Are You a Good Delegator?

A manager that I used to work for was the best delegator I’ve ever met. He had a fundamental understanding of what tasks were the most profitable and he focused his time and attention on doing those things. The rest he left for others to do.

I admit that my first impression was that this was laziness on his part. He didn’t seem willing to do the “tough” work. But the longer I worked with him, the more I realized that he truly understood the meaning of working smarter, not harder. He realized that not only was his time more valuable spent performing activities that led to increasing the bottom line, he realized that things he delegated were accomplished in a more efficient manner than he could have done them anyway.

I was at a conference earlier in my career and the speaker made this statement: “Never perform a task, that someone else can do, if it is less than your hourly wage.” His instruction was to take our annual income, divide it by 52 (for weeks in the year), then by 40 (for hours worked per week) to determine our hourly wage. Once I knew that, I was to cease doing any task that I could pay someone a rate that was less than that. I immediately made a list of the things that I was doing that I should be paying someone else to do (yard work and home repairs topped the list, but there were countless activities that I was performing at the office that could be delegated as well). It was an incredibly freeing exercise.

It’s easier said than done. If you are like me, you likely have a hard time letting go. No one does the job better than you, right? I have a tendency to think that way, but that is where specific training and tremendous communication come into play. It may be a trial and error process. But when done properly, delegating will free you up to focus your time and energy on the activities that are more profitable for your business.

Net Worth - The Key Ingredient to Home Ownership

The link below is a great blog from NAR with a great reminder to give your clients on why owning a home versus renting is so important. Sure there are the common reasons for why people should buy versus rent (here are 5 good ones):

1. They have to live somewhere anyway, so they might as well get ownership rights and have something they can call their own.

2. They want a hedge against inflation. In other words, rents historically go up. However, once a mortgage is in place, particularly a fixed rate mortgage, the payment for principal and interest stays the same.

3. They want the tax benefit of being able to deduct the mortgage interest.

4. They want the forced savings that paying a mortgage provides. Every payment provides a principal component that steadily pays the loan down, building up equity.

5. They realize that buying a home is a leveraged investment if they have a loan. The house goes up in value the same regardless of whether there is a loan or not. The leverage of a loan allows a higher return because the increase in value provides a greater return due to less invested initially.

But stated more simply, as the link below shows graphically, people who own their home historically have a much larger net worth than those that don’t. There are always those situations that justify renting over buying. But the argument can certainly be made, and the stats back it up, that those who own their homes generally have more money (net worth) than those that don’t.

http://economistsoutlook.blogs.realtor.org/2014/09/08/net-worth-of-homeowners-vs-renters/

Solve the Problem Before it's a Problem

Obviously this is not a new concept. Most of the best solutions to life’s issues are tried and true - there is no reason to reinvent the wheel. To fix the complications that exist in most business processes, I think this is the easiest solution, when properly implemented. I know beyond a shadow of a doubt that the key to having an efficient process in the real estate world is dealing with potentially problematic issues before they become significant issues.

How many times have you been involved in a deal and find out two days before closing that there is a problem and closing will have to be delayed? From what my newer referral partners tell me, that seems to be the one thing that irritates their clients more than anything.

I want to go back again to something that I heard, and really felt to be the main takeaway from the top producer panel at the GNAR convention a couple of weeks ago. Every panel member, both Realtor and mortgage professional, has gone to great lengths to create a process that either eliminates problems or deals with them early in the process. I’ve mentioned before that I think my team has created a world class process (timeline and communication) for our mortgage clients. The driving force behind almost everything we do is eliminating confusion and problematic issues either before they happen or at least early enough in the process that the issue isn’t last minute. Having in house processing, underwriting and closing are a HUGE help with this.

If you are receiving this email, then you are excellent at what you do (another part of my team’s overall process is to only work with referral partners who excel at their profession). You have the experience to be able to recognize possible issues early on in the sales cycle for every client. Have mini-processes (check lists work great) in place that help you with this and complement your overall process. Consistently recognizing complications and dealing with them before they become a last minute issue will separate you and your reputation from your competition.

Get Some Help

I have had at least three different conversations in the past month (2 with Realtors and one with a financial planner) who were all explaining to me their desire is to take their business to that "next level." In each case, the individual feels bogged down by the minutia of the daily routine of paperwork, emails, and general support type activities.

I asked each of them a simple question, “Have you considered hiring an assistant?” All said “yes”, but none had put a plan together to make that happen. Everyone’s concern is what happens if business slows down and then paying for the assistant becomes overbearing? That thought process seems to me to be short-sighted and goes against the whole thought process of taking business to the next level.

While visiting with several folks and listening to different presentations this week at the GNAR annual convention, it became very clear to me. If you want to be exceptional in our business, and I believe it really applies to any sales job, you have to have great help. As a salesperson, I have one overriding responsibility – bring in new clients. It should therefore be my primary focus to spend my time and attention on activities that will do just that. The more time I spend following up on paperwork and dealing with the minutia of any process, the less time I have to build relationships with clients. The best way I know of to stay focused on those activities that are profitable is to have someone or a team of people helping me deal with the grind that takes place behind the scenes.

Fortunately for me, I have someone that helps me handle the “process stuff” that I don’t have time to handle. It doesn’t mean for me, nor does it have to for you, that you lose touch with your clients. It is just a situation where you can devote your time doing the things that create new business and not spending time processing current business. When I hired my first assistant years ago, it was only a part-time job for him. So there are ways to begin the process of hiring someone to help without diving in headfirst (but diving can work too). If you want to go to that next level, getting some help is the best first step.

How to Get a Top Credit Score and Keep It!

I read a great article this week with some really helpful information you can pass along to your clients on how they can get the best credit score possible and keep it there. This is a little longer update than usual, but the information is fantastic. Have a great week!!

There's no doubt about it ‒ when you're applying for a mortgage loan, a high credit score helps you lock in a better interest rate, which can save you thousands of dollars over the life of the loan.

