The option ARM became very popular, and with the real estate rush that we experienced over the past years, it's no wonder how so many people became wrapped up in the many types of creative loans for buyers to choose from. However, the option ARM wasn't intended to be used by buyers who "wanted more house for their money" - it was created as a good choice for investers and homeowners who were not going to own the home for very long. But the majority of buyers who are now stuck with this type of loan were exactly the buyers who should have been wary of the option ARM.

But in reality, rates have begun to rise and home values are dropping in many areas, and the option ARM has become more of a danger than it looked to be in the past. With an option ARM, there are several choices for the monthly payment, but the choice that poses the most risk is to pay the minimum due. This would be a similar risk to paying your credit card off by simply making the minimum payments. If you pay the minimum paymnet on your credit card, you would end up with a balance that is greater than the original charges. This would be exactly the result on an option ARM in which the homeowner paid just the minimum payment option.

Most borrowers with the opton ARM are opting to pay just the minimum payment, and are putting their homes at risk. The minimum payment is usually calculated using the first month's interest rate, generally a low "teaser rate" as low as 1-2%. When the monthly payments are not even covering the total amount of interest that is accumulating, the balance of the loan continues to grow, while the value of the home may not be rising as quickly as the balance due. Any unpaid interest is added to the principal, and the total of both are then used to calculate future payments. This is called negative amortization, which can present only problems for both the borrower and the lender.

So over the next few years, many mortgage holders will find that their mailboxes may be filling up with offers to help you refinance your mortgage. This is a serious time to consider your options. If you have a mortgage that has a low introductory rate, and you are nervous that your interest rate may rise out of control - you may actually be a prime candidate for the opportunity to break out of the adjustable rate mortgage. Although there are many people that are actually benefiting from the ARM - if your payments are already as much as you can handle - consider your options before the mortgage resets. When this happens, (for many borrowers, this could as much as double the payments) the payment shock can be overwhelming, and many borrowers could be in danger of default.

There are options that can prevent the drastic rate hike, and talking to a lender or broker that you trust can be the best option available. If you don't already have someone you trust, ask your friends and family. If you still don't have anyone you can talk to, the best thing you could do would be to talk to several mortgage and loan companies. Don't take the first answer you get as written in stone, you should definitely shop around. Also, don't be afraid to tell them that you are shopping around, you may actually get a better response, and a fair quote. Some loan officers will quote you the low introductory rates, and then you are subject to the same problems you may already have been experiencing. Not all mortgages are the same, and not all of them work in the same way. Use a mortgage calculator to come up with some figures that you are comfortable with, and then bring those figures to your lender. Discuss the possibilities with your loan officer, there are definitely things you can do to prevent disaster before your mortgage resets.

Now, more than ever, home equity loans have become the "thing to do". With credit cards holding interest rates higher than the rate on most mortgages, homeowners are have been looking towards home equity lines of credit (HELOCs) to buy the toys that they have always dreamed of. Now this may not sound like much of an issue to the untrained ear, but to those in "the know", there is a huge problem brewing in the real estate and mortgage industries. Home prices are beginning to drop in previously booming areas, interest rates slowly climbing, and a burst the number of exotic loans have increased the risk for homeowners, borrowers, and industry professionals. So why are so many mortgage professionals remaining calm? This type of build-up of financial burdens on homeowners brings about a perfect opportunity to cash in on the increasing need to refinance to keep their mortgage payments under control. According to Brad Brunts, with Citi Mortgage, these changes will bring him more business, "It offers an opportunity."

Freddie Mac estimates that Americans took $556 billion in home equity loans or cash-out refinancing programs. With little or no equity left in their homes, many homeowners will find that when their mortgage adjusts, that their payments could nearly double. This may even leave the borrowing homeowner with very few choices, and none of them good. The homeowners could choose to sell their home, but would most likely be in a position in which they owe more on the house than it's worth, and many similar homes on the market.

So is there hope? There is, take action before it's too late. In fact, it would be better to act on it before millions of other interest-only or exotic mortgage holders join the rush to dump their homes on the market.

When I first started in this business, I signed a contract that stated that I would be "fully trained" by the company that I signed on with. What a surprise it was to find out that I was supposed to "fake it until I make it." Many times when I would ask for help I was told that the answers would come to me over time, and to speak with confidence - that way the customer would have confidence in me.

Prior to getting into the mortgage business, I studied real estate in two states, Oregon and California. I was required to take many hours of courses and to have a certificate of completion prior to taking any tests for my licensure. But years later, as I sat with a blank expression on my face in my mortgage broker's office, I found myself wondering something I'm sure I wasn't alone in: Why don't mortgage brokers and loan officers face such a rigorous learning program?? I still to this day have not come up with an answer.

