PANTA FAMILY


Saturday, June 30, 2007

Getting Started As A Commercial Mortgage Broker(First)

The Commercial Mortgage Industry is quickly becoming one of the hottest industries in the United States. The surge of Small Cap mortgages coupled with the need for knowledgeable mortgage brokers makes this the best time to take advantage of this opportunity. All it takes is a desire to learn and grow and the right partner on your side.

As with any industry there are obstacles you must overcome to be successful. For the Commercial Mortgage Industry, these barriers include (but are not limited to):
-Proper training in commercial underwriting.
-Lender relationships and loan programs
-Deal Flow. Getting clients in the door.
-Geographical service limitations.

The first step to getting your foot into this hot industry is the proper training. As you are looking for training, it is important that you find the most in depth and comprehensive training possible. While most direct lenders will provide free training, the training is almost always directed toward the loan products offered by that lender. This type of training, while valuable, will not provide you the breadth of knowledge you will need to be successful in this highly competitive industry. Look to the established industry organizations like the Mortgage Bankers Association or the National Association of Mortgage Brokers for better training opportunities. Another option is to look for a company that serves the interests of commercial brokers as a whole. These companies should provide the best training options and may also include other services that will make your transition a bit easier.

The role of the commercial mortgage broker is to provide financing solutions for commercial property owners. Often brokers are called upon for seemingly difficult financing scenarios. The key to finding a solution is locating the right lender with the right loan product. In the past, this meant a lot of research. There are hundreds of sources for commercial loans representing thousands and thousands of financing options. The best route for someone new to the industry is to locate a database of lenders that will allow you to input the loan information and allow the system to narrow your search to a handful of potential lenders. This technology is somewhat new to the commercial industry so be careful that the database allows you to search programs from multiple lenders, not just one or two. Keep in mind that these lenders want your business, you are their client. They should be willing to do the work required to match a loan program to your needs.

So now you have the training and the lender options in place, now comes the most important piece, the clients. You will spend the majority of your time looking for borrowers that need your assistance in helping them find the right financing. The key to building a client base is education. You must educate your potential clients in the commercial industry and above all why they should work with you. Marketing to potential clients is both time consuming and can be costly. Finding the best way to market yourself will require a bit of research and testing. As you build your business you will find that most of your clients will come from referrals. These referrals can come from friends, family, or your network of existing contacts. Be sure to let everyone you know that you are now a commercial mortgage broker and what services you provide. You may be surprised to find that your existing contacts may be your best source for business.

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Friday, June 29, 2007

Getting Started As A Commercial Mortgage Broker(Second)

What about commercial mortgage "leads"? Many companies offer leads that you can buy. Just be careful about buying leads. Some can be great, but some can be a great waste of money. Leads are often offered to multiple brokers at the same time and you will find yourself competing with several (or many) other brokers for the business. The key term you want to keep an eye out for is "exclusive referrals" not leads. This means that you are the one and only broker receiving that referral and in this industry, a referral is gold. Exclusive referrals are of course not free. Often they are part of a membership to a brokerage service which includes additional services as well. Be aware that these golden opportunities may mean a commission split with the provider that may take up to half of your income. The best advice is to go into any lead or referral situation with your eyes open.

The final aspect you need to keep in mind as you venture into the commercial mortgage industry is your geographical reach. I don't have to tell you that if you limit yourself to working deals solely in your local area, your earning potential will be equally as limited. Though it will take time, or just the right partner, your best bet is to serve as large a geographic area as possible. This flexibility will enable you to increase your potential client base and your potential income. Once you determine your target regions you will need to obtain the necessary licenses and qualifications to do business in those states. A few states require a special license to broker commercial mortgage loans. However, most states only require a basic qualification to do business. You should always consult your attorney to make sure you are taking the necessary steps to operate your business within the constructs of the law. It is a reasonable expense given the peace of mind you will have in knowing that you are conducting your business in accordance with the law.

Finding the right partner or mentor is a great way to start your career in the commercial mortgage industry. We all know it is much easier to get into something new when you have a friend that already does it. How many people decide, on their own, that skydiving is a good idea? It takes a friend that knows about it to get you involved. To show you the ropes and get you off the ground. This puts you more at ease with trying something new. Knowing someone who has "been there done that". In the commercial mortgage industry, a little research and networking, will allow you to find the right partner to help get you started in this exploding industry.

In summary, the commercial mortgage industry provides a wealth of opportunity for those willing to put in a little hard work. While there are many companies out there that are willing to help and do provide a valuable service, there are equally as many, if not more, that are of no value to you at all. Do the research and go in with your head up and your eyes open and you may find wonderful opportunities within the commercial mortgage industry. Good luck!

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What to write

I will publish tomorrow.

Thursday, June 28, 2007

A Guide to Mortgage Terminology

Whether applying for your first loan, second or refinancing, the mortgage application process can be overwhelming. Understanding the language of mortgages is a first step to understanding it.

The first thing to understand about the mortgage application process is the subject of origination. This is the filling out of the application, rounding up and supplying of documentation, verification of employment and checking of credit history.

If you are cash rich at the closing, you might want to investigate paying a discount point. It is the equivalent of one percent of the loan amount. By paying it, you can pay down the interest rate on the loan and save money over time.

When is the best time to start the loan process? This is a common question and leads us to the term pre-approval. You want to get pre-approved for a loan and lock in an interest rate. This allows you to shop for a home knowing exactly what you can spend.

Refinancing is one of those terms that sound fairly basic. It is. One refinances to pull cash out of equity or just to get a better interest rate or monthly payment. Be aware, however, that your original loan may have a pre-payment penalty.

Perhaps the simplest term to understand is equity. Equity is simply the amount you own free and clear of any debt obligations on your home. Equity grows as you pay down the mortgage balance. It also grows as the home appreciates. Over time, it can become a large amount.

The mortgage industry is full of terms that sound rather drastic such as underwriting. This simply refers to the evaluation process by an underwriter at the lender. These days, it is often a piece of software. It takes all your information, crunches the number and approves or rejects the loan.

Lenders evaluate potential borrowers in many different ways. The loan-to-value ratio is one of them. It is the requested loan amount divided by the appraised value of the property.

