Trevor Curran – Page 8 – Thoughts on mortgages real estate and first time buyers

Wake up call. “Vulture” Hedge Funds soon to Destroy The FHA.

Washington was asleep at the switch the first time ’round, now the train of economic recovery is about to go off the rails again unless someone WAKES UP!!!

Hedge funds—known on the street as “vulture” funds—buying distressed mortgage loans from banks at discount prices then refinancing these mortgages into U.S. Government Insured FHA mortgage loans. These funds are probably run by the very same people who created this whole danged mess to start with. Now they’re going to ruin the FHA—an important instrument in the recovery of the housing market and the economy—the way they ruined your pension, 401k, credit, career and you-name-it what else.

Wake up call. Please someone in Washington has to get smarter about developments like these and step in before it’s too late. Washington was asleep at the switch the first time ’round, now the train of economic recovery is about to go off the rails again unless someone WAKES UP!!!

Here’s my posted comment to the NYTimes.com article:

“I’m giving money away,” said Mr. Florez, who is a 35-year-old Las Vegas native. “It’s really a feel-good business.”

This sounds suspiciously similar to the language used during the Sub-Prime boom. Are they kidding? These are many of the same people who created this mess in the first place. Now they’re going to trash the FHA the way they trashed everything else. I’m sorry, you can’t tell me that these people have anything even remotely resembling an “altruistic” motive when their profits are directly tied to the origination and closing of the new FHA mortgage.

How is it that FHA is monitoring the situation? This is exactly the characteristic of previous massive frauds perpetrated on FHA in the past (think 203k Investor loans in Florida, 1993-1994): when the “originator’s” profit motive is as strong as it is here, that’s the perfect invitation to commit mortgage fraud. The FHA cannot afford a wait and see attitude in this case; too much of the nation’s economic recovery depends on the FHA’s ability to continue to insure mortgage loans. If the FHA is damaged in any big way, kiss any hope of recovery goodbye.

I welcome Comments for all my blog entries. I will be happy to review and approve all legitimate comments provided by readers of tcurranmortgage.com. I do not permit unfettered access to comments for obvious reasons: mortgage spammers and their ilk. If you wish to Comment on any entry, please do so and I will quickly review and approve. Thanks for reading tcurranmortgage.com. Hope that helps!

First-Time Buyer Tax Credit Fraud: Get $8,000, GO TO JAIL

The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme

The IRS is closely watching the First-Time Buyer Tax Credit program for fraud. I’m glad they are. I have personally heard of two situations where people have collected $8,000 under the program and they have not yet purchased homes. In one of those instances, I was told that 3 people in one family received the credits—totalling $24,000—and they had not yet purchased a home, were planning to, and were told by their tax person that, “If you don’t buy the house by the deadline you just have to repay it.”

I can’t imagine why anyone would think a stimulus program allows receipt of the stimulus money without actually undertaking the stimulus activity: BUYING THE HOUSE!

Here’s an excerpt from the IRS press release and a link to the IRS site for more information:

“The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.

On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.

To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.

‘We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,’ said Eileen Mayer, Chief, IRS Criminal Investigation. ‘The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.'”

IRS Warns Taxpayers To Beware Of First-Time Buyer Credit Fraud

FHA in the New York Times

The New York Times presented a brief piece about FHA insured loans.

I attended the grand opening of the Hamilton Lofts development in Harlem last week. The developer and sponsor of this brand new condominium project, Romy Goldman, has done an exceptional job: the finishes, the thoughtfulness and attention to every detail are very impressive. More impressive still is Romy’s understanding of the nuances of financing for her potential buyers, especially with regards to FHA Insured Financing. She had the condominium approved by HUD to allow her potential Buyers to purchase using the FHA program. On the entire island of Manhattan there were only 7 other approved condominiums for FHA financing. Romy was definitely ahead of the curve: her project is the eighth approved condo in Manhattan.

The New York Times presented a brief piece about FHA this past Sunday; they interviewed Romy Goldman and included her thoughts on FHA in the article.

My favorite quote from the article, “According to Meg Burns, the F.H.A.’s director of single-family program development, these loans actually perform very well. “That’s kind of a shock to most people because we serve borrowers with riskier profiles,” she said. “But we have pretty stringent underwriting standards. You have to have sufficient verifiable income and employment to make your mortgage payments.” YAY FHA!!!

Here’s the article: FHA Loans Help Sales

FHA Insurance is NOT PMI!!!

Realtors and clients will call FHA loans, or the attendant insurance premiums, “PMI.” “Trevor, what is the monthly PMI on that FHA loan?” The two programs are different.

