What Makes a Good Mortgage Broker?

by Jack M. Guttentag

Last week I brought you some tips on how to know a good mortgage broker when you see one. Here are some more points to consider when you are in the market for a broker.

Good Brokers Will Not Quote Low-Ball Prices
Accurate pricing depends on a number of borrower, property, and transaction characteristics. If these are not known or used, the price cannot be accurate. Loan originators who quote the best prices possible -- and sometimes even better than the best possible -- with the intent of roping in the customer are low-balling.

Avoid any broker who quotes a price without first quizzing you about loan size, down payment, loan purpose, type of property, use of property, state, credit score, and documentation of income and assets.

Don't tempt a broker to low-ball by requesting a price on the telephone.

Good Brokers Try to Find the Best Price Available
You can't take this for granted because it can be tedious work. Brokers get their prices from wholesalers in the form of very complicated price sheets, all of which are formatted differently, making comparisons difficult. Further, while pricing the loan, the broker must also be mindful of getting the loan approved.

There isn't any very good way to monitor this, but you can ask the broker to show you rate sheets from the lenders he checked. This is not so that you can compare prices -- that would require a lot of instruction -- but simply to verify that the information is there.

Good Brokers Are Masters of Detail
Mortgages have many details that must be attended to before a loan can close. Overlooking even one can delay the closing, which could be costly to the borrower.

Good brokers avoid this danger using the same tool that is standard for airplane pilots about to take off, and increasingly in hospital intensive care units: a checklist. This is a low-tech device that has been shown to save lives, and it can also save a mortgage.

Ask the broker to show you her checklist, but don't expect to be able to keep it.

Good Brokers Keep Their Clients Informed
Failure to keep a borrower informed is one of the most frequent criticisms of brokers that I hear from borrowers, especially on purchase transactions where borrowers are faced with a firm closing date. Brokers often fail to let borrowers know that, while there is no news to report, matters are proceeding on schedule.

Negotiate an agreement with the broker on both the type and frequency of communications.

Good Brokers Attend Closings When Needed
Having a broker attend a closing may not always be feasible because the closing is too far away, and sometimes it isn't necessary because the borrower has been through the drill before. But if the borrower is a novice, having the broker available to help explain things is a major source of comfort.

If relevant to you, ask the broker if she will attend the closing.

Good Brokers Get Documents From Lender Prior to Closing
Obtaining all documents from the lender provides the borrower with an opportunity to read them at their leisure and clarify any issues. This may be more useful to the borrower than having the broker at the closing.

Ask the broker if you will have access to the final documents at least two days prior to closing.

Good Brokers Are Experienced
Mortgage transactions are complicated; there is much to learn, and brokers learn most of it by doing it. While more states are moving toward required examinations as a condition for licensing, the rules are spotty and not to be relied on. It is still possible for a borrower to be confronted with a broker who, a week earlier, was flipping burgers.

Ask the broker to summarize his work experience over the past 10 years.

Good Brokers Communicate Effectively With Borrowers
Poor brokers frequently slip into trade jargon, because they are accustomed to it, and insensitive to the client's lack of comprehension. I never fail to be amazed at mail I receive from borrowers asking me to explain something they were told by their broker. A broker who can't communicate well combined with a borrower afraid of looking stupid is a recipe for trouble.

Don't let a broker assume you understand something when you don't. Mortgages are complicated, but they are not beyond the comprehension of the average borrower, provided they are explained properly. If you don't understand what you are being told, it is because of the poor communication skills of the broker. Try another one.

Good Brokers Are Straight With Their Clients
Here are some broker statements that indicate your broker is not being straight. If you hear any of these, head for the door:

"I have a 1.5 percent mortgage for five years."

"Don't worry about the rate increasing in two years -- I will be there to refinance you into a lower rate before that happens."

"Don't worry about my fee. It's being paid by the lender."

Provided Courtesy of Yahoo Finance.

Obama's top priority: the economy

Aides say the President-elect's first full day in office will include several executive orders, push for stimulus.

By Ed Henry, CNN Senior White House Correspondent
Last Updated: January 19, 2009: 9:14 AM ET

WASHINGTON (CNN) -- Senior aides to President-elect Barack Obama say he will convene a meeting of his top economic advisers on Wednesday, his first full day in office, as the incoming president immediately tries to put the financial crisis at the center of his agenda.