Timing is a big issue in the world of mortgages. Specifically, rates change on a daily basis. To avoid this problem, you want to “lock in” your interest rate when a lender approves you. The cost is usually a few hundred dollars.

The concept of truth-in-lending is designed to protect you, the consumer. Finance is a complex subject, so this law requires the lender to provide you with written disclosure of all fees, conditions and terms associated with your loan.

Applying for a mortgage can be a hectic and stressful process. This is particularly true for first time borrowers. Before you go through the process, take the time to learn the language. Not only will you understand what is being said, but also you’ll be able to respond!

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Thursday, June 21, 2007

Are Interest Only Mortgages A Good Idea?

An interest only mortgage is a mortgage where you only pay back the interest on the loan, and none of the capital debt is repaid directly. Once you get to the end of the mortgage term, you will pay back the capital payment in full.

How do you pay back the capital?

Although you don’t pay the capital back directly through your monthly mortgage payments, you indirectly pay for the capital. You pay for the capital through an investment fund or other lump sum. So, instead of repaying your mortgage capital each month through mortgage payments, you may monthly payments into an investment fund. Apart from investment funds, the other main ways to pay off the capital are:

Savings

Switching to a repayment mortgage

Another lump sum such as inheritance

What is the advantage of this?

Although you are still making monthly payments into an investment fund, these payments are likely to be a lot lower than the monthly mortgage payments you would pay on a normal repayment mortgage. Your interest only payments will be low each month and so if you cannot afford to pay a lot each month at the moment, an interest only mortgage might be a good idea. Also, the idea is that the money you put into the investment fund will mature and leave you with enough money to pay off the capital at the end of the mortgage term as well as leaving you with some extra money.

Are there risks?

Of course, there are a number of potential risks of getting an interest only mortgage. The first problem is that if you are hoping to pay off the capital by switching to a repayment mortgage later on, you will be paying back a lot more money than if you started on a repayment mortgage. Although you may find it hard right now, getting a repayment mortgage to start with might be a better option. However, the main risk involved with interest only mortgages is that the investment fund you set up will not be enough to pay back the capital at the end of the mortgage term. If you cannot pay back the capital then you could end up losing your home at a time in your life that it will hit you hardest, such as at retirement age.If you are going to take out an interest only mortgage, make sure that the funding method you use is safe, and that you have contingency plans if the fund is insufficient to pay back the capital. If you do this, then getting an interest only mortgage can be a great way of keeping your payments low whilst you improve your income.

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Sunday, June 17, 2007

A Nationwide Service for Property Managers, Landlords and Real Estate Investors

Our full-service, hands-on approach to tenant and employee screening draws on the expertise of our staff of dedicated professionals. A strong commitment to excellence has helped E-Renter become a leader in the field, and has won praise from our diverse group of clients. In fact, E-Renter was awarded the Certificate of Excellence by the Better Business Bureau (BBB) as the “2006 Winner of the Western Washington Better Business Bureau innovative Business Practices Award”. Our nationwide services allow our clients to relax with the knowledge that their rental property is in safe hands, is well-managed and their return is maximized. Similarly, our pre-employment background checks are as effective with large offices as they are with smaller businesses of all sizes. Wherever you are in the United States, E-Renter services are targeted and result-oriented. We identify prospective candidates for your company or property and approach them directly. All our investigative activities are geared towards identifying the best possible tenant for you or the most capable employee to take your business from one success to the other. The entire process is cost-effective!E-Renter provides extensive and significant coverage as far as evaluating your prospective residential tenants or employees are concerned. Specifically, we use our search records compiled from 38 states to return felonies, misdemeanors, traffic violations, sex offenders and incarcerations, bankruptcies, judgments, liens, credit limits, payment patterns, reported employment and evictions records search of all 50 states and more! We conduct the broadest possible searches to provide you the most comprehensive details about your prospective tenants or employees, at whatever level of confidentiality you require.

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Saturday, June 16, 2007

A Nationwide Service for Property Managers, Landlords and Real Estate Investors(Last)

The Nationwide tenant screening services at E–Renter include Name and Address Identity, Social Security Number Identification, Previous Name and Address, Birth Date, Employment History, Public Records and Civil Judgments, Consumer Trade Report, Payment and Loan History, Previous and Current Credit Information. In addition, free customer support 7 days a week is a cherry on the cake!

Property managers can use the E-Renter online access to order and review reports. This service demands no monthly fees, no minimum billing amounts, and no annual fees. You only pay for the reports you order! The following reports can be yours in a matter of seconds-
  • Consumer Credit Report
  • Criminal Records Search
  • Eviction History
  • ID Verification
  • Business Credit Reports
In today's complex world- wrought with crime and distrust, you need the representation of a professional Consumer Reporting Agency that places your interests first. We would like the opportunity to put our experience to work for you. E-Renter can help you! Please visit www.E-Renter.com for more information

Friday, June 15, 2007

There Was This Guy Banging On The Door… Inquiring About Lis Pendens Foreclosure Action On His Home(Second)

With time ticking away, Bobby called Ralph the Realtor to come over right away with the plan of selling the property on a “short sale” basis and put this nasty business in the rear view mirror. Ralph laid out the plan. To lay the groundwork to go at the lender, Bobby would need to prepare a tight and accurate family budget to prove to the lender that there was zero blood in the turnip to be squeezed. Bobby shared with Ralph the entire loan documents, the mortgage note, mortgage, mortgage statement with all the contact numbers and account number. Ralph completed an updated sales market analysis and made recommendations to Bobby on how to position the home to sell quickly. Bobby had not made any mortgage payments for the past four months and had limited funds to move to other living quarters with his sons, Brian and Mitchell. Ralph wanted Bobby and the boys to pack up immediately and remove all clutter from the closets and garage. A $50 storage unit was rented to store the stuff that was going to be kept. A garage sale was scheduled to sell all items not to be retained and raise a few bucks. Ralph and Bobby discussed freshening up the entryway with fresh paint and painting the master bedroom with a more neutral shade, which had a wild color and would be a distraction for most buyers. The carpets were shampooed and foodspots removed. Some potted flowers and plants were purchased at a local flea market to pick up the front of the house. In the meantime, Ralph was in contact with the lender and was engaging them with the “short sale” proposition. The lender already had three or four Broker Price Opinions in hand to further bracket the price. After a week of negotiations, Ralph received a verbal agreement from the lender to proceed on the sales plan. Ralph would receive nothing and would assign over all escrows for taxes and insurance. Ralph and Bobby checked with a local Real Estate Attorney to make sure they were avoiding any current and future land mines.

