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December 31, 2013

Big Company, Big Marketing, Big Disappointment

The new generation has their blinders on when it comes to big-name branding. In fact, some people such as myself are starting to avoid using name-brand companies as much as possible. If your company has been established for at least two years and you still depend on spending marketing money to keep the leads coming in, you're doing it wrong.

Wal-Mart, eBay, and Google.

Wal-Mart started out small, offering to beat anyone's price even if it's one Penney. All customers get greeted at the door, this separated them from the rest. When I worked there as a teenager, I was proud to work for such a great company. Now they are owned by a corporation, they advertise like crazy, they deliver the cheapest product regardless of its quality. The experience of shopping at a Wal-Mart store today is so poor that people only go there if they can't afford to go anywhere else. It's no longer a place you want to go, it's a place you try to avoid. Wal-Mart spent 2.5 billion last year in marketing, I am disappointed in their service.

eBay started out small and was a place just about anyone with a PC could list junk laying around the home and find a buyer somewhere else in the world that would pay more than what you would get in a garage sale. If a seller did not send the product to the buyer, eBay protected its buyers through a Pay Pal system. It was a great way to score an amazing deal. The fees for eBay and PayPal were so low you would profit off your sale enough to make it worth your while. eBay had to start out marketing and should have not needed it after a few years because the word was out, however, they kept spending more and more on marketing and the fees went up, up, and up. Now if you don't sell tons on eBay, you pay much higher fees than the person selling a few items a month. Making it so it was cheaper to buy new junk from china than used junk from the USA. If you sell something for about 100.00, you pay about 30.00 in fees. Now all you get is poor products that don't last long if at all and can kill you. eBay spent 871 Million last year in marketing I am disappointed in their pricing.

Google started out as a free search engine that was just that, a search engine. No advertisements, no personal widgets all over the screen. When first started few if anyone was paying for AdWords. As a result, when you searched for something, you would get good relevant results even if it was for something free. Now you get whatever the people who have the largest marketing budget results unless you go to page one or two. When Google started, I like many others used to search and sometimes even I would have trouble finding what I was looking for and remembered my friends telling me in 2002 that if you typed "weapons of mass destruction" into you would get a page that said, "No weapons of mass destruction were found". So I tried looking on google. To my surprise, I found exactly what I was looking for as the top results. After this happened several times I switched to using only google. Now they are so saturated with marketing that you will most likely never find what you're really looking for. Only what the companies with large marketing budgets want you to find. If you create a site with your first, middle, and last name in the META TAG, which is what search engines use to match searches to your page, put your name on the page 20 times. Go to google and manually force their spider bots to crawl your page wait a couple months and then search your first, middle, and last name. Here is what you will get, pages and pages of non-relevant information, probably even lots of listings for people's names that don't even match. This makes it so the price of the product you are buying must cost more to pay for marketing and or the service will be less than par because the seller is paying their workers less to pay for marketing. Google spends the least when it comes to marketing vs other large disappointing companies and I would also say they are the least disappointing. I am still a Google supporter when it comes to Google for Business Apps, Gmail, Android, and Chrome, however, I am on the lookout for a new search engine. Google spent 188 Million last year, I am disappointed in their results.

2014 consumers should use their social media to find recommended products and services. I recommend Facebook and here is why.

If you purchase from and you like it, you can hit the like button in an email they send you. A simple way to say, I like this company. The difference between liking a company and reviewing a company is that reviews just stay online likes only stay if you still like them. I liked Wal-Mart, I don't anymore, if I left them a review, you would see online Michael Hansen says good things about this company. However since I liked them instead, when they gave me poor service, but not poor enough for me to complain, I was able to unlike them.

Here is the fun twist, some people are good at finding the right company to use, if you know your mom is good at choosing the best companies, you would be inclined to look at Moms likes on Facebook before making a choice on your own. If you find that Mom's likes are working out well for you, you may want to spread the word. Now here opinion matters. Her marketing budget last year was $0.00. I am highly satisfied.

Prediction for Starbucks

Currently, Starbucks sells their coffee at a premium price, however, the value is still there. The service is reliably good every time, the product is reliably good all the time. Starbucks only spent 95 million last year in marketing. Less than all the other names we are all familiar with and yet they are just about the last standing on great terms with me. I predict that if marketing expenses increase significantly we will equally see the service diminish followed by the product not holding its value compared to the current competition.


Written By Michael Hansen




December 3, 2013

How Do I Figure Out What My DTI Is?

