financing (9)


Another milestone reached by the mortgage industry reform: the end of the  disclosure forms confusion! Provided to those applying for a mortgage, these forms were originally created based on two separate federal statutes: Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). The duplicate information as well as erratic language of these two separate documents, lead to an immense amount of confusion. Apart from those two documents, there were also two sets of disclosures: one provided when applying for a mortgage, and the other provided at the closing or just prior to closing on the loan. The consumers weren’t the only ones confused -even the lenders had a difficult time completing the forms. Basically, if the lenders weren’t even able to understand the verbiage, how could they possibly explain the documents to the consumers? 

[Update: The Consumer Financial Protection Bureau announced a proposal to delay the effective date of the TILA-RESPA Integrated Disclosure rule until Oct. 1.Click here to read more.]

The resolve (hopefully) . . two new, straight-forward disclosure forms. This change will apply to all consumer mortgage applications received on or after August 1, 2015. The change is currently being referred to as “TRID,” for TILA-RESPA Integrated Disclosure.

The changes . . In a Nutshell

♦ With TILA, lenders use a uniform system for disclosures, including the same credit terminology.

♦ The Real Estate Settlement Procedures Act (RESPA) applies to any federally related mortgage loan, generally including any loan secured by a first or subordinate lien on family residential property (1-4 units).

♦ CFPB was responsible for integrating the existing disclosure requirements with the new amended requirements by combining the RESPA and TILA disclosures.

♦ The integrated mortgage disclosures use language that is designed to help consumers better understand the mortgage loan closing transaction.

♦ The new “Loan Estimate” form integrates and replaces the existing RESPA Good Faith Estimate (GFE) and the initial Truth in Lending forms.

♦ The new “Closing Disclosure” form integrates and replaces the existing RESPA HUD-1 and the final Truth in Lending forms.

♦ The integrated disclosure rule does not apply to HELs, reverse mortgages, mobile homes and dwellings not attached to real property, or for those making 5 or less mortgage loans per year.

♦ The definition of an “application” has been changed; now, an application consists of six pieces of information which are submitted.

♦  Consumers can’t be charged for fees until after they’ve been given the Loan Estimate form and consumers have agreed to proceed with the transaction.

♦ The Loan Estimate is provided to the consumer within 3 business days after submitting a mortgage loan application.

♦ There are only six legitimate reasons for revisions to a Loan Estimate form.

♦ The Closing Disclosure form integrates and replaces the existing RESPA HUD-1 and the final Truth in Lending disclosure forms.

♦ A Closing Disclosure is provided to the consumer so that they have a 3 business day waiting period before closing on the mortgage loan.

♦ There is now a three business day requirement once the consumer has received the Closing Disclosure, representing a waiting period for the consumer to review the disclosure.

♦ The lender now has all the liability for preparation and delivery of the Closing Disclosure form, even if they allow the escrow company to do it.

♦ The new Integrated Disclosures must be provided by a lender or mortgage broker that receives an applicationfrom a consumer for a closed-end credit transaction secured by real property on or after August 1, 2015.

♦ For a Loan Estimate, a “business day” is a day on which the lender’s offices are open to the public for carrying out business functions.

♦ For a Closing Disclosure, a “business day” includes all calendar days except Sundays and legal holidays.

♦ The Loan Estimate must be delivered or placed in the mail no later than the 3rd business day from receipt of the mortgage loan application.

♦ The Closing Disclosure must be placed in the mail no later than the 7thbusiness day before consummation of the loan.

♦ The “Your Home Loan Toolkit: A Step-by-Step Guide” replaces the HUD Settlement Cost Booklet.

Key Points derived from The CE Shop “RESPA/TILA Changes: Are you Ready?” course. Right now the course is completely free when you use the promotional code (respafree) at check out. No credit card info is required.



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Finding the Elusive Starter Home

Finding that Elusive Starter Home

Starter-Home-300x169.jpg?width=300The past few years have brought several changes in the real estate industry. The housing bust of 2006-08 led many people to either sell or walk away from their home. As the market is continuing to rebound, many investors have scooped up homes at affordable prices and are offering them as rental properties. In addition, other investors have bought homes at discounted prices with the sole intention of selling them at near-full value for a profit. So the question remains; how does a first time homebuyer find an affordable starter home?

