Category Archive: Mortgage Loan

Sep 09

Mortgage Update – Sept 9 2012

Sorry, haven’t posted in a long time, been crushed at work.  Long days, even weekends in the office trying to get ahead of the game.  The local real estate market has improved a little but not as much as we would like to see.  However, last month we posted an all-time company funding record for a single month!

Most of my closed transactions last month were purchase transactions instead of refi’s.  I believe part of the spike in closings can be explained by two things, less competition and the fact that we hired some very good staff that was laid off by other lenders.

It has been a learning period, the mortgage industry continues to change and the timeline to close a loan has increased for many lenders, even us.  Our timeline has stretched about an extra week, better than most lenders that are taking 45 to 90 days to close one.

Something odd, I have been approached a couple of times a week for the last quarter by recruiters, something that hasn’t been the case for a couple of years.  Sounds like other lenders do not have the necessary staffing requirements to move the pipeline.  Too bad for them, we increased the number of people over the last two years while other lenders laid off.   We picked up some real talent that were let go because of downsizing or going out of business entirely.

Mortgage Turn Times Slowing Down

 

What is causing the slowdown?

I have already mentioned the lack of staff that is plaguing other lenders.

In addition, the mandatory SAR’s initiative is clogging the system. Volume is up, so are closing conditions.  SAR stands for Suspicious Activity Report.  Until last week these reports were voluntary, now they are mandatory.  They are causing the underwriters to be super careful.   When an underwriter reviews the loan application they post-closing conditions, items that must be addressed prior to the closing.

I am receiving almost DOUBLE the number of closing conditions that must be cleared before closing!  Think about this for a moment, I am focused like never before on doing the absolute best application possible and receiving twice the number of conditions.  What?

Items that would not have been a big issue in the past are derailing loan applications.  DE underwriters will not sign off on anything that is questionable, PERIOD!

They are not willing to risk losing their DE Certification over a missing page on a bank statement or something equally silly.

Helpful Hints

The primary purpose of this web site is to offer helpful information to anyone that is buying or selling a home including the Realtors that represent them.  I have started collecting a list of helpful hints that I email to my clients when they apply for a loan.  I will begin to post a copy here and create pages in the Buyer’s section that elaborate and address as many issues as possible.

 

Jul 23

Sub-Prime Mortgages

Sub-Prime Will Return

The overall condition of the economy is creating an environment that will hasten the return of the sub-prime mortgage.  I was never an advocate of the sub-prime industry but it served a need.  That need is stronger today than ever before.  I predict sub-prime mortgages will return soon.  They may be called something different, may be touted as new and improved, but a rose is a rose.

There are many factors that will push my prediction forward.  Unemployment is very high with disposable income being the lowest it has been in modern time.   This is causing many homeowners to defer maintenance on their home opting instead to put food on the table.

Home inspectors are being super critical as their industry matures, causing many pending transactions to implode.  Not long ago the National Association of Realtors reported the highest fall out ratio since they have been keeping stats.   The number of real estate listings reported as a pending sale then changed back to an active listing is where that bit of information comes from.

Buyers and sellers are both more difficult than I have ever witnessed prior to the last couple of years.  Prior to last year I never had a buyer and seller disagree on a day and time for closing the deal.  This year it has been difficult to get both sides on the same page on any subject, let alone a closing date.  I mentioned in an earlier post that people searching for information on Power of Attorney or POA is the number one subject people are looking for when they visit this site.  They  just don’t want to attend the closing!

Another factor is the middle ground on credit scores seem to be disappearing.   I see either very high or very low credit scores, not much in the middle.  This is a personal observation; I haven’t read anything that supports this.  You would expect a general distribution, a third low, a third in the middle and finally a third on the top.  Not what I see these days, either very high above the top credit tier or very low below the minimum threshold.  Last week I saw several above 800 or in the high 700’s and an equal number in the low 500’s dipping into the high 400’s with none in the mid 600’s.

Finally, the wreckage caused by foreclosures and loan modifications will linger for at least a decade.   The buzz topic has been short sales, but in reality they are a very tiny slice of the pie.  They are a symptom of the times but I don’t think they are as serious to the overall market as the other factors mentioned above.

All of the dynamics mentioned here have one result, stress.   Sellers want to sell and buyers really want to buy but never has it been as stressful even back in the days of very high interest rates.

As the gap widens the mortgage industry will figure out a way to serve the demand that is having trouble moving above the minimum credit score threshold.   That segment of the buyer pool is the only one that is expanding.  The market conditions are not pushing people upwards, only down.   Individuals that have never been late on credit obligations are suddenly finding themselves below the credit thresholds.

The Solution

I don’t have an answer to the overall problem, but I see lots of opportunity.  A few people are doing very well, but most are not.  What I know for sure is the market has changed.  People have changed.  Those that are moving forward have a chance to improve greatly, interest rates are low and prices are good.  It has never been a better time to buy in the last 50 years.

