Announcer: Please note disclaimers at end of show. Welcome to Creating Wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the Complete Solution for Real Estate Investors™.
Jason Hartman: Welcome to Creating Wealth Show No. 132. This is your host, Jason Hartman. Thanks for joining me today. We are going to talk about mortgage financing today. We’re going to talk about four different areas of mortgages here in just a moment.
A couple very quick announcements. No. 1, join us for IRA Investing Seminar. Again, you know the laws have changed and there’s good new opportunity going on with Roth IRA conversions and investing in real estate with your IRA right now. That event is a free event and a light luncheon will be provided. It’s Wednesday, December 9, here at our office in Costa Mesa, California; 11:30 a.m. sharp, ending at 1:00 p.m. It’s going to be a very quick presentation because of the lunch hour.
Also Creating Wealth Bootcamp on January 23rd and the Masters Weekend on March 6 and 7, and there we’re talking about 2010. If you want tax write-offs for this year, buy your properties now. You’ve only got a little time left. You have to be able to close by the end of the year, so be quick about it.
Business is booming in a lot of our areas right now. We have high, high activity and we are finding it a little bit tough to get inventory. Properties, when they’re going up on our website, they’re selling very quickly, so be sure to talk with one of our investment counselors here at Platinum Properties Investor Network about that.
Also, I want to make sure – I haven’t talked about it much lately, folks, but you have to subscribe to the Financial Freedom Report. That is our newsletter. I’m holding the new edition in front of me now. It’s 20 pages long and I tell you, there is some phenomenal information in here. So you can subscribe. It’s only $197.00 a year via email; $297.00 a year via print, and go to www.JasonHartman.com and go to the Store. And even the world’s cutest dog, my dog, Puppy, he writes a column in there a lot of times. So you’ll really enjoy that.
There’s a fantastic flowchart, by the way, on the front page that talks about paying the man, and it talks about the financial situation we’re in now and which way it may lead, whether we’re going to see inflation, deflation, price stability, monetary tightening, monetary loosening, and how that affects your investments in income property, stocks, bonds, savings, whatever else. So the newsletter, the Financial Freedom Report is awesome. I have not mentioned it much lately. Be sure you subscribe. You need to get yourself a copy of that and get a regular subscription.
If I don’t talk to you before, but I think I will, I want to wish you all a very happy Thanksgiving for all of our American listeners. And let’s go to the interview now with Randy. You’ve heard him on the show before and we’re going to talk about four important aspects of mortgage financing. Our next show, we have Nancy talking about internet marketing. And then after that, we have Mike Munger, a politician from South Carolina, former gubernatorial candidate, and I think you’ll really like his show. Very interesting.
So we’re going to keep talking about how you can gain financial freedom through solopreneurship business, very small micro-businesses, being a micro-preneur as we call it, and having home based internet marketing type businesses, and America’s most historically proven investment in that, of course, is income property. So that’s what the Creating Wealth Show is all about, creating income and creating wealth. Let’s listen in. Let’s talk about mortgages today. Here’s the interview with Randy.
Interview with Randy
Jason Hartman: You’ve heard him on the show before. It’s my pleasure to welcome back our mortgage expert, Randy Luebke. Randy, welcome.
Randy: Thanks, Jason. Glad to be here.
Jason Hartman: Tell us, what is the temperature of the lending market today? Things are still crazy out there.
Randy: They still are. If you recall back a year ago when the idea was that the banks are too big to fail and the government had to step in and do this bailout money, what’s interesting is to fast forward to today and realize that they’ve now created two, three, or four really big banks that really can’t fail. I think that’s a good place to start from.
And inside that, what I’m seeing on a day-to-day basis, is everything is as strict as it’s ever been, if not more so than ever. And we have literally no flexibility or latitude in terms of varying from the guidelines whatsoever.
Jason Hartman: So the guidelines are strict. Are they overcorrecting, Randy? Are they too strict? They were too loosy-goosy before for sure.
Randy: The answer is that the guidelines are not any different than they were back, say, in the late ’80s. The difference is there’s no variation from the guidelines. So if we have, for example, a 50 percent debt-to-income ratio and that’s the maximum, that’s the maximum and it can’t be one penny over. It won’t happen.
Jason Hartman: What’s going on in the world of disclosures when it comes to lending?
Randy: Well, that’s another big change that’s happened recently, and it’s people that are buying properties that are going to be mostly affected by it. It’s really a timing thing. And the idea is this, that when you take a loan application with us, we have a certain amount of days before we need to send out the initial disclosures just to tell you what the interest rate is and the terms and the various costs and fees associated with the loan.
Jason Hartman: That’s the Truth and Lending Disclosure.
Randy: The Truth and Lending Disclosure and the Good Faith Estimate, our closing costs. So in the past, what we were able to do, was meet with the borrower, take their loan application, and if we were in agreement with the terms at that initial meeting, we would be able to go right ahead and order their credit report, order their appraisal, and get the ball rolling.
Well, what’s happened recently is they put a stop to that where now we have to actually wait four business days before we’re able to order an appraisal on the property, and if there’s any significant changes, any material changes, which, by the way, means if the interest rate on the APR, the annual percentage rate, changes as little as an 1/8 percent, we have to redisclose again, and the soonest you would be able to sign loan documents would be seven business days after that.
Jason Hartman: But that wouldn’t be that much of a problem usually because the loan needs to be processed. But in the front of the transaction, what goes on because you said you have to wait four days to order the appraisal?
Randy: That’s right.
Jason Hartman: What’s the big deal? What’s the rationale there? I don’t get it.
Randy: Well, the rationale is when we order appraisals nowadays, we are going to collect a fee from the borrower to pay for the appraisal.
Jason Hartman: Oh, so what you’re saying is that they don’t want you charging the fee until they’ve been disclosed the terms.
Randy: That’s correct.
Jason Hartman: So if the borrower is shopping, then they can talk to three different people, get three different Good Faith’s before paying for an appraisal.
Randy: Before paying for that appraisal, exactly.
Jason Hartman: That’s not that big of a deal.
Randy: Well, the big deal you mentioned not at closing because of the processing time, but the truth of the matter is, we used to work with our borrowers and you could literally wait until you were ready to draw loan documents to choose what points and fee structure you wanted to have with your loan or choose which loan program you wanted to go with, 15-year or 30 or whatever. Not anymore because if they make a change to that loan program that affects the APR, it’s a seven-day wait before we can get the loan documents out to close escrow.
