Subprime Mortgage Brokers and FHA foolishness!!!

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TLW...ROAR!

I totally agree...

Bryant - What's really scary is those folks out there who did nothing but Sub-Prime Loans and now .... they claim to be FHA Experts.  Conventional & Government Loans are a much different entity than Sub-Prime Loans.  If they weren't doing them before, I can guarantee that they are going to have a heck of a time doing them now.  You aren't able to throw anything against the wall these days.

The landscape has cahnged, and some people have transitioned to the new business (FHA) "read most" without actually picking up a HUD handbook.

Jason, Right on my brother. They be playing with the Feds on these loans and the Feds don't play that stuff. If you can't prove it it doesn't exist.

This is a very important post.

Lenders had better get their stuff together because these companies are under scrutiny more than ever before. 

Buyer's Agents need to know their business and don't present lender letters that don't present a true picture of their buyers. 

Listing agents need to know their business so they can make sure that the buyer presenting an offer is capable of getting financing. 

The trend of agents doing and knowing less and less puts a lot of buyers and sellers in jepardy.  It also puts the agents, the clients and their brokers at extreme risk. 

This business does not take a Rhodes Scholar.  It takes some experience and some dedication to quality representation.  Some of the "deals" I've seen over the years look like they came out of the twilight zone. 

BB - I don't think you could make it any clearer than you did. Is it really all that difficult?

Jeff

Wow!  I cannot believe that agents are allowing their non-occupant "purchasers" submit FHA offers on your listings that are not ultimately going to be primary residences!  They really ARE submitting those types of offers to you?!  Well, you can't fix stupid.  But, good for you for trying to make very obvious rules very clear and concise.  :)

I read a lot of Jeff Belonger's posts and I know he goes out of his way to specialize in FHA loans. I've heard him mention the Farmer's Home Loan" too. But I'm pretty sure I also read in one of his posts, that to do FHA loans, the mortgage bankers must have a certification? Aren't they required to have some training?

You'd be surprised (okay, maybe you wouldn't be surprised) how many agents don't check out the financing at all before getting the seller to sign on a wing and a prayer. I submitted an offer with a home to close contingency a little more than a week ago, which was accepted. The listing agent didn't even attempt to call the lender to verify and never even asked to see my buyer's home sale contract at all!

Bryant - the agents are just as responsible as the lenders.... How the devil are agents supposed to do due diligence when they haven't got the foggiest idea which end of the GFE is up? 

Bryant, my dear,  You are something else, but I like it :o)  I hope you manage to have a great weekend in spite of the cluesless lenders you've been dealing with!!

Bryant- Oh, how about this, Offers on Short sales using the Neamiah program or other non profit program where the 'seller' has to put the funds PRIOR to closing into the non profit's account and they will bring the check from their account to closing. OK, my seller does not have that money floating around, if he did, he would pay his mortgage! And what short sale note owner is going to go and put their OWN money into some non profit account? I don't think so! Do your homework and use  good o' common sense.

Katerina, Nehemiah does not work that way. It's all done at closing. I actually have a short sale pending right now that is a FHA with Nehemiah. The seller is contributing 9% total!! You'd think this wouldn't work on a Short sale but I ran it by the lenders negotiator prior to negotiating the contract and he gave it his blessing. And of course the purchase price reflects the contribution.

Lenders are VERY agreeable these days. They do NOT want these properties on their books. But of course you know that.

Lenn, Right on. I just don't know how folks can be in this business and not be students of real estate. Granted there's a lot I don't know but I know a whole bunch!!!

Lisa Hill, I actually don't know if they have to go through training to do FHA or not. I don't think they do. I think it's just a matter or registering. But I could be wrong.

Jesse, I would bet you money that are many agents that don't know what GFE means. That's scary.

Yvette, My dearest:) I plan on having a GREST weekend with TLW! Pool time and sunshine.

Lisa Spalding, Yep, I get them. I also received a USDA Rural Housing on a pool home(resale). Can't do that either.

Kelly, That's frightening! But I know it to be true as I have seen it many times. Fortunately for them my buyers are qualified.

Jeff, I'm a very good communicator:)

Mathew, Is that you up there?

Todd, FHA specialist. I like that. Is it true? Send me some stuff

That's about the same as an agent trying to pretend they know about VA and referring buyers to lenders that don't even do em.

You made it clear...are they listening?

Ok.. I get it.. I see you drinking coffee.  I am still nervous around TLW and now she has a gun!..wow..lol just kidding..

Bryant,


"Please quit trying to fit a square peg into a round whole."

That advice alone should earn a star!

Bill

I agree 100%. I have seen Mortgage lenders who say they know what they are doing only to see the loan flop because oif some small deatil that they should have known before they even started. It is a different landscape today and you better know what your talking about!

