatory police force, and if they find a case where they feel a consumer is wronged, they will come after everyone in the chain, lender, title, and Realtor. Make sure your partners are following the guidelines.