Mortgage By Randy

In Issue 38 We Touch On:
#377413 Reporting For Duty
Perfect Storm For Home Buying
U.S. Slapped For Spending Bing

The Southwest Florida Association of Mortgage Professionals tradeshow was this month and although the mortgage industry has shrunk considerably, there are some interesting new lenders to work with combined with a handful of lenders that survived the mess of the housing crash. By now, anyone that has decided to remain a licensed mortgage professional has completed all the steps. You can go the national mortgage registry yourself and check on anyone to ensure they are licensed. You can even look up my skirt if you click here. My new federal license number is 377413. Keep in mind that mortgage staff that work at banks are required to be listed in the national mortgage registry, BUT they have not completed the licensing testing and other requirements that the rest of us have. Why? Because the banks wrote big enough donation checks to your elected officials to get an exemption from the law.

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…

Mortgage Market: Perfect Storm For Home Buying
A perfect storm for home buying has emerged from the burst of the housing bubble, financial crisis and resultant recession we’ve experienced since 2005. The supply and demand in the housing market remains out of balance. There is a glut of bargain-priced REO (bank owned) homes and new home builders have to try to compete against them. Adding to the glut is a shadow inventory of homes with loans that are 90+ days delinquent, which is 1.96 million, according to Lender Processing Services, and the number of properties that are in the foreclosure process, is 2.18 million. It is going to take a lot more time to work this inventory down to a reasonable level that allows new home builders to resume normal operations. This inventory will keep home prices depressed.

Speaking of supply and demand we are witnessing the rental market go through the same thing. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press. This demand for rental property has consequences. Census data reveals that the median price of advertised rents rose 4.1% between the end of 2009 and the end of 2010. Average apartment rent is likely to rise an additional 3.4% this year and another 4.3% in 2012. It’s cheaper to rent than buy in about 72% of metro areas according to Moody’s Analytics.

In our May12, 2011 Daily Dollar article, we published 5 Reasons Why You Should Consider Buying A Home Now. Check out all five but the one that makes the argument best is that you can lock in your housing expense for 30 years if you purchase a home today. Not only lock it in, but at a historically low interest rate and the home price itself will be deflated compared to 5-8 years ago. Renters face ongoing uncertainty about their housing costs. Landlords raise rents as they wish and with the millions of new renters entering the market, the rental prices will be driven upward. The stars have aligned and a perfect storm is brewing right now that makes it the best opportunity in our lifetime to purchase real estate.

Personal Credit: Lesson For Fred About Overreacting To Identity Theft Stories
We hear disturbing stories on the news about huge files of customer data getting lost or stolen. Credit card numbers, social security numbers, etc. vanish into thin air. Having a real-time credit monitoring service in place is a smart thing to do if you are concerned about your credit and identity. However, there is some common sense to be used when it comes to protecting your identity.

I was reading a letter written by a subscriber (let’s call him Fred) to the Bonita Banner newspaper who was taking the advice not to discard mail containing personal information a little too far. Fred referenced the return address labels that charities like to mail to us in exchange for a donation. You probably have some stashed in a drawer right now. Fred receives more than he can use so he shreds the extra supply and in the process has burned through more than one shredder (shredders don’t like stickers). He has also tried cutting them into little pieces with his scissors.
Let’s take a breath here. We are talking about return address labels, not correspondence from your credit card company or bank. I think someone needs to introduce Fred to the phone book, or whitepages.com, or Google Maps, or the county tax website. Enough sarcasm about Fred and time for the tough love. Public information (call it “phone book” information if you like) such as your name and address, even in the hands of a criminal, has little to no chance of resulting in a stolen identity.

There is no need to obsess over these pieces of information. Rather, be cautious with mail that contains statements from banks, credit card companies, investment firms. Also, be cautious about swiping your credit card. You may have noticed that many places never take possession of your card anymore. Instead, you swipe yourself. Although this isn’t foolproof (just ask shoppers scammed at Michael’s craft stores), it drastically reduces the chance of truly sensitive information from being stolen. Fred, when your grandkid calls you about his emergency and needs you to wire $1,000 through Western Union – it’s probably a scam – hang up and call them back to double check. These are the types of situations to obsess about. As for the free return address labels, if you’re not compelled to make a small donation to the charity, feel free to eliminate your shredder budget and just toss them in the trash.

