The Mortgage Manifesto! YOU can still get a mortgage!

Real estate agents complain if their mortgage banker or broker is unable to find an underwriter or program that will accept their buyer for a loan, whether it be a credit issue or income or other qualification. The pressure on the lenders/brokers is never ending. If they don’t get that one done, they won’t likely get another deal from that agent.

If the sale that seemed wrapped up can fall apart at the last, everyone suffers. So, the agent or the borrower simply dumps the one lender and looks for another that will get them approved for a loan… no matter what the cost, unfortunately. It is rarely a consideration from any of the three parties (Buyer/borrower, real estate agent or lender/broker) whether that home buyer should be put into that loan or that home in the first place.

It is all in the name of more business, making the borrower happy by achieving the American Dream’ and doing one more deal. Is anyone looking objectively

More on the Real Estate Boom and Bust...

So, if one in five is subprime loans to borrowers with less than perfect credit, then how about the rest? It is estimated that 2 of the remaining 4 are in a category known as non-prime loans. These are the interest only loans, No-income or lower documentation loans, and the very popular optional-payment Negative amortization loans. The default on the non-prime loans is also up substantially; to the point that the Feds and Wall Street are very concerned. Consider this…

Until about 10 to 15 years ago, most homebuyers got a mortgage the old-fashioned way, by going to a bank or savings and loan to apply. Lenders typically wanted 20% of the value of the home as a down payment. People with less than stellar credit often were denied.

Borrowers that didn’t have 20% down had only 2 choices: FHA or VA (HUD) loans, and these had caps in price, income or qualifications.

Beginning in the 1990s, several trends changed that picture. Entrepreneurs saw a niche in serving the so-called subprime and non-prime market of customers who had been denied loans by banks or for whatever reason, couldn’t qualify under the conventional means. At the same time,

More on a Real Estate Boom and Bust...

With the housing market in a slump and foreclosures on the rise, is it time to tighten regulations on the mortgage-lending industry… or by doing so, do we hurt the marketplace even more? Huge question!
Mortgage lenders don't get all, or even most, of the blame for the problems in the various real estate markets. But should they at least be held partially responsible?

A steady, but not booming economy could be some of the cause for the demoralizing drop in home sales and home prices, but personally, I don’t think so at all.

First off, if you look at GDP, inflation numbers and unemployment numbers, they are a strong and steady as they have been for nearly 15+ years. Yes, there is movement up and down, but no real recessionary-like valleys at all.

That said, nearly one in five recent mortgages made to buyers with sub-par credit expected

Mortgage Defaults Up!

Mortgage Loan Defaults On The Rise!

A new study has found that up to 70% of mortgage early payment defaults and can be linked to a significant misrepresentation on the original loan application.

The purpose of the study was to investigate the link between fraud and payment trends during the early life of the loan. The result of the study concluded that loans that contained egregious misrepresentations were up to 5 times more likely to default in the first six months than loans that did not.

“Many lenders are facing increases in repurchase requests and early payment defaults. The cost of mortgage fraud is borne by every person or family who buys or sells a home.

The studies showed 16,000 loans that were confirmed to contain egregious misrepresentations in the loan file that later led to a default. These misrepresentations included fraud such as: income inflated by as much as 500%, appraisals that overvalued the property by 50% or more, fictitious employers and

What will happen with the Real Estate Market?

A question I keep getting is what will happen with the market? Like I have a crystal ball ;-)

That said, here are some thoughts for discussion:
1. There are over $1 Trillion in interest-only and adjustable rate mortgages all coming due for their payment adjustments in 2007! The FED estimates that the payment increases will be between 25% and 35% or more. What affect will that have on the economy nationally?
2. Foreclosures are already up over 43% in the last quarter of 2006! Those percentages are expected to go up another 10-15% as well.
3. Subprime and conventional lenders are closing their doors right and left already. There is anticipated that as many as 35% of the lenders in business in 2006 won't be by the end of 2007.
4. Average marketing time in most major markets across the country has gone from under 30 days to over 100 days in the beginning of 2007.

So what will all this mean for the economy from here on out? What will that do for the REO inventory due to foreclosures and delinquencies in the coming months and years?

Here is a big and even risky question: Are the lenders at least partially liable for the financial ruin for so many families in the coming months and years? We saw class action suits in the tobacco and drug companies... might we possibly see the same thing happen in the mortgage banking business? Hmmmm...

Has your loan been "sold" before?

Have you been surprised to find out that your loan was "sold" to some other lender after you closed?

This happens often and for some of you, many times on the same loan! Did you panic? For 99.99% of those transactions, it is not a real big issue. I will attempt to simplify it and explain:

Virtually all mortgages get 'sold' back and forth between lenders and off Wall Street. When you get a mortgage and it closes, the lender that 'originated' your loan often is not equipped to 'service' the loan... or collect payments every month. When you make payments, most borrowers think the lender is making all that interest. They are not. Mortgage loans are 'bundled' together in blocks, most often in the millions. Those bundles are bought and sold on Wall Street as mortgage backed securities (bonds).

The interest rate spread (profit) is most typically less than 1% and in fact in greater than half of them, it is less than 1/2 of 1%! So and lender would have to have a whole lot of mortgages to be profitable at just 1/2 of 1% profit... right?! But over the term of the loan

Refinancing: It is getting tougher!

Homeowners are finding it tougher to refinance, and it won't get any easier. Many borrowers have chosen adjustable rate loans over the past 5 years or so. The majority of those loans have been interest only and negative amortizing optional payment programs, which makes it even more difficult.

The greatest issues to watch out for are: possible prepayment penalties and whether or not you have had an erosion of equity with so many markets declining in value. if either one of those is a part of your loan scenario, you may not be able to refinance when your loan adjusts to the current rates. Unfortunately for many, you may have an increase in your house payment of more than...

The Final Credit Mistake

The final Fatal Mistake I am highlighting in the series is this: If you have ever had a collection account, judgment or tax lien, assuming the creditor, collection agency or taxing body will report the resolution to all three bureaus is a big mistake! That goes for erroneous reporting you find on your report too.

Don’t assume that just because you paid-off a collection, judgment, or lien that it is immediately reported to the bureaus. Even when you close an account, it is often not efficiently reported as such to all bureaus. It is not uncommon to see such activity reported to just one bureau, even when the adverse account was being reported on your credit report by two or all three bureaus. Unfortunately, agencies and creditors are quick to report you when you own them money or have made a recent mistake, but they can be very slow to report the final resolution to that account when you have paid them off. Collection agencies and the creditors that have sold your account to the collector are both extremely poor at taking the final step and reporting that the account is paid in full.
This problem is magnified when