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comic.jpgI am proud to be a mortgage broker, but I have noticed that at cocktail parties now I get one of two reactions from people when I tell them I am a mortgage broker. 

The first is like I just told them I am a porn star or a convicted child molestor.  I can see that look of concern that I might be dangerous.  After all, according to the media I have been ripping old ladies off for a living and single handedly responsible for all the foreclosures and the implosion of the mortgage market. 

The second reaction is one of pity.  People have been reading about all the layoffs and starving brokers and they seem concerned that I might soon be living in a cardboard box.

Of course, neither reaction is remotely true.  I have never had a client go into foreclosure, nor have I ever been accused of being a shady salesman.  I am also not starving.  In fact, this has been a phenomenal year for me in terms of a loan volume and income. 

Don’t believe everything you read in the media…

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starbucks.jpgI am sure you have seen it by now, but there is a Coffee Calculator that was flying all over the web a few weeks ago that shows how much money you would have if you invested the money you spend on coffee at Starbucks. The website is hilarious and quite frankly as a certified coffee addict, I know for fact my portfolio is thousands of dollars smaller than it would be if it were not for coffee. Nevertheless, I believe man should have a few vices to stay sane.

The website uses very simple linear logic of evaluating the lost opportunity of not investing money that is spent on the coffee. Instead of spending $3.00 on coffee, invest the money at x% return and you will soon be rich!

While the site is entertaining, what it fails to do is point out that you can use this type of logic on any part of your life. For instance, if I chose to drive a beat up lime green Pinto instead of my Volkswagen Touareg V8, I could have invested the money and would be x richer. Or better yet, if I chose to wear K-Mart kickers with hard ass rubber soles instead of my butter soft leather Ferragamo loafers I would also be a bit richer. Come to think of it, if instead of buying a limited edition Panerai watch, I should have bought the plastic digital Timex. I also probably should have reconsidered taking my wife to Aruba for our honeymoon too. We could have stayed here in Chicago and I would be much richer. I also should have not bought my bungalow in Oak Park and instead rented some 500 square foot studio next to a crack house in West Chicago. Hell, I would have been a millionaire by now. Oh the shame, what horrible financial decisions I have made with my life!

There is no part of your life that you cannot make this argument. In fact, what the examples above do is point out the absurdity of this line of thinking. See, you can make a numerical argument, but most of life’s decisions are not black and white and cannot be boiled down to a number. The Touareg costs dramatically more than a Pinto, but is much more fun to drive and reliable. Wearing Ferragamos is like heaven to your feet as opposed to some odd form of Guantamo Bay torture from K-Mart kickers. My Panerai watch will be passed on to my kids and will probably appreciate in value as a collectors item. My point is the numbers cannot quantify the intangibles. In fact, drinking coffee for me is a stress reliever and I know it is a complete waste of money, but there is a great comfort in my cup of coffee that simply having an additional $3.00 in my pocket will not provide. I also think you can see that living your life in terms of lost opportunity cost would probably make you miserable. You would be richer, but miserable. You definitely don’t want to be around me prior to my morning cup of joe.

How does this relate to mortgages? This line of thinking is what most rate shoppers do when selecting mortgage providers based purely on the lowest rate. You simply take monthly savings from the lower rate and carry it out over the life of the loan. The next thing you know, you saved a Gazillion dollars! There is nothing wrong with this logic except that many people do not do it in the context of it being the largest financial transaction of your life. Like with most of life’s decisions, mortgages are also not a black and white decision. Does having a low rate matter? Yes, but it isn’t the only factor that matters with your mortgage. You also have to consider if the lender can perform as promised – meaning you actually close on time at the rate promised with no hiccups along the way. What most consumers fail to understand is that a rate quote is just a rate quote. It doesn’t mean anything unless the loan closes. Some of the most fervent rate shoppers I come across use the linear logic of lost opportunity cost, but will think nothing of dropping $40k for a loaded 3 series BMW instead of a more fiscally prudent Hyundai. Both get you from A to B. Sure the BMW pulls more chicks, but so would having the extra cash in your pocket.

I understand why otherwise rational people act irrationally in the context of their mortgage. For most people, their mortgage payment is their largest monthly obligation. It is not a small feat to pay it and you can physically see the money going out the door every month. On the other hand, your coffee addiction is not as visible. You don’t necessarily feel the pain of spending $3.00 and you don’t tie it to anything in particular. With your mortgage, a payment of $1950 is better than a payment of $2000. It is right there on the payment coupon book, so most people disconnect themselves from the intangible aspects of the transaction and focus on the bottom line. In addition, obtaining a mortgage is not something that people do frequently so they don’t really understand the pitfalls of home buying and mortgages and why cheaper does not equal better. As such, it is difficult to explain that getting a mortgage is not as simple as calling around asking “what is your rate” and voila, you have a $500k loan.

Take this excerpt from an email I received from a client a couple of months ago:

“After careful consideration of all the alternatives available to us for financing, we have decided to use another lending institution… our decision was driven by available interest rates, closing costs…”

I closed this borrower’s transaction last week without a hitch. The other lending institution couldn’t close the loan because of the borrower’s employment status. Of course, this didn’t pop up until a little over two weeks from closing and borrower had $15k in earnest money that they were about to kiss bye bye. I am sure on my client’s next purchase or refi, he won’t be so focused on whether another bank is quoting .125% lower rates even though it would have made him a millionaire.