Three aides said the incoming president is planning an ambitious first week that will include several other high-profile moves: a Wednesday meeting with military brass to map out a change to the mission in Iraq, appointing at least one envoy to quickly deal with the Mideast crisis, and issuing several executive orders that could spark controversies on issues ranging from the environment to detaining terror suspects.

But the Obama aides said the bulk of the executive orders are not likely to be issued on Tuesday because the incoming administration, in the words of one top aide, "does not want to cloud the first day" by overshadowing the historic swearing-in of Obama as the first African-American president.

That's why aides are pointing to Wednesday as a key marker. Obama is planning to bring together his top economic advisers to map out how to step up his own personal lobbying efforts to get Congress to pass his stimulus plan, which now has a price tag of $825 billion in the House.

"We have got to get an economic recovery and reinvestment plan in place quickly to turn the economy around," said one senior aide, citing the financial crisis as the top priority.

And on Wednesday Obama will also meet with top military commanders to discuss the war in Iraq and move to begin implementing his campaign promise of removing all combat troops within 16 months, according to aides. That is part of an effort to reassure Obama's liberal supporters that despite his heavy focus on the financial crisis, he will stay focused on changing the mission in Iraq, the stance that first propelled his presidential campaign at the grassroots level.

The Obama aides also revealed the Mideast crisis has shot to the top of the incoming president's immediate agenda. The aides said Obama himself has been pushing behind the scenes for quick, decisive action on the matter, overriding the advice of some aides who believe getting active instantly may unrealistically raise expectations for Mideast peace.

The aides told CNN one option under serious consideration is naming at least one high-profile envoy this week to help dig into the long-term problems in the region beyond just the crisis in Gaza, a move that Obama hinted at last week in an interview with USA Today.

On Sunday's "State of the Union with John King" on CNN, incoming senior White House adviser David Axelrod said the president-elect "has said repeatedly that he intends to engage early and aggressively with diplomacy all over the world and using the men and women, the professionals who are in place, who are great, and - where appropriate - special envoys."

Pressed on whether this meant moving to deal with the Mideast crisis as soon as Tuesday, Axelrod said, "I think that the events around the world demand that he act quickly, and I think you'll see him act quickly."

Executive orders

Aides say the incoming president is also mulling several high-profile executive orders that can change U.S. policy with the simple stroke of a pen, particularly major changes to the approach in the war on terror. In addition to an executive order closing the U.S. military prison at Guantanamo Bay, aides say the incoming president is considering another executive order that would specifically ban the use of torture on terror suspects.

CNN has learned that another option under consideration is an executive order raising fuel efficiency on automobiles, a move that would please environmentalists but put more pressure on the struggling U.S. auto industry.

For now, however, aides are being tight-lipped about specifically which executive orders will be issued.

Incoming White House Chief of Staff Rahm Emanuel told reporters on Saturday that "there are a number of things we're looking at" based on campaign promises the president-elect made on domestic and foreign policy.

Focus on economy


Meanwhile, aides say Obama is strongly considering an economic speech to a joint session of Congress just weeks after taking office in order to communicate directly with the American people that the financial crisis is likely to continue for a long time - even if his economic recovery plan is passed into law during the first 100 days.

Aides are expecting the speech to be delivered the week of February 23, after Congress returns from the Presidents' Day recess. Democratic leaders are aiming to get the economic recovery plan to Obama's desk for his signature before that recess.

Obama has been trying to downplay expectations for quick results from his stimulus plan in recent public speeches, which could give him some political breathing space to try and let the plan work.

"We're going to have a tough year, 2009," Obama told CNN in an interview Friday.

"I don't think that any economist disputes that we're in the worst economic crisis since the Great Depression. The good news is that we're getting a consensus around what needs to be done. We've got to have a bold, aggressive reinvestment in a recovery package. It's working its way through Congress. That's going to help create three to four million new jobs," he said.

Aides say the speech to a joint session of Congress is part of a broader strategy by the incoming president to "engage with the public" about the financial crisis to try and build trust with the American people.

Provided courtesy of CNNmoney.com

Tax Tips for the Unemployed

As April 15 approaches, those who were out of work in 2008 might have a lot of questions about their tax returns. Here are some answers.

By Jessica Dickler, CNNMoney.com staff writer
Last Updated: January 9, 2009: 3:39 PM ET

NEW YORK (CNNMoney.com) -- Tax season can be a frustrating and confusing time for those with a spotty employment record and little spare cash. But people who were out of work in 2008 will still have to report to Uncle Sam.