With the property spiffed up and clutter now in storage, the home was in good condition to show. In the agreement with the lender, the net to the lender would include a buyer incentive to pay up to $5,000 of buyer’s closing cost and prepaids. The listing price was set at 5% less than comparable properties with seller help on the closing costs. Ralph, got Bobby and the boys to go ahead and move into a townhouse apartment complex that was close to the boy’s school and Bobby’s work with the apartment community offering a move in special waving the deposit with one month free. The garage sale had generated just enough money to make it happen. Bobby was a good salesman, and in spite of everything was continually meeting his quota numbers and was on track to earn a bonus in a few months.

At the second open house, Ralph had an offer, which was a few thousand less than the list price. The incentives of buyer paid closing cost and prepaids were making a big difference. The buyers had already been pre-qualified with a mortgage lender letter in hand and were ready to close in two weeks. The fact that this home was vacant and immediate occupancy was possible made a big difference in the sales process. After a few days, the lender accepted the terms and took a little more of a hit to their bottom line net. Even though they had lost $40,000 other lender’s statistics show that in this current market place the loss could have been in the $60,000+ range without someone like Ralph getting involved and time running on and on.

Bobby had done his homework and after being assaulted with a parade of “investors” and “foreclosure specialist” then settled on a known professional, Ralph the local Realtor who had demonstrated his skills from prior experience. Anyone facing this foreclosure situation it is not uncommon to be filled with emotion and cloudy thinking. To gather all the facts, consult with market experts that have a license to protect and then coupled with seeking legal advice will go a long way of solving this situation. Open and continuous communication with the lender will serve to make this an easier experience. There are many lenders acting in a proactive way to keep homeowners in their homes IF it can be done. In Bobby’s case, he could only sell and get out. When a “short sale” is not possible, a deed in lieu of foreclosure, or just walking away is better than having the Sheriff set one’s stuff to the curb. That may be the “Ultimate Reality Show Experience”.

Bobby and the boys, six months after the sale are doing ok and the ex-wife is sending some child support. Bobby’s bonus came through and the process of rebuilding his credit history is underway. Little league and karate classes continued for the boys and school was going pretty good as well. Bobby was thankful that he had researched and called Ralph. It was the answer for this situation and Bobby and the boys were able to get on with their lives. Note: A knock at the door may not be an opportunity for owners.

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Thursday, June 14, 2007

There Was This Guy Banging On The Door… Inquiring About Lis Pendens Foreclosure Action On His Home

Bobby had already determined that he and the boys could not stay in the home and crank the mortgage payment. He had four Realtors in to give a Comparative Market Analysis on the home giving some idea of a probable sales price. It didn’t take long to figure out that Bobby was upside down in his home. With the Monthly Option ARM with negative amortization that Bobby and his then wife had taken out when they purchased the home. The original mortgage amount had increased 15% of the original balance. It was always the intent to pay the mortgage down, but with the divorce and other expenses of a single wage earner in the home, that didn’t happen. He had a mortgage balance with catch up penalties, late charges and such that was approximately $30,000 above the net sale price of the Realtor’s estimates. Three of the Realtors were pretty close but the other was obviously dreaming and apparently trying to “buy” a listing with a kited price. Bobby had been checking the neighborhood activity during the divorce proceeding. Bobby was to get some court ordered child support but has yet to see any money. He wanted to keep the boys on a regular schedule without too much disruption of their normal activities and was able to keep them both in little league and in an after school karate/kick boxing program. The karate school picked the boys up after school then Bobby was able to pick them up after class. Being a self-employed outside salesman gave him the flexibility to work around the boys schedule.

Bobby had already determined that he and the boys could not stay in the home and crank the mortgage payment. He had four Realtors in to give a Comparative Market Analysis on the home giving some idea of a probable sales price. It didn’t take long to figure out that Bobby was upside down in his home. With the Monthly Option ARM with negative amortization that Bobby and his then wife had taken out when they purchased the home. The original mortgage amount had increased 15% of the original balance. It was always the intent to pay the mortgage down, but with the divorce and other expenses of a single wage earner in the home, that didn’t happen. He had a mortgage balance with catch up penalties, late charges and such that was approximately $30,000 above the net sale price of the Realtor’s estimates. Three of the Realtors were pretty close but the other was obviously dreaming and apparently trying to “buy” a listing with a kited price. Bobby had been checking the neighborhood activity during the divorce proceeding. Bobby was to get some court ordered child support but has yet to see any money. He wanted to keep the boys on a regular schedule without too much disruption of their normal activities and was able to keep them both in little league and in an after school karate/kick boxing program. The karate school picked the boys up after school then Bobby was able to pick them up after class. Being a self-employed outside salesman gave him the flexibility to work around the boys schedule.

Bobby straightened the guy’s shirt out and smoothed it out the best he could. He invited the bloke in. He said his name was Frederick. Bobby asked him, “Look what were you saying before I was interrupted?” Frederick explained the plan that simply he’d try to save Bobby’s home or would negotiate with the mortgage lender to accept less than what was owed on a “short sale”. He further explained that Bobby would need to quit claim the deed over so that he could position himself to negotiate and get paid. All the while the home would be sold to a buyer at slightly below market and for Bobby’s trouble he would get nothing but would obtain an agreement from the lender not to sue for a deficiency judgement and would avoid a foreclosure proceeding. Bobby thought about it for a minute and asked, “Well why couldn’t I do that for myself?” He received a blank stare back from Frederick then he responded, “Well I’m a better negotiator.” Bobby grabbed Frederick by the arm and showed him the door. Bobby gave Frederick some parting words “Look I’m sure you’re a good negotiator but you’re not as motivated as I am going to be and I’m certainly not going to quit claim my house over to you.” “So see ya and don’t bother coming back!”