But, on a scale of 300 to 850, only less than 1% of the population has an 850 credit score. While it may seem impossible to achieve a "perfect" credit score, it's good to know that you'll be rewarded with the best interest rates when your credit score is 760 or higher.

It takes consistently responsible financial behavior to maintain a top tier score of 760 - 850. Let's take a look at some of the common traits of high credit score achievers.

Conservative Spending Habits
Never max out your credit cards! People with high credit scores use only 30% or less of their available credit, and those with scores over 800 are using 10% or less. According to a recent survey by Fair Isaac Corporation (the creators of the FICO® Score), people with top level credit scores have an average of four credit cards with balances. So, using your credit cards does help you to build a solid credit history, but it's important to maintain conservative spending habits and keep your balance owed as low as possible.

Make Payments on Time
Did you know? Late payments on your credit report can cost you up to 110 points on your credit score. Ninety-six percent of the people with top credit scores have no late payments on their credit reports.

Have a Well-Established Credit History
FICO® states that the top tier credit scorers have an average credit account of 11 years old, with the oldest credit account averaging 25 years old.

This might be frustrating to hear if you're just starting to establish or re-establish credit. If you're in this position, find out if your bank offers a secured credit card.

With this type of card, you provide a security deposit, which could be a percentage of your spending limit or the actual spending limit. Over time ‒ providing you are making payments and showing responsible financial behavior ‒ the bank may upgrade you to an unsecured card. Before entering into a secured credit card agreement, make sure your monthly payments will be reported to the credit bureaus, and the card will not be flagged as "secured" on your credit reports.

Have a Limited Number of Credit Inquiries
On average, the newest credit account is 28 months old for the top credit scorers. Remember, too many credit inquiries in a short period of time can have a damaging affect on your credit score.

So, don't apply for every credit card that is offered to you in the mail or at the mall. Too many recent inquiries from applications for revolving accounts in the last 12 months represent a greater risk when it comes time to apply for your mortgage.

Make Regular Payments on Installment Debt
If you're making payments on a student loan or a car payment, make your regular payments on time.

Do not try to pay it off early! That won't increase your credit scores. However, if you make the regular payments on time, then you're proving that you have the ability to fulfill a financial commitment.

Don't Cut Up Old Credit Cards
If you have a stagnant credit card with a zero balance, make a small purchase and pay it off quickly. Or, use the old card to make automatic payments on a regular monthly expense, such as a utility bill. This doesn't change your monthly budget, it only changes who you're paying the money to. This can raise the Credit History portion of your scores, based on how long you've had the credit card!

Make Sure Your Credit Reports are Accurate
Last, but definitely not least, go through your credit reports carefully (you should have one each from Experian, Equifax and TransUnion) and look for errors.

• Make sure the items listed on your card are yours. If you find charges you didn't make, you may be a victim of identity theft, or someone else's data is being reported to the wrong file.
• Make sure "on time" payments are not listed as "late".
• Make sure any collections that you've paid off have been removed.
• Make sure all creditors you are faithfully making payments to are being recorded.
• Look for negative comments that are older than seven years. You can ask to have these removed.
• Look for bankruptcies older than 10 years, or accounts associated with the bankruptcy that are still showing up. You can ask to have these removed.

Financial Success - The Solution is Simple

“What is the secret to a life that is free of financial burdens?”

I get asked this question a lot, in some form or fashion and not always in direct context to mortgage financing. Some people are buying their first home and trying to put together a game plan. Others are moving up in the world and trying to manage career and family. I’ve even had this question come from opposite ends of the time spectrum – high school students, trying to comprehend what a budget is, on one end, and soon-to-be retirees who are trying to figure out how to make their dollar last longer, on the other end. Even if the definition of financial success varies slightly depending on the generation or situation, people want a simple, easy to follow guide.

Well, here is the simple answer – practice stewardship. And here is the quantifiable answer - set up a budget and live on 80% of what you make each month. There you have it, nothing complicated about it. We should treat all of our earthly possessions as if they belong to someone else and it is our responsibility to take care of them. We need to spend our money in a manner that allows us to set aside 20% every month for giving and saving (10% each is a good guide). I will never overextend when I only spend 80% of what I make and I will have a safety net set up from saving at least 10% every month to help with any future, unforeseen need for an immediate cash outlay that is more than the monthly income allows. I know, it’s not rocket science - the solution is pretty simple.

Why is it then that 75% or more of the people I talk to on a daily basis don’t live this way with their finances? It’s kind of like the strategy to lose weight. Everyone knows the simple answer is to exercise and consume fewer calories. So why can’t people stick to what they know works? It’s because knowing what to do and doing it are diabolically different things. Maybe the simpler answer for both scenarios, physical and financial health, is to have self-discipline. Drink water when I want Coke. Save the money even though I want the new outfit. Drive the clunker another couple years when I “deserve” a new car. Go for a walk when I’d rather sit and watch TV. Get up earlier in the morning when I’d rather sleep. Live on a budget so you can experience financial success.

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, the important monthly Employment report will come out on Thursday due to the holiday on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, Pending Home Sales and Chicago PMI Manufacturing will be released on Monday. ISM Manufacturing will come out on Tuesday, ADP Employment will be released on Wednesday, and ISM Services also will come out on Thursday. Mortgage markets will be closed on Friday in observance of Independence Day.

The Week That Was
It was another good week for mortgage rates. Weaker than expected economic growth data and increased concerns about Iraq were favorable for mortgage rates. These factors outweighed the negative impact of improving data in the housing sector, and mortgage rates ended the week a little lower.

The biggest surprise last week took place when first quarter Gross Domestic Product (GDP), the broadest measure of economic growth, was revised substantially lower from -1.0% to -2.9%. This was the fastest rate of decline since the first quarter of 2009. The news caused mortgage rates to move lower. The improvement in mortgage rates may have been even greater, but investors took into account that unusually bad winter weather was the main cause. Consumers postponed shopping, and businesses scaled back inventories. Much of the missed economic activity during the first quarter was simply delayed, and GDP growth is expected to rebound to around 3.5% during the second quarter.