Susan

Back in the day there were mortgage brokers without a clue...wait...this is now!

What does FHA or VA have to do with it? 

I was competing against a Loan Officer yesterday that was quoting a payment without escrows and the customer was concerned because my payment was so high.

I did get the origination for now....  until they get a GFE from another company and the LO fails to disclose the mortgage insurance.  Gotta love friends of the family...

Find a good LO and stick with them.

It is amazing how many mortgage brokers are now getting approved to do FHA loans.  They are clueless.  It is plain old scary dealing with some of these people.

Back in the 1990s and earlier FHA and down payment assistance was the only way to go for first time homebuyers.  History repeats itself. 

Bryant--Offers that will not close are a waste of everyone's time...It is very clear in the instructions but your post reinforces it. Now if people would now try to actually follow the rules, life would be so simple! :)

We have loan reps and agents who can't even spell Nehemiah trying to do them without being taught and it shows in the wording of the contracts they submit as all terms have to be spelled out and not lumped into a numbers grouping.

Bryant the problem with the Subprime Brokers and LO's is that they were use to skiping around the rules because there was very little rules, but with FHA you better opperate by the rules or be ready for problems.  FHA is a great loan product but not for those who want to play games.

I agree we get into transactions where the the other agent is not aware of the financing issues and we either have to train the other agent or look for a new buyer.

oops I FORGOT TO LOGIN

To top it off there are some mortgage brokers that are not even FHA approved "referring" loans to an approved lender for a referral fee.  Talk about a potential mess and a violation of FHA guidelines.  There are too many Lo's that have never done an FHA loan until this spring, have no idea what the rules are and no idea where to find out.  Make sure you are working with an experienced FHA lender with experienced LO's, experienced Underwriters, and Closing dept.

wow guys and gals this post seemed to have struck a cord with some eh......I do agree too many people are jumping on the FHA train and don't have a clue......

I have gotten more than a couple of offers with bogus loan letters.  Brokers and out of town lenders are where 95% of them are coming from.

Many mortgage people have no experience with FHA. They will actually have to learn it and it does have some twists.

BB - My solution to this as an agent, get the seller to agree to risk intentionally pricing the property 10-15% below market value for a full asking price offer or better, and for an opportunity to pick and choose the buyer based on money down and the need for concessions!    

Bryant.... it's so true that so many are now jumping on the bandwagon. But the link that you placed in your post, linking to a FHA website?  That is not a HUD site, but a link to a mortgage company that makes it look like it's part of FHA.. I am just saying this because I have read some misleading things in the past from that same site.  Just a FYI... but some good points.

I am able to help a lot of my lease option people go from leasing to owning thanks to FHA and they are becoming a wonderful product here as well. I've been using them for a lot longer than most, mainly because of the down payment assistance programs and the fact they don't base lending on credit scores.

I had to releard VA loans this year- I had a few clients use them during all the low interest zero downs, but now that those are gone, and this is a military town, VA loans are a really excellent option for buyers. But it has been a bit odd to get my head around them again. And the FHA. But if you are learning and growing, you are withering and dying.

Well good morning everyone. Great comments!!!

Carol, Your comment has my brain spinning this morning. I'm just thinking through how I can implement this strategy in my market right now. I have always priced properties taking into consideration that the seller will be contributing towards closing costs. Since that is the norm in my market the comps will already have these contributions in the price. By eliminating this 6% and the 3% to 4% in negotiating room I could effectively price 10% below market and then negotiate upward. OK I need to ponder this.

Jeff, Thanks for pointing out the link. I knew it wasn't HUD but used it because it list the available DBAs. Maybe I shouold add a disclosure on it.

OK I have a very busy day today but will be back.

I wouldn't work with them either...those loans are for people who want to own homes and have little money to purchase...anyone who is an investor are trying to take advantage of a program that really wasn't meant for them.

Some communities here don't even allow them when you are screened. Most of them are condo communites.

  WE had taken the attitude until recently, that lending was for lenders and real estate for agents. Thinking all the goofy lenders had been washed out of the business and the cream had come to the top...oh not.....a closing this week with a "friend" of the buyers produced $8000 in closing costs....I don't want to be a lender when I grow up....but from now on we are taking more time to point our buyers in the right direction !

BB- While both are doctors, there is a big difference between a Veterinarian and an MD.  Each has a speciality.  Mortgage brokers and Real Estate Broker are similar but indeed decidedly different.

Hi Bryant: The only saving grace for the client and us is that FHA is much more involved than a subprime loan. I've seen it in my office. Whereas LO's could easily do a "stated stated" deal often to 55%, FHA caps everything at 41% DTI with very few exceptions. Plus, it's a full doc. world and the paperwork (HUD Addendum, etc.) would drive most of the inexperienced and uncommitted LO's crazy. I'm o.k. with that. I always felt like the transactional sorts that got into this business solely for the money probably wouldn't last. That's become true and I think everyone is better off because of it! Have a great weekend!

