The Mortgage Cicerone - The Loan Attraction Coach - Con

Mortgage Pricing Report - 3/30/09

A New Post By The Mortgage Cicerone.
A Guide for Mortgage Professionals.
Read other posts by The Mortgage Cicerone.

If a family member asked my advice and they were scheduled to close on a mortgage purchase or refinance in the time periods indicated below, I would recommend...

1-7 Days	8-20 Days	21-45 Days	46 Days Plus
Floating	Floating	Floating	Floating

 Check MBS pricing here.

For current MBS pricing, checkout the "MBS Price Data" chart in the far right column (underneath Subscription & Contact Links).

Other excellent sites providing insightful market commentary:

• Daily Market Commentary
• Robert Ashby - Mortgage Market Update
• MBS Commentary
• Daily Market Commentary- WesCorp
• Mortgage Rate Commentary - Moving.Com
• Weekly Economic Commentary - Dr. Raymond James

Important Note: These recommendations to lock or float constitute solely my opinion and are not represented nor should be taken as a guarantee of mortgage rate direction.

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MAYDAY! Are You Prepared For the New Appraisal Standards? Are Your Clients?

A New Post By Dan Melson.
Mortgage Loan Broker - California.
Read other posts by Dan Melson.

Effective May 1, 2009, most of you should know that New Appraisal Standards go into effect.
I've been doing some research of late, and the results aren't pretty. Appraisers are going to become essentially unaccountable for anything they do short of a blatant rule violation, but they're going to be able to levy extremely destructive charges that could destroy a lender at will.

I've got an article aimed at consumers going up tomorrow (March 26th) at 7 AM over at my own site, but there are some highlight concerns for Loan Officers and anyone else whose income potentially depends upon an appraisal. The big ones I see are:

• how the appraisal gets paid for (deposit or essentially jacking up margin)
• how the appraisal/deposit gets collected so as not to create issues with escrow account that will lose our license
• preventing accusations of attempting to manipulate value (it's got a doozy of a penalty!)
• getting clients to understand that we have no input on who the appraiser is or the value they return, and that we are unable to order a second appraisal (unless the lender requires it as a matter of standard practice for a given loan program)

Most of these are really going to need to get hashed out on a company wide basis prior to May 1 (MAYDAY!)

There is going to be a blortload of client, LO, and lender pain on this score, and we will be feeling it every time we get a bad appraisal, upon which there will be essentially only one check - that the appraiser cannot objectively violate one of their own rules. The burden is, unfortunately, going to be largely upon loan officers to educate the public into understanding of what the government has enacted, and how we are victims every bit the same as they are.

The only silver lining will be that the appraisers are going to completely own this disaster.

I may be significantly behind some others on looking hard at this, but the folks who were warning us back in November and December were more right than probably even they knew.

(Please don't blame this one on Obama. As far as I can tell, he's no more liable than any other Senator on this one score. It was the Bush Administration, pushed by the theatrical hearings held by Congress last year, that enacted this monstrosity, and I say this as someone who generally has a lot more esteem for President 43 than number 44. Even though I have no evidence he was personally involved, the buck for this stops on W's desk)

_________________

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How Wall Street Turned Garbage Into Gold and Then Back To Garbage

A New Post By The Mortgage Cicerone
A Guide for Mortgage Professionals.
Read other posts by The Mortgage Cicerone.

This video does a terrific job of illustrating how sub-prime MBS pools were turned from "BBB" rated pools to "AAA" rated pools.

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The Birth and Evolution Of The MBS Market

A New Post By The Mortgage Cicerone
A Guide for Mortgage Professionals.
Read other posts by The Mortgage Cicerone.

