Each homeowner is unique — and we'll help you
   determine if it's the right time for you to refinance.
   Effective refinancing typically means lowering your
   current mortgage loan rate by at least one percent. You
   might also want to consider changing the length of your
   loan or receiving cash from the equity in your house. It's
   simple to see what will work for you, just run the
   numbers for yourself using our calculators.

   Quite possibly. To get a good idea of what your new
   monthly payment would be, use our Calculators.

   Yes, as long as you qualify. For instance, you may be
   able to reduce your mortgage loan term from 30 years
   to 15 years.

   Absolutely. Many people borrow against the equity in
   their homes to make improvements.
   Up to 90 percent of the appraised value of your home
   can be used to make home improvements. The equity
   you can use is based on the value of the home and what    you currently owe, subject to applicable state laws.

   Quite possibly. To get a good idea of what your new
   monthly payment would be, use our Calculator.

   You will have closing costs associated with refinancing
   your loan, including points and processing fees. You
   may have the option of rolling these costs into the loan
   amount to reduce your cash out of pocket. To evaluate
   your options, use our Calculators.
   A Mortgage with an interest rate that changes over time
   in line with movements in the index.

   The length of time between interest rate changes on an
  ARM. For example: a loan with an adjustment period of
  one year is called a one year ARM, which means that the   interest rate can change once a year.

   Repayment of a loan in equal installments of principal
   and interest, rather than interest only payment.

   The total finance charge (interest, loan fees, and points
   expressed as percentage of the loan amount).

   A Buyer's agreement to assume the liability under an
   existing note that is secured by Mortgage or Deed of
   Trust. The Lender must approve the Buyer in order to
   assume the loan.

   The limit of how much an interest rate or monthly
   payment can change, either at each adjustment or over
   the life of the Mortgage.

   The financial disclosure statement that accounts for all
   funds received and expected at the closing. These
   include deposits for taxes, hazard insurance and
   mortgage insurance if applicable.

   The dependence upon a stated event, which must occur
   before a contract is binding. For example, the sale of a
   property which is contingent upon the Buyer obtaining
   financing.

   A provision in some ARM's to convert the loan to a fixed
   rate loan, usually after the first adjustment period. The
   new fixed rate is generally set at the prevailing interest
   rate for a fixed rate Mortgage. This conversion feature
   may be an extra cost.

   The portion of the down payment delivered to the Seller
   or Escrow Agent by the buyer with a written offer as
   evidence of good faith.

   The total cost a borrower must pay, directly or indirectly,    to obtain credit according to Regulation 2.

   An estate in which the owner has unrestricted power to
   dispose of the property as he/she wishes including
   leaving by will or inheritance. It is the greatest interest a
   person can have in real estate.

   A residential mortgage with monthly payments that stay
   at a low level and increase at a predetermined rate.

   The relationship between the amounts of the appraised
   value of the property and the amount of the loan as
   expressed by a percentage.

   The number of percentage points the lender adds to the
   index rate to calculate the ARM interest rate at each
   adjustment.

   Negative amortization occurs when monthly payments
   fail to cover the interest cost. The interest that is not
   covered is added to the unpaid principal balance. This
   means that even after several payments you could owe
   more than you did at the beginning of the loan. Negative
   amortization can occur when an ARM has a payment
   cap that results in monthly payments that are not high
   enough to cover the interest.

   A fee or charge for establishing a new loan.

   The Monthly Treasury Average, also known as 12-Month Moving Average Treasury index (MAT) is a relatively new ARM index. This index is the 12 month average of the monthly average yields of U.S. Treasury securities adjusted to a constant maturity of one year. It is calculated by averaging the previous 12 monthly values of the 1-Year CMT. Because this index is an annual average, it is more steady than the 1-Year CMT index. The MTA and CODI indexes generally fluctuates slightly more than the 11th District COFI, although its movements track each other very closely, as illustrated on our historical graph. The MTA and COFI-indexed ARMs work much the same way. ARMs tied to the MTA index may have the potential for negative amortization (like those tied to the 11th District COFI). The MTA is the most widely used Option ARM loan index.

   This index reflects the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts, advances from the FHLB, and other sources of funds. The 11th District represents the savings institutions (savings & loan associations and savings banks) headquartered in Arizona, California and Nevada.

Since the largest part of the Cost Of Funds index is interest paid on savings accounts, this index lags market interest rates in both uptrend and downtrend movements. As a result, ARMs tied to this index rise (and fall) more slowly than rates in general, which is good for you if rates are rising but not good for you if rates are falling.