Today, more than ever, I am pushing for loan officers and consumers alike to educate themselves. I would highly recommend that ALL borrowers take a class or two, do internet research, and talk to many loan officers before locking yourself in with the first LO you find. It's not enough anymore to "trust" that brokers and LO's know what they are doing, many of them do know what they are doing - and many times - it's not good. My father had the best advice growing up: "If you want something done right, do it yourself." I've rambled and vented, and I believe that my point is this: education, education, education. Whether you are an industry professional, or a consumer, if you are educated - even self educated - you stand a better chance at obtaining the desired results.

The National Association of Securities Dealers, Inc. and the Conference of State Bank Supervisors have entered into an agreement to develop a nationwide licensing system for state residential mortgage regulators. This 18-month effort, which involves CSBS, the American Association of Residential Mortgage Regulators and the industry to develop uniform mortgage licensing applications that would be used by each state mortgage regulator. Industry leaders are hoping that the system will lead to benefits from access to a national licensing and enforcement repository, and will likely be the result of the uniform application process and produce more closely related regulations throughout the states.

There are quite a few industry skeptics with growing concerns about how such a system will be implemented, but there are a few states that are currently testing the forms for new license applications. We could be seeing this new system available as early as January 2008, and so far a total of 30 state agencies have agreed to participate in the system. An online mortgage banking compliance service, iComply, suggests that careful consideration should be taken when deciding what information will go into the new system. A pilot program was tested in Illinois, in which implementation issues were much more dificult than anyone anticipated.

One of the more common "distractions" in the office (granted, this issue is not limited to the mortgage industry) is a non-producing attitude in co-workers. Although there are many techniques to avoiding the distractions associated with workplace sloths, you're going to need a bit of self control and discipline to pull it off, whether you choose to remain in the office, or take your work home with you.

One very realistic solution for many mortgage professionals is to set up shop in your home office. One of the most important factors in originating mortgages from the home is local and state laws. In some states, there may be laws regulating how the information is stored (such as in a locked room, locked file cabinet, etc.) If you're considering working from your home, you should also be aware of the possibilities of distractions in the home, such as T.V., family members, too many breaks, or other potentially distracting factors. Be sure that you set up your home office to prevent distractions, such as using a spare room with a door that you can close, and telephone line, computer & internet, a file cabinet and a fax machine.

One of my favorites is Mortgage Professor, run by Jack M. Guttentag. It is indepth, it covers a huge number of subjects that can be useful not only to buyers, borrowers, and sellers, but to mortgage professionals - and it's not written in mortgagese. You can visit their website for quick tips, better understanding of specific loan types, and more. Another well-put-together informational geared towards educating consumers against mortgage fraud is the "Stop Mortgage Fraud" website. They cover a great deal of information that can educate borrowers and mortgage professionals alike. For "lender specific" education, such as information about Freddie Mac, Fannie Mae, or HUD, visit their websites. Each has training and educational tools, and some even have classes or scheduled internet events that you can be a part of.

Some mortgage transactions are subject to a three day "cooling off" period allowing the borrower to essentially back out of the loan before the money is actually received. I found an article that clearly explains what types of loans are subject to this cooling period, and what types are not - and why.

Originally set up to protect borrowers from unethical business tactics by lenders and mortgage professionals, the laws also provide for borrowers who may wake up and decide they have made a bad financial decision. But more often than not - it's being used to undo a bad financial decision. I have not seen this right excercised very often, but when I have - it was usually not due to fraudulent activity on the part of the lenders. But it is comforting to know - especially with my week long report on foreclosure scams (which often involve equity loans, in which these laws and rights apply) - that you can consult an attorney with the paperwork that you signed, and you would have three days to "cancel" the loan. Read the article by Holden Lewis, of Bankrate.com

It's actually a reality check. I can understand the young kids making quick descisions, such as a drunken choice of what to pierce . . . And even marriage has a "cooling off" period of it's own - during which the marriage can be annulled. But an escrow takes a while - if you can see the train wreck coming for 30-60 days, geez, get out of the way! Don't wait for it to hit you

This question can be answered in two ways, but first one would have to ask themselves why they would be working as a loan officer part time. If you already have experience in the business, and you understand the ins and outs of mortgages, you may do fine. But if you have a lot to learn, and are new to the industry, you may not find that you are learning at a pace that brings you any substantial income for quite some time. There are mortgage companies out there that can assign other more experienced loan officers to be your "mentor" and help you learn some of the lingo and more popular products.

If you have another job, you may be pressed up against deadlines that you can't realistically meet. I have read about a man who is actually in the mortgage industry, stayed in a hotel with a wife, two kids, and a cat for five weeks while waiting for his loan to close through a moonlighting loan officer before finding out that it was causing him to sleep most of the day. He gave the loan to a co-worker and his loan was closed in 4 days. Although it is true that there are full time workers that accomplish part time volumes, and part time workers that generate full time incomes successfully, it is generally a good idea to focus on one thing, and do it well. Many times, a new homeowner's dreams are becoming reality at this point in their life, and a good mortgage professional is there to ensure that things are going smoothly and quickly.

