Monday, October 20, 2008

My Phoenix Lender

A couple of weeks ago, my former colleague at Silver State Bank, began her very own blog. Though I am jealous, as she seems to be more proficient at it than I am (see: Own domain name, good blog content, fun widgets), I am excited that she is continuing to increase her business through this tool. Her site is at the following link... .

If for no other reason then to check it out, go to her blog and say hello. If you want, say that I sent you - I don't get anything for it, just the satisfaction of seeing her become successful.

I hope to someday match her when it comes to my own domain name, etc. but for now, I enjoy active rain and the social interaction it provides.

Wednesday, September 24, 2008

FHA to Change Guidelines due to Buy and Bail

A new mortgagee letter from the FHA was posted yesterday. In it the guidelines were changed for those homeowners who currently own a home and are looking to rent the property and buy a new primary residence. The goal of these new changes is to "respond to an unscrupulous practice arising in the housing market that poses a risk to FHA..." This unscrupulous practice is known as buy and bail, where current homeowners buy a new home under the guise that they will rent their former residence and in turn they let the house go into foreclosure.

Here are the highlights:

1) Cannot use the rental income from the previous home unless there is 25% equity in that property.

2) Borrower must qualify for the new mortgage with the new mortgage payment and the previous home's mortgage payment.

3) Surrounding properties with FHA mortgages would be negatively affected by the bail out on the old residences by these customers seeking new FHA mortgages.




Hope this helps. Good luck. For the actual mortgagee letter check the HUD website and look up letter 2008-25.

Friday, August 1, 2008

H.R. Bill 3221 - It will soon leave its mark.

I will not re-invent the wheel for discussion on the H.R. Bill 3221 that Bush signed in as law on Wednesday. I do, however, want to get the information out to you in an easy to access format so that you can read the information and understand what it all means.

  • The Arizona Mortgage Guru - Here is a great article that explains in detail the different ins and outs that go with the new Bill. Within his article are some great links to other articles that are useful as well. Check them out and a big thanks to Shailesh Ghimire.
  • Craig's Blog - Great vantage point from a Realtor's Perspective.
  • Down Payment Assistance - WIth the new bill a law, DPA programs have received the axe which means...1) if you are a potential buyer, then call me or any loan officer to get the ball rolling and find the house you want, or 2) if you eventually want to buy a home, then find a way to start saving money for the down payment.
  • H.R. Bill 3221 - Glutton for punishment or locked into your job as an LO then knock yourself. All the details in there you will need.

Hopefully that helps as you begin to research and evaluate what it all means.

Wednesday, July 23, 2008

Freddie Mac and Fannie Mae bill passed by the House

In a move today, which was coming for about a week or so, the House approved the new bill regarding Fannie-Mae and Freddie Mac. The bill is now being pushed to President Bush's desk by, what they are hoping, is the end of the week.

You can read the full article here:

The bill is designed so that ONLY if the two major mortgage players, Fannie Mae and Freddie Mac, begin to have "issues", then government will step in and use this bill to infuse capital and lend to the organizations. The estimated cost to the taxpayers, you and me, is roughly $25 Billion dollars.

In addition, a part of the bill would be used to help about 400,000 homeowners with sub-prime loans avoid foreclosure by being able to refinance. However, the instances of foreclosure in the U.S. is surely greater than that.

Hard to say whether the bill will have a positive impact or not. Only time will tell.

USDA Rural Housing Loan Option

The USDA Rural Housing lending program is designed to help low-income families purchase homes in outlying and rural communities. In Arizona, those communities include places in the far West and East Valley cities. This may be a great way to market those attractively priced homes and fit potential buyers with a program that will satisfy their needs.

Here are some of the benefits:

  • Provide up to 102% LTV financing for existing homes or new construction based on appraised value (the extra 2% can be the financed mortgage insurance fee)
  • Available to low and moderate-income rural households
    No requirement to be a "first-time" home buyer.
  • Less up-front cash to close requirements than for conventionally insured or FHA loans.
  • No monthly mortgage insurance required. One-time guarantee fee, payable to Rural Development at closing.
  • 30 YR fixed rate loans
  • No PPP

These benefits may help some homebuyers who fit this specific product. You can look up more information regarding the program and benefits at the Rural Housing website.

Good luck and don't hesitate to let me know if you have any further questions.

Saturday, July 12, 2008

Three Easy Things to Discuss


Three EASY things to talk about...Sports, Weather, and the Implosion or seemingly near implosion of Fannie and Freddie (at least that is what the media says).

Okay here goes...

Sports - Diamondbacks can't find a hole to squirm into fast enough. With all the promise of April now comes the reality of a young team teetering on the verge of collapse. They salvaged a bit of self respect last night...but it took 11 innings to beat the lowly Nationals, but without April we would be the lowly Diamondbacks. Okay so it isn't that easy to stomach.

Weather - My poor tree in the front of the house looked as though the Big Bad Wolf was standing directly next to it and blowing with all his might. Granted the tree is no bigger than my forearm in diameter but still, the wind gusts last night in Phoenix reached 50 MPH not bad for a Thursday night Monsoon. Hopefully I am smart enough to stay inside and not have my car turned into a luxury four seat boat like some other guy on the freeway last night.

Anyone keeping score because I am 0-2 when it comes to things that are EASY to talk about...

Ah yes, the impending "implosion" of Fannie and Freddie. So I was a little late to reading the WSJ yesterday (it was about 10:30 last night) when I saw the article about the difficulty these two major Mortgage players were having. Fell asleep uneasy and awoke to find that the 41% loss in FNMA stock price by 6:45AM was not a good sign.
Couple that with Indy Mac this week and well...I am 0-3.

When I call you next week...maybe I will talk about "Wipeout" - the new show on ABC. At least then we can have a good laugh at the people bouncing of those big red balls (I do laugh every time - I can't lie). At least it is an escape from the other EASY things to discuss.

Wednesday, July 9, 2008

Learning to Add Value

As a loan officer, the most difficult aspect of the job is learning how to Add Value to the many Real Estate Professionals that I meet every week. If I can enhance the process of buying a home by bringing value to all parties involved, I will have done my job. There can be many different ways to Add Value within this business, but finding them is the hard part. Here is a list of ways to potentially Add Value to your business partners:
  1. COMMUNICATION: This is essential to the process. Think of it this way...there are three "main" parts to the home buying experience: the Realtor, Loan Officer, and the Homebuyer. Realtors rely on the Loan Officer to "pre-approve" the homebuyer for a loan so that they can help the homebuyer find the home they like. Once the real estate agent helps the homebuyer find that home, it is up to the Loan Officer to process the financial paperwork and make sure the loan is in place and ready prior to the COE date. Along the way there are many steps involved from the appraisal on the property, to the underwriting, to conditions on the loan request, etc. In order to be successful, it is beneficial to communicate quickly and efficiently at every step. Not only when there is a problem, but also throughout the entire process. A phone call to say hello and let all parties know you are still working on the loan will go a long way to adding value to the buyer as well as the real estate agent.
  2. PRODUCT KNOWLEDGE: In this ever changing environment, where more often than not products and programs are axed, it is imperative to understand your Real Estate Agents, their client base and needs, as well as understanding all the changes that are constantly occurring within the market. If there is something you can't do as a loan officer, don't be afraid to meet other loan officers who may have access to other products. Even if you obtain nothing from the deal, the Real Estate Agent will know they can come to you anytime; because even if you can't do it you can still point them in the direction of the program/loan officer that will help get the deal done. They are more apt to using you the next time because they know you aren't just in it for yourself but you are in it for the Homebuyer.
  3. TIME SENSITIVE: Though some may take this for granted and abuse your promptness by waiting until the last minute to ask for something, the majority will appreciate the attitude of getting done today what can and should get done. Some are prone to putting things off until "later" but in a business where you are serving the Real estate agent and the Homebuyer, it is in the best interests of all parties to get done what needs to be done as soon as possible.
  4. UNDER PROMISE & OVER DELIVER: The great motto of the service industry. Never promise what you can't come through on; it looks bad to the Real Estate Agent and to the homebuyer. My goal is to always provide the Agent and the Homebuyer with a great experience, and I know from my experiences that when things are done better, more efficiently, and more quickly than expected I am usually apt for repeat business.
  5. REAPING WHAT YOU SOW: Treat the Agent and the Customer the way you would like to be treated and it will come back to you tenfold. Sometimes in difficult situations it is easy to point blame, lose your temper, or react badly to a situation. 9 times out of 10, that response gets you nowhere. Instead always treat the Agent and the Homebuyer like they are your only customer and give them the utmost respect because that is usually what you will get in return. Don't lose sight of the service aspect of what we do and it will go a long way.

