first time buyer – Page 3

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

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.

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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!!!

FHA: Mortgage Solution for 2009

The FHA program was created to make it easy for families to acquire their own homes. I say this often these days, “The FHA is the ONLY game in town.”

When I started in the mortgage business in 1989 I was introduced to the FHA Insured mortgage loan. As a Mortgage Banker, the loans I made were typically FHA as this had long been the province of mortgage bankers in general.

During the Sub-Prime “Boom” I found myself often confronted with clients who, in my professional opinion, were prime candidates for FHA financing. The problem with the boom times and FHA was simple: there is a limit to FHA loan amounts, and during the boom, those limits were far below what was needed in the marketplace. FHA loan limits had not kept up with market price advances.

Now, the FHA limit here in the NY Metro region is $625,500 for a single family home. This is something we can work with.

The FHA loan program was created in 1934 during The Great Depression as part of the New Deal. The concept was simple: turn a nation of renters into a nation of homeowners. At the time, 70% of the United States population rented. The FHA program was created to make it easy for families to acquire their own homes. To this end, the FHA was spectacularly successful.

I like that there is so much rich American history associated with the FHA. I have always loved helping my clients obtain their dreams of homeownership with the FHA program. And I am thrilled that during these terrible economic times the FHA has once again come to the forefront to create possibilities of homeownership. I say this often these days, “The FHA is the ONLY game in town.”

And I like that.

I’ll write more about FHA, in the meantime, visit FHA’s website for more information about this wonderful loan program.

A New Hope…just like the Old Days

As a new sense of optimism sweeps into the housing market, the old-fashioned way of getting your mortgage comes once again into vogue.

There’s a feeling of hope we’re seeing from new clients; they want to buy homes. Monthly payment leads the day when it comes to determining if they can buy a home, not the rate, not the state of the economy, not the state of the housing market. And that’s just like the old days.

The hope is driven by the idea there will be a new President, a new administration, and a new attitude in Washington.

These people are coming out in the cold, looking at homes, asking questions, making offers and ultimately buying a home. Many of them are being qualified using another traditional mortgage “standard” the FHA Insured mortgage loan.

FHA has been around since The Great Depression and is still, in my humble opinion, the best way for a family to purchase a home. FHA financing allows for a more “human” understanding of a borrower’s qualifications; lower credit scores (not “deadbeat” credit, just the stuff life throws at you), lower cash required for downpayment (important in the NY Metro region where the cost of living and closing costs are so high), and the ability to use more of your income to qualify for the loan.

I’ve performed miracles using FHA loans throughout my career; and a lot of plain old boring loans that didn’t require a miracle, just a human touch.

FHA is a government insurance program; it’s not a bailout. The bank makes the loan, Uncle Sam insures it against foreclosure. So an old program comes into it’s own just in time. As a new sense of optimism sweeps into the housing market, the old-fashioned way of getting your mortgage—with some help from the government through the FHA—comes once again into vogue.

Yay for that.

Intangible Benefits of Homeownership

I don’t think my radar is any more tweaked than usual, but I did pick up quite a few quotes in today’s NYTimes.com which point to the American Dream of homeownership and the “intangible benefits” of same.

I have long said that you simply cannot put a number to quantify the intangible benefits of homeownership. When you live in your own home there is something that changes within you, there is a feeling which you simply can’t express with a number such as “4% increase in property value.”

My entire career as a mortgage professional has been spent helping people who think as I do, who “feel” it makes complete sense to own their own homes. These folks focus on the monthly payment—can they afford to own a home—then decide to move forward if that payment fits. They move forward regardless of the person sitting in the White House, regardless of interest rates or property values or what the newspapers say about it (“Buy NOW! Real estate always goes up!” or, “Worst time to buy real estate!”).

These folks know deep down inside there is something they will receive that you can’t put into numbers, and only rarely into words, that just makes it feel like you did the right thing when you put it all on the line to buy a home.

’nuff said from me, here are some quotes (with the links) from today’s NYTimes.com:

From “The Backyard In New York City-An Urban Oasis” (The article describes the joys and rather unusual circumstance of a backyard within the urban confines of New York City)—NYTimes.com August 31, 2008

“”I wish they’d pass a law,’ said Rebecca Cole, a designer of high-end backyard, terrace and rooftop gardens, ‘that if you have outdoor space you have to put something on it because the rest of us want it.’”

