Tax Credit not Extended Yet. Bill Has not been enacted!

All too often I see poor forms of marketing. That would be the spreading of  information that is only partially true. It may draw your attention and it may have a call to action to read it but it does not deliver the whole truth. Someone somewhere reports the rumor of what may be true and then virally this information runs amuck through the internet.

Most recently this has been the case with the Home-buyer tax Credit. The current deadline of November 30th, 2009 is awaiting an extension and revision anxiously. The revision appears to extend the credit to other buyers yet reduces the credit they would receive to $6500. This has not been enacted. As members of the National Association of Mortgage Brokers we received this directly from them:

October 30, 2009

The $8,000 first-time home-buyer tax credit is set to be extended until April 30, 2010. The Obama Administration has urged Congress to pass legislation to extend the program from its original December 1, 2009 deadline. In addition, legislation may provide a tax credit for some current homeowners. NAMB will continue to monitor legislation and will inform members when the extension is formally enacted.

The key words are formally enacted. Marketing should state the facts but always seems to focus on partial or half-truths. As a professional that has the privilege to assist home-buyers make their single largest financial decision I ask my readers and consumers to hold me accountable. It is easy to get caught up reporting something not finalized or only partially true to bring business. If you ever feel that I have done so call me out. I want to be accountable to my consumers. Transparency is the focus to my business. I wish you all the very best and when the tax credit becomes formally enacted you will be the first to hear about it.

Happy Halloween!

Lowest Rate + Lowest Fees = Best Loan Available?

There are many places that I can go with this but I just wanted to take a moment to ask you the following question:

Does the Lowest Rate and Lowest Fees = The Best Loan Available?

You have to be careful when you are shopping for a home loan of those that will offer you the lowest rate and the lowest fees at the same time. By nature the lower the rate the more the cost of the loan. The higher the rate the lower the cost of the loan. The reason is simple. It costs to get the best. There are many cases where you may get a low rate at a low cost but what type of loan did you get? 3 year fixed, five year fixed?

I would like to believe this is not happening in today’s market but it does. The other thing that still happens in today’s market is bad loans. Even though the scrutiny is way up there have been loans in the last year that have been made to low credit borrowers with little down payment or borrowed down payment. These loans were made with high Debt to Incomes and are a recipe for disaster. I expect to see several HUD foreclosures on the basis of these loans and continued job loss. A bad combination for those that had little to no savings and got into the home.

Loans are a lot like suits or fancy dresses. Loans have to be tailored to the individual and their specific situation. Your goals and dreams for the home will play largely into the decision of loan type, cost and structure. No two loans are ever alike. Even identical twins will get different loans because their situation is different. I mean you can buy a suit or a dress off the rack and it may fit but will it be the best fit for you? The answer is know.

How do you make sure that the combination you get is the right one for you? It starts with making sure that you are working with a professional that you are comfortable with. Ask questions, ask to see examples, ask them to explain and when they cannot answer a question do they get you the answer. My goal on every transaction is to make sure that my consumer understands every charge and expense and why we went with the loan program we did. We have a plan moving forward. I do not always accomplish this. Some consumers do not want to know all the details and ask that I give them only the basics. Those are the instances that I have earned the trust I presume.

The Best Loan Available for you is a combination lock with only one combination of rates and fees for you. Like I said no two deals are the same. If you are approached by a Loan Officer that says I have the lowest rate and fees available beware. They may very well have it but make sure that what they are selling is something you want. If you were to pass a Hot Dog stand and the vendor yelled out “I have the cheapest best Hot Dogs in town” you may or may not buy. It would depend on whether you were hungry, liked hot dogs and felt that the price was worth it.

I would suggest that everyone remember that if it sounds too good too be true it may be, however, you owe it to yourself to do your due diligence and make sure that it is the appropriate suit or dress for you.

