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Graham Financial Associates
http://finance.groups.yahoo.com/group/grahamfinancialassociates 



  




----- Forwarded Message ----
From: "[EMAIL PROTECTED]" <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED]
Sent: Thursday, February 8, 2007 12:34:06 PM
Subject: PFA Monthly Newsletter from Marty Eisler


Monthly Newsletter From Marty Eisler
Volume 7 Issue 2 For February 2007
Marty Eisler
PFA
34145 Pacific Coast Hwy #328
Box 697
Dana Point, CA 92629
Phone: (949)240-0404
Fax: (714)242-1458
http://www.pfa.com

Top Mortgage Story: 

New mortgage 'suitability standard' law proposed 
By Jim Woodard 

A new "suitability standard" law has been proposed by Rep. Barney Frank 
(D-Mass.), new chairman of the House Financial Services Committee – a law that 
would require mortgage lenders to grant loans only to those applicants who are 
... 
Read Full Article 

Other Mortgage Stories: 

Mortgage rates slowly rising
Key factor that boosts home values
Cash-out refi mortgage applications up
Senate moves to prohibit banks from entering real estate brokerage
Popularity rising for attached housing units
The 50-year mortgage is introduced
Number of home foreclosures dropping
New home sales up, but down in 2006
State bond programs help home buyers with financing
Prospects for non-residential construction very positive in '07
Home remodeling activity up
Economy will grow in '07, MBA predicts
Demand for rentals continues to grow

New mortgage 'suitability standard' law proposed 
A new "suitability standard" law has been proposed by Rep. Barney Frank 
(D-Mass.), new chairman of the House Financial Services Committee – a law that 
would require mortgage lenders to grant loans only to those applicants who are 
clearly in a position to make their monthly payments without undo hardship. 
Frank, of course, claims his proposal is designed to protect the interests of 
consumers. 

The law would require loan officers to make certain that applicants are 
financially capable of handling a requested loan before and after their payment 
increases, and that they fully understand all pertinent elements about the loan 
they select. The Mortgage Bankers Association takes a dim view of the proposal. 

"Making the lender responsible for determining which loan is suitable for a 
borrower will limit consumer choice and could deepen the slowdown in the 
housing market," said Kurt Pfotenhauer, MBA's senior vice president of 
government affairs. "After 25 years of the industry developing increasingly 
sophisticated and objective underwriting standards, a suitability standard 
would turn back the clock on fairness in lending by virtually requiring lender 
subjectivity in the lending decision. The lender is obligated to determine that 
a borrower will repay their loan before the lender extends the loan. The 
borrower, however, is best qualified to determine whether a loan that he 
qualifies for is suitable. To legally obligate the lender to determine 
suitability would limit credit to all but the most financially secure people," 
he said. 
Top 



Mortgage rates slowly rising 
Mortgage interest rates continued their slow rise in January, reaching an 
average of 6.25 percent, with 0.4 percent points (fees), for a 30-year 
fixed-rate loan by the end of the month, according to Freddie Mac. The rates 
are still well within what could be described as "historically low levels," 
still allowing home buyers to avail themselves of very low rates. The 
end-of-month rate is the third consecutive week of rate increases, the highest 
level since the week of Nov. 9. 

Despite slowly rising rates, mortgage applications were up during the last week 
in January. Both applications for mortgages to finance the purchase of a home 
and to refinance an existing loan were up, according to the Mortgage Bankers 
Association. 

"Mortgage rates are generally mixed on news that recent indicators, a measure 
of future economic activity, signaled steady growth in coming months," said 
Frank Nothaft, Freddie Mac's chief economist. "In the new housing market, 
construction is coming in stronger than expected despite a decline in one-unit 
residence starts." 
Top 



Key factor that boosts home values 
An interesting study has just been concluded by the National Association of 
Home Builders that identifies how various features in a home impact the 
property's value. The association's Housing Economics Department created a 
house price estimator, based on data from the American Housing Survey, a 
nationally representative survey of about 60,000 housing units conducted by the 
U.S. Census Bureau in odd-numbered years. 

Waterfront locations have the most significant positive effect on home values, 
the study determined. This applies to homes in every census region and in every 
type of setting. For example, being on the waterfront raises the value of a 
standard home in a Midwestern suburb by an average of 43 percent, and in a 
non-metro areas in the South by 44 percent. In the central city of a large 
California metro area, being on or near water raises the value of a home by 41 
percent. 

The characteristic with the largest negative effect on home values is the 
presence of abandoned buildings within one-half block or about 300 feet of the 
home. Bothersome trash, industrial buildings, inadequate shopping and bad roads 
also have a significant negative effects on the price of a home. For more 
information about the house price estimator, check out the model online at: 
www.nahb.org/estimator/. 
Top 



Cash-out refi mortgage applications up 
An increasing number of homeowners are continuing to obtain needed cash by 
refinancing their existing mortgage. There's a very good reason for that trend. 
Home equity loans and lines of credit are usually tied to the prime rate. Those 
rates have been increasing significantly while long term mortgage rates have 
remained relatively low. Homeowners feel the best way to generate needed funds 
in today's market is through a cash-out refinance mortgage. 