Consider a Different Location

Too many times a young person or couple will buy a home in hopes of expanding their family. That leads to choosing a home that is convenient to good schools, nearby shopping and plenty of entertainment activities. However, for people that may be a few years away from starting a family, the location should be different. Buying a home within the city limits, for example, where the owners can be extremely close to work, could be a better fit.

Consider an Older Property

Younger people often get caught up in the dream of buying a new home and settling in with the smell of fresh paint and recently rolled carpet. However, new homes usually have a much higher price than older homes.

While it is true that an older home may either need a bit of repair before purchase or more maintenance compared to a newer home, the savings in purchase price can often offset the repairs and maintenance expense. In addition, young ambitious people may be able to tackle some, or all, of the maintenance and repairs on their own which can save them more money in the long run.

Tone Down Expectations

A starter home is simply a way for most people to get experience with the entire home buying process. This means that potential buyers should look at the home as a learning experience. Most individuals can get by with far fewer amenities than what they are accustomed to. Or, instead of giving up nice amenities, it is possible to buy a much smaller home and save up for a bigger home in the future.

Have Financing in Order

Since there seems to be a bit of competition for starter homes it is wise to have the financing in place before looking for a home. Putting an offer on a home with a firm pre-approval letter from a local mortgage lender will make the whole process smoother and give you a better chance of getting your offer accepted.

It may take some time, but with a little patience and realistic expectations a qualified borrower can find that starter home that will set them on the path to achieving their financial dreams.

↓↓Start your home search today!↓↓

[Janesville Area]

[Madison Area]

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Low home loan rates

What Kind of Mortgage Fits Your Needs?

No matter the state of the economy, each year the number of new mortgages underwritten reaches millions of homeowners.  Some are buying for the first time while others are downsizing or upsizing.  When rates drop, like they did over the past 2 years, many people seize the opportunity to refinance their home loan.  However, how do people decide on which mortgage to use for their specific need?  An online survey conducted by points to some of the factors that influence consumer decisions.

Most Important Factor

It should come as no shock that the most important factor is the interest rate.  Regardless of the type of loan, the size of the loan or the customers home state, everybody is trying to get the best rate for their home loan.  In the survey mentioned above over 45% stated that the rate was the top factor for choosing a loan.

Other items, such as the length of the term and the fees also ranked high in the survey, but none was as vital as the rate.

Deciding How Much to Use for Down Payment

The ability to make a down payment equal to 10%-20% of the home’s price will give the borrower a range of products to choose from.  A large down payment and a solid credit score will usually allow a borrower to qualify for a conventional loan which has the best interest rates.

For borrowers that have a smaller down payment, their options will be limited to FHA, USDA or VA for qualifying veterans.

Choosing the Right Term

With rates at an all-time low many borrowers are actually paying more attention to the term of the mortgage loan as part of the decision process.  While the traditional fixed rate of a 30 year loan remains quite dominant more and more people are looking at different adjustable rate products.  Those borrowers that have refinanced in the past 2 years have often chosen to go down to a 15 or 10 year term in order to drastically cut down on their total interest pay back while also paying off the home sooner.

Brokers Still the Top Choice

When looking for the right mortgage loan a number of people still prefer to use the services of a mortgage broker over a local bank or credit union.  In the survey mentioned earlier over 30% of respondents claimed that they sought the services of a broker rather than another type of lender.  Since brokers typically have access to multiple lenders they can offer any type of mortgage loan and get the best rate too.

Obviously, none of these factors discussed the two biggest items facing a borrower; are they happy with the home and can they afford the mortgage payment?  Beyond those two items, the guidelines mentioned above should help any new borrower pick a loan that is right for their situation.

Additional Mortgage Info:
Home Mortgage Loans

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Differences Between FHA and Conventional Mortgages

Across the land the vast majority of home buyers use either a FHA or a conventional mortgage to purchase a property. While these loans are similar in a few ways, there are some pronounced differences. Each one has benefits that cater to a particular group of buyers. Understanding how they are different and which one is best suited to different circumstances will help buyers feel more informed about their financial situation.