Changes coming on December 12th by Fannie Mae

On December 12th Fannie Mae will be making major changes to their automated engine Desktop Underwriter. DU findings are the basis for most of the loans that are funded today. Once a file is assessed in the DU underwriting engine and receives Approve/Eligible findings this loan can be done. The only thing that would keep this particular loan from closing is not being able to provide the documentation requested or the Loan Officer miscalculating or inputting incorrect information into the system. (this does happen by the way so it is imperative that your loan officer understand several important criteria)

So what changes can we prepare for or expect from Fannie Mae? Highlights of these changes include but may not be limited to the following:

• An Update to the DU Credit Risk Assessment
• An update to the Maximum Total allowable expense ratio (Debt to Income) to 45% with flexibilities to 50% for certain loan case files with strong compensating factors.
• Retirement of expanded level approvals EA II and EA III recommendations
• Minimum 620 fico score for delivery eligibility
• MI Updates
• o    A new minimum MI coverage option; a loan-level price adjustment (LLPA) will apply
  o    Streamlining of other MI coverage requirements
  o    Retirement of Reduced and Lower-Cost MI options
• Implementation of High Balance Mortgage Loan Eligibility Guidelines specified in a previous announcement
• Retirement of Homestyle construction to Permanent Financing
• Implementations from three previous announcements.

The focus of these changes should go to Debt to Income. For too long we have been allowing a total back end Debt to Income to 56.99% for FHA and in some cases exceeding that for conventional financing. For all intensive purposes this means that your Housing Payment plus debt that reports to the credit bureaus minimum monthly payments added together represent 56% of your total gross income.

If you are in a 30% tax Bracket and take home 70% of the gross it leaves you 14% of your gross for all other expenses. Other expenses that include food for a family of five which is at minimum $800 dollars a month. We have set people up for failure of home-ownership.

Why you might ask? California leaves very little option for new buyers. The Housing affordability based on average income and price for the area is still high. It is very difficult to get a home that would meet the needs of a family of five in a location, near to schools on the average household budget. This would be significantly easier if we were taught about finances more accurately growing up and did not have the worldly pressures to keep up with the Joneses.

See it as good news – This may change the amount that you qualify for and that is not a bad thing. You have to see it for what it is. It is an attempt by the banks to save their own butt by forcing you to buy well within your means. It is a good thing to keep you well within your budget. Please check with your Broker and Realtor and make sure that these changes will not affect your closing. Ask them what your back end debt to income is. It should be less than 43% in my eyes.

As always thank you for Reading.

Successful Thinkers at the Park

Last night, I had the opportunity to attend and event at the park. The event was the Successful Thinkers meet-up and the energy was electric. John Orozco and Rickey Sanchez of A2B concepts were the hosts of the event and they did an outstanding job.

This was the very first time I had attended an event like this and I did not know what to expect. I was thinking that it would be another night of drinks and networking more of the usual conversation. Hi I am Matt who are you? Awesome what do you do for a living? Then a little of acting interested or acting like you understand what they are telling you when you are thinking I can’t wait to get out of this conversation. Sounding a little negative? I am just trying to be honest. We have all been there because we are human and we all have a goal that we would like to reach in our lives.

How was the Successful Thinkers meetup different? This was the first time that I had conversations and my occupation was not the first thing to come up. People asked about me and who I am and what I represent and told me a little about themselves. Occupation was secondary. It has always been my opinion that my occupation is not who I am but simply what I do and this was the first time I felt like others cared about that.

How did the night go? When I first arrived I gave a business card to the person that was registering everyone, Gina. I filled out a name tag and began to socialize. After about a half hour of socializing everyone sat down and the hosts said a quick introduction and rolled right into the agenda. The first thing they did was highlight a few local businesses that are doing things out there. The first speaker Gina was a breast cancer survivor and she is doing some awesome things for raising funds and providing resources for those that have breast cancer. Next was Marlo who runs a family Jewelry store in Elk Grove. From there they had some giveaways provided by business owners within the network. The gifts were awesome and the winners were very excited. Especially the guy who one the girls t-shirt. After the giveaways , Robert Velarde stepped up and hit a home run explaining the purpose, the mission and the design of the Successful Thinkers community. He was inspiring and informational. Nick Lynch followed to explain just a few of the many amazing things that are going to happen at the November 6th event featuring the main speaker Rudy Ruettiger. Yes you read that correctly the same Rudy from the movie continues his story and inspiration right here in Roseville California at Adventure Church. If you would like to go the event is free if you sign up to SuccessfulThinkers.com and create a profile with a photo and a bio. If you are like me you may be asking what is the catch. That is whay I went to the event in the first place. To determine what I was not reading or seeing. However, there is no catch.  If you would like to attend the event just go to Successful Thinkers and sign up. My referral ID is 6228 so be sure to let them know I sent you. Remember to create a bio so that you can go on the 6th for free. If you are scared that there is still a catch like I was don’t let that stop you from going. You can pay $25 at the door and still get hundreds of dollars worth of information and inspiration.

