Beware Using Non-FHA Approved Mortgage Brokers

Work only with an FHA approved mortgage broker with a Mini-Eagle or an FHA approved Lender with a Full Eagle.

Since the FHA Insurance program is pretty much the only way to get a mortgage these days, I’d like to caution you against working with any mortgage professional that is not approved by HUD to originate FHA Insured Loans.

The process of obtaining such an approval is difficult and expensive. When a mortgage broker is approved, the office receives what is known as a “Mini-Eagle.” The Mini-Eagle is the permission from HUD to originate FHA loans. A Direct Lender, approved by HUD, has a Full-Eagle.

As we become more and more aware of the excessive lengths some unscrupulous mortgage people will go to in order to make money without paying any attention to legalities, ethics, or professional conduct, we need also understand these same lowlifes will try to jump on any bandwagon in order to make a buck.

Fact is the regulation is in place to prevent anyone from jumping on the FHA bandwagon. That regulation is the Mini-Eagle and Full-Eagle.

FHA does allow in certain instances a Non-FHA Approved mortgage broker to recommend a client to a Full-Eagle Lender and to act as a consultant for the client. This permission is limited to consulting and the fee is limited as to how much the consultant can earn. The consultant is paid by you, the client. Consultant means exactly that: advice, counseling and consulting. The Non-FHA approved mortgage professional cannot originate the loan, cannot write the loan application or become involved in any aspect of the process for loan approval. For that you will work directly with the Lender.

Think of the Non-FHA approved mortgage person as a facilitator who connects you with a Lender, is available to answer your questions and offer advice on the program, but cannot do anything more than that.

Beware of the mortgage people walking around saying, “I can do FHA loans.” More often than not these lowlifes are not FHA approved and they plan on convincing you to doing a loan application with them for an FHA loan. “I’ll find an FHA Lender for you. Sign here.” This is ILLEGAL.

Further, this consultant doesn’t have any real standing in terms of accessing information about FHA products or interacting with the Lender to get your loan processed timely for an approval.

Why should you pay one of these people when you can easily find and work with an approved and experienced FHA mortgage professional?

These folks are just trying to take your money by joining in the current mortgage market opportunity without making the proper professional investment (in time and money) to obtain the proper licensing.

Work only with an FHA approved mortgage broker with a Mini-Eagle or an FHA approved Lender with a Full Eagle. You can find listings of both types of Mortgage Company in your area by visiting www.fha.gov and entering your zip code.

Why You Need To Look At Your 401k Statement

One of the prime methods to getting a mortgage loan approval during the current mortgage-underwriting climate is proving you have reserves: those dwindling 401k accounts might be useful after all.

Mortgage Loans are difficult to obtain these days.  Underwriters at Banks are about the craziest I have ever seen in 20 years as a mortgage professional.  Arguments over the interpretation of an underwriting guideline—the kind I used to win back in the 90’s—are frequently Cold-War-style standoffs: there is no clear winner, you see it your way, and I see it mine.

Folks think Underwriting a mortgage loan application is some kind of objective exercise.  It’s not.  Underwriters are human and they are subject to the same day in and day out challenges all the rest of us humans face, with one difference.  If the Underwriter is having a bad day, or, in our current market, a BAD YEAR, that Underwriter is making obtaining a loan approval an impossible endeavor.

As a mortgage originator, I have to “pre-underwrite” each and every client’s situation.  I have learned to “roll with the punches” as it were to find strengths in any given loan application and help my client get the loan approval for the home they wish to buy or refinance.  I’m watching how Underwriters are reacting to market conditions or the directives they are receiving from their bank employers (too often confused and muddled) to gauge the best path to loan approval for my clients.

Thus I look for every little bit of ammunition I can find in order to fight the good fight when I’m prequalifying a client.

One nice bit of artillery is the ubiquitous 401k or retirement account.  Underwriters like “reserves” on a loan application.  Reserves is the money you have left over after closing on a mortgage loan; it’s the money you didn’t spend on downpayment and closing costs.  In the event you experience some life catastrophe in the future, like a job loss, you can use the reserves to pay your mortgage every month while recovering from said catastrophe (finding another job).

Reserves are required for two months’ worth of mortgage payments for Conventional (Non-Government) financing. The FHA does not require reserves for 1 or 2 family home financing; 3 and 4 family homes require 3 months’ reserves. Those are the guidelines, but let’s talk about getting your loan approved during the toughest mortgage underwriting era I’ve ever seen. Reserves count a lot; the more you have, the higher the probability of a loan approval, especially if your application is weak in any of the other areas of loan underwriting (IAC, or Income, Assets, Credit).

Often, my clients come to me for prequalification with their standard documentation in hand: paystubs, Tax returns, bank statements.  I always request but never seem to encounter proof of any retirement accounts, like 401k statements.  And when I ask my clients, “Okay, you don’t have the statement with you, but how much is in your account right now?”  I am often met with blank stares.

Folks just don’t know. Considering how much money they may have lost in those retirement accounts in recent months, they don’t want to know.

I understand a lot of us don’t want to face the bad news of dwindling retirement funds due to markets falling and investments failing.  But you need to open up that 401k statement if you’re planning on applying for a mortgage.  Those monies, eviscerated by market forces though they may be, can be very useful on a loan application.

In fact, I’d be so bold as to say that right now, one of the prime methods to getting a mortgage loan approval is proving you have reserves.  So get out those statements this chilly Sunday afternoon and face the music. Put your 401k statment together with your other documents you’ll need for the loan application.  Doing so might be the difference between getting a mortgage approval, or not.

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.