Trevor Curran

You would think the downturn in the real estate market and subsequent downturn in mortgage originations business would have finally “separated the wheat from the chaff.” Unfortunately, there are still people hanging on the fringes of the mortgage business claiming to know what they’re doing.

I know there are many Realtors who have moved on. My wife the Realtor said to me in the middle of the boom how “everyone and his brother is a Realtor!” A lot of those folks have gotten out of the business. Good, they shouldn’t have been in it in the first place.

Same holds true for mortgage originators. The fantasy years attracted so many amateurs and slimebags and idiots who jumped on the “million-dollar-mortgage-bandwagon” and contributed greatly to the mortgage meltdown of 2007.

I lost business to these idiots as they lied to Borrowers, whether through intent or sheer ignorance. The lies where simply a way to garner a commission check from an unwitting consumer.

Experienced mortgage pros like me could only look on and shake our heads.

My business has been picking up as of late. We’re seeing people coming out to buy homes again. It’s no great rush for the gates, but it’s a healthy pickup after the incredibly slow market since ’07.

I’m receiving referrals from Realtors who have been around longer than 5 years; people with experience who are truly professional Realtors. But I’m noticing a disturbing occurrence in the past two weeks: clients are being solicited yet again by former mortgage people who are still hanging on the fringe, hoping to originate a loan or two while working their new day job (you know, the one they had to take when the mortgage meltdown hit BIG time).

Tuesday of this week a Realtor informed me that a client he’d referred to me was pre-approved for $500,000 by a mortgage “guy” who lives in the client’s building. Interesting because the client IS NOT qualified for a anything near that amount according to current guidelines. I know, because I ran the client’s credit, reviewed his income and assets. I advised the client who would definitely need a co-signor on the loan so that he could qualify for a $365,000 single family house. There’s no way around the math. There’s no calculator that exists that can make the numbers work any other way. And there are no programs as flexible as the FHA insured mortgage—the one I used to qualify said client.

So, how does “the mortgage guy in the building” qualify the client for $500k? I dunno. But it sounds a lot like what I heard from clients back in the boom. All kinds of amazing claims and feats of magic (but not heroics) to get people approved for mortgages they couldn’t and can’t afford.

Same thing yesterday. A woman earning $41,000 a year with less than 3% down payment told the Realtor that a woman she knows “in the mortgage business” suddenly has her qualified for a mortgage of $425,000 for a 2 family house.

The math just doesn’t work! The woman told the Realtor her mortgage whiz kid had all kinds of programs available to help her get the house without a cosignor and without the 3% downpayment.

You would think that people would watch the news or read a newspaper once in a while! Don’t they know these losers are just leading them on and wasting their time?

Met a Realtor yesterday who knew me from way back in the early 1990’s. Back then he was an agent; today he owns his own office. I walked in his office and he literally said, “Thank God you’re back! Where have you been? I have needed you to close my deals!”

He went on to tell me how he has referred 8 deals—that’s folks buying houses—to his next door neighbor, a mortgage broker. The mortgage-broker-next-door hasn’t closed a single loan. And these are transactions that have been kicking around for something like three months.

So, these losers and slimebags and idiots are still out there, wasting everyone’s time, claiming to know how to originate and close mortgage loans. They don’t know how to do anything but lie to clients and waste Realtors’ time. Immediately these losers should fill out those applications for employment at their nearest fast-food establishment; I hear they’re hiring.

I’m happy to report our good pal Craig Newmark of Craigslist fame is featured in a NYTimes.com piece.  Some silly shenanigans on the part of the corporate folks at eBay trying to corrupt Craig’s ever-sensible 21st Century approach to commerce and all things internet. Blah-blah-blah.

Still, there are great insights in the piece into Craig’s modus operandi and his attitude toward the undeserved criticism laid at his doorstep by newspaper publishers across the land. This little story makes for a good read.

I love being reminded that Craig believes—STILL—in the power of the internet to deliver goodness and honesty all in the hands of the people. Woot.

Many of you readers came to me one way or another through the Craigslist Housing Forums or through ads I posted (for FREE!) on CL. So, here’s the link to the Times bit.   Happy reading and remember, MORE POWER TO CRAIG!