Part of the solution to get things moving is going to be the return of some of the aspects of the sub-prime industry.  I am not calling for a movement, just predicting this is going to happen.

Jul 19

Continuing Education

Spent the entire day in class, continuing ed.  We covered RESPA, ECOA, TILA, Dodd Frank Act, and a lot of other wildly boring topics, most of it a rehash of info that I have reviewed every year for the last two decades.  Guess what wasn’t on the menu.  Not one item aimed at making the process easier for the customer. 

Don’t get me wrong, some of the legislation has done much to weed out the bad guys, but the rest of us are paying the price, including you.  I think it is time the rule makers shift their focus to what the consumer wants, not what someone in an ivory tower thinks we need. 

The instructor mentioned a recent news item about the Bank of Scotland manipulating the LIBOR index, give me a break.  Did it happen? Of course it did.  Our guys are lining up to point the finger across the pond. 

What about one of the largest investors of US mortgage backed securities buying 30 year bonds with proceeds from short term notes?  No one is complaining because the result of the manipulation here is low interest rates.  Everyone wins right?  Not the elderly that are getting paid less than 1% interest on their cd’s.  Think about it, $2,000,000 stuck in FDIC insured cd’s would generate less than $20,000 a year, that should be a crime. 

 

Jul 15

Power of Attorney AKA POA

What is a Power of Attorney?

A Power of Attorney is a written document authorizing one individual, referred to as the Attorney in Fact to act on behalf of another regarding legal matters like signing a contract, deed or other instruments.  The signature of the Attorney in Fact is binding on the part of the individual that conveyed the POA.  There are different forms of POA’s, they can be general and all inclusive or specific for a single transaction.  They must be notarized to be binding.

In theory, when an Attorney in Fact signs on behalf of another it is the same as if the individual signed for them self.  Obviously a POA is a very unique document and requires attention to detail not only in content but in form as well because the agreement signed using one is binding on the party that is not signing on their own behalf.   If a mistake is made it could be a binding error.

When to Use a POA

You should not use a POA unless absolutely necessary.  If a contract or document is important enough to require a signature it should be signed by the individual that is bound by the terms of the agreement.  There are times when this is not possible, that is when one should be used.  For example, an individual that is in the military and is stationed overseas would not be able to attend a real estate closing back home, a POA would be required if the closing is to proceed.

Other examples of when a POA is appropriate would be for an individual that is senile or incapacitated by illness or injury to the point they are not able to conduct their affairs.  In events like these it may be necessary to obtain a court order appointing a relative Attorney in Fact or some other legal capacity.  Another example, in the event of relocation where one spouse moves in advance while the other remains behind to complete the sale of their home.  There are many circumstances when using a POA is appropriate.

When Not to Use a POA

A power of Attorney should only be used if you can absolutely not be present for signing the agreement.  I am not an expert in legal matters, only those regarding the real estate mortgage process.  In the past year I have had more buyers and sellers inquire about using a POA than in the previous 20 years combined.  This is very strange.

In every case this year the request to not attend a closing was not because of distance but simply because they individual did not want to attend the closing.  It doesn’t matter what you would rather do, nothing is more important financially than a real estate closing.   Think about it, if you earn $20 an hour compared to buying or selling a $150,000 house, which is more important?  Take a long lunch hour or use a sick day and attend in person.

One lady that was selling a home told me she just didn’t want to be in the same room as the buyers.  Okay, I can understand that, but there are other ways to accomplish non-contact.  Recently I had a buyer in one room the sellers in another room and the Realtors wanted a little privacy for a chat so we put them in yet another room.  That was a first for me.  I have put many divorcing couples in separate rooms but never used three rooms until then.

Using a POA for Real Estate is NOT Automatic

Lenders do not want the buyer or seller to use a POA.  Especially when it comes to the buyer signing the note and mortgage, most lenders want an original signature of the person that is borrowing the money.  Do not assume that you can use a POA as a buyer or seller.  This is something that should be reviewed and approved long before arriving at the closing.

The actual POA document should be reviewed in advance by the closing attorney or Title Company that is going to officiate the closing.  In addition to this step it should also be pre-approved by the lender long before setting a closing date.  Power of Attorneys are custom documents, no two are exactly alike.  There are different types, some are general in nature while others are specifically designed for a single transaction.  A POA for a real estate transaction should be very specific, spelling out who, what, when, where and how.

Obviously, if an attorney is acting on behalf of a title company they will be very picky about the content of a POA.

Who Can Act as Your Attorney in Fact?

The best individual to act as your Attorney in Fact would be your spouse.  Next would be a very close blood relative, a parent or sibling.  Anyone you appoint that agrees to accept the responsibility is allowed as long as they do not have a financial interest in the transaction.  For example, a seller should not act on behalf of the buyer regardless of the relationship.