The housing data released last week showed nice improvement. May Existing Home Sales increased 5% from April, which was the largest monthly gain since August 2011. Total inventory of existing homes available for sale rose 2% to a 5.6-month supply. May New Home Sales jumped 19% from April to the highest level since May 2008. The April Case-Shiller 20-city home price index showed that home prices were 11% higher than one year ago.

6 Things Highly Productive People Do Every Day

I read a great article this week that I want to share. You may do several of these things already, but I thought if you get even one additional idea, it is worth the read.  You can read the FULL ARTICLE HERE

Here is my quick recap:

1. Manage Your Mood
   a) If you start the day calm, with a routine, it’s easy to get the right things done and focus.
   b) Studies demonstrate that happiness increases productivity and makes you more successful.
2. Don’t Check Email in The Morning
   a) When you read an email, you are putting yourself in position to react instead of taking initiative.
   b) You wind up giving your best hour(s) of the day to someone else’s goals instead of your own.
3. Before You Try To Do It Faster, Ask Whether It Should Be Done At All
   a) Many times the answer to “Why can’t I get everything done?” is because I’m trying to do too many things.
   b) Do what is important AND NOT MUCH ELSE.
4. Focus Is Nothing More Than Eliminating Distractions
   a) Distractions make us stupid.
   b) Have a place that you can “hideout” and escape distractions – for at least portions of the day.
5. Have A Personal System
   a) Productive people have a routine.
   b) Great systems work because they make things automatic – and don’t tax our very limited supply of will power.
   c) Adapt a system using the 80-20 rule where you spend 80% of your time and energy on the most important activities.
6. Define Your Goals The Night Before
   a) Research proves that you are much more likely to accomplish something when it is specific and written down.

Have a great week!!

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
With the current focus on inflation, Thursday's report on the May Core PCE price index will be significant. Investors also will be watching the housing data next week. Existing Home Sales will be released on Monday and New Home Sales will come out on Tuesday. Durable Orders, an important indicator of economic activity, will be released on Wednesday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Outside the US, the situation in Iraq will remain the primary focus.

The Week That Was
Inflation concerns were the main influence on mortgage rates last week. A surprising jump in CPI caused mortgage rates to rise on Tuesday. The Fed downplayed the threat of high inflation on Wednesday, however, causing mortgage rates to decline. The net result was that mortgage rates finished the week a little lower.

The May Consumer Price Index (CPI), one of the most widely watched inflation indicators, was 2.1% higher than one year ago. Core CPI, which excludes food and energy, was 2.0% higher, up from an annual rate of 1.6% just two months ago. Core CPI has now reached the Fed's stated target level for core inflation of 2.0%. Another inflation indicator released this week, the prices paid component of the Philly Fed report, also showed a sharp increase. Since expectations for future inflation are a primary factor in setting mortgage rates, this data was unfavorable for rates.

The impact of the negative news did not last long, however. While Wednesday's highly anticipated Fed statement was very similar to the prior one, Fed officials indicated little concern about inflation. Comments from Fed Chair Yellen suggested that current readings reflected normal volatility in monthly inflation data and that the recent uptick did not change the Fed's long-term forecast. In addition, Fed officials place more weight on a separate monthly inflation report, the Core PCE price index. Core PCE measures a different basket of goods than Core CPI, and Core PCE recently has provided readings a good deal lower than Core CPI. In short, looking at Core PCE, inflation remains well below the Fed's 2.0% target, giving them comfort in maintaining an accommodative monetary policy. Not all investors are as confident as the Fed that inflation will remain low, though, and this will be an important area to watch in coming months.

Integration - Taking Balance to the Next Level

"The goal is not just balance, it is integration"

I heard this quote earlier in the week and it has really resonated with me. My goal has always been to have a well balanced life – so that I’m devoting the proper time and attention to the things that are important to my life’s purpose. It doesn’t matter if it is work versus family/play time, eating habits, sleeping habits or exercise – I want to have a positive balance with all those things! I think balance makes sense because I can measure it. In other words, I can examine a 24 hour day and monitor exactly how I spend every hour, making sure that all of the important components of my life’s priorities get their allotted time requirement. Or, I can examine my diet or exercise routine and monitor exactly what I am consuming or the effort put forth in the gym. I’m not saying it is easy to accomplish balance, I’m just saying it is somewhat easy to measure.

But is balance as important as integration? I looked up the term “integration” and it simply means the act or process of making whole. Integration is more than just making sure everything gets its proper attention. To me, it is living out my life’s purpose- taking all of my life’s priorities, those that I’ve always wanted to make sure have the proper balance, and mingling them all together so they are all part of an interwoven theme. Everything I do then becomes integrated for my life’s purpose. Exercise and diet become the fuel that allows my body to be the best it can be for my purpose. My work, my family time, my relationships, how I rest and recreate all become woven together, or integrated, for this same beneficial purpose.  This becomes the motivation then for everything I do.

Having balance is great, but when everything I do becomes part of my life’s purpose and vision, balance takes care of itself.

If you are ever interested in reading prior weekly emails, please visit my Facebook page. Mike Smalling Mortgage Advisor

The Week Ahead
This week, the big news will be Wednesday's Fed meeting. Investors will be looking for hints about when the Fed will begin to raise the fed funds rate. The biggest economic data this week will be Tuesday's release of the Consumer Price Index (CPI), the most closely watched monthly inflation report. Industrial Production, Housing Starts, and Philly Fed also will come out next week. In addition, investors will be keeping a close eye on the violence in Iraq. Further escalation could cause investors to shift to safer assets.

The Week That Was
Mortgage rates were influenced by a wide range of factors last week, resulting in a good deal of volatility. Violence in Iraq, comments from the Bank of England, divergent US Treasury auction results, and mixed US economic data all had an impact. Overall, the unfavorable news slightly outweighed the favorable, and mortgage rates ended the week a little higher.