In order to prevent homebuyers from getting into a home they cannot afford, FHA, Fannie Mae and Freddie Mac requirements and guidelines have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios. These ratios are used to calculate whether or not the potential borrower is in a financial position that would allow them to meet the demands that are often included in owning a home. The two ratios are as follows:


Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify for FHA is 31%. See the following example:
 Total amount of new house payment:$750
Borrower's gross monthly income (including spouse, if married):$2,850
Divide total house payment by gross monthly income:$750/$2,850
Debt to income ratio:26.32%


Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify for FHA is 43%. See the following example:
 Total amount of new house payment:$750
 Total amount of monthly recurring debt:$400
 Total amount of monthly debt:$1,150
Borrower's gross monthly income (including spouse, if married):$2,850
Divide total monthly debt by gross monthly income:$1,150/$2,850
Debt to income ratio:40.35%

Please note that the above indicators do not exclusively determine whether or not a candidate will qualify for an FHA loan. Other factors will be considered, including credit history and job stability.

November 30, 2013

What is an FHA Mortgage

FHA is an insured loan, insuring the lender that incase of a default, FHA will pick up the tab. It typically requires two MI amounts, monthly and up front. You can get an ARM FHA loan, or a FRM FHA loan. You can even get a HECM FHA loan. 

Current Up-Front FHA Mortgage Insurance (MI) Premium

The up front MI is currently at 1.75% of the base loan amount. This applies regardless of the amortization term or LTV ratio. 

ANNUAL or Monthly FHA MI  

UPDATED: 02/25/2018

FHA MIP Chart for Loans Greater Than 15 Years
Base Loan AmountLTVAnnual MIP

FHA down payment

A borrower's down payment may come from a number of sources. The 3.5% requirement can be satisfied with the borrower using their own cash or receiving a gift from a family member, their employer, labor union, or government entity. Since 1998, non-profits have been providing down payment gifts to borrowers who purchase homes where the seller has agreed to reimburse the non-profit and pay an additional processing fee. In May 2006, the IRS determined that this is not "charitable activity" and has moved to revoke the non-profit status of groups providing down payment assistance in this manner. The FHA has since stopped down payment assistance program through third-party nonprofits. There is a bill currently in Congress that hopes to bring back down payment assistance programs through nonprofits.

Mortgage insurance

Mortgage insurance protects lenders from mortgage default. If a property purchaser borrows more than 80% of the property's value, the lender will likely require that the borrower purchase private mortgage insurance to cover the lender's risk. If the lender is FHA approved and the mortgage is within FHA limits, the FHA provides mortgage insurance that may be more affordable, especially for higher-risk borrowers

Lenders can typically obtain FHA mortgage insurance for 96.5% of the appraised value of the home or building. FHA loans are insured through a combination of an upfront mortgage insurance premium (UFMIP) and annual mutual mortgage insurance (MMI) premiums. The UFMIP is a lump sum ranging from 1 – 2.25% of loan value (depending on LTV and duration), paid by the borrower either in cash at closing or financed via the loan. MMI, although annual, is included in monthly mortgage payments and ranges from 0 – 1.35% of loan value (again, depending on LTV and duration).

If a borrower has poor to moderate credit history, MMI probably is much less expensive with an FHA insured loan than with a conventional loan regardless of LTV – sometimes as little as one-ninth as much depending on the borrower's credit score, LTV, loan size, and approval status. Conventional mortgage insurance rates increase as credit scores decrease, whereas FHA mortgage insurance rates do not vary with credit score. Conventional mortgage premiums spike dramatically if the borrower's credit score is lower than 620. Due to a sharply increased risk, most mortgage insurers will not write policies if the borrower's credit score is less than 575. When insurers do write policies for borrowers with lower credit scores, annual premiums may be as high as 5% of the loan amount.

Canceling FHA mortgage insurance

The FHA insurance payments include two parts: the upfront mortgage insurance premium (UFMIP) and the annual premium remitted on a monthly basis—the mutual mortgage insurance (MMI). The UFMIP is an obligatory payment, which can either be made in cash at closing or financed into the loan, so that you really pay it over the life of the loan. It adds a certain amount to your monthly payments, but this is not PMI, nor is it the MMI. When a homeowner purchases a home utilizing an FHA loan, they will pay monthly mortgage insurance for a period of five years or until the loan is paid down to 78% of the appraised value – whichever comes later. The MMI premiums come on top of that for all FHA Purchase Money Mortgages, Full-Qualifying Refinances, and Streamline Refinances.

