The Mortgage Cicerone - The Loan Attraction Coach - Con

Bad Mortgage - No Surprises, Yet It Still Stinks

This kind of stuff makes me both sick and angry!

We all know of individuals like those highlighted in this investigative report. What's worse, it's the actions of a minority in our business that is causing politicians to call for legislation to stop the parasites in our industry. Problem is, many of these well intended proposed laws will hurt consumers and our industry in the end.

Rediscovering FHA - Conversation Starters: LO's to REALTOR® or Builder

Wondering how to get started explaining the benefits of FHA financing to your Realtors or builders? Give these conversation starters a try!

1. Start with an opener like:

I'm guessing that moving existing homes is a challenge at times. If so, let's talk about FHA financing. Although FHA has been around since 1934 it has recently gained significant popularity due to the recent credit contraction of subprime programs and the need for flexible, prime financing options. In fact, now more than ever, FHA may be an ideal program to (choose from the following):

• Introduce to clients who are looking to buy their first home. Currently, 80% of FHA purchase loans are made to first-time homebuyers.
• Introduce to clients who are looking for a conservative adjustable rate mortgage with no negative amortization. FHA loans are tied to the one-year treasury index with 1% annual and 5% lifetime caps. They also offer a 3/1 and 5/1 Hybrid ARM with extremely competitive rates.
• Introduce to clients who want to keep their down payment and closing costs to a minimum, need a nonoccupying co-borrower or may have had some minor credit challenges
• Introduce to clients who may have access to gift funds or wish to use a state bond or Down Payment Assistance Program
• Introduce to clients who want a fully assumable program to potentially increase the marketability of their home when they decide to sell
• Introduce to sellers who want to sell their home faster and would consider a temporary buydown through our Buydown program to provide a reduced initial interest rate instead of lowering their asking price

I want to introduce, or maybe re-introduce you to a program that may help you expand your business. FHA may be an ideal offering for clients who are first-time homebuyers, need reduced down payment and closing costs, have minor credit challenges or need to use non-traditional credit, and are looking for the security and affordability of a prime mortgage product.

And, just in case you didn't know, all FHA loans are fully assumable...even the fixed rate products. This means that you may build-in financing today that could make your listing in the future more marketable. That's a value proposition that's hard to beat!

I've got all the details on how an FHA program can help you sell more houses and provide future business. If you can spare a minute or two, I'd like to walk you through the program and the benefits it may provide to you and your customers.

2. Fill in the blanks with:

This is great news for you and your homebuyers for two main reasons:

• First, FHA can help grow your business. This type of financing enables your clients to potentially qualify for a prime program with minimal down payment and closing costs thus translating into increased sales for you.
• Second, FHA loans are fully assumable which will increase the marketability of your clients homes and make their decision to purchase a home much easier.

3. Conclude with:

Remember, because I can provide you and your clients FHA loans solutions, I am truly a One Source connection to a full complement of home-financing and service solutions. My team of experts will provide you and your customers with one-stop access to virtually any of your or your homebuyers' needs.

Rediscovering FHA - Conversation Starters With Customer

Wondering how to get started explaining the benefits of FHA financing to your customers? Give these conversation starters a try!

1. Start with an opener like:

• When thinking about financing options you may want to consider the variety of products available under the Federal Housing Administration umbrella. FHA offers everything from 15 and 30 year fixed rate mortgages to 1 year, 3/1 and 5/1 hybrid ARMs allowing you to
  choose the loan that best fits your needs.
• FHA financing is great for borrowers who want to keep their down payment and closing costs to a minimum. The program provides safe financing options for many borrowers, even those with minor credit challenges and, all FHA loans are fully assumable which could make your home more marketable in the future.
• FHA is a prime loan with a prime rate that does not contain risky features, such as negative amortization, balloon payments or prepayment penalties that are associated with some of the exotic and subprime programs you read about today.
• The FHA program also allows a non-occupying co-borrower (like mom or dad) to help borrowers qualify for their new home. FHA takes a common sense approach to approving loans and, due to their flexible qualifying requirements, are often the loans of choice for many first-time homebuyers as well as for those who have experienced a few bumps in the road.
• I have more details on how FHA financing can work for you. If you can spare a minute or two, I’d like to walk you through the FHA program and explain its benefits.

2. Fill in the blanks with:

This is great news for you for two main reasons:

• First, FHA financing enables you to potentially qualify for a program with minimal down payment and closing costs.
• Second, FHA loans are fully assumable, meaning anyone can buy the house and take over the loan without an application or credit check. This option could make your home more marketable in the future. (Refer to FHA guidelines for complete details).

3. Conclude with:

Remember, as a full service mortgage professional, I am your connection source to a full complement of home-financing and service solutions. My team of experts will provide you with one-stop access to virtually any of your homebuying needs.

Do You Know The Benefits of FHA?

With the subprime implosion and liquidity issues the market is currently experiencing, guess what is fast becoming popular again? That's right, the original "blue collar" loan program, FHA.