The following graph illustrates the trend for the COFI index to lag other indexes:

It should be noted that although COFI generally follows trends in market rates, it can move in an opposite direction over the near term (these periods are marked in white on the historical graph above).

The 11th District Cost Of Funds Index is the slowest moving and most stable of all ARM indexes. It smoothes out a lot of the volatility of the market. Since its initial publication (in 1981) the annualized volatility of COFI has been only 6.2% compared with more than 20% for the 1-Year CMT index during the same period.

The 11th District Cost of Funds index is one of the most popular ARM indexes. This index is primarily used for ARMs with monthlyinterest rate adjustments. Because this index generally reacts slowly in fluctuating markets, adjustments in your ARM interest rate will lag behind another market indicators. Many lenders believe COFI-indexed ARMs are some of the best deals available on the market today.

Please note: the 11th District COFI is a 2-month lagging index: the index value for a particular month is not reported until the end of the next month.

   The 11th District Cost Of Funds is one of the most commonly used ARM indexes, because many lenders believe that an index that moves with their cost of funds reduces their risk. ARMs based on this index can adjust every month, every six months, or every year.

Many COFI-indexed ARMs often have payment caps, but no periodic interest rate caps creating the possibility for negative amortization (your loan balance can increase). However, it's not necessarily a bad thing because you may consider any unpaid (deferred) interest to be an extended loan at a very attractive rate. You can use your monthly savings (the difference between the fully indexed payment and the minimum monthly payment) for investments, or you can use them to pay off credit card and/or car debt. This makes the negatively amortizing COFI ARMs a great financial tool for homeowners (especially for people with unsteady income, such as self-employed or commissioned salespeople). In addition, you will always have the option to never increase your loan balance (by making the fully indexed payments instead of the minimum monthly payments).

Advantages of COFI ARMs:

• Flexibility in the monthly payment. It is one of the main advantages of COFI ARMs. With COFI-indexed ARMs you will usually have a choice of payment options. Besides fully indexed and minimum payment options your COFI ARM will probably have an interest only payment option and you will be able to change payment options every month if you like.

• Tax Planning. COFI ARMs may be used for tax planning. The borrower can defer interest payments and at the end of the year, analyze their tax situation. If it serves their tax interests, they can make a lump sum payment toward any interest that has been deferred and deduct it for tax purposes.

• Easy qualifying. Many COFI lenders allow homebuyers with good credit to apply without documenting their income, assets, or source of down payment. This is helpful for self-employed borrowers or those who have jobs where it is difficult to document their income.

• Low initial rate. Most COFI ARMs are offered with a very low initial rate. Some lenders will allow you to qualify for a larger loan due to this initially lower rate.

Summary

COFI ARM products provide more opportunities for financially savvy borrowers who seek more customized, and ultimately less costly, home-finance choices. However, because some of the COFI products do not offer rate caps or other key features to protect the borrower, you need to be particularly careful to study the product before you make your choice.

   London Inter Bank Offering Rate (LIBOR) is an average of the interest rate on dollar-denominated deposits, also known as Eurodollars, traded between banks in London. The Eurodollar market is a major component of the International financial market. London is the center of the Euromarket in terms of volume.

The LIBOR is an international index which follows the world economic condition. It allows international investors to match their cost of lending to their cost of funds. The LIBOR compares most closely to the 1-Year CMT index and is more open to quick and wide fluctuations than the COFI rate, as shown on our graph.

There are several different LIBOR rates widely used as ARM indexes: 1-, 3-, 6-Month, and 1-Year LIBOR. The 6-Month LIBOR is the most common.

LIBOR-indexed ARMs offer borrowers aggressive initial rates (lower than many other ARMs) and has proved to be competitive with such popular ARM indexes as the 11th District Cost of Funds, the 6-Month Treasury bill, and the 6-Month Certificate of Deposit. With the LIBOR ARMs borrowers are generally protected from wide fluctuations in interest rates by periodic and lifetime interest rate caps. LIBOR ARMs usually do not have negative amortization.

Note: Lenders may use the LIBOR rate either as posted by Fannie Mae (Fannie Mae LIBOR) or as published in the Wall Street Journal (WSJ LIBOR) as an index for setting rates of ARM loans. So if your ARM is based on a LIBOR, the loan must specify which one is being used.

The LIBOR quoted in the Wall Street Journal (WSJ LIBOR) is the LIBOR posted by the British Bankers' Association (BBA). Each day the Wall Street Journal publishes yesterday's BBA LIBOR rate as part of the Money Rates table in the Money and Investing Section.

