Imagine waking up one morning and checking your bank account balance online, as you routinely do, only to find a large negative balance. Frantic, you immediately delve into a transaction history to see what could have possibly happened only to find several large, unexplained debits that have completely drained your entire account. How will you make your mortgage payment or pay the monthly bills? Put food on the table? The sudden shock sinks in as you realize the likely scenario: you have fallen victim to one of the most prevalent crime epidemics sweeping the country.

With our world so largely dependent on the digital transfer of sensitive financial information, identity theft is growing at an increasingly alarming rate. If you have ever been the victim of a scenario such as this, you know the emotional pain, time and financial toll that can be involved in repairing the destruction caused by this criminal activity. In many cases, by the time it is even discovered there is already significant damage to the victim’s credit report. In some cases, similar to the one described above, bank accounts have been depleted, which causes legitimate checks and debits to not clear.

According to the Federal Trade Commission (FTC), as many as 9,000,000 Americans have their identity stolen each year. Of these people, estimates show that most do not have a formal identity protection plan in place prior to the fraud. Although there are five general categories of identity theft, the most common form we see is financial. As a mortgage planner who reviews many credit reports each day, I have seen many cases where a person’s identity has been compromised and credit is obtained in their name without their consent. If the theft is not discovered until they need their credit to make a purchase, they may find themselves in a position where they are unable to qualify for new credit until the fraudulent activity is cleared up. In some cases, it can take years to fix all of the damage and clean up the credit report.

If you learn you are a victim of identity theft, the FTC suggests doing the following steps: (for more information visit their website at www.ftc.gov)

1. Place a fraud alert on your credit and review your credit reports.
2. Close the accounts that you know, or believe, have been tampered with or opened.
3. File a complaint with the FTC. You can reach the FTC Identity Theft Hotline at 1-877-ID-THEFT.
4. File a report with your local police or the police in the community were the identity theft took place.

If someone steals your identity to buy goods and services, the sooner the fraud is discovered the less time it will take to prevent further fraud and repair the damage. One of the services we provide at no cost is Identity Theft Protection Monitoring. As part of this service, we will check your credit and review the report with you each year to ensure there is not any unauthorized transactions. If there is fraud discovered, we will help you begin the process of repair. If you want additional protection, people in our program can receive a discounted membership with LifeLock. They will provide additional monitoring and protection that can help ensure you are not a victim of identity theft in the first place. To begin the process of protecting your identity, call my office at 801-501-7950 to sign up for the free service or e-mail me at mike@citycreekmortgage.com.

2011 was a year full of surprises for the financial markets, and the bond market was no exception. By taking a look at the Fannie Mae 30 year 4% bond chart, you will see a great deal of volatility and market movement. To help this graph make sense, you must consider that as the trend moves higher interest rates are dropping lower. Therefore, as the market moved higher in July and August, mortgage rates were falling.

The European Crisis Rocks the Markets in 2011

Although we started 2011 with interest rates making a strong move higher, they reversed course and fell sharply in July and August. This move was largely influenced by the turmoil brewing at the time in Greece and subsequently supported with deteriorating financial troubles in Italy, Portugal, Spain and Ireland.

Adding to the volatility of the markets in 2011, several Middle Eastern countries also faced rebellion from their citizens. In the cases of Libya, Egypt and Syria, each of their leaders was forcibly removed from their positions. As European nations pull back on entitlement spending, we anticipate increased tension and continued dissatisfaction with their leaders.

Continued Volatility and QE3 in 2012?

As we move into 2012, there is still a great deal of uncertainty in the financial markets. Here in the USA, we are still facing a depressed housing market, stagnant job growth and an uncertain political future. Abroad, there is no solution in sight for the European debt crisis, not to mention that many Euro countries are now feeling a slowing in economic growth and facing an increased likelihood of falling into a double dip recession. Should this trend continue, these forces will likely help keep mortgage interest rates low for the foreseeable future.

One of the major potential market moving factors in 2012 could also be Iran. Given the seemingly deteriorating relationship the United States has with Iran, and the inevitable impact to the price we will pay at the gas pump, this may be a bit of a wild card this next year. Should the problem escalate, we may find ourselves paying higher interest rates for home loans as well.