The issue...many originators have not originated one for years or even worse; have never done one at all. Yet, with all the recent changes made to the program over the last two years and FHA Reform appearing as if it will pass in Congress later this year, it's mission critical you learn and have access to FHA programs at your company...even in California (more regarding The Golden State in a later post).

With that being the case, I'm going to start an FHA series over the next few weeks.

On countless occasions, I've been asked by originators and Realtors across the country what the benefits of doing an FHA loan are?

There are many advantages to providing an FHA solution to a borrower including:

1. Flexible Debt to Income Ratios of 31/43. Note: Loans decisioned by the FHA Mortgage Scorecard may allow significantly higher ratios than FHA published ratios.
2. Lower down payment generally in the range of 1.25% to 2.75%. The lower down payment requires a minimum cash investment of 3% which may be a combination of down payment and allowable closing costs.
3. Seller may pay ALL of buyer's Closing Costs. Or they may be paid through "premium pricing."
4. Seller financing concessions/contributions can be up to 6% of the sales price.
5. Cash reserves are not required. The only exception is for 3 & 4 unit properties; then 3 months PITI (principal, interest, taxes and insurance) is needed.
6. Gift Funds - All funds can be gifted if coming from an approved source.
7. Loans are assumable to a qualified individual. FHA loans are assumable with a credit review and approval of the prospective buyer.
8. Down Payment Assistance Programs (DAPs) are available.
9. There is no pre-payment penalty.
10. FHA loans are not credit score driven; there is no minimum FICO requirement.
11. Citizenship is not required. 
12. There is an allowance for non-occupying co-borrowers.
13. Up-front Mortgage Insurance Premium (MIP) may be financed.
14. Borrower may be eligible for a "Streamline Refinance" to reduce rate and payment.
15. No First Time Homebuyer Education required.
16. One of the best ARM products available.

Are Your Clients Maxed Out?

As a professional mortgage originator/planner, part of our job is to put our customers in a better place financially. On March 5, 2007. I made a post titled "Do You Ever Feel Like Michael Jackson's Plastic Surgeon?" The article spoke to a financial crisis touching millions of consumers across America and the role we as professional originators/planners play in solving this financial crisis.

We are now seeing the results of this crisis with the current state of the mortgage business and the reckless underwriting standards practiced over the last five years. Don't get me wrong, I'm not against subprime or Alt-A products. Millions of homeowners have benefited from being able to either purchase or consolidate their debts utilizing non-prime financing. Bad things happen to good people and non-prime loans have helped them resolve their issues and put them in a situation later to refinance into a prime home loan. When sub-prime and Alt-A lenders utilize sound underwriting principles, it's a great financial tool for many consumers. The problem lies when some in our industry take advantage and profit (to the clients detriment) from their clients financial mismanagement.

Too many originators and financial institutions are only too happy to continue profiting from enabling their clients "out of control" spending habits. What happens to these clients when they run out of equity and are "Maxed Out" again?

Fortunately, I believe there are enough ethical and professional mortgage originators/planners in our industry to make a difference. It however is our responsibility to police our ranks and fight passionately to educate/protect consumers from those snakes who profit from placing them into neutron loans. What is a neutron loan? A neutron loan is a loan that leaves the house intact, but destroys the individual(s) financially.

Neutron loans can come in the form of credit cards, personal, car and mortgage loans or most likely a combination of them all.

As a professional mortgage planner, we are in a situation to assess a clients whole financial picture. Many times we can consolidate our clients debt and save them money via increased tax savings, lower interest rates and monthly payments, while increasing their cash flow which enables them to increase their savings/investment portfolio.

We also have another responsibility and that is to educate our clients. That process not only takes place during the loan process, but also after the fact. Are you sending your clients monthly/quarterly newsletters regarding financial fitness tips and planning. Do you contact them annually and conduct a comprehensive financial review to evaluate if their financial position or needs have changed. Do you work with their CPA or Financial Planner coordinating these needs?

Most importantly, ask yourself the following questions whenever your are doing a loan for a client:

1. Am I doing this loan solely for the commission to the detriment of my client? (or)
2. Will this loan put my client into a better position financially and have I acted in the highest accord of professional standards?

If you can answer affirmative to question number two on all your loans, not only will you be doing the right thing, you will be on the right track to building a long-term and lucrative mortgage originating career.

Please take the time to watch this trailer for the movie "MAXED OUT" and let's repair and uphold the professional and ethical standards of our wonderful industry.

FHA - Not the FHA Your Parents Knew!

FHA Loans are coming back! The changes made to FHA loan products over the last two years by HUD have been seismic to say the least.   

HUD's overall effort to make the processing of FHA loans easier and more cost-efficient so that lenders will be better able to offer FHA-insured loans and expand the availability of affordable financing for potential homebuyers.

Best of all, this doesn't even include the FHA Reform legistlation in Congress right now.