BBA LIBOR is compiled each working day by an electronic vendor (currently Bridge Telerate) and broadcast through contributing a number of international distribution networks (including Reuters, Knight-Ridder, and Bloomberg). Each day's BBA LIBOR rate is posted on the BBA (British Bankers' Association) web site. Daily BBA LIBOR rates.

Fannie Mae has its own LIBOR rates, which are posted on the Fannie Mae Web site. The Fannie Mae LIBOR rates are made available by the last business day of each month.



   This index is the weighted average of the rates of interest on the deposit accounts of the federally insured depository institution subsidiaries of Golden West Financial Corporation (GDW). All of the depository institution subsidiaries of Golden West Financial Corporation operate under the name World Savings.

World Savings receives money from consumers in the form of deposits and lends money as home or other loans. The interest rates in effect on these deposits are the basis for the COSI index. It is not based on actual interest paid, but rather the weighted annualized average of all interest rates in effect on World Savings deposit accounts on the last day of each month.

The COSI adjusts monthly and has a one-month reporting lag. It is computed on the last day of each calendar month and is announced on or near the last business day prior to the fifteenth day of the following calendar month.

The Cost of Savings index considered to be among the most stable ARM indexes in the industry. It is one of the most widely used Option ARM loan indexes.

Many COSI-indexed ARMs often have minimum payment change caps (usually, up to 7.5% of minimum payment amount), as well as lifetime interest rate caps (usually, about 12%) but no periodic interest rate caps creating the possibility for negative amortization.



   These indexes are based on the results of auctions that the U.S. Treasury holds for its Treasury bills, notes and bonds. Treasury bills are issued by the U.S. government with maturities of 1, 3 and 6 months (4-week, 13-week, 26-week bills) in order to pay for the national debt and other expenses. The 3- and 6-month Treasury bills are auctioned every Monday and the resulting figures are released to the public the next day. Treasury bill auction results provide the discount rate*, investment yield, and price for recently auctioned bills.

* The discount rate is an annualized rate of return based on the par value of the bills and is calculated on a 360-day basis. The investment yield, or coupon-equivalent yield, is calculated on a 365-day basis and is an annualized rate based on the purchase price of the bills and reflects the actual yield to maturity.

Treasury bills can be bought at original issue or on the secondary market. At original issue, the Treasury Department sells new securities to the public. On the secondary market, traders buy and sell previously issued securities.

Following is the definition of the weekly 6-Month T-Bill index:

The weekly 6-Month T-Bill mortgage (ARM) index is the discount rate for the 26-week Treasury Bill bought at original issue (at the most recent auction of U.S. Treasury bills).

T-Bill indexes have both weekly and monthly values. Monthly values are averages of the past month's weekly T-Bill rates. The monthly 6-Month Treasury Bill index (6-MoT-Bill) is the most often used. ARMs tied to the 6-Month T-Bill usually adjust once every six months.

The Treasury Bill indexes move with the market and respond quickly to economic changes like the CMT indexes. The following graph reflects the movement of the 3-, and 6-Month monthly Treasury Bills and compares them with the monthly 1-Year CMT index.



   These indexes are the weekly or monthly average yields on U.S. Treasury securities adjusted to constant maturities*. Yields on Treasury securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

* Constant Maturity Treasuries is a set of "theoretical" securities based on the most recently auctioned "real" securities: 1-, 3-, 6-month bills, 2-, 3-, 5-, 10-year notes, and also the 'off-the-runs' in the 7- to 20-year maturity range. The Constant Maturity Treasury rates are also known as "Treasury Yield Curve Rates".

The CMT indexes are volatile and move with the market. They reflect the state of the economy, and respond quickly to economic changes. These indexes react more slowly than the CD index, but more quickly than the COF index or the MTA index (see historical graph below).

The following CMT indexes are the most often used for ARMs:

1-Year Constant Maturity Treasury index (1 Yr CMT)

This is the most widely used index. Roughly half of all ARMs are based on this index. It's used on ARMs with annual rate adjustments. It is also referred to as the 1-Year Treasury Bill (1Yr T-Bill) [see note], the 1-Year Treasury Security (1Yr T-Sec), or the 1-Year Treasury Spot index.

This index is less popular than the 1-Year CMT. ARMs based on the 3 Year CMT will adjust every three years (3 Year ARMs). It may be referred to as the 3-Year Treasury Security (3Yr T-Sec) index. -,

5-Year Constant Maturity Treasury index (5 Yr CMT)

Same as the 3 Year CMT, but ARM loans indexed to the 5 Year CMT will adjust once every five years (the ARM's adjustment period is usually the same as the security's constant maturity).