Economy & Financial Insights: U.S. Spending Binge Leads To Federal Debt Downgrade
I read a transcript of a Bloomberg TV interview with David Walker, head of the Comeback America Initiative and former US comptroller general. He says the US is spending $4 billion a day more than it is taking in! That’s billion, with a “b”. Not exactly a sustainable fiscal policy. Walker continued that “we could eliminate all discretionary spending, including national defense, Homeland Security, the judicial system, Congress, the Executive Office of the President, et cetera and we still wouldn’t have enough money.” Ouch. Even if he is using hyperbole, there’s substance to the message.

I also found some other useful factoids quoted by Walker including that 51% of Americans don’t have any income taxes and the richest Americans are paying just 18% income tax rates even while the top marginal rate is supposed to be 35%. In an interview I saw on television, Warren Buffet confessed that he doesn’t pay his fair share in taxes. All signs point to higher taxes in our future and if you are a firm believer in this then getting your assets into vehicles like Roth IRAs might be a good move – pay the piper now at the current tax levels and let what’s left grow so you can access it tax-free down the road.

The world is taking notice to our federal spending and debt. Standard and Poor’s downgraded the long-term rating for U.S. sovereign debt in April. Other rating agencies may follow suit. S&P’s action is further evidence that the U.S. is following an unsustainable fiscal path and that our elected officials must take action in order to avoid a collapse of worldwide investor confidence. Keep an eye on news from Greece, Spain and Ireland – the events there are foreshadowing what could happen in the U.S. without significant redirection of our fiscal policy.

Question of the Month: I am in a chapter 13, which will be over with next year. How hard will it be to get a FHA purchase loan?
A recent bankruptcy is a disqualifier for FHA so that is not an option for you at this time. Once your bankruptcy is discharged by the judge, and if you wish to begin the process of re-establishing a clean credit history, then step one is to apply for a SECURED credit card. Most banks offer this product. It requires that you place a minimum amount on deposit (these funds are what secure your card). There is usually an annual fee to pay for this product too.

Once you have the card, use it at least one time per month. It does not matter what you purchase or how much – just a tank of gas is good. When the bill arrives, pay it off in full and on time. Repeat this each month. After six months, ask the bank to consider switching you into an unsecured credit card. If they say no, continue using your secured card as described above. Every month, re-ask the bank to switch you into an unsecured card. Eventually they will say yes. When you work your way back into an unsecured card, follow the same monthly process described above. This will put you on the path toward rebuilding a clean credit history.

Read the Daily Dollar article Card That Rebuilds Your Credit for more info. If you ever end up in a position where you have 50% or more of a purchase price to apply toward a home, then getting a private mortgage is an option, but that is a story for another day.

Giving Back: Please Consider A Tax Deductible Donation To Help A Kid Pay For School
High school graduation season is upon us. Once again, the Larry Mitchelson Scholarship Foundation will be selecting an aspiring art student from Fulton, NY to receive a cash award to help them pursue higher education. Since 2004, the Foundation has awarded thousands of dollars to seven deserving art students, some of whom have graduated and started their career in the arts. Previous winners are profiled on the foundation web site and you can also see a sample portfolio of artwork created by our Dad. As the students progress in their careers they can post updates and pictures of their art work. Your generous donations can be made conveniently and securely on the foundation website, Facebook page or use the mailing address found at http://www.mitchelsonartscholarship.org . All donations will be acknowledged with a letter from the Foundation. Thank you for your consideration and support.

Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.

Behind the scenes things are in motion to rebrand and relaunch our mortgage channel. Stay tuned for more announcements throughout the summer months. Sue and I attended the Southwest Florida Regional Technology Partnership Awards and had the pleasure of meeting Roger Berry, retired Chief Information Officer of a small company you might have heard of called Disney. Roger gave an instructional lesson on innovation leadership from which we both took practical ideas to apply in each of our workplaces. It is a rare treat to interact with a Global 100 C-level executive in our sleepy slice of paradise.

Randy

_______________________________________________________________________________________________
Mortgage by Randy newsletter, Copyright 2008-2011 Randy Mitchelson. All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
______________________________________________________________________________________________
You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.