Before looking at the factors driving mortgage rates, it's helpful to understand a little about the process through which a mortgage passes from the originator to the ultimate investor who will own it. In the early days of the mortgage industry, a typical transaction involved a bank originating a mortgage loan which would be held by the bank as part of its portfolio for the entire life of the loan. In this system, the bankers had to be very careful in evaluating the risk of each loan since they were the ones who suffered from making bad loans. The major downside to this approach was a lack of diversification in most portfolios. All of the loans were made in the same region to the bank's customers, so an economic downturn such as the oil bust in Texas might cause many of the loans to go into default at the same time.

As financial markets grew more sophisticated and financial institutions increased in size, new techniques were developed which helped alleviate the risks of concentrated loan portfolios. Through a process called securitization, pools of mortgages were combined together and sold as Mortgage Backed Securities. Mortgages from across the country were packaged together so that a downturn in the prospects of one industry or region would affect only a small portion of the mortgages in the portfolio. This made investors, such as mutual funds and pension funds, much more willing to own mortgages as an investment. The greater demand resulted in higher prices paid and conversely lower mortgage rates.

The last remaining major objection by investors to owning MBS was that suddenly the bankers no longer had much incentive to scrutinize the quality of the loans they originated because they were selling them off immediately to someone else. Freddie Mac, Fannie Mae and Ginnie Mae were created largely to address this issue. The credit standards created by them meant that investors no longer had to worry about the quality of the loans. Loans were also guaranteed by the agencies, removing nearly all the risk to investors of default. So when loans are underwritten to, say FNMA Guidelines, investors know there is a certain underlying credit quality for the MBS that they purchase.

How The MBS Market Effects Loan Pricing

A New Post By The Mortgage Cicerone
A Guide for Mortgage Professionals
Read other posts by The Mortgage Cicerone

Who sets mortgage rates? Why do rates change? How often do rates change? What is a Mortgage Backed Security (MBS)? These are some of the questions often asked and following is a brief explanation of the MBS market and how it works.

Mortgage loan interest rates, and the corresponding fees or points charged for various rates, are driven by the prices of Mortgage Backed Securities (MBS). While lenders, in effect, set their own mortgage rates, how those rates are set is driven largely by the then current prices of Mortgage Backed Securities. MBS are actually pools, or groups, of mortgages packaged into securities for sale in the secondary market. One security may, for example, be made up of 500 loans totaling $75,000,000. These MBS are traded in markets in a manner very similar to stocks and other fixed income securities, and what investors will pay for these drives interest rates.

Direct lenders originate loans, while wholesale and correspondent lenders purchase loans from Mortgage Brokers or smaller lenders. Most often the different type of lenders aquire these pool of loans with the intent to resell those loans into the secondary market, packaging them into MBS. So the going price in the secondary market for loans at various interest rates influences the rates and prices a lender will offer to the public or a Mortgage Broker. Although lender and wholesaler rate sheets are typically issued no more than a couple of times each day, the value of the mortgages, or the price of MBS, and consequently the price (points) for a certain interest rate is actually constantly changing.

Unlike purchasing or selling stock, where the price is whatever it is at the moment you make the trade, wholesale and correspondent lenders generally issue a rate sheet setting forth their rates and corresponding points/premiums for those rates, and honor those rates, until the change in MBS prices reaches a certain threshold, before passing new prices on to their customers in the form of a new rate sheet. Typically lenders will issue new rate sheets as prices move more than 4/32nds to 8/32nds, or 0.125% to 0.25% points.

A few other characteristics unique to the MBS market also distinguish it from equity and Treasury markets, but the overall operation is similar. A wide range of economic, social, and political factors leads to changes in the value of a mortgage whenever new information is released. This post serves as an introduction to these influences.

As a mortgage professional, your business is greatly impacted by changes in mortgage rates. From a client relationship perspective, the implications are many. An unexpected increase in rates may cause clients to change their mind about a loan you are discussing, cause them to not qualify, result in dissatisfaction with you as their loan officer, or result in other problems. Or you may offer a rate and point quote to clients which they accept, only to find out prices have moved swiftly and suddenly, and those terms are no longer available from your lender. A sudden improvement in rates, on the other hand, if you know the possibility exists, and communicate it to your client, can create a loyal client for life when they benefit from it by receiving a lower rate. In your clients' eyes, you are the expert guiding them through the financing process, and you greatly increase your credibility with them if you are informed and help them make better decisions.

