Identity Theft

5 Tips to Protect Your Privacy

The Federal Trade Commission (FTC) estimates that as many as 9 million Americans have their identities stolen each year. This means that an identity is stolen every 3 seconds, costing the average victim nearly $4,000 and nearly 175 hours to straighten out their problems and their credit. How can you protect yourself from the dangers of identity theft? Here are some suggestions.

Conduct a Credit Check-up – Visit www.annualcreditreport.com to obtain a free credit report every 12 months. Review all three of your credit reports and look for any suspicious activity, unusual or inaccurate names or addresses, or any inquiries that were done without your knowledge. In many states, you may place a 90-day “Fraud Alert” on your credit report, which further restricts access to your credit information. Simply call one of the three main credit bureaus to activate the alert. Here are the toll-free numbers: Equifax 1-800-525-6285; Experian® 1-888-397-3742; or TransUnion® 1-800-680-7289.

Don’t Give It Up – Avoid falling prey to phishing scams, both over phone and through email. In a phishing scam, identity thieves pretend to be someone from your bank or a credit institution and simply ask you for your personal information. If someone contacts you and requests any personal information, don’t give it to them. Verify who is requesting the data and why, and then call the institution yourself. One extra phone call could save you a lot of trouble and money.

Stay off the Pharm – While phishing enables thieves to pilfer information from you, pharming is another kind of scam that consists of hijacking your computer and stealing your personal information. A pharming site is designed to look just like the website you’re trying to visit. However, enter your information on this fake site and not only can it track your moves within it, it may also direct your computer to give up other personal information at a later time. Be sure you are visiting the correct site, that the address in the navigation bar is correct before entering any information.

Return to Sender – Some scammers simply fill out a change of address form and divert your mail to another location. Others simply steal the mail they want right from your mailbox. The key to avoiding this scam is to know your statement delivery dates and pay close attention to any unusual delays in delivery. A lot of identity thieves do things the old-fashioned way: They rummage through your trash to collect your information that way. Be sure to shred any junk mail or other documents that may contain your personal information before you throw it away.

Opt-out of Special Offers – Visit www.optoutprescreen.com to cut down on the pre-approved offers from credit card and insurance companies. It’s also good idea to have your clients opt out as well, especially if they’re thinking about buying a home. When people apply for a mortgage, they often become “trigger leads” to the credit bureau, who sell your clients’ information to any number of companies. It only takes a few minutes to opt out, but it could spare your clients a ton of junk mail and could possibly save them from identity theft.

Guns don’t Kill People, People Kill People

This can also be said about home financing.  Loans don’t cause foreclosures, bad decisions cause foreclosures.  The press loves a juicy story and the housing/credit crisis is ripe with tales of woe.  The bottom line, in very simplistic terms, is that there are no bad loans, only bad decisions and advice in choosing a particular type of financing vehicle over another. 

Let’s take a look at the downtrodden Option ARM product.  The Option ARM has taken a great deal of heat in the press and I would put out the challenge that out of every reporter that wrote a negative article on the Option ARM, less than 10% of them truly understand how they work and what place they hold in the financing hierarchy.  No they are not good first time home buyer programs, no they should not be used in conjunction with a 20% second to achieve 100% financing, and NO they should not offer the borrower a 1% pay rate when the fully indexed rate is 6%+ and the maximum negative amortization is only 110% prior to recast.

The tradegy of this program is that stupid, greedy, or inexperienced Originators were allowed to utilize the features of the program to take advantage of the public and reap a fortune in the process.  Originator’s routinely would offer the 1% pay rate at a 1.000 point loan fee.  But that was not enough.  In order to line their pockets further they would buy up the margin to increase the rebate or back end incentive from the funding entity.  On a typical $500,000 loan, it was not uncommon for an Originating entity to receive compensation equal to a 1.000 point origination fee and a 3.000 point rebate amounting to a total of 4.000 points.  That equals a $20,000 pay day on a $500,000 loan and, oh by the way, the Loan Agent probably spent 2 hours total time on the deal.  To cap off the insult, to get the higher rebate they bought up the margin and put the client into a 3 year prepayment penalty. I am probably crossing the line here but the Originator’s that engaged in this type of activity are pieces of S#$% and deserve to be stoned by their borrowders in the town square!

I am on this rant for a simple reason.  As a 23 year veteran of the industry I can look in the mirror and honestly tell myself that I always advised what was in the best interest of my clients.  The black eye this industry has suffered at the hands of a few will cause us to pay the price for years.  Just remember, if you are one of these guys (or gals) your judgement day will come and it won’t be pretty.

There are no bad loans, only bad Loan Agents.  If there are bad loans and no bad Loan Agents, then none of the bad loans would ever get funded and the first sentence of this paragraph would prevail and win the day.  Thanks!

Inflation and the Federal Reserve

President Woodrow Wilson signed into law the Federal Reserve Act in 1913, creating the Federal Reserve, the nation’s central banking system. The Federal Reserve, or Fed, has also been called “the gatekeeper of the US economy” because of its unique power to influence US financial and credit markets.

Comprised of seven presidentially-appointed Board of Governors; the Federal Open Market Committee; 12 Federal Reserve Banks; and private U.S. banks and advisory councils, the Fed’s mandate is “to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar, and moderate long-term interest rates.” In other words, the Fed’s job is to regulate the nation’s financial institutions while simultaneously keeping inflation in check.

To accomplish this important yet difficult task, the Fed studies economic indicators, creates, and then implements monetary policy – its specific plan of action or “target” for the economy – based on its findings. And while there are many tools at its disposal, the Fed has three main instruments of monetary policy: open market operations, interest rates, and reserve requirements, all of which can impact the mortgage industry.

Open market operations, the principal tool used by the Fed in its monetary policy, consist of the buying and selling of U.S. government and mortgage-backed securities (treasury bonds, notes, and bills) on the “open market.” Basically, the Fed buys when it wants to increase the flow of money and credit, and sells when it wants to reduce it.

The Fed also controls two important interest rates: the discount rate and the fed funds rate. The discount rate is the interest rate charged by Federal Reserve Banks to commercial banks and other eligible financial institutions on short-term loans. The Federal Reserve Banks offer three discount window programs to depository institutions: primary credit, secondary credit, and seasonal credit, each with its own interest rate. Experts say that changes in the discount rate can serve as a clear announcement of a change in the Fed’s monetary policy. These changes are important because they can impact lending rates for banks and interest rates for the open market.

According to the Federal Reserve, the fed funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. Like the federal discount rate, the fed funds rate is another tool the Fed can use to control inflation and other interest rates. This interest rate is often a source of intense speculation whenever the Federal Open Market Committee meets, creating uncertainty that can move the financial markets as well.

Finally, think of reserve requirements, the last of the Fed’s main monetary policy instruments, as the cash deposit requirement for a secured credit card. Reserve requirements represent the specific portion of deposits that banks are obligated by law to keep in non-interest-bearing funds at a Federal Reserve Bank, typically 10%. Consequently, as banks attempt to stay as near to the reserve limit as possible without dropping below, they constantly lend money back and forth to each other. The Fed, interpreting signs of inflation in its economic indicators, may choose to reduce the amount of reserves available to banks by slowing the selling of securities. Generally, this causes interest rates to rise, the economy to slow, and inflation to slow with it. The reverse is generally true when indicators suggest a slowing economy or deflation.