Mortgage Anyone? To Dream The Impossible Dream?

Hi Everyone,

   Welcome to another Sizzling Summer Friday!

   Unless you've been living under a rock for the past few years (or you just don't follow the Real Estate Lending market, but if you didn't, I guess you wouldn't be reading this), you know that mortgages and lending has been tight and more stringent as opposed to the pre-housing bubble days.

   In a recent CNN Money article from Les Christie ("Secrets to getting a mortgage with so-so credit"), Christie concurs and says that, "Getting a mortgage can be tough these days -- even people with near-perfect credit have been rejected for loans". Christie points to a conference in which Fed Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago -- cannot qualify today."

   Is there money to lend? Christie quotes the acting commissioner for the U.S. Department of Housing and Urban Development (HUD), Bob Ryan, who said that mortgage money "is flowing, it's stable, it's tightened from the boom years, but it's there.". "The belief is that you can't get a mortgage at all -- but you can," says Keith Gumbinger, of the mortgage information provider HSH Associates.".

   Christie writes about a loan officer who had a client with a 700 FICO a couple million dollars in assets, and he wanted to refinance. He was rejected! Apparently, his report showed an investment property he could not (housing bust), and had to do a short sale, and that blemish "resulted in an automatic rejection of his refinance application."

   So, are things really that bad?

   "Depends on who you ask", says Brian Willingham, a Loan Officer with FitzGerald Financial Group.

   "Lending has gotten a bad rap lately", adds Christopher A. Potter, a Loan Officer at GuardHill Financial.
  
   "Basically, these days you actually have to be able to afford what you want to buy (and disclose your true income on your tax returns).", says Willingham. Potter adds that now banks, "want to see that you can actually afford it. This is just common sense and will benefit all in the long run.". He also said that it's, "not that difficult assuming that you qualify.", and that people are so used to easy credit standards ("It used to be that all you needed was a pulse to get a loan.", adds Potter).

   Nicole Tucker, a Licensed Texas Real Estate Consultant, says that even though the requirements are tighter that several years ago, "it is not difficult to get a mortgage if a borrower has verifiable and steady employment and decent credit. You do not have to have stellar credit." Willingham continues this point, and agrees that for people with "sufficient, stable income it's a lot of paperwork but it's not "hard" to get a loan.", but adds that if your credit is "poor" and "you don't have a stable work history and stable income, it could be pretty difficult."

   So, on that note - less-than-stellar credit - is FHA still an option?

   In the article from Christie, he quotes Gumbinger as saying that "The FHA is just about as free and easy as it was in the go-go days,". Christie says that the standards are, "flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.". Potter agrees, and says that the "FHA is extremely flexible with credit issues and there are plenty of lenders with "common sense underwriting". Melanie Roussell, a spokeswoman for the FHA, explained that "the agency is willing to overlook a blemish on a credit report -- even a big one -- if other factors are favorable", as written by Christie.

   Tips? Pointers?

   Paul McFadden of The Legacy Group, tells us that the most important thing is "to have all your documentation in order (income and asset information) along with a flexible attitude if letters of explanation need to be written." He summarizes the process as follows; "A borrower needs to work with a great team that would include a loan officer and possibly a realtor to make sure they are approved and their loan closes."

   Have you tried applying for a mortgage? Before or After the Housing Bubble? How was your experience?

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Have a Great Weekend, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #mortgage #loan #credit #refinance #FHA #FICO #HUD #LoanOfficer #RealEstate

Crazy Hazy Appraisal Madness

Hi Folks,
   Hope your week is coming along great, so far.

   Well, considering the fact that we put a man on the moon and that we have found cures to a vast amount of the illnesses that have plagued mankind, you would think we would have this appraisal thing licked by now, right? Well, not exactly !

   To bolster this argument, this morning, I read a story on Yahoo Finance about a couple that were looking to purchase a specific home, and who shelled out $1600 for 7 appraisals, each of which was different than the other...and some of them by substantial amounts. Ultimately, due to this fiasco, the couple wound up renting the home that they actually wanted to purchase, but could not due to the scattered and lower appraisal(s).

   Since a majority of the trades on the stock exchange are done via computer, isn't there a way to have a universally-accepted appraisal program that spits out a figure? Perhaps there can be 3 programs (as with credit scores/FICO), with a Low, Middle, and a High. In that case, lenders can choose to accept the middle price, an average, or some other computation. I realize that my Appraiser friends are turning bright red with anger, but it should be a system that is created, organized, and computed by Appraisers, and they would still need to go on-site to verify all features of the property.

   Please don't yell at me for this one...but I am a stickler for automating procedures to minimize variation and errors. What are your thoughts on this proposal?

Have a Great Day, and Happy Rent-to-Owning !
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com


Tags: #appraiser #appraisal #finance

Does Subprime Still Exist ?

Hi Folks,

   Hope you've had a great week, and that you've been able to keep warm !

   A few days ago, a colleague of mine asked me if subprime loans still exist, and I realized that I have not heard the term, "subprime", for quite a while, and I also realized that before responding to him, I had better gather a consensus from some mortgage professionals with knowledge on this topic. At the same time, I figured that this might be something to share with all of you good folks out there, as well.

   We spoke with a few sources, one of which is Fred Glick, a mortgage broker and banker, who says that, "Fannie Mae and Freddie Mac now have minimum credit score standards based on loan to value.", and that the, "new subprime lenders are private ones that charge a lot in rates because they are limited to what they charge in points by many different state and federal laws, including but not limited to what is coming out under the Merkely Amendment of Dodd-Frank", that, "limits compensation to a maximum of 3% of the loan amount and does not allow for both front end points and back end compensation from lender to broker in the same transaction."

   Steven Bote, Mortgage Planner, says that the "very short answer" is, "no, subprime lending does not exist.", and he continues to say that, "for me, the defining characteristic of all subprime loans is the absence of "documented income necessary to support the ability to reasonably repay.". Bote says that today, residential financing is on the "complete opposite extreme of the lending spectrum from where it was three years ago during the height of the subprime era, and as such, everything is fully documented (pay stubs, W2s, tax returns, schedules, etcetera)."

   Any discussion on lending would not be complete without looking at the impact of FHA and VA loans, of which Bote calls, "Government-based loans that allow for higher LTV-based financing, such as FHA and VA". Bote says, that for example, "FHA allows a person to buy an owner-occupied 4-unit property with as little 3.5% down of the purchase price, and VA financing of the same property type allows for 0% down payment (and with as low as a 620 middle FICO)", and says, "To put things into perspective, conventional financing requires all buyers to put down a minimum of 20% of the purchase price." Glick says on a similar note that the, "VA has gotten tougher and FHA claims not to have a minimum, but the GNMA market is moving up to 620 to 640 as a minimum. So, for the people with the scores in the 5's, it's a problem unless you have lots and lots of equity."

   Greg Cook, a Mortgage Professional, agrees that a, "certain segment of the subprime market is being served by FHA financing", and also says that, "Most subprime (hard money) lenders have gotten out of owner occupied loans because federal and state legislation limit the total fees that can be charged. These limitations do not apply to commercial, business or investor loans, so hard money lenders have evolved back to these types, which were their staples before the rise of subprime."

   So, with all of this information in hand, I have duly advised my colleague that the subprime market does still exist (well, kind of), and as Cook said, he has seen, "subprime mortgages start out as hard money, morph into subprime for homeowners, and back to hard money.".

   Do you have anything to add to this discussion? We welcome your comments and insights.

Have a Great Weekend, and Happy Rent-to-Owning !
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #mortgage #loans #hardmoney