FHA Loan

Differences between FHA and Conventional

FHA stands for Federal Housing Authority. This agency does not make the loan itself. Instead, they insure FHA loans that are offered by approved mortgage lenders. The lender is protected in the event the borrower does not repay the loan.

FHA is committed to providing basic, conservative loans. A large number of their deals are fixed rate loans even though FHA does allow for adjustable rate mortgages.

Conventional loan

A loan that is not insured by FHA is most likely a conventional mortgage. Mortgage brokers, banks, and credit unions offer a wide variety of conventional loans. Conventional loans have more unique offerings such as interest only type of deal or a combination of a first and second mortgage used for a purchase.

Down Payments

One of the major differences among the two types of loans is the requirement for a down payment. FHA will allow buyers to pay 3.5% of the home's price as a down payment. The money used for the down payment may come from cash on hand, savings, retirement accounts or even a gift from a relative.

For conventional loans, the normal down payment is 20% of the home's value. However, there are quite a few loans that will allow a 10% or 5% down payment. The money used for the down payment must come from the borrowers own funds such as savings, investments or retirement accounts.

Private Mortgage Insurance

Both the FHA loan and conventional loan requires private mortgage insurance (PMI) if the buyer makes a down payment that is less than 20% of the purchase price. This insurance is designed to protect the lender if the loan is not repaid in full.

With a conventional loan, the PMI will be in place until the loan balance is paid down to 80% of the home's value. Typically, the PMI amounts for a conventional loan are higher than a FHA loan.

For an FHA loan, there is a fee charged at the time of the loan closing as well as a monthly amount paid with the loan payments. The monthly amount is enforced until the loan amount reaches 78% of the home's value.

Credit Score Requirements

Conventional loans have usually been reserved for customers with the highest credit scores. Due to the problems faced by the mortgage industry over the past several years, this fact is even more true today. Conventional loans rely heavily on standard credit reports offered by the major credit bureaus. Most conventional mortgages are approved by a computer system and reviewed by underwriters.

On the other hand, FHA loans will allow a slightly lower credit score. In addition, FHA will allow underwriters to go beyond the computer system and make approvals based on a borrower's complete file. Items like residence history, rental history and stable job history can persuade some FHA lenders to approve a loan for people who have scores that are slightly less than perfect.

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Avoiding Problems with Your Mc Farland Escrow Account

If you are using a mortgage to purchase your first home it is highly likely that the lender will request that you use escrow in order to handle the annual homeowner's insurance and taxes on the property. This is reflected by an additional payment on top of the interest and principal payment that you make on the home loan. Ideally, the lender will review this account every year to see if there are overpayments or underpayments and change the escrow accordingly.

Unfortunately, we don't live in a perfect world and companies do make mistakes. Here are some important facts to help you understand the basics of an escrow account.


Property taxes are usually reviewed one year after a home has been purchased. At this time the property will likely get a new assessment, which can drastically increase the tax amount. For people that are buying a previously owned home this will usually not be an issue, although you should look at what the current assessment value is. If you are buying a brand new home, or if you have just built a home, then the previous tax amount was based on an empty lot. The existence of a new home will greatly improve the lot's value and subsequently change the tax amount.


Before finalizing the loan you will be asked to provide proof of insurance from a licensed insurance agent. The location of your home may dictate a few extras that might not be prevalent in other areas.

For instance, if you are considering the purchase of a home that is close to a river or lake then you may be in a flood zone and subject to flood insurance. Homes that are located in extremely rural areas may be subject to higher premiums if there are no fire fighting stations in close proximity to the home. It is vital that you speak to your Realtor® before buying a home to see if there are any conditions about the home that would result in a higher insurance policy.

Reviewing the Escrow

Every year your lender should mail you a letter that goes over the escrow account for the previous year. It should list all of the payments you made to the escrow account as well as any amounts disbursed from the account to cover your expenses. You should also contact your homeowner's insurance agent and the local tax assessor's office to see if there are any upcoming changes for your tax bill or your insurance bill.