As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.

He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Treasurer of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.

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In Issue 37 We Touch On:
Investors Caught Gaming Mortgage Market
Europe Faces Worsening Crisis
Low Credit Score Mortgages

The Mortgage by Randy website is undergoing a redesign as we switch to a new platform. One of the enhancements on the new site will be real-time mortgage pricing. You may still access all the articles at the same address- http://www.mortgagebyrandy.com – during this transition.

Looking forward to the Southwest Florida Association of Mortgage Professionals tradeshow in May. With my new federal license in hand we will begin reinventing our mortgage platform with the goal of offering loan programs in multi-states while retaining control over our branding. Our network of hard money and private lenders is still available to review loan scenarios that the banks reject.

The growth of our sister newsletter – the Daily Dollar – is opening new doors to delivering news, tips and coaching on personal money matters. If you haven’t had a taste of it yet, click here to visit and if you prefer video or podcasts instead of reading, we have those versions available too.

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…

Mortgage Market: Cooling Period Continues
According to HSH.com, about 3,400 mortgage-related jobs disappeared from Bank of America and Wells Fargo in the past month. Despite really low interest rates (you can get a 5/1 ARM for about 3.75% !) refinancing activity has cooled considerably, and there has been no surge in home sales to support them. Potential homebuyers are still on the sidelines. It is estimated that 25% of homes that would normally refinance are underwater – something that will take years to resolve. Stricter loan guidelines make it tough for marginal borrowers with job interruptions, income changes and credit blemishes. HSH.com also cites that the “inventory levels of available but unsold homes stands at 8.4 months, little changed from last month.” That 8.4 figure does not include the additional months available in “shadow inventory”, which means homes that were on the market and pulled off, foreclosures in process and other such “distressed” properties. When we can get the inventory to 6 months we will be in much better shape.

Personal Credit: Property Investors Caught Gaming The Mortgage Market – It Affects All Of Us
In our September 2010 Mortgage by Randy Newsletter, our Personal Credit section was titled “Are Credit Inquiries A New Trend In Decisioning Mortgage Applications?” More evidence of this continues to appear. One lender recently issued guidance about credit report inquiries that the underwriter must review the credit inquiries section of the credit report to determine if the borrower(s) has received credit not reflected on the report or included in the debt section of the 1003. If the credit report reflects a credit inquiry within 120 days of the credit report date, then additional documentation is required.

Remember, there is a delay between establishing a new credit account and it getting reported to the credit bureaus. One game that property investors have been playing (causing this guidance no doubt) is applying for mortgages at multiple lenders on multiple properties simultaneously. This would enable the investors to finance the purchase of multiple properties that they were buying at bargain prices, regardless of their ability to afford all the mortgages at once. Normally, underwriters would not pay close attention to your credit inquiries unless there were a hug number of them. If you had applied for 2 or 3 mortgages at other lenders for other properties there’s no way for the lenders to know. This new guidance requires underwriters to follow-up on every credit inquiry in the last 120 days so for the applicant there’s no escaping the explanation of what each inquiry was for.

Economy & Financial Insights: European Union Slowly Coming To A Rapid Boil
While signs of small economic improvements continue to sprout this Spring in the United States, a firestorm is brewing in Europe which will impact us whether we like it or not. Having our head in the sand won’t protect us from volatility in the stock market so we must stay aware of threats to our retirement accounts, etc. and act accordingly.

Remember the riots in Greece last year? Things have not improved. 3 year interest rates are 21% there and more budget cuts are looming. Worse, expectations are growing that Greece will default on their debt. What do Ireland, Portugal, Spain and Finland share in common? Answer: The same financial woes as Greece. Without severe budget cuts, these countries all are at risk of creating a European financial crisis that will dwarf our episode in the U.S. when Lehman collapsed. In crisis, New Yorkers, Texans, Idahoans, etc. all rally as Americans and we have a central body (the Federal Reserve) to help manage crisis. Not so in Europe. At the end of the day, Germans, Irish, Greeks and Spaniards stick to their own – they are not structured to unite centrally as Europeans to solve problems – they finger point and play political games for their own country’s gain.

