Really?

I have no doubt that some people would be elated by the return of liar loans and other forms of nontraditional mortgages. However, there are more than a few who would object including mortgage insurance companies, mortgage investors and perhaps even financial regulators.

But what about those poor souls who cannot document their income?

Nonsense. You mean these non-documenters don’t file taxes? If they file taxes they must have some records and if they don’t file taxes then why would a lender underwrite a loan for them?

It’s said that no doc loans are great for self-employed borrowers but I don’t see why. I’ve been self-employed since the earth first cooled and never had a problem getting a mortgage. I just provide my tax returns and whatever other information that will make the application easy for the lender to underwrite.

The financial statements of the self-employed are just not that hard to figure out. You just add back real estate depreciation, count 75 percent of rental income, check the returns and make a few other adjustments. No big deal. Underwriters do it all the time.

If toxic loans are coming back just who will be originating such financing? Not the hundreds of lenders who the Mortgage Lender Implode-O-Meter reports have gone out of business. Not Washington Mutual, now a part of JP Morgan Chase. Not Countrywide, now a part of Bank of America.

No less important, would YOU make a loan to someone who would not or could not verify their income? Does that seem like a really shrewd idea? Do you think lenders, investors and regulators have not noticed that so-called affordability loan products are at the heart of the mortgage meltdown?

Right, toxic loans will be back — maybe at about the same time that stores start selling succulent lead-covered toys once again.

For the full story, see No-Doc Loans Returning?

Are Toxic Loans Coming Back? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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On Monday, May 11th, HUD posted Mortgagee Letter 2009-15 which explained that “Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans– secured only by the anticipated tax credit due the homebuyer as collateral.”

Immediately the letter was removed from the site. However, we have a copy of HUD Mortgagee Letter 2009-15.

It is not clear if HUD has changed its policy or if the letter will be back. As of early May 18th, the letter has not been re-posted on the HUD Mortgagee Letter site.

If the policy is to allow state and non-profit groups to use the $8,000 first-time buyer credit created by the Obama Administration as a downpayment, then such purchasers would be able in many cases to buy a home with nothing down or close to it.

For instance, FHA requires 3.5 percent down. If a home is purchased for $225,000 the downpayment would be $7,875. Closing costs would be extra, but in today’s market it might be possible to get a seller to pay some or all of the closing costs because the FHA allows a 6-percent “seller contribution” from owners. Please speak with lenders and real estate brokers for specifics.

Stay tuned — we’ll follow up as more information becomes available.

Will HUD Allow FHA Loans With No Money Down? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Going through this process as a consumer of real estate services suggests both that local brokers are hugely valuable and also that traditional relationships between brokers, buyers and sellers are in transition.

It’s always interesting to hear self-proclaimed “consumer representatives” discuss real estate brokerage. Inevitably their core issue — often their only issue — is transaction cost. In their eyes it seems expensive to sell real estate, unusually so.

Yet if you equate selling a home with raising money, which is what selling a home really is, then it becomes possible to compare the cost of real estate marketing with the expense of non-profit fund-raising. Given that the Better Business Bureau says charitable organizations should not spend more than 35 percent of their contributions on fund raising, the idea that real estate fees are somehow overpriced seems absurd.

What consumer groups do not normally address, and what might be useful for the brokerage community to consider, are changes to traditional listing and buyer brokerage agreements. With very little adjustment, it’s possible to make such arrangements both more consumer friendly and far better for the brokerage community.

How? Let’s consider some specifics:

*Listing success today is typically related to the attainment of a “ready, willing and able” buyer. But sellers are really interested in something different, the completion of the transaction. Why not avoid both litigation and bad PR and instead relate listing compensation to the sale and settlement of the property? One could then offer a standard owners can instantly understand: No check for the broker without a check for the seller.

*Buyer brokerage agreements seem remarkably broad. Why would purchasers have an interest in agreements which include an entire state? Instead, why not an agreement that’s specific to a few communities and counties where a salesperson has particular expertise?

*Buyer brokers often say their services are “free,” an expression which surely means the purchaser should not have any payment obligation. Given this view, why not have brokerage agreements that authorize buyer brokers to seek payment only from owners and listing brokers — but NOT from buyers? And like listing agreements, why allow any buyer brokerage fee to be earned unless there is a completed transaction?