The night capped off with more networking. I truly enjoyed the format of the Successful Thinkers eetup and know that it will not be the last event that I attend. Stay tuned for all the great stuff that will be coming soon…………. By the Way thank you Robert Velarde for all the very kind words about my blog and my business. Your delivery is both genuine and passionate…………Thank you Rickey Sanchez and John Orozco for arranging the event……………….In the closing words of Mr. Robert Velarde, “See you at the Top.”

Do you need a Direct Lender Approval?

Ok, so I have dealt with this enough at this point that I will finally put my thoughts on paper.

Do you need a Direct Lender Approval?

Well at this point of time there are a lot of listings in the market that are requiring that you get pre-approved through a direct lender. Now for sake of the argument the question then would be:

What do direct lenders do differently than we as Brokers do?

The answer is absolutely nothing. They take the application, gather the documents, pull the credit and run your file through the exact same automated engine that we use. Desktop Originator or Loan Prospector are the two engines that are used to determine whether or not your loan can be done and sold on the secondary market. Many of the direct lenders still sell the loans on the secondary market. They are not all in the game and business of servicing. If you go directly to Wells Fargo or you come to me both the Loan Officer and I will run the file through Direct Express. This is Wells Fargo’s engine which issues an LP approval. LP is the engine for Freddie Mac Investor’s.

If we are doing the exact same thing for the approval, what is the difference?

Essentially a direct lender approval is straight from the source. They will be funding the loan Directly from their own warehouse line. A broker will then send the loan to a wholesale conduit to fund the loan on the conduit’s warehouse line. We do not have the underwriters in house. However, the majority of the wholesalers follow the automated findings that have been produced when ran through the engine. The main trick on the wholesale side is that each wholesaler may impose their own set of criteria that will Overlay criteria produced by the investor or in this case Fannie Mae or Freddie Mac. As a broker we get a bad rep because the Loan Officer does not understand or know the overlays which in the end could cause delays in the process.

If you have an automated approval from the same engine as the Direct Lender what then could go wrong?

Again this is a case where it is the Loan Officer not the bank or the underwriter than will make the difference. You see the automated engines are only as good as the information that is submitted. Therefore if you submit incorrect information or do not verify the income, assets, and credit of the borrower you could get an approval that will later cause problemns for the closing. An underwriter may not agree with the income that you calculated for the consumer and this could decrease the qualification amount or turn an approval into a denial. Whether you are with a Broker or a Direct Lender this can happen.

Why then are they requiring a Direct Lender approval on certain properties then?

The answer to this seems real trivial if you take a step back. The bank who owns the property wants you to get pre-approved through their bank because they want to earn some money on a project that they are already taking a loss on. If they retain your loan then at least they will still be earning interest on a portion of the loss plus the fees to do the loan. It affects the bottom line. They also have control over the deal and can check the progress. If only the righ half knew what the left half was doing this would make complete sense. Wells Fargo is arguably one of the largest banks remaining and they are one of the largest wholesale channels today. If they see the value in taking in Brokered loans then I would suggest that there is value in a Broker. I have discussed my thoughts on this in another article before.

REO agents saying that they will not entertain and offer without a Direct Lender Letter.

I will reserve my opinion on this because it does not hold true for all the REO agents that I know. However I have been informed through some of the parties that I work with that there are agents that are big in the REO business that want Direct Lender Letter or your offer floats to the bottom. I simply think that I would do the same for my employer. Yes they get all their listings from the bank so naturally my agreement would be to reciprocate the referral business. It is networking 101. You have to give to receive.

