Category: The Mortgage Game

“We must be free–not because we claim freedom, but because we practice it.”–William Faulkner

“I am not a has-been. I am a will be.”–Lauren Becall

I am writing this newsletter at the airport in Havana, Cuba. We spent one week here on the “People to People cultural exchange trip” organized by The Santa Fe Photographic Workshops. I’ve taken classes with them before, but this was a different experience.

A group of about 25 Americans, amateur photographers, traveled to Cuba to meet local people, experience life in a country which has a U.S. embargo since 1960, and to interact with local photographers. Usually after any trip, travelers asked if they would come back.

For me, the answer is a definite “YES”.

We met some of the participants who’ve been back every year. One woman in the group was there on her sixth trip to Cuba. Because of the embargo, American visitors can only visit in organized groups under a special one-year license issued by the Treasury department; unless one wants to violate laws and sneak in through Mexico or Canada. Because each airline has to report each passenger, the fines can become costly if one gets caught. Because the rest of the world does not have any restrictions for travels to Cuba, our hotel was filled with tourists from all over the world.

I can write a book about my impressions, thoughts, and feelings about Cuba, and share photos out of about 4500 images that I took there. But for the sake of the brevity of this email, I will just stick to a few stories, which I will spread out in some of my next week’s writing.

Before going on the trip, we received a letter describing what we can bring along. We were also advised to have presents to give away on the streets while taking photos, and to leave some old clothing in the hotel after our departure. We collected soaps brought from other trips; tooth brushes received from visits to the dentist, bought crayons, and grabbed extra lollipops from the neighborhood bank.Phil Wiseman contributed over 20 pens left over from his clients. At the end, we had a substantial bag with the stuff.

Our first story started in the San Francisco airport. My suitcase was two pounds overweight, which would have cost an extra $100 to check on, in addition to the $25 charge. So, I took the gift bag out and stuffed it into my camera bag, which thankfully solved the problem.

The group met and stayed in Miami for one night before our trip, where we received an overview of our itinerary and some instructions on how to manage our stay. This is where we heard the words of wisdom from our trip leader.

Remember he said, “It is Cuba. It is complicated.”

After only a few days in Havana, while encountering a glimpse of local life, it suddenly dawned on me. The only way to explain what is going on in my business is just to say, “It is the Mortgage business. It is complicated.” It also seems that the complication is due to the fact that the government for “the benefit” of the people controls Cuba as well as the Mortgage business. Cubans do not have a choice…do we?

At the end of our trip, a group of us got together to talk about what was the biggest impression from the trip, and everyone had the same answer–the people: friendly, beautiful, and very poor. Some asked for a dollar after posing for a photograph and after receiving a small gift, were very grateful. Many spoke in English and after finding out that we were from San Francisco, California, would happily exclaim, “America!” and showed thumbs up. They would add “We love you!”

Cuba’s history is full of complicated events. From 1790 to 1880, it was a distribution center for the slave trade to America. Havana was a cultural center and has a lot of beautiful buildings, most of which are now dilapidated.

After the collapse of the Soviet Union in 1991, which according to our travel guide was “breast feeding” Cubans, by subsidizing the sugar cane trade, there was literally a famine for four years. Today, Cuba’s economy depends on tourism and help from Venezuela. Cuba has oil refineries, which process Venezuelan oil, Canadians built an airport in Havana, with high-end hotels and restaurants owned jointly by the Cuban government and business men from Spain. China supplies Cuba with many products, including cars and there are 2500 Chinese who study Spanish in Cuba. Cuba and the United States are only 90 miles and a 45-minute flight apart. Through the years, many Cubans have managed to cross over. I believe that soon more people from the United States will be able to go the other direction without restrictions.

P.S.

Next week, I will share with you more of my encounters in Cuba and why there are so many old American cars over there. At the end of our trip, I had to choose four of my images for the group show. It was challenging to choose from all of the snaps that I took. Here they are. You be the judge, and please let me know your impressions.

Next week on February 14^th, widely known as Valentine’s Day, is the busiest day of the year for the flower business. It seems that everyone suddenly remembers that there are people in our lives to whom we can express our love. What about the rest of the year?

Flowers grow year-round and candies come in forms other than heart-shaped red boxes. When I grew up in Riga, Latvia, we celebrated “Women’s Day” on March 8^th. I remember being about 7 or 8 years young when I saved up 3 rubles, which was enough to buy my mom a chocolate bar (of my favorite brand of course) as an expression of my love.

Now that I’m a little bit older, I feel that every time I help someone get a new mortgage and save them a lot of money, or help someone move into their new home, is the greatest expression of my love to people with whom I rarely have the opportunity to be together with. I do not want to wait for the exact day on the calendar–I’m telling you today, “I LOVE YOU.”

My daughter, Tamar, who edits all my writing suggested to include“10 Things You Might Know About Love” article to this week’s newsletter.

“If you paint in your mind a picture of bright and happy expectations, you put yourself into a condition conducive to your goal.”–Norman Vincent Peale

Last week, I wrote about the challenges of getting loans for non-owner occupied investment properties. But as always, there is light within the darkness. Somehow, we can always find creative solutions.

Dr. Dan is a dentist who was referred to me by my friend who is his patient. He came to my office very well prepared with all the necessary documents.  His middle credit score was 815 (this is excellent) and he has a good income. Besides his own residence, he owns a second home and two rental properties. He is a typical middle class professional, who can easily handle his mortgage payments.