Jason Hartman: Oh, that is a big deal. I take back what I said then because what you’re saying is that it makes it hard for the buyer to switch products during the purchase transaction. So here again, I would assume that the government, in all of their infinite stupidity, is trying to help the consumer and they may actually, in some cases, be hurting the consumer. No?
Randy: I think they are.
Jason Hartman: They are which one?
Randy: I think they’re doing what you said in the latter. They’re doing exactly what you say. Government wants to come in and protect the consumer. They don’t want consumers to get locked down and pay upfront fees, which make sense, but in the process of doing this are a lot of unintended consequences. Now they’re going to cause delays to escrow when the borrower, for legitimate reasons, would like to change loan programs or pay more or less points on a loan.
Jason Hartman: And you can see that sometimes, as you’ve dealt with hundreds of times over the many years you’ve been in the business, the rate is going to change and maybe you’re in a market where the rates are trending up and the buyer wants to switch horses, do a different program because a new program became available, and you can’t switch them without violating the rules.
Randy: Yeah, well, you can’t violate the rules. We have to wait seven days. The violation isn’t going to happen.
Jason Hartman: Yeah, not that you would violate the rules, but you can’t switch them. Wow. Okay, there we go again, government and all their wisdom.
Randy: Another thing to bring up is appraisals. In the past, of course, we had relationships with appraisers in local markets.
Jason Hartman: And now it’s appraisal management companies.
Randy: Now it’s appraisal management companies.
Jason Hartman: This is really a seismic shift in the industry, I think, and I’ve read a lot about it. You can see the rationale behind it. They don’t want you guys influencing the appraiser, right?
Randy: Absolutely, that’s it.
Jason Hartman: They don’t want the realtor influencing the appraiser. They don’t want the lender influencing the appraiser. There were too many abuses there, right?
Randy: Well, I don’t know how many abuses there were, but certainly, there were abuses. And that’s the issue. We maybe strong-armed an appraiser to give us a value, but if you flip-flop it and go to where we are today, now the way they choose an appraiser is from these appraisal management companies, who have a pool of appraisers that are licensed appraisers and they’re qualified.
Jason Hartman: But it’s a blind pool, so you don’t know which appraiser will be going to that property.
Randy: Which I don’t have a problem with that. What I do have a problem with is the way they actually choose the appraisal. It’s like a reverse eBay, meaning –
Jason Hartman: Oh, it’s an auction. It’s a reverse auction. So tell us how that works.
Randy: Basically, if the appraisal fee is, say, $500.00 and I’m an appraiser and I’m willing to do it for $400.00, the next guy is willing to do it for $350.00, and the next guy is willing to do it for $300.00, and so on and so forth. Do you see where I’m going with this? What you end up with is potentially the person who is the least qualified to do the appraisal.
Jason Hartman: The lowest bidder.
Randy: The lowest bidder. The least busy. The least need. The least valuable, and not necessarily a requirement that they even be familiar with that particular market.
Jason Hartman: But that reverse auction scenario isn’t legislated, right? That can’t be legislated that way. That’s just the way these appraisal management companies – they’re becoming like the Lending Tree for appraisers in essence.
Randy: And in essence right between the cost of the appraisal and what they can actually get it bid out for.
Jason Hartman: Let me just explain if I may, and I’m sure you want to add to this, what happened here. So back in the day, in the old days, which is only 8 – 10 months ago, a year ago, the old days, what would happen is appraisers would develop relationships with lenders, with mortgage brokers, with mortgage bankers. And they would come into the office and they would call on them and schmooze them for business, if you will, and maybe bring them a bottle of wine or some cookies or bagels.
Randy: We never got that.
Jason Hartman: You never got that? Well, I know appraisers that did that. These mortgage companies were giving them business. And so their interest was to – their client ostensibly was not the borrower – it was the mortgage company. So this is just how it worked. I’m just explaining it. They would schmooze the mortgage company to get business and then when there was an appraisal that would come up here and there, where it was hard to bring in the value, the mortgage company might, in some cases, exert some pressure on the appraiser, say, hey, you have to bring this in so I can get my deal closed.
And what would happen there was the value would be artificially high. That was the abuse.
Randy: That was the abuse, but if you think of it, again, once the appraisal goes from the lender to the underwriter’s desk, the underwriter is supposed to review that appraisal. And so the underwriter is looking at the values, comparing the comparable sales, and essentially doing another review without actually going to the field to see the home. So there was a checks and balance system there.
Jason Hartman: There was, but was there always a review appraiser? I mean there was always an underwriter, but some appraisals had appraisal review and some didn’t, right, in the old days?
Randy: Well, a formal review is done by an appraiser, but all appraisals were reviewed by underwriters to look for the variances in the product.
Jason Hartman: But again, just to kind of do a little history here, those underwriters work for the mortgage company so they were under pressure to get loans done. They were under pressure to do as many files as possible so the quality goes down when the pressure goes up potentially. But that reverse auction thing is terrible. That’s awful.
Randy: Yeah. So now we have a system where we’re basically getting the least qualified, least busy appraisers. And I don’t mean, by the way, to disparage any appraisers listening to this podcast whatsoever.
Jason Hartman: Especially the lowest bidder. Or except the lowest bidder maybe.
Randy: Well, it only makes sense. That’s the person that’s going to be available and that’s an issue. That’s an issue. I think appraisals – well, I don’t even think; I know because I’ve been through these market cycles before, where it’s really going to become difficult is as we start going through the transition, meaning as home values stop declining and start going back up again, it’s going to be a problem because it was easy, of course, when home values were continuing to go up and then you bought something for less because you had a higher comparable.
But when you go to the transition from the other direction, where now a house is selling for $20,000 – $40,000 more than the previous home, the appraiser has to know his stuff to be able to justify why somebody’s willing to pay that in any given market.
Jason Hartman: So is that causing potentially the market in the bubble markets that are collapsing – and most of them have pretty much collapsed now; there’s maybe only a little bit more to see come down, I think, in some of these markets. They’re not quite at the bottom, but they’re getting close. Is that causing the market to decline faster potentially? It seems like that dynamic could be occurring.
Randy: It could. It depends on how many short sales and foreclosures you’re going to have in a market. The way the appraiser looks at it is let’s just take a given neighborhood and in a given neighborhood, say that there are ten sales in that particular neighborhood. If one of those sales is a short sale or one of those sales is a foreclosure, they’re told to ignore it. They have to list it. They have to show it as a comparable. But they’ll make note that this was a short sale or a foreclosure.
