Due to some technical difficulties, this newsletter is later than intended...

September Due Dates

BUSINESS TIP OF THE MONTH

Very simple this time. Final tax deadline for filing personal returns in October 15th. There is still a little time to meet that deadline. Get with your bookkeeper and CPA and don't be late!!

ORGANIZATIONS-PERSONAL TIDBITS

September has been a little hectic to say the least. It's back-to-school for many people. In my case, my oldest started Middle School and was pretty excited about it. He is enrolled in an relatively new program called Expeditionary Learning at Mountain Shadows Middle School. This is a program with approximately 90 students who are in 6th, 7th, and 8th grade and spend most of their time between two teachers. The focus of this program is "learning by doing." They will be taking trips all over the state, to include a week in Yosemite, an overnight on the USS Hornet and a trip to China Camp State Park. For a recent camping trip in Sugarloaf, he and three other boys had to budget, plan meals, and shop for a three-day, two-night trip. Great parent involvement and dedicated teachers make this a great program!

GROWING MY BUSINESS

As the year starts to draw to the end, I am looking for those business owners who have not yet started organizing their finances for 2008. Now is a great time to gather your paperwork and get it going. Start now and you can file your returns by that April 15th deadline.

VIRTUAL JEANNIE VIRTUAL SPOTLIGHT

This month's spotlight is on Bill Matz, from MastersTouch Mortgage Corporation. He gave us a brief summary of the lending market and mortgage crisis last month. Here's more detail:

An Overview of the Mortgage Crisis

What's wrong with the American mortgage system? The answer is complex and multi-faceted. American real estate finance has evolved far beyond the old model of going to the local bank to get a loan to buy a house. This is both good and bad. While it was simple to get a loan then, the pool of money for home loans was far more limited. Banks and other investors were reluctant to tie up money for the long term because it was very difficult to sell the loans.

Today we have a secondary market in which huge packages of loans are bought and sold in the same manner as bushels of wheat. The benefit is that investors are far more willing to lend money and at much lower rates than the rest of the world. The disadvantage is that to make mortgages so readily tradable, they must be written to common standards, the source of all those nit-picky document requirements.

Loans are originated either by a lender's loan officer, using just the products of that one lender, or by independent brokers, who have access to the products of many lenders. However, there are no education or training requirements for loan officers or brokers; few have any real financial background. The result is that millions of borrowers have been sold loans that do not consider the whole financial picture. And because other financial professionals (such as attorneys, C.P.A.s, and financial planners) do not have detailed knowledge of the loan market, no one can provide borrowers with an overall financial picture that includes the real estate loan options.

Lenders have made the situation worse by providing financial incentives to originators to "push" loans products, such as the now-infamous Option ARMs, that are rarely in the best interest of borrowers. Lenders also began lowering standards in order to increase the volume of business. As lenders sold more loans into the secondary market and were no longer facing the direct consequences of defaults, lenders became less concerned about the quality of the loans they made.

Finally, Wall Street, no longer content just to package pools of similar loans to be sold to investors, began to create new, exotic investments. These "derivatives" included many investments with much higher risk.

The proliferation of all these mortgage investments left trillions of dollars all tied to one factor: real estate values. But when real estate value flattened and then began dropping, all the related values followed suit. The fall in values made people wary of investing in mortgage investments, making less money available. With less money available and standards tightening, people who needed to refinance often could not, and fell into foreclosure, which drove values even lower. So here we are as all these dominoes continue to fall, wondering where we are going to end up.

Some good news is starting to emerge. Interest rates have dropped significantly, once again allowing 30-year fixed in the 4's. Sales, particularly in the lower price ranges, are picking up. Longer term, values in the Bay Area should firm up and then rise, as a growing population confronts the availability of very little new housing being built. So borrowers with good credit and incomes can take advantage of bargain prices and near record low interest rates.

William P. Matz, B.S., J.D., LL.M, President
Masters Touch Mortgage Corporation
8979 Conde Lane
Windsor, CA 95492