In Conclusion, although a direct lender letter may or may not give your more leverage for your offer they are being required. On the listings that they are required I assist my clientele in getting them. It has been rather easy until the late where one certain bank does not want to cooperate. Our money and our approvals come from the very same place and the loans are packaged and sold the same way. While there are subtle differences a loan is a loan is a loan. Do not be suckered into compromising the comfort and relationship you have made with a Broker because the public is saying that you need a Direct Lender Approval. For all intensive purposes you are repeating the process we did for a second time.

Related Articles:

• 5 Perceived differences between a Broker and a Banker
• Third Party Origination

Sactweetup at the Lofts

I had an opportunity to attend last nights Sactweetup at the Lofts in downtown Sacramento. The Lofts on L street were kind enough to host the event while showcasing their beautiful 1900 square foot Penthouse Suite. The suite had amazing views of Sacramento and was definitely a showcase of contemporary design.

Alejandro Reyes (also known as @Successfool) and Sierra Friend (@sierrafriend) are the creators of this amazing Sacramento event. The first event that I attended was at Panera and there were quite a few people but last nights event showed just how much the event has grown. Walking in I passed News 10 filming so they could cover the event and give it well deserved time on the news.

What is all the Buzz about? The Sactweetup is where Sacramento and Twitter meet. Local business professionals as well as some from as far as Walnut Creek and Fremont get together and share ideas about how to grow their business through Social Media. It just doesn’t stop there. I have met with many of the professionals that I first met online and then at the Tweetup outside of the event. I have been able to exchange referrals and learn more about their businesses.  Above that I have established some relationships that transcend business. I regularly get together with a friend @thisaac and we share our faith and hold each other accountable is areas of life.

Last night, at the event, I had the opportunity to meet several more people. Each time I get the chance to go I am never let down. I carpool with one of my favorite people ever @meghanwood; the meghanshow.com and we just have a great time.

Make sure to check out the L street Lofts and make sure that you make it to the next Sactweetup. Check it out at www.sactweetup.com.
Here are the great people that I met last night to name a few:

Jason Everett – Sales Partners

Rajkumar Karthikeyan – Midland National Life Insurance

Kristi LeGue – CPA

Ryan Lucia – Voyage Financial Group

Rick Pearse – American City Realty and Financial

This list is certainly not all encompassing as I met Jennifer Bourn, Mickey O’brien and spoke to several others that I have met in the past. Looking forward to the next tweetup!

First Time Home Buyer Tax Credit: What is going on?

I was sitting in the office thinking what do we know now about the tax credit. I came to the conclusion that all we know is the tax credit deadline is November 30th and there are 6 bills or so that we are trying to pass that would extend and/or revise the credit. Check out those thoughts here!

As Always Thank you for Reading.

Key Delivery Experience was the Best!

Last week I closed a transaction on a home for my clients. Generally, once I have “FUNDED” the loan and informed the buyer that we have gone on record I am done. I get to send a Thank you card but the last time that I have seen the client was at the signing. The signing is a time to get the paperwork done and laugh a little but generally it is still stressful because you are almost done. There is still the whole funding process to go through. This could take a few days and there is still a remote possibility that it does not happen.

This time was different. Once we had funded and recorded the transaction I received a call from the Realtor, James Herron, and he said, “Hey I am meeting our clients at the property at 1pm and I have some Champagne. I am going there to deliver the keys. Do you want to meet us there? This was the first time that I was invited to join a Realtor to drop off the keys. This was my very first experience of the key delivery. IT WAS AMAZING. Not only did we toast to the completion of the deal, the clients showed me around the house and explained all the plans they had. The EXCITEMENT on their faces was irreplaceable. I really enjoyed being part of the Key delivery. It is obviously  the most gratifying part if the transaction.

I am thankful for my clients and James for allowing me to share in the moment. This is something that I would like to be part of moving forward. The joy on the clients face when they get the keys is a look that is better than any other time of the transaction. Thank you all so much.

Matt Freeman