Friday's labor report showed that nearly 2.6 million jobs were lost over the course of 2008, the highest yearly job-loss total since 1945. The unemployment rate now stands at 7.2%, a 16-year high, according to the Labor Department.

"More people than ever before may be experiencing, for the first time, unemployment and the tax implications related to that," saidMark Steber, vice president of tax resources at Jackson Hewitt.

For those taxpayers who were unemployed in 2008 and unsure about how to account for a brutal year, here are some answers:

Do I still have to pay tax if I was out of work in 2008?

Probably. The IRS requires anyone who received a W2 from their employer and made at least $8,950 (if you're single and under 65 years old), or made at least $400 if you're self employed, to file a tax return. If you're anticipating a tax refund, you must file - even if you didn't work at all.

But whether you will have a tax liability depends on a variety of factors, Steber said. "Every tax situation is unique, based on the facts and circumstances of the taxpayer."

For example, if you only had unemployment compensation throughout the year, you may owe some tax on the checks you received. A severance package could also give you a tax bill, as could dividends and interest from investment income.

Other factors that weigh in include your tax deductions and other life changes associated with unemployment, like if you downsized your house or picked up supplemental income, Steber said.

Do I have to pay tax on my unemployment checks?

Yes. Unemployment compensation is taxable on federal and most state tax returns.

When applying for unemployment, you can choose whether you want federal and/or state income taxes automatically taken out of your unemployment benefits. If you choose to withhold, federal income taxes are withheld at a 10% rate, while the state rate varies. But since many cash-strapped Americans opt not to withhold - come April they may have to pay up.

So unless you previously elected to have taxes withheld throughout the year from your unemployment checks, a tax bill may be an unwelcome surprise when you file your 2008 return.

What if I took money from my 401(k)?

You may owe taxes if you took money out of a retirement plan or 401(k) to supplement your unemployment checks. That counts as income and is taxable too, said Joseph Perry, the partner in charge of Marcum & Kliegman's tax department. And that might not be all you owe. The taxes are in addition to a 10% penalty on early withdrawals if you're below the age of 59-1/2, he cautioned.

What if I did some supplemental work?

Freelance and project work can be a lifeline for unemployed workers between jobs. "Unemployed tend to become self-employed, that's a natural outgrowth of being unemployed," Steber said.

But if you picked up odd jobs or offered consulting services while unemployed, you're subject to income tax and self-employment tax on that income.

To report that supplemental work, taxpayers must include a Schedule C with their income tax return, which details the income and expenses for the year.

If you continued a project for your old employer or freelanced for someone else, and made more than $600, you will be issued a 1099 and must include that in your income tax return as well. (If you made less than $600, then you will not be issued a 1099 but are still responsible for reporting anything you made as taxable income.)

What if I had to relocate for a job?

If you accepted a new job that required relocating, you may also be able to deduct the moving expenses not reimbursed by your new employer. But there's a catch, the new job site has to be 50 miles further than the old residence was from the old job, according to Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants, which basically prevents you from trying to deduct a move within the same metropolitan area.

What if I spent a lot of money on job searches?

Those who were on the job hunt last year may get a gift from Uncle Sam: a slew of tax deductions. In fact, many of the expenses incurred while looking for a job can be deducted, which can result in some serious savings.

By declaring the following itemized deductions, taxpayers may lower the amount of taxable income they have for the year.

For starters, anything you spend on creating, printing and mailing your resume is deductible, as is anything you spend on a career coach or headhunter. Also included are long distance or cell phone charges directly associated with your job search.

Transportation costs such as a bus, taxi, train or plane to an interview is deductible, as is the mileage costs accrued when you drive to interviews and even to the unemployment office. (Between Jan. 1, 2008, and June 30, 2008, taxpayers can claim 50.5 cents per mile, between July 1, 2008 and Dec. 31, 2008, taxpayers can claim 58.5 cents per mile.) That also goes for parking and tolls and meals and lodging if the interview was out of town.

But the buck stops there. You cannot, unfortunately, deduct the value of your time or the cost of a new interview suit, briefcase or new shoes for pounding the pavement.

Of course, taxpayers should keep receipts related to any of these expenses in order to substantiate them when filing and experts recommend consulting a professional tax preparer for help.

First Published: January 9, 2009: 2:43 PM ET