Also adding to the volatility of 2012 is the growing chatter about QE3. Should this happen, many expect there to be an inclusion of further Federal Reserve purchases of mortgage backed securities. Given that further Fed purchases of mortgage debt, this will help to hold mortgage rates low.

Although it is impossible to accurately predict the direction and future of interest rates, it is safe to say that there is a lot of uncertainty that will likely make for another interesting year in 2012. We feel that rates will likely hold low, quite possibly move lower than they currently are. Some of the points that would change our convictions would be if the stock market makes a strong movement higher, or if the Fed stops purchasing mortgage backed securities.

If you are not yet on our interest rate watch program that will let you know when you should be considering a no-fee mortgage refinance, call us immediately to inquire about the program. If you are eligible, you may be able to save a great deal of money on your home loan or overall consumer debts. Also, for a more detailed report on our predictions for 2012, call my office after January 5^th. We will have our detailed predictions for 2012 complete.

Closing costs…certainly one of the least attractive components of refinancing a home mortgage. In many cases, closing costs can be as great as 3% or more of the loan amount. When you combine underwriting fees, title fees, appraisal costs and origination fees, the total can be a significant amount. In most cases, there are options that will greatly reduce the amount of fees that a borrower pays, even to as little as nothing.

Many homeowners have refinanced multiple times since interest rates began their initial decent in November of 2008. Unfortunately, far too many of these borrowers were charged thousands of dollars each time they refinanced. As a result, their mortgage balances are now much higher than they were before the initial refinance. Although they now have lower interest rates, one can argue whether or not they are better off having added to their principal balances. In the current age of falling home values, it is more important now than ever that mortgage balances move lower not higher.

The solution to avoid having a mortgage balance continually increase, while still taking advantage of falling interest rates, is by managing the mortgage with no-fee loans. By definition, a no-fee loan is one where in exchange for a slightly higher interest rate a borrower can have all the closing costs that are legitimately incurred in doing a mortgage paid for them through the higher rate. Because there are loan size and credit score requirements, and the home must be owner occupied, a total no-fee loan may not be possible in some cases. However, a lower fee loan is always available and should be the second alternative to a true no-fee loan.

A Case Study

Let’s assume that a homeowner has a $250,000 mortgage with an interest rate of 4.75%. If the current market rate is 3.875% with $5,000 in closing costs, a no-fee loan will be in the ballpark of 4.25%. I have adjusted the loan amounts to compare apples for apples. In other words, if there is a difference in loan costs between the two options of $5,000, the no-fee option will have a loan amount that is $5,000 lower. That will most effectively show the true cost of paying closing costs to obtain a lower interest rate. Therefore, we would compare a balance of $255,000 at a rate of 3.875 vs. a loan amount of $250,000 at a rate of 4.25%. The results are as follows:

• Full-Fee Option: $255,000 @ 3.875% has a P&I payment of $1,199.10
• No-Fee Option: $250,000 @ 4.25% has a P&I payment of $1,229.85

You will see that by paying $5,000 in closing costs, the monthly payment will be $30.75 lower than the no-fee option. Therefore, the breakeven point is 162 months. If the loan will be in place for at least 13.5 years, then paying the fees for the lower rate may be the best option. However, that is very rare and does not account for the option to move the rate lower again should interest rates continue to fall without losing the amount paid for the loan.

Even if you have refinanced your mortgage in the most recent three years and would love to take advantage of the low interest rates available, a no-fee loan may be just what you need. Contact me at 801-501-7950 or e-mail me at mike@citycreekmortgage.com for a free mortgage review.

Given the amount of misinformation continually circulating about mortgage loans, we’re ready to set the record straight – Mythbuster style! Oftentimes, misinformation keeps people from making decisions that could benefit their financial situation. However, through clarity and understanding of mortgage fact vs. fiction, different opportunities never realized before may arise.

Myth #1 – All loans have closing costs that the borrower must pay.

Truth: In exchange for a slightly higher interest rate you can receive a credit back that may cover all of the closing costs involved in the mortgage. This includes paying for the appraisal, underwriting fees and all title fees. Although there are certain restrictions involved (such as owner occupancy, loan size, loan-to-value and credit score), we typically suggest this option when it is available.

Myth #2 – Only refinance if there is at least a 1% savings to the interest rate.