Improvement in the labor market is clearly good for the economy, but it is a negative factor for mortgage rates. Following solid job gains in last week's Employment report, this week's indicators also suggested that the labor market is gaining strength. The JOLTS report measures job openings and labor turnover rates. Because it helps to construct a more well-rounded view of labor market conditions, Fed Chair Yellen is a fan of this data. It showed that job openings jumped to 4.5M in April. This was the highest level in seven years. In addition, a May survey of small businesses revealed that optimism rose to the highest level since September 2007. Small businesses are an important source of job creation.

While many factors affected mortgage rates this week, it was notable that one formerly significant report has lost much of its influence. The May Producer Price Index (PPI) showed a decline from April, while the forecast was for a small increase. This followed a much larger than expected increase in April. At the start of the year, the calculation of PPI was changed to include price changes in services in addition to goods. PPI now captures roughly 75% of the economy, up from around 33%, but the new components make the measure much more volatile month to month. As a result, investors are less likely to react to swings in the PPI data.

5 Questions to Ask Before Choosing a Real Estate Agent

US News had an article this week Click Here to Read addressing this question. I know this may be preaching to the choir a bit, but it made me think that anyone in sales should be proactive in any and all presentations they give to a potential client. As you read through this list, be thinking of ways that you can have these types of questions already answered. You may want to have them in writing and ready to hand to the client before the first question is even asked!

1. How long have you been in the business? Question behind the question: How much experience do you have working with clients who had the exact same need I have?
2. What geographic areas and types of properties do you handle? Real question: How qualified are you to sell my specific property in my neighborhood?
3. How will you communicate with me? Real question: Will you communicate with me exactly the way I want you to – when I want you to and using my preferred medium?
4. Can you share references?  OR Who can I talk to, that is doing what I am doing, that you have helped?
5. What will it cost me to sell this property?  Real issue: What is the bottom line $$ figure I will walk away with?
6. Bonus – my suggestion:  How will you market my property? Better stated: What are you going to do to earn the commission I’m going to pay you?

While these questions are specific to real estate, they apply, in some form or fashion, to all sales. Before meeting with a client, in person or on the phone, we need to have a game plan. It would be best in writing, so that you have answers to all of their questions before they are even asked.

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
There will be two major economic events this week. The ECB meeting will take place on Thursday. Investors will be looking for news about additional stimulus measures. The important monthly Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Earlier in the week, ISM Manufacturing will come out on Monday and ISM Services will be released on Wednesday. Construction Spending, Factory Orders, the Trade Balance, and Productivity will round out the schedule.

The Week That Was
It was a volatile holiday-shortened week. Mixed US economic data was roughly neutral for mortgage rates. Anticipation of additional stimulus from the European Central Bank (ECB) was favorable, however, and mortgage rates ended the week a little lower.

In the big picture, mortgage rates are primarily being driven by indications about the pace of global economic growth and the resulting implications for central bank policy. In the US, investors are still sorting out the negative impact of unusually severe winter weather, but they expect the US economy to show moderate growth in coming years. The outlook in Europe is less optimistic, however. ECB officials have indicated that conditions in the euro zone warrant additional monetary stimulus to boost the economies in the region. Investors expect the ECB to signal new measures as soon as next week. One possible action could be a bond purchase program, and the potential added demand from the ECB has driven bond yields around the world lower in recent weeks.

The report on Gross Domestic Product (GDP) is the broadest measure of economic activity. As such, the data is revised multiple times. Investors anticipated that the first revision to first quarter US GDP would change the slight increase of 0.1% seen in the first reading to a decline of roughly -0.5%. This week's report showed that the decline was an even larger -1.0% during the first quarter. Investors were not worried by the shortfall, however, since it was due to an unexpectedly large decline in inventories. If inventories drop in one quarter, it means that production, and thus GDP growth, will be higher in future quarters. Current estimates are for second quarter GDP growth of around 3.5%, which would mean an average of roughly 2.0% growth over the first six months of this year.

Happy Memorial Day!

Thank you God for my freedom. Thank you that as I get up every morning, I can do whatever I want to do.  I’m an American and I’m free! Thank you for the men and women who went before me to provide that freedom I have and thank you for those that go before me still. Please bless them and their families today and every day.

Amen

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
This week, Durable Orders will be released on Tuesday. Pending Home Sales will come out on Thursday. Core PCE inflation, Chicago PMI manufacturing, and Personal Income will be released on Friday. Consumer Confidence and Consumer Sentiment will round out the schedule. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Mortgage markets will be closed today in observance of Memorial Day.

The Week That Was
Investors viewed the news from the Fed last week as favorable for mortgage rates. A very light batch of economic data contained no major surprises and had little impact. As a result, mortgage rates ended the week a little lower.

Following comments from Fed officials last week, attention was turned to the Fed's plans for its enormous bond portfolio. After years of bond purchases to boost the economy, the Fed owns close to two trillion dollars of mortgage-backed securities (MBS). Investors expect that the Fed will continue to steadily taper its purchases of additional bonds, ending the program around the end of the year. At that point, the Fed's balance sheet will stop growing.

A remaining question is how long the Fed will replace balance sheet runoff (principal payments, prepayments, and maturing securities) to hold the size of its portfolio steady. So far, the Fed has been replacing runoff with new MBS. Prior to last week, the Fed had given little guidance about the timing of future policy changes in this area. Last week, Fed officials indicated that they may continue replacing runoff for a long time, possibly even after the first fed funds rate hike. This would mean more MBS purchases by the Fed than had been previously anticipated, which was favorable for mortgage rates.

The housing data released last week reflected improvement. April Existing Home Sales posted the first monthly increase this year, while April New Home Sales increased 7% from upwardly revised March figures. One factor holding back the pace of home sales activity over the last few months has been a lack of inventory, and the news on this front was also positive. Total inventory of existing homes available for sale jumped 17% from March to a 5.9-month supply.

Credit Cards Are Evil. Really??