“’One of the reasons we love it, it’s garden to garden,’” said Ms. Franklin

My Fave Quote from the article:
“At night, after putting their sons to bed, they set up a folding table to sip cocktails and grill by tiki candles and music on the radio while counting their blessings, as Mr. Pinn says: ‘A house, two kids, two cars and a lawn.’”

I don’t detect a single word about “ROI” (Return On Investment), the state of the economy and the effect on property values, or the mortgage meltdown of 2007. Nope, this is what the folks are talking about:

“They consulted neighbors who were also fixing up their yards. ‘We get together over drinks and talk about seeds,’ Mr. Pinn said. ‘It’s kind of an odd conversation for the city.’”

Instead of watching the value of his property ticking up or down:

“…weekends often find him pushing a manual mower back and forth across the baby lawn but he doesn’t mind. ‘It’s a little therapeutic,’ he said. ‘I get out there and do my thing. It kind of softens up the hard life of New York City.’”

Another article on NYTimes.com reports on the unique penthouses being constructed atop an apartment building in Manhattan! The penthouses look like quaint little suburban tract homes. But the most interesting part of the story is the reaction of neighbors watching these mini-Manhattan-miracles make their way onto the (above) streetscape:

“Ms. Gavilanes found the penthouses alluring. ‘I would get a car,’ she said, ‘and put it out in the driveway. And then I’d add a white picket fence, and AstroTurf. Maybe have a golden retriever playing in the yard.’”

Even Jaded New Yorkers Are Intrigued By The Little Houses On The Roof. —NYTimes.com August 31, 2008

I’d like to say, “Only in New York” but the fact is, these articles/comments all reflect the deep-seated understanding that there is something special about owning a home. That understanding isn’t unique to a bunch of New Yorkers, either. I’ve believed it for so long, I’ve forgotten just how long. And I’ve defended this intangible benefit vehemently, even during the “fantasy boom” when all the rage was “values going up, up, up,” and then later during the meltdown when all the pessimists said, “Don’t buy NOW. Wait ’til the prices drop.”

You can’t put a price on this stuff. Period.

To The Rescue!

This afternoon we’re closing another loan we rescued from previous disaster with not one, but two other mortgage companies. This morning, we’re continuing to process the “rescued” loan from two nights ago.

Last night I spoke with yet another Realtor down and out because he had a purchase transaction dragging on and on into oblivion with no hope of ever closing. The Seller’s attorney advised him yesterday that today, Friday August 29th was the absolute last day to get an approval.

The Realtor said, “I think I’ll just let this one go and lose this deal.”

I pointed my finger at him and admonished him not to every say such a thing while I was around. Told him to get the file ready and show it to me today at 1pm when I return to his office. Turns out I also know the Seller’s attorney and I’m certain that, after reviewing the file and determining if I can get it approved and closed, that one phone call to that attorney will provide us with the time we need to finally get it done right.

Rescue, rescue, rescue. I encounter so many of these situations, whether it’s for folks trying to refinance their homes or families trying to purchase their first homes. Many times I have to say, “No, this is truly not possible. There is no way to make this loan work.” But my “No” comes in a few minutes, or, at the most 24 hours. The losers keep wasting everyone’s time as if some magic wand is going to fall out of the sky, hit them in the head and provide a miracle cure for the loan in question.

Days turn into weeks as everyone waits for the mortgage loser to come up with a solution, approve the loan and close it. And the losers are not just mortgage brokers, they are mortgage bankers and loan officers of regular banks, too.

This is the fallout of the mortgage meltdown of 2007. Too many losers still populate the mortgage industry, wasting the time of hopeful homebuyers, serious sellers, and realistic Realtors.

Message to mortgage losers: GET OUT OF MY BUSINESS!!!

For those of you industrious readers, working honestly every day in your field, let me wish you a peaceful Labor Day weekend!

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Last Night’s Save: Another Buyer Rescued

I did it again last night: I wrote a loan application to save a purchase where the Buyers had gone to two other mortgage companies. Those companies couldn’t find a way to approve their loan request.

The mortgage biz ain’t rocket science. Why is it so difficult for mortgage people to get their act together?

I met a couple last night who are purchasing their first home. They have good credit, they work hard and they are receiving a gift of $40,000 from her Mom to buy the home. Her aunt attended our meeting too because she is cosigning on the loan with them.

When this situation was first presented to me by the Realtor the day before, I kept thinking there must be something I’m missing or something really bad about this loan application that the other companies can’t get it done.