*Lastly, why not have listing and buyer brokerage agreements that allow for early termination by either party without penalty? Such arrangements instantly end consumer worries about broker relationships. If broker performance is not satisfactory to the consumer, the agreement can quickly end. For brokers, such clauses mean being freed from buyers and sellers with implausible expectations.

Are the ideas above revolutionary — or merely revolting? Do they make any sense at all?

When looking for listing brokers and buyer brokers we expressed an interest in the terms above and the reaction from hugely-successful professionals was universally the same: Sure.

Why? We think the answer is that the representatives we selected are enormously successful and had confidence in their ability to get the deals done. Relating compensation to completed transactions was not an issue — that’s what they do.

But was there additional risk for our representatives? In theory, yes. We could have bought a property outside the counties where we had engaged our buyer broker — but how realistic is that? We might not have finalized the sale of our investment property — but why would we do that?

Here’s another risk for our buyer broker: We could have bought from a self-seller or someone offering a minimal fee. In such circumstances we would have had no obligation to pay a commission.

What if our brokers were wrong and there were no transactions? Part of being in business is risk, nothing is assured. No doubt if deals failed our two professionals would merely move on to the next clients. Alternatively, while other brokers might hem and haw about contract details, our brokers got the business — and hefty checks for their services.

From a consumer perspective, our modified agreements were comforting. They suggested, first, that we were dealing with professional people who wanted to advance our interests. Second, our agreements removed potential entanglements and complications that were discomforting to us.

In the end both our listing broker and our buyer broker were very well paid. The transactions were fast, straight-forward and we will make a point of recommending the professionals who served us so well. In effect, what they earned was not only a commission for particular transactions but also referrals and a potential stream of future income. Not bad for a little bit of flexibility.

————————

Published originally by The Real Estate Professional and posted with permission.

The Case For Flexible Real Estate Commissions is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Huh? How can this be?

In the U.S. today we have a surplus of job seekers and a shortage of workplace opportunities. Employers want people with training, education and experience, but once you’re actually hired such qualities are not enough, you need something more, you need to be aware of tribal customs. If you do not learn your employer’s tribal customs you will be fired as soon as possible.

And firing, unfortunately, has big implications in a world where jobs are not easy to get. Think about the mortgage, car loan, health insurance and rent — for starters.

What do I mean by tribal customs? I mean the unspoken traditions and standards that employers and other workers expect from the “new person” — that’s you.

When you get a job you’re not a member of the tribe. Yet. There’s more to be done. The problem is that tribal customs often take the form of expectations which are not precise, not verbalized and not explained. You have to figure this stuff out for yourself because every workplace is different.

Here are some basic issues to consider:

Timing

If the job starts a 9 AM the employer expects you to be there and ready to work at 9AM. Not 9:01. Not taking off your coat. Not getting coffee.

Tribal Custom: Always get to your workplace a touch early. Never leave before other workers, even if the day is done. The employer does not want to worry about empty seats, blank computer screens and missing crew members.

Tasks

No matter what you’re asked to do, there’s a way to do it that meets the employer’s requirements. If the process has six steps do not complete the task with five.

Tribal Custom: The employer sets the standard for workmanship, service, productivity, timing and quality. The employer does not want to worry that the new person doesn’t get it, refuses to follow the system or has a “better” system. Especially at first, follow the employer’s system exactly and precisely as the employer wants. Later on, when you earn the trust of your employer and co-workers, you can suggest alternatives.

Criticism

You may be asked “so what do you think about new design?” or “what do you think of our system?” Do NOT criticize the system. Instead, say that it’s really impressive, big, fast, proven, better than anything you’ve seen or whatever.

Tribal Custom. Such questions may simply mean the employer wants your confirmation — and maybe even applause — for his or her ideas and approaches. Egos may be involved. Remember that when you criticize a product or system that you may be speaking to the person who designed it. Since you’re the new person you don’t know enough to criticize. Learn how things work, then make suggestions.

Nature Calling

Every uses a bathroom from time to time. You will stick out like a giant red balloon if you use the facilities too often or too long unless there’s a health reason to the contrary.

Tribal Custom: Never leave a bathroom, regardless of why you went in, without washing your hand. NEVER!