First, let me say that I really appreciate Dave Ramsey – I believe he has the heart of a teacher and wants to help people be financially successful. Secondly, I firmly believe that one of the biggest contributors to financial failure, for many people, is credit card debt. I’m adamantly opposed to it myself, but is the best solution to follow his advice of not having credit cards? He and I disagree on the answer to this question.

If you avoid getting any credit cards, it will remove the temptation of over-spending and I get that. However, responsibility is the real issue here. Not spending more than you can pay off at the end of each month and not overspending because "there is less emotional pain when paying with a card", should always be our practice. Now, if you completely buy in to avoiding all debt and not having any credit cards, where does that leave you? It may keep you out of debt, which I am a HUGE fan of, but it is also going to keep you from having a credit score.

Does that mean you can’t get a mortgage loan? No. Does that mean it is going to make it much more difficult? Absolutely. There are options where non-traditional credit (things that don’t show up on your credit report like rent, utility payments, insurance etc.) can be provided to support a loan. Many times options like FHA and THDA work just fine, but what about conventional loans?

I worked with a client this week that has the ability to put 20% down, which will enable her to avoid mortgage insurance. In her case, a conventional loan is the best option. She has a great job, low debt to income ratios and plenty of cash. She has lived a very disciplined life and has no debt – and no credit. Period. For several reasons (interest rates being tied to credit scores as the primary), it is going to be incredibly difficult to get her the financing she deserves. We’ll find options for her, but it will require additional documentation on her part and will likely be less favorable pricing. There is a better way.

For clients like this, who live frugally and are committed to saving, what is the danger to owning a couple of credit cards? In my opinion, when done strategically, there isn’t any. I have a daughter in college that has been taught from the time she had a concept of money, that she better never carry a balance on a credit card. When she graduates, she will have at least two cards that will have been opened for 24+ months. They will have no annual fee and have a maximum limit of $500. She can’t get in trouble this way and she will have a stellar credit rating when she graduates. So let's be responsible and take advantage of building good credit to our advantage.

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
The biggest economic release this week likely will be the Fed Minutes from the April 30 FOMC Meeting which will come out on Wednesday. These detailed Minutes provide additional insight into the debate between Fed officials. Investors also will be watching the housing data. Existing Home Sales will be released on Thursday and New Home Sales will come out on Friday. Mortgage markets will close early on Friday in observance of Memorial Day.

The Week That Was
The two biggest reports on economic growth released last week both fell short of the forecasts, which was favorable for mortgage rates. In addition, expectations increased for a bond purchase program by the European Central Bank (ECB), which also was positive for mortgage rates. As a result, mortgage rates ended the week near the lowest levels of the year.

In recent weeks, the economic data generally has shown a solid rebound from the weather-related slowdown seen this winter. Last week's data for April activity caused investors to grow a little more cautious about the outlook for the rest of the year, however. While the forecast was for a third straight month of large gains, April Retail Sales rose just slightly from March. Retail Sales account for roughly one third of consumer spending, so a big miss is significant. Another important indicator of economic activity, Industrial Production, showed a sharp decline, surprising most economists.

A bright spot in last week's economic data came from the housing sector on Friday, and the better results offset some of the improvement seen in mortgage rates earlier in the week. April Housing Starts increased 13% from March, far exceeding the consensus forecast, and they were 26% higher than one year ago. April Building Permits rose 8% from March to the highest level since June 2008. Most of the increase came from multi-family units, however. Excluding multi-family units, Housing Starts showed much more modest gains.

Beggars Can't Be Choosers!

I wonder, how many times have you said this? I can’t count how many times I've repeated those words, particularly when someone gives me something that he or she may not think is much of a gift, or might even be embarrassed to be giving.  But hey, if it is something I need, and they don’t, and they are willing to give it to me, I love it.  Beggars can’t be choosers, right?

I was greeted once again this past week by the guy that sells papers on the exit ramp from Old Hickory Blvd. to I-65. I always try to buy a paper from him when I get stopped there. He was smiling and waving to everyone, like he always does, as I rolled down my window to buy my paper. Not realizing that I didn’t have any bills on me as I rolled the window down, I started scrambling for change. Then I realized that the papers were now $2 versus the $1 that they had always been, so I’m scrounging for nickels and dimes to come up with the $2. I give him the handful of change and apologize for taking so long and loading him down with coins. He looked at me with a big smile and said, “Hey, beggars can’t be choosers. I really appreciate you.”

That really hit me and I can’t get the thought, or vision of him, out of my head. I’ve bounced all over the place with it. First, I'm thankful that I've been blessed with a life that allows me to choose versus beg. Second, I'm amazed at the grateful attitude and response from an individual that sees himself as a mere beggar. I wonder why this guy isn’t in sales somewhere instead of being homeless – with a personality like that, shouldn’t he be able to find a great job? Is that even fair for me to ask? I know nothing about him.

So what does that mean for you and me? Just thinking here... What if I treated everyone that crossed my path on a daily basis the same way this guy does? With a smile and an attitude of gratefulness. That would create quite an impact!  That’s my plan. How about you?

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
Next week will be packed with major economic events. The next Fed meeting will take place on Wednesday. Investors expect the Fed to continue scaling back its bond purchases, but comments about the strength of the economy or the timing of the first fed funds rate hike could have a large impact. First quarter Gross Domestic Product (GDP), the broadest measure of economic growth, will be released the same day. The important monthly Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Pending Home Sales, ISM Manufacturing, Construction Spending, Core PCE inflation, and ISM Services will round out a crowded schedule.

The Week That Was
The last two weeks have been relatively light ones for economic news. Mortgage rates moved a little higher late last week ahead of Easter weekend, and they reversed that increase during this week. Headlines from Ukraine added a short burst of volatility but had little lasting impact.

Overall, the economic data released this month has been better than expected. After slowing due to unusually severe winter weather, most sectors of the economy appear to be picking up. The economy added jobs at a healthy pace. Retail Sales and manufacturing posted solid gains. This week, Consumer Sentiment jumped to the highest level since July of last year.