I know that there are many more ways to Add Value to Real Estate Agents and Homebuyers. For example, be willing to teach homebuyers about the loan process (educate them) and offer to help the Agents with any items they may need should the opportunity arise (i.e. open houses, marketing material, flyers, etc.).

I do believe there are more ways to Add Value, and I would love to hear about what other Real Estate Agents find valuable from their loan officers. I believe we can all learn from each other and in so doing make the process better for the Hombuyer. In the end, that is what we are here to do.

I look forward to hearing everyone's thoughts.

Monday, June 30, 2008

Where have you been?

For those dedicated subscribers, the answer is Active Rain. I apologize for the atrophy that overcame this blog. I just was so focused on building my blog through Active Rain that my own personal blog suffered. For that I am forever in disgrace...

But to make it up to you, I posted like six blogs today (go to the right column and scroll down to June - there you will see the blogs) that will show you what has been going on in the marketplace. In addition, I will do a better job of posting to both locations until my very own blog page is designed. Until then, thanks and as always, let me know what you think.

From Mortgage Licensing to the "End" of Countrywide

Due to a wonderful weekend shared with and old friend and his family, I was unable to blog earlier regarding the new Mortgage Licensing bill that was passed by lawmakers early on Thursday morning. Cahtherine Reagor, our local Real Estate writer for the AZ Republic posted this blog regarding the new bill:

In addition to that I received a blog from a local Realtor, Steve Belt, posting information and his thoughts with regards to the new bill and potential licensing requirements for originators.

Lastly, today is the last day for Countrywide to be known as Countrywide. Mike Mueller, aka "The Mortgage Man." has a video excerpt regarding his thoughts on Countrywide. I agree with his thoughts about B of A probably not doing as good of a job as CW had in the past. Only time will tell.

As far as I am concerned. The licensing laws are necessary. The more difficult it is to be able to "do" a job, then typically there will be less people working the job who are not qualified. It takes determination and dedication to make it through a doctoral residency, physical therapy school, teacher certifications, etc. and the more hard work it takes to learn a professional the more credibility it will be given.

I believe licensing will bring more credibility to the profession and will hopefully continue to "clean-up" the mortgage industry.

FHA to Change Upfront and Monthly MI Premium

On July 14th, FHA will introduce risk based Mortgage Insurance Premium pricing. Currently, FHA's mortgage insurance requirements are the Upfront MIP of 1.5% of the base loan amount (that can be financed into the Total Loan Amount) and then a monthly mortgage insurance payment of .50%.

When the new changes become effective the range will be from 1.25% - 2.25% Upfront MIP and .50%-.55% on the monthly mortgage insurance premium. The actual amount of Upfront MIP and Monthly mortgage insurance will be based on LTV and Credit Score. (Very similar to Fannie Mae's risked based interest rate pricing) You can see the full Mortgagee Letter 2008-16 by the following the link below:

FHA makes changes to Mortgage Insurance Policy

In the past, FHA has had a mandatory 90 Day waiting period to insure recently foreclosed properties. However, today the "Bush Administration...announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties."

This policy will be in place for one year and you can read the full News Release at .

What does this do?
1) Allows foreclosed properties to be sold quickly through FHA.

2) "...Help(s) stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties."

3) "Ease(s) the excess supply of unsold homes in neighborhoods across the country."

Just another reason for Lenders to add FHA to their product resevoir and for Realtors to know what they can help customers purchase.

*Quoted information obtained from the following ( Please view the website for the entire story.

Yes: Positive Feedback

I made a follow up phone call today to the listing agent that I worked with on a recent loan closing for a mutual customer. My goal in every transaction is to communicate as effectively with the listing agent as I do with my customer and their real estate agent. Everybody wants peace of mind in this lending environment and so I try to deliver that service to them. I believe it is invaluable to all parties involved to know the status of the loan as things are completed or change during the process. But this isn't about me, this is about the listing agent and the assistant.

When I made the call, she was so nice and welcoming that I almost thought I had called someone who I had known forever. Granted, I had talked to the assistant on several occassions during the process but the fact that she remembered me was icing on the cake. Long story short, she said the realtor had spoken very highly of the service that we were able to provide and asked that I send my contact information and any special loan programs to both her and the listing agent so she could have it on file.

I don't have a deal yet from it and frankly I am not too concerned at this point. The main part for me was that I was able to make an impression by communicating effectively with all parties involved. I know that communication breakdowns can definitely hinder progress and I am certain now that effective communication can foster long term relationships that will continue to grow.

It seems that marketing and building relationships is a lengthy process but it is worth it if you are willing to work at it. I received positive feedback today and believe that I will continue to gain more positive feeback as I work and expand my base network of people.

In short...the hard work is worth it when you know that you have done all you can to serve the realtors and customers involved in the deal and they respond in kind. There is nothing like leaving a lasting impression for the positive, it isn't always easy to do, but it sure is worth it when done right.
I have to go back to helping them out. They had some questions that I hope to find answers for so that I can continue to be of service to them. Make it a great day.

Zillow Mortgage Marketplace

It has been around since April 2, 2008 and I have been checking it out occasionally to see if it is a viable option for consumers. It does in fact seem to be working well for some lenders and borrowers. However, there are also some definite draw backs...

1) The goal is to be transparent. But when the rates are scrolling there is no way to know if the rate quoted is at no origination fee and no discount points to the borrower or if the rates are quoted with points and origination fees. There is still a wide range in rate quotes with regards to the most recent quotes scrolling through the main page of the Zillow Mortgage Marketplace. This can lead to confusion and bad offers from lenders.

2) Discussions paint Loan Originators in a Negative Light. The goal was to foster healthy competition and honesty within the industry and if you read the discussion areas, it seems that the opposite is still happening. I don't know if this is from LO's not liking the fact they were beat on a quote, or if it is truly a function of the industry. All I can say is that if I were a consumer looking at the discussion boards I might have a hard time trusting the sources of these quotes.

3) Quotes on some Loan Requests seem Bogus. It appears from my brief checking around the Zillow Mortgage Marketplace that there is still too much misleading going on and that is disappointing.
I don't understand the consumer in all of this. The only way to truly know that you aren't being taken advantage of has to be with direct contact with the lender/loan officer. And I think that goes the same for the real estate professionals. Take the time to meet a Loan Officer that believes in giving customers the best value for the product and program. Then allow them to continually evolve and help grow your business by their knowledge of the market and lending guidelines.

It is far too easy to be a Loan Officer/Broker and those lenders, who may or may not be a part of Zillow Mortgage Marketplace, are what makes it difficult for the LO who is willing to work and help people through their actual loan request.
What do you think? Leave your comments here. Have a great day.

Friday, May 16, 2008

Great News...A new lending avenue has reopened for "Distressed Market" areas, including Maricopa County in AZ. Go to and you can read the news release from today.


  • New Changes go into effect June 1, 2008
  • "Fannie Mae will accept up to 97% LTV ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system"
    95% LTV on loans underwritten outside of DU
  • Down Payment requirements will be for purhase transactions of Primary Residences.
  • DPA will be available through Community Seconds® and MyCommunityMortgage® products

Read the article if you are interested in some of the remaining comments from contributors to the press realease. This just gives realtors and lenders more options for helping people into their new home. Have a great weekend.

Let me know if this article is useful...

Housing Starts reach lowest levels since '91

Click on the title to see the article from Bloomberg today regarding the low levels of housing starts.

Points of Note:

"Starts increased in three of four regions, led by a 24 percent jump in the Midwest. Construction rose 19 percent in the West and 3.6 percent in the South. Starts dropped 13 percent in the Northeast", (Schlisserman, Bloomberg 5/16/2008)

"Home construction and property values ``seem likely to decline well into 2009,'' Federal Reserve Bank of San Francisco President Janet Yellen said May 13. She also said the risks around her forecasts are ``unusually large because of uncertainty'' about financial markets, housing and commodity prices." (Schlisserman, Bloomberg 5/16/2008)

" Economists surveyed by Bloomberg forecast growth from April through June would slow to a 0.1 percent pace and consumer spending would advance at a 0.5 percent rate, the smallest increase in 17 years" (Schlisserman, Bloomberg 5/16/2008)

Just keep moving along. Everything we do is about attitude, communication, and dedication. We must educate people about how to get into houses without hurting their financial condition. We may be reaching the bottom and then there is only one way to go...UP.

Have a great day.

Wednesday, May 14, 2008

Home Sales are UP???

Not sure if you saw this article today on, “ASU Report: Home sales up in the Valley.”, if you haven’t read it take a second (it isn’t long) and think about what is “wrong” with the title. (I put wrong in quotations because it is a subjective wrong in my opinion) Home sales are NOT up in the valley. Month over month sales from March to April were up and from April of 2007 to April of 2008 they were up. But the actual numbers and trends are in the remainder of the article.