Bobby was not operating in a vacuum. He had been researching the sale prospects ever since he had interviewed the Realtors for comparative market studies. One of the Realtors, Ralph had touched on the “short sale” aspects of selling the home and had indicated that he had successfully negotiated three “short sale” situations to gain a sale on a reduced basis and free up the owner from any further obligation. Bobby had been reviewing some horror stories written up in the local paper about persons or companies extracting up front fees from homeowners in the process of a foreclosure and it turned out to be an out and out rip off. Other “investors” got the homeowner to sign a quit claim deed over and then would get the homeowner to move out to do some sort of “creative financing”. In some cases the “investor” would rent the property out and garner three or four months of rent plus deposits and security and ride it all the way into foreclosure with the homeowner and the tenant getting ripped off. A few “investors” would negotiate a “short sale” with the lender and would then flip it to a new buyer.

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Wednesday, June 13, 2007

There Was This Guy Banging On The Door… Inquiring About Lis Pendens Foreclosure Action On His Home

Bobby had already determined that he and the boys could not stay in the home and crank the mortgage payment. He had four Realtors in to give a Comparative Market Analysis on the home giving some idea of a probable sales price. It didn’t take long to figure out that Bobby was upside down in his home. With the Monthly Option ARM with negative amortization that Bobby and his then wife had taken out when they purchased the home. The original mortgage amount had increased 15% of the original balance. It was always the intent to pay the mortgage down, but with the divorce and other expenses of a single wage earner in the home, that didn’t happen. He had a mortgage balance with catch up penalties, late charges and such that was approximately $30,000 above the net sale price of the Realtor’s estimates. Three of the Realtors were pretty close but the other was obviously dreaming and apparently trying to “buy” a listing with a kited price. Bobby had been checking the neighborhood activity during the divorce proceeding. Bobby was to get some court ordered child support but has yet to see any money. He wanted to keep the boys on a regular schedule without too much disruption of their normal activities and was able to keep them both in little league and in an after school karate/kick boxing program. The karate school picked the boys up after school then Bobby was able to pick them up after class. Being a self-employed outside salesman gave him the flexibility to work around the boys schedule.

Bobby straightened the guy’s shirt out and smoothed it out the best he could. He invited the bloke in. He said his name was Frederick. Bobby asked him, “Look what were you saying before I was interrupted?” Frederick explained the plan that simply he’d try to save Bobby’s home or would negotiate with the mortgage lender to accept less than what was owed on a “short sale”. He further explained that Bobby would need to quit claim the deed over so that he could position himself to negotiate and get paid. All the while the home would be sold to a buyer at slightly below market and for Bobby’s trouble he would get nothing but would obtain an agreement from the lender not to sue for a deficiency judgement and would avoid a foreclosure proceeding. Bobby thought about it for a minute and asked, “Well why couldn’t I do that for myself?” He received a blank stare back from Frederick then he responded, “Well I’m a better negotiator.” Bobby grabbed Frederick by the arm and showed him the door. Bobby gave Frederick some parting words “Look I’m sure you’re a good negotiator but you’re not as motivated as I am going to be and I’m certainly not going to quit claim my house over to you.” “So see ya and don’t bother coming back!”

Bobby was not operating in a vacuum. He had been researching the sale prospects ever since he had interviewed the Realtors for comparative market studies. One of the Realtors, Ralph had touched on the “short sale” aspects of selling the home and had indicated that he had successfully negotiated three “short sale” situations to gain a sale on a reduced basis and free up the owner from any further obligation. Bobby had been reviewing some horror stories written up in the local paper about persons or companies extracting up front fees from homeowners in the process of a foreclosure and it turned out to be an out and out rip off. Other “investors” got the homeowner to sign a quit claim deed over and then would get the homeowner to move out to do some sort of “creative financing”. In some cases the “investor” would rent the property out and garner three or four months of rent plus deposits and security and ride it all the way into foreclosure with the homeowner and the tenant getting ripped off. A few “investors” would negotiate a “short sale” with the lender and would then flip it to a new buyer.

With time ticking away, Bobby called Ralph the Realtor to come over right away with the plan of selling the property on a “short sale” basis and put this nasty business in the rear view mirror. Ralph laid out the plan. To lay the groundwork to go at the lender, Bobby would need to prepare a tight and accurate family budget to prove to the lender that there was zero blood in the turnip to be squeezed. Bobby shared with Ralph the entire loan documents, the mortgage note, mortgage, mortgage statement with all the contact numbers and account number. Ralph completed an updated sales market analysis and made recommendations to Bobby on how to position the home to sell quickly. Bobby had not made any mortgage payments for the past four months and had limited funds to move to other living quarters with his sons, Brian and Mitchell. Ralph wanted Bobby and the boys to pack up immediately and remove all clutter from the closets and garage. A $50 storage unit was rented to store the stuff that was going to be kept. A garage sale was scheduled to sell all items not to be retained and raise a few bucks. Ralph and Bobby discussed freshening up the entryway with fresh paint and painting the master bedroom with a more neutral shade, which had a wild color and would be a distraction for most buyers. The carpets were shampooed and foodspots removed. Some potted flowers and plants were purchased at a local flea market to pick up the front of the house. In the meantime, Ralph was in contact with the lender and was engaging them with the “short sale” proposition. The lender already had three or four Broker Price Opinions in hand to further bracket the price. After a week of negotiations, Ralph received a verbal agreement from the lender to proceed on the sales plan. Ralph would receive nothing and would assign over all escrows for taxes and insurance. Ralph and Bobby checked with a local Real Estate Attorney to make sure they were avoiding any current and future land mines.

With the property spiffed up and clutter now in storage, the home was in good condition to show. In the agreement with the lender, the net to the lender would include a buyer incentive to pay up to $5,000 of buyer’s closing cost and prepaids. The listing price was set at 5% less than comparable properties with seller help on the closing costs. Ralph, got Bobby and the boys to go ahead and move into a townhouse apartment complex that was close to the boy’s school and Bobby’s work with the apartment community offering a move in special waving the deposit with one month free. The garage sale had generated just enough money to make it happen. Bobby was a good salesman, and in spite of everything was continually meeting his quota numbers and was on track to earn a bonus in a few months.