One piece of good news for the U.S. is that investors may flock to the safety of the U.S. Dollar if all these European situations collide. A stronger dollar will ensure low interest rates for a little longer (unless of course our economy starts humming and hiring like mad overnight).

Question of the Month: I Have A Good Job But Lousy Credit – Where Can I Get A Mortgage?
I receive calls regularly from people who have good jobs, steady income, but for one reason or another, their credit score is low. It may be due to a nasty divorce. Or maybe there was a previous job loss which caused late payments. Lenders don’t care why the score is low – it is what it is. But there is still an option to get a mortgage without seeking private money sources. An FHA loan is a mortgage loan fully insured through the Federal Housing Administration (FHA) and issued by FHA-approved lenders. FHA insures lenders against losses that may result in the event of a borrower default. Advantages of an FHA loan are:

-Low down payment.
-Lower cost.
-Easy credit qualifying.
-Straightforward mortgage terms.

Let’s focus on the easy credit qualifying part. At one time, credit scores were irrelevant but they’ve tightened up slightly. If your credit score is above 580 and you have good income and little other debt, you may qualify for a program with a minimal down payment – 3.5%. If your score is below 580 you may still get approved, but the down payment minimum jumps to 10%.

FHA is more concerned with your monthly income and debts. Debts do not include your monthly expenses such as utility bills. Rather, debts include any loans like car loans and student loans as well as your credit card debt. An acceptable ratio of monthly debt payments to monthly gross income is something below 43%, but sometimes exceptions can be granted.

Example Of Calculating How Big A Loan You Can Afford From Your Debt Ratio
For example, if you had a car loan payment of $290 per month, a student loan payment of $100 per month and you pay $100 per month toward credit card debt, your total monthly debt is $490. If you gross $3,000 per month from work your debt ratio is $490 divided by $3,000 or 16.3%. Given that the maximum debt ratio for an FHA mortgage is 43%, you can estimate what you can afford in a mortgage payment (remember to include estimates for taxes and insurance). In this example, 43% of $3,000 is $1,290. Since you already owe $490 per month you have $800 left. Taxes and insurance on a small home will run at least $200 per month so that leaves $600 for principal and interest. At a 5.00% interest rate on a 30 year fixed loan, you could do a loan of $110,000 and have a principal and interest payment of $591.

Giving Back: Two Loyal Newsletter Readers Raising Money For Good Causes This Month
For the fourth year, our friend Adam Selsley will be cycling in the American Diabetes Association’s Tour de Cure fundraising event. Please support Adam with a donation by clicking here. Adam tells us that “as long as I can ride and as long as I can help I will do what I can so that one day the more than 20 million Americans with diabetes no longer have to say “diabetes is still there.” Please help me make my goal of raising $1500 this year. I am nearly a third there.”

Another cause worthy of your heart and generosity is the Muscular Dystrophy Association. Our friend Dr. Chris Green writes “”Did you hear the news…they finally caught me! I’m going to jail…but it’s for a great cause…MDA!” Click here to help Chris out of lock-up as he works toward his fundraising goal – we need him back in the office fixing our aches and pains!

Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.

Just returned from a business trip and mini vacation to Northern California. We were in San Francisco for a tradeshow and did some typical tourist stops – Chinatown, Coit Tower, Ghiradelli, Fisherman’s Wharf, Giants vs Dodgers – to name a few. Then a spectacular long and relaxing weekend in Napa – why we ever postponed doing that is beyond me. Can’t wait to go back. For now, we are staying home for a while.

Randy

Mortgage by Randy newsletter, Copyright 2008-2011 Randy Mitchelson. All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
____________________________________________________________________________________
You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.

As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.

He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.

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In Issue 36 We Touch On:
Charlie Sheen Guide To Credit Scores
HUD: Job Loss NOT Extenuating Circumstance
Two Signs Inflation Is Here

As promised in last month’s newsletter, I have completed all of the new requirements that our federal government has in place for mortgage professionals and I can continue on in this ever-changing industry. Not too many people can say that. The vast majority of mortgage brokers have chosen to abandon their license. For example, in Florida, there were over 81,000 licensed mortgage brokers in 2007. Now, less than half remain (about 39,000) and that number will likely go down even more as legacy licenses officially expire March 31, 2011 if the new federal licensing requirements have not been met. Keep in mind that the mortgage originators employed by banks are still exempt from being licensed (although they must be registered in the national registry). Banks have huge influence over our elected officials and so the uneven playing field between banks and brokers continues.