A brief primer on the difference between FHA Mortgage Insurance and its pale imitator: PMI or Private Mortgage Insurance.

The FHA mortgage insurance program has been around since 1934. This program was created under President Franklin Roosevelt’s New Deal to help turn a nation of renters into a nation of homeowners. Back then, the rental rate was 70%, and FHA was instrumental in turning that around.

What the FHA or Federal Housing Administration does is it provides insurance for Lenders against foreclosure. When an FHA loan goes bad, the FHA steps in, reimburses the Lender and takes the house in foreclosure. Anytime you see “HUD Homes For Sale” those are FHA loans that went bad.

FHA has been absent for most of the “boom” years due to the limitations on loan amounts for any given geographic area. These loan limitations are set through an act of Congress and are—by law—a percentage of the median price and the FNMA limit in a given area. FHA was absent for most of the past ten years due to the low limit on lending. For example, in the NY Metro region, the limit for a single family home was $362,000 (approx.). The fact is, during those crazy times, you couldn’t find a single family home priced in the New York market unless you went very far afield, indeed, usually to a distant suburb.

As part of the 2008 stimulus package, Congress increased the permanent FHA limit to $625,000 (approx) for a single family home. As part of President Obama’s 2009 stimulus package, that limit has been further increased to $729,250 through December 31st, 2009. These numbers are not only more reasonable for our market place, but open up the FHA mortgage opportunity to so many more homebuyers.

FHA is, in my opinion, the “miracle loan.” The Underwriting criteria, as set forth by FHA, is much more flexible than Conventional or Fannie Mae guidelines. FHA requires a purchaser or homeowner (in a refinance) to pay mortgage insurance regardless of the size of the downpayment. In my humble opinion, this is a small price to pay for the excellent flexibility afforded by FHA guidelines, and the opportunity for homeownership opened up to so many more families.

PMI, or Private Mortgage Insurance, is the corporate, non-public version of mortgage insurance. PMI companies came into existence to fill the gap left by the FHA loan limits. For Conventional, or Fannie Mae/Freddie Mac loans, when a purchaser makes a downpayment of less than 20%, the Lender requires the purchaser to buy Private Mortgage Insurance to protect the Lender’s (riskier) investment.

Often, Realtors and clients will call FHA loans, or the attendant insurance premiums, “PMI.” “Trevor, what is the monthly PMI on that FHA loan?” The two programs are different. The FHA insurance is actually called, “MIP” for Mortgage Insurance Premium. There are two MIP’s when obtaining and FHA Insured mortgage loan.

The first is the Upfront Mortgage Insurance Premium, or UFMIP. This is typically 1.75% of the loan amount and is most often financed on top of the mortgage loan you need to purchase or refinance your home.

The second premium is the Monthly Mortgage Insurance Premium or MMIP. This premium is included with your monthly mortgage payment to your Lender. The premium is calculated based on a percentage value of the loan amount determined by the amount of your downpayment (and in recent history, your credit score, although that requirement has been cancelled). You will pay this monthly premium until your equity position in the home reaches 78% of the value at time of closing. It may be possible to eliminate FHA MMIP after 5 years of good payment history.

The UFMIP is included in your principal and interest payment for the life of the loan. If you sell the home or refinance into a non-FHA mortgage, you may be entitled to a refund of a portion of the UFMIP.

More information about FHA loans can be found at the FHA website.

Hope that helps!

Boston Triple-Deckers: A Suggestion

Buy your first home—a New England triple-decker—and use the FHA 203k Rehabilitation Loan to do so. Your purchase money and repair money can be had in a single, convenient, 30year Fixed Rate Loan.

Today’s NYTimes.com features an article about that particularly New England home, the triple-decker. These are lovely homes from the 1890’s built to house the influx of immigrants from Europe. These homes were a wonderful alternative to the tenement housing of the time. In the ensuing years, triple-deckers have come to describe the character of a neighborhood, whether in Boston or New Bedford. Dennis Lehane, author of “Mystic” featured these homes much like characters in his book (and in the subsequent film directed by Clint Eastwood).

My wife lived in one for a time when she lived in the Boston area and has fond memories of her time living in a triple-decker.

Today’s NYTimes reports of the foreclosure blight affecting this beloved New England icon.

I have a suggestion for any of you first time buyer folks living in a town with triple-deckers: go out and buy your first home—a triple-decker—and use the FHA 203k Rehabilitation Loan to do so. NYTimes reports there are many foreclosures selling far below market. This is the ideal opportunity to purchase a first home at a considerable discount and obtain the money necessary to renovate that home to your specifications. As the article points out, triple-deckers have long been the domain of first time buyers looking for an affordable option for homeownership: the rental of the other two apartments helped homeowners offset their monthly mortgage payments.