“Home resale transactions for March and April totaled 9,920 sales, compared with 10,245 sales during the same two months last year. The current year-to-date total is 16,975 sales, compared with 19,045 sales during the same period in 2007.”

Home sales are NOT up. Based on this information we are still considerably down in year over year sales and didn’t even match last March and April’s number of sales. If you look in the comments section a reader asked what the number of homes for sale on the market was compared to last year. I think that is a great question to ask.

I have nothing against the article itself. I do have an issue with the title of the article as I feel it is misleading. I am all for positive reporting and believe there are many positives out there, i.e. Lending standards are back to their former self, realtors and lenders are needing to work and discover new ways to educate people about home buying. But I don’t think it is necessarily an article worth writing if it doesn’t stay real to the current trends of the market.

I would like to read articles about mortgage loan originators and realtors that are reinventing the way they do business, and/or finding ways to educate the consumer about what it takes to be a homeowner. Give me those articles and let's change the way people view the professions and in time the housing market will begin to correct itself.

Tuesday, May 13, 2008

Another Day, Another Dollar...Another Person!

I was fortunate enough to have the opportunity to listen to Greg Swann of Bloodhound, and Brian Brady of World Wide Wealth Advisors, deliver a short presentation last Friday for Mortgage Brokers and Bankers regarding Web 2.0 and Social Media Marketing. The event was hosted by Chicago Title through their Phoenix branch. I can tell you that I was intrigued by the ideas and held captive by their willingness to share what they have found to be successful in their business.

I learned many different tips, ideas, and techniques that I hope to use in my Social Media Marketing and Weblog. There was one part of Brian’s presentation that stuck with me and of course it had to do with numbers. (Since I am a numbers guy which further has to do with my organizational and pattern personality it naturally stuck) The final number was 1200. Based on a previous book he had read, “The Millionaire Real Estate Agent”, he gleaned the basic principle of the amount of people in your database directly reflects the amount of business you will do. This concept isn’t new to me but at this time I felt it stick, mostly due to the way it further broke down. As he was continuing his presentation we began talking about prospecting and finding new leads. The basic idea was that if you aren’t prospecting 2-3 hours a day and talking to at least 10 new people a day, then you aren’t really selling.

So I got to thinking and those numbers were dancing around in my head and the idea that if I wasn’t prospecting daily, conjuring up leads, and meeting new people, then I wasn’t selling (which means I am not doing my job) started to eat at me. A little background for you: I have always wanted to know as many people as possible. I love meeting new people, not sure why, but I feel they have interesting stories and each person has something to tell. People’s stories fascinate me and the way we think about situations, handle pressure, and deal with problems individually makes us all so unique. However, I do know that I have a draw back…call it past history, grade school insecurities, etc…I don’t know if people will enjoy meeting me. I am not sure if what I have to offer is really all that unique and so it binds me from starting conversations in person or on the phone. Truthfully, I get a bit tongue tied, don’t know what to ask, hate the introductory part, and when making cold calls generally feel like I am ruining the person on the other end of the phone’s day.

But that thinking isn’t conducive to helping me become a productive Loan Officer, which became even more clear when I read this blog from Jeff Brown, “#1 Myth in Real Estate: Agents Don’t Know Why They’re Failing”. I know it is directed towards Real estate agents but it really is for all people from Pharmaceutical Sales Reps to Loan Officers to Stock Brokers and everything in between. I know I want to be productive, I want to be the top producing loan officer in my office and I want to meet as many people as possible. I believe I can do that by meeting 10 new people a day and prospecting relentlessly.

The process can seem overwhelming if you look at the end result (having 1200 people in your database) but when broken down to meeting or talking with 10 new people a day it isn’t that daunting of a task. It is just determination, grit, and honestly looking at what we do daily that will take us to the end of the road.

Let me put it to you this way:

10 people /day x 5 days/week x 52 weeks/year = 2600 new contacts in 1 calendar year.

Those are huge numbers and not all will make it to your database but if you capture half of that then you will have affected more people through your work and personality than you could think possible in one year.

I have challenged myself to reaching this single goal. I don’t care about how many deals I close this month or next month. I just want to meet people to learn what they do and to hopefully have them know what I do so if we are ever in need in either direction (they need me or I need them) the connection will be there.

This will be my: 10-A-Day Campaign.

If you are in the sales profession in any line of work and are interested in joining this campaign, email me at and let’s get started.

Monday, May 12, 2008

Web 2.0: Good or Bad for Small Businesses

I read an insightful answer to a consumer’s question today at CNN entitled, “Should your business be on Facebook?” The FSB experts cited some pitfalls as well as some tips when navigating the Web 2.0 environment.

What are your experiences with Web 2.0? Do you find it useful? Are you excited about the future for your company and products?

Let me know what you think.

Tuesday, May 6, 2008

Character and your Credit Score

In my post on Tuesday, I made the following statement, "...(Many companies are beginning to use Credit Reports on applicants as an evaluation tool.)" I want to go into more detail on this comment and what some companies may believe your credit history says about you.

First, let me explain a basic fundamental taught at colleges across the U.S. This fundamental is that there are 5 C's to your credit worthiness as a borrower. They are Capacity (ability to repay loan), Capital (money you have personally invested in the business, home, etc.), Collateral (pledging an asset you own - mortgages are in most cases based on the home), Conditions (what is the money being used for...), and Character (general impression you make on the lender, experiences, past history etc.).

Banks and other Lending Institutions use your credit score/history, which displays the above 5 C's, to evaluate your "worthiness" as a borrower to receive a loan against your new home or business. Your credit score takes into account your past history on "credit" you have been granted through these various channels. So at some point, your character/responsibility level to repay these debts comes into question. Now employers are beginning to use, with permission from the job applicant, a credit report to further examine the applicant.

I read a past bloggers take (See Tech Republic) on Companies using credit scores/history as an evaluation tool. I then read the article by Diane Lewis, "Qualification: Must have a good credit history." and researched a few more websites including this report in early April by Channel 7 ABC in Los Angeles (ABC 7 Report). Note the retraction regarding the credit score vs. credit history. The companies don't care about your score but they do about your history because many times history is an indicator for the future.
Since researching I am sure: 1) That if the credit history gives a clearer picture of a person's background than a reference or resume it should be used and 2) That I am not clear as to what the public believes regarding this issue.

What do you think? Do you believe that a person's credit history should determine whether they are hired by a company or not? Does credit history really speak to a person's character?

I read many of the comments from the Tech Republic blog site and most of them discussed extenuating circumstances that led to difficulty in past credit history. However, I do believe that how one handles those circumstances does speak to their character/financial responsibility/integrity. And if there were extenuating circumstances surrounding a person's history and they believe it may cause an issue with a potential company, should they not explain the situation and speak to how they are repairing/dealing with the past situation?

I am very interested to hear what you think. Please don't hesitate to comment on this article.

Walking Away from Your Home

"Walking Away from Your Home" has become a disturbing trend over the last couple of months. The company, You Walk Away, began in January according to this ABC Nightline Report and they definitely paint a picture of desperation and of "walking away" being an OPTION for some. They did a decent job of explaining the consequences of this course of action. However, it is frustrating to have so much negativity surrounding lenders and the mortgage lending industry, especially in the face of what this company may gain financially.

There were definitely Mortgage Lenders that worked under the guise of providing the customer a service and then getting them into their dream home by qualifying them for mortgages they could not afford down the road. In my opinion, this company, "You Walk Away" is doing the same thing. Providing a service that people pay for that will cause them to lose the ability to get decent interest rates on Credit Cards, Buy a Home, Finance a Car, maybe even Get a Job. Short term, this may be a solution but what happens in three years when they can't get the car they need because of past credit history, or they are not hired because of past credit history. (Many companies are beginning to use Credit Reports on applicants as an evaluation tool.)

I am not naive and understand that foreclosures are inevitable for some given recent market conditions. But it isn't an OPTION. It isn't like choosing what to eat at McDonald's, there you have options. The word OPTION shouldn't be used because a foreclosure is the bottom of the barrel. It was a gross miscalculation by the borrower to believe that they could or would be able to refinance/sell etc. in x number of years no matter what the lender/broker/banker told them. They should have thought worse case scenario.

Sample questions that would have been prudent and are prudent now to ask during the lending process:

  • How long are my payments the same?
  • What will my payments adjust to?
  • Can I qualify for those payments if it adjusts?
  • What is the LTV on this home? If values hold steady are there options to refinance? If they go down are there options?
  • Am I buying this house for the speculated future value or because I want to live in it with my family?