Jason Hartman: An artificially low sale potentially. And by the way, we should also, Randy, and you and I both know this, say to the listeners that just because it’s a foreclosure or a short sale doesn’t mean it’s a good deal.
Randy: Really good point.
Jason Hartman: Haven’t you seen foreclosures and short sales that went above the comps that were really overvalued sometimes because they’re bid up and there are multiples. Some of these folks, you just need to work with a person with experience, right? That’s the bottom line.
Randy: When you’re out there in the market, you definitely don’t want to be overpaying and it’s easy to get caught up in that because a lot of listing agents are taking homes that are REOs, purposefully advertising that a price that they know is way below what it will actually sell for, getting buyers to bid them up.
Jason Hartman: Yeah. So sometimes that auction scenario actually makes it overvalued.
Jason Hartman: But then again, sometimes an auction can be a good deal. It depends. This stuff, there’s no hard and fast rules about a lot of it. It just depends.
Randy: Well, know your market.
Jason Hartman: Yeah, know your market and have a professional that’s experienced that’s going to help you.
Randy: The last thing I wanted to say about the current lending environment and we talked about this before, too, as a perspective buyer, being pre-approved is more important than ever. Let’s kind of go back on this idea of short sales and foreclosures right now. Most lenders won’t even accept an offer unless you have a bona fide pre-approval. Not just an opinion letter from somebody that says I think this guy is qualified. But they want to verify the income, verify the assets, verify the credit, and actually have a bona fide approval from one of the automated underwriting systems. A pre-approval is very important nowadays.
Jason Hartman: Yeah, I totally agree with you. How long does the pre-approval take because these aren’t the instant pre-approvals that are like written on a piece of letterhead that’s the worth the paper it’s written on maybe, that just says, hey, this guy is probably going to qualify for a loan. This is a formal approval.
Randy: Formal approval.
Jason Hartman: How long does that take?
Randy: The answer is the process itself can take an hour, but it depends on the borrower.
Jason Hartman: How can you verify income in an hour, though?
Randy: Well, that’s it. It depends on the borrower providing us with the income and asset documentation. So if we meet with a borrower, they show up with the W2s, they show up with the tax returns, they show up with the paystubs and the bank statements, now we can verify that, put accurate data in the system, and within an hour, you can have a formal approval.
Jason Hartman: Good. So basically, when you talk about the temperature of the lending market today, there are sort of three pillars there. There are disclosures, appraisals, and pre-approvals. All very important for people to understand.
Randy: And one more maybe, Jason, which is strict adherence to guidelines. Don’t expect favors. Don’t expect variations on what is offered.
Jason Hartman: Maybe that goes under the pre-approval category. But talk to us just for a moment about credit scores, if you would, Randy, because what I see happening out there is millions and millions, maybe tens of millions, maybe even more than that of people having their credit damaged, and I see people that are strategically hurting their credit by defaulting intentionally on loans to get loan modifications or just not to pay. I’m hearing stories all the time of people sitting in their houses, haven’t paid for a long time, and the lender hasn’t even filed a notice of default. It’s like a free ride. It just irks me to no end. Credit is getting pretty important, isn’t it?
Randy: You know I’ve always felt that credit is like the cornerstone for this whole process.
Jason Hartman: Credit score.
Randy: Credit score, exactly. And in fact, I guess Fannie Mae and Freddie Mac agreed with me about a year ago when they started doing credit pricing based on credit scores. So depending on the loan to value, the amount of money you’re borrowing versus the value of the property and your credit score, you may end up paying two or three points more for the same rate that somebody would have if they had good credit.
Jason Hartman: Percentage points on interest or points in loan fees?
Randy: On loan fees. So on a $200,000.00 loan, you could pay $4,000.00 more than the guy sitting next to you. Same loan, same loan to value, same property, but because you didn’t have a good credit score and the other person did, you paid $4,000.00 more in fees.
Jason Hartman: Like in that example and I know this is just off the top of your head, but what’s the difference in the credit score. Like the A level credit is 720 and above still, right?
Jason Hartman: 740 FICO Score.
Randy: And they even have another criteria at 760 and above now.
Jason Hartman: Whoa, that’s really stellar credit. I remember during the subprime debacle you could just tell it was a bubble waiting to burst. They were making loans to people with credit scores like at 500, maybe even lower. I don’t know. What’s the lowest FICO score a person can get a loan with nowadays? And maybe you’re not speaking for all lenders; just your bank. I’m not sure.
Randy: Let me just say, in general, if you have a score below 680, it’s going to be difficult. If you have a score below 580, it will probably be impossible, unless you get an FHA loan.
Jason Hartman: Then what happens?
Randy: Then there is no minimum credit score.
Jason Hartman: Do you do FHA loans?
Randy: We do FHA loans. And you can have literally a zero credit score. You could have no credit and we’ll still give you an FHA loan.
Jason Hartman: Can you tell us about that? I mean why?
Randy: It’s just a policy. FHA is insuring the loans. The government is insuring the loans. This is kind of the irony of it again with FHA.
Jason Hartman: Didn’t we just go through this whole problem?
Randy: Jason, we went through it again.
Jason Hartman: Haven’t we learned anything? This is so recent. It’s not like ancient history either.
Randy: Don’t you remember the saving and loan bubble? That was only eight or nine years ago.
Jason Hartman: It’s crazy.
Randy: And we’ll go through it again. Ten years from today, we’ll probably sit down in front of whatever we’re doing ten years from today and interview the same thing. People forget. Memories are short.
So yeah, FHA, with the FHA program, you don’t have to have any minimum credit score and we can still make the financing, even with as little as 3.5 percent down payment.
Jason Hartman: Wow. It seems like we had the subprime problem. It was time to tighten up on qualifying criteria. Get good at qualifying people. Vet the borrower well. In some cases, they’re just throwing gasoline on the fire.
Randy: Well, and the irony is we need to have stated income loans again for a variety of reasons. Not just to make up income per say, but there are a lot of people that have income that just doesn’t show up on their tax returns.
Jason Hartman: Drug dealers, money launderers, mafia. I’m kidding. Well, I’m not kidding actually, but that’s not the only person. Tell us about the real legitimate case when that happens, if you would.
Randy: Well, let’s talk about a senior citizen, for example, somebody that is withdrawing money from, say, a life insurance policy and they’re taking cash that they put into these life insurance policies and let that money grow on compound. Now when they take it out, that money comes to them because it’s a loan. Guess what? Income tax free. It’s not reported on their income tax return.