His objective was to lower his monthly payments by about $300/month. First I showed him that he can get savings of about $370/month, just by getting a 3.50% fixed rate loan with no out of pocket closing costs for his home. He was very happy, but I suggested taking a look at his other properties. At the beginning, he was reluctant. But after I compared myself to a good dentist, who not only fixes one tooth, but also examines the whole mouth, he accepted my suggestions.

After reviewing the monthly payments on all of his properties, I offered to increase his loan amount on his house to $417,000 and get a cash-out of about $120,000. Then I suggested refinancing his rental property with the maximum of $50,000 cash out limited to 75% loan to value. After that, he would combine both amounts and pay off a loan of $165,000 on his second home. As a result, this mortgage payment on his residence would only be $200/month higher, but his rental property would be $100/month lower. After paying off the mortgage on his second home, it would be free and clear with an overall savings of about $1200/month. If he would apply this amount to the mortgage payment, he could have his own home free and clear after 14 years.

Dan’s response was, “You exceeded my expectations.”

As it happened on the same day, one of our new agents brought a loan where the client wanted to refinance a $130,000 loan. He owned six properties, which created a limitation (only a few lenders can lend up to 10 properties).

When I analyzed his entire portfolio, I offered a completely different approach–to consolidate all the mortgages into two. One for the owner occupied home for $417,000 at 3.500% and another for $230,000 for his single-family rental property at 3. 75%. By doing that, four properties will not have any mortgage and the overall savings on the monthly payments would be $1,413.

How impressive is that?

P.S.

By the time you read this email, I will be in Havana, Cuba with my wife and a group of photographers. To improve my photographic skills, every year I take a week off to attend different photo workshops. This year will be a completely different experience.

Americans can go to Cuba on a cultural exchange or through other countries, and this will be my first trip there.  So far, most of the images I have shared with you were without people, and I’ve mentioned that I do not specialize in any particular photographic field. This is only partially true; I love to photograph people, and not only when I travel. As a matter of fact, my photo exhibition titled “French Baguette” is still on the walls of the restaurant Chouchou. You can see more of my older images atMannyKagan.SmugMug.com

The images you see today were taken recently in the Britex fabric store in San Francisco, when I accompanied my wife to buy some fabric.

Please let me know which one is your favorite. You will see images from Cuba upon my return.

When I saw this title in The Wall Street Journal article on January 7^th, I got excited. It is about time for regulators to release their grip on lenders. But my joy was premature. The actual story was about a meeting in Basel, Switzerland. There, global banking regulators succumbed to the banks’ pressure and eased the “liquidity coverage ratio”. In other words, banks can keep less money in reserves since they need as much capital as possible to make risky investments to generate hefty profits.

After the global financial meltdown was caused by the reckless activities of banks and large financial institutions, the pendulum has swung in the other direction. It seems that the concern about the banks’ lack of capital liquidity became an international issue. After reading the article, I thought that this ruling had very little to do with you and me, but then I changed my mind.

As I mentioned before, I am in the middle of writing the sequel to“The Mortgage Game”. The title of my new book is going to be“Mortgage Solutions for Smart People: 5 Simple Ways to Get Your Loan Approved”. In my book, I write about the ways to increase the probability of getting a mortgage by improving each of the 5 C’s. One of the “C’s” is Capital.

While researching for materials, I came across a good book–“The Smartest Way ™ to Save: Why You Can’t Hang on to Money and What to Do About It.” by Samuel K. Freshman and Heidi E. Clingen. While reading the book, I realized that the Banks’ lack of capital liquidity has a great deal to do with all of us. It is a reminder that for many borrowers the lack of liquidity or “Capital” has caused a lot of problems while attempting to get a loan approved.

We were at dinner with friends whose mortgage I refinanced six months ago. Before leaving for dinner, I checked if the interest rates were low enough to justify another no cost refinancing, and they were. They could lower their monthly payments by another $107/month.

When I shared the exciting news with them, the wife asked me the question–“Can the rates go down even lower?”

We could have asked the same question six months ago, but who knew? According to a recent article in the Wall Street Journal, the interest rates could be lower at the present. However, big banks who control interest rates keep them higher, to make more profits. Since overall interest rates are quite low, no one complains. To stimulate the economy, the Federal Reserve continues to buy Fannie Mae mortgages in the rate of 40 billion a month. As long as banks continue to make huge profits and consumers have extra cash every month by refinancing, why lower interest rates even more? Actually, rates started to go up in the first week of 2013, possibly as a result of the good feeling from averting the “fiscal cliff”. Refinancing has become “a big business”. Why else would the article, Refi, Save, Repeat be in the San Francisco Chronicle‘s Business Report Section?  

I stopped being surprised, but many of our clients actually do not refinance their mortgage to lower their interest rates. They are either saboteurs who do not want to help the economy, procrastinators who do not want to deal with all the extra paper work, or own shares of the banks whom they are making higher payments to.

Can you come up with another reason why some of my clients, whom I contacted and emailed loan applications to, do not even respond to my emails? How would you react if your favorite Bank/Lender sent you a letter asking to pay them $100, $200, $300, or even more every month? But this is exactly what those who wait for the interest rates to go down even lower do. Please do not wait. Remember “a small bird in the hand…“?