Donuts

In many work environments it’s common and routine for workers to bring in donuts, candy, cakes or whatever. If that’s the practice, then make sure you contribute either financially if money is collected or through participation by bringing in goodies.

Tribal Custom: Never be a total taker, sometimes you have to give to fit in.

Ask Questions

As a newly-minted employee you have the right to ask questions. “Fred, am I doing this right?” “Mary, is this how you want this done?”

Tribal Custom: Asking questions is a way to show that you want to please others in the workplace, that you respect their judgment and opinion.

Keep Learning

Whenever you’re asked to learn something new, go for it. You’ll become more value with each new skill. After you have been with the employer a bit, see what skills you need to advance and tell the employer you want to learn.

Tribal Custom: We no longer live in a static world where the job skills you have on day one are sufficient for the rest of your career. To stay employed you must constantly be learning new things.

Computers

Any use of the employer’s computers is use of the EMPLOYER’S computer, not your computer. You have no expectation of privacy. NEVER use an employer’s computer or a company email account for any reason which would be inappropriate or uncomfortable for your, your co-workers or your organization. Don’t post negative items about your employer or co-workers on social media. If you have any doubts, just ask if you want your use of the computer on the evening news.

Tribal Custom: You wouldn’t use an employer’s van for private purposes so why would you use the employer’s computer system, or lathe, or stock of paper for your own use?

Enthusiasm

You have a job. You must act as though it’s important and valuable. Body language can send out signals no one wants to see — sighs, tilted heads, poor posture, etc. suggest no interest in the job or the people around you.

Tribal Custom: Negative non-verbal cues are often regarded as extremely disrespectful. If you signal non-interest and a lack of enthusiasm you will be fired.

Phone Manners

How one answers the phone is important. The word “hello” is not a question. Always answer with a strong, affirmative voice. If someone gives you a number to write down, write it down and then repeat it back to the caller.

Tribal Custom: Millions of people carry phones in their pocket. It’s a way to keep in touch. Make it work for you, otherwise it can lead to the loss of a job.

Yes and No

In many cases employers, managers and bosses are looking for a yes or no response to a question. They really mean that they want to hear the word “yes” or the word “no.” They do NOT want to hear “yeah” or “nah.”

Tribal Custom: The issue is not the use of a given term or slang versus proper language. The issue is that words convey attitude. When employers ask a question they want to be certain that what they said was understood and that their directions and instructions are clear. A hazy response, a lackluster response, does not provide the needed — and required — level of assurance.

Thank You

Always acknowledge the help of others. It doesn’t cost a dime to say “thank you.” It’s not a hardship to say “that’s a great idea.” No one will be hurt if you say, “this is really good, thank for showing me how to do this.” A little courtesy goes a long way in the workplace.

Tribal Custom: All humans have egos, all humans like to be acknowledged. You’re not the center of the universe. Be nice to co-workers, managers and employers. As the old expression goes, it’s easier to catch flies with honey than with vinegar.

How To Hold & Keep Your Job is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The way you get loans with less down is to find a financially-strong co-signer, someone or something that will bail out the lender if you can’t repay your mortgage. Loans guaranteed by the VA, FHA or private-mortgage insurance (MI) all allow borrowers to buy with little or nothing down.

But — and you knew this was coming — insurance requires an insurance premium, so to buy with little down AND without the cost of insurance, borrowers and lenders during the past few years increasingly turned to piggyback financing or financing with a simultaneous second.

With porker financing you get a first loan for 80 percent of the purchase price and a second loan for 10-, 15- or 20-percent of the home’s value. The result is little or nothing down, plus no cost for mortgage insurance.

Who makes such second loans? Sometimes a second lender, but often the very lender who provided the 80-percent first mortgage and also finances a second loan for the same transaction.

Once-common piggyback deals are now increasingly rare. The reason: That second loan is immensely risky. If a home is foreclosed the odds are overwhelming that the entire value of the second mortgage will be lost. Unlike a first loan, of course, there is neither insurance to offset a loss nor the equity represented by a significant down payment to protect the lender.

The evaporation of piggyback loans is a marketplace “correction” that’s long been overdue. Such financing is cute and clever — but only when home values are rising. Since home values do not always rise, the once-popular piggyback loan is now toast, nicely browned on both sides.

