Wendy Cutrufelli, Contra Costa Realtor

In California, every home buyer receives a Natural Hazards Disclosure Statement and they carefully check if the home is in a Flood Hazard Area, a Dam Inundation Area, a Fire Hazard Area, an Alquist-Priolo Fault Zone or a Geological Hazard Area (landslides) because they could have a significant impact on the homeowner's insurance expense. Less carefully reviewed are the Supplemental Disclosures.

What if the home is located in a Habitat Sensitivity Area?

Does it really matter if the property has the Salt Marsh Harvest Mouse or.........

the California Tiger Salamander or . . . . .

the Red-Legged Frog?

After all, you can be environmentally sensitive and keep an eye out for the little critters while moving your lawn. Nope, not good enough! If the property is in a Habitat Sensitivity Area, you could have restrictions on the improvements you are allowed to make to the home or landscape in order to protect the Habitat. Any changes may require an Environmental Impact Statement (expensive, ouch!) or the scope of your improvements could be restricted.

The Natural Hazard Disclosure Statement only specifies that the property is IN a Habitat Sensitivity Area but doesn't specify the potential property restrictions. If your home purchase in in such an area, it is important to contact the Department of Fish and Game and the local Planning Commission to determine the impact, if any, on your intended use and plans for the home.

After a frustrating week, I am coming to the Active Rain community - specifically the mortgage professionals - for feedback and direction.

I received a referral from a current Short-Sale client. During the initial meeting with the new clients, I learned:

• the clients don't want to sell their home if there is any way to save it
• their lender has agreed to a short-refinance as long as they got it from a different institution
• they have only been late on their mortgage once and that was because their lender TOLD THEM TO in order to be considered a "hardship" - even though the true hardship could easily be established.
• The buyers qualify to a "T" under the FHA "Hope" program (I was a mortgage lender for 20 years)

As would be true with any ethical realtor, I had no desire to list a home for sale if it wasn't the best option (or only remaining option to avoid foreclosure) for the client so I started dialing lenders. I first called the Big 5 (you know who they are). None of them offer the program and, frankly, some of the "corporate hooey" that I received was hysterical.

I then went to the HUD website and pulled the 42 page list of "participating lenders" and started calling them. Much to my surprise, even the "participating lenders" don't currently offer the program because there are NO INVESTORS FOR THE PROGRAM.

To add insult to injury, during the same week I read an article from the Secretary of HUD stating that the program is a dismal failure because lenders are unwilling to take the short-refi losses. How does the Secretary of HUD not know that it is impossible to find a lender who will actually DO the program?

Do any of YOU offer the program or know a reputable lender who does?

It is a rare home owner who doesn't embark on a home improvement project at some time. Unfortunately, horror stories abound about cost over-runs, missing permits and projects that don't finish on time or at all.

If you are planning a home improvement project, a little homework will protect your project and your funds. The Contractors State Licensing Board of California offers some excellent guides and pamphlets full of step-by-step instructions and tips. They are well worth reading and could ultimately save you save you thousands of dollars.

A Consumer Guide to Home Improvement Contracts - Terms of Agreement

What You Should Know Before You Hire a Contractor

10 Tips for Making Sure Your Contractor Measures Up

Tips for Hiring a Roofing Contractor

Before You Dive Into Swimming Pool Construction

I would like to thank Jim Brooks of Pipecam Inc. for telling me about these informational booklets for my clients! You should visit their website to learn the 10 Ways To Avoid Costly Plumbing Repairs!

I worked as a mortgage lender for 22 years and in that time heard my share of horror stories about the incompetence of lenders. I could not fathom that loan officers could be that bad and survive the industry so, I must admit, I assumed that the complaining realtors didn’t really understand the details or simply misunderstood.

Now that I am a realtor dealing with numerous loan officers as a listing and selling agent, I will tell you that I was dead wrong.

I have been unpleasantly surprised – no, shocked - at the weak performance of mortgage lenders. My shock is not a function of underwriting guidelines that change mid-transaction. That is the unfortunate result of the current mortgage environment. My shock is due to the absolute lack of minimal care in verifying and reviewing the buyers’ income and asset documentation and their true capacity to qualify for a mortgage prior to issuing a preapproval letter.

As a listing agent, it is my fiduciary responsibility to protect my sellers and keep their home on the market until they accept an offer from a valid buyer. As a selling agent, I must exercise care for my buyer’s money and ensure that they qualify for financing before writing an offer and incurring multiple hundreds of dollars in inspection and appraisal fees.

To exercise due care, I call every loan officer on every pre-approval letter to get very specific details on the level of due diligence that went in to the approval letter. I have learned that the line of demarcation between a prequalification letter and a preapproval letter is entirely gone. Most preapproval letters that I receive are actually prequalification letters (unverified and useless).