I believe that this company is not doing the public or the housing market any favors. Just as people thought short term when buying the house, they are thinking short term in getting out of the house. Some may be willing to deal with the ramifications of this course of action but I hope that they are fully given the extent of the ramifications. A foreclosure has to be reported on the 1003 for any application to purchase a home. Fannie Mae recently released a statement saying that they have increased the amount of time from 4 years to 5 years in accepting an application from a home loan applicant with a past foreclosure. And the foreclosure will affect their credit score for up to 7 years. That is a long time to deal with the consequences of this OPTION.

We are in unprecedented territory with regards to the housing market. This, however, doesn't change the fact that this company is getting paid for providing the customer a package that may very well reap the same result: A customer blaming the provider for their bad misfortune. There must be accountability to some degree. Whether from the lenders, the borrower or now this new company. The cycle of taking advantage of dreamers who over extend and become desperate has to stop somewhere.

Note: If you are beginning to go through the unfortunate proceedings of foreclosure and haven't been able to work a solution with your Lender, please find the time to research the necessary steps and information about foreclosures and how it affects you, the consumer. There are many ways to go about finding information without paying a service. I scanned this website and it had some good quick information and research about foreclosure laws, etc. for AZ. Use it as a resource:

Remember: A foreclosure isn't about living payment/rent free or using it as a tool to help your financial situation...a foreclosure is about saying that what you signed and agreed to pay back is not possible. Make sure that the situation was caused by an extenuating circumstance(s) that must end in foreclosure (Divorce, Loss of Job, Injury, Death, etc.). Not because it was your OPTION to stick it to the lenders or prove a point. It won't do anybody any favors in the long run.

Tuesday, April 29, 2008

Credit Score Effecting Interest Rates

The new risk rating outline by Fannie Mae is here. As I was pricing a loan yesterday for a customer, the difference was clear. Fannie Mae and its underwriters will take the lowest middle score of the two borrowers applying for the loan. In this case, the lowest middle score was 697. This completely changed the outcome in regards to pricing.

We were looking specifically at LPMI programs (Lender Paid Mortgage Insurance) and BPMI (Borrower Paid Mortgage Insurance). Under the LPMI program, the interest rate difference was up to a quarter different. From 6.50% with a credit score of 731 to 6.75% with the credit score of 697. This has ramifications not only in how much they may pay, but also in qualifying for a loan.

For example (an extreme example but nonetheless plausible) - Let's say that the borrowers would qualify at a rate of 6.625% but at 6.750% the total debt ratio becomes too high and they can't qualify. Obviously, short of changing programs or going through a manual underwrite, which still may allow them to be accepted for the loan, these borrowers may not be able to purchase this new home. This would be devastating, especially if the credit score difference had very little to do with delinquent payments or a borrower over extending themselves. With the couple I was dealing with yesterday, they had very little debt and were working themselves through the last credit card. Unfortunately, they had a balance that was too high vs. their allowable credit (just over 50%) and that is more than likely what caused the lower score.

In short, be aware of your credit score, it will be vital for your next home purchase.
Check out my blog post on March 5, 2008 for tips on how to improve your credit scores and what to watch for in terms of your credit history.

P.S. There is good news on the horizon for the couple above. The credit reporting agencies are developing a better way to evaluate credit score in light of the recent tightening in the credit markets. This will hopefully allow people to have a credit score that is more indicative of their credit history and not as arbitrary (at times) as the current system. Check out this article for information on Credit Changes

Wednesday, April 23, 2008

Construction and Lot Loans

It doesn't matter what you can still get Constuction Home Loans and Lot loans for Primary Residences and Investors. True, they may not be based on value or future value of the property, however, you can still get them.

One great option is Silver State Bank. We are a construction and lot loan portfolio lender with the goal of taking a person from lot loan financing to construction financing to permanent financing with as little hardship as possible. We do this effectively with our wonderful Loan Servicing Team (which is where I got my start) and our definitive programs that are simple and easy to follow.

Here is a quick run down for you:

1) Lot Financing - 70-80% LTV depending on borrower's qualifications. Usually a 2 year loan with a balloon payment.

2) One -Time Close Construction - 70%-80% LTV again depending on qualifications. Standard 3/1 ARM I/O product with 2 YR waivable PPP. This has one interest rate locked in from beginning of construction to the end of the three year term. Then the loan can adjust every year from then on.

3) Several Broker Options - Opportunity to broker your loan to another lender with 30 YR Fixed or longer term ARM financing for jumbo loans at no cost to you upon completion or whenever you desire to refinance.

Overall, the main benefits to using Silver State Bank are: the ability to use one bank for every stop along the way from lot purchase to final end loan, the ability to have quick draws (24-48 HRS in Maricopa County), servicing done in AZ with live person and direct access to me, the LO, should there be a problem, and service you can trust.

I believe that if you are looking for a great lot loan and find it, then Silver State Bank may be the best place for you to go. Give me a call at 602-670-3272 for any questions. Thank you.

Thursday, April 17, 2008

Analyzing Self-Employed Borrowers

The great American Dream, outside of owning your own home, is probably running your own least for some. The freedom that comes with watching something grow, setting your own hours, working for your self and working hard is in itself satisfying. But with anything there are positives and negatives and with the many positives comes a negative in the underwriting world of lenders.

Fact of the Times = If it isn't on paper then it can't be counted.

The lending world has reverted back to its pre "lend money to anyone" phase. Investors are being selective in the loans they want to purchase and in turn underwriters are having to explain and underwrite files with no holes. The days of Stated Income/Stated Asset for a wage earner are gone and it will be a long time before those programs return. The only harm is that the SISA program for Self-employed or 1099 borrowers with excellent credit has dried up as well. This is harmful for two reasons...

1) Self-Employed/Small Business Owners account for 18.6 million in the U.S. (See link. --Statistic from 2003, however one could assume the numbers have and will continue to increase)

2) Self-Employed borrowers accounted for 44% of all loans closed in 2006.

This means that as the numbers of self-employed borrowers increases, those persons are going to be in need of mortgages. If they can't get a mortgage due to the structure of their business and taxes, it is going to be difficult for these borrowers to qualify for homes and "move-up" in the housing market. If they can't move up, then they won't sell their home and the market will continue at a stand still. It will be important to begin seeing the programs return for Stated Income Self Employed borrowers in order to refinance them and get them into new homes.

The truth is there are many different variables affecting the current market and the above is just a piece of the puzzle. Self-employed borrowers can take the following steps to prepare their finances in order to present a full, clean documentation file to a lender:

1) Showing two or more years of Self-Employment history.

2) Owning 25% or more of the business

3) A strong two year average of income.

4) No significant decline in your busines income.

5) Lenders may require; Business License, Personal Financial/Corporate Financial Statement, 2 Years Tax Returns (personal and business), etc.

It is important to have your financial information in order when applying for a mortgage to insure that they underwriter can get complete information and file on you. It is possible to get a mortgage, it just may be a bit more of an exhaustive process.

See article "Chasm Grows between Home Lenders and Self Employed." for related information.

Monday, April 14, 2008

Tax Deadline Approaching

Tomorrow is the last day to take care of what many people consider to be a hassle...taxes. However, tax time doesn't have to be a time to dread. It can be an easy and relatively painless process if you follow these few steps.

1) Be Organized throughout the Year. -- Don't wait until April 14th to try and pull everything together to complete your taxes yourself or for your CPA. It won't go well. Instead, track and monitor the items you will deduct throughout the year so that at tax time you will be ready with the information and amounts for your 1040.

2) Consult a Tax Professional -- If you don't know what you are doing or are feeling overwhelmed. Ask around and find someone you can trust. CPA's (Certified Public Accountants) can guide you through the process and even take care of your taxes in less than an hour. Sure it might cost a little bit, but if you are due a refund, then consider it paid through those funds. Plus, the time and headache of figuring it out on your own will be minimal. There are many resources for finding a tax professional. Search Accountant's World.

3) Research Tax Tips Online. -- MSN Money and Turbo Tax are two sites that you can use for any minor questions. If you understand most of the tax information you will need, then you can look up some other tips or even use Turbo Tax to help file your taxes.

4) Promise to do Better for Next Year, Today -- If you are reading this and you still haven't completed your taxes or filed your extension for 2007, plan to take care of your taxes earlier. Saving stress by planning ahead is always a good way to go.

Remember, taxes come every year and the more moving parts you have as it relates to income, i.e. Self-Employed, Commissions with no taxes (1099-R), Personal Business, Capital Gains, etc. the more you may need to find a local CPA that may be able to help organize and help with your taxes. It may be the best hour you spend to find out the best way to manage yourself through the rest of this year.

Good luck with 2007 and set a goal to make 2008 better. Have a great week.

Wednesday, April 9, 2008

WAMU – Out of Wholesale Business

In recent news…We can add another casualty to the Mortgage Lending business. Washington Mutual halted its Wholesale Division operation and will no longer “mak(e) loans through mortgage brokers”. They are also closing down 186 home lending offices and cutting 3,000 jobs as well.