At the second open house, Ralph had an offer, which was a few thousand less than the list price. The incentives of buyer paid closing cost and prepaids were making a big difference. The buyers had already been pre-qualified with a mortgage lender letter in hand and were ready to close in two weeks. The fact that this home was vacant and immediate occupancy was possible made a big difference in the sales process. After a few days, the lender accepted the terms and took a little more of a hit to their bottom line net. Even though they had lost $40,000 other lender’s statistics show that in this current market place the loss could have been in the $60,000+ range without someone like Ralph getting involved and time running on and on.

Bobby had done his homework and after being assaulted with a parade of “investors” and “foreclosure specialist” then settled on a known professional, Ralph the local Realtor who had demonstrated his skills from prior experience. Anyone facing this foreclosure situation it is not uncommon to be filled with emotion and cloudy thinking. To gather all the facts, consult with market experts that have a license to protect and then coupled with seeking legal advice will go a long way of solving this situation. Open and continuous communication with the lender will serve to make this an easier experience. There are many lenders acting in a proactive way to keep homeowners in their homes IF it can be done. In Bobby’s case, he could only sell and get out. When a “short sale” is not possible, a deed in lieu of foreclosure, or just walking away is better than having the Sheriff set one’s stuff to the curb. That may be the “Ultimate Reality Show Experience”.

Bobby and the boys, six months after the sale are doing ok and the ex-wife is sending some child support. Bobby’s bonus came through and the process of rebuilding his credit history is underway. Little league and karate classes continued for the boys and school was going pretty good as well. Bobby was thankful that he had researched and called Ralph. It was the answer for this situation and Bobby and the boys were able to get on with their lives. Note: A knock at the door may not be an opportunity for owners.

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Saturday, June 9, 2007

Does Your Insurance Cover Water Damage?

During a cold snap, the pipes in your building freeze and burst. While doing a load of laundry, your washing machine overflows. A heavy rainstorm causes water to leak through the roof of your building--and you live on the top floor. Water damage occurs frequently, so it's a good idea to know what is (and isn't) covered by insurance.

Won't my landlord's insurance cover the damage?

Your landlord's insurance will provide coverage for damage to the building itself, but it won't provide coverage for damage to your personal property. And if your landlord's policy only provides coverage for damage to the exterior of the building (you can find this information in your rental agreement), it won't cover the cost of replacing pipes, carpeting, wall coverings, etc. inside your rental unit. (Depending on the circumstances, your landlord may still be liable for repairs, even if the damage is not covered by insurance.)

What about renters insurance?

A good renters policy will provide coverage for most water damage. Just make sure that it is specifically mentioned in the policy--that way both your damaged belongings and the cost to repair the rental unit itself (e.g., new pipes, carpeting, wall coverings) will be covered. One possible exception: whatever causes the water damage (e.g., dishwasher, washing machine) may not be covered by your renters policy if you failed to maintain it properly.

What if the water damage is the result of a flood?

Basic renters insurance doesn't provide coverage for water damage that is a result of a flood. If you live in a flood-prone area, you'll need to purchase a separate policy or add a rider onto your renters policy for this type of coverage.

What if I can't live in my apartment as a result of the water damage?

Most renters insurance policies will provide coverage for additional living expenses incurred if your rental unit is unlivable. In other words, the insurance company will pay for you to live at another location (at a price similar to your old apartment) while your apartment is being repaired.

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Friday, June 8, 2007

Talking to Your Parents About Insurance

Are your parents adequately protected against financial loss? What if your parents' home burns down and there is insufficient insurance to cover the entire loss--can they come live with you? What if one of your parents is held liable for someone's injuries, but does not have liability insurance--will he or she be financially ruined? What if a parent becomes seriously ill and needs long-term care--will he or she have the financial resources to pay for this contingency? What if one of your parents dies unexpectedly--will the surviving parent have enough money to live on?
If you're a member of the baby-boom generation, your parents may be of an age where these concerns may be troubling you. The only way to get the answers and ease your worries is to have a heart-to-heart talk with your mother and father. This may not be easy for some people, but if you shy away from this topic, the consequences could be devastating. Your parents were there to talk to you about the tough issues--now you need to be there for them. How you choose to approach them will depend on the type of relationship you share (e.g. adversarial, open and warm). Here are some tips on how to break the ice:

Prepare for resistance

Your parents may find inquiries regarding insurance intrusive, regardless of the fact that you're trying to help. They may feel it's none of your business, or that it's demeaning for you to assume they haven't made the proper arrangements. Be prepared to explain that you're simply concerned about their well-being and don't mean to be nosy or presumptuous.

Keep it private

A discussion about insurance involves issues that are personal. Broaching the subject in a restaurant or other public setting is inappropriate. Keep the conversation private, and choose a setting where your parents feel comfortable--at their own kitchen table over a cup of coffee, for instance. Also, don't rush the conversation. Even though you shouldn't expect to finish or resolve anything during the initial exchange, be sure you've set aside enough time to comfortably address everyone's concerns.

There's safety in numbers

If you have siblings, encourage a group discussion. If your parents see that all of you feel strongly, they may be more amenable to talking openly and considering your advice. If that's not possible, at least talk to your siblings about your parents' situation. Of course, if you have a sibling who is particularly good at rubbing your parents the wrong way, then perhaps you will want to exclude him or her from the discussion.

Be direct

Sometimes, the best approach is to put all your cards on the table from the get-go. If this is an option for you, find the right time and place, then just say, "Mom and Dad, we need to talk . . ."

The "I have a friend" approach

If a more subtle method is to your liking, you might describe an experience (real or hypothetical) that illustrates the consequences of not being adequately insured. For example, you could say something like: "Joe's father went into a nursing home a few years ago. His father didn't have long-term care insurance, so now Joe has to sell his father's house."

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Wednesday, June 6, 2007

Discuss your own plans

Another indirect strategy is to talk about your own insurance needs or plans. Once the discussion is under way, you can steer the subject in the direction of your parents' insurance needs.

Ask for their advice

Parents are used to giving advice to their kids, not getting it from them. Start by asking them what they think you should do about a particular insurance issue. For example, you might ask if they think you should increase your life insurance now that a grandchild has been born, or drop the collision coverage on your 10-year-old car. From there, you can divert the topic to their own insurance needs.

Ask a simple question

Another "lead-in" approach involves asking a seemingly innocent question, such as: "Who is your insurance agent?" or "do you keep your insurance policies in case of an emergency?" Whatever answer your parents give will be an opening for you to ask other questions that are on your mind.