The FHA 203k Loan is a program wherein the Lender provides you with the money to purchase the home (acquisition) combined with the money to improve the home (construction) in one closing and with a single 30year fixed mortgage payment. I am an expert in this program having originated many such loans in Harlem and Bedford-Stuyvesant in the early-mid 1990’s under President Clinton’s initiative to rehabilitate inner cities using the FHA 203k program. We encountered a similar experience then in those communities that New Englanders now face with these triple-deckers: historic brownstones, multiple families of 3 and 4 family properties, were in need of serious rehabilitation and presented first time buyers with an excellent opportunity.

With this program, you make your 3.5% downpayment off the purchase price of the home. You present to the Lender your plans for renovating the property. These plans are prepared in consultation with your contractor and an independent FHA Certified Consultant. The Lender uses your proposed improvements both to appraise the house at “future value” after improvements and to make the final loan decision. Minimum repairs are $5,000 with most Lenders. A feature of the program allows you to include up to 6 months’ worth of mortgage payments in the loan so you don’t have to worry about paying rent on your current apartment and a mortgage on your new home while your contractor completes the renovations.

The Seller of the home receives her money (your 3.5% downpayment and the Lender’s portion of the acquisition loan) at the closing table and you receive title. Your repair money is placed in an escrow account upon closing of title: your contractor receives the go-ahead to begin work with the renovation money available in up to 5 “draws” or payouts depending on the amount of construction/renovation.

FHA Loans are only available for Owner-Occupants; Investors are not permitted. You don’t have to be a first time buyer to qualify, either.

FHA Loans require you qualify based on your income, assets, and credit, although the criteria are much more flexible with most FHA Lenders than with Conventional loan programs. There are no income limitations; the program is available to all American Citizens, Permanent Resident Aliens, and even Aliens working with Authorization from the U.S. Government. FHA is an insurance program so you’ll be paying two insurance premiums (one Upfront at closing, financed in the loan for thirty years, the other built into your monthly payment), and you must pay those premiums regardless of the size of your downpayment (even if it’s more than 20% down).

You can find an FHA Lender in your area at the FHA Website along with more information on the FHA program. If you live in a New England town or city where there are triple-decker homes in need of your love and attention, and you want to get a great deal on your first home, I strongly recommend you consider this financing option to help you make that dream come true. You’ll be doing something good for you, and for the historic quality of New England, too.

Hope that helps!

I’m Going To Be Sick

The New York Times reports today on targeted racial discrimination by Wells Fargo.

The truth comes out, and I am so disgusted by it that I literally want to vomit. I knew there were shenanigans going on back in the day—I watched my clients evaporate before my eyes when I told them they could get a 30yr Fixed Rate loan if they only purchased a cheaper home. Those clients went elsewhere for their mortgage financing, preferring to “drink the koolaid” with mortgage “professionals” peddling loans that were affordable for about the first fifteen minutes after closing.

As much as the “boom” was great for lots of people in the mortgage business, I watched my originations decrease. I made less money. I started writing tcurranmortgage.com as a way to maybe, possibly, sorta-kinda, hold on to clients by demonstrating more about who I was as an originator and how I really had their best interests in mind. I guess I had some vague hope that the clients would read my blog, come to realize they were being bamboozled by the “other mortgage person” and stick with me. They didn’t. (It’s okay, I sleep very well at night)

Little did I realize then—I guess I am that naive—the kinds of officially sanctioned shenanigans going on at companies like Wells Fargo Home Mortgage. Read more about it in today’s NYTimes.com article linked HERE.

You might want to be sick while you read.

Excuse me…I think I’m going to be ill…

Use a Blanket that’s Big Enough

People don’t want to get in over their heads with a mortgage payment they can’t afford.

Recent conversations with First Time Buyers have revealed a refreshing attitude amongst today’s home buyers: affordability. People don’t want to get in over their heads with a mortgage payment they can’t afford. I really like that. I have advocated exactly that concept with my clients for my entire career: buy a home you can afford.

During The Boom my words of advice in this regard fell on deaf ears. I would do then as I do now: calculate the mortgage payment and ask the client if this number fits the family budget. In other words, “Can you afford this?” Too often the answer would be “Yes” when I truly knew it should be a “No.” I tried to tell these folks to buy a cheaper house, buy a home they could afford so as not to lead to trouble down the line. I walked away from many of those situations because I just couldn’t reconcile the math and I wouldn’t be a party to a future financial disaster. I knew full well, as I left the room, that another mortgage “professional” would sit down with those clients and tell them what they wanted to hear, give them a truly bad mortgage, collect his commission check, and march off into the sunset leaving this family with a ticking time bomb.