See article “Washington Mutual Gets $7 Billion from TPG-Led Group”

Though not a significant blow dealt to me specifically, as an originator, it does remove another option for brokers to place a loan for a borrower. This comes in the face of the continuing credit crises and difficulty for Home Owners to refinance and for Home Buyers to purchase a home.

As I reviewed the available programs today, it became apparent that the Stated Income program is all but obsolete. We are looking to find a lender who will continue to fund Stated Income loans, but the truth of the matter is that 99% have removed the programs entirely. This is definitely a harsh blow dealt to all borrowers. The only question that remains is…when will these products return? 18, 24, 36 months…

At the core of this correction was the greed with which lenders used perceived values as a saving grace for those looking to buy or refinance a home. And as I have mentioned in previous articles, one should not bank on perceived values, a home is only worth what the next person will pay. Just like the shoes you wear are only worth the money you use to purchase them. Sure, sometimes people will over pay and according to this market people will wait to try and under pay to find a great deal as well. This, however, does not change the fact that this market correction is affecting everyone, and perhaps unfairly at best.

So, without further ado here are some tips as to approach your next purchase or refinance…

1) Make sure you can afford the payment. Do not be duped by someone else. Think about what you realistically make, learn your personality, and make a decision. If you think you will make more in the future, because you just have to…knock off 5% of your income. This may keep you safe.
2) Save for the house. Yes you can still find nearly 100% financing, they are hard to find in Arizona but it is a possibility. With changes to FHA limits and DPA programs it is possible, however, if you can’t (SEE #1) afford the payment. Take a deep breath and think.
3) Educate yourself on the process. Take a pro-active approach to your financial situation and seek out those who wish to teach and not those who wish to tell. If you haven’t learned something from your Loan Originator, they aren’t doing their job.
4) Good Luck and Hold On. I can’t say when this credit crunch and housing crises will subside. But I implore that you don’t give up on the house just because it is worth less than you thought. You made a loan and are responsible for the terms held within the note. A foreclosure is going to hurt you financially and in your future for a long time to come. Giving up usually leads to a huge hill that must be climbed again. Climb it now and save yourself the harm of trying to climb again, and again, and again.

Keep emailing and responding to the blog…I love the feedback.

Friday, April 4, 2008

A New Name: Choice Bank and Silver State Bank Merger Complete

On April 1, 2008, the merger between Choice Bank and Silver State Bank was successful. This has been, for me, an exciting week with new possibilities and a positive outlook for the future. It is early in the process and the changes mostly involve processing and internal issues. However, the new name comes with it a hope for newer and more efficient systems and tactics that will ensure the success and dreams of the original Choice Bank founders are reached.

In life we dream of growing and changing, making ourselves better each and every day. In this merger we have done just that. Choice Bank has the increased capacity to market effectively, to expand further, to reach a new and exciting audience, and to stand up as a community bank with strength, power, and the desire to meet each customer's needs. It is a new day for Silver State Bank. I am lucky and proud to be a part of the growth in the valley over the next few years. If you don't know of us will know of us soon.

On to the week in the Mortgage Industry. Rates were up and down this week, which followed the pattern of the Stock Market. They are very consistent at week's end with last weeks rates. Investor options for us, as brokers, have come and gone and the ability to be involved with heavy hitters in the construction industry is increasing. Sometimes overnight, products that were once available are removed and it leaves a bumpy wake in its path. However, it keeps us on our toes as originators and forces us to continue to evolve.

List of Current and Upcoming Trends in the Mortgage Industry
  • FHA and VA Loans - the way to go for low down payment and Down Payment Assistance programs.
  • Longer and more heavily scrutinized underwriting by all investors.
  • Rates are going to be soon be tied to credit score. Great Credit Score = Better Rate and vice versa.
  • More activity from buyers (Pre-qual activity up)
  • Rates may continue to increase overall. See article on for more information.

Stay tuned for more information. Call me with any questions. Make it a great Friday and have a fantastic weekend.

Wednesday, April 2, 2008

Bernanke speaks on U.S. Recession

This morning I had the opportunity to listen to Fed Chairmen Ben Bernanke speak on the Bear Stearns "bail out", the current Housing condition, and the potential for U.S. Recession. First, let me say, Mr. Bernanke does appear as though he genuinely is looking out for the best interests of the U.S. Economy and consumer. With that said, I have been reading stories on the CNN Money website from Americans who are struggling to make ends meet. This may seem every bit the norm, as there have always been classes of people (upper, middle, and lower), but I do believe that the struggles of so many Americans goes far beyond a normal level. My question is what can be done about these troubles.

There are two sets of thoughts:

1) Those struggling made bad decisions (their own uneducated decisions) that brought them to their current situation.

2) Those struggling are victims of circumstance and unfortunate misgivings that have landed them in a situation of which they are no longer in control.

Both sets of thoughts put the blame in two places, either on the person or on external factors. The housing turn down, for most, was likely an external factor. Many people, and I have heard countless stories from my work as a Mortgage Loan Originator, believed they have/had equity in the house that, on paper, is no longer there. The problems with this arise when they chose a Mortgage that may not have been explained properly or chose cheaper payments now in leiu of sound financial decision making. The other side of the housing turn down occurred when people wanted what they couldn't afford to actually pay off, and in the meantime were given a loan that allowed them to make payments while continuing to lose in the process. ARM's, Interest Only, Negative-Amortization loans, etc. All programs that if not used properly can have a profound impact on one's financial future.

I subscribe to a great Real Estate blog by Steve Belt at Realty Executives in Scottsdale, Arizona. His blog is Yesterday, he wrote an article about the mindset of the public and their ideas about housing. I believe he said it best when he said, "...a home is: a place the average person lives in for 5 years, making memories." You see, we all look for great deals and hope to someday have enough financial security to retire comfortably. However, we are viewing homes, not as places to live and dream, but as a place to invest and make money. Sure, there are people who are very successful at buying and selling homes for profit, but it is their job. They wouldn't understand the inner workings of Apple, or Tax Accounting, or our legal system. And, if they stepped into those arenas they may find themselves to be unsuccessful in those ventures, unless they devoted their time and resources to being great at those specific occupations.

So here is the bottom line, be in control of your finances. Don't go based off of what you can't control but what you can. A home, for sure, is an investment, but not at a price you can't afford or aren't willing to sacrifice for in order to keep. Be educated and intelligent about your decision to buy the house and when you found your home and can afford it, then make the purchase and live in your home to enjoy it.

With that said, let me go back to the start of the article and Mr. Bernanke. He stated that the housing crisis is in the center of the current economic situation and a big part of the problem. Unfortunately, he offered little as to what the Fed may do to help struggling Americans.
  • Should stuggling Americans be helped in this crises, should tax-payer money be used to bail out those who can't make payments and face foreclosure, should those who are more fortunate or were responsible be made to foot the bill to fix this situation?
  • Can blame be placed on the purchasers of mortgage backed securities, the broker shops who supplied bad loans to people in rough spots, or the investors who were looking to make a quick buck?
  • Lastly, can we find a way to fix or regulate the industry in a fashion that will prevent the same problems from occurring again?

I am not sure there is a definitive answer and the debate is ongoing as to what should be done. I do believe it starts with educating the average American about the mortgage process and finding ways to give guidance to those who are seeking it. It starts with education and continues from there. I would be thrilled to know your thoughts on this issue and how you believe we can begin to mend the issues and prevent them from happening again.

Make it a great day

Friday, March 21, 2008

PMI Guideline Changes

Changes just keep coming. These changes are coming in "alignment with the Economic Stimulus Act of 2008." Though the opening letter paints a bright picture of these changes, they are actually making adjustments and tightening their standards. These changes are going into place on April 15, 2008.

Here is the link to read the full letter and information regarding these changes:

Here is a summary of the changes...

  • LTV and FICO "requirements are effective regardless of any AUS decisions or recommendations."


  • --Cash out Refinance loans are no longer eligible

  • --Investment properties are no longer eligible

  • --Limited Documentation loans are no longer eligible

  • --Interest Only loans are no longer eligible on Investment Properties

  • --Owner Occupied/Primary Residence I/O, then borrowers must qualify using full PITI (Principal, Interest, Taxes, Insurance)

Besides the above major points, PMI also developed a matrix to better explain its requirements. A couple of examples:

  • One unit SFD (basic single family detached home) - Max LTV 90% with min fico score of 680.

  • Jumbo Loans on Full Doc PMI up to 85% LTV with min fico score of 700.

Other than the above, finding PMI for certain types of loans and borrowers is going to become increasingly difficult. The best new option is FHA loans as long as they remain under the $346,250 limit threshold.