The mortgage industry in some areas is beginning to lag, and employees are being laid off all over. It's not just the big companies anymore, even smaller companies are starting to be affected by the slow in sales. The same offices that were booming with business, giving away loans because they cold afford to - brokers are beginning to close their loan officers' deals just to make a commission to keep on top of the business expenses. Much of this slowdown can be blamed on the inflated prices, rising interest rates, and increasing personal debt (affordability). I would call it "TNT" - that is "Too much inventory - Not enough buyers - Too many sales people".

When there is too much inventory of any product, whether it's ragdolls from China, or luxury homes in the hills of San Francisco, prices will go down. It's a simple case of supply and demand, and with the current inventory in what used to be called "high growth areas" we will almost undoubtedly see prices "correct" themselves as people become more and more unwilling to pay the inflated prices we are seeing today. Even if they don't drop very drastically in every neighborhood, they will for the majority be getting much lower in the future in the high inventory areas. Although this is just my prediction, and it will probably take a few years to hit the low, I believe that we are at the breaking point, and about to see the bottom drop out.

I came across some free courses offered by Fannie Mae, which are a great series for anyone who wants to get more familiar certain aspects of lending, appraising, originating, and underwriting. They have an abundance of other online courses as well, take a look around their website for more courses. This link will take you to their scheduling page, with dates and times along with many of their currently available courses. Some you can take right away, just by downloading them, others are scheduled sessions.

The varied courses are great to take, and I highly recommend the fraud prevention courses - anytime we can get updated training about fraud and fraud prevention, professionals in this industry should soak it up like a sponge - the more we prevent fraud in this business, the more fraud we can prevent ourselves - causing less need for the government to step in and create more confining laws regarding our industry.

Even if you are an originator it is good to take the appraisal and/or the underwriting courses. If you gain nothing else from the courses, you may gain an understanding of what the process is for others working on your loans with you. This can be especially helpful for understanding why certain conditions need to be met with certain circumstances, and the turn around time for processing and return of information.

I was recently asked this question online, and generally speaking - NO, it is not legal. While I will agree that it is practiced widely throughout the U.S., it is generally not legal, and should even be discouraged for several reasons.  Many times, it leads to other forms of fraud, such as inflated appraisals. Whenever a lender is not aware of all of the details of the transaction in writing, or the lender is not informed as to the true nature of the transaction, the transaction is illegal.

First of all, what buyer wouldn't be enticed by the notion of not only avoiding having to come up with cash for the closing costs, but actually receive cash in hand at closing - when most buyers are left nearly broke! Many new homeowners could really use the money towards paying off credit debt or home repairs and renovations.

And what mortgage officer or broker wouldn't be lured into the hope of a bigger commission check? Seems like a win/win situation, but there are actually loosers, and reasons that the government is actually regulating the cash-back scheme. Lenders could be tricked into making risky loan which they may otherwise have avoided. Buyers may end up owing more than they need to borrow, or worse yet, more than the property is worth. Many times the borrower is tricked into buying more house than they can afford.

Do you own a second home or investment property in a vacation spot?  Don't expect to be able to sell it any time soon.  Vacation markets all around the country are seeing prices drop as the real estate bubble deflates.

David Olsen of Wholesale Access (whose clients look like a who's who of mortgage lenders), reports that 40% of all homes being bought are being purchased by either investors or as vacation homes.  That's who is artificially driving up the prices we are seeing in the market. 

Olsen reports that in 2005, 28% of homes were purchased by investors and 12% were bought as vacation homes.  Vacation home prices shot up in the past five years and are now deflating.  One example Olsen gives is near Sarasota, Florida, where homes bought for $140K five years ago, sold for between $700K and $800K last year.  This year buyers are accepting $500K just to get out before the bubble burst.

Scenarios like this one are happening all over the country in vacation spots.  Mark Zandi of economy.com predicts that the first to be hard hit will be California, Florida and the DC market. 

If you're thinking of buying a vacation home now, don't.  If you have one and can get out with a decent profit, it's probably a good time to do it.

ACC Capital Holdings sent shock waves through the mortgage industry when it announced yesterday it was closing 229 of its Ameriquest retail branches and laying off 3,800 of its 11,000 workforce.  Ameriquest is one of the largest sub prime lenders focusing on poor people and people with bad credit ratings.  ACC wants to cut costs and stay competitive in a mortgage industry that's slowing down as interest rates rise and home sales slow.

Ameriquest settled an investigation in January started by investigators in 49 states.  The heavy-handed sales tactics of some of its agents was questioned.  Ameriquest agreed to pay $325 million and change its business practices to settle with the states.

Obviously the investigation hurt more than ACC cares to admit.  In addition to all the negative press, the impact of the declining number of new applications in the mortgage market led ACC to this retrenchment decision.

Ameriquest is not the first to cut back.  Washington Mutual, Aames Investment Corp. and ECC Capital Corp cut their staff during the past few months.