In your seminars, you talk about “Refi till You Die,” right? And the strategy with “Refi till You Die” is you can take out $150,000.00 of equity and not pay taxes on that money. Well, that money is not reported as income, but it certainly is legitimate income and it’s available to the homeowner to spend. But we can’t use it to qualify you for a mortgage.
Jason Hartman: That’s very true. That makes a lot of sense. Definitely a challenge there. Okay, so what’s going on in the world of rates nowadays and what’s your prediction for the future?
Randy: Yeah, this is a really good topic. I did this in research for our call today because I wanted to see a couple things. First of all, I have a chart here that we’re going to look at and I’ll talk so that the listeners can kind of visualize what we’re seeing. If you look at the chart, the colored blue one that I gave you, Jason, this is a chart that shows the history of the long-term U.S. government securities. So we’re talking 30-year Treasury bonds essentially. And this chart, interestingly enough, goes back 217 years, so it’s a big sample.
Now, you’ll notice I drew some lines on there as we look across this graph that the rate of 3 percent and 5 percent – do you see the two lines that go across the 3 – 5 percent? – Well, those lines representing the interest rates on those Treasury bonds represent what the rates were about 80 percent of the time across 217 years. So let me say that again. Out of a 217-year sample, the 30-year Treasury bond ran between a range of 3 and 5 percent 80 percent of those years.
Now if you go up 8 percent, in other words, from 3 – 8 percent range, now we have 90 percent. The range of 90 percent of the years is going to fall into that 3 – 8 percent range. So now I looked yesterday to see what the 30-year Treasury bond was yesterday and the interest rate – this is October 28th – so October 27th, the rate was 4.29 percent. So what I’m pointing out here is if you look back in the big picture, right now we’re at 4.29 percent. We’re within that 80 percent range of Treasury bonds.
What’s really interesting, if you look to the very end of the graph and look to the area that starts kind of about 1951 and then goes all the way to about 2001, do you see that big spike in interest rates there?
Jason Hartman: Sure, yeah.
Randy: So this is what we remember in terms of interest rates. We remember this hyperinflation or very high rate of inflation.
Jason Hartman: Which is nothing compared to what other countries have experienced.
Randy: That’s right, which is another piece of this pie here because you look at this; we’ve had a very stable interest rate environment for a 200-year history. So the question would be what happened in 1951 that started this upward increase in interest rates. What would be your perspective on it?
Jason Hartman: Well, quite a few things. America really owned the Industrial Revolution for quite a while. We started really abusing monetary policy with the Federal Reserve. Taxes increased. And then in ’71, we went off the Gold Standard. So that was the period where – and you look at the ’70s, that was a disaster.
Randy: That’s where we have the huge spike. So basically, what I’m showing here is going back into the ’50s, which is right after World War II, basically the idea of Cold War, the locking up of trade, the idea that we weren’t trading with the world, and the reason I want to bring that up –
Jason Hartman: Oh, yeah, I forgot to mention globalization. Gee, I left out a minor thing here.
Randy: And the point being we have to make everybody aware of the same idea it could happen again. People are talking about protectionism. People are talking about shutting down markets and holding prices and doing that. You can see what happens when you shut down global markets. Then all of a sudden, the cost of goods and services in your local market get jacked up because there’s no other place to supply them.
Jason Hartman: Okay, but what also happens is employment gets better because Americans have jobs because they’re not outsourced to China.
Randy: Well, okay, so Americans have jobs, and then they’re going to still not have a fair and level playing field in competition for prices of services, which will drive up the cost of everything.
Jason Hartman: Okay, so what are you advocating?
Randy: Well, what I’m advocating is this. If you hear people, especially politicians, talking about the idea of shutting down markets and protectionism, it’s something that you really need to stay away from. We need to have open markets. We need to have free markets where people can trade globally. That’s what I’m advocating.
You know what else is really interesting and we’ll get off this chart. If you look at 9/11, the last little number on there, 9/11 we were still at interest rates that were about the same as they were in 1979 and you can see right after 9/11 is where all the interest rates crashed.
Jason Hartman: Precipitous decline.
Randy: Big precipitous decline. So with that, let’s switch to this other chart. This is a much narrower look at interest rates, but I’m still going back two years. So what I wanted to do is get a sense of what’s really gone on over the last two years, so I’m going to start with, again, today. And this is broad based, but this is what the interest rates would be for an owner occupied 30-year fixed rate loan, so this is kind of vanilla. As of yesterday, we had a 4 7/8 percent 30-year fixed rate at a cost of about two points; 5 ¼ percent 30-year fixed rate at a cost of no points. So 4 7/8 at two; 5 ¼ and zero points. Pretty good.
Now as you look at this chart, and you probably understand this that as the price of bonds goes up, which is what we’re showing here, the interest rate goes down. So the higher the level on this chart, the lower interest rates should be.
Jason Hartman: Those are counter cyclical.
Randy: It’s like a teeter-totter. Rates go up, bonds go down; bonds go down, rates go up.
Jason Hartman: Teeter-totter is a great analogy.
Randy: That’s exactly how it works. So if you look at this chart, the first thing I noticed was, wow, we’re pretty much at a peak again. This is going back two years. You can see all the ups and downs and ups and downs and ups and downs, but we’re pretty much at this peak. If I go back two years, fully back to two years to October 28, 2007, interest rates at that time were 5 ¾ percent for two points and 6 1/8 percent at zero points. Two years ago. Still good rates, by the way, overall. But it’s still about a 1 ½ percent difference from two years ago today to today.
Now let’s fast forward. Go back to January 6th of this year. That was kind of the peak, if you will, if you look at this chart. And sure enough, if we look at the interest rate on January 6th, at 4 ¼ percent, 30-year fixed-rate loan costs 2 points, and at 4 ¾ percent it was zero points. You follow me?
Jason Hartman: Yes.
Randy: Now let’s go to March 6th. So we went from January to March, three months later, where the bond prices are virtually the same. It’s almost a straight line across. You with me? So if the prices are the same, you would think the rates would be the same as well.
Jason Hartman: But they’re not.
Randy: But they’re not. So what happens is 4 ¼ goes to 4 3/8; 4 ¾ goes to 4 7/8. Not much difference. Just about a 1/8 percent higher. But now go all the way over to October 7th, which was the height of the bond prices, which should have been the lowest rates we’d ever seen ever, October 7th, just a few weeks back; 4 5/8 at two points and 5 1/8 at zero points.