Note: The CMT indexes have both weekly and monthly values. If your ARM is tied to a CMT index, be sure to note whether it's weekly or monthly.



   Principal, Interest, Taxes, and Insurance.

   An amount equal to 1% of the principal amount of the
   investment or note. The Lender assesses loan discount
   points at closing to increase the yield on the mortgage
   to a position competitive with other types of investments.

   A fee charged to a Mortgagor who pays a loan before it
   is due.

   Insurance written by a private company protecting the
   Lender against loss if the Borrower defaults on the
   Mortgage.

   A written document in which the purchaser agrees to
   buy certain Real Estate and the Seller agrees to sell
   under state's terms and conditions. Also, this is called a    Sales Contract, Earnest Money Contract, or Agreement
   for Sale .
   Reduced documentation for those borrowers who could
   otherwise provide documentation.

Background:

In 1978 Californians enacted Proposition 13, which limited many local public agencies ability to finance new projects. In 1982, Senator Henry Mello and Assemblyman Mike Roos affected the passage of the Community Facilities District Act (CFD). This act authorized local governments and developers to create CFD's for the purpose of selling tax-exempt bonds to fund public improvements. Subsequently, property owners that participate in the CFD's pay a "special tax" to repay the bonds.

Mello-Roos Community Facilities District Act:

The Act allows any county, city, special district, school district or joint powers of authority to establish a "Community Facilities District" which allows for the financing of public services and facilities. The services and facilities Mello-Roos Districts can provide include streets, police protection, fire protection, ambulatory, elementary schools, parks, libraries, museums, and cultural facilities. A requisite for the Mello-Roos districts' establishment is that it be approved by twothirds margin of qualified voters in the district. If there are fewer than twelve registered voters within the proposed district, the vote may be passed by current landowners. At the close of legal proceedings, an established Mello-Roos District has all the legal privileges of a legally sanctioned governmental body.

Responsibilities of Property Owners in the Mello-Roos Districts:

Property owners in Mello Roos Districts are responsible for payment of the "special tax". The amount of the "special tax" is not (directly) based on the value of the property. Special taxes are based on mathematical formulas that take into account property characteristics such as square footage of the home and parcel size. The special tax is typically included in the annual County tax bill, however it can also be paid off on a monthly basis. Legal Rights of the Community Facilities District: A Mello-Roos District has the legal right to adopt stringent penalties and foreclosure priorities; in the event that the special tax payment is delinquent. Ergo, if the "special tax" is not paid, the District may exercise its legal right to foreclose and sell the property. Foreclosure rights can be initiated after 150 - 180 days in arrears.

Disclosure (California Civil Code §§1102.6):

Seller shall make a good faith effort to obtain a disclosure "Notice of Special Tax" from local agencies which levy on the property a special tax pursuant to the Mello-Roos Community Facilities District Act, and shall promptly deliver to the prospective buyer any such notice made available by those agencies. If the Transfer Disclosure statement or the Mello-Roos disclosure notice is delivered to Buyer after the offer is signed, Buyer shall have the right to terminate this Agreement within three (3) days after delivery in person, or five (5) days after delivery by deposit in the mail, by giving written notice of termination to the Seller or Seller's agent.

   There are two primary deadlines that apply to every §1031 Exchange. After a real estate buyer sells the investment property, the buyer has 45 days to designate the qualifying replacement property. The buyer can identify up to three potential replacements (3-property rule) by sending a written notice to the seller or their qualified intermediary. This is 45 calendar days and not business days. There are provisions made for Saturdays, Sundays, or even legal holidays. Failure to adhere to this deadline will cause the exchange to be void.

The buyer has 180 days after closing on the relinquished property to close on the replacement property. This is also calendar days, and makes no provisions for weekends or holidays. If the exchange occurs late in the year, then the closing will need to take place before April 15 of the following year, even if that timeframe is less than 180 days. The only exception is if the buyer files for an extension on their income taxes prior to April 15. Failure to adhere to this deadline will cause the exchange to be void.

The 45/180 day rules applies to both forward and reverse exchanges. Sometimes in a deferred exchange, you transfer more than one Relinquished Property and they are transferred on different dates. If this happens, the identification period and the exchange period are measured from the earliest date on which any of the properties are transferred.

   Interest Only: Initial payments are interest only for a
   specified period. After completion of the interest only
   period, the unpaid balance is fully amortized over the
   remaining term of the loan.