With the virtual disappearance of subprime loans — and with a substantial decline in interest-only mortgages, option ARMs and stated-income loan applications — what we have today is your father’s mortgage marketplace: Take your pick: You can get a conventional loan or a mortgage backed by FHA, VA or private mortgage insurance. Exotic mortgages are out, piggyback loans have been barbecued and dull loans that borrowers can actually understand are back.

Unfortunately, some buyers will not be able to get financing or refinancing under the new standards or they’ll be forced to borrow less. That sounds fairly gruesome until you realize that prudent borrowing means fewer foreclosures and a gradual return to normal markets, things which benefit us all.

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Published originally by Realty Times on July 23, 2008 and posted with permission.

Why Have Piggyback Mortgages Disappeared? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: down, loan, mortgage, no, payment, piggyback, simultaneous second, toxic

With “stated income” loans borrowers tell the lender how much they make but the lender graciously does not verify the information. The borrower’s word is accepted as gospel, even if that word is sometimes inflated.

In comparison, if you apply for a mortgage and own rental property lenders are somehow less trusting. They want signed leases as well as tax returns that show income, costs and profits. They’ll knock off 25 percent your rental income as a “vacancy factor,” thus reducing your ability to qualify for a loan — even when tax returns show no vacancies for years.

But if you apply with a no-tell loan and provide no evidence supporting what you claim to make, lenders will gleefully accept your declaration without question. Only if the loan is later audited or you switch to a loan program that requires verification will anyone check your tax returns to see if what you told Uncle Sam and what you told the mortgage company are in anyway similar. The catch, of course, is that if the numbers differ a borrower can face serious legal difficulties, a situation to avoid and a chance no one should take.

Lenders will tell you that rental property represents more risk than owner-occupied housing, thus the justification for higher rates and tougher qualification standards. There is a certain logic to this view — until you get to stated-income loans.

Why is rental property more risky then someone buying or refinancing a personal residence without income verification? The investor must supply reams of leases and tax returns because of lender worries that rental income might somehow be inflated. The prospective homeowner has no such requirement with a stated-income loan.

At this point someone will say, “look, we now have credit scores which allow us to show whether a borrower is creditworthy. To some extent, the question is not whether someone earns a given income, it’s whether they can support a given level of debt.”

Not always. Look for stated-income loans and you will find that such financing is often available to those with credit problems. Not to be cynical, but aren’t these the very borrowers lenders would want to check with the greatest possible care? Do folks in such financial straights generally have great credit scores?

Another argument goes like this: “I’m a person who values privacy. I don’t want lenders contacting my employer and I don’t want people fishing through my tax returns. For these reasons I prefer a stated-income loan.”

If real estate financing is required why shouldn’t lenders reduce risk and get verified information? What is the case for less prudence? If you were lending someone money wouldn’t you want past tax returns, pay stubs and other data?

A third argument goes like this: “But we only make stated income loans in those cases where the borrower has 30 percent equity.”

This is plainly true with some loan programs — but not all. Search around and you can easily find 90 percent (or better) financing and refinancing with stated-income loans.

Some borrowers have a different issue: They’re concerned that their income is “too difficult” for lenders to comprehend, that they’re the only people since colonial times who have filed a 280-page tax return.

It just isn’t so. Lenders deal with millions of loan applications each year. They’ve seen the returns of the rich and famous. They know how to evaluate sole proprietorships, corporations, foreign income, royalties, rents, and partnerships. If income is reported to the IRS, lenders can figure out how it fits within a loan application. If income isn’t reported to the IRS, the lender should decline the loan.

Stated-income loans represent too much risk for lenders — and too much temptation for borrowers. Perhaps a little rigidity in the lending process is not so bad. After all, how hard is it to produce tax returns and pay stubs?
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Published originally by Realty Times on July 27, 2004 and posted with permission.

Should Lenders Dump No-Tell Loans? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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For instance, payments for utilities, rent, student loans, auto debt, or a telephone all show financial responsibility.

And — interestingly — if you do not have credit cards but have regular expenses and solid savings, there’s an argument to be made that you’re MORE credit-worthy than someone with many credit cards and huge debts.

Can I Get A Mortgage If I Have No Credit Cards? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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