Jason Hartman: So what does this all mean?
Randy: Well, what it means to me is that the banks are getting a little greedy.
Jason Hartman: A little greedy? That’s an understatement. They take a bunch of TARP money so they can pay out a bunch of big bonuses and then don’t lend it back like they’re supposed to.
Randy: Or lend it back at higher rates because basically, the money cost them the same back in January as it did October 7th, but they’re charging 3/8 percent more of the interest rate.
Jason Hartman: Charging a higher premium on the money.
Randy: That’s right. And if you wanted to equal it all out, if I wanted a 4 ¼ percent rate on October 7th, I would have paid 4 7/8 points for that rate. Not two; 4 7/8 points for that rate. I wanted a 4 ¾ percent rate, which would have been no points in January, 2 ¼ points in October.
Jason Hartman: So this begs the question, Randy, we have a theoretically competitive market and if banks are getting the money cheap, some competitor is going to break the price barrier and offer mortgages at a better deal. Now, of course, when you have a consolidation of banks and you have fewer choices in the market –
Randy: Back to our very first point.
Jason Hartman: You’re going to get the consumer gets screwed. Is it just that there’s less competition? Is that why they can charge a higher premium? Or are they building in a higher risk premium, saying that we’re so scared of defaults that we all have to charge more, and they sort of collectively – well, hopefully they didn’t have a meeting on this because that would be a violation of anti-trust laws, but they probably violate them all the time anyway. But did they sort of all come to the same conclusion that they have to charge more because it’s a risky environment? What’s happening?
Randy: You and I can speculate. We’re not there making the decisions. But back to my original point as we opened this conversation, too big to fail. I think there’s too little choice. I think there are too few lenders. There’s too little competition.
Jason Hartman: And I think the competition is going to get smaller and the number of lenders will get even smaller.
Randy: Which will make the cost of borrowing go up.
Jason Hartman: So there, folks, is another urgency to buy and lock in long-term, 30-year, fixed-rate financing.
Randy: This is a big deal and we said this many, many times. Rates are on sale. Homes are on sale. It’s an incredible opportunity to go out and really make a mark.
Jason Hartman: And Randy, I thought this first chart, the blue one, I thought you were going to get into the Treasury auctions. That’s where I thought you were going with this. And you didn’t, but that’s really another big pressure coming onto mortgage rates, if you ask me because those Treasury auctions, I mean every expert I have on the show that consults on this, that writes books on it, they’re all talking about how the auctions are failing. And this is being hidden to some extent because they say the Federal Reserve is acting as a shell to artificially prop up the auctions. The foreign buyers, most notably China, aren’t really buying our debt anymore.
Randy: They showed up yesterday.
Jason Hartman: Yeah, but did they show up and did they buy a lot?
Randy: They bought a lot.
Jason Hartman: Well, what happened yesterday?
Randy: Well, they had some short-term bond auctions. There are lots of different 1-year, 2-year, 5-year and so. What you’re referring to, though, is part of the stimulus package is the Fed is charged with the ability to spend $1.25 trillion on buying mortgage-backed securities from the market. So by doing that, they’re creating an artificial market of an extra $1.25 trillion worth of purchasing power. The more you buy something, the more it drives up price; the more you drive up price, teeter-totter, the lower the rates go.
Jason Hartman: Yield is lower.
Randy: But their checkbook has almost run out. They’re about $900 billion right now. They have a few more dollars to write. They’re slowly easing off on that. So going into what I think is going to happen next year, I think fundamentally, again, if we’re looking at these charts here, I think fundamentally the economy is still not robust by any stretch of the imagination. In fact, I just tell people now in October we’re going to start to see signs of it stopping getting worse. That’s about where we’re at right now. For this quarter and next quarter, things are going to start to stop getting worse. It’s not going feel better.
Maybe by this time next year, 2010, we’ll start to see some signs of recovery. So without inflation in place, we’re not going to see the rates go up. Once that recovery starts, then the inflation will take hold.
Jason Hartman: I think the bigger fear is inflation. There are a few deflationists out there, but I can’t get my head around it. I’ve listened to them. I’ve read their stuff and they don’t strike me as the way it’s going to go. Now, granted, we may have some interim deflation. We’ve had some already. But if you talk to anybody, and listeners, if you just look in your own life, if you’re wealthy, it’s pretty deflationary. But if you’re not wealthy and you’re just getting by, actually, there’s quite a bit of inflation going on even now. The basics of life are still getting more expensive.
Randy: It is. It depends on what you’re buying. If you’re buying gasoline for your car or health insurance for your family, food, those things are.
Jason Hartman: College tuition. Are you kidding me? I mean college tuition inflation; I heard a survey that just in the last year it’s up almost 8 percent in the worst financial crisis in seven decades. That’s amazing to me.
Randy: College inflation over the last 10 – 15 years has always been about 6 percent, well ahead.
Jason Hartman: But this year, wow! So the basics are getting more expensive and I call that the hidden inflation rate. And then, of course, you have all the manipulation of the indices and hedonics and all the rest we’ve talked about.
Randy: And that brings us back again to why is it valuable to get fixed rate mortgages today because if you get a loan at 5 percent and all of a sudden we’re in a 5 percent inflationary environment, the real cost of that loan is nothing.
Jason Hartman: That’s for sure. And what if inflation gets to 10 – 15 percent, which has already happened in the U.S. and compared to other countries that have actually managed their money better than we have, we just happen to be the reserve currency. Inflation could be a lot higher than that.
Okay, let’s get to another part, Randy, and I definitely agree with you that there’s some urgency. These 30-year, fixed-rate mortgages are big time assets, folks, and you have to acquire as many of those assets as possible during this period. That’s really critical for you to do that. And Randy, your famous saying that I always ask you to say, I’ll let you do it. I’m not going to say it.
Randy: Most people think of their home as an asset and a mortgage as a liability, and the fact is it’s the other way around because the home costs you money. It’s a liability. But a mortgage, especially right now, a fixed-rate mortgage makes you money.
Jason Hartman: Now take that exact quote and apply it to an income property. So the way I would apply it and I’m putting you on the spot here is that if it’s an income property where the land is cheap and you’re following my risk evaluation model, if you’re doing that, then you’re in a situation where essentially buying packaged commodities or construction materials that are indexed nicely to inflation. Not tied to the dollar because they’re globally traded. And that becomes an asset. It produces income and the mortgage is also an asset, so you have what I call the asset trifecta there. You have three assets and that mortgage certainly being a huge asset that most people think is a liability.