Despite the good results this month, however, investors require more evidence that the improvement is sustainable before they will raise their long-term outlook for economic growth. The steady economic outlook over the last several months has helped keep mortgage rates in a fairly narrow range.

One sector which has lagged in its pace of improvement is housing. March Existing Home Sales were roughly the same level as February, which was very close to the consensus forecast. A tight supply of inventory in many regions was one factor holding back sales. Offering potential for future activity, the total inventory of existing homes available for sale rose 5% in March. March New Home Sales showed a sharp drop from February, but this data is extremely volatile month to month.

Cash is King

If you ever have a financial emergency, which would you rather have, equity in your home or money in the bank? Let's say you unexpectedly lost your job. Would you rather have cash on hand to pay your bills or extra equity in your home?

I mentioned in an email a couple of weeks ago how someone is truly debt free when he/she has liquid funds sufficient to pay off any outstanding loan balances (including a mortgage). The argument was made that it makes sense in most situations to invest money (stocks, bonds, etc...) versus paying down mortgage debt. The main reason for the argument is that typically arbitrage exists (when investment rates are better than mortgage rates) and compound interest takes effect, allowing money to grow faster when invested than it will by using the same funds to reduce mortgage debt.

The thing that I didn't mention, that helps the argument even more, is that Cash is King!! Not only is a dollar in your hands worth more today than it will be 10+ years from now, there is no better insurance to fend off difficult situations than cash on hand.

If you have sufficient liquidity, I certainly recommend paying off non-mortgage debt, particularly if you are paying a rate of 3 to 4% or more on the debt. But, if the only debt you have is a mortgage, I’d argue that liquidity trumps equity. I guess I could also make the argument that if you have a home equity line of credit with sufficient availability on it, that it could be used to some degree as an emergency fund as well. When it comes to living a stress-free financial life, there is no substitute for liquidity (cash available invested wisely). Liquidity can always be converted into equity by paying off/down mortgage debt, but the opposite isn't always the case.

If you are ever interested in reading prior weekly emails, please visit my Facebook page: Mike Smalling Mortgage Advisor

The Week Ahead
Next week, Retail Sales will be released on Monday. Retail Sales account for about 70% of economic activity. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Tuesday. CPI looks at the price change for finished goods which are sold to consumers. Housing Starts and Industrial Production will come out on Wednesday. Philly Fed and Empire State will round out the schedule.

The Week That Was
The stock market was the biggest influence on mortgage rates this week, as investors shifted assets from stocks to bonds. The Fed Minutes also were favorable for mortgage rates, and rates ended the week lower, near the lowest levels of the year.

Beginning with the Jobs report last week, investors became more bearish about the stock market, and investors grew more concerned this week that upcoming earnings releases will be weak. As a result, investors have reduced their positions in stocks, causing the Dow stock index to fall over 500 points from last week's record high. Some of the proceeds from the stock sales were used to purchase bonds, including mortgage-backed securities (MBS). MBS prices increased from the added demand, leading to an improvement in mortgage rates.

Wednesday's release of the FOMC Minutes from the March 19 Fed meeting also helped mortgage rates. In the Minutes, some Fed officials expressed concern that inflation would remain below the Fed's target level of 2.0% for years. While this may be bad from the Fed's point of view, low inflation is positive for mortgage rates.

On Stage

I had the pleasure, once again, of getting the Disney experience on spring break this week. I'm not sure there is a company that has had more of an entertainment influence on American families over the past few decades. One very unique aspect about Disney is that they do not have employees. They have cast members, and as cast members, they are always "on stage."

You see, every "cast member" that has contact with a patron, regardless of the task they perform, has a responsibility to be part of the magic that is Disney. So, regardless of whether you are at a park, a cruise or staying at one of their hotels, a cast members responsibility is to make their visitors feel like they are not only being treated with special customer service, but like they are part of the total Disney experience. Every single person plays a significant role in making our visits memorable.

How about us? When we are dealing with our customers and referral partners, should we not maintain that same philosophy? We are always on stage. Every aspect of our interaction with our clients should be treated as another opportunity to make them feel special – that they are getting treated to something extraordinary. That is the kind of attitude and approach that will create loyal customers and fans that tell others about us. Plus, it makes our job a lot more fun!

How will you create an extraordinary experience for your customers this week?

The Week Ahead
There is a wide range of economic data for investors to consider next week. The primary reports will be New Home Sales, Durable Orders, Pending Home Sales, and Core PCE inflation, the Fed's preferred inflation indicator. Personal Income, Consumer Sentiment, and Consumer Confidence will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Changes in the situation in Ukraine also could influence mortgage rates.

The Week That Was
A short comment by Fed Chair Janet Yellen caught investors off guard on Wednesday, and the reaction was not good for mortgage rates. In addition, a reduction in tensions in Ukraine cause investors to return to riskier assets, hurting safer assets such as mortgage-backed securities (MBS). As a result, mortgage rates ended the week higher.

As widely expected, the Fed scaled back its bond purchases by $10 billion to $55 billion per month. According to Yellen, if the Fed's economic outlook does not change significantly, the bond purchases are expected to end in the fall of this year. Fed officials have long maintained that they expect that the fed funds rate, the Fed's primary tool for monetary stimulus, will remain near zero for a "considerable period" of time following the end of the Fed's bond purchases. The big surprise came during Yellen's first press conference as Fed Chair, when she defined the meaning of a "considerable period" as about six months. This would place the first fed funds rate hike in the spring of next year. Before Yellen's comments, the market consensus was for the first rate hike to take place near the end of next year. While mortgage rates are not directly tied to the fed funds rate, the economic strength implied by the expected timing of the first fed funds rate hike was unfavorable for bonds of all maturities.