When we talk about canceling the FHA insurance, we talk only about the MMI part of it. Unlike other forms of conventional financed mortgage insurance, the UFMIP on an FHA loan is prorated over a three-year period, meaning should the homeowner refinance or sell during the first three years of the loan, they are entitled to a partial refund of the UFMIP paid at loan inception. If you have financed the UFMIP into the loan, you cannot cancel this part. The insurance premiums on a 30-year FHA loan which began before 6/3/2013 must have been paid for at least 5 years. The MMI premium gets terminated automatically once the unpaid principal balance, excluding the upfront premium, reaches 78% of the lower of the initial sales price or appraised value. After 6/3/2013 for both 30 and 15 year loan term, the monthly insurance premium must be paid for 11 years if the initial loan to value was 90% or less. For loan to value greater than 90% the insurance premium must now be paid for the entire loan term.

A 15-year FHA mortgage annual insurance premium will be cancelled at 78% loan-to-value ratio regardless of how long the premiums have been paid. The FHA’s 78% is based on the initial amortization schedule, and does not take any extra payments or new appraisals into account. For loans begun after 6/3/2013, the 15-year FHA insurance premium follows the same rules as 30-year term (see above.) This is the big difference between PMI and FHA insurance: the termination of FHA premiums can hardly be accelerated.

Borrowers who do make additional payments towards an FHA mortgage principal, may take the initiative through their lender to have the insurance terminated using the 78% rule, but not sooner than after 5 years of regular payments for 30-year loans. PMI termination, however, can be accelerated through extra payments or a new appraisal if the house has appreciated in value.

November 27, 2013

2014 Conforming Loan Limits

Thank you Fannie Mae and Freddie Mac. For the ninth consecutive year, 2014 conforming loan limits will remain at their current levels.

California Loan Limits By County

County 1 unit 2 unit 3 unit 4 unit
ALAMEDA $625,500 $800,775 $967,950 $1,202,925
ALPINE $463,450 $593,300 $717,150 $891,250
AMADOR $417,000 $533,850 $645,300 $801,950
BUTTE $417,000 $533,850 $645,300 $801,950
CALAVERAS $417,000 $533,850 $645,300 $801,950
COLUSA $417,000 $533,850 $645,300 $801,950
CONTRA COSTA $625,500 $800,775 $967,950 $1,202,925
DEL NORTE $417,000 $533,850 $645,300 $801,950
EL DORADO $474,950 $608,000 $734,950 $913,350
FRESNO $417,000 $533,850 $645,300 $801,950
GLENN $417,000 $533,850 $645,300 $801,950
HUMBOLDT $417,000 $533,850 $645,300 $801,950
IMPERIAL $417,000 $533,850 $645,300 $801,950
INYO $417,000 $533,850 $645,300 $801,950
KERN $417,000 $533,850 $645,300 $801,950
KINGS $417,000 $533,850 $645,300 $801,950
LAKE $417,000 $533,850 $645,300 $801,950
LASSEN $417,000 $533,850 $645,300 $801,950
LOS ANGELES $625,500 $800,775 $967,950 $1,202,925
MADERA $417,000 $533,850 $645,300 $801,950
MARIN $625,500 $800,775 $967,950 $1,202,925
MARIPOSA $417,000 $533,850 $645,300 $801,950
MENDOCINO $417,000 $533,850 $645,300 $801,950
MERCED $417,000 $533,850 $645,300 $801,950
MODOC $417,000 $533,850 $645,300 $801,950
MONO $529,000 $677,200 $818,600 $1,017,300
MONTEREY $483,000 $618,300 $747,400 $928,850
NAPA $592,250 $758,200 $916,450 $1,138,950
NEVADA $477,250 $610,950 $738,500 $917,800
ORANGE $625,500 $800,775 $967,950 $1,202,925
PLACER $474,950 $608,000 $734,950 $913,350
PLUMAS $417,000 $533,850 $645,300 $801,950
RIVERSIDE $417,000 $533,850 $645,300 $801,950
SACRAMENTO $474,950 $608,000 $734,950 $913,350
SAN BENITO $625,500 $800,775 $967,950 $1,202,925
SAN BERNARDINO $417,000 $533,850 $645,300 $801,950
SAN DIEGO $546,250 $699,300 $845,300 $1,050,500
SAN FRANCISCO $625,500 $800,775 $967,950 $1,202,925
SAN JOAQUIN $417,000 $533,850 $645,300 $801,950
SAN LUIS OBISPO $561,200 $718,450 $868,400 $1,079,250
SAN MATEO $625,500 $800,775 $967,950 $1,202,925
SANTA BARBARA $625,500 $800,775 $967,950 $1,202,925
SANTA CLARA $625,500 $800,775 $967,950 $1,202,925
SANTA CRUZ $625,500 $800,775 $967,950 $1,202,925
SHASTA $417,000 $533,850 $645,300 $801,950
SIERRA $417,000 $533,850 $645,300 $801,950
SISKIYOU $417,000 $533,850 $645,300 $801,950
SOLANO $417,000 $533,850 $645,300 $801,950
SONOMA $520,950 $666,900 $806,150 $1,001,850
STANISLAUS $417,000 $533,850 $645,300 $801,950
SUTTER $417,000 $533,850 $645,300 $801,950
TEHAMA $417,000 $533,850 $645,300 $801,950
TRINITY $417,000 $533,850 $645,300 $801,950
TULARE $417,000 $533,850 $645,300 $801,950
TUOLUMNE $417,000 $533,850 $645,300 $801,950
VENTURA $598,000 $765,550 $925,350 $1,150,000
YOLO $474,950 $608,000 $734,950 $913,350
YUBA $417,000 $533,850 $645,300 $801,950