Mortgage Pricing Report- October 14, 2008

A New Post By The Mortgage Cicerone
A Guide for Mortgage Professionals
Read other posts by The Mortgage Cicerone

If a family member asked my advice and they were scheduled to close on a mortgage purchase or refinance in the time periods noted below, I would recommend...

1-7 Days	8-20 Days	21-45 Days	46 Days Plus
Locking	Floating	Floating	Floating

Check MBS pricing here.

  Subscribe to The Mortgage Cicerone

What The Heck Are "Mortgage Back Securities" (MBS's)?

A New Post By The Mortgage Cicerone
A Guide for Mortgage Professionals
Read other posts by The Mortgage Cicerone

Mortgage Backed Securities (MBS) are sort of like bonds, meaning there’s a “principle amount” (the amount being loaned) and interest coupons (or payments) that would be paid monthly on the loan.

However, MBS’s aren’t single loans.

Instead, these loans are really thousands of individual mortgages with similar underwriting parameters pooled (bundled/grouped) together to create a single, tradable security.

By grouping a large number of mortgages together in a "pool", the uniqueness of each mortgage is submerged in the whole. Let's take 500 mortgages at $200,000. This gives a lender a pool of $100 million of mortgages. Lenders then take aggregated statistics such the "weighted average maturity" (WAM) or the "remaining amortization" (RAM) and use these to describe the pool. In theory, Lenders make sure no one mortgage is too large a portion of the pool. Arrangements are made that the "servicing agent" collects the mortgage payments and gives them to "central paying agent" which, in turn, "passes through" the payments to the final investor. We now have something that looks very much like a bond.

However, there's one outstanding issue: how does one assess each of the mortgage pools for their value, creditworthiness and soundness?

Enter Government Sponsored Enterprises (GSE's).

GSE's guarantee the principal of a mortgage against default by the borrower. In theory, this process provides investors (domestic and foreign) with a "commoditized" credit risk. The large GSE's are government or quasi-government agencies. These agencies leverage the credit standing of the federal government to guarantee mortgage loans.Investors then view the credit risk on the principal amount as equivalent to the credit risk of a government bond.

According to The Securities and Exchange Commission:

"Most MBSs are issued by the Government National Mortgage Association (Ginnie Mae), a U.S. government agency, or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises. Ginnie Mae, backed by the full faith and credit of the U.S. government, guarantees that investors receive timely payments. Fannie Mae and Freddie Mac also provide certain guarantees and, while not backed by the full faith and credit of the U.S. government, have special authority to borrow from the U.S. Treasury. Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as "private-label" mortgage securities."

Thus, the underlying issue or reason behind the bailout of Fannie Mae and Freddie Mac and Wall Street.

Wikinvest elaborates further:

"MBS have garnered controversy for their role in subprime lending. MBS allow originating banks to offload their exposures to homeowners to the bond market, recycling their capital so they can originate more mortgages. Investors count on the investment banks and, crucially, the rating agencies to rate and then monitor the credit quality of the resulting MBS. Apparently compromised by their reliance on this flow of business, however, the agencies and investment banks failed to spot (or, say some, deliberately ignored) the deteriorating underwriting standards of the originating banks, and rated as triple-A (AAA to Standard & Poor's and Fitch, Aaa to Moody's Corporation) some MBS that were, in fact, much riskier. This mistake was compounded by the emergence of CDO's (Collateralized Debt Obligations) that invested in these MBS on the basis of their ratings, and got their own AAA/Aaa ratings on their bonds as a result.

