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I called one of my good friends the other day; this guy is both a personal and professional acquaintence of mine as he is a mortgage loan originator (loan officer) for Fifth Third Bank. I was disappointed to learn that Fifth Third Bank had retired a popular mortgage product that I have long touted and promoted to clients: The Good Neighbor Home Loan.

This loan was unique in the respect that it allowed first-time home buyers to borrow 100% of the sale price of the home on a competitive 30-year, fixed rate mortgage WITHOUT having to pay PMI (private mortgage insurance). To qualify as a first-time home buyer the applicant had to not own a home within the last two years. There was also an income limitation (cap, not minimum) so it was great for young professionals, newly weds, recent college graduates, or just your regular working stiffs. The closing costs were very reasonable, too. I want to say that the numerous closings that I had as a Realtor where the borrower used this loan program, the closing costs to the borrower were usually $1,200 to $1,600. Also, the seller could help pay some of the buyer’s closing costs (up to 3% of the sale price I believe) so the buyer could almost walk in and buy the home with no cash at closing.

Now I realize that with the rise in foreclosures and everything you hear on the news about subprime loans and banks having problems with liquidity that this program sounds horrible to a bank for the same reasons it sounds great to buyers! But this wasn’t for your subprime borrower… the buyers had to have good credit to get these loans, conforming loans as opposed to non-conforming. This loan program gave Fifth Third a nice competitive edge in the first-time home buyer market and I can only assume helped build loyalty and helped sell additional products and services. The borrowers were given a half a point reduction on the interest rate of their loans if they had the monthly payment automatically drafted from their Fifth Third checking account. Hence, borrowers then started doing more and more banking with Fifth Third.

I would like to see Fifth Third bring back this loan program. If you bank with Fifth Third and if you are ever in a position where you’re asked by an employee or manager what you like or don’t like about the bank, I hope you will mention that you’d like to see them bring back The Good Neighbor Home Loan Program. In the meantime, there are still many loan programs out there to help first-time home buyers - such as FHA loans. If you have questions or need specific advice, call or stop by the bank of your choice to talk to a lender that you know and trust.

As always, I welcome your comments and feedback…

Yesterday I read an article that National City Corporation, with headquarters in Cleveland, Ohio, is laying off approximately 900 people that work in its mortgage division and is no longer accepting loans from mortgage brokers.

As a quick aside for those readers out there who have never shopped for a mortgage or did not realize there are different types of lenders, we have mortgage bankers and mortgage brokers. A mortgage banker is typically an employee of the bank, “the loan officer” in your friendly neighborhood branch, whereas the mortgage broker is like an independent agent that takes your loan application and sends it to multiple lenders to (supposedly) try to find you the best deal that they possibly can in the market. Mortgage brokers of course charge you a fee to do this service and/or they receive a fee from the lender that makes you the loan.

As the number of foreclosures ticks higher and banks tighten credit standards so fewer people qualify for mortgages, I have noticed an increase in the advertising for non government-backed student loans in the media and especially on tv.

First there were the ads for Astrive, which only caught my attention because they continued to run similar ads with different website addresses. The website address at the bottom of the tv screen always starts with Astrive and then ends in some three-digit number and the usual .com suffix. In the financial world, seeing a company use multiple websites with similar addresses always throws up a red flag in my mind. I am not saying Astrive is a bad company; at this point, I don’t know enough about them. But I am curious why they have multiple website URLs and why they are so similar.

I didn’t think much of the Astrive ads (aside from the various - and seemingly frequently changing - website addresses) because this is the business that Astrive is in. But then I saw a commercial for student loans from Chase Bank. I haven’t seen a commercial for home loans through Chase in quite some time so seeing the commercial for student loans caught my attention immediately.

It is interesting to see that as the mortgage and real estate market has taken a downturn, lenders have turned to student loans, which are repaid over many years - up to 20 in most cases - similar to the 30 years that a home loan is amortized over.

Only time will tell if student loan defaults will become a crisis in our society similar to the foreclosures. Some news commentators and talking heads on tv have speculated that the auto industry may be next with its flat sales and low (or zero) interest loans. Certainly the default risk on a zero percent interest loan is still higher than zero and those loans, when packaged with other interest-bearing loans and sold to investors, would sell at a steep discount.

As always, I appreciate your comments and feedback…

Recently, The Cincinnati Enquirer ran an article online about police billing motorists’ insurance companies for the cost to respond to accidents. (Adobe .pdf copy of the article). I don’t think the article did a good job of examining both sides of the issue so I have submitted my letter to the editor, although I doubt it will be printed.

So, what is the article about you ask?! Well it seems the Erlanger, KY police chief wants to charge a fee for officers’ time in order to respond to accidents. The article cites statistics that a majority of the wrecks in Erlanger’s jurisdiction involve people that are not residents of the municipality. I didn’t think it mattered where you were from, if you caused an accident you get a citation. If you get caught speeding, you get a citation. I know plenty of people that have received speeding tickets in their home town as well as other cities and states. If Erlanger does not want to help non-residents because of the cost involved, perhaps it should have the decals on the side of their police cruisers amended to read “To protect and serve our community only.”

The article also addresses (from one side) the notion that you can bill an insurance company for responding to an accident. I don’t see how you can levy fees on motorists that have insurance that will cover such a response but not your own community members as the article suggests that Erlanger will do. If you levy the fee on out of town motorists, you would also need to assess community members.

Here is my letter to the editor, just in case The Enquirer decides not to print it:

In response to the article about charging a response fee to drivers involved in a wreck, I want to clear up an inaccurate statement made by Cost Recovery Corp and also respond to the police chief’s comments.

First, for Cost Recovery Corp to assert that insurance companies cannot raise rates in certain areas and that companies will not increase rates if they’re required to pay first responder fees is simply not true. Any actuary that incorporates those added fees into the rate modeling will in fact use these costs to affect rates. Insurance companies will file with the state for higher rates and justify the rate increase by pointing to the evidence that higher claim dollars are being paid out. Insurance regulators want these companies to remain solvent just as much as they want the market to be competitive. First responder fees affect all of the insurance carriers competing in a given market so this will affect everyone, not just those who have accidents.

Police Chief Marc Fields questioned why his community should fund the cost of his officers responding to accidents. My response is quite simply, “isn’t that what fines and citations are for?” Sure fines are to punish someone for wrongdoing and to deter future behavior, but the fines also help fund the municipal government’s operations. Perhaps Chief Fields should have read the article entitled Don’t Speed Here on the front page of The Enquirer about Arlington Heights being a speed trap. That village also responds to a number of accidents on I-75 that don’t involve its own residents. But that village also actively patrols that stretch of I-75 to deter speeding and issue citations to generate revenue. Unlike adding first responder fees, which drives up insurance cost for everyone in a given area over time, issuing citations drives up insurance cost to those that committed the violation.

As always, I welcome your comments and feedback…