I knew the fundamentals for mortgage prequalification were in place. I had spoken briefly to one of the clients on the phone; the rest of the information had been provided by the Realtor. I saw a potential “save” of this loan application using an FHA Insured mortgage. FHA is known as “the story loan” and, if you know your guidelines, you can help a lot of folks achieve their dreams of homeownership.

I came to our meeting at the real estate office warily and with an exit strategy so I wouldn’t look too foolish. I had told the Realtor the night before that all looked good and that I could find a loan approval. Now my reputation was on the line, and I hadn’t even met the clients yet.

I continued my wary thoughts last night. I grilled the clients with lots of extra underwriting-type questions just to get to the root of the problem. After two hours of this and a call to my Ops Manager (the smartest man I’ve ever worked with in the mortgage biz), I had the clients sign the loan applications and we were on our way to obtaining a loan approval and a closing.

The issue at hand was the husband’s employment history. At first blush it seemed awfully spotty. But, when the time was taken to sit there with a blank sheet of paper and note the dates and the continuity of same, well, then the puzzle was solved. The rest of the qualifications were fairly straightforward.

I’m still scratching my head wondering why the other mortgage “professionals” couldn’t get this done. But, then, a lot of the people remaining in the biz grew up during the fantasy boom when all you had to do was take someone’s pulse to approve a mortgage loan. A loan officer didn’t have to actually “think.”

I must confess, too, that as I wrapped up the paperwork, photocopied the ID’s and asked the clients for referrals, I had a nagging suspicion that I was missing something. In the end, I realized my experience of having sat through thousands of interviews like this had served me well. The “detective work” was rigorous, leading me to solve the problem; the rest was automatic.

I guess experience really does count for something. That and a thorough knowledge of FHA underwriting guidelines got me through to a successful conclusion.

Note to Sellers: CHILL OUT!

Holy Cow! You would think the market was still red hot the way Sellers are (still) behaving! Either they have no patience with the new (difficult) paradigm of mortgage financing or they still think their homes are worth $42Million!!!

Really, of late I’m seeing this ridiculous attitude from Sellers threatening to kill deals and hold the Purchasers’ downpayments all because the process of obtaining financing is more difficult and thus slower than it has been in recent years.

What part of: THE BOOM WAS AN ANOMALY or HELLO? IT WAS A FANTASY don’t these people understand???

I hired a new loan officer this week. He related a story of a Seller who legally threatened to cancel the transaction (serving a “Time Is Of The Essence” letter on the Purchaser) after only 4 weeks. The Purchaser was in the process of obtaining a gift from a relative for the extra $5,000 they needed to close. This can be a rather delicate process of asking your family for help to buy a home, so it can take a couple days.

When the Purchaser got the news about the cancellation threat—the TOE—they were so infuriated, the let the gift go and ultimately were denied for the mortgage because of insufficient assets to close. Stupid Seller lost a qualified Purchaser through lack of patience. I’m sure there are four other Purchasers lurking in the wings ready to step in and pay full price and close in 36 hours, NOT!

I have a loan closing this Friday where the poor Purchaser went to two other mortgage companies before finding his way to us. We got the loan done in a fairly timely manner (six weeks), but not without much travail and anxiety. Meanwhile my telephone blew up everyday as I had Realtors, Attorneys, the Purchaser and the Seller calling me with one question: “When are we closing?”

Fortunately my background is in customer service, so I know how to field such calls. But ultimately, I can’t answer the question, literally, until the closing date is set.

Two and a half weeks ago, the Seller served a TOE (Time is of the Essence) letter on the Purchaser. We got the loan cleared in time and scheduled a closing for the day after the TOE date. Pressure relieved, everyone got into place to attend the closing.

But then we discovered the Seller wasn’t even truly ready to close! Apparently there were documents needed from the condominium association that had never even been requested by the Seller’s attorney! So, even if the Buyer had shown up on the TOE date with cash in hand, there would have been no closing! How did they have the nerve to threaten to cancel and they were not truly ready to close?

Where do these people find the gumption to be so impatient and arrogant? Do they even READ the newspapers?

Then there are the stories I’m still hearing from Buyers about prices.

Granted there are some crazy Buyers out there who think EVERY house is in foreclosure and can be bought up for fire-sale prices; those Buyers are not serious at all.