[tags]Word Press, Technorati, Simple Tags, Craig Newmark, Craigslist, New York Times, Technology, Internet[/tags]

The word on the street is this: in the first week of April, Stated Income Loans will cease to exist.

As it stands, the PMI companies will begin refusing to insure such loans. PMI is required when your downpayment is less than 20%. The PMI or “Private Mortgage Insurance” protects the Lender for the 20%.

We don’t yet know if you’ll be able to find a “Stated” Income Loan if your downpayment (or equity position if you’re refinancing) is equal to or greater than 20%; this is just the preliminary word “on the street” as it were.

I’ve said it often: FullDoc All The Way Baby!

That’s the best and right way to qualify for a mortgage you can afford; end of discussion.

[tags]Full Income Mortgage, FullDoc, No Income Verification, mortgage qualification, downpayment, Stated Income Loans ,PMI[/tags]

“I learned something,” said the Realtor.

I’ve known this Realtor—and received referrals from him for about five years. He doesn’t know of the “old” old ways, wherein a Realtor has a buyer prequalified before even pointing and clicking on the MLS site to search for a home.

He’s used to the ridiculous mortgage qualifying methodology of the past six or so years. That’s the method where the mortgage “professional” places two fingers on the prospective Homebuyer’s wrist, checks for a pulse and proclaims the subject alive, well and qualified for mortgage financing.

Think: Sub-Prime mortgage debacle.

Too often the Realtors—running with the (wolf) pack or following the (sheep) herd (you choose the appropriate metaphor depending on your viewpoint) —responded to any and every prospective Buyer. The call came in and the Realtor setup an appointment to show the house. No worries about the prospective Buyer’s qualifications for a mortgage, oh no, none at all. (Think: Bobby McFerrin, “Don’t worry, Be Happy”)

Run out there and sell that buyer a house. Who cares of the Buyer’s Income, Assets, or Credit? They’ll get a mortgage! And who cares the affordability of the monthly payment? They’ll manage it, somehow!

Well, I always cared. I always stopped prospective clients and Realtors dead in their tracks by asking the fundamental qualifying questions about Income, Assets, and Credit: IAC.

I got a lot of people looking at me as if I were deranged. I got a lot of Realtors admonishing me, “Look, can you do the deal or not?” I lost a lot of prospective Buyers/Borrowers by asking too many questions and worrying if they could afford the mortgage.

After all, why should these Realtors and Buyers waste their time with me discussing the finer points of those late payments with Macys and Nissan, or responding to my queries about how long they’ve received their overtime and is it guaranteed by a contract? Why waste the time when there were plenty of other mortgage “pros” out there ready, willing and able to provide mortgage financing in a flash.

Oh, and flash it was.

And now that flash has passed, nay, exploded! And those flash in the pan mortgage losers are working for a fast food establishment asking you if you’d like ketchup with your drive-through order.

Yes, and those flashed-upon Homebuyers are in dire straits, indeed. Many of them in danger of soon losing their home.

What of the Realtors? Well, those like my Realtor-referral-guy are now learning the hard way how they should prequalify before opening the door to any house.

In the case of my Realtor, he not only showed the house, but the Buyers LOVED it and made an offer on the spot.

Why wouldn’t they love it? It was priced more than $100,000 below what the Seller owed the bank as well as comparable houses in the surrounding area!

As quickly as we qualified the Buyers, wrote the loan application and got it approved—Saturday application, loan approved by 10:40 a.m. Monday morning—the deal died a horrible death. It died because I discovered shortly after the loan was approved the truth: the Homeowner took out a mortgage in July 2007 in an amount fully $110,000 more than the offered price.

Apparently the Listing Realtor in this case has some learning to do, as well. Somehow she never disclosed this fact to my Realtor-guy, the Selling Realtor. Only the list price of $325,000 was disclosed.

The Listing agent had some crazy notion she would negotiate a “short sale” for the homeowner and make this deal happen.

Arrrrgggghhhhhh!!!!! What a waste of EVERYONE’S time. The Selling Realtor, me, my processing staff, and the Homebuyer’s. Worse, the Buyers are fixated on that price and mortgage payment.

Worse, still, there are NO houses available in the Buyers’ qualified and desired range. Homes the Buyers like are $70,000 to $100,000 more than the amount of the first house.