Randy: Leverage makes the world work.
Jason Hartman: Yeah, it really does.
Randy: Banks couldn’t function without it. That’s exactly how it works.
Jason Hartman: Well, that’s your Bank of U paradigm, right?
Randy: That’s it.
Jason Hartman: Well, good. Let’s get to another discussion here, foreign nationals. We have so many foreign listeners. If you’re in another country outside of the U.S., folks, this part is for you. You’re not going to like what Randy has to say too much, but the good news is that it doesn’t apply everywhere. It only applies to his source. But tell us what’s going on in financing foreign buyers, Randy. This is getting tougher and tougher.
Randy: And let’s qualify “by my source.” We’re really talking about Fannie Mae and Freddie Mac, the agency lending, lending agencies. So in preparation for our talk today, I researched all of the guidelines under every loan program that we have in our quiver of programs. There are over 100. Every one of them, without exception, said foreign nationals, no, or actually the terminology they use is “not allowed.”
So as of today, foreign nationals, in terms of getting agency financing, which would be your 30-year fixed rate, your 15-year fixed rate, any of the traditional loans, foreign nationals are essentially locked out.
Now, don’t be too disheartened for anybody listening around the world because I do have just a couple solutions to offer for you.
Jason Hartman: We like solutions.
Randy: We love solutions. The first one is really out of the box.
Jason Hartman: The bad news first is what you’re saying here, right?
Randy: Yeah, and you know what? Things will change. Foreign nationals were good borrowers a few years ago. They’ll become good borrowers again. For whatever reason, they’ve tightened up on those guidelines and they’ll stay with that for now.
But if a foreign national wants to buy an owner-occupied property, not an income property, but a property they would live in here in the States, they would be allowed under the FHA guidelines to purchase a loan. You don’t have to be a resident of the United States to get FHA financing, but you do have to buy an owner-occupied property.
Jason Hartman: So what do you do if you’re a foreign buyer and you want to buy an income property?
Randy: Well, this is the solution I found for us. It’s called a Repurchase Agreement. Have you heard that expression before?
Jason Hartman: I’ve heard it, yeah.
Randy: Another term for Repurchase Agreement is called a stock loan. And this is a pretty interesting concept. The most similar analogy would be like a margin loan. A margin loan on stocks is basically you take your securities and then you go to the wire house that holds those securities and they’ll give you a loan securitizing against those stocks.
Jason Hartman: Usually 50 percent.
Randy: Usually 50 percent.
Jason Hartman: So if you have $100,000.00 in stocks, they’ll loan you $50,000.00 to buy more stocks, so you can get an account up to $150,000.00, right?
Randy: That’s how it would work. Now, the downside of that is what you already said is, first of all, you can only get 50 percent of the stock value. The second downside is if those stocks decline in value, you have to do what’s called a margin call, which basically says you need to bring in money to make up the difference between the value of the stock and the 50 percent you took out originally.
Jason Hartman: In the loan-to-value ratio, if you will.
Randy: That’s right.
Jason Hartman: Okay, so here’s the thing that I love about real estate is because you really don’t get a margin call on real estate, even if the value declines, if the property is stabilized. So that’s a key term, listeners. If the property is stabilized, meaning that you’re never forced to sell it – in other words, it’s a self-supporting property, so the income generated from the property will support all of the costs associated with the property, then you just sit and wait. And in real estate, with history as our guide, time heals all wounds.
You may have a property that’s underwater now and you’re not forced to sell it. So just relax. Just run your property through the storm and it will run through the storm fine.
Now if you were a buyer who bought a property and put either nothing or very, very little money down, you need to understand that you haven’t paid your down payment yet. You’ve deferred your down payment. So if you have potentially some negative cash flow, the question is there are two kinds of negative cash flow. There’s negative cash flow that’s generated because the property was a bad deal in the first place and you may have put little to nothing down or even put a lot down, and the property never generated a good enough RV ratio, or rent-to-value ratio, to cover its own cost. And that was just a bad deal. So that’s a bad deal. You got yourself in a bad deal.
There’s another type where you intentionally took on negative cash flow as really a deferred down payment because you didn’t pay our down payment up front. You decided at the beginning that you were going to pay it on a monthly basis, and as such, maybe you put only $5,000.00 or 5 percent down, very little money down, and your deferred down payment was $50.00 a month. So you’re paying $600.00 per year to finance the down payment that you didn’t pay up front.
Randy, I have to tell you. It is amazing to me how many seemingly sophisticated people that just do not understand. It’s so simple. It’s so clear to me. But I don’t know why some people just don’t get it.
Randy: Because it’s not simple. But it is clear.
Jason Hartman: It’s totally simple. What’s not simple about that? If you didn’t put enough down and you bought a property that was a good deal, that made sense from the day you bought it, all you’re doing is deferring your down payment. You’re paying it over the course of the first two or three years instead of all up front.
Randy: It’s just memories are short.
Jason Hartman: Memories are short and I think monthly expenses are an emotional issue.
Randy: Exactly. That’s where I was going.
Jason Hartman: Good point. That’s the fair statement because people just get really illogical about the whole thing and they forget what they agreed to up front.
Randy: That’s right. So they see themselves writing a $500.00 check every month and thinking it’s awful, but they forgot they didn’t put that $20,000.00 down in the beginning.
Jason Hartman: Yeah, they forgot they got $20,000.00 extra sitting in the bank that they have not yet used.
Randy: Maybe what we should have done is have them give that $20,000.00 to us and then we could have written the check for them.
Jason Hartman: Right and put it in like a slush fund or escrow account. Yeah, I agree. Then it would be a lot more logical, but you know how people are.
Randy: Okay, I’m going to bring you back.
Jason Hartman: Okay, yeah, bring us back to foreign nationals. Sorry.
Randy: Here’s how the Repurchase Agreement works similar to a margin loan. However, instead of getting 50 percent of the value of the equity as a loan, you up to 80 percent of the value of the equities. Significant difference, No. 1. No. 2, you can pick the term of the loan anywhere between 3 – 10 years and during that term, you can fix the interest rate anywhere between 3 to a high of 5 percent.
So I’ll kind of go through that really quickly. If I had $100,000.00 of equities, I could get $80,000.00 from this repurchase agreement and the interest rate I would pay on that $80,000.00 would be between 3 – 5 percent. That’s a fixed rate. And I’d be able to repay that, interest only payments, during the next 3 – 10 years.
