Hello!
My name is Matt Azari and I am happy to be contributing to the Foreclosure Industry Blog. I recently attended Christine’s Auditing class and I was overwhelmed with all of the undisclosed charges and inconsistencies with chain of title that go into a typical mortgage.
A little about myself: my background is in Finance; I hold a Bachelor’s of Science in Business Administration/Finance from the University of Arizona’s Eller College of Management in Tucson, AZ. During my time in Tucson, I began my legal experience by working at a medium sized insurance-defense law firm. I then went to work for a business valuation and transaction advisory firm, where I learned auditing skills. I moved to Phoenix to take a job with Quicken Loans as a Web Mortgage Banker. This was an eye opening experience and I quickly learned the ins and outs of mortgage origination. After months of working at Quicken, I decided I no longer wanted to “sell” mortgages and decided to pursue my dreams of practicing law. I had already applied to law school prior to my time at Quicken and decided attending would certainly advance my career goals and get me where I want to be. I am proud to have just completed my first year of law school and I welcome the challenges ahead in my quest to succeed in the legal profession.
My time at Quicken afforded me a unique opportunity to connect with potential refinance and purchase clients, looking for hassle-free home loans. By this time, the housing market had been hit with waves of foreclosures, and the government was offering a first-time home buyer tax credit. Needless to say, with rates at all-time lows and government incentives in place to help homebuyers, a refinance boom was underway. We were offering any kind of mortgage one could think of; from conventional 30 year fixed loans to 3, 5, and 7 year ARM programs with rates as low as 3.99%. These ARMSs appeared quite attractive, despite the fact that with falling home prices and no end in sight for the housing mess, the ARMs made no sense for the vast majority of my clients.
I was always skeptical of any sort of an ARM program, especially during the trough of the credit crunch; what tragedy would befall unsuspecting homeowners when they attempt to refinance their ARM into a fixed rate loan, but their home value had remained stagnant or depreciated? Three years did not leave much time for home values to stabilize, especially considering that the majority of my clients were in the hardest hits states, like Arizona and California!
I look forward to getting into more detail about my experience in the mortgage lending industry, telling my story from an insider’s perspective, stay tuned!
If you have any questions, please feel free to email me at matt@desertedgelegal.com.
DISCLAIMER:
****MATT AZARI IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HIS OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****
LIBOR, Treasury Index, CODI, COFI….What Do These Letters Mean?
If you’ve looked at your loan documents lately (which, I hope you have after having read my blog), you might have noticed that your loan is tied to an Index upon which the payment is based on. Basically, your adjustable rate is figured by adding the index to the margin, whichever index your loan is tied to.
There are quite a few indices, but the most common one I see in homeowners’ loan documents is the LIBOR, which stands for the London Interbank Offering Rate.
The LIBOR is the daily reference rate based on the interest rates at which banks borrow unsecured funds from other banks in the London wholesale money market (or interbank market).
The majority of loans I see are tied to the LIBOR index, although recently I’ve seen a handful of loans tied to the Treasury Index, (or CMT for Constant Maturity Treasury), which is the average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board.
Recently, I also saw a large loan that was based on the COFI, or Cost of Funds Index, or more formally, the 11th District Cost of Funds Index of the Federal Home Loan Bank (FHLB), which is located in San Francisco. The 11th District includes the states of California, Nevada, and Arizona.
What’s interesting about these indices is that it is very difficult, if not impossible, to properly disclose the terms of these mortgages. Why? Because no one knows what the index will be in the future. I doubt the authors of the TILA foresaw the advent of adjustable rate mortgages. The financial industry keeps coming up with sophisticated products that consistently outpace our government’s ability to regulate them. Adjustable rate mortgages are just one of those inventions.
If a loan was really large, the bank would need to hold the note on its books, which meant it could not be securitized. The bank would not be able to free up the capital by selling the Note, it had to find a way to make money on the loan, so it sold the borrower an exotically financed loan.