In other words, the Buyers are NOT qualified for the kind of house they want in the area they want. No matter we can potentially add a cosignor or find a home in a different area. Fixated on price and location, these Buyers won’t budge.

And it’s all the Realtor’s fault.

He realizes now how he wasted his time. Now he will listen to me when I say, “Let’s prequalify EVERY prospect before you invest your time.”

He learned something, alright.

It’s unusual.  Unprecedented, even.  Lenders changing guidelines mid-stream, after you have your loan approval.  You get your client’s loan approved; you collect the approval “conditions” and send them over the bank to clear with the Underwriting staff so you can schedule a closing.

 All of a sudden the Lender changes it’s “mind.”   Now, there’s either new conditions piled on top of the ones you submitted, or the loan is out and out cancelled.  And if there are new conditions, you can bet they will very unreasonable ones.   As if the Lender is looking for problems on the loan that don’t exist.

After all the lies and fraud and bad mortgage loans originated in the past few years, the kneejerk reaction is beyond precedent.  It’s as if the banks don’t want to make any loans.

The problem comes down to the state of the mortgage industry, today.  This problem is symptomatic of what’s happening industry-wide as a result of the “mortgage meltdown” of 2007.

In my opinion, Wall Street is not giving the banks any direction.  Will the Street buy the packaged loans, as they have always done, or not?  Without the ability to move loans in this way, the mortgage-lending industry is hamstrung.

While Wall Street gave our industry TOO MUCH direction in the past few years, i.e., “Give us EVERYTHING!” now the Street doesn’t seem to be answering the phone when the mortgage industry rings up.  And if they do answer the phone, it’s a bad connection. 

Frankly, it’s beyond all reason.  There’s no sense to it in that there are basic lending guidelines in place, the foundation, if you will, of the mortgage lending industry.  You would think that, in the event of such cataclysmic results from garbage mortgage loans, we would at least be able to revert to the basics and continue to approve mortgage loans.

 The fact is people still need to borrow mortgage money, regardless of market conditions or interest rates.  And those people are being told, “NO” even when they meet the basic qualifying criteria as written in the guidelines.

For instance, there is a FNMA program designed to make it easy for people of Low-to-Moderate Income purchase homes with little or no money down.  It’s called by different names at different Lenders, the most common being “My Community.”

The program guidelines allow for a borrower to have NO credit, and to provide “alternative” credit such as utility bills, phone bills, etc. to provide a credit history.  (This is a long-standing tradition with FHA loans) 

Well, while the guidelines allow for it, the FNMA loan approval software doesn’t (commonly called “DU” or Desktop Underwriter).  Therefore, to approve a loan like that, you must have a human being underwrite the loan; someone who can read the file and signoff for the approval.  The human underwriter would have the guidelines at hand, could check the loan application against those and make a decision on the loan, whether that be approval or denial.

Except, there are NO humans underwriting loans at the banks right now.  The banks say, “If the FNMA software doesn’t approve it, don’t talk to us.”

 
Whoa.  It’s nuts out here.

I find myself working so hard these days to gain people’s trust so that I can do their mortgage. I find the obvious sense of professionalism I bring to any encounter is lost on most people; they’re looking at me doubly-distrustfully.

I may be thick in the head but I didn’t realize until reading the following quote from an article in today’s NYTimes.com how much my own personal reputation has been affected by the mortgage meltdown. Not only that, but I didn’t realize why I was having so much difficulty gaining a new client’s trust.

I have never minded working hard to gain the trust of a new client or referral source. I have always felt that I walk in the door at a disadvantage because there are so many people of less-than-stellar-character working in my industry. So my presentation—including this website—is designed in such a way as to overcome that initial doubt in the mind of any client. I think once I open my mouth and begin talking, the client is more than a bit relieved; they know they are in the presence of a trustworthy professional.

But that whole process has become more difficult of late. And I guess I wasn’t making the connection, either how much more difficult it is or the reason why.

I remember my wife, The Realtor, once said about a year ago, “Everyone is a real estate agent these days!” She was right; even the young woman who cuts my hair told me she was thinking of getting her real estate license. Nothing wrong with that, except for the fact the young hairdresser at the next chair said she already had her real estate license!