I sat last night with a young couple shopping for a 2 family home. They make an excellent income and have excellent credit. They’re working with not a whole lot of cash (for New York) and so we’ve qualified them for an FHA Insured mortgage loan. They had an expression, “Use a blanket that’s big enough.” In other words, buy a home you can afford. It’s truly all about the monthly payment. If you can’t reconcile that number with your family’s budget, you’re either not ready to buy, or you should look for a less expensive home.

Even though this couple could afford a pretty hefty mortgage payment based on their income, they insist on shopping for a house that allows for a mortgage payment that leaves “breathing room” in their budget. This is good, sober thinking.

When you buy a home, you’re reaching for the stars to make the dream of homeownership come true. But reaching for the stars doesn’t mean you have to launch yourself into orbit. You can make that dream come true with an affordable mortgage payment if you are honest with yourself and realize that you really need to a “blanket that’s big enough.”

Makes sense to me, a blanket that’s big enough keeps you warm at night.

Mortgage Modification Murder: Homeowner Beware!!!

The lowlife mortgage modification scam artist has committed financial “murder.” The crook has taken not only this homeowner’s hard-earned cash, but caused the loss of a home and a substantial financial asset for the family.

I received a call yesterday at our office from a homeowner in Virginia. He was looking for some kind of FHA mortgage modification company and found us instead in his Google Search. Our company is not licensed in Virginia; neither do we do mortgage modifications. We just do plain old-fashioned mortgage originations, helping people buy homes and doing some refinance work, too.

I spent a few minutes with this gentleman on the phone cautioning him against mortgage modification fraudsters. I told him about the many scams being perpetrated by modification companies seeking to take money from unwitting homeowners while delivering zero satisfaction or assistance. I pointed him instead to the HUD.gov website to seek out a mortgage counsellor who might better assist him with his dilemma. I told him, too, that an attorney was probably his best option.

One of our Loan Officers told us of a man he met who is losing his home to foreclosure. A little over a year ago this man had a perfect mortgage payment history. For whatever reason, he decided he needed to modify his mortgage. He hired one of these mortgage modification murderers and paid thousands of dollars in fees to the fraudster. The crooked scam-artist told the man to stop paying his mortgage; upon the advice of his paid-professional-mortgage-modification-expert, the man did indeed cease paying his mortgage.

There was no modification; no call was ever made the the Lender to negotiate on the homeowner’s behalf. Money was stolen from this man and his family; now they are losing their home to foreclosure. The lowlife scam artist has committed, IMHO, financial “murder.” The crook has taken not only this man’s hard-earned cash, but caused the loss of a home and a substantial financial asset. Disgusting.

Homeowners beware. Too many of you who I speak to or hear of are doing exactly what too many of you did during the boom years: you’re following a dangerous path, ignoring the advice of seasoned professionals, and you’re allowing yourselves to be duped out of your homes the same way many of you allowed yourselves to be duped into bad mortgage loans.

If you feel you need help modifying your mortgage, contact your Lender directly. If at first you don’t succeed, try, try, TRY again. If you don’t have the time for that because you are busy working hard to pay your mortgage and your bills, then hire an attorney. Pay your attorney a retainer fee and let a licensed legal professional work on your behalf. If you don’t have an attorney, get a referral from family or friends, or consult your local bar association. You can find local help here, on the American Bar Association website.

President Obama and Congress have provided Homeowners with an opportunity to refinance or modify as part of the 2009 Stimulus Package. Find United States Government help here: Making Home Affordable.

A list of HUD Approved mortgage counsellors can be found here: Foreclosure Avoidance Counselling

No Credit Does NOT Mean “Bad” Credit

No credit means just that: here’s a person who has no established credit history.

I heard it again tonight from a client who’s looking to buy his first home for his family: he thought because his wife had no credit that meant she had “bad” credit.

This is NOT TRUE. False. Fallacy. Myth. Mis-Information. Incorrect assumption. Bad Medicine (oh, wait, this blog is NOT “Dances With Wolves!” Scratch that last part)

If a person has no credit that just means the person has no credit score and no established credit history that a financial institution can use to determine credit-worthiness for approving a car loan, student loan, personal loan, credit card, line of credit, checking account, car insurance, or a mortgage loan. No credit means just that: here’s a person who has no established credit history.

