James Wirth

In a blog on the subject of the Making Home Affordable program, I have received a number of questions from ActiveRain'ers looking for clarification, expressing their frustration or generally commenting on the program. I have also received a number of private messages from individuals who had specific questions they wanted to be kept out of the blog.

You can view and comment on the blog post here.

In both of these scenarios I have done my best to provide clarification as I understand it. Unfortunately the program is still very new and I don't believe it's really up and running yet; I'm not sure how helpful I've really been but I hope people continue to comment, and I'll continue to respond.

One recurring question/frustration -- especially in the private messages, has been this: 'I bought my home using a stated income loan and now they're saying that disqualifies me from the program.'

The requirement of the Making Home Affordable program that borrowers were 'honest' when they applied for a stated income loan has been debated heavily, and we've just begun.

As an industry professional I have heard many accounts of a borrower, after providing income documentation as requested, who was told by a Loan Officer that they were just going to do a 'stated' loan and when the borrower received the completed loan application back from the Loan Officer to sign, the income had been changed and they were told 'oh don't worry about it, it doesn't matter anyway -- it's a stated loan. Just go ahead and sign.'

This continues to be an issue even today! Case-in-point: I recently discussed a Home Equity Line of Credit with a bank representative on behalf of a client of mine. Ater they verified that my client's credit score was high enough they suggested their stated income program, and I inquired about the maximum debt-to-income ratio for that program to make sure they were within the qualifying range. Her response was, "why does it matter? It's STATED," and only after pressing the issue was I told what the maximum percentage was. The implication was that we could just adjust the income upward to bring it into the qualifying range if it were too low.

This wasn't two years ago, this happened very recently!

One camp argues that a borrower should have protested and refused to sign if the income they reported wasn't what they saw on the documents when they were presented for the borrower's signature. But where is the accountability of the Loan Officer who altered the application in the first place?

To complicate things further, that's assuming they even realized the income was different!

Most of us think of our income in two separate categories: gross income (the big number, before Uncle Sam takes his share), and take-home income.

Enter human nature: In discussing income, most of us think of gross income in terms of an annual amount and our take-home income in terms of a monthly amount. When a borrower is asked for gross income they often respond with their annual salary, which is then converted to a monthly amount for the loan application. It's therefore reasonable that the borrower, when signing the application, may not immediately realize it if the Loan Officer had changed the income in order to qualify.

POP QUIZ
Answer the following question. Don't work out the math, just pick the one that jumps out

An annual salary of $65,000 is equal to how much monthly:

A) $5,225
B) $5,417
C) $5,872
D) $6,017

The answer is B. Please comment with which one you would have picked.

Let's look at this in a real-life scenario -- you're the Loan Officer and I'm the borrower -- a little role-reversal here, walk a mile in my moccasins, will you?

THE APP (short for application)

We complete the loan app over the phone, it takes about 35 minutes. On the subject of income, you ask me what my gross is.

YOU: So, what's your gross income?
ME: Well, my salary is $72K/year.
YOU: NICE!
ME: Yeah, it's a living.

I answer the rest of your questions, you indicate that based on my credit score I qualify for a stated income loan, meaning that I don't need any income documentation like paystubs or W2s, that would normally be required. We set an appointment for me to come in and sign the initial disclosures required to process my application.

THE APPT (short for appointment)

Fast-forward 2 days later, I'm in your office to sign some initial paperwork. We sit down and begin going through the 40 pages of documents. About 1/2 way through on one of of the pages, page 2 of the loan application, it shows at the top my monthly gross income of $6,480, my various bank accounts and their balances, and the balance and payment etc. of my liabilities. I object at the balance on my credit card and you explain that it's only a snap-shot in time and there's generally a lag between making the payment and the payment reflecting on my credit report. I nod in understanding and we turn the page.

What's the likelihood I will realize that the monthly income amount was $480/month too high? Remember, we have been talking for 20 minutes and I've had to go to the bathroom for 10, we are half-way through a stack of 40 pages, and THERE'S NOT EVEN A SIGNATURE LINE ON THAT PAGE.

Things that make you go, "Hmmmmm...."

Oh -- rest assured though, the borrower will be required to sign a 'final' loan application, 52 days from now, after they'e found and successfully negotiated a price on a home, when they are signing the actual loan docs and are closing on the house in two days on a day where they had to take their lunch hour, at the end of the month, and they know they're going to run over on time. Nothing on their mind I'm sure...

My goal here was to make the point that it's not black and white. Borrowers that took advantage of "Stated Income" loans may not have realized their income had been inflated or they may have been coached as far as what amount they needed to put in order to qualify.