And, back then, everyone was in the mortgage business, too. I remember sitting with a client at his house at 9 o’clock at night to write the loan application. He was referred to me by his long-standing tax accountant. He was a business owner and a smart homeowner who had owned his home for quite a while and only refinanced once before. I was sure he would be impressed by my professional demeanor and my solid financial advice. Of course, I was recommending what I always recommend: the thirty year fixed rate mortgage.

The interview was going well until he said, “My business partner’s son is in the mortgage business and he recommended I refinance into the Option ARM loan.” Hooboy. There goes trust and reputation and experience right out the window. I wrote and closed the loan but it was a struggle all down the line. All the time that “son in the mortgage business” lurked in the background attempting to get “my” loan.

Today’s NYTimes.com article presents yet another face of the foreclosure mess. The article’s perspective is how other areas of local economies are affected by the mortgage meltdown.

The sentence from the article that struck me was the one regarding referrals. I read over it and then it hit me and I had to go back and read it again, and again for it to sink in. Then it hit me and I knew why I was having such a hard time of late.

Here’s the quote:

“This is not an easy time of year, as people trudge into Ms. Ortiz’s office carrying sheaves of financial documents. Sometimes the tears come before the words. Often, the story is the same: A friend from church or work suggested they refinance their home, or insisted they could help them buy their first home. Within a few years, they are facing Ms. Ortiz, frantic and frightened.”

Ms. Ortiz is a housing counselor for a non-profit group trying to help people stave off foreclosure. The people facing her “frantic and frightened” are homeowners soon to be in or already in foreclosure.
The part that struck me and made me realize how the era of solid referrals and the trust clients put in me are over is that bit about “friends” suggesting they could help refinance the home or buy their first home.

Was a time those “friends” were recommending the clients to professionals like me. I got those referrals from having done the right thing, having done a good job, and having helped someone realize their dreams of homeownership or from refinancing them out of financial difficulty. The referrals came to me because of the quality of my professionalism.

In the past few years these “friends” stopped referring me. Instead, they, as my wife pointed out, were “all in the business.” And what the hell did they know about the business? Nothing beyond the ability to sweet talk someone into signing and buying something they couldn’t afford.

There was nothing professional about the friends, apart from possibly a business card from some now defunct mortgage company. There was certainly no reputation; these were, after all, friends.

And where the hell are those friends today? You can be sure they’re not practicing the profession of originating mortgage loans. Nor are they selling real estate. The quick buck is no longer there to be made so those friends have returned, no doubt, to peddling cosmetics or household cleaning supplies or life insurance through those ridiculous multi-level marketing schemes. You know, living room parties on a Tuesday evening where you’re walking out with an armful of resealable kitchen containers that you neither need nor can afford.

Those “friends” took that concept to a whole new level and now it’s costing people their homes.

Meanwhile I’m left out here standing with the smoke clearing and still trying to do what’s right. It’s hard to to do and I know I’m up the challenge, but, boy, I sure miss the days when getting a referral wasn’t so filled with mistrust and such hard work.

Here’s the article:Holidays Find Loan Crisis Spreading to Businesses and Neighbors

Jimmy Buffett, in his song “Volcano” starts out singing, “Well, I don’t know, I don’t know, I don’t know where I’m a gonna go when the volcano blows.”

I find myself remembering that lyric and repeating it over and over in my mind quite often lately.

I find myself saying those words, “I don’t know,” out loud often, too.  I say them to clients and to Realtors and to attorneys.

The “ground is moving under me” as Jimmy continues to sing.  Lending practices, regulations, underwriting criteria and guidelines, all are changing rapidly as the markets and the banks react to the continuing mortgage meltdown.  Where once I was so sure on my clients’ behalf, knowing exactly how to get their loans approved, nowadays I often say, “I don’t know.”

I don’t know exactly how I can get your loan request approved.  I don’t know how long it will take to approve your loan once we actually figure out how—and with which Lender—to get it approved.  I don’t know if the underwriter will suddenly develop cynical dementia and decide she doesn’t like the loan and creates “obstacles” to block the path to a successful approval.  I don’t know if the bank will dump that loan product a week before we’re due to close, thus causing a scramble for a replacement bank and product.  I don’t know if the bank will be in business by the time we’re ready to close—or even the day of the closing.

I don’t know.

I don’t know if your property value will dip, or remain steady, or decline further.  I don’t know, in the event values decline further, how much you can regain in the future when the market begins its return to vitality.