Paul

Great post. I did nothing but FHA when I first got into the business 16 years ago. Over time it became less and less of a factor, until this year when it is the go-to program again. I talked with a friend who is now a wholesale FHA underwriter and she says they are seeing a whole lot of loans where the broker doesn't have a clue on how to make them work or even what the guidelines are. Because of all the extra volume, their turn times are way out there, which means deals are dying in underwriting well over a month after the contract is written. Very scary.

"You aren't able to throw anything against the wall these days".

Wheh, thank goodness for that.  I remember seeing contracts come through with $10k decorating allowance.  My attorney's office would reject them, we didnt' want to be part of that Fraud Train.

FHA is a great program for low to moderate income families, as you stated.  It never would cross my mind that investors and flippers would go that financing route- good grief.

Learning the simple tenants of underwriting guidelines (and they change constantly) is also a key to a successful sale for your buyers and sellers.  Thanks for the reminder :)

Hey Bryant:  My only problem with this post is that you seem to be using the term "Mortgage Broker" as a generic for what should be the term "Mortgage Lender".  Not to split hairs, but a lot of folks don't know the difference and unfortunately, too many times the term "Mortgage Broker" is bandied about when its a negative topic.

Bob Mitchell

ValueList Real Estate Services, Inc.

Hi Bryant, congrats on the feature.  This is a sore spot for me.  I find the information is not always correct and we have to watch the loan information given to our clients.  Picking the right lender is very important.  Many of the lenders a very knowledgeable but some are poorly lacking in FHA training.  Nice post.

IT's hard to believe that people actually sell a product that they don't understand. That's just asking for problems.

BB.,

I agree with you, J. Sardi, Lenn, and the rest that feel the way you do as I do...

Know your stuff or tell me you don't, but don't waste my time if you don't know...it is a thread to no where land if you don't know how to do the loan.  I know choose my lender's carefully...hear that Matt Blum? :-)

Bryant,

I'd say you said it very clearly.

Hi guys. I hope everyone is doing well. I must say I have been very busy the last couple of weeks. This has been causing me to be bad blog host!!!  As always  though your comments are appreciated.

Bob, I use Mortgage Broker because in my market that's just about all I ever deal with. I realize mortgage lenders suck too :)

BB - There is a difference in your market and mine - we do not price assuming every buyer needs the seller to contribute towards closing costs. Seldom do we even advertise it as an option. Usually, if the buyer needs assistance it is written into the purchase offer (and if not - I always ask the buyer's agent if there is any assuming the seller will pay points before presenting the offer). I've recently changed strategy by explaining to my sellers that only 5% of the homes listed in our area will close this month. By intentionally under-pricing, I sold my last 2 listings in only 4-5 days when the local average is 135 DOM. One had mutiple offers and I got full asking price, the other 5% less. OK, with my sellers too because I make sure to let all my sellers know that they are competing with bank owned property and short sales and they are prepared to sell at the below market price - and realize time is money too. I've been encouraging sellers to be realistic by being ahead of the wave as prices continue to decline. I have taken less listings too - I am not afraid to walk away from a listing opportunity if they don't agree with my strategy.  

Carol, It certainly sounds like you a have a handle on it. The biggest issue I'm having right now is that just about everybody is upside down on their mortgage. It's not that they are not willing to price properly, it's just hat in most cases they can't. If they are having financial difficulties but don't qualify for a short sale then they are screwed.  I took 2 listings yesterday. One seller paid $179,000 for their house in late 2006. I just priced it at $99,000 and even at that I'm probably $10,000 too high. Fortunately they only owe $70k and can go lower but we just have to try for a couple of weeks at the higher price. They will end up losing $100k in less than 2 years!!!

The other one the guy paid $229,000 in late 2006. I just priced it at $115,000 as a short sale.

But you can see by these figures that even folks that bought right by placing 20% to 30% down in the last 6 years are still upside down. It's brutal. I've heard 1 in 7 properties in Poinciana is in foreclosure. And it's getting worse.

I'm still wrapping my head around how I can utilize your strategy in my market and will probably write a post about it soon. I'll give you some link love:)

Save Ameridream and other Down Payment Assistance programs
If you haven't done so, go to this website, http://www.rallyforhomeownership.org/

It only takes 30 seconds.  This form will go to your local Congressmen and Senators.
CONGRESS MEETS ABOUT THIS TODAY! 

HUD should modify to lessen the risk BUT don't get rid of it.  This is one of the last programs out there right now that can get buyers into a home with no money.  (They still have to credit and income qualify)

http://activerain.com/blogsview/605114/Down-Payment-Assistance-Congress