What about your Realtor?  This is another bad choice because they are receiving a commission from the sale.  It happens, but it is not a good choice and may not be allowed by the lender or closing attorney.

How about a friend or co-worker?  These are not as good as a close relative but are better than the Realtor.  Keep in mind if something goes wrong you are stuck with the consequences.  Is that really something you want to put on the shoulders of a close friend?

Helpful Hints for Using a POA

If you must use a POA have it prepared by the attorney that will close the deal.  This would eliminate the document being rejected by the closing attorney over form or format.   If this is not possible have it prepared and signed well in advance and provide the closing attorney a copy as early as possible, do not wait until the day of closing!

If it is not possible to attend the closing the documents may be sent overnight to the absent party, they can sign in front of a notary and returned to the closing attorney.

I hope this information is helpful.  If you have questions just give me a call, my direct line is (502) 753-4127.  If you found this information interesting please share it with others.

Jun 01

Rate Watch – June 2012

Mortgage Rates improved again this week hitting record lows.  Bad economic news domestic and abroad continued to push mortgage rates down.  The unemployment figures were also bad, jobs added were less than half of what was expected and the unemployment rate increased slightly. Something interesting about the new jobs report, they lowered the numbers for previous months by almost 50,000 and that is a lot of nonexistent jobs that were counted, opps!

I have been hearing for at least a month that home sale are picking up dramatically.  Locally that may be true, I know the mortgage company I work for had a record month for May.  We closed an all-time high for a month, breaking the old monthly record by 4.6 million.  Our previous record was set in September 2010.  By the way, the 4.6 million INCREASE is more than most of our competitors do totally for a month.  We were on the plus side of a 100 million for the month, by far the largest volume of any mortgage company based in Kentucky.

Okay, let’s be honest, we do a lot of things right, but there is a lot less competition too.  I have not had a call from a recruiter since 2008, I have had 3 calls in the last week looking for loan officers.  Volume must be picking up in my area.

I just posted the lowest rate on my application site, be sure to check them out.

How much lower can they go?  Not much, there are cost to bring money to the closing table, the current rates are getting painfully close to the hard dollar cost of raising the money.  How much higher can they go? No limit. 

Remember my first rule on interest rates, Rule #1, What goes up must come down, what goes down must come up.

Every day you do not lock in a low rate is one day closer to a higher rate.

 

 

May 15

4 Ways to Derail a Loan Application

Everyone has heard horror stories about loan applications taking forever and what appears to be endless requests for additional documents.  What you have not heard about is the source of most of the problems.  Over the years I have noticed there are a couple of reasons that pop up again and again. 

I have broken down the four main reasons that can slow down or derail a loan application.

The first cause is missing documents.  All loan applications for a home mortgage must include documents that support the information contained on the application form.  For a well-qualified borrower the support documents are minimal and fairly standard. Most home buyers have copies of everything we need to process a mortgage.  But if we are not provided copies by the borrower we must get them from another source, that requires sending out requests, waiting for the mail and cooperation from a third party that is not a part of the transaction.  If you do not give us a bank statement we must get it from your bank, good luck speeding up that process.

The second reason is missing pages from the support docs that are supplied.  This one drives everyone crazy.  We need the entire document.  A good example of the most common missing page is the last page of the bank statement.  It often says, “This page left blank intentionally.”  For some reason that statement causes borrowers to leave it out, but we do not know it is blank if you don’t give us a copy.  If the first page says page 1 of 5 we need all 5 pages.  If the borrower leaves off page 5 then we can’t use the other 4 pages either.  Then we must ask for the missing page, meanwhile if the cutoff date on the statement you furnish indicates another statement has been sent, we need the new one. 

Any little side trip that slows down the process might cause one or more of the documents we already have to expire.  Everything in the loan file must be current. If it takes six weeks to process the loan and the original bank statement was 3 weeks old when we got it, we’ll probably need two more bank statements before closing.     

Other common examples of frequently missing pages are schedules in tax returns.  This one is clunky because you must read the entire tax return to see if anything is missing.  That is easier said than done, try it sometime, shuffle up your return and take out a random page without looking at it.  Now look at the other pages and figure out what is missing.  If you want to slow down the loan processing leave out a page or two from your tax return.    

The third thing that slows down the process is conflicts between the information in the application and what is contained on the support documents.  All of the information contained in the loan application must be verified by cross checking it against the information on the support documents.  For example, if the borrower says they earn $15 per hour and that matches the figures on the pay stub everything is hunky dory.  But if the pay check shows $10 an hour that raises a red flag and slows down the process.

