Archive for April, 2006

The Phishing is Bad Today

At some point, folks, it’s just too much, and I have to say something.  Most of you know (I’ve complained about it before) that I have several email accounts and routinely get 2-300 emails in a day.  Along with the usual Viagra ads (six children, seventh mere minutes away now, seriously doubt that the Viagra is necessary) and pitches to help someone-or-other in Nigeria (got one in French the other day – good French, too, my father says, and he would know), I get phishing attempts from “banks” wanting me to “upgrade”.  Sometimes it’s EBay instead (I think EBay is one of the six reasons the Internet was created), but mostly it’s “from” some bank I don’t have an account at.

Some of the scams are pretty good.  Phishing, for those not in the know, is an email trolling scam where your financial information or passwords are collected by a third-party website pretending to be a bank or other institution “upgrading its account” or “verifying your information”.  Mostly, these are pretty transparent, though there are some that are quite good and one or two (I save these) that are downright diabolical.  So the bar is set, you might say, pretty high.

Then today I get this:
Dear client of Washington Mutual,
Technical services of the Washington Mutual are carrying out a planned software upgrade. We earnestly ask you to visit the following link to start the procedure of confirmation on customers data.
To get started, please click the link below:
http://www.wamu.com/softwareupg
This instruction has been sent to all bank customers and is obligatory to fallow.
Thank you,
Customers Support Service.

You may not be a grammarian.  You may not be a member of the SAGP.  But please, please tell me nobody would ever fall for something like this.  Note additionally, if you’re ever uncertain about one of these phishing scams, just mouse over the hyperlink to see the site you’ll be taken to.  If it isn’t the same one in the hyperlink, don’t go there.  Heck, just don’t go there.  Ever.  If any – ANY – email letter or chain email ever proves to be accurate, I promise you you’ll hear about it here first.

And a word about email chain letters: they are all false.  All of them.  People send them (surely not you), saying things like “what can it hurt?”, and nearly always those batch emails are sent in the clear as Cc, not Bcc, so the email addresses are all out there for anyone to get.  But it can’t hurt, right?

Oh yeah?  Do you really think the phishers are buying their email lists?  Why would they, when all they have to do is send out a warning about someone trying to ban the US flag from classrooms, together with a bogus link to a cnn.com webpage, which link nobody – NOBODY – ever seems to click on, and presto! ten thousand emails go swooshing about the Internet and the email addresses pile up!  And since the people sending and re-sending these emails are among the most gullible humans ever created by God, they are, coincidentally, the perfect market for phishing scams, which they will think are “obligatory to fallow”.  So somewhere out there is a little old grandma who lost her life’s savings because someone sent her an email about how Bill Gates was giving away his billions to “anyone that forwards this email”, because, after all, “what can it hurt?”  Don’t you hope it wasn’t you?

The Last Mortgage Loan I’ll Ever Get

Promised to write about a loan program you’ve never heard of.  So here we are.

A couple weeks ago I sat with a lender and he told me about a program they are importing from overseas.  Apparently, outside the US, the standard 30-year amort (why 30 years?  Why not 25?  Or 40?) is not the dominant force it is here.  Out there, people get variable loans at a much higher rate than they do in the United States.  Interestingly, one does not hear about how German consumers are going to destroy their economy by getting adjustable mortgages, but I digress.

Last time I posted a question – how important is your interest rate, and offered an analysis of some answers.  Bottom line for most people – the rate matters far, far less than they think.  Yet the #1 question I get asked is not – hey, Jones, what’s the lowest payment I can get borrowing $200k? – but “so, what are rates right now?”

Example #1: the payment (on a 30-year loan) is the same for $150,000 at 9% as it is for $200,000 at 6%.  So is the rate more important than the loan size?  No.  But most people think they know the loan size going in.  Most people are wrong.

Example #2: the payment on $200,000 is about the same at 6% and 7% if the 7% loan is amortized at 40 years and the 6% at 30.  But I’m not going to live in my house for 40 years, you say.  No, you’re not.  You’re not going to live in it for 30 years either, though, are you?

What if you could make the interest rate matter even less?  What if you could change your outstanding loan amount every month – even every day?  What if your interest rate was not calculated as an amortized loan over 30 years, but computed like a credit card – based on your average daily balance for the month, with simple interest?

Well, there’s a loan like that.  What most people are doing with it is depositing their paychecks directly into the loan every time they get paid.  But you can’t do that, you say, because you need that money to pay bills.  So you do.  This loan lets you write checks (it even comes with a debit card) to cover them.  As long as you do not exceed your loan limit, you can do what you want with the rest.  Interest is calculated on your average daily balance, not on your loan limit.  So most people are paying interest on $2000 less than other people with traditional loans of the same amount – just for a few days.  Then it’s $1400 less.  Etc.  Another check comes, and the loan drops another $2000.  Goes back up.  And so on.

But what if, like me, you happen to be a business owner?  And what if your business sometimes puts $15,000 through in a month?  What if you’re a builder, and you put $50,000 through?  Or $100,000?  We have a builder we’re working with that has $150,000 in his business checking account right now.  Just in case.  His mortgage is $165,000.  He’s paying $1100 a month in interest.  When we finish the refinance, he’ll be paying about $175/mo.  And if he ever needs the money, he can get it.

What this means is that the average Joe, just by changing where his paycheck is deposited, can cut 7 years off his loan, and save tens of thousands in interest.

The industry has been searching for a way to make mortgages a part of the savings programs of Americans instead of a drain.  This loan, for many, many people, is the answer.

