A Perspective

on the

Newly-Approved Rate Freeze

After a lot of careful thinking and retrospect, I think this is ultimately the only option we truly have as homeowners, consumers, and as Americans. Our economy could, and would, otherwise be in more turmoil than it already is. I mean, we have not seen a downfall in one sector of our economy (i.e. real estate) so severe since the Great Depression. The dot-com crash was not even measurable as our current economic dilemma. So the rate freeze, in essence, is one of the last viable options.

Why?

Well, real estate, as we have seen, impacts not only our economy but the global economy. The homes foreclosing impacts Americans. It impacts the livelihood of families, with new burdens and stress. Bankruptcies and consumer credit defaults are soaring day by day. This downfall in real estate also impacts our government because they cant suck the living blood (via taxes) from homeowners anymore; imagine the REO properties sitting have no owners to send in those lovely property taxes our government utilizes for "paved roads" and such. Real estate also impacts our state of employment (construction jobs, mortgage industry, realtors, contractors, lumber yards, Home Depot, etc). Morever, it impacts our GLOBAL economy by affecting the Chinese, Japanese, Indian, and other global economies that hold these notes, which our stock market representatives such as Bear Stearns, GMAC (Homecomings), Greenpoint (Cap1), etc. sold their souls to. The minute we "sold" our friendly neighbors across the sea the notion that they can buy pools of mortgage notes and claim high interest yield, the Mortgage and Real Estate Gods cast one evil spell onto our economy. You see, this dilemma affects our import export, our GDP, our micro and macro economy.

So why is the government doing what they are? Why is the Bush administration with help from other entities rushing to freeze the rates on adjustable rate mortgages? In short: to save us, to save themselves, to save this economy.

Is it a good move? Yes. In actuality, when one really has no other options, ANY option is a good one. This is that ANY option, simply stated. We have compromised so many Americans' livelihood and the shelter they work hard to pay by allowing just about any average Joe into the mortgage and real estate industry. So will the rate freeze change that? No. But the reform to follow probably will.

I personally run a mortgage company. From the start, I have been strong on education and truly being a consultant to our clients. I NEED every single one of my mortgage consultants to know the difference between "then" and "than" and "their" and "there." That goes far in this industry.

I am glad there will be reform, because all those unethical and morally deviant "loan officers" who have neglected the fact that a mortgage is a very big debt in most Americans' lives are slowly being kicked out of this industry. Is that a good thing? Yes, a very good thing. When I was at my old company, the loan officers were so damn stupid and would tell borrowers just about anything just to make a quick buck. That was, that is, and that will be the downfall to a lot of mortgage companies founded on these practices. The days of, "Yes, the 1% is a 30 year fixed, sir!!!!" will soon be gone. The days of not disclosing loan information will long be gone. A while back, probably before my time, a mortgage was an important thing. It was valued--not only by the borrower but also by the consultant. Usually, the two were good friends. They trusted one another...weird, huh? Well, I foresee those days coming back.

Just like we put our lawywers and doctors through rigorous testing and certification, we will now hopefully do the same for mortgage consultants. For the last couple of years, just about every family had a daughter, son-in-law, niece, or great grandmother who was a broker and did mortgages. You couldn't walk through a hallway without running into an owner of a real estate firm. Although, most may have never received the proper training on fundamental economics, finance, and debt flow management, they still had that darn broker's license! Now, that by itself is not a bad thing so don't get me wrong. I personally know brokers, who have had much experience in finances, management, running businesses, and overall understand how a mortgage works in the micro and macro sense of things.

However, I am simply stating that a good portion of these untrained individuals who did not even understand the economics of how a mortgage intertwines into the overall scheme of things were the same ones compromising consumers/borrowers and their biggest debt in life.

So back to the top: is the rate freeze good? Of course it is; it is our last option. Any option now is good. Bush is realizing that his gas prices will be affected now because as people cant afford their homes, they wont be driving any longer either. They will start commuting. Those property taxes the government was collecting...they will be gone too. Ex-homeowners are renting. Bankruptcies are soaring. Credit card defaults are climbing. It is simply a widespread incident people. So any move will just about help; it surely won't hurt!

My last thought is based on the premise that any career, any industry, in which a salary of six figures could potentially be made while dealing with an important component of someone's life (e.g. stocks, mortgage, legal affairs, body and health, etc.) there should be reasonable training, education, and certification processes that will actually provide credibility for that career or industry.

Best wishes for 2008! I hope our economy and its members rejuvenate and prosper.

Kindly,

Cyrus Khadivi
Managing Partner

Freedom Lending Group, Inc.
www.freedomLG.com