I definitely do not know where interest rates are headed—but, then again, I’ve always said that, and who the heck knew rates could stay so low for so long?

There is a lot I don’t know about our industry today, and about the varying conditions that affect your ability to sell or buy a home.

I do know one thing for sure.

I know that it is a wonderful thing to own your own home.  I know that, in several conversations with clients this past week, it’s fun to put up Christmas lights on that house you own.  I know there’s something special about arriving home in the dark of a winter’s chilly evening to see the lights in the windows of your home and immediately anticipate the warmth and comfort awaiting you within.

I know it’s nice to go to bed at night feeling a certain sense of peace that you own something as worthy, as valuable, and as life-enriching as a home of your own.

Not only do I know these things about the homebuying experience, I accept them as “givens.”

These are concepts and standards and quality of life issues that cannot be affected by crazy markets, high interest rates, falling home prices, and worrisome newspaper stories.  These are tried and true facts of life that affect each and every homeowner, and, by extension, home buyer no matter what we mortgage professionals “don’t know” about loan approvals and other such nonsense.

I like that certainty; it’s a feeling that informs how I conduct my business.  Because at the end of the day, when I tick off my long list of “I don’t knows” that one certain thing I DO know—buying a home of your own is a great thing to do—is worth the aggravation, the impatience, the uncertainty, the worry, and ultimately, the struggle, to fight for a loan approval for my clients.

So, the heck with what I “don’t know” and here’s to more of what I know.

I really don’t follow the statistics or the bad news in the newspapers. No, not at all.

But on average, we’re receiving at least one referral a day—that’s about 7 to 10 per week—of people in trouble. They’re one or two months down on their [tag]mortgage[/tag] and they want to save their home. Pretty much there’s nothing we can do. There’s no value in most cases to refinance the client, even if it’s going to be at a terrible fixed rate. In just about every instance we’re passing on the referral.  We don’t even want the telephone number.

Many of these clients are Hispanic and they have those nightmarish I/O Option ARMS that have now adjusted to a higher rate. Once again I’m thankful of the fact that I refused to originate those types of loans for my clients—many of whom are Hispanic. Of course, in refusing to originate anything but 30year fixed rate loans, I lost a lot of business in the past three years. So much so that my originations within the Hispanic community—which has been a consistent 80-90% of my business since 1997—dropped off significantly. In fact, these originations went to less than 10% of my business.

Still, I stood firm. I knew what was waiting down the road for any client with these types of loans and I simply would not, and could not, in good conscience originate these radioactive loans for my clients. Too, I never subscribed to the “…your house will go up 25% in value and you can [tag]refinance[/tag] next year…” theory, either. No, I never said that; not ever.

It’s painful to speak with these folks who are in very real danger of losing their homes. I started in the business helping people out of [tag]foreclosure[/tag] in the early 1990’s. I learned a lot about the mortgage industry, people’s dreams of homeownership, and how to get loans approved through that experience. But today there’s nothing I can do to help most people in this situation.

And many [tag]Realtors[/tag] are listing “[tag]short sale[/tag]” foreclosure homes. This means the bank holding the loan has to agree to take less than they’re owed on the mortgage before the house can be sold to another buyer. This, then, seems to be the latest hot trend in real estate sales.

It disgusts me.

Recently I’ve been speaking to a lot of “experienced” mortgage originators. Not only speaking to them, but interviewing them to work with our company.

The common denominator with this bunch of bananas is they all have little experience with “real” mortgage loans, care very little about their originations after the fact, and ALL want to someday (soon) own their own company. They all want to be a star and the captain of their own ship.

That’s all fine and dandy to want to be a successful entrepreneur and business-owner. But there’s something amiss when you have very little understanding of the “big picture” of our industry and don’t even know the basics of underwriting even a fundamental FNMA or FHA mortgage loan (you would not believe what comes out of their mouths when we ask questions aboutf basic guidelines!).

So these “burger-flippers” (that’s where they really belong, after all) continue to screw up our industry, home buyers and homeowners, and ultimately the economy. You want to be a STAR? Put in the time, gain the experience, develop some ethical standards, and learn the damned RULES!!!

Success is long in the coming and requires the investment of your character as well as your time and sweat.

Yeah, again, I have to say, “It disgusts me.”