Truth: If the loan does not have any closing costs that are being paid by the borrower and if the new mortgage balance is not increasing, any level of savings will be of benefit. For example: If a $250,000 loan is currently at a rate of 4.75% and we can do a no-fee loan at a rate of 4.25%, there will be a .5% savings to the interest rate without increasing the balance.

Myth #3 – All loans must be kept for 5 years in order for it to be worth refinancing.

Truth: If there are not any closing costs that are paid by the borrower, the breakeven point is immediate. Therefore, even if there are plans to sell the home in two years, it is worth completing a refinance to lower the interest rate. The borrower will, in turn, benefit from this lower interest rate for as long as the loan is in place.

Myth #4 – If I have already refinanced my loan in the last two years I should not refinance again.

Truth: First of all, the sad truth is that many people have paid thousands of dollars to refinance their home loans two or more times since mortgage rates began to fall in November of 2008. Now that rates have dropped even lower, many are stuck in the dilemma of wondering if they should refinance again. Although the decision to refinance in the past seemed to be good at the time, the reality is that many now owe more on their home loans than they did before they refinanced the first time. This is typically the result of receiving bad advice.

Even if a homeowner has refinanced recently, it is worth looking at the option again as long as a no-fee interest rate is lower than their current interest rate. If the no-fee interest rate is the same or higher than the current interest rate, it is best not to refinance.

Having a professional mortgage planner who offers superior advice is the way to ensure you are making wise decisions with regards to your home loan. For a no-cost or obligation mortgage review, call my office at 801-501-7950 or e-mail me at mike@citycreekmortgage.com to schedule your review.

The Federal Reserve recently announced that it intended to keep “interest rates” low through at least mid-2013. This unprecedented statement shocked the markets and helped drive mortgage rates down to match historic lows. As investors digested this information, many concluded the Fed is essentially stating that they believe our economic growth will remain stagnant for some time. Although the markets appreciated the transparency of the Fed’s statement and assurance that lending rates will remain low, it was a sharp contrast to prior predictions that our economy would be at a healthy growth rate by the end of 2011. The acknowledgement that our economic recovery has been “significantly slower” in the first half of 2011 than previously expected was more in line with what many on “Main Street” have been saying all along.

How Will this Decision Impact Mortgage Rates?

There are two interest rates that are controlled by the Federal Reserve – the Fed Funds Rate (a lending rate at which banks with deposits at the Federal Reserve lend money to other banks overnight) and the Discount Rate (the interest rate that an eligible depository institution is charged to borrow short-term funds directly from a Federal Reserve Bank). Both of these are very different from mortgage rates. A mortgage rate can be in effect for 30 years while a rate set by the Fed can change from one day to another. Therefore, this recent statement by the Fed does not guarantee that mortgage rates will stay in current ranges until mid-2013, only that it is likely short term rates will remain at current levels for the next two years (home equity rates, car loan rates, credit card rates, etc.).

One of the greatest determining factors in the direction of mortgage interest rates is the rate of inflation. Being that mortgage rates are set based on the price of a mortgage backed security (a bond sold to investors that is backed by mortgage notes), inflation is the arch enemy of any type of fixed income note or bond. Therefore, as inflation increases, mortgage rates will move higher regardless of how low short term interest rate are. In fact, if the Fed continues to hold short term interest rates low in the face of inflation, mortgage rates will increase further. A failure to increase short term rates in an inflationary environment will be viewed as a lack of effort by the Fed to fend off inflation, and long term rates will be the victim.

What Action Should Each Homeowner Take?

One primary benefit of the current low interest rate environment is the opportunity for homeowners to reduce the interest rate they pay on their mortgage. If you have a mortgage, or any other consumer debts, now is the time to have your mortgage reviewed by a professional who can advise you on the opportunities and determine if you should make a change to your home loan. If it is a wise decision, be mindful of the expenses to do the loan and the amount that most lenders add to your principal balance to refinance your mortgage. Any time a no-fee loan is available, that is likely the best solution to consider. Most of the loans we structure do not have any closing costs paid by the borrower and do not increase the principal balance of the mortgage. Our goal is to have homeowners reduce their mortgage liabilities, not add more to their balance. If you have any questions, or if you would like a no-cost mortgage review, call me at 801-501-7950 or e-mail me at mike@citycreekmortgage.com.