Bad credit means just that: BAAAAADDDDD CREDIT!!! When a finance professional reviews a credit report with bad credit we encounter such things as charge-offs, collection accounts and judgments. Maybe the person owes money to a former landlord or a utility in the form of a judgment. Maybe the person had a checking overdraft account that went unpaid and ultimately wound up with a collection agency. Maybe the person borrowed a book from the library and never returned it thus racking up late charges eventually resulting in a collection account (yes, I’ve seen it), or, MAYBE the person didn’t show up for jury duty and has a judgment for a fee incurred as a penalty for not reporting to jury duty from the County Clerk’s office (I can’t believe I capitalized that for a person that sues people for not showing up for jury duty).

All of that stuff is what you can easily see is BAD CREDIT. It’s NOT “no credit.” There’s some form of credit in there and it’s bad. And it’s on the person’s credit report.

Those other folks—like my client’s wife—who don’t have any credit appearing (whether Good, Bad, or Ugly), those folks have NO CREDIT.

There’s a difference. And with FHA mortgages, a person with NO CREDIT has a chance of building an alternative credit profile and getting approved for an FHA Insured mortgage loan.

The person with BAD CREDIT (and no other credit) has less of a chance of getting approved for such a mortgage loan. Let’s say “zero” chance, and leave it at that.

But get that idea out of your head right now about No Credit meaning “Bad” credit.

Hope that helps!

They’re BACK. Mortgage Losers/Thieves/Lowlifes Return To the Industry

All those mortgage losers who put this industry and the economy in the toilet are returning to prey on consumers once again.

We’re seeing it. All those mortgage losers who put this industry and the economy in the toilet are returning to prey on consumers once again. They’re returning because opportunities abound to separate hard-working homeowners and homebuyers from their money.

We’re hearing of people getting back into the mortgage business after the long cold “winter” of 2007-2009 when business was hard to come by and only the brave and the bold stuck it out to continue hard-earned careers. These mortgage-professional-wannabees are coming back because low interest rates and a newfound sense of optimism are bringing buyers back and opening up homeowners’ minds to the idea of refinancing.

The Associated Press reported of a warning from Senator Charles Schumer about these mortgage losers. The Senator it seems is also aware of the return of these crooks looking to ripoff consumers. Read more HERE

More than ever when shopping for a mortgage the words “Buyer Beware” ring true. Look for those mortgage professionals with substantial experience and preferably those who you find through a referral from a friend or family member, or your tax professional or attorney. Searching the internet for a mortgage professional is, IMHO, a recipe for disaster. You’re likely to come across many alleged experts who only want to tell you what you want to hear just to get your business. Once they get you to the closing table, everything changes and you can watch your money evaporate from your wallet.

I’ve recently cautioned against working with non-FHA approved mortgage people. These are yet another class of mortgage lowlife who pretend they are allowed to originate FHA loans. Worse, they pretend to know “all about” FHA loans. I just spoke on the phone while writing this blog entry with a young man who told me how he encountered many such people who claimed they could approve him for an FHA loan on a Co-Op apartment purchase. He told me they all seemed very happy to want to separate him from his money for application fees and the like. He contacted me to ask about getting an FHA loan for a Co-Op. He seemed to know already that such a loan was not available, but thought it’s because FHA doesn’t insure Co-Op loans. In fact, FHA DOES indeed insure Co-Op loans (FHA is an insurance program; FHA doesn’t make the loan, they insure the Lender’s loan in the event of foreclosure). I explained this fact to him. The problem with FHA and Co-Op loans is there are no Lenders who provide such financing.

No conversation about mortgage lowlifes would be complete without a mention of those poor homeowners trying to do a loan modification. As I mentioned recently, there are many scams out there with alleged “loan modification experts” very willing to take thousands of dollars in fees from distressed homeowners while providing absolutely nothing in return: no modification, no saving of the house, nothing, nada, zilch. Many of these crooks are, in my opinion, former mortgage losers who have changed their crime tactics from putting unsuspecting people into terrible sub-prime loans. Now they seek to steal your money—and your home—by pretending to counsel you on modifying your loan. BUYER BEWARE.

If you truly feel you wish to modify your loan contact an attorney. Or do it yourself.

On a sidenote, I attended a job fair yesterday seeking to recruit salespeople for the company where I work. I met the recruiters from the FBI and asked them to please, “…hire more people today and arrest more mortgage brokers.” They laughed and asked what I do. “I’m a mortgage broker!” I replied. “Please, I’m serious,” I continued, “these people have destroyed my industry, please hire some good people today and go out and arrest more mortgage brokers.”

Postscript: To the young man who called for advice on FHA and the Co-Op loan: Thank you for your kind compliment about tcurranmortgage.com and thank you for stopping by to read my rantings!!!