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chicagodogs.jpgMoving to a new city can be a challenge.  I moved to Chicago seven years ago to attend business school at Northwestern.  I never paid rent anywhere else until then except Atlanta where I was born and raised.  Even though I spent weeks working in countless cities living out of a hotel room, actually moving to a new city for me was somewhat of a shock to the system.

 

Every city has it’s own culture and norms.  Often times the challenge of moving to a new place is figuring out these little intricacies.  Chicago is no different.  While I definitely consider myself a Chicagoan now, I am by no means an expert on the city’s cultural tendencies.  However, here is a list of the things that I noticed over the years that are uniquely Chicago:

Winter Parking Spaces:  If you ever visit a downtown Chicago neighborhood after a heavy snow you are bound to see lawn chairs, strollers, 2 x 4’s, and any other convenient piece of junk lining the streets.  So what is going on?  In Chicago after a heavy snow, people “reserve” their parking spot by placing junk on the street.  The logic is that if you took the trouble to shovel the snow out of the parking space, you should get to keep it.   While this is not an official law, Mayor Daley is on record supporting it.  Every winter, the local newspapers report on fights and other arguments over the parking spaces.  In short, if you see a stroller next to the curb in what looks like an otherwise empty parking space, don’t park there unless you want your car keyed. 

Stop light Drag Racing:  Chicago drivers love to pass on the right hand side of the road.  Many of the streets in Chicago were intended for one car, but are just wide enough for two.  The end result is impatient drivers who decide to make a lane on the right side of the road.  Often times this lane runs out just after a stop light.  As a result, you get into a situation where the driver on the right decides to drag race you off the light so they can merge back over before running into the cars paralleled parked on the street ahead.  This is hilarious because you will often see this same driver weaving in and out of traffic and squealing the tires at stop lights.  Of course, five miles later, this asshole, I mean cab driver, is no further ahead than you.

 

Deep Dish Pizza: Chicago is the land of big shoulders.  This is definitely a blue collar town.  Naturally, floppy pizza with tofu on it won’t do for Chicagoans.  Ever try to fold a Giordano’s deep dish pizza?  New Yorkers eat their pizza standing up on a grease soaked paper plate folded over.  They can even eat pizza walking down the street.  Not in Chicago.  Eating pizza is a meal unto itself.  You have to let it bake for 45 minutes and eat the 3 inch thick pizza with a knife and fork.

Hot Dogs: Like the pizza, plain ole hot dogs won’t do either.  Hot dog stands are on every corner just like Starbucks.  Chicago hot dogs are piled high with everything from peppers and onions to pickles.  However, whatever you do, NEVER put ketchup on a Chicago hot dog.

I am sure there are some other cultural norms I left out and each one of these probably deserves its own post.  If I missed any other big ones let me know.  Also, what are some of the weird things that people do where you live?

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Fish and FlushNow I have seen it all.  You know you want one!  I just want to know who would be crazy enough to put this in their house.  Honestly, depending on the personality of the homeowner, I could see this in  a powder room.  I wonder if People for the Ethical Treatment of Animals (PETA) has anything to say about this product?

Hey Realtors.  How would you handle it if your client had one of these in the master bathroom?

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Mortgage GangstersThe internet is amazing.  You can find almost anything.  The internet darling of 2006 was none other than www.youtube.com.  A collection of homemade videos from average joes.  Youtube has everything on it.  Bad recitals.  Jackass impersonators.  Commercials.  Music videos.  You name it, someone has made a video about it.  Seriously, who woulda thunk? 

Being the mortgage junkie that I am, I did a search for mortgages and what pops up?  The mortgage gangsters!  I couldn’t believe it.  The video is a must see for anyone who thinks I am lying when I say that the barriers to entry are way too low in the mortgage business or it is more important to shop the loan officer and not the mortgage.  I could not believe it, but caught on film are the antics of a typical telemarketing boiler room mortgage hack shop.  These jagbags as my assistant, Pamela likes to say, actually filmed themselves giving the mortgage business a bad name.

All I can say is I feel sorry for the people on the phone with them.

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TrumpYou may not have caught wind of it early this year, but Donald Trump opened up a mortgage company called Trump Mortgage.  It was at this point I officially knew we were at the top of the market.  Trump promised to use the power of his name to bring integrity to the mortgage business.  He brought it alright.  It was discovered one of his top dogs at Trump Mortgage embellished a bit on the resume.

The take away from this is simply that no matter how big the advertising budget, there are crooks everywhere.  In fact, I would argue that the biggest crooks in the mortgage business nowadays are also the ones with the largest advertising budgets.  Hey, someone has to pay for all the commercials and that someone is usually YOU.  Quicken and E-loans?  Good luck if you like dealing with over priced boiler rooms.  Lendingtree?  Have fun getting your phone number changed because it won’t stop ringing after your personal information gets sold as a sales lead fifty times.  Bankrate?  There is a reason their interest rate average is also on every 9/11 conspiracy website – they are full of it.

It is the Wild West out there folks.  Don’t get blinded by the advertising hype.

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