Jason Hartman: Who offers this?
Randy: There are several institutions who are doing this around the country. They can contact me because obviously this is a specialized type of process. But the fourth characteristic of a repurchase agreement, which margin loans don’t carry, is it’s a non-recourse loan.
Jason Hartman: That’s cool.
Randy: This is very cool because if you think about it, let’s say you take that theoretical $100,000.00 and you get $80,000.00 of cash if you will out on that $100,000.00 of equity and those securities go in the toilet. Let’s say they go bankrupt. They file Chapter 11 and they’re out of business and now worth nothing. Guess what? You still keep the $80,000.00 and you don’t have to pay the $80,000.00 back. It’s a non-recourse loan.
Jason Hartman: That’s good.
Randy: That’s an opportunity not available to just foreign nationals. It would be available to anybody and it’s a great way to really have your cake and eat it, too, because you could invest in a Spider in like the S&P 500 fund and then borrow 80 percent of the money out of that.
Jason Hartman: Right. I looked at that. I remember I looked at that doing it myself back in – oh, I’m going to say 1996 or 1997 – when I first learned about those types of deals. And I wanted to do it against my retirement account.
Randy: Can’t do it.
Jason Hartman: They wouldn’t let me.
Randy: Still can’t.
Jason Hartman: Yeah, because that was not an arm’s length transaction. You can’t do it against retirement funds. It has to be non-qualified funds. So people should know that.
Randy: That’s correct. It’s another good solution for us to work with. The last thing I wanted to talk about today is something I guess you’ve already previously discussed on a podcast?
Jason Hartman: Yeah, I think this is really exciting, listeners, so listen up. This is a good, good opportunity what Randy’s about to talk about, so go. It’s the Roth conversion option.
Randy: The Roth conversion, the 2010. This is the tax sale of our lifetime. And just to kind of put the framework on this house here, any of us who have put money into qualified plans, whether it’s an IRA, a 401k, a 43B, 457, it doesn’t matter what type of qualified plan it is, the benefit of doing that is really twofold. One, you get to put in pre-tax dollars, so if I earn $1.00, I can put the full $1.00 in, as opposed to tax dollars, which I would only have, say, $.70 left on a dollar.
But in addition to putting in whole dollars, I also get to have that investment growing compound without having to pay taxes on it.
Jason Hartman: On a tax deferred basis.
Randy: On a tax deferred basis.
Jason Hartman: So eventually, you will pay tax on it.
Randy: Oh, yes, and of course, Uncle Sam is just wringing his hands waiting for that time to come.
Jason Hartman: Right, 59 ½ you can start taking distributions or 70, I believe, you’re forced to.
Randy: Seventy and a half you have to.
Jason Hartman: Seventy and a half, okay.
Randy: Yeah, at 70 ½, which is a big point because a lot of people, when they get to that age of 70 ½, if they don’t need the money, they would really just like to let that money grow on compound and leave it to their heirs.
Jason Hartman: Randy, I have to make a point here because this is really important. And Harry Dent recognized this a long time ago. Robert Kiyosaki, his book Rich Dad’s Prophecy talks about this. And folks, if you just look at the aging baby boomers and you look at their age and you just calculate that into the stock market, this is one of the reasons that there is a major school of thought out there that the stock market is going to crash badly, 2010, 2011, 2012, 2013, 2014. All in those years, when these baby boomers either can take distributions by choice or they’re forced to take distributions.
Now I’m the only one who’s thought of this that I know of, but here’s what I want to say and I’d love to get your take on this. Money doesn’t just evaporate unless it was never really there in the first place. And in the financial crisis, money didn’t evaporate either. It was just never really there in the first place. It was all on balance sheets and it was fake.
But what happens is money does change hands and it changes form a little bit, and so no one is talking about, not Harry Dent, not Kiyosaki, about the fact that these people are forced to take distributions and I agree with that – that’s going to be bad for the stock market, really bad, so you better get ready.
Randy: I know where you’re going with this.
Jason Hartman: I don’t know if you know where I’m going. Maybe we’ve talked about this before, but I don’t think so. But here’s the question I always ask. Seventy percent of the S&P is really consumer spending. That’s most of the spending any of us listeners do is going on in the S&P. So this begs the question and may tell whether the stock market is a Ponzi scheme or not – I think it is a Ponzi scheme – but the question is this: Is it more important for a company to have customers or shareholders?
Randy: That isn’t where I thought you were going with that. That’s good.
Jason Hartman: Oh, you didn’t think that. I’m the only one that’s thought of this that I know of, so I’m taking full credit for it. And listeners, if you’ve ever heard this theory before, please go to www.JasonHartman.com and click the Ask Jason button and let me know because I’d really like to know.
So people are forced to take distributions. Well, they have to do something with that money. They stick it in the bank. Well, then the bank uses that money maybe. Hopefully they loan it, they spend it, whatever. They take big bonuses for themselves and then spend it. Or they just spend it on their own life. It doesn’t evaporate. But if it’s more important to have investors than customers, it seems to me like Wall Street is a Ponzi scheme.
Randy: Well, see, this is where I thought you were going with that because money doesn’t evaporate, so the idea of the stock market crashing, especially when you have so much of the stock market based on consumer consumption, that money is going to get spent. So if I cash the money in from my 401k and I still use it to buy clothing and travel and entertainment and medications and healthcare and so on, I’m going to throw that money right back into the economy, which should keep the values of stocks up.
Jason Hartman: Right, but the question is I don’t know what’s more valuable to a company, shareholder or customers? That’s an interesting question. I would love to hear some listener feedback on that.
Randy: That’s a thought I never processed before. Let’s just go back to the point here.
Jason Hartman: Yeah, let’s go back to the Roth 2010 conversion. And folks, this is a really good opportunity he’s talking about, so if you have an IRA or any kind of qualified plan, there’s a good opportunity here.
Randy: Here’s what’s going to happen. I gave you the basis of 401k as a place to put in whole dollars and let those dollars grow in compound. The problem is when you go to cash those dollars in. When I go to take the money from my IRA, just like we were talking about, the 70 ½ year olds or the 59 ½ year olds, now I have to start paying back the taxes that I didn’t pay as the money was growing and compounding.
What most people don’t realize is that of all the money they saved in putting the money into the plan, those whole dollars that went in, in about 18 – 24 months, they’ll end up paying all of that back, 100 percent of it back in taxes to the government on the withdrawal side. So let me say that again. If I put in money into a qualified plan, the money I saved on taxes going in will be completely used up when I start taking it out in about 18 – 24 months.