The serious Buyers, on the other hand, the ones who truly want to own a home, are making offers on homes, and discounting from the asking price by what I would say are reasonable percentages. For example, a list price was $485,000 for a 2 family home, and the Buyer offered $460,000. That’s not ridiculous, nor is it insulting. The Seller wouldn’t even counter-offer!

A Realtor yesterday showed me a listing he just took. We all know the home isn’t worth a penny more than $575,000 and will probably sell for around $550k-560. The Seller insisted at the listing meeting that the Realtor take the listing at $629,000. Absurd. Do you want to sell or not Mr. Homeowner?

These Sellers are still thinking there are fourteen Buyers for every home wandering the streets willing to pay top price and carrying wads of cash in their pockets so they can close in ten days. Wake up call for Mr. and Mrs. Seller: THOSE DAYS ARE OVER!

I want to send a package containing a GIANT CHILL PILL to each of these Sellers with a note that says, “Hey Seller, CHILL OUT!”

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More “Old Is NEW” Stories and Stuff

Things will slow down when it comes to processing a loan application and purchasing a home. That’s the old way and it’s new again; as it should be.

I’ve written before, “Everything That Was Old is NEW Again.” The “old” ways of buying a home and getting a mortgage are coming back; please fasten your seat belts and move your seats to the upright position: we’re landing.

I spoke to my friend John McEntee, an attorney, the other day. He told me how 5 clients he had tried to refer to me had decided to go to the banks directly for their mortgage loans. (I guess they figured they would cut out the “middleman” and save a few bucks; fact is, mortgage brokers get lower/discounted rates you can’t get at the banks!)

John complained of the terrible state of service at the banks. In one case an appraisal had been done on the house, the appraiser had forwarded the appraisal report to the bank, but the bank lost it. Twice.

Another client faxed over their docs—paystubs and bank statements—to the loan processor at the bank. The bank processing people couldn’t find the docs. John said, “You call and you can’t get an underwriter on the phone, and when you do, they’re all very good with their sweet customer service voice, but they can’t get anything done.” And he wasn’t complaining about any single bank in particular; all the banks had similar problems.

We’re seeing the same thing at our firm. Our emails and phone calls go unanswered quite often at the Lenders we work with. We spend a lot of time jostling between harassing the banks while simultaneously providing a good customer service “face” to our clients and referral sources (we always try to provide the service to such a level the client has no idea just how bad things are with the banks).

I had a meeting with a Regional VP for a BIG bank in our office last week. My complaints were similar to John’s. The problem with my complaints is that WE are processing the loan application. Because of our experience, we kinda sorta REALLY know what we’re doing. So, when we send a file to the bank, it’s complete. Underwrite it and close it! Set it and forget it!

But, we’re having to deal with overwhelmed and inexperienced Underwriters, especially with regards to FHA loans, and we’re being ignored same as the average consumer.

Now, while a lot of the OLD ways are returning to our industry, this abysmal level of service is not one of those things. In the old days, back in the nineties, loans took time to approve and close, but you always had someone you could speak to. Customer service was never truly “exceptional” but it wasn’t disgustingly abysmal, either.

What has made a dramatic return to the industry is the notion that a loan “closes when it closes.”

That is, when the loan application is FULLY processed, FULLY underwritten, with all documentation in order, then the loan can close. And getting to that fully-processed stage requires time, patience, and, often, more documentation.

Here in New York, home buyers use an attorney to represent them for a home purchase. In New York a sale of real property cannot take place unless a written contract is executed between the two parties (Seller and Buyer). Thus, we use attorneys.

The contract is the foundation upon which is built the entire sale/purchase transaction. The terms of the contract lay out everything from the appliances and/or rose bushes to be included in the sale, to the purchase price and time permitted to obtain a mortgage loan.

In recent years during the fantasy boom, contracts here in New York began to call for commitments in two weeks and closings in 30 days. Say good bye to that nonsense.

Now we’re back to the OLD way. It takes time to process and close a loan. I’ve said to many Realtors and attorneys lately that we’ll be seeing a return to 60 day commitment periods and 90 day closing periods written into purchase contracts.

I’m sure these recent ugly customer services issues will work themselves out at the banks. As we settle further into that old mindset of “full documentation,” “common sense underwriting,” and a properly processed loan application, all parties involved will work together to smooth the wrinkles of this new OLD process.

And things will slow down when it comes to processing a loan application and purchasing a home. That’s the old way and it’s new again; as it should be.