Now, it won’t work for everyone.  You have to have good credit and you have to have some equity in your property.  But if you do…

Email me or call me at 801-310-3407 if you want to talk about it.  You’ll be glad you did.

Ray’s Vacation (take 2)

As some of you know, Ray went on vacation Sunday for three days (it’s Spring Break here) to Bear Lake, which is up by Logan in northern Utah.  Beautiful spot.  Last year, when he went, his car broke down.  This year he has a new Suburban, so that’s not a problem.

Yesterday it snowed 11 inches in Logan.

Here is Ray on vacation.

Does Your Interest Rate Matter?

So, now that 30-year fixed rates are cresting 6.5%, it’s time to ask a question: how important is your interest rate on your mortgage?

There are several answers to this question.  You’re instantly thinking one of them.  Let’s take them in turn, then, shall we?

What most people are thinking: the rate is critical.  Nothing matters more than the interest rate.  I once had a client that got a 5% fixed rate on his 30-year mortgage.  What was unusual about this is that he was willing to pay over $15,000 in discount points to get it.  That rate was about 3 points below par (the rate at which the broker gets paid nothing by the wholesale lender).  Was this a good idea?  We’ll explore that.

What some people are thinking: the rate is important, but it has to be balanced by closing costs.  Some people don’t know this (if you’re one of them, you haven’t been paying attention to this blog), but your closing costs and your interest rate are absolutely inextricably linked.  Get a high enough rate, and you could have no closing costs at all (I did several of those kinds of “no cost” refinances a couple of years ago).  Get a low enough rate, and your closing costs could be astronomical (see example above).  Your closing costs will generally average about 3% of your loan amount.  If you get better than that, good for you, but understand that your rate will reflect it – or someone cut you a super deal.

A note about super deals: I understand that the cheapest wireless router in town is being sold at Wal-Mart.  I don’t buy computer equipment from Wal-Mart, however.  Or garden supplies.  Or, frankly, much else that is truly important to me.  Lots of people want a cut-rate mortgage with no closing costs and a rock-bottom rate.  These same people would never shop at Deseret Industries (the DI, to us in Utah) or the Salvation Army for clothes, though.  They are willing to pay Nordstrom $125 for a couple pair of jeans, but when someone is helping them borrow $350,000, they want DI prices.  Which is sillier – expecting top-quality clothes from a discount used-clothing retailer or expecting that the same rules that apply to clothes won’t apply to mortgages?

What practically nobody is thinking: the interest rate makes almost no difference at all.  All that matters is the payment.  Now, there are some people that think this when they should be thinking one or the other above, but there are indeed some people that think the foregoing and are perfectly correct.  We did a loan recently for a builder that would be holding construction financing for only a few months while he built several houses on some lots he wanted to buy.  The lots were going to appreciate by 100% themselves, and the houses would sell for roughly 20% over what it cost to build them.  He told me his rate made no difference as long as he got the loans in a week.  Happy to oblige.  He is selling the houses now and will make about $180,000 net profit from the operation.  He couldn’t tell you within two points what his rate is, and I’m not sure I could, either.  Why should we care?

The question really is not “which of these are you thinking” but “which of these things should you be thinking in your situation?”  Guess what?  I don’t know.  I won’t know until about a half hour after we sit down and start discussing your objectives and your current position.  I likely won’t be sure even then, but I’ll have a pretty good guess.  How can you figure this out yourself?  Well, I recommend getting a mortgage license and spending six months or so getting to know lenders and programs.  I have said many times that this business is not rocket science.  It is, however, math intensive and very knowledge-based.  In other words, what you don’t know can hurt you very badly and for years.

Tomorrow: a loan that you never heard of before that could change the way you think about interest rates forever.

The End of the World as We Know It

Terrible news.  Really shatteringly bad news from medical authorities today.  There is a definitive link between cancer and barbecue.  Oh, the humanity!

Actually, I have lots of problems with this study, which is in the first place conducted by people that do not know the difference between barbecue and grilling.  This is the first giveaway that the research is not being performed by experts.  Barbecue describes a process that does not necessarily involve a barbecue grill, whole grilling is what many people call “barbecuing”.  Linguistically, it is indeed problematic to invite people over for a “grill”, whereas having a barbecue is generally accepted as the proper thing to do to kick off the summer.  So some confusion is understandable, but really, if you’re going to do a study like this, don’t you have to get this stuff right?

Today is Opening Day, the first day of summer.  Well, of course not really, since the first day of summer is the day after daylight savings begins (for those of us in the time-travel portion of the USA), because that is the first day that the kids have to go to bed when it’s still light outside.  So that was yesterday.  But today is the first day of the baseball season, so that’s yet another sign that the White Witch is dethroned and Aslan is on the move.

The Dodgers lost, 11-10.  Maybe next year.

Announcements:

The First Ever Chris Jones Group First-time Homebuyer Seminar will be held at the Provo/Orem Chamber of Commerce offices in Provo (corner of Center and University) at 10am on April 15.  This is invitation only, meaning that you need to RSVP to come.  If you’re reading this, you’re invited.  There will be mail – watch for the newsletter.  We’re going to talk about the 5 things nobody knows about credit, the four things you should never do when buying a house, three ways to save for that first house, two things you have to remember about real estate, and a partridge in a pear tree.  You’ll want to come.

Apropos of the first item above, we’re reprising the Chris Jones Group Client Barbecue in August this year.  More details as the summer waxes.

Ray and Chrys had a baby last week.  Photos appended.  Congratulations from us all.

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