According to the American Bankers Association, the dollar amount of home equity 
loans (including loans made through home equity lines of credit) increased by 
an annualized 14.6 percent for the first three quarters of last year, compared 
with all of the previous year. However, that's down from a 17.4 percent 
increase in 2005 and a 31.2 percent increase in 2004, ABA noted. 
Top 



Senate moves to prohibit banks from entering real estate brokerage 
The Community Choice in Real Estate Act, S.413, was introduced on Friday, Jan. 
26 -- a bill co-sponsored by Senators Hillary Rodham Clinton (D-NY) and Senator 
Wayne Allard (R-CO) and is supported by other senators on both sides of the 
aisle. 

In a letter circulated during the same week the bill was introduced, Clinton 
and Allard explained that allowing banks into the real estate industry would 
"upend one of our nation's most fundamental economic policies -- the separation 
of banking and commerce -- and put our economy at risk." The letter also noted 
that "allowing banks into real estate hurts competition and consumers. It will 
result in bigger banks, higher costs and less consumer choice and service." 

Earlier in January, Congressmen Paul Kanjorski (D-PA) and Ken Calvert (R-CA) 
introduced the House version, H.R. 111. The bill is designed to keep real 
estate brokerage and management clearly defined as commercial activities and 
not financial matters, ensuring that the separation of banking and commerce 
continues as mandated by the Gramm-Leach-Bliley Act. 
Top 



Popularity rising for attached housing units 
A few years ago, the vast majority of newly constructed homes were 
single-family detached residences, often with large yards. Today, it's a 
different story. Within the past few years, there's been a significant swing 
toward attached units – e.g., condominiums, townhomes. In these residential 
units, buyers share walls, common areas such as walks, pools, club houses, even 
yards. 

The most obvious advantage of an attached home is cost. The price of a high 
quality condo or townhouse is less than a comparable single-family detached 
home. They are both expensive in today's market, but the attached units are 
less expensive because per-unit building expenses are less. Other factors that 
appeal to today's home buyers relate to security, professional management of 
the property, freedom to leave their unit unattended for extended periods, and 
some residents like the community aspect of living in this type of complex. 

Attached housing was once known as being most popular with young, first-time 
home buyers and retiring seniors. Today, it's becoming the home of choice by 
all ages of buyers and their level of affluence. Especially popular are 
attached units constructed or converted in downtown areas, close to major 
employers. 

The trend toward attached housing has reached the point where more than half of 
new housing construction starts in many major markets are attached housing. 
This was determined by Hanley Wood Market Intelligence, a research firm that 
gathers data on home sales in markets nationwide (formerly the Meyers Group). 
Top 



The 50-year mortgage is introduced 
Last year, the 40-year fixed-rate mortgage became increasingly popular with 
borrowers -- primarily marginally qualified home buyers. Predictably, the 
50-year mortgage is being offered by lenders and brokers this year. It's very 
close to being an interest-only mortgage, but the balance is amortized very 
slowly particularly in the early years of the term. It helps people qualify for 
needed financing in the purchase of a much-desired home, and the lower monthly 
payments make it possible to buy a more expensive home than would otherwise be 
possible in some cases. 

The downside is the extra cost the borrower will pay in interest. That extra 
interest cost is seen in every payment due to the long repayment period. Also, 
in many cases these mortgages carry a higher interest rate as compared with a 
conventional 30-year loan – sometimes a quarter to a half a percentage point 
higher. If this type of mortgage interests you, discuss it in detail with a 
mortgage lender or broker, and compare it with other options. 
Top 



Number of home foreclosures dropping 
The number of property foreclosures are dropping, according to a report from 
RealtyTrac, a real estate research firm. About 109,650 properties nationwide 
entered some stage of foreclosure during the month of December, reflecting a 
decrease of nearly nine percent from the previous month. The report shows a 
national foreclosure rate of one new foreclosure filing for every 1,055 
households. 

Colorado posted the nation's highest state foreclosure rate in December. 
Nevada's foreclosure rate dropped to second highest in the nation. Texas 
recorded the most new foreclosure filing of any state in December, taking the 
top spot from California, according to RealtyTrac. 
Top 



New home sales up, but down in 2006 
New home sales fell last year by the largest annual amount in 16 years, 
according to Commerce Department figures. However, sales were up in December 
for the second straight month raising hopes that the worst of the sales slump 
for new housing is behind us. 

Sales in December rose by 4.8 percent, following an even bigger 7.4 percent 
rise in November. Those increases, however, were not enough to salvage the 
year, with total sales of 1.06 million units, down 17.3 percent from 2005. That 
marks the biggest year-to-year decline since the 17.8 percent plunge in housing 
downturn in 1990. 
Top 



State bond programs help home buyers with financing 
Many people are not aware of certain state bond programs that provide 
exceptionally good financing terms for first-time home buyers, or those who 
have not owned a home for at least the past three years. Such programs are 
available in many states – each with their own terms and provisions. 