Below are key reasons you should rediscover FHA again!

Downpayment Assistance Programs

Downpayment assistance from Down Payment Assistance Programs (DPA, DAP's) helps people by providing gift funds of typically 3-6 percent of a home's purchase price for a down-payment or closing costs. This gift is provided to borrowers who qualify for an FHA purchase loan and who buy their home from either a builder or seller.

Benefits of an FHA Mortgage

FHA offers low downpayment options, eligibility with less than perfect credit, a loan at reasonable cost, and help if there is ever trouble making the mortgage payment.  Because an FHA mortgage insures the lender against loss, an FHA mortgage typically has an interest rate that is competitive with the best in your market and lower than the rates charged for sub-prime and other non-prime mortgages.

FHA not only helps people buy a home, but helps them keep it as well.  In return for protecting lenders against loss, FHA requires financial institution to offer assistance to borrowers experiencing difficulty making mortgage payments.

10 Fast FHA Facts

1. No credit score required 
2. No prepayment penalty
3. Manuel underwriting acceptable and allowed on all programs
4. Maximum financing allowed on Manufactured Homes (purchase/cash-out)
5. Qualifying ratios 31%/43% (may be higher with compensating factors or TOTAL Scorecard AUS Approve/Eligible findings)
6. 100% gift funds can be used for minimum 3% required investment
7. Appraisal VC Sheets, Homebuyers Summary, and most repair requirements eliminated
8. Buy and repair home with one loan (203 "Streamlined (k)", 203 (k), EEM)
9. Fully assumable mortgage (credit qualifying)
10. Loss mitigation/foreclosure prevention on every FHA loan insured

FHA Manufactured Housing Guidelines (The Basics)

• Each unit must have a HUD label (I.D. Tag(s))
• Must have been manufactured on or after June 15, 1976
• Must be affixed to permanent foundation
• o Per FHA guidelines
• Can only have been moved from factory to site once
• o Factory to dealer lot to home site (OK)
• o Home site to another home site (NOT OK)
• Must be taxed as real property
• Must have engineer's certification that permanent foundation meets FHA guidelines
• Can purchase land and home with one loan
• If borrower already owns land, can be used for minimum required investment 

Fannie Mae, Freddie Mac Benefit From Subprime Disaster

Fannie Mae, Freddie Mac Benefit From Subprime Disaster BLOOM Jun. 05, 2007. 06:00 AM EST The shakeout in the subprime lending market is proving to be a boon for Fannie Mae and Freddie Mac.

Cicerone's Favorite Posts Last Week - 5/29/07

• The Dirty Little Secret in the Title Industry   - Title-Opoly
• Licensing is Just Plain Selfish -  America's Most Opinionated Mortgage Broker
• Feel Sorry for Mozilo Yet? - California Housing Forecast
• This isn't a Country Song... - Mike Mortgage Minute
• Why I Hate My Industry Sometimes - Quick Loan Funding - Blown Mortgage
• Business Killer - Beat Canvas
• It Took 17 Years, But Milli Vanilli May Have Been Right - The Mortgage Reports
• San Diego Mortgage Broker Questions Transparency in Lending  -  America's Most Opinionated Mortgage Broker
• Adventures in 1st Time Homebuying: "Are We There Yet?" - SoundBiteBlog
• How "Repair Credits" To The Buyer Can Sabotage Your Home Sale - The Mortgage Reports
• Real Estate Interventions Needed! Why Do Agents Enable Sellers? - Jim's Atlanta Real Estate Blog
• Why Shopping for the Lowest Mortgage Rate Can Cost You Thousands - Blown Mortgage

Benefits of FHA

The are many advantages to providing an FHA solution to a borrower.

These include:

• Lower down payment (1.25% to 2.75%). The lower down payment requires a minimum cash investment of 3% which may be a combination of down payment and borrower paid closing costs.
• FHA loans are not credit score driven - There is NO minimum FICO score requirement.
• Seller may pay ALL of buyers closing costs, or the closing costs may be paid by the lender through "premium pricing."
• Seller financing concessions and contributions are allowed up to 6% of the sales price.
• Cash reserves are NOT required - The only exception is for 3-4 unit properties where 3 months PITI is required.
• Gift Funds - All funds can come through gift.
• Loans are assumable to a qualified individual. FHA loans are assumable with a credit review and approval of prospective buyer .
• Down Payment Assistance Programs are available.
• There is no pre-payment penalty.
• Citizenship not required.
• There is an allowance for non-occupying co-borrowers.
• Upfront MIP may be financed.
• Borrower may be eligible for a "streamline refinance" to reduce rate and payment on owner occupied and non-owner occupied loans.

MBA: Fix System, Don't Smash It

MBA: Fix System, Don't Smash It Bloomberg May. 22, 2007. 02:00 PM EST Analysis and Discussion with John Robbins, President of Mortgage Bankers Association: Prevent Abuse, Don't Eliminate Subprime Loans.