How to Handle Property Tax Increases

Going back to the early example of someone buying a new home or building a home, there is the expectation that the property tax amount will increase tremendously. If the increase is more than $1,000 then the lender will possibly add $2,000 to the escrow account in case the taxes increase again the following year. This presents you with three choices:

  • Accept the new escrow amount and pay the additional $167 monthly amount
  • Ask your lender if they will spread the extra amount over the next two years to make the monthly amount lower
  • If you have the funds, offer to pay the increased tax amount yourself so that your escrow payment does not change.
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Financing for a Short Sale Property

Ran into an issue this week - wanted to see if anyone else has ran into it and what happened.

Had buyers, we found the home, knew that it was a short sale, made an offer and it was accepted. During the offer to acceptance, we found out that an investment group had successfully negotiated a short sale and that they would be closing on May 19th, 2010. They would be the ones selling the property to us. Thought okay, we got a good price on a good home, works for the buyers. Buyers had been approved for a FHA loan. We found out all the details several days later, when the listing Realtor called the buyer's mortgage company. What happened was that everyone we have talked to has stated that they can not close the loan until 90 days after the investment group has closed. Most all of the lenders said that even though FHA has waived the 90 day rule at this time, it doesn't apply in cases where investors have bought a short sale property. One lender has said that they would close it, but their debt to income ratios are much lower and the buyers didn't qualify.

My question is: with the number of short sales out there, has anyone else ran into an issue where they have the buyer and the property is now owned by an investor. And if so, have you had financing issues and how did you get around it. In our situation, it appears next to impossible. We have been told that we could go conventional with either 10% or 20% (depending which lender), but the buyers don't have that kind of money. Are we now going to end up with a surplus of investor owned homes that they can't sell for 3 months due to financing restrictions.