Now, hopefully, most of us will live a lot longer than 18 – 24 months into our retirement. Is that fair? But if you take a normal age distribution, say that I start taking the money out at 65, I live to age 85, I have 20 years of taking money out where I’m going to pay taxes back on that money that I put in over the course of my lifetime. And it’s a huge amount of tax and the government is really looking forward to this.
Back in the day, George Bush, back in 2001, he put a lot of changes into the tax law. Most of them are going to end in 2011. But one of the tax law changes they put in back in 2001 was this holiday to convert regular IRAs and 401ks and so on to Roth IRAs.
Jason Hartman: So this was a George Bush thing.
Randy: This was a George Bush thing, right. And it’s a big deal because for –
Jason Hartman: I mean there’s zillions of dollars in these plans that a lot of people could take advantage of this.
Randy: And I should explain the difference –
Jason Hartman: And you could turn this into a self-directed plan. You can buy real estate with it. This is a pretty cool opportunity.
Randy: And the biggest thing is, of course, the tax holiday. So let’s just make sure the listeners understand. The difference between a regular IRA and a Roth – I’m just going to use IRA from now on because it’s going to mean the same thing, qualifying.
Jason Hartman: IRA is individual retirement account.
Randy: Right, whether it’s 401k, 437, we don’t care. Same thing. You don’t pay taxes on that money when it comes out. So once you put the money into the Roth IRA, the money grows and compounds basically tax deferred forever and you’re also not required to take the money out at age 70 ½. So now you have a vehicle that allows you the benefit of growing and compounding over time and the benefit of letting that money come out income tax free the rest of your life.
So the limitation has always been income because if you earn too much income, you weren’t allowed to contribute to a Roth IRA. You weren’t allowed to convert from a regular IRA to a Roth IRA. But in 2010, next year only, one-year sale, doesn’t matter how much income you have or how much income you make. You’re going to be allowed to convert any amount of regular IRAs to the Roth IRAs.
Jason Hartman: Great opportunity.
Randy: Big deal.
Jason Hartman: What about the fact, though, that you have to pay the tax from the conversion over the following two years? They let you split it up into two years and there are no penalties. That’s really nice. But you still have to pay it, right? Is there a way around that?
Randy: No, there’s not directly. Not directly, which, again, you need to caution listeners, if you go out onto the internet even today and you’re going to see these Roth conversion calculators out there, probability is every one of them is going to come back and say it’s a good idea to convert. It’s going to make sense to convert. And the reason for that is really that they want you to move your money.
Jason Hartman: Right. It’s not necessarily good for you. And by the way, Randy, I just want to give a little disclaimer. Neither of us are tax advisors or legal advisors, so check with the appropriate professional always on this stuff. We give you concepts. You go and verify it with your professional tax advisor or CPA.
Randy: Right because what I don’t want people to do is hear this, run out, go to the calculator on the website, and go, oh, this makes sense for me because you are going to pay taxes on it. So if I had $100,000.00 and I’m in the 25 percent tax bracket, I’m going to pay $25,000.00 out of my pocket. And as you said before, money doesn’t come out of thin air, so that $25,000.00 has the ability to earn money as well. So you either have to reduce the amount of money in your qualified plan to the pay the tax or take it from some other place where it could potentially earn money. Does that make sense?
Jason Hartman: Sure.
Randy: So when you start factoring in all of these things, you need more sophisticated calculators I guess is what I’m saying. For many, many people, it isn’t going to be a good deal. It isn’t going to be the right thing to do to convert. Rule of thumb: Younger people will have a much better opportunity because they’ll have more years to make back those losses and continue to have those compound and grow over time.
So what’s younger? In their 40s, something like that. But somebody that’s like 60, 65, certainly 70 years old, they’ll never have a chance to make back that money before they need to potentially have access to it.
When we’re looking at those decisions, we have to take those accounts and we have to break them down into different pieces because there may be some money that you do plan to leave to your estate that you’re never going to touch. Excellent candidate for a Roth conversion. There may be money that, for example, there are a lot of people that have lost money in the stock market in the last year. They maybe haven’t made it all back yet. Well, now those lower evaluations can be converted over at lower values, so my $100,000.00 account from 2008 is only worth $50,000.00. Now I can convert it.
Jason Hartman: Welcome to Wall Street.
Randy: I can convert it at $50,000.00 to Roth IRA and pay less tax on it than I would have when it was $100,000.00. Does that make sense?
Jason Hartman: Okay, but that’s taking a loss.
Randy: No, it’s not taking a loss.
Jason Hartman: You took the loss anyway.
Randy: Yeah, the loss is existing because it went from $100,000.00 to $50,000.00. What I’m saying is that the conversion is now only taxed on $50,000.00 as opposed to the $100,000.00 value. So it’s a little silver lining in that dark cloud. And they do give you a 21-month do-over, which basically means if we converted this money in January of 2010, you would get all the way until October of 2011 to actually change your mind and not convert it if you wanted to, or re-convert it if the stock went down even further in value. Does that make sense?
Jason Hartman: Yeah, it does.
Randy: Relative to the real estate listeners, which I think it’s something we should talk about, is if you have suspended losses from real estate that you haven’t been able to use and if you can qualify, meaning generally if you can qualify as a real estate professional, this would be a great opportunity to use up those losses, convert your regular plans to Roth plans, and be free of that tax burden forever.
Jason Hartman: Interesting things going on. Well, we’ve been talking for quite a while. Anything else to just kind of wrap all this up or anything else you want the listeners to know?
Randy: I guess, just in summary here, what people need to do is have a good sense of – cynicism is too hard – but they need to be discerning. They need to listen really hard. They need to do their research and do their homework and just be careful to not get caught up in the hype of what’s going on, whether it’s good hype – people are excited, homes are going up, and stock market is going up – or it’s bad hype. You just have to do your homework, do your due diligence, work with reliable people you can depend on and trust, and then you’ll make good decisions.
Jason Hartman: Very good point, Randy Luebke. You’ve been a guest on many times and we’ll have you on again. Thank you so much for sharing this interesting insight today on basically four categories we covered, the temperature of the lending market, rates today and the future; we talked about foreign nationals, and then, of course, the special 2010 Roth conversion option.
Randy: That’s the tax sale.
Jason Hartman: Excellent. Thanks so much, Randy. Appreciate it.
Randy: Thanks, Jason.
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