November 19, 2013

2014: A “New” War for Talent

Post by Gary Burnison
In 1997, Ed MichaelsHelen Handfield-JonesBeth Axelrod of McKinsey & Company wrote a book entitled: The War For Talent.
The book depicted a battle for talent during the dotcom era.
However, going into 2014, we are in a new era that I have referenced as an unprecedented fight for growth. In meeting with corporate leaders worldwide, there is consensus that the problem of growth – or lack of it – is rapidly becoming the world’s No. 1 problem. Governments and corporate CEOs alike are grappling with the growth question, even if from different perspectives.
At the core of the growth issue is the question of leadership – not the individual superhero CEO or head of state, but the leadership team that collectively demonstrates insight, courage and inventiveness to deliver double-digit growth in single-digit markets. Such leaders are few and far between today. So unlike the talent war of the 1990s and 2000s, which was driven by a lack of supply of all talent, today’s war is all about a lack of supply of the right talent.
I’ll be talking about these and other issues this week at the Bloomberg Business Summit in Chicago. But here’s what you need to remember: The winning companies will be those that find and develop outperforming leaders in an underperforming economy.
The End of an Era – No More Easy Paths to Growth
The mid-1990s to 2007 was a period of growth unusual for its scale and speed. Raising capital was easier and cheaper than any other period in history, globalization created access to new markets and consumers, innovation in technology and financial services took value to new heights and the rise of a middle class drove consumer spending. To grow, all you had to do was show up, and not mess it up.
An entire generation of corporate leaders was shaped during this era of “easy growth.” Now, that era is over, having been replaced by what I admit is the “new normal.”
The New Normal: “The Post Crisis Era” = Slow Growth/Fast Change
After six years of global economic turmoil, we are now in a post-crisis era. In this era, changed market conditions posed a set of circumstances different from anything in the past. Current challenges could persist for decade, creating a “new normal.”
In this new normal, growth is slow, but change is fast. The challenge for leaders is to create growth opportunities that far outstrip the potential of the global economy. Leaders in the new normal will have to think and act very differently -- the differences between “easy growth” and “new normal” conditions are not trivial.
Source: Korn/Ferry client discussions
What This Means for Leadership Talent
The twin threats of slow growth and fast change make the leadership challenge in the new normal much more complicated and nuanced than ever before. Based on our discussions with CEOs, we have identified four shifts that characterize the changing requirements of leadership.
Are Leaders Ready for the New Normal?
Measuring the readiness of leaders to change, adapt and create new growth is not an easy task. Cognitively, it is easy to understand that outsized performance in an easy growth era will not automatically transfer the new normal. Raising awareness and providing clarity around changing expectations however, can go a long way in creating readiness.
We found in our study of outperforming leaders that two leadership constructs define a level of readiness, or reveal the lack of it. These are leadership maturity and learning agility.
Leadership maturity is defined as an individual’s ability to operate effectively at the appropriate level of complexity, ambiguity and scale. Think of maturity as the indicator of a “seasoned executive,” experienced in highly complex situations with the grace and temperament to take difficult leadership challenges in his or her stride. Given the complexity and the un-nerving problems of the new normal, maturity will be a critical differentiator.
Learning agility is defined as an individual’s ability to operate effectively at the appropriate level of disruption, speed and volatility. Think of agility as an indicator of a “fast-learning executive,” someone who knows what to do even when he or she doesn’t know what to do. Plus leaders must have cultural dexterity - the ability to meet customer needs at the exact right time to tap borderless consumers.
Given a fast changing environment in the new normal, agility will be a second critical differentiator.
Taken together, leadership maturity and agility is the best combination of factors to predict readiness to outperform in the new normal. Both can be measured fairly accurately, and benchmarked against leaders in the relevant industry and markets – critical considerations to ensure the pragmatic use of these factors in business. Most importantly, both can be developed over time, giving a clear line of sight to leaders focused on enhancing the ability of their teams to win in the new normal.
Businesses that excel in this gain in the marketplace as (paraphrasing Warren Buffett) the retreating tide exposes the winners and losers of the new normal.