Bring in the big guns

Perhaps not during the first discussion, but at some point in time you may want to make an appointment with your (or your parents') insurance agent for an evaluation of your parents' insurance situation and needs.

Be patient

Realize that this process takes time. Your parents may need to think things over, and it may take several discussion sessions to work out all the details.

Follow your parents' wishes

Finally, remember that just because your parents have agreed to let you help doesn't mean that you can take charge and do things your own way. You should act only when and how your parents want you to.

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Tuesday, June 5, 2007

Issues to talk about

Once you have successfully begun a dialogue with your parents about insurance, make sure you cover all the pertinent issues. Here are some you should not miss:
  • What policies do they currently have?
  • What policies do they have, but no longer need?
  • What policies don't they have, but need?
  • What are the details of their current policies?
  • Do their current policies provide adequate coverage? too much coverage?
  • How much can they afford to pay for premiums?
  • If there are beneficiaries, are the proper persons named? Have the proper designation forms been completed?
  • Who should be responsible for paying the premiums (you or your parents)?
  • Where are the policies kept?
  • Who is their insurance agent?

In addition, make sure you address each type of insurance that may be important for your parents, which may include:

  • Health insurance
  • Long-term care insurance
  • Life insurance
  • Homeowners insurance
  • Auto insurance
  • Disability insurance (though this may not be important if your parents do not have job earnings to replace)

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Monday, June 4, 2007

Mortgage Lenders Are Dropping Like Flies With Their Little Legs Turned Up And Kicking

In the wake of negative news after negative news stories filling page after page of print media coupled with negative outlook stories air time on radio and TV the public is found pacing the floor wondering what is going on. Fear can be a crippling emotion to many would be investors who thought nothing of buying a high priced property a year ago with little prospect of even breaking even. Everything was going to be made on the come. The savvy investor who has experienced a cycle or two now recognizes the opportunity knocking at the door. Yes, some areas will get a bigger bounce than others, BUT in the worst of the worst economically depressed areas there are deals which can make sense. There are areas where the affordability index is still good. Commercial and other income producing properties where over extension on part of developers utilized poor projection models and what if scenarios to now bring them to the cliff’s edge of financial ruin.

Per contrarian actions of the past, this class of investor gets as far away from the maddening crowds as possible. The public usually has it wrong on a consistent basis while arriving at the party late and staying too long. Whether stocks, real estate, Dot Coms or other hot and flashy investments the public investor, in far too many cases, lose. In the cases of long term investment would be the exception with regard to real estate IF they can stand to hold it. There are high inventories of foreclosures in many areas of the country with more coming. Commercial and residential properties in trouble are ripe for acquisition. Now, the Debt Service Ratios and Capitalization rates might actually make some sense IF the price is right. In most areas, the rents have been holding if not slightly appreciating. There are exceptions of course, but overall, returns are possible at the right price. Banks and mortgage lenders are compelled to dispose of real estate owner (REO) quickly. Thus with a flooded market of foreclosures (in many areas of the country) and other non-performing assets coupled with a slow real estate market situations are ripe for working something out with lenders. After all efforts to bring residential defaults current have failed and the foreclosure action has taken place the bank or mortgage lender owns the property it is here that the opportunistic contrarian may take a shot.

It is here say with a single family home the rents are imputed for a long holding period to determine the “strike price” of the deal. At this point there is no lack of properties to make contractual purchase offers on Real Estate Owned inventories. Working backwards, the contrarian investor will plug in the projected rents based on current market rents while backing out the monthly maintenance and upkeep, the hazard insurance, the taxes, professional management, a vacancy factor of 5% or more and other expenses. Like the massive tax changes that took place with depreciation schedules in 1986 large portfolio investors moved to a low to moderate leverage positions. The reason these properties became REO properties is that debt has the potential to suck the life out of value based returns versus similar investments. The same can be said in this scenario. A buy and flip strategy may work IF the acquisition price is low enough for a quick turn by strategically pricing the property say 10% to 15% below the market and has been put in reasonable or great shape. A little higher leverage could be considered in this instance, but until the market strengthens this could turn out badly. Deep discounts can cure many a risky investment.

Back to the watching paint dry method of renting and holding. It’s slow and steady and not as flashy as the buy and flip program.

As an example: Bob the “Neighborhood Contrarian” is looking at a REO owned property serviced by an out of state lender in bankruptcy. A court appointed trustee is temporarily handling the portfolio of loans, where this loan is serviced. Bob has an interest in a property that is listed by a local Realtor. Originally the home had been purchased two years prior for $250,000.00. The prior owner closed on a piggyback first and second mortgage loan with a first mortgage of 80% LTV (Loan To Value) of $200,000.00 and a 20% LTV second mortgage of $50,000.00. The first and second mortgage holders were two separate lenders. The home has been vacant for over five months and the grass gets cut periodically. A string of open houses and marketing efforts have gone for naught with zero results. Bob and his sharpened pencil begin to figure returns. The foreclosure action on part of the first mortgage holder wiped out the second mortgage holder who chose not to bid at auction. When the gavel fell at the court house sale of the foreclosure sale, the first mortgage holder was the only one left subject to real estate taxes as a superior lien.

Bob determines after careful due diligence that the market rent for this property will be $1,800/month. The taxes are currently $3,600/year or $300/month. The hazard insurance is quoted at $1,800/year or $150/month. The professional property manager’s fee will be 75% of the first month’s rent and 10% per month of the collected rents. A vacancy factor of 5% is applied to the equation. The home has four bedrooms, 2,000 square foot ranch style with two baths and a two-car garage with a pool. The pool has a security fence and child alarm system. Schools and employment and shopping centers are close by. The carpet and paint need immediate attention. The appliances need to be upgraded. The roof had been replaced five years ago. Bob figures new carpet and tile will run $6,400.00 with a total interior painting color scheme change at $3,900. New refrigerator and stove and updated microwave above the stove will run $2,800 installed. The tenant will pay all the utilities and pool and lawn maintenance and minimal repairs.