The housing reports released this week revealed that conditions in February were little changed from January. February Existing Home Sales decreased slightly, while Building Permits increased 8%. The March NAHB Housing Index showed that home builder confidence increased slightly. It is widely believed that housing activity over the last couple of months has been depressed by the usually severe winter weather, which means the pent up demand could be a positive in coming months.

I Walked on Fire!

Have you ever done something that you thought was absolutely impossible for you to do? I mean something that in your wildest dreams you never imagined yourself doing? Riding a motorcycle? Skydiving? Running a marathon? You fill in the blanks. What would it feel like after you did the very thing you thought impossible? Would you feel accomplishment? Relief? Excitement? This past weekend I had the opportunity to feel all three.

I found myself standing barefoot at the end of a 12 foot bed of 1,200 degree burning hot coals! I had just done something I never thought I would do. Yep, I walked right through it – completely unscathed.
IT. WAS. AWESOME!

Why do I tell you this story? Well, number one is because it is fun to tell! However, the main reason is because I think too often, we allow our self-imposed limitations to keep us from doing amazing things. I know I do it to myself. “I’ll never get that deal." "I’ll never succeed like him." "I’ll never achieve that much...” I'm sure you have heard similar statements in your own thoughts. None of us have supernatural powers, but I also believe, when we set our minds to it, we are all more powerful than we give ourselves credit for. That was definitely proven to me last week.

So this week, when YOU hear the voices of doubt and fear, let me encourage you to set your mind, take the first step, then keep moving forward. You will experience some amazing things too.

The Week Ahead
The most significant economic report next week will be the Retail Sales data on Thursday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, measuring job openings and labor turnover, will come out on Tuesday. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Friday. Import Prices and Consumer Sentiment will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Changes in the situation in Ukraine also could have an impact on mortgage rates.

The Week That Was
It was a volatile week in mortgage markets. Early in the week, rapidly changing conditions in Ukraine caused a great deal of movement in mortgage rates, but there was little net impact. Later in the week, stronger than expected labor market data was negative for mortgage rates, and rates ended the week higher.

Against a consensus forecast of 140K, the economy added 175K jobs in February, and the figures for the prior two months were revised a little higher. This took place, according to the Bureau of Labor Statistics, despite the largest weather related disruption since 1996. The Unemployment Rate unexpectedly rose from 6.6% to 6.7%, but this was due to an increase in the number of people that entered the labor force. The solid jobs report exceeded expectations nearly across the board. Since stronger economic growth raises future inflationary pressures, this was unfavorable news for mortgage rates.

After Russia moved troops into Ukraine, the threat of an escalating conflict caused a "flight to safety" in financial markets on Monday. This involved a shift by investors to relatively safer assets, resulting in a large decline in stocks and significant improvement in bonds, including mortgage-backed securities (MBS). A complete reversal took place on Tuesday, however, after the Russian President said that Russia would not use military force in Ukraine.

You're Rich...Now What?

Imagine yourself sitting in an auditorium, listening to someone speak. Now the speaker says, "Raise your hand if you are rich." How would you reply? Yeah, if you are like me, that hand is not going up.

“Rich” is always a couple of income brackets above wherever you are currently. It’s just human nature. We don’t like to think of ourselves as rich, but let me give you a few stats:

• If you own a car, you are in the top 6% of richest human beings worldwide.
• If you make $37,000 per year or more, you are in the top 4%.
• If you own a house, you are in the top 3%.

Knowing this, does it make the answer to the question any different for you? We are living in the richest nation on the planet, at probably the richest time period in history.

My suggestion: Become Good at Being Rich How? Follow these four principles:

1. Don’t forget that everything you have is a gift. If you believe, like I do, then you understand that none of it is yours anyway. You're just here to take care of it.

2. Don’t be arrogant with wealth. That is pretty easy if you recognize you are not the one responsible for it in the first place.

3. Don’t trust it. Your relationships? Yes. Your abilities? Yes. Your passion? Yes. Money? No.

4. Don’t think it is just for you. You leave your legacy by what you gave, not what you made.

The Week Ahead
The biggest upcoming event may be an important vote in Ukraine's Crimean region on Sunday. If Crimea votes to secede from Ukraine, investors will be concerned that it could lead to an escalation in the tensions between Russia and the US / Europe. In the US, the next Fed meeting will take place on Wednesday. Investors expect the Fed to proceed with another cut in its bond purchase program. Industrial Production will be released on Monday. Core CPI inflation and Housing Starts will come out on Tuesday. Existing Home Sales and Philly Fed will be released on Thursday.

The Week That Was
Tensions in Ukraine flared up again this week, causing investors to shift assets from stocks to the relative safety of bonds. Weaker than expected economic data in China also favored bonds over stocks, while the US economic data was roughly neutral. As a result, mortgage rates ended the week lower.

The most significant US economic report released this week, Retail Sales, contained some good news and some bad news. On the positive side, the results for February were stronger than expected. Unfortunately, the figures for January were revised lower. Overall, this left the data over the two-month period a little weaker than expected. Given the offsetting effects of the solid headline number and the downward revisions, combined with weather related distortions, the report caused no change in the economic outlook and had little impact on mortgage rates.

There was a lot of talk in the mortgage industry this week about a proposal out of the Senate Banking Committee that would replace Fannie Mae and Freddie Mac. Together Fannie and Freddie purchase or insure the majority of fixed-rate mortgages, so any changes to their structure would have enormous implications for mortgage lending. In the proposal, a new government entity would take over many of the functions of Fannie and Freddie, while some of the default risk would be shifted to private insurers. Both political parties support a reduction in the risk to taxpayers, but beyond that opinions vary widely about the appropriate role of government in the housing market. As a result, this proposal is viewed as a starting point for a long political debate, and the implementation of major reform of Fannie and Freddie is projected by most experts to be many years away.

Living the 10-10-80 Life

Are You Up For The Challenge?

First, let me make clear that I’m not talking about a piggyback mortgage where you put 10% down, get a 10% second mortgage and an 80% first mortgage. This is a different concept entirely. I had the pleasure of speaking to a high school group this week and I shared this simple concept with them:

Give the first 10% of everything you make
Save the next 10% and
Live on the remaining 80%.