Whether the resulting meltdown was the result of corruption, or simply incompetence, is still under debate. The rating agencies, not without some reason, can claim to have been duped alongside the investors -- to have lost 'reputation capital' just as the investors lost money capital. Many observers, though, point to the enormous growth in their business on the back of the securitization phenomenon.

While highly visible and distressing, subprime MBS and CDOs are only a fraction of the securitization market; many MBS are still considered high-grade either because of the high credit quality of the mortgage pools that back them, or because of the guarantee of the federal housing agencies. Securitization remains a pillar of all modern capital markets because of its ability to move risk onto the balance sheets of investors and creditors who are better able to bear that risk than the originating institutions."

Articles that will help you further understand MBS's and how they are priced:

• Pricing mortgage-backed securities will be tough
• Subprime mortgage crisis
• Basics of Fannie Mae MBS

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Have You Designed Your Housing and Economic Recovery Act Marketing Plan?

A New Post By Bill Rice
Marketing & Lead Generation Expert
Read other posts by Bill Rice

The recent Federal Economic Stimulus package and now the more permanent Housing and Economic Recovery Act of 2008 is opening a whole spectrum of new people you can help.

These programs are not simple for consumers to understand, but therein lies the opportunity. Put on your mortgage adviser hat and get to educating.

You should develop marketing campaigns to help struggling home owners and savvy home buyers interested heavily discounted homes, such as foreclosures and short sales.

Make sure you are focused on the burning question–Am I Eligible?

Learning about FHA

The latest Housing and Economic Recovery Act makes permanent some very helpful reforms to FHA lending standards. The following are some key opportunities:

• Permanent FHA loan limits at the greater of $271,050 or 115% of the local median home price, capped at $625,500
• Streamlined programs for FHA condos and manufactured home programs
• FHA foreclosure rescue allowing lenders to do principle reductions and refinance into 30 year fixed mortgages at 90% of the appraised value, with a loan limit of $550,440

How it Applies to the Market You Serve

The new permanent FHA program reforms maintain the local nature of their eligibility requirements. Therefore, you need to make sure that you understand how the provisions apply to your service areas.

The local nature of these FHA eligibility requirements is causing a significant amount of uncertainty and confusion for current home owners and potential home buyers. This becomes your opportunity to help.

Simple, Help-based Marketing

The local structure of the FHA programs makes for a prime opportunity to launch hyper-local education programs and become the local FHA mortgage and real estate expert. Here are some simple ideas to claim your position as the local FHA guru:

• Offer brief presentations on the new FHA assistance programs to local civic groups
• Offer home owner assistance seminars or information to local libraries
• Post local FHA qualification and eligibility information on your local website or blog
• Email or direct mail your past prospects and clients an FHA reform alert
• Offer free FHA qualification and eligibility consultations

These reforms were meant to help people. It is your job to get the word out and educate home owners and home buyer that you have programs to ease their pain.

Reprint: From Bill Rice's "Better Closer"

5 Tips To Make Sure Your FHA Loans Get Approved And Close On Time

Here are five quick tips loan originators can use to help prevent FHA mortgages from falling through during processing. For some mortgage originators these tips will seem ridiculously basic. Unfortunately, conversations with FHA underwriters show me that many loan officers haven't caught on to these ideas yet.

1. Make sure the loan you are submitting makes common sense.

Incredibly, this is one of the most common mistakes made by originators who entered the mortgage business within the last 5 to 7 years. Subprime programs generally only required that the loan fit into their matrix and never cared about the reasons the person had credit problems. Make sure that you can verbalize a good case that it makes sense to believe that this borrower can reasonably be expected to make the payments on the loan. Often this requires asking a lot of uncomfortable questions of the borrower to make sure that you truly understand their situation. Even when your submission is approved by the automated underwriting system and theoretically the underwriter needs only to validate the information and does not need to make a credit decision, the underwriter may well find something wrong if the loan does not make common sense. Lenders are held accountable by HUD for loans that default. They can always find a reason to override the automated underwriting findings if they want to.