The rental agent confirmed Bob’s findings that with the upgrades the rent could command $1,800/month. Bob’s investments in the market and Certificates of Deposit were yielding a little over 6% per annum. To move quickly, Bob decides to make an all-cash offer which can close in ten days or less. The only thing better than cash in buying a foreclosure is FAST CASH. Bob continues to sharpen his pencil. Starting with the rental amount of $1,800 less $293/month (includes initial rent up) for management, $300/taxes, $150/month insurance, maintenance and reserves budgeted at $100/month and a vacancy factor of 5% or $1,800 x 12 = $21,600 x 5% = $1,080/12 = $90/month. The total projected offsets to the rent are $933/month. Taking the gross rent of $1,800 less $933 gives a gross rental net of $867.00. If Bob demands a 8% initial return on his money (not including appreciation or tax benefits) just on the surface it would be $867 x 12 = $10,404 divided by .08 (8%) gives us $130,050.00 with no annual income tax considerations on the income stream. The upgraded carpet and tile is running $6,400 and the new paint scheme is $3,900 and the appliance upgrade of $2,800 for a total of $13,100. So taking the $130,050 less $13,100 upgrades and $2,200 for acquisition costs the penciled offer would be $116,950 or $116,000 CASH with a TEN DAY CLOSE subject only to a home inspection, termite inspection, survey and a clear title. An attorney would be advised. All figures and calculations could accompany the offer to the mortgage holder with the upgrades and improvements necessary to capture the necessary market rents. This will give decision-makers at the mortgage holder company cover in the CYA game of justifying a huge write down.

The key, Bob has found is to make several offers at bargain basement prices on properties that have an opportunity to appreciate over time with benefits of appreciation. Dealing with highly motivated REO portfolio holders will lead to an eventual YES on the offers. If Bob chose to look at this deal on a five-year basis while assuming a 3% appreciation rate the numbers might look like this. Let’s assume the original owners overpaid and the home is really now worth $180,000 as-is. In five years $180,000 would appreciate to $208,669 or say $208,000 at the 3% rate. A real world deal, prices would be much higher than this. Here we are showing an under appreciating scenario. The land has been determined by tax assessment to be worth $50,000 leaving ($130,050-$50,000) $80,050. Let's further reduce this number by the appliances and take them over a five-year period. $80,050 less $2,800/5= $560/year. The improvement would be $80,050-$2,800=$77,250/27.5 years = $2,809.09/year in depreciation. The total depreciation would be rounded to $3,369/year including the longer-term period on the improvement and the shorter term on the appliances. If Bob is in the 25% tax bracket he would shelter $3,369 x 25% = $842.27 in taxes per year or $842.27/12= $70.19/month. This is a real worst case scenario with the deflated value, low appreciation over the five-year holding period. With an on surface cash flow of $867 plus tax savings of $70.19/month = $937.19. However, there are taxes on the annual cash flow of the property. This net amount then would be $720.44/month. Based on a 30-year mortgage with a rate of 6.5% with a principal and interest payment of /month would be a mortgage of $113,981.40 or say $113,000. This is close to the acquisition price so to avoid PMI an 80% LTV would allow for a mortgage of $116,000 x 80% = $92,800 with a payment based on a rate of 6.5% on a 30 year loan would be $586.56/month.

So Bob, after the cash all cash closing could take out cash out refinance with a low closing cost lender and gain the bulk of his cash to buy another deal. With $937.19 adjusted monthly cash flow less the new $586.56/month principal and interest payment would leave a $350.63/month cash flow with tax savings. However, now Bob would also be able to write off an interest deduction. That would be $92,800 x 6.5%= $6,032 in mortgage interest which would save additional income taxes of $6,032 x 25% = $1,508/12 = $125.67/month in projected tax savings on the mortgage interest deduction.

So how does Bob do at the end of the five-year period? Let’s say the home is now worth a measly $208,000 and Bob decides to sell it with an 8% selling cost giving an adjusted sales price of $191,360. If then the improvements are added to the basis for figuring capital gains tax that will be a point of beginning to determine returns. The acquisition cost of $116,000 plus improvements for carpet and tile, appliances (*some depreciation recapture may be required at sale) and paint for a total adjusted basis of ($116,000 + $6,400 carpet and tile + $3,900 paint + $2,800* appliances + $2,200 acquisition cost) = $131,300.00. On the surface the capital gain would be $191,360 - $131,300 = $60,060 x 15% = $9,009 capital gains tax. Overall on the full cash basis purchase with no mortgage: the $131,300 investment would give back approximately $191,360 in adjusted sales price. Then add the 60 months of net monthly income of $720.44/month x 60 months = $43,226.40 less $9,009 in capital gains for a total return of $191,360 - $131,300(acquisition) + $43,226.40 (net after tax rents) - $9,009 capital gains for a net of $. The question would be “If I could show you a way of taking $131,300 and getting the original investment back plus $94,277 over a 5 year period on an after tax basis, would that be a good deal?” Roughly, that would be a 12.27% annualized after tax return on a Internal Rate Of Return Basis. A leveraged deal with a mortgage would be more.

The whole key for Bob, or any other contrarian, is to make lots of offers based on a valued analysis. If you don’t get the deal let someone else take the hit. There is desperation in the market place and it IS a BUYER’S MARKET. The professionals tune out the bad financial news and move out of the living room and put some serious cash to work. A year ago sellers would laugh bottom feeder buyers out of town. No one is laughing now. The continued muse of desperate sellers is “Where have all the buyers gone?” They’re right here babies! The Contrarians are on the beachhead and moving in. The maddening crowd is on the sidelines wondering if it might be time to put their toe in the water. When the temperature of the water is just right, it will be too late. The deals are here and now. With all things being equal, value based investments have worked every time it’s tried.

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Sunday, June 3, 2007

Insuring Your Wedding Ring



It's more than just a fashion statement. A wedding ring is a symbol of everlasting love and commitment. So it goes without saying that insurance is probably not the first thing that comes to mind when you glance down at the wedding ring on your finger. But while insurance can never replace the sentimental value of a wedding ring, it can give you some peace of mind in knowing that it would be covered if something ever happened to it.