Regardless, the point still remains: lowering their monthly payment is going to increase the chance of them being able to stay in their home.

And isn't that the purpose of the program? To make their home more affordable?

Other entries on this subject:
Original: The Home Affordability Refinance Program posted 3/04/09
Update: Making Home Affordable Part II posted 3/30/09
Update: Making Home Affordable FREQUENTLY ASKED QUESTIONS posted 5/12/09

Thanks for reading! --James Wirth

An article was released today quoting The Donald in a phone interview on CNBC's "Squawk Box."

The article quotes Mr. Trump as saying:

"The banks are not lending money, there's no money out there, no matter how strong you are, no matter how good your deal is, if you go to a bank today they virtually laugh at you if you're asking for money. They don't have money or they're hoarding money,"

OUCH.

Here's the full article, and it had a pretty catchy title: Banks 'Virtually Laughing' at Loan Seekers: Trump

But if you take the time to watch/listen to the interview -- which most of us don't have time to do -- he was very clearly talking about commercial loans, NOT residential financing. When you're in the market for a FIVE HUNDRED MILLION DOLLAR loan, I imagine it's a lot different than the five hundred thousand dollar loan most of us are concerned with.

Well gee, that makes a difference!

This sort of -- dare I say -- irresponsible reporting is hurting our economy's recovery. Imagine how many people might have glanced at this article and scanned the quote from Mr. Trump and thought, "Wow. If Donald Trump thinks it's hard to get a loan, what chance do I have?!? Well forget trying to buy a house then!"

So to re-direct my subject line more appropriately: Unnamed CNBC reporter: YOU are fired!

To everyone reading this: home loans are alive and well. Thriving, if I may be so bold. No one gets a home loan from a reporter, so I'm not sure why there are posing as the authority. Oh right... they're quoting The Donald...

While this post may be a little more on the satirical side than most of my comments, there's only so much a guy can take as far as mis-information, innacurate reporting that serves no good purpose!

Ok -- off my soapbox now. And it's available to anyone who'd like to comment. STEP RIGHT UP!

Thanks for reading! --James Wirth

Mortgage rates held on to improvements made over the previous sessions today. Little Mr. Doubting Thomas here was sure they were going to climb back up.

DARN YOU MAGIC 8-BALL!!!!!!

Lucky for you fence-sitters out there, you got to weigh the pros and... well, they're really all pros... for another day.

I leave you with one of my favorite quotes:

"Good things may come to those who wait, but only the things left behind by those who hustle." Abraham Lincoln.

Let's show some hustle people! Pick up those knees! MOVE! MOVE! MOVE!

:)

Thanks for reading! --James Wirth

The last couple of bond market cycles have produced a nice little drop in rates. Although it's impossible to predict any bottom (stock market, gold market, real estate market, rates), all factors point to rates being as near to the bottom as we can really hope to guess:

4.625% Rate / 4.773% APR
P&I payment: $2,143.96
Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed
Minimum Credit Score: 720

The only sure way to see the bottom? In the rear-view mirror.

For every 1 person who times the bottom just perfectly, there are 100 who missed it; maybe even more than that.

Call or email me today. Let's talk about why right now really is the time to buy.

Thanks for reading! --James Wirth

In my blog at the beginning of March I outlined my understanding of that portion of ARRA (the American Recovery and Reinvestment Act of 2009), designed to curtail foreclosures and assist homeowners in taking advantage of the historically low mortgage rates currently available. My original blog entry can be found here.

A couple of asides:

There's a site that has been published containing interactives, information releases et al regarding ARRA, which can be found at www.recovery.gov.

The foreclosure mitigation plan, now somewhat officially coined the "Making Home Affordable" program, can be found at www.makinghomeaffordable.gov.

Ok: Here's an UPDATE on the loan modification and refinance plans:

We're still waiting..........

While more details have been released since my original posting (once again, found here), many of you have expressed a great deal of frustration from your efforts to receive answers in the channels that have been outlined. Loan servicers (the company that receives the monthly payment) understands the program one way, the official web site (www.makinghomeaffordable.gov) understands it another way, and the HUD Counselor Hotline that has been established (1-888-995-HOPE) seems to understand it yet another way.

From what I understand, it feels not unlike the Abbott and Costello routine, 'Who's on First.'

I don't mean to make light of the frustrations of many. I sympathize with you and hope that things will resolve quickly.

My advice: hang in there. Keep calling the loan servicer, the HOPE hotline, your government representatives, keep rocking the boat, keep those wheels squeaking. The industry was not set up to make sweeping changes this quickly and we can have an impact on how quickly they move by continuing to make our voices heard... even if it seems it is falling on deaf ears.

As always thanks for reading! --James Wirth