Not loan ago a fellow told me he earned $22 an hour, his pay stub clearly showed a pay rate of $16 an hour and his tax return from the previous year indicated a $12 an hour pay rate.  All three rates could be correct if he received raises or a promotion.  But we need to document the correct figures.

I have been given bank statements that show a different address than where the home buyer says they live, I have been given the wrong social security number.  Lord help the guy that gave me the wrong birth date for his wife!  The list is endless.

You’ll love this one; a guy told me he was single with no kids.  His tax return was filed jointly with his wife and listed 2 children.  Opps, something doesn’t match up.  How fast do you think that will move through the system?   He was separated but not yet divorced. 

The fourth reason is closely related to #3, misrepresentations.  The first three can be honest mistakes, this one is an outright attempt to commit a crime.  It can come in many flavors.  Recently a lady told me she had been on the same job for 3 years, turns out only 3 months, oopsie.  We do verify this stuff you know.  When I questioned her about the discrepancy she said she thought 3 years sounded better.  Really?  I can’t count the number of times people have told me they have enough money for the down payment when they don’t.  That one is always good for a laugh.

We must verify everything you tell us, EVERYTHING!  All of the data must match.  Close only works in horseshoes and hand grenades.    

Here is how to streamline and speed up the process.  Gather everything before filling out the application and use the numbers from the support documents to complete the app.  If the most recent bank statement shows an ending balance of $9,400.12 put that figure in the loan application, not $10,000.  That way the bank statement matches the loan application and it speeds up the process.  What if you really have $10,000 because of a recent deposit that isn’t on the statement?  So what?  It doesn’t matter unless you need the extra $600. 

Most buyers apply for a mortgage and then gather support documents.  By following my suggestion and reversing the process it is possible to cut out weeks from the process.  They are called support documents because they are supposed to support what is in the loan application.  If you use the actual figures from the support documents to fill out the loan application they match 100%.  

 

Apr 19

Mortgage Calculator Added in the Buyer’s Section

Over the years I have been asked about 100,000 times, “How much is the payment?”  Obviously that must be an important question if every client wants to know.  I added a mortgage calculator in the Buyer’s section.  The page contains a link to current interest rates and an online application for anyone that wants to apply or be pre-qualified for a mortgage.

We want to provide the very best resources for anyone buying, selling or refinancing a home in Kentucky. Please let us know if there is something you think should be added.  

  

Apr 17

New Pages Added to the Credit Report Section

The Credit Report Section continues to grow.  A couple of new pages added recently, What is a Credit Score and Why Are Credit Scores Important

Coming soon is a page dedicated to taking the information on these two pages and turning it into cold, hard cash!

As always, my position is, “It’s not how much you pay for a house, it’s how you pay for it that matters”. 

 

 

Apr 11

Mortgage Application Support Documents – New Page Added

We just added a new page to help home buyers with the support documents that are needed to process a mortgage loan.  Being prepared eliminates most of the stress with the home buying and financing process.  Knowing what to expect helps the buyer and makes the process much simpler.

The single largest delay in processing a mortgage application is trying to obtain missing documents or pages that are missing from the documents.  This checklist will help eliminate the problem for the buyer that wants a Quick and Easy Process.

 

Mar 25

Legal Credit Repair with CreditXpert™

Everyone that knows me professionally is aware of my opinion of the credit repair industry.  It is my belief these guys are the root of the mortgage meltdown. These guys call frequently asking for my turndowns, loan applicants that have had an application rejected. 

Traditional credit repair is based on lying about what is contained in the client’s credit report.  They instruct the client to dispute everything on the report that is negative in nature, even if the information is correct.  These snake salesmen attack the soft underbelly of the credit industry.  Federal laws place the responsibility on the credit grantor to prove the information is correct.  And the timeline to answer a dispute from a creditor is very short.

The credit repair guys know if you dispute everything some of the credit grantors will not respond or may even be out of business and therefore unable to respond.  It’s a numbers game, dispute everything and some of it will go away making the client’s credit score improve.

The only problem with this tactic is it isn’t legal.  If the client knows they were late on a payment and lies about it by disputing the information in order to be approved for a mortgage then it is fraud.  And mortgage fraud is a very, very serious crime. 

I order all of the credit reports for my loan applicants from CBCInnovis.  They recently hosted a seminar for my company and introduced us to a legal alternative to credit repair called CreditXpert™.  What a fantastic product!

It is a web-based software program that reviews an individual’s credit report and makes suggestions of what can be done to increase the credit score.  It is common knowledge that when credit cards are maxed out the credit scores will plummet.  CreditXpert™ will not only make suggestions, it estimates how much each action will add to the credit score.  It doesn’t suggest doing anything wrong, it just fine tunes the debt structure to maximize the credit score using the same matrix used by the credit bureaus.

Buying a property in Kentucky and want to use  CreditXpert™? Visit my online application site or printand use this simple form to get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.

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