Archives for January 2007

Don’t Miss the Boat…or the Explorer West Auction!

Explorer West will be holding their 7th annual dinner and auction on the evening Mcj038258900001_1 of March 17th at the Jerry Brockey Student Center at South Seattle Community College. 

This year’s theme is “All Aboard the S.S. Explorer West!”  I can’t even imagine what the talented folks at Explorer West are dreaming up for this adventure.  Last year, the auction’s theme evolved around Paris.   When you entered the room, you were greeted by a 30 foot tall Eifel Tower (including the light show) and felt as though you had stepped into a street side bistro.    I’ve gone to several school auctions in my lifetime, this one amazed me.

It’s not too late to advertise in their auction catalog…ads must be submitted by February 1, 2007.    And the school is still procuring items for the auction as well.  If you would like to attend this event and/or promote your business to a southwest  Seattle area school and do a good deed…here’s your chance!

Preapproval Letters Defined


The preapproval letter is a tool typically drafted by a loan originator to be used by a buyer’s real estate agent when presenting an offer on a property.   The letter may be in the form of a certificate or be an actual letter on the lender’s letterhead.   The preapproval letter is intended to assure the seller and the listing agent that the buyer has been buyer has been approved by the lender and therefore accepting an offer from this buyer, there should ideally not be any financing issues with the buyer.


When I prepare a preapproval letter, it usually contains the following (depending on the program):

  • Effective date.
  • The borrower’s names (who is approved for financing).
  • The sales price and loan amounts they are approved for.
  • The type of financing is confirmed (ex. Conventional, FHA, etc.)
  • Credit has been reviewed.
  • Employment and income has been confirmed.
  • Down payment and closing cost have been verified.
  • Any closing costs that are being requested to be paid for from the seller.
  • Any item the preapproval is subject to (such as satisfactory appraisal, title, complete purchase and sale agreement, etc.).

If these items have not been actually verified with proper documentation, then a buyer has been prequalified—not preapproved.  BIG DIFFERENCEBeing prequalified essentially means that a verbal interview has been conducted without providing all of the necessary supporting documents (pay stubs, W2s, bank statements—again, depending on the type documentation required for the specific loan “full doc” to “no doc”).  In addition, a Good Faith Estimate does not constitute a preapproval, it does detail the proposed loan scenario.


The preapproval letter does not contain private information such as a buyer’s credit score or their additional assets.   It is a sales tool for the buyer’s agent and if there are multiple offers presented on a home, having a strong preapproval letter is an advantage.   This is one reason why it is crucial for buyers to become preapproved before they begin shopping for their next home.   Many listings agents will not even consider an offer unless the buyer has been preapproved.    



The preapproval letter is generally effective for 90 days a specific amount of days, typically when most lenders consider the credit report “expired”.   Updating a preapproval letter is simply re-running the credit and possibly obtaining most recent income and asset documentation (paystubs and bank statements).    On occasion, the buyer’s agent may request a revised preapproval letter if they are presenting an offer on a home that is priced for less than what the buyer is approved for and if they are asking for closing costs.   



Real estate agents may also consider who the preapproval letter is from, and they may contact the lender to confirm the buyer is indeed prepproved and not just prequalified.   Many agents will tell you that the preapproval letter is only worth the paper it’s printed on.   This is also why it’s very important to be selective with lender you work with…it could possibly impact whether or not your offer is accepted on your next home.


If you’re considering purchasing a home located anywhere in Washington state and need a preapproval letter, I’m happy to help you!


EDITORS NOTE:  This post has been updated since credit reports are no longer “valid” for 90 days with most lenders.


Colorado’s Mortgage Broker Law Bars 10 Originators

Like Washington State, Colorado’s new mortgage broker law, the Morgtage Brokers Registration Act, went into effect January 1, 2007.   All ready, they have banned 10 mortgage brokers according to the article in the Rocky Mountain News.

Will Washington State be banning unsavory brokers?   We’ll have to wait and see.

I’ll keep you posted.

Spam I Am…NOT!

SpamiamLately, I have been buried alive in spam.   I have approximately 30-100 forms of spam waiting to great me in my email box every morning.   What’s even worse is that a majority of it appears to be from my domain names/web sites ( and    Some spambots have “pharmed” my email address from my websites.   

It really burns me up.  Not only does spam waste my time, I’ve had companies like Comcast and spam-cops deem me to be a spammer…talk about insult to injury!   It can really make e-mail communication challenging for me at times.   Just this morning, I received Jillayne Schlicke’s email newsletter, which I really enjoyed.   However, I cannot respond to her in an email since I’ve been put into a spam box with my email addresses from my websites being hijacked. 

I do email quite a bit with my profession as a Mortgage Planner.  And, of course I email my family and friends, too.  I send a monthly email newsletter to my database of clients…and if any one decided they did not want my e-newsletter, they could opt out at anytime without any hurt feelings.

So if you receive a funky email that appears to be from me—it’s not.  And I’m sorry there’s nothing I can do about it!   If you do want to receive emails from me, please do add me to your address book.

Meanwhile, if you’re in the same spam boat I’m in.   Try searching your email address in Google.   You’ll see what other sites and directories your address spelled out for spybots to grab. I found that I was my worse culprit with having my email address all over my webpages.  Try to have your email text address removed and replace with a simple “email me” link to your email address.    