Stating a good case for loan approval is even more important when the FHA Total Scorecard underwriting system has referred your loan to an underwriter to make the decision. Do not ever assume that just because the debt to income ratios meet guidelines and the borrower hasn't been late on any payments in the last 12 months that you don't need to submit a well constructed cover letter with your loan - in addition to the borrower's own credit explanation. Make sure that both your cover letter and the borrower's explanation fully account for what happened to cause the borrower to have credit problems and why the underwriter should now believe that the borrower has solved the problem.

Loan officers who "grew up" in the days of subprime lending based on credit scores and matrices often foolishly leave it up to the underwriter to probe through a huge stack of papers in the submission to come up with their own justification for approving the loan. Rest assured that the underwriter is too busy to do that and will only gripe about you to their colleagues after they give you an approval with a stack of conditions which are often impossible to comply with. This is one of the most common rookie causes for real estate closing delays. Let the underwriters know what you want them to base their decision on and you stand a greater chance of getting an easy approval with conditions you can comply with.

2. Check the CAIVRS number before processing the loan.

CAIVRS stands for Credit Alert Interactive Voice Response System. Don't ask me why HUD sometimes transposes that to CAVIRS instead of CAIVRS in their own documentation. I guess it sometimes serves their purposes to keep the public confused?

The CAIVRS system verifies that the borrower has not been disqualified from using government insured financing because of past defaulted FHA/VA mortgages, student loans, or any of several other reasons. An amazing number of people are not aware that they have officially been excluded from FHA financing. This commonly happens due to "charged off" student loans that the borrower may have long forgotten about and which also do not show up on their credit report any longer. Just slightly less common are cases where the borrower's ex-spouse was foreclosed upon and the borrower says they were not even aware of the situation. Strangely, even this fails to show up on the borrower's credit report fairly often.

Whatever your company's procedures, make sure you check the CAIVRS as early as possible.

3. Collect all the correct documents.

Make sure you have documentation to support the information you entered into the automated underwriting system, or that was mentioned in your cover letter and the borrower's explanation letter. Surprisingly again, many loan originators fail to think ahead strategically when compiling their loan submission package. Loans which started out with an approval from FHA Total Scorecard often revert while in process to a "referred to underwriter" status.

First, this would occur much less often if originators took the extra few minutes necessary to verify the information being submitted by examining original paystubs, W2s, divorce decrees, bankruptcy filings and other support documentation before turning the loan over to their processor.

Second, if the loan is later unexpectedly downgraded to refer status, much more documentation is needed.

Here are a few quick but painful examples of that.

When there is no valid automated approval the borrower's rental history must be verified. I have seen many loans fall through at this stage because the loan officer failed to even ask the borrower if their rent had been paid on time! Remember, the rental history is not a factor if the loan is approved by automated underwriting because that history is not shown on a borrower's credit report.

Another common version of this problem occurs when the loan officer fails to examine documentation showing that extra income (for example, child support payments) has been received consistently in the past and that payment is going to continue. Again, the loan ends up falling apart well into the processing stage, leading to much greater frustration and anger from borrowers and real estate agents thus disappointed.

An equally common mistake is not verifying that a retirement account submitted on the application as an asset can legally be liquidated if necessary. For example, many teachers have substantial funds in their retirement accounts, but these funds often can not be liquidated unless the teacher is fired or dies. These funds are not considered to be liquid assets but many rookie loan officers get automated approvals based on these funds which subsequently go down in flames.

4. Compute the income accurately.

Sounds obvious, I know, but tales of mortgage closings which fall through because the borrower's ratio of debt to income is too high are legion among real estate agents as they swear to never use that particular mortgage broker or lender again. Real estate agents and borrowers are reasonably amazed that such a basic element of the loan approval process could have slipped by the mortgage originator's attention until so late in the process.