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I've prepared this blog with the hope that it will educate and streamline the process for First Time FHA Buyers and their agents when writing offers on Fannie Mae REO's; of which we should see a large supply in the near future.Our market has changed and is not a traditional market any longer. As Realtors/Brokers & buyer's we all must adjust. Adjust to the fact that FANNIE Mae’s reo RPA supercedes all State RPAs (Residential Purchase Agreements). Fannie is also exempt from normal closing cost that a seller would be required to pay, Such as Title, Escrow, City/County X-Fer Taxes.1). So what does this mean to you as the buyer or buyers agent? It means you cannot assume that Fannie is going to pay for it even if you put it in your state RPA. You have to ask for it to be paid, and expect that total amount to be included as a portion of the total max of closing cost that the seller, Fannie will pay.It's an art to writing the perfect offer; however what is more of an art and much needed in this market, is educating your buyers. Sellers normally take the best offer, and Fannie Mae is no different. The best offer may not always be the highest offer and I have seen a lot of this lately. Buyers and their agents often question or wonder why their higher priced offer are rejected and lower offers accepted by the banks. The pecking order is CASH (We all know is King), Conventional, FHA, and Then VA. Why? It doesn't take rocket scientist to figure this out. We all know cash offers can usually close in 15 days and they are less likely to fall out. Conventional buyers usually have more money to put down and the lender guidelines/requirements for financing aren't deal breakers. FHA, less money down, and lender required repairs could be deal a breaker for a seller selling a property AS IS. VA, will just multiply FHA x 2 or 3 with no money down... If you were selling your property, what would your pecking order be in a declining, unstable market? Time is money, and if a property is tied up for 30-60, 90 days and falls out of escrow, a lot of money is loss. These days the banks are currently in the business of minimizing losses. We may see this change in an appreciating market, but not in a declining unstable market.2) So does this mean that FHA buyers won't get a chance to buy Fannie REO's at or near Rock Bottom Prices?No absolutely not. It means that buyers agents have to put together solid offers. Writing a contract 10 to 15K over list price on a Fannie Mae REO so that closing cost can be paid by the seller is an example of a poor offer, (Agents are u looking at comps when u do this, is this really in the best interest for your buyers?) Every Fannie Mae REO property has an extensive Broker Price Opinion (BPO) also know as a CMA, completed the listing agent as well as an appraisal. When the price is set, they are well aware of the value a property will appraise. Fannie Mae is also provided a monthly marketing update in which they are given statics to support lowing, increasing or mainting list price of the property. Writing an offer over the appraised value means the FHA deal is more likely to fall out should the appraisal come in low.When you see HomePath Financing! That’s a good thing it means the property will not have to be appraised (Fannie Has an Appraisal On File) and can be sold at list / offer price should you come to terms; however you have to use an approved Home Path Lender. A good way to go should this opportunity present itself.3) How do I present my best offer the First Time?Buyer's make sure you are Pre-Approved (preferably an institutional lender) Not Pre qualified. It’s also a good idea to show good faith by putting down a healthy Earnest Money Deposit (EMD). $1000.00 deposit with 3.5% down on a 150K is a poor example. I would recommend $2,500 to $5,000 if you want your offer to appear strong. When you read a RPA you can tell a lot about a buyer by their EMD. Cash offers are required to put 10% down as a EMD. As an REO listing agent I can only present to my client what you give me.If your a buyer or buyers agent that is doing FHA financing because you don't want to exhaust your savings account, show me!! Along with your offer and EMD your agent should be also including POF in your accounts. If you don’t tell me this I have no way of expressing or showing my client why your offer is just as strong as the next or maybe even better!! By doing this you increase your chances of direct competition with conventional offers, and you make it easy to select the best FHA offer.In closing I have just a few words of advice for agents writing offers.If listing agent instructions say preferred method to submit an offer is via Email. DO IT (In the subject line Enter Property Street & Buyers last name)Stack your Fannie offer as follows prior to emailing1) PRE APPROVAL LETTER2) EMD OR POF3) STATE CONRTACT4) FANNIE RPA (Signed/Initialed)If there is a Bank Addendum Attached in MLS. Have your buyer initial and sign it. Should your offer be excepted with the counter the terms can be written in and this streamlines the time it takes.Know that any lender required repairs after an agreement has been reached will be added to the top of the purchase price. Therefore do a complete initial walk through with your client before writing an offer, and ask for know repairs credits up-front if your comps don’t reflect the asking price with needed repairs. Remember the first offer received is not always the best offer so don't think you have to be first. Never write an offer without seeing the property, I actually check MLS and will request agents update their Dis Key's if an offer comes in too fast.This article is exclusive to Fannie Mae REO's; however the principals are universal and can be applied to all fields. Agents and buyers do your home work , comparable sales don't lie, so use them. My team of agents are trained to complete a CMA for buyer clients whenever their writing an offer. I would encourage others to do the same.Jonathan Burgess Broker/OwnerCode 3 Real EstateBroker/SAR/ IVAR/NARNFSTI Reo CertifedRes Net CertifiedReo Trans Certifiedwww.code3realty.comCode 3 Realty & Mortgage Inc.777 Campus Commons Drive Ste 200Sacramento CA. 95825Branch Offices In Tracey CA & Riverside CA.
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Here is a post from one of my AR collegues I thought it was worth sharing:Has Fannie Mae pulled their head out of their... sand box?What if I told you Fannie Mae is offering special financing if you buy one of their bank owned homes? Would you believe me? Well you should because it is true!Why does this benefit you? Well frankly... the terms of their offered financing is pretty darn sweet!The benefits of their HomePath program include:Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)You may qualify even if your credit is less than perfectAvailable to both owner occupiers and investorsDown payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employerNo mortgage insuranceNo appraisal feesFREE home warranty is included with the purchase.I recently wrote a blog about another local Sacramento Agency that is offering a similar incentive if you buy one of their bank owned homes. Read the blog now >>BUT the catch is they only have 2 or so homes available in the Sacramento Area to purchase.Here is the best part about this program... There are over 250 homes available in the Sacramento area right now that qualify for this program!Here are some other homes available in the Sacramento Area:Elk Grove... 46 homes available!Citrus Heights... 21 homes availableRancho Cordova... 16 homes available!Fair Oaks... 4 homes availableCarnichael... 14 homes available!and so on...Here is some more specific information about their guidelines:97% (3% down) for owner occupied financing with NO MORTGAGE INSURANCE!Why is this such a big deal?A typical FHA loan with an equivalent down payment (3.5% down) would require 1.75% of the loan amount to be paid upfront for a mortgage insurance premium. Then on top of your monthly payment (PITI), you would be charged .55% (of the loan amount) every year for ongoing mortgage insurance.Let me break this down so I don't throw too much loan lingo your way.. Here is an example mortgage insurance fees for an FHA loan of $200,000...$200,000 x 1.75 = $3500 You would be charged this amount at closing or you could roll this into a loan on a traditional FHA loan program for the upfront mortgage insurance premium.$200,000 x .55 / 12 months = $91.67 This means $91.67 would be added to your payment every month for mortgage insurance.With this special financing offered by Fannie Mae you could put .5% LESS down than a FHA loan and you do no pay ANY MORTGAGE INSURANCE! This really is a sweet deal!Do you feel like a little more sugar today? Wait until you see what they will do for an investor!90% (10% down) for non owner occupied properties with NO MORTGAGE INSURANCE!If you are looking for an investment home in Sacramento, you know that you will get a better return on your investment if you have less money in the deal. Right now with typical financing (actually offered by Fannie Mae for non-Fannie Mae owned homes), you should expect to put down at least 25%.Wow! So for example if you purchased a home for $150,000 (not owned by Fannie Mae), you would need to put down $37,500 plus closing costs. If you buy a home owned by Fannie Mae, you only have to put $15,000 plus closing costs. If that does not help you"sharpen your pencil" I am not sure what will! This is a really big deal!They even offer a renovation program that allows you to finance light renovations upfront and add it to the loan amount. So if you find a Sacramento Fannie Mae owned home that maybe has some vandalism issues (which many do), you can probably get a discount for the home and finance in the repairs that are needed to bring it back to livable condition!It is so nice to be able to report some good news to folks. It really has been a drag having to shovel through the bad news to try and find something good to report as far as guideline changes go!Here is a link to search for homes in your area >>We can offer this special loan program... so just give us a call and we can discuss this opportunity further!Happy Hunting!This blog by:Team NewingtonSacramento Mortgage Planners(916)
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Tales from a CFK Completion