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…

Mortgage Market: Government Does Not Consider Job Loss An Extenuating Circumstance
In the July 2010 Mortgage by Randy newsletter, we reported on the new rules lenders have put in place for mortgage loan applicants who exercised a strategic default on a previous property. In other words, they deliberately allowed their mortgaged property to enter foreclosure despite having the financial means of keeping the mortgage current. Banks can set their own rules for loan applicants in this category and we have seen banks institute waiting periods of 3 to 7 years depending upon the circumstances which lead to the default. Some lenders considered a job layoff as an acceptable extenuating circumstance which would result in a shorter waiting period. However, our own government does not.

The Federal Housing Administration (FHA) is part of the U.S. Department of Housing and Urban Development (HUD) and provides mortgage insurance to FHA-approved lenders for low down payment mortgages. Like lenders, HUD has waiting periods in place for potential borrowers who have completed a short sale, pre-foreclosure sale or simply walked away from their home and mortgage obligation. HUD does not consider loss of employment due to company closings or reductions in work force an extenuating circumstance beyond the borrower’s control. Also, borrowers with Chapter 7 bankruptcies and foreclosures in their credit history are not eligible for an FHA loan if their sole extenuating circumstance is loss of employment due to company closings or reductions in work force.

Should the borrower lose their employment due to a long-term illness, HUD will make an extenuating circumstance exception. Another example of an allowable extenuating circumstance is death of a primary wage earner. Click here for more info about these waiting periods.

Personal Credit: The Charlie Sheen Guide About Credit Scores
Love him, despise him or pity him, but Charlie Sheen has provided an entertaining side show to all the disturbing news from North Africa, Japan and the Middle East that the next generation of kids will undoubtedly study in their history textbooks. This month’s credit lesson pays homage to Wild Thing, so have some fun as I, “exercise the poetry in my fingertips”, and imagine how Charlie Sheen would offer advice on credit scores. Charlie will never need to worry about his personal credit score given his arsenal of cash and Austin Powers-inspired one hundred million dollar lawsuit. Although you might not have “tiger blood” or “Adonis DNA”, Charlie would agree that even “fools and trolls” can take control of their credit score.

“Come On Guys, We’re Talking About Practice? I Missed Practice?”
This Charlie Sheen quote is borrowed from an infamous quote by NBA great Allen Iverson. Sometimes people who are at the very top of their profession can get lazy about practicing their skills. Ultimately they learn the hard way that practice is the key to staying on top. For those of you with great credit scores, don’t get lazy – keep up your practice of paying bills on time, inspecting one of your three credit reports every four months, protecting yourself with real-time credit monitoring and keeping your debt levels under control.

“Duh!”
Pay your bills on time. Every time. If you do nothing else about your credit, do this one thing and it will be like “effortlessly and magically converting your tin cans into pure gold”. The “Goddesses” of the credit world will bestow high honors upon you. Having a strong credit score will shout to your creditors that “I am battle tested bayonets”!

“Like In Baseball, The Scoreboard Doesn’t Lie”
Not happy with your credit score? Then take action to change the scoreboard until you are “Winning!” The good news is that you can change the scoreboard all the time. By using every credit account you have at least once per month and then paying the bill on time you can rack up points month after month. Charlie’s baseball nickname is “Wild Thing” because of his character’s unpredictable pitching. Likewise, your credit score represents to creditors your predictability of paying your bills on time.

“On A Quest” to “Right Every Single Wrong”
Sorry Charlie. This quest is an exercise in futility. Once you have negative (but accurate) info on your credit history, you can’t get it removed (legally). Only a combination of passing time and positive payment history can lead you to the holy grail of credit scores. As time elapses, older info on your credit report has less importance and most of it disappears after seven years. You can’t control time, but you can control the fresh (and most relevant) info that is being reported to the credit bureaus now.