Here's what happened. The loan officer asked the borrower "How much do you make?". The borrower told them an amount from their last paycheck, or worse an amount from their best paycheck. The loan officer submitted the loan through automated underwriting and received an approval so they told the agents and borrower to go ahead with their purchase offer only to find out after finalization of the purchase contract that 30% of the borrower's income comes from overtime pay they have only been receiving for the last year. Oops, this doesn't fit into FHA guidelines. Alternatively, the loan officer does look at the borrowers paycheck ahead of time, but fails to note that part of the gross pay comes from overtime or bonus pay or commission pay. So the originator submits the gross income, but it isn't entered into the system correctly and factors such as commission income actually play an important part in the automated systems risk analysis of the loan. Either way the result is not good for the parties involved.

One effective strategy to prevent this is to be very conservative in determining the borrower's qualifying income and not count bonuses and overtime pay when submitting the loan for automated approval unless absolutely necessary. If the borrower has been qualified with less than the maximum income that can be squeezed into the loan officer's calculations, unpleasant surprises are less likely to occur.

5. Be sure you have ALL the borrowers assets listed and listed correctly.

Loan officers frequently fail to gather complete information on all the borrower's assets once they have an automated approval. Once again, automated approvals are downgraded to "referred to underwriter" status fairly frequently for many strange and different reasons. A good strategy for the mortgage originator is to gather documentation for every dime in every account the borrower has squirreled away anywhere, but submit the loan through the automated underwriting system with the fewest assets necessary to get an approval. When the loan is downgraded later on, the extra assets can often save the loan officer's reputation.

Another common mistake regarding assets has already been mentioned. The assets must be verifiably liquid. For this reason, FHA guidelines require that the loan file include proof that the assets would be available to the borrower without being fired or dying. In addition, due to potential withdrawal penalties, FHA loan guidelines will allow only 60% of the vested amount of the account to be counted towards the borrower's liquid reserves. Frequently, the entire balance has been submitted into the automated underwriting system.

These 5 tips won't guarantee your deal will go through underwriting without a hitch. After all, FHA guidelines seem to change daily now, but a little attention to these details will go a long way toward improving your reputation among borrowers and real estate agents.

________________________________________

Reproduced with permission from Carl Pruitt. To visit Carl Pruitt's website, go to http://fhaloanadvice.com/index.php/about/  Copyright 2007 Carl Pruitt. All rights reserved worldwide.

Carl Pruitt is a 22 year veteran of the mortgage/real estate businesses who specializes in using FHA loans to get low fixed rate mortgages for borrowers who have had credit problems. He also coaches other loan officers on the best methods marketing, packaging and processing FHA loans.

FHA - Writing Effective Credit Explanation Letters

Loan officers who have lost their subprime golden goose are streaming into FHA loan origination. Their FHA loans are being turned down left and right by frustrated underwriters who can't believe such junk was put on their desk.

I'm about to place in your hands one of the most powerful tools there is to make sure you get your loans approved by FHA underwriters - the ability to excel at packaging a loan submission.

First things first. These tips are worthless without the proper foundation. Here it is: Make sure you have a borrower who really deserves a loan!

I know loan officers think everyone who wants a home deserves a loan as long as there is any way to squeeze them into the guidelines. Use common sense though. Make sure you really do believe someone will be able to make the payments before you go out of your way to get a mortgage approved for them.

Don't use the typical excuses so common during the mortgage boom years that you "aren't their parent" or "it's up to them to know whether they can make the payments" or "they'll just go on to someone else." The loan officers spouting those excuses are a prime reason that today you are having to fight tooth and nail to get loans approved that were once easy to close.

I'm not telling you all your customers must have pristine credit. I am saying you should not be helping deadbeats who haven't changed their habits, but want a home because "they are tired of throwing their money away on rent." Market yourself better and find the people who really did have an unexpected problem ruin their credit and who have learned their lesson. Remember FHA will cut you off from the program if you allow too many deadbeats through your filter anyway.

With that in mind, here are 3 power tips for writing an effective FHA credit explanation letter.