For example, a California program now offers 100 percent financing and a low 
rate of 5.5 percent for a 30-year, fixed-rate mortgage. It also offers "silent 
second" loans to cover down payment and closing costs. "These programs are 
available to any buyer in our area who earns less than $112,840 per year," said 
Elizabeth Alvarez, director of education for The Home Buying School, based in 
Ventura, Calif.. "The high sales limit for the program is $592,717 for existing 
construction." 

She noted that for employees of school districts that include a low-performing 
school, interest rates are even lower with additional down payment assistance 
funds of up to $15,000. After three years of service at a high-need school, 
this becomes a no interest loan, according to Alvarez. 
Top 



Prospects for non-residential construction very positive in '07 
The American Institute of Architects, in their recently released semi-annual 
report, sees the 2006-2007 period as the best two year period for 
non-residential construction since the late 1990s. They expect a significant 
increase in non-residential construction this year (by about 7 percent, they 
predict). This industry niche grew by about 6 percent last year. 

"Unless there is a significant downturn in the overall economy, the prospects 
for nonresidential construction activity are very favorable," said Kermit 
Baker, AIA's chief economist. "The high level of projected activity will help 
offset some of the effects of the slumping residential market in past months." 
Top 



Home remodeling activity up 
In the wake of sluggish home sales in recent months, more homeowners are opting 
to stay in their existing home and remodel it to fit their current their 
housing needs, as opposed to selling and purchasing a new home. Many owners 
feel this will solve their immediate housing needs while enhancing its value in 
a later sale. 

A new survey of 5,000 homeowners shows a continuing trend toward major 
remodeling projects, with an increasing concern about the project's cost. All 
participants in the survey were considering either remodeling their home or 
purchasing a new one, according to Dan Fritschen, director of the study. An 
increasing number of homeowners planning a remodeling project plan to handle 
all or much of the work themselves, it was revealed in the study. About 32 
percent said they will be their own remodeling contractor, up from 25 percent 
in a similar study a year ago. About 65 percent will do at least a portion of 
the remodeling work themselves. 

Half of homeowners now planning a major project will spend up to 30 percent of 
their home's current value on the project, according to the survey responses. 
Last year, only 33 percent were willing to spend that much. Most of the 
homeowners were planning to add rooms to their home – e.g., bathrooms, dens, 
bedrooms. The most frequent additions are bathrooms. 

Nearly half (47 percent) of homeowners plan to remodel their existing 
bathrooms, while 55 percent plan to remodel their kitchen. The costs of their 
choice of materials were described as expensive (15 percent), economy (10 
percent), and average for the type of home they live in (75 percent). A final 
question in the survey revealed that about 55 percent of respondents were 
optimistic and excited about their planned home remodeling project. About 10 
percent were dreading the process. 

"Just a year ago with high home prices many homeowners were influenced by the 
wealth effect and were remodeling with a blank check attitude," Fritschcen 
said. "What the new survey shows is that homeowners are planning to spend about 
the same amount but are expecting to get more for their money. They are more 
inclined to do some of the work themselves in the interests of reducing costs." 
Top 



Economy will grow in '07, MBA predicts 
The economic growth in this nation will grow in the first half of this year and 
will accelerate from the second half of last year, it was predicted by the 
Mortgage Bankers Association. MBA expects economic growth to pick up, returning 
to a near normal rate over the course of 2008 through 2009, it was reported. 

"Residential investment is expected to decline further through the first half 
of this year but at a diminishing pace," said Doug Duncan, MBA's chief 
economist. "Economic growth should accelerate later this year to a trend-like 
pace as the drag from the housing market wanes. Long-term interest rates have 
remained historically low following two years of monetary tightening. Consumer 
spending growth is robust, helped by solid stock market gain, declining oil 
prices and healthy wage increases," he said. 
Top 



Demand for rentals continues to grow 
The demand for apartment rental units continues to grow, fueled by several 
important growth indicators. The number of people searching online for 
apartments continues to increase from year to year. The Apartments.com site 
reported a record number of visits last year – nearly 45 million visits. That's 
an increase of 20 percent over the previous year. 

A recent Apartments.com survey revealed that 85 percent of renters plan to move 
to another rental apartment this year. Also, a Harvard University study 
indicates that the renter population is expected to increase by at least 1.8 
million renters by year 2015. 
Top 




Jim Woodard writes a nationally syndicated newspaper column on real estate news 
and trends, carried in about 230 U.S. newspapers - along with freelance 
features. Reproduction of this report, in part or entirety, is prohibited 
without the express permission of the author. E-mail: [EMAIL PROTECTED] Web 
site: www.jimwoodard.net

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