The days on the calendar swirled by, and before you know it, two months and a week had passed, and it was time to do the actual Cash for Keys - get the keys from the former owners, and give him the keys, and everyone goes on their merry way.I don't know how it is with everyone else, but here's how my CFK goes. A day or two before, I call up the former owner and arrange a time to do the exchange. I go over the requirements again (that the place be clean, the appliances in place, etc.), and say OK, see you then. I then call the locksmith to reconfirm the time and address, and then at the appointed date and time, I meet the locksmith out at the property.Almost invariably, the former occupants are not ready to go. They are usually still packing up. I can't fork over the cash (a check, actually) until I see that everything is loaded up. So, I usually stand around, chat with the locksmith, the former owner, etc., while I take interior photos for the listing BPO.Yesterday,this is just what happened - I show up, the former owners aren't quite ready to go, so I stand around for an hour or so while they finish up and the locksmith goes about his business. I got to chatting with the former owner - a nice guy, too bad he lost the house and all. He's from Mexico, and he doesn't speak English, so, as with about 1/2 of these deals, we converse in Spanish.Kind of an interesting conversation. He said he hadn't made a mortgage payment in a year. "A year?!" I said. "Well, at least six months, maybe year." Wow, at $4K a month in mortgage payments, that's a lot of dough. And of course, he gets the CFK money, too - although he only asked for $500.I asked him what his plan was. They were going to rent, and then buy another house. It seems they had saved up quite a nest egg, not paying anything for rent or mortgage the past 6-12 months - enough for a down payment for sure, especially with this groovy new FHA financing they have out here, which he already knew a good deal about. There were a number of adults living there, and only one of them had been on title - plenty of un-affected credit reports out there. And now, home prices are 1/2 of what they were two years ago when this guy had bought - the perfect time to buy!I gave him my card (again) and said if he knows someone who wants to buy a house, please call me. And I do believe he will. Who'da thunk.
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