Tip Number 1: Don't write the credit letter. Let the borrower put it in their own words.

Probably not what you were expecting, but this is very important. A perfect letter put together completely by the loan officer can easily be detected by the underwriter and it will hold less weight when they see it. Allow the borrower's own words and own personality to make their way into the letter.

Tip Number 2: Don't leave the borrower completely on their own to write the letter.

Most loan officers still simply give the borrower a list of derogatory accounts and ask them to explain them. Don't do that. Give your borrower the proper guidance. Tell them what you expect from them.

Sadly, the average high school graduate today is functionally illiterate when it comes to the task of putting together such a letter. You are doing good people a disservice when you leave it all up to them. They could probably do a fine job of explaining it themselves if they were speaking directly to the underwriter and the underwriter could ask follow up questions. That doesn't happen anymore, so you must help them get it right from the beginning.

After the borrower explains the details of the situation which caused the credit problems and you have informed them that it is a crime to lie in this instance, have them write out exactly why the problem happened. Make sure they address and account for every single negative item on the credit report no matter how old or how insignificant it appears. Get them to explain in their own words why they feel this problem won't happen again and exactly what they have changed in their life to prevent it from doing so. Then have them explain why they feel the underwriter should reasonably expect them to be able to make the payments.

Don't skip any of those points. Once the borrower understands what is needed, let them put it in their own words.

Many loan officers tell their borrowers to keep their explanation letter short. Don't fall into this trap. Make sure the borrower explains everything in tedious detail to the point that anyone who picks up that loan file 10 years from now can easily understand why this borrower ended up being approved.

Here's a bonus tip: To satisfy the underwriters who don't like to read, always include your own cover letter in the submission file briefly summarizing the borrower's credit explanation and adding your own interpretation of which compensating factors the underwriter should consider.

When you structure the explanation part of your file this way, you are helping the underwriters make the decision without having to figure out on their own how they are going to justify it. This makes them more comfortable giving you an approval with fewer conditions.

Tip Number 3: Document the borrower's credit explanation and solution.

This is the extra punch even experienced loan officers often leave out, but it is the step which can take you above the level of the average loan officer into the category of miracle worker in the eyes of your borrower and their real estate agents.

Get some documentation to prove the borrower's credit explanation is true and that their explanation of how they have changed things is true. I know this involves extra work for you and for the borrower. It is worth it. If the borrower had a medical problem get something from the doctor, or include bills in the file. If the borrower was laid off, include a copy of their termination letter or evidence of receipt of unemployment benefits. If the borrower said their problems occurred because they had no medical insurance, prove they have it now. You get the idea.

Of course the borrowers often have difficulty finding this type documentation. That's why the average loan officer never gets it. Push them. It doesn't take much documentation to add considerable punch to your case that the loan should be approved.

Every day I talk to loan officers crying over turned down files that should have been approved. The common element in almost all of these cases is that the loan officer left it up to the underwriter to figure out why the loan should be approved. To avoid extra work which might be wasted, loan officers submit the loan hoping it will slip through without having to provide this documentation. Underwriters don't have time for this. When you put them in this position their answer will be to turn the loan down or approve it with approximately four thousand conditions of approval.

Times are difficult in the mortgage industry today. The mortgage originators who survive will be those who find a way to help the people other originators aren't helping. Becoming an expert on FHA loans can be the best way for a loan officer to do that. Use these tips to get more loans approved and get more referrals from your happy customers.

________________________________________

Reproduced with permission from Carl Pruitt. To visit Carl Pruitt's website, go to http://fhaloanadvice.com/index.php/about/  Copyright 2007 Carl Pruitt. All rights reserved worldwide.

Carl Pruitt is a 22 year veteran of the mortgage/real estate businesses who specializes in using FHA loans to get low fixed rate mortgages for borrowers who have had credit problems. He also coaches other loan officers on the best methods marketing, packaging and processing FHA loans.