And please know, I will never sell your email (or any personal information) address or spam you! 

Loan Originator Licensing Links

Try saying that 3 times fast!  I’m preparing for my presenation at the Greater Eastside Escrow Association on Thursday on Loan Originator Licensing.   I’m going to feel a little like the wolf in front of the hen house…although I’ll be out numbered!  It’s actually all good.   I have a background in title and escrow in my past life before I was a lender.   Since I’m working on assembling a list to hand out to the Escrow Officers, I thought it might be more convenient to post the website regarding licensing here. 

Mortgage Broker Practices Act

Mortgage Broker Practices Act Rules

Washington State’s Broker and Loan Originator Licensing Law Chpt. 208-660 WAC

DFI’s List of Licensed Loan Originators (this is very backlogged…I’m not on it yet and I should be.  So please don’t assume that because a LO’s name is not on the list that they didn’t pass the background check).

WAMB’s LO Licensing info

Seattle Time’s Article

Rain City Guide blog that I authored, Licensed to Loan

Ethical Lending Foundation — offers clock hour approved courses for loan origintors.

I’m sure there’s more information available…this is just a quick place to start!  If you have suggestions for other links I should post here, please comment and let me know.

Not a Good Option

Yesterday, one of my clients asked me about Pay Option ARMs.   These loans are Mpj034192600001_1 probably the most heavily advertised products promoted on the radio.   I cringe every time I hear the announcer boast about the low start rates of anywhere from 1 – 3%.  Pay Option ARMs are marketed by many different names, such as pick-a-payment or cash flow ARMs.   

A newer Option ARM program features a fixed period for the minimum payment and a fixed rate for a five year term.    Every month, when the mortgage payment is due, the borrower has the choice of what kind of payment they would like to make typically based on four different selections. 

Here’s an example of what a fixed period Option ARM could look like.

Option 1:  Minimum Payment–an interest only payment at 3% under the note rate available for the first five years of the loan (NEGATIVE AMORTIZATION).

Option 2:  Interest Only–an interest only payment based on the note rate available for the first 10 years of the loan term.

Option 3:  30 Year or 40 Year Fixed–A full principle and interest payment amortized over either a 30 or 40 year term.

Option 4:  15 Year Fixed–A full principle and interest payment over a 15 year term.

Sounds great, right?  Wrong.  I know a lot of lenders offer this product.  And, at least this option ARM offers a controlled minimum payment for a five year term.  However, how many people are going to make a principle and interest payment when they receive their mortgage coupon? 

Negative Amortization (deferred interest is the nicer term) is the difference between your note rate payment (the actual payment due) and the minimum payment (the low teaser rate).   In this case, every time you opt to make the lower payment, the difference is tacked on to your mortgage balance.   There are ceilings in place that will prevent all of your equity from being gobbled up from your mortgage called “negative amortization cap”.   This loan particular program (option ARMs vary from lender to lender, and this is just one that we could offer, if I don’t persuade you otherwise) features a cap of 115%.    This means that once you’ve made minimum payments long enough to increase your original mortgage balance by 15%, your loan terms will change and you no longer have the minimum payment available as one of your options (this is referred to as “recasting”).

Option ARMs can also impact your credit scores for the worse.   Credit scoring modules give more favorable scores when balances are decreasing and worsen if balances are shown above the credit limit.   If your original mortgage is $200,000 and due to negative amortization, the current balance is $215,000 (for example) your credit scores will be dinged as it appears to the scoring system that you’ve extended beyond over your credit limit on your mortgage.

These loans may work for seasoned investors who do not plan on utilizing the minimum payment option unless, perhaps, they have a rental without a tenant.     However, the majority of homeowners who have Option ARMs don’t fully understand how this animal works or that they are trading equity for lower payments until it sneaks up on them.  It’s not a program that I recommend for my clients when there are so many better programs available that won’t jeopardize home equity.


Mlk_2 Our office, Mortgage Master Service Corporation, is closed today in honor of Martin Luther King.   We will reopen for business as usual on Tuesday, January 16, 2007. 

Check It Out

You have the right to access your own credit report once a year from the three main credit bureaus; Eurohawk_4 Experian, Equifax and TransUnion at  You probably have noticed the many different commercials on TV promoting this from various other sites.   Since it’s been a while since I’ve accessed my report from this site and because I’m promoting in my upcoming quarterly newsletter for clients to access their credit, I decided to do so this morning.   

Currently, I publish and mail my newsletter three times annually.   As a person can access their credit report from each bureau once annually, and there are three bureaus…I thought I should use my newsletter as a reminder for my readers to review their credit when they receive the newsletter.   In my upcoming issue, I’m encouraging people to access their Experian report.   In the following newsletter, a few months later, I’ll remind them to pull their credit from either TransUnion or Equifax (you get the idea). 

After answering a few security questions, you will have access to what is being reported as potentially negative, what is positive and who is requesting your credit information.  What you won’t find on the “free” report is your credit score.  The bureau wants you to spend an extra $5.95 for that AND they would also like you to sign up for their credit watch programs.   

One of the services I provide my clients is an Annual Review, which includes their current mortgage and financial plans along with a review of their tri-merge credit report which includes the 3 credit scores.  I still advise everyone to take advantage of the free report to keep tabs of your credit throughout the year.   

Oh…and before I forget…GO HAWKS!!!