Underwriter

I recently had an application from a Middle Eastern born borrower. The loan applicant was difficult to work with in that they were very secretive as to where their money for the down payment was deriving from. I realize that this mentality is often attributable to culture, but in this day and age of terrorism, why are we as Americans and lenders having to worry about not offending certain cultures.

The secretive way this person handled his down payment was worrisome. Not only do I have to worry about being out of compliance but I also have to worry about saying the wrong thing for fear of a lawsuit.

Mortgage undewriting

HUD’s Mortgagee Review Board has suspended three mortgage lenders accused of serious violations under the agency’s regulations.

Golden First Mortgage of Great Neck, NY, Great Country Mortgage Bankers, Inc., of Coral Gables, FL, and Beneficial Mortgage Corporation of San Juan, PR have all been barred from originating new FHA-insured mortgages.

The Board found that Golden First Mortgage failed to notify HUD/FHA about an investigation by the Office of Thrift Supervision into the business activities of the company’s president, including his involvement in a civil money penalty.

Great Country Mortgage Bankers, Inc. was suspended for violating multiple HUD/FHA requirements, including failure to implement a quality control plan, failure to disclose business affiliations, and failure to properly verify “key credit information” on 55 FHA mortgage loans reviewed by HUD.

Beneficial Mortgage Corporation was suspended for failing to notify HUD/FHA about an investigation and sanctions imposed by the Puerto Rico Financial Institutions Commissioner’s Office related to its loan servicing practices.

HUD took these actions after it determined that the serious nature of each violation posed a risk to the agency and the public, as well the FHA’s depleted insurance fund.

FHA lending increased an unhealthy 169 percent in the first half of fiscal year 2009, prompting HUD officials to improve oversight and go after bad players.

The suspension of these three companies is probably just the beginning of what will be an ongoing trend in cleaning up the FHA lending space, which many liken to the new subprime. Story courtesy of Truth in Mortgage.

April was the strongest month in more than a year for home sales under $1 million in the Las Vegas-Henderson area, and the region's REO market also appears to be improving even though prices in that range have continued to fall.

"The month registered gains in almost every category except price," said Rob Jenson, who works for Jenson Group, a company that specializes in Vegas's high-end market.

The monthly supply of unsold houses fell, the overall number of listings declined and, perhaps most importantly, the number of real estate owned listings also slipped. In houses priced under $1 million, moreover, sales were up 7.8%. But the average price in the below-$1 million sector fell by 3.4% to $161,729.

It was the ninth monthly price decline in a row, but the 3,063 sales were the most recorded in a year in the beleaguered market. Mr. Jenson also said that above $1 million, listings were up, sales were down " only 12 units priced above the million dollar benchmark sold in April, an 8% decline " but the average price rose 2% to $1.53 million.

Bank of America stated it funded $85 billion in first mortgages during the first quarter of 2009. The bank and mortgage lender helped about 382,000 borrowers either purchase a house or refinance, with only about 25 percent allotted towards home purchases. The company said it originated another $4 billion in home equity products.

During the quarter, 119,000 home loans were worked out via the company’s loan modification program.

Provision for credit losses increased to $13.4 billion as non performing loans increased to $25.7 billion, compared with $18.2 billion last quarter and $7.8 billion a year ago. Bank of America posted net income to $4.2 billion, or 44 cents per share, compared to net income of $1.2 billion, or 23 cents per share, a year earlier.

The below tell-all article exposes how the mortgage banking industry twisted the arms of appraisers and how the government ignorantly refused to take appropriate steps to curb fraud and abuse. Again and again I wonder when the regulators will start doing their jobs and again and again I am disappointed.

How can we relie on regulators that are deaf, dumb and blind to help consumers and protect the system.

Unheard Warning Bells

""Before real estate prices began to plummet in 2006, some sounded the alarm on fraudulent appraisals and lender pressure, but few listened to the warnings, least of all Congress, industry regulators, and the Justice Department.

David Callahan, a founder of the public policy think tank Demos, was one of the first people to study inflated appraisals and lender pressure. In 2005, Callahan wrote a paper describing the financial incentives for lenders and appraisers to pursue inflated appraisals. The goal of lenders, brokers, real estate agents and developers was to ensure that a home loan closed without a problem, Callahan said. All those people exert pressure on appraisers to inflate values.