Granted, it takes discipline and strategy (yes, budgeting requires both) to live on 80%, but learning to do this, truly live on 80% of your take home pay, is the key ingredient to making this strategy work. Doing this allows you to “pay yourself first”. I’m sure you have heard that concept before. It’s why the 10-10 comes in front of the 80 and not vice-versa. By putting the important things first and committing to them, they get done instead of becoming an “afterthought” of something to do once all the monthly expenses have been paid.

In my mortgage career, two things stick out to me that cause most financial disasters – over-extension, or spending more than you make, and lack of savings to deal with emergencies. Many times the two go hand in hand. By following the simple principal of the 10-10-80 Rule, you overcome both of these obstacles. The things that you are able to accomplish in life, at least from a financial perspective, are accomplished via those first two components of the 10-10-80 Rule – Giving where there is a need and Saving to be able to address future needs. That is how you become a difference maker. It is how you grow your legacy and it is the key to your financial freedom. If a group of high school kids can get it, all of us can. Are you up for the challenge?

The Week Ahead
The important monthly Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, ISM Manufacturing, Personal Income, Core PCE inflation, and Construction Spending will come out on Monday. ADP Employment, ISM Services, and the Fed's Beige Book will be released on Wednesday. Factory Orders, Productivity, and the Trade Balance will round out the schedule. tion Spending will come out on Monday. ADP Employment, ISM Services, and the Fed's Beige Book will be released on Wednesday. Factory Orders, Productivity, and the Trade Balance will round out the schedule.

The Week That Was
The economic data released this week contained mixed results and had little impact on mortgage rates. Strong demand for US fixed income securities was the main influence this week, helping mortgage rates end the week a little lower.

There were strong indications this week that foreign investors, most likely in Japan and China, increased their purchases of US bonds, including mortgage-backed securities (MBS). The currencies of Japan and China have weakened recently versus the dollar, and the economic policies currently in place in both countries have caused investors to expect their currencies to weaken further. This makes US bonds more attractive to investors in those countries as the investor not only receives interest on the investment, but also expects appreciation in the value of the investment.

After a couple of months of weaker readings, the New Home Sales report released this week was a pleasant surprise. January New Home Sales jumped 10% from December to an annual rate of 468K units, far above the consensus of 400K. This was the highest level since July 2008. Also released this week, January Pending Home Sales posted a slight increase.

THe "F" Word

How To Flip Your View on Failure

As I’ve watched the Olympics the past couple of weeks, I’m reminded again and again the fraction of a difference that separates victory from defeat. The concept that intrigues me is how will those that didn’t win a gold medal, or particularly any medal at all, handle their loss? Is their failure going to serve as motivation for improvement or bring fear of future failure into their psyche?

Think about the women’s hockey team. Three and a half minutes from a gold medal with a 2-0 lead, only to give up 2 goals in that time frame and another in overtime to lose. How will they cope with that loss? How do you handle failure? I have to be honest here - I wish I enjoyed it more. I know that sounds strange, but to accomplish anything truly remarkable, I have to get really comfortable with failing. If I’m not failing, then I’m not risking enough. I’m free to fail. I hope you are encouraged by the words of some who have pushed through failures to accomplish great things.

Abraham Lincoln
Lincoln was defeated for the U.S. Senate in 1854. In 1856 he was defeated for the nomination for Vice President and in 1858 defeated once again for U.S. Senate before being elected President in 1860.

"My great concern is not whether you have failed, but whether you are content with your failure." - Abraham Lincoln

Thomas Edison
For 2 years Edison and his team worked on over 3,000 theories to develop the modern light bulb. Edison said "I tested no fewer than 6,000 vegetable growths, and ransacked the world for the most suitable filament material."

"Many of life's failures are people who did not realize how close they were to success when they gave up." - Thomas A. Edison

Steve Jobs
In 1985, after poor sales of the Lisa computer, Jobs lost his position in the company as head of the Macintosh division. He then founded the company NeXT, which flopped.

"I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life." - Steve Jobs

Week that Was: Rates Higher after Fed Minutes
The positive momentum in mortgage rates shifted direction after the release of the Fed Minutes on Wednesday. Investors viewed the Minutes as somewhat positive for stocks and negative for bonds. As a result, mortgage rates ended the week a little higher.

The Minutes from the January 29 Fed Meeting revealed that Fed officials remained very divided as to the appropriate path for future policy. Overall, though, the perception of investors was that the position of the hawks remained solid, while the views of the doves may have weakened a little. As a reminder, "hawks" tend to favor less stimulus to help keep inflation low, while "doves" prefer more stimulus to boost economic growth. The Minutes stated that "a few participants" considered the possibility that it "might be appropriate" to raise the fed funds rate sooner than many expect. The Minutes also reinforced Fed Chair Yellen's recent comments that there is a high hurdle for the Fed to pause in reducing its bond purchase program. The Fed's bond purchases have helped keep mortgage rates low, and the Minutes reduced the likelihood that the program could be stretched out for a longer period of time.

The economic data released this week continued to be affected by the unusually severe weather this winter. In particular, the housing reports all fell short of expectations. January Existing Home Sales declined 5% from December to the lowest level since July 2012. They were 15% below the peak levels seen last summer. On the plus side, total housing inventory available for sale increased. The results for January Housing Starts fell even farther below expectations with a decline of 16% from December. Building Permits declined as well. Finally, the February NAHB/ Wells Fargo Housing Market index showed that builder confidence dropped sharply. Both the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) attributed the weakness in recent data to a combination of bad weather, limited supply, and tight credit conditions.

Week Ahead
Next week, New Home Sales will be released on Wednesday. Durable Orders, an important indicator of economic activity, will come out on Thursday. Pending Home Sales, Chicago PMI Manufacturing, and revisions to fourth quarter GDP will be released on Friday. Consumer Confidence and Consumer Sentiment will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.