Making sure you have proper coverage




Your homeowners/renters insurance policy won't cover your wedding ring if it is lost. However, it will probably cover your wedding ring to some extent if it is stolen. Keep in mind that you'll need to check your policy, since a coverage limit may apply for certain types of personal property (in this case, your ring). If you want to make sure that your wedding ring is covered for loss, or if the value of your wedding ring exceeds the coverage limits on your homeowners/renters insurance policy, you may want to look into purchasing either a floater or a stand-alone policy.



A floater provides you with a specific amount of coverage for your ring based on its appraised value. With a floater, the insurance company has the option of paying the appraised amount or replacing the ring. Keep in mind that more often than not, your insurer will replace the ring.
A stand-alone policy is a type of insurance that is specially designed to protect valuable items. If you purchase a floater or stand-alone policy, however, your insurance company will probably require you to have your ring appraised by a certified jeweler.


Finally, while you're at it, now may be a good time to review the adequacy of your insurance coverage for all of your valuable items (e.g., your engagement ring, china, silver, or crystal). If you need help finding out if your valuables are properly insured, contact your insurance agent or insurance company for more information.


Keeping your ring safe

  • Have a jeweler periodically check your ring for loose prongs, worn mountings, etc.

  • Whenever you take off your ring, always put it in the same place. That way, you won't ever forget where you put it!

  • If you remove your ring when you wash your hands, be careful not to leave it by the sink where it can accidentally fall down the drain.

  • Be careful while cleaning or doing household chores. Harsh chemicals can damage precious stones and metals, and a rough blow can easily dislodge a stone from its setting.

  • Be careful not to lose your ring when you go for a swim, especially if your fingers are slippery from tanning lotion or sunscreen.


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Saturday, June 2, 2007

Kids Off to College? Make Sure They're Protected

Sending your kids off to college can be hard. All along, you've shielded them from injury and danger, but now they're on their own. Fortunately, you can still help protect them by making sure that they have the appropriate coverage.

Health insurance coverage is a must

Health insurance coverage is just as important for your college-bound child as it was when he or she lived at home. Accidents, illnesses, unexpected emergencies, and routine conditions may require expensive medical treatment. Many colleges even require health insurance coverage as a condition of enrollment.

In most cases, you can continue to insure your child under your own family health insurance plan. Most plans will continue to cover full-time students who meet the age requirements of the policy (e.g. under age 21 or 24). If your plan is a health maintenance organization with coverage restricted to local doctors and hospitals, you may need a separate plan for your child if he or she is going out of state. You may be able to buy an individual policy from a private insurance company.

Another option is to buy health insurance directly from your child's college (if offered). Since plans vary, pay close attention to cost and coverage provided. When reviewing a plan, consider the following:
  • Amount of deductible and co-payment
  • Extent of coverage
  • Types of services covered
  • Exclusions and limitations, especially if there are pre-existing conditions
  • Maximum benefit amount provided
  • Flexibility regarding choice of health-care providers and specialists

Make sure that your child is covered by auto insurance, both at home and away


When your child goes off to college, it's time to review your auto insurance coverage. Your insurance agent can tell you how your coverage and premiums will be affected.


For instance, if your child owns a car and is taking it to school, your insurance company may require that the auto insurance policy be issued in your child's name. Or, if your child borrows one of your cars for school, you'll probably want to list him or her on your insurance policy as either a principal driver or an occasional driver.


What if your child isn't taking a car to college? If you expect him or her to use your car during school breaks and summer vacations, it may be wise to list your child on your policy. But if your child won't be using the car regularly, ask your insurance agent if you're eligible for a premium discount.

Protect your child's possessions at college with homeowners or renters insurance


Like many college students, your child may be bringing a personal computer and printer, stereo, and other personal items to school. If your child commutes or lives in a dormitory (or other college housing), your homeowners insurance should provide a certain amount of protection for his or her personal possessions. But if your child lives off-campus, you'll need to purchase a renters insurance policy to cover his or her belongings. A renters policy may also provide liability coverage if your child injures someone or causes property damage. Your insurance agent can help you determine the amount and type of coverage you need.


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Friday, June 1, 2007

Getting A Home Improvement Mortgage

essential. It not only shelters one from all the natural exigencies, but also acts as an emotional blanket to cover one in times of stress and need. We as Humans have a lot of animal like tendencies. We prefer to hibernate during the winters mostly. At least we leave all our important business activities for the springtime. It is during this season that people decide to refurbish and do up their houses. Maybe they want to sell their house or maybe they are plain sick and tired of the old look and want to go in for a makeover. After all if humans can do it, why can't houses look good? This is where a home improvement mortgage comes handy.

Why I have specified on the seasons has a secret behind it. During wintertime when you do not have much to do, you can actually load your piggy bank. You should try to Save as much as possible. If you hang around for a very long time doing no saving, it will only be more expensive for you. It will also cost you a lot of time. Most of the times, the money we save is not enough. We then go in for a home improvement mortgage. They are actually loans that are utilized to fund for the upgrading of your home. These mortgages are extremely beneficial for us because they boost the worth of our habitats. Now what can these improvements be like? They can be things like -

Major repairs

Total renovation like remake of toilet or kitchen.

Upgrading of garden etc.

There are plenty of home improvement mortgages available. It is for you to decide which one is the most suitable for you. A comprehensive table can be made which can include all the computed as well as probable costs. The calculations should also include the total value you are anticipating. You see a foresight is a must in this kind of planning. This is not only for your own good; it's also very essential, as you may have to show it to your mortgage provider. One has to do a lot of survey before going for this kind of preparation. It is also better to take the opinion, calculations and costs from other service providers.

You can go in for a lot of choices here. There are a number of home improvement mortgages available -

Loans for refinancing

First and second mortgages

Personal loans

Donations

A lot of queries play hide and seek in our minds. What will be the monthly installments? What are the tax repercussions? What are the likely deductions on the income tax? The most important question of all, whether the improvements that we embark on will add to the worth of our home and will it be more than the home improvement mortgage that we have applied for? Even while taking a loan, the first step is to discuss all terms and conditions with the lender who is providing you with the home improvement mortgage. Possible negotiations can also take place. You can even avail of a personal loan that has been paid out by a finance company or bank.

One must realize that now the home improvement expenses have increased a lot. There are lots of people who have the money to make their homes look brand new again. There are of course many who still need some support. For them, the home improvement mortgage is really a God gift.

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