In a 2007 study by October Research, a real estate news provider, 90 percent of more than 1,200 appraisers polled reported feeling pressure to change property values, usually from lenders, mortgage brokers or real estate agents.

“Congress didn’t really care about it,” Callahan said, noting the lack of reaction his report generated in Washington. “There was remarkably little legislative activity looking at the corruption in the real estate market.”""

Mortgage Interest Rate Buydowns

Most mortgage borrowers shop for the lowest mortgage interest rate. Finding the lowest rate is one way to gain a low mortgage interest rate, another is to buy down the rate.

Mortgage borrowers will take a higher mortgage interest rate with lower closing costs (higher rate usually means lower fees). Other mortgage shoppers will buy the lowest possible interest rate by paying one-time up front fees to save on interest over the long-run. This is a prudent idea if the borrower intends to keep the property for many years.

If you’re working with a mortgage bank or mortgage broker you can buy down your rate by buying "points". This is called "buying down" the mortgage interest rate and is very common in the mortgage industry.

Since coming out of a sellers market, some real estate agents aren't aware of the practice of having the seller buy down mortgage rates for the home buyer. Your agent may be too timid to ask for a buydown but you should still ask the agent and the seller to offer a buydown contribution as part of the purchase offer.

If you are refinancing, decide whether you should buydown your rate by speaking to your loan officer and calculating the savings over the loans term. This is a fairly easy thing to do. Most of the time you can save a .25% on rate by paying 1% in "points". A point is 1 percent of the loan amount.

For example, if your interest rate is level at 6.25%, but you would like a mortgage interest rate of 6%, you’ll need to buydown the rate.

your broker rates sheet could look like this:

Rate / Fee

6.25% - 0.00 (Level/par: not paying $ and not costing $ )

6.00% - 1.00

Each rate has a price/cost that is displayed as a percentage of the loan amount. A mortgage loan at the Level or Par rate would be 6.25% in the above example because it has an associated price of zero.

Usually as the interest rate goes lower, the cost goes higher. Many homeowners or buyers may have a certain interest rate they must have. It is important to compare your payment at different rates and the associated costs for buying down those rates to see if its worth it.

You can easily calculate your payment comfort range by plugging the numbers for payment, cost to get that rate and the savings over the years.

I'm reading a lot of super green news reporters and johnnycomelatelies in the mortgage business talking about the plight of the housing market and homeowners because of 100% loans. Sorry but its all bullsheet. I KEEP TELLING PEOPLE ITS NOT THE 100% LOANS THAT ARE CAUSING THE PROBLEMS ITS THE SHODDY UNDERWRITING.

100% loans were great and useful loans. We need them back. These loans were just in the wrong hands. EASY CREDIT, LOW CREDIT SCORES, NO INCOME DOCUMENTATION UNDERMINED THESE LOANS.

If you tell me 100% loans are bad I'll tell you Ferrari's that go 185 miles an hour are the work of the devil... please. 100% loan are no less evil than a Ferrari. The Ferrari is a horrible thing in the hands of a 16 year old. 100% loans are horrible in the hands of coked up mortgage broker, greedy bankers that don't hold the paper, appraisers that live by the referral, underwriters that are paid on deals funded, etc etc etc etc.. on and on.

You mean to tell me that someone that puts down 3.5% is less likely to walk away from their home or pay slow because they have a punie 3.5% downpayment? Heck no. You lose a job, you get sick, you buy three big screens and you will get in trouble with your mortgage, its doesn't matter 3.5% down or zero down.

The problem here is simple but we threw the baby out with the bathwater. ZERO DOWN LOANS ARE GREAT AND THEY WORK. 

YOU WANT PROOF, LOOK AT THE USDA'S RD PROGRAM AND HOW MANY FORECLOSURES THEY HAVE- HARDLY ANY.

Pure and simple 100% loan work on this basis: Low debt ratios- 31/43, Credit scores above 620, preferrably 700 with no traditional credit allowed, FULL income documentation with no De Miminmus income allowed, Bank approved appraisers and strict guidelines for the underwriter to follow- no wiggle room.

100% LOAN WORK AND WE NEED THEM BACK BUT ONLY IF THEY COME WITH GREAT UNDERWRITING.