I was sharing my frustrations regarding the lack of verified preapprovals with Janet Guilbault. She was amazed because, in her opinion, the ability to verify income, assets and credit according to underwriting guidelines is the absolute baseline minimum for the profession. That’s what I thought too! But guess what, the invalid approval letters look exactly the same as the valid approval letters to most Realtors and buyers…….and they don’t have a 22 year lending background to know the difference.

In July 2007 I wrote a blog entitled Evaluate Your Buyer’s Lender as a Value-Added Service to help Realtors ferret out the good from the bad approval letters/lenders. But, hey, if you’re one of the good ones, why don’t you save them the time and effort?

To the competent, professional mortgage lenders who DO exist: Don’t assume that your professional minimum is the norm!

CLEARLY DEMONSTRATE YOUR EXPERTISE AND DUE DILLIGENCE ON YOUR APPROVAL LETTER. In additional to the approval information, specify the steps you took to verify the information prior to issuing the preapproval. If your company requires a specified form for approval (most do), attach an additional letter stating your verification process.

OK, I get it. If anyone had suggested this to me I would have thought they were crazy. Why write this out when verification is the norm for approval letters? Let me reiterate, it has been proven that verification is NO LONGER THE NORM for approval letters!

Review my suggested preapproval letter below. Providing this letter will be a breeze for every professional, competent loan officer who KNOWS every one of these details ………you will become the topic of pleasant and relieved conversation in real estate offices!

Sales Price

Specifc loan program

Maximum approval interest rate ____% (current rates are lower)
(Or the maximum rate at which the buyer will still purchase the home. In the current market, if there is no “wiggle room” in the qualifying interest rate, the deal could fail during negotiations due to interest rate fluctuations!)

(Important note: Approval letters that don’t reference a maximum interest rate and specific loan program force Realtors to leave those items blank on the Purchase Agreement. This puts the buyer at risk. Unless both are specified, a buyer can only get out of the contract if they don’t qualify for ANY financing, not just their preferred financing.)

Income has been verified for [timeframe] e.g. 2006, 2007 and YTD 2008
(Too often income is “verified” for the purposes of the pre-approval using a single paystub which is typically insufficient for loan approval from an underwriter. Far too many transactions fail because the 2 year average required to count overtime, bonus, etc. is lower than that reflected on a single paystub. If you know your underwriting guidelines and conducted your due diligence, make sure it is known!)

Funds to close and funds for reserves have been verified and reviewed using 2 months asset statements per underwriting guidelines. Funds are immediately available.
(Proof of funds to close (i.e. liquid funds) is required within a very short timeframe on the CA Residential Purchase Agreement. If they are not immediately available, when will they be available?)

Buyer/Borrowers’ representative credit score (if good) – provided with permission
(if the buyers have a good - or great- representative credit score, get their permission to provide this. While Realtors don’t know a lot of underwriting guidelines, they DO know that the higher the credit score, the higher the likelihood of a closed transaction)

Soft market guidelines were used to qualify the buyer(s) OR Soft market guidelines are not required on this loan program.
Contra Costa is considered a “soft” market by many lenders but loan officers continue to issue pre-approvals based on non-soft-market guidelines and wait for the appraisal to spring the news on the buyer that they don’t qualify due to the additional down payment required. Buyers are crushed and sellers are furious.

Any additional conditions that are required to close the transaction (this is an actual list of conditions that were missing from approval letters provided to realtors, ultimately causing the transactions to fail weeks later)

<!- Specific terms of secondary financing, if applicable

<!- Verification and receipt of gift funds (not disclosed and parents changed their mind)

Sale of current home OR finalized relocation buy-out agreement at $xxx minimum net proceeds

Rental lease on current home at $x,xxx per month
(do they have 30% equity to count rental income? How was it verified?)

Second underwriting approval from [specialty program underwriter/senior underwriter, etc] (CalHFA, for instance)

Realtors are hungry for loan officers they can trust. Help them find you!

Presented by Alain Pinel Realtors

Open House
Sunday, October 5, 2008
1:00 - 4:00
Hosted by Wendy Cutrufelli

2257 Bromfield Court
Walnut Creek, CA
$1,195,000
Offered for Sale by Margaret Garber-Teeter

This home is a dramatic 10!

5 bedroom, 3 bath, 2900 s.f. home in the desirable Walnut Creek school district.
Upper end remodel with views, rich hardwood floors, huge formal
dining room, downstairs den is an optional 6th bedroom suite,
and a veranda that runs the length of the home.

This high-end kitchen with built-in cabinets and custom
lighting systems will please the most serious chef.

Visit 2257 Bromfield Ct to view additional pictures and then treat yourself
to a personal visit on Sunday, October 5, 2008 from 1:00 - 4:00.