“Winning, Anyone? Winning!”
Who can argue with winning? It’s the American way! Take a “defeat is not an option” attitude and you will be on the right track. If you follow the core principles of managing credit, you will see your score improve. It won’t be overnight. It won’t be in a few weeks or even a few months. Rebuilding credit is a marathon, not a sprint. It takes approximately 24 months of on-time payments to establish a good track record. Picture yourself in 24 months when you are asked about your credit score and you can proudly exclaim – “Winning!”

Does Charlie have you pumped to tackle your credit? “You’ve been warned dude. Bring it.”

Economy & Financial Insights: Two Signs That Indicate Inflation Is Here
Gas prices aside, there are more signs of inflation leaking into the marketplace. Listening to corporate earnings reports and reading my favorite economic newsletters in the last week, there have been price increase warnings issued by companies like Nike, Kimberly-Clark (Huggies, Cottonelle, Kleenex, etc.), Colgate (Speed Stick, Softsoap, etc.), Proctor & Gamble (Swiffer, Tide, Gilette, etc.), and others. We all buy stuff from these manufacturers and we’ll feel it in the pocketbook regardless of whether we buy from Wal-Mart or Wegmans. Strike one…

An unexpected natural disaster in Japan has created a wild card in the inflation conversation. Price increases are inevitable due to supply related challenges. As economist John Mauldin put it in his week of March 19 Thoughts From the Frontline “It is clear that, at least for a while, prices of electronics and tools are going to rise as one company after another is shutting its production lines down in Japan. Auto manufacturing plants in the US will have to close soon, as critical parts from Japan are not going to be forthcoming. Flat screen TVs? The iPad 2 I keep trying to find? All sorts of companies are going to get their costs squeezed even further.” Strike two…

Strike three could come in different forms. Wage pressure is one possibility as companies hire again but we are far away from that level of employment. A more likely source could be our own government. You see, the Federal Reserve has been keeping interest rates artificially low by purchasing federal debt. This subsidization is scheduled to end in several weeks. When the free market takes over, many experts predict a bit of chaos including rising interest rates, stock market contraction and continued swelling of gold and silver prices. Only time will tell.

Question of the Month: I own a condo with my ailing mom, but I am not on the mortgage. When my mom passes I want to keep the condo but what becomes of the loan?
This is less of a mortgage question and more of an estate planning matter that you should address right away with your attorney. Upon passing, the mortgage will have to get settled by the estate during probate. To avoid probate you could set-up a living trust and place the property in the trust. This can be done by a competent attorney for less than $1,000. If mom is no longer competent to sign documents of that nature then that may not be an option. If you do not expect the estate to have sufficient funds to pay off the mortgage at probate, then consider paying it off now to secure a satisfaction before mom dies. As long as payments keep coming in on time, the lender won’t know or care so if you can avoid probate, via trust for example, you could take over payments. There are whole books written about these matters – too intricate for this newsletter – that’s why consulting a competent elder law/estate planning lawyer is your best move.

Giving Back: Last Minute Tax Tips Regarding Charitable Donations And Your Volunteer Work
The personal income tax deadline of April 18 (the due date is the 18th instead of the 15th this year because of the Emancipation Day holiday in District of Columbia – regardless of whether you live there or not) is fast approaching so this month our Giving Back segment focuses on tax matters associated with charitable donations. For example, if you have donated used clothing and household items to a qualified charity during the year, be sure to follow these simple steps to remain compliant with IRA regulations:

1) Document an itemized listing of each article of clothing or other item being donated.
2) Determine either the thrift store or garage sale value of each item and document that figure on your list.
3) When delivering the donations to the charity ask for a receipt and ensure it is signed and dated by a representative of the charity.
4) Attach your itemized listing to the receipt and keep it with your tax records for at least seven years.

Another deduction to consider is if you drove to and from volunteer work, you can take the actual cost of gas and oil or 14 cents per mile. Add in other travel expenses like parking or tolls.

Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.

Busy month ahead as we finally get our first experience of Napa Valley in mid-April, but not before a few days in San Francisco for ad:tech and a few more spring training games in Florida before Opening Day. Anybody see the cover of GQ Magazine this month?

Randy

Mortgage by Randy newsletter, Copyright 2008-2011 Randy Mitchelson. All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
____________________________________________________________________________________
You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.

As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.

He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.

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