There is no telling how far and fast the guidelines can change from these most recent changes. The goal is to stay encouraging to our borrowers and buyers of homes and consult them from the beginning of the process on how to improve their credit and save money in order to buy their first or second home. In addition, a mindset change must take place regarding the largest purchase the average American will ever make, a home. It has seemed as though it was a fleeting decision made by buyers who were not educated properly. This has left a path of destruction in its wake and made it difficult for those who would be qualified and responsible buyers to even secure a loan. A process where we work for the things in life we want and desire to have must begin to unfold. This will keep us away from the past few years when Americans over-extended themselves hoping to "cash-in" on values and have found themselves without a strong and secure financial background to rely on.

Let's make a decision as realtors and loan officers to educate our buyers and take care of them in their dream of home ownership, not using it as a way to cash in on their lack of understanding of the industry we enjoy so much.

I hope your week is going well and it finishes off as strong as it began.

Fannie Mae Changes

Changes occur everyday in the mortgage lending industry. In order to be the most efficient Loan Originator, it is important to stay on top of these changes and be aware of programs that become obsolete and new programs that may become available. As I discussed a couple of weeks ago, FHA loan limits have increased, which may ease a borrower's necessity to put down more than 5% toward their new home purchase. It may also allow for a refinance to someone who's current loan falls within the new limit of $346,250. This change doesn't affect everybody or ease the difficulties within the housing market and lending sector's of the financial industry. It may lend for new opportunites for an LO to prove their worth to Real Estate Agents and Title Companies.

Fannie Mae Guideline Changes Effective June 1, 2008

Market deterioration has led to the implementation of "revised standard pricing requirements for certain risk attributes" (See Announcment 08-04 from Fannie Mae). Which means, the higher the risk then the higher the price in originating a loan with Fannie Mae (Conventional, Conforming Loan Limit's <417k).>
  • LTV & Credit Score
  • Cash-Out Refi's & LTV & Credit Score
  • 2-4 Unit Properties.
  • On June 1, 2008, any loans will have the adjustments. Basically, they (Fannie Mae) developed a matrix that the lower your credit score and the higher the LTV the more expensive the pricing for the loan. This translates into higher rates for borrowers with lower credit scores and less money into the transaction.

    For example:

    • 95% LTV with 650 Credit Score = 1.75% adjustment to rate
    • 60% LTV with 700 Credit Score = .50% adjustment to rate

    The same type of mindset has been applied to cash-out refinances with Fannie Mae, after June 1, 2008, not providing cash-out refinances over 90.00%.

    These changes will significantly affect the rate environment that we are in and may make it more difficult to qualify borrowers and convince them of the rate structure. It is imperative that the word gets out to those buyers who may be on the fence and to those people who may be holding out for a better rate. Sure as day, unless they have a low LTV and impeccable credit their rate will be affected.

    It isn't likely that this change will solve the problems that arose over the last 6-12 months within the market or keep them from occuring again. However, now is the time to make sure that lenders and investors have done their due diligence to ensure they will insure the financial industry weathers the storm that blew in last Spring. Stay tuned tomorrow for more changes regarding PMI (Private Mortgage Insurance).

    Hope you have a wonderful final week in March.

    Thursday, March 20, 2008

    This Week's Top Stories

    This has been a week of big stories and interesting changes within the Financial Industry and overall economy of the United States. Here are some links to articles regarding these stories.

    JP Morgan takeover of Bear Stearns for $2/share.

    Fed cuts Overnight Lending Rate to Banks by 3/4 Point.

    Mortgage Rates (30 YR Fixed) hold steady despite cut.

    Stocks are Rallying Today.

    Obviously, it has been a week of newsworthy items. From takeovers to Federal Reserve Rate cuts, we continue to see the country and its leaders fight to stave off a Recession. But we need to keep our eye on a few items: Unemployment, Job Growth Rates, Consumer Confidence/Spending, and inflationary concerns. Still a tough road ahead.

    The mortgage industry continues to see a tightening due to mortgage backed securities losses and the "credit crunch" that is largely affecting the ability of borrowers to obtain new loans or refinance old ones. Tomorrow, I will discuss the upcoming changes to Fannie Mae's guidelines that will affect interest rates for customer's based on credit score, as well as discuss PMI (one mortgage insurance company) and their response to the Stimulus Package.

    Make it a great Thursday.

    Thursday, March 13, 2008

    FHA and the FED

    Over the last month or so lenders have continued to tighten and remove loan programs that were once available. This is mostly due to the lack of liquidity within their own portfolio. They no longer have the resources to fund deals that aren't "A" paper deals (which means good credit, adequate reserves, significant down payment, etc.). This has caused most investors/lenders to reduce the amount they will lend on purchases and refinances. Programs aren't available without a 5% cash contribution for purchases and upwards up 10-15% in value on refinances. In addition, Mortgage Insurance companies are too reeling from the credit and housing crisis. Some have put a cap on how high they will allow LTV/CLTV to go for coverage. In AZ the cap is at 90% (though some exceptions can be made - it is a difficult process). Add to all this that rates are about .375%-.50% higher than they were 30 days ago and the plot continues to thicken.

    The above may sound bad but in reality it is a switch for the better. People that can afford homes and have adequate resources are getting into great loan programs that will help them for years to come. Lenders and Investors are not just thinking about the money they are thinking about the borrower and making the best decision for their company as well as the borrower. Though it isn't always easy, it is necessary.

    Two newsworthy events occurred within the last 10 days. The first is in regards to FHA. In Maricopa County, the loan limit was raised from $263,500 to $346,250. The second was in regards to the Federal Reserve. "The Fed said it will make $200 billion available to financial institutions in an effort to ease a crisis of confidence that is making it harder for families and businesses to borrow money" (Tomoeh Murakami/Washington Post). What does this mean for borrowers?

    FHA Change to $346,250.00

    1) LESS DOWN PAYMENT/CASH TO CLOSE: FHA loans allow for at least a minimum contribution of 3%. (In light of most programs outside FHA, currently requiring a 5%contribution).
    2) CREDIT ISSUES: If there are some deragatory issues on your credit, you still may qualify for FHA based on your DTI ratios and Income Stability.
    3) REFINANCES: For those borrowers that have ARM's that may be adjusting, if your loan is less than this amount you may be able to refinance up to a higher LTV if your home's value was hit by the recent market turndown.


    1) INCREASES LIQUIDITY WITH LENDERS/INVESTORS: It is no secret that Mortgage Companies and Banks were hit by this recent change in home values. The companies lost so much money that there is very little room to offer products that may cost the companies more money. They have become safe and so in turn it becomes more difficult to find a decent program with little cash requirement. This extra liquidity may give some companies the opportunity to loosen their standards.


    We may not know how all of this will eventually shake out but we do know that relief in some form may be available. That is good news. Keep your eyes and ears open for more updates down the line. Make it a great day.

    Friday, March 7, 2008


    In order to begin the actual process, it is necessary to complete a loan application. The form is called a 1003 - Uniform Residential Loan Application. It can take anywhere from 30 minutes to an hour or more depending on the amount of information that you will be providing to the Loan Originator. (By that I mean- the more accounts you have, income sources, real estate holdings etc. the longer it may take to complete)

    In today's age of technology, Loan Originator's have access to software that allow us to input your information into the system and pull credit as well as run Automated Underwriting all while taking a phone application. It is convenient and provides almost instant feedback to the customer if they are willing to spend the time with the LO.

    The application doesn't lock you into any programs or interest rates, its purpose is to show intent on your part to complete the loan process with the LO and to provide the LO with the ability to make a sound credit decision on your behalf. Normally, a fee is associated with taking a pre-approval and/or application. The fee is to cover the costs of pulling credit, running AUS, etc. It in no way provides the LO with any income. If they are charging you more than $25-$50 and you haven't decided on a program or agreed to an appraisal then be careful (they may be taking you for a ride). However, once a loan program is agreed upon and the initial disclosures are signed the fee may be higher. Again it allows us to cover the costs of the appraisal, credit, AUS, and is credited back to the borrower at closing.

    For example: If there is a solid deal in the works, then I may charge $350 to get the ball rolling. This is a good faith payment from you that you are willing to do the loan with me and that I can go ahead and order the appraisal. If you are specifically asking for a pre-qualification/pre-approval for the purchase of a new home then I will more than likely collect the $50 fee and when you are ready to go collect the remainder of the upfront fee for the application.

    In a nutshell, you will be asked about income, debts, assets, credit history, schooling, dependents, social security number, address, job, race, nationality, real estate, and much more. This will provide a solid base and give the LO the chance to provide a sound credit decision with regards to your file. There are two fees, either pre-qualification/pre-approval or an application fee.

    Once you are ready then the next step begins, deciding on the program and terms. Stay tuned for more information next week on programs and terms.

