Over the past few months, with the ever increasing volume of loan originations, several questions seem to be at the top of the list on everyone's mind. I thought I would give some explanations for anyone who is interested - I call these the "Frequently asked Questions"

Answer: No. Your property taxes are locked in when you buy your home. Back in the 1970's, California passed legislation (entitled proposition 13) which, simply stated, says the property taxes can only be reassessed on the transfer of title of the property (in other words when you sale your house). Of course, as with any good law, there are some loopholes that need to be explained. First: If you do a significant remodel (with city/county permits) and significantly improve the basis of your home (such as turning a 3-bdrm 2-bath 1500 square foot house into a 5 bdrm 3 bath 2500 square foot house - now officially a two story house), then the property taxes can be reassessed based upon your new improvements to the structure. Now if the value of the land increased, you will not be reassessed on the increased value of the land, just the improvements to the structure. Second: Your property taxes are allowed to be adjusted upwards to a maximum of 2% per year to keep pace with inflation. But for the normal person, a refinance will not effect your current property tax liability.
 
How can you offer me a no cost loan? I know all loans have costs, so who pays for them?
 
Answer: We, as mortgage brokers, do not have one lender or one rate or even one program that we can offer to the public. We have a multitude of lenders that offer a wide array of programs at many different interest rates. Each lender offers us a matrix of rates at different prices. Whereas we can offer rates from as low as 6.0% on a 30 year fixed, we can also offer rates as high as 7.5% on the same program with the same lender. So what's the difference ?? It's simple, the cost of the rate. The lower the rate you choose, the higher your costs are. Where we might be charged 2.0 points for the 6.0% rate (which we have to pass onto you along with our point for our profit), we can also receive compensation directly from the lender if you agree to take a higher rate. In many cases, if you decide to take a high enough rate, then the lender will pay us compensation (in the form of a rebate) which we in turn can use to pay for all of your costs.
  
EXAMPLE: For someone who has a loan amount of $200,000, they have a choice between 6.375% on a 30 year fixed where they pay their own costs (say 1.0 point + $2500 is non-recurring costs) or to take a slightly higher rate, say 7.0% wherein the lender will pay us a rebate of 2.25 points which we can keep as our compensation. The commission generated by the 2.25% rebate will equal $4,500 - we can use this commission to pay your non-recurring costs of $2,500 for you and then keep the rest as our profit, thus in essence you just got a "free" loan. Now you could have gotten a lower interest rate, but you would have had to pay some or all of the costs in order to get your rate that low.
 
What is a rebate?
  
Answer: Again, as in the above question, a rebate is compensation that the lender pays us to make you a loan. The higher the rate that you agree to take, the larger the rebate and thus the larger our compensation will be. On the other hand, the lower the rate you choose, the lower the rebate will be and thus our compensation will shift from being lender paid to being paid by the borrower (or you).
 
I know there are an abundance of other questions that you all might have, so if you would care to e-mail me, I can try to answer them directly or if enough of you ask the same questions, I can answer them globally through e-mail.
 
I look forward to your questions or comments.
Thank you,

Jim Mihalick
Program Director
Cambridge Home Loans
(858) 481-292