October 23, 2013

HARP 1.0, 2.0, and 3.0 Home Affordable Refinance Program

This loan will enable homeowners who have less than 20% equity in their home to take advantage of the historically low rates without having to pay mortgage insurance. Even if you have negative equity, you can get the same low rate without MI as the person who has 20% equity.

HARP 1.0 allowed you to go up to 125% loan to value, meaning you owe 125% of your home value. HARP 2.0 allows you to go up to unlimited LTV so even 200% would be ok. Secondly your loan has to be secured prior to May 31, 2009 where HARP 1.0 required that Fannie or Freddie acquired the loan prior to May 31, 2009. Some of us acquired our loan prior to May 31, 2009 however Fannie didn't acquire it till the following month.

Updated HARP Eligibility Requirements
The eligibility requirements for HARP are basic :
  1. Your loan must be backed by Fannie Mae or Freddie Mac
  2. Your mortgage note date must be on, or before, May 31, 2009
  3. Your loan must be current, with no "late pays" in the last 6 months

A HARP 3.0 bill is currently in committee in Congress. Fannie Mae and Freddie Mac could wait for its passage, or release additional HARP updates on their own.

As of August 31, 2014 HARP 3.0 has still not been passed.

HARP 3.0 would allow you to take advantage of the product even if Fannie or Freddie do not own the loan. Sign up for alerts by subscribing to this blog to be notified when HARP 3.0 gets passed. Our blog only gets emailed to you on the first of every month, if you want alerts sooner, email Michael Hansen at or call 855-955-SOEZ (7639).

August 28, 2013

How To Get The Lowest Payment With The Lowest Down When Purchasing A Home

FHA loans can seem ideal for buyers with less than 5% to put down, however after you add the 1.75% UFMIP your actually putting 5.25% down. The best choice for lowest payment would be 5% down conventional financing LPMI, not BPMI.

FHA mortgages offer low rates and flexible guidelines. This article explains what option you should take if you are considering purchasing a home.

What Is The FHA Mortgage Program?

The FHA mortgage program is technically an insurance program. This is because the FHA is not a mortgage lender -- it's an agency which provides insurance to lenders for defaults or loan foreclosures. In order for a loan to be insurable, the lender must be FHA-approved and the specific loan must be underwritten to the standards set forth in the official FHA mortgage guidelines.

FHA mortgage guidelines are among the most forgiving of all mortgage loan types. There is no minimum credit score requirement. Some cases allow you to go up to 65% debt to income ratio. That is 22% higher than todays conforming loan DTI. If you have an income issue, FHA might be the way to go. Otherwise if your looking for the lowest payment and you dont have a DTI issue, LPMI is my recommendation. Here is why.


1. Cost Of FHA

3.5% down, plus 1.75% up front mortgage insurance premium. This is money paid to FHA for the policy. 1.35% monthly payment. That means you take 1.35% of the loan, divide that by 12 and add it to your payment.

Example: 3.625% rate
$420,000 purchase price. 
$405,300 loan amount. 
$22,050 down payment. 
$2,332 monthly payment not including tax and insurance.

3. Cos Of BPMI

5% down, plus up front mortgage insurance premium that varies on the provider, this is shop-able.

Example: 4.25% rate
$420,000 purchase price. 
$399,000 loan amount. 
$28,350 down payment. 
$2,228 monthly payment not including tax and insurance.

4. Cost Of LPMI

Example: 4.625% rate
$420,000 purchase price. 
$399,000 loan amount. 
$21,000 down payment. 
$2,051 monthly payment not including tax and insurance.

Take Your First Step Towards Your New Purchase

FHA loans account for a significant share of the U.S. housing market and it's EZ to understand why. The forgiving nature of the FHA mortgage guidelines, combined with the low rates available via the program, can make it a compelling mortgage option.

See how much home you can afford with an LPMI mortgage. Get started with a rate quote today.