    Have a safe and wonderful weekend.

    Wednesday, March 5, 2008

    Credit Matters

    The recent changes in the market can be attributed to many different variables but none more noticeable than the Sub-Prime Mortgage problem that is affecting current loans and the ability of the home owners/investors to make payments. The sub-prime lending that was rampant about 2-3 years ago made it easier for those with deficient credit history and non-qualifying income to receive a loan. When most of these deals were put into place they came with the caveat that house prices would increase and thus make it possible to refinance into a better loan when a) their credit deficiencies were cleared or b) they could qualify for the loan. Clearly, this was not the case. As things began to turn in late 2006, homes were not moving as quickly as they were being built and the next wave of homebuyers balked at the home prices. Coupled together with rates adjusting on the ARM (adjustable rate mortgage) products and the home-owners inability to make payments and we now find ourselves in a huge market correction that has never before occurred.

    What does that have to do with you and the rest of those anxious home buyers? It means that it is important to take the necessary steps to be educated about purchasing a home so that you don't "bite off more than you can chew" in the process. It may seem silly, but maybe the best plan is not to buy your dream house the first, second, or even third time around. It is hard to enjoy the house of your dreams when you are constantly worried if you can make your payment. Trust me, my dream homes is the home owned free and clear. A goal in life should be to find yourself living debt free but that is a subject for a different blog.

    Back to credit...

    A major component of the loan approval process hinges on your credit score. Underwriters accept what is known as a tri-merged credit report. This report calculates the credit score from each of the three credit reporting agencies (Equifax, Transunion, and Experian). Most investors and lenders will accept the middle score of the three (or your average credit score). There are times when there are large swings in your score, mainly due to the different credit companies reporting procedures, but often the scores are very similar.

    Note: You are entitled to one free credit report per year by the Fair Credit Repoting Act. I have used It is the only free site and authorized by the FTC for supplying the reports. It is a good tool to see what you financial debt obligations are and if you have paid them on time.

    Your credit score can affect what products you have available to you and what interest rate you may receive. The catchy part is some investors (the ones who purchase the loans if the loan is brokered) don't penalize or better a person's interest rate if their score is above 680+. While others will have different breaks at 700+, 720+, etc. Typically, if your score is 720 or better then your credit will help you in the process. If your credit is <660,>
  • Make payments on time. There are three time frames to consider. 30+, 60+, and 90+. If you are over 30 days late in making your minimum payment on credit cards, car loans, mortgage payments, etc. then you are considered delinquent. These are all reported to the agencies and negatively impact your score. Over 60 days is worse and by 90+ you are in default (really bad for your credit)
  • Total balance on Credit Cards should not exceed 30-35% of the max credit allowed on the card. For example: On a $1000 credit limit, your total balance due at the end of the period (when the agencies are reported to) should not be over $300-$350. Your credit score is linked to the amount of credit used vs. the amount available.
  • Consider signing up with one of the agencies for periodic credit checks. For as little as $10/month you can sign up for a service through either Equifax, Experian, or Transunion where they monitor and give you updates on your credit status. This can help against fraud as well as keep an eye on any other adverse activity that may affect your credit report.
  • Lastly, understand that though you may be discouraged now about your credit situation, you can always improve it. Think of it like this, if you have adverse or deficient credit, it can mean to an underwriter that you were irresponsible with the credit given to you in the past. Credit isn't a free gift but it is an opportunity to prove that you are trustworthy in making payments and handling responsbility. If you haven't handled your past credit efficiently, it may be time to begin taking control of the situation and improving your credit.

    (There are other situations that may impact your score: Bankruptcy, Divorce, Death, Injury...the comment above is not to make light of different situations that may be present that were out of the control of the person(s) involved - sometimes things happen in life that may knock us down, but knowing how to manage issues now may help in the future and allow us to stand a bit taller)

    There are more things to consider with credit and various ways to make changes but these are the basics. If you are in significant debt, maybe focus on eliminating that debt first before moving up or into home ownership. If you have good credit and can afford the home, then get pre-qualified and start house hunting. It is a great time to buy if you are ready for the responsibility.

    Monday, March 3, 2008

    Loan Process

    Before we get started this week, I am going to give you a few organization tips for you finances to help in the loan process.

    Here are three key items to consider that will help you begin to organize your financial life so you can see what it will take to qualify for your next home purchase or refinance.

    1. Income
    • How are you paid? -- Salary (W-2 wage earner), Commissions, Bonuses, Independent Contractor (1099-R), Cash.
    • What is your monthly income? -- Once you find out how much you make, there are two things to consider your Gross Income (before taxes) and Net Income (after taxes - what you actually take home)

    2. Debt

    Three main types of debt -- Mortgage, Installment, and Revolving.

    • Mortgage - Amount you owe against a property...can be primary residence, second home, or investment property.
    • Installment - Usually a loan in connection with a car and the amount due each month.
    • Revolving - Debt associated with credit cards.

    3. Assets

    • How much do you have in your savings account?
    • Do you have any other liquid assets? - Cash that you is easily accessible.

    From there you can deduct a couple very important items for what you can qualify for in a purchase and what type of products may be available to you. To find out your Debt-to-Income ratio, first add up all your debt (mortgage, revolving, installment) and divide it by your gross income.

    *For example - ($25 C/C, $325 I, $125 C/C, proposed mortgage $1375 / $5500 Income) = 33.6% DTI back end ratio.

    There are two ratios - Front End and Back End. The front end ratio is your mortgage debt vs. income and the back end encompasses all debt (see example above) vs. income. Typical DTI ratios are 33%/45%. You can usually qualify for higher ratios, i.e. 43/55 but the higher the ratios the harder it may become to fit the loan.

    Lastly, what amount do you have in reserves? In this market, you can expect to put at least 5% down on any purchase of a primary residence. Due to the distress market label (see article from Tuesday, February 26) even the flex products and "My Community" mortgages are requiring a cash contribution. On a $220K purchase price you can expect to need at least $11k in cash to bring into the deal.

    Hopefully, this will get you started with finding out how to set your dreams for achieving that home purchase. It is always good to evaluate your current financial situation and discover what it will take to accomplish your goal of home ownership. Please email me or comment on this blog if you have any questions.

    Thursday, February 28, 2008

    Underwriting and Appraisals

    Underwriting and appraisals - two items that originators have only limited control of. Our role as originators is to know the products we offer, just like a doctor would know a drug, and to educate people about those products. Within the scope of these products there are many variables. The constants remain; income, assets, credit score, debts. However, within each transaction there is the understanding that the "underwriter" may see something they don't like and either...

    A) Ask for more information from or about the borrower
    B) Check with "Senior Management/Review Board" for approval
    or C) Deny the loan entirely.

    There is some responsibility that must be placed on the originator as the "quarterback" of the deal to make sure enough information is collected up front to find the right program. However, there are times when this doesn't happen and we will call it human error.

    (Please forgive us for the times we make mistakes - as much as you want the loan to go through, so do we -- our well being depends on it...very high levels of stress)

    In order to avoid the small underwriting snag along the way; before you come to the table for a loan, as a consumer, be prepared to answer questions about everything from last night's meal to the time you almost had your tooth knocked out of your head by that remote control airplane. (Don't ask - long story.) In all honesty, we don't mind the information and the more upfront and honest you are, the more smoothly the process can go. From there, we will do our best to find the best program for you based on your plans and financial capabilities. Be willing to learn and we will be willing to teach. You may not like what we have to say or offer, but I am sure that we hate delivering bad/different news than what you were looking for just as much as you hate hearing it.

    Note: Underwriting and programs are changing constantly. I cannot stress enough that products/loan programs available today may very well be gone tomorrow (kind of like interest rate changes). Be prudent with your decision but don't hesitate too long unless you are prepared for the changes that can occur.

    Appraisals - the quick run down. Completely out of our control and if we knew what your house was worth we would be a licensed appraiser. But, I am not and most LO's I know aren't as well. We do have access to resources that may give us a good estimate, but again a full appraisal by a licensed appraiser is the only way to know what your house is worth - in theory, on paper, based on what other people have listed for sale/paid for a similar house in that neighborhood.

    If you aren't sure about the value of your house, you can take the risk and have the appraisal done or you can wait. I would love to pay for every single person's full appraisal but at an average of $350 a pop (though I make a million dollars a year...I would still be able to only do appraisals for about 3000 homes) you can see how costly that would be. The scrutiny placed on appraisals is currently slowing down underwriting times and with the lenders/investors constantly in "Caution" mode (link to article on AZ Central today - reinforces this weeks topics) it is taking a long time for deals to be closed.

    Quick Hits:
    1. Disclose as much information to your LO as possible (this will help them choose the best loan)
    2. Be patient during the process. Understand that some things are just due to the human element involved in underwriting and originating.
    3. Appraisals can make or break some deals (especially today) but don't let it discourage you from refinancing or purchasing if you are in need. It just may mean that things need to be adjusted later.
    4. Current Market - May take a while for underwriting and it is definitely time to be as clear as possible with your situation and loan request.

    Excuse the length of the blog. I am trying to cover a bunch of information quickly so that you have a good base as we move through this year. As I move forward I will try to bring more insight, knowledge, and resources to the table to help you in the process.

    Next week-- Step-by-Step look at the overall origination process from initial pre-approval to application to closing of the loan.

    Have a great weekend...until Monday!

    Wednesday, February 27, 2008

    Purchase Price vs. Loan Amount

    Series Note: Part 3 was originally slated to be "Underwriting and Appraisals", but the editor felt the following article flows better within the context of the series. Enjoy.

    In this market of foreclosures and home prices dropping by the minute (not exactly but it can sure seem that way), there are times when the appraised value and the purchase price are not the same. For starters, if the appraised value is lower than what you are going to pay, you may want to rethink your offer. There are also instances when you are purchasing the house for $225K and it is worth $250K (or so the appraiser says).

    Quick Tip - A house is only worth what someone is willing to pay for it. So even if the house has an appraised value of more than what you are offering, you must think that it may only be worth what you were willing to pay, because there may not be someone else who thinks it is worth more.

    In the example above you believe that you have built in equity, which may be the case, but the lender will not base your Loan To Value (LTV) on the appraised value, he will base it on your Purchase Price. Here is what that means for you...
    1. You must consider that the purchase price is your starting point. A loan for $225K on a purchase price of $225K is...that's right 100% LTV.
    2. The loans that give you the best rates , if the borrower qualifies, are those at 80% LTV. You would need to put down at least $45K + closing costs to get this loan. Your loan amount would be $180K.
    3. Any loans over 80% LTV require PMI (Private Mortgage Insurance), or you can choose to get a 2nd loan to cover the difference. (Purchase Money 2nd's are very difficult to obtain in today's market so PMI may be the way to go.)
    4. 100% LTV loans are difficult to obtain and come with a higher interest rate. In this market the likelihood of a buyer needing to bring money in to complete any deal is pretty high.

    There are alternatives...FHA Loans are great and allow a buyer to bring in a minimum of 3% (in the example above that would mean as little as $6,750 to the table), some lenders still have "My Community" mortgages but the underwriting is difficult because of declining home values (this may work if you have an appraisal higher than the purchase price).

    Overall, it is good to remember that whatever your Purchase Price is, that is where the value starts.

    FYI -Refinances are based on the appraised value. Tomorrow, I will get into underwriting and appraisals and how they relate to the loans.

    Make it a great day.

    Tuesday, February 26, 2008

    What are your Rates?

    Loan Originators are tied to interest rates. Our lives begin and end with interest rates. Though often times the difference between 6.25% and 6.125% is less than $20 a month, it can mean the beginning of the end for a deal. Competition is plentiful between mortgage companies but in the end the consumer should choose the company with the best service and products. Today, I want to briefly discuss a few key ideas about interest rates as well as explain the relationship between the Federal Funds Rate and the Long term 30 YR fixed rate.

    Rates can fluctuate daily and hourly.
    • During the past few weeks, rates have been as low as 5.375% on a 30 Yr Fixed loan to as high as 6.5%. These fluctuations are tied to the long term bond market prices and rates (not the Fed Funds Rate - more on that later). With the market and its recent volatility it is important to understand that choosing to play the "rate game" may end up costing you, the consumer, in the end.
    • Constant adjustments occur, so if you are thinking of purchasing a house, understand that a quote on a Monday may very well be unavailable on Friday (save Monday evening depending on conditions). Instead of focusing on the rate focus on the payment and housing affordability.
    • If you are refinancing, make the move only if the costs associated with the new loan don't outweigh your new reduced payment. (Talk to an experienced lender and they should be able to let you know what Interest Rate makes sense and where your break even point will be with the new loan)

    Rates are different among Lenders

    • Many lenders quote rates differently, some quote rates based on charging origination fees, some do not (I happen to quote rates based on no origination or broker fees to the customer)
    • Lenders do not all have access to the same investors, thus the difference in the rates between lenders. Find a lender you trust to get you the best deal possible and work with them.

    Historical data about Interest Rates

    • From 1983-2006 the average 30 YR Fixed Interest Rate is 9.12%. (See for the chart.)
    • Current average rates on 30 YR Fixed loans are about 6.25%-6.75%. Anything between, below, or even a bit above these rates are great. If you have a high interest loan it may be time to refinance.


    Unfortunately, the Fed Funds Rate (Prime Rate) is not tied to the 30 YR Fixed (long term) rate. Though it may appear that way, the recent change with interest rates was due to the bond market and its changes. The volatility of the economy and the stock market have attributed somewhat to the rate fluctuations and as long as it remains volatile we may see swings in both directions. Eventually you need to ask and answer three questions...

    1) Do I trust my loan originator? 2) Am I getting a good deal? 3) What payment can I afford?

    By answering these questions, you may discover the process of purchasing and/or refinancing to be educational and come to think of the interest rate as the secondary aspect to the deal.

    Stay tuned for Part 3 - Underwriting and Appraisals...

    Monday, February 25, 2008

    Blog Series, Part 1

    Over the next week, within this blog, I will be touching on different aspects of originating that sometimes make it difficult to complete the loan transaction. It will encompass everything from market conditions to debt ratios to consumer goals within each transaction. In the end, I hope that it is a week filled with some learning moments and if an "AH HA" moment occurs, then the job will be successful.

    One of the most difficult aspects of originating loans is discovering the interest rate that will satisfy a customer. Often, consumers are a bit jaded when it comes to what their interest rate should be and they focus too much on that aspect and not on the aspect of housing affordability. True, an interest rate can price you out of the market, but an interest rate phobia can lead you to missing the right opportunity.

    There are currently some difficulties within the lending business that may make it hard for first time home buyers and those in need of refinances to find a loan. Many underwriters and companies who buy loans on the secondary market have declared Maricopa County a distressed market. This distressed market rating automatically cuts the loan to value on maximum financing back by 5%. So, if the max LTV on a cash-out refinance is 95% on their guidelines, because of the current market conditions, the LTV can be no more than 90%. This, on a refinance, can kill the deal. The same goes for a purchase, if the max LTV on a specific purchase product is 100% (unlikely in this market but still available), the new LTV is 95%.

    What does the above mean for you as a consumer. It means that you will be responsible for the cash necessary to close the deal. For example, on a $100,000 loan amount for 100% financing, with the cut, the loan is $95,000 and the consumer is responsible for the $5000, plus closing costs. A well informed originator will prep the customer for this change, however, it is always possible that unforseen changes occur of which the loan originator is not always at fault.

    More about that tomorrow as we begin to break down the stigma against Loan Originator's and begin to educate people about how they can make the process work for them.

    Monday, January 28, 2008

    FED Rate Cuts

    Last week was a week of mortgage rate volatility due to the market. There were more reposts and changes to rates than what has been seen in the recent past. The good news: the rate cuts from last year affected the current rates and so we have seen a trickle down in the long-term rates. The unique news: Fed may cut rates again by a quarter to a half percentage point which will hopefully further drive rates down over the coming months.

    If you get a chance read this article on a different view of the past few rate cuts.

    Keep your eye out for more information this upcoming Wednesday. Get ready for another wild week. None of the negative talk of recession changes the fact that rates are definitely better and if you need to refinance, now may be the best time. Have a great week.

    Wednesday, January 9, 2008

    New Year, Same Story

    The talk is of recession. To be honest, I am interested to see what really shakes out in 2008 and 2009. The last recession found me too young and naive to even realize the economic impact that came about due to the recession. I was, however, fortunate enough to read an article this morning from the FDIC about a hearing of top executives who discussed the possibility of a recession. Though they believed it to be a few years off, the reasoning behind the cause for the next recession were spot on.
    See for the full article.
    So, the recession may happen earlier than they expected but they could see it coming. What does that mean for us in the mortgage and real estate business. It means we should stop thinking GREEN, as in money, and start thinking globally. In my opinion, it is important to be educated about all factors that affect any person's profession, so that when change happens (as it inevitably does)they can be ready.
    With that said, let us move through 2008 with a steely resolve. Let us look toward the future with a positive perspective, knowing that our economy moves in cycles. This isn't the year to run, it is the year to BE PESISTENT, DISCIPLINED, and CONSISTENT, in our efforts to provide people with the best service imagineable, so that when the fear and negativity is gone, we are left standing ready to work even harder.

    Rates have improved and the products to complete loans are still available.

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