Mike Sikorski,MBA,GRI

Many of today's Florida licensed mortgage brokers and Loan Originators lack the necessary skills to truly assist consumers in securing the best financing arrangements possible, due in large part to the fact they are poorly trained, lack the most basic skills necessary to truly understand all facets of mortgage lending, and possess little or no experience in residential mortgage lending, as well as offering too few mortgage loan programs for consumers to choose from.

Under Florida Law, an individual can be licensed or unlicensed to originate residential mortgage loans, depending on the type of business entity they choose to employ under. Licensure is required for employment under a Mortgage Brokerage Business only, whereas employment with a mortgage lender requires no licensure at all.

For those individuals who choose licensure, education requirements by Florida law are limited to a 24 hour class that basically teaches an individual how to pass the state licensure exam. The core principles of the 24 hour class deals with Federal & State law, with a basic review of underwriting guidelines set forth by Fannie Mae and Freddie Mac. Very little can be taught within a 24 hour period (usually a Friday evening followed by two full days on Saturday and Sunday) to educate the average individual. After successfully passing a state exam, all that is really required to maintain licensure is 14 hours of continuing education every 2 years, which is typically completed online through an ‘honor' system.

Once an individual is licensed, they are required by law to place their license with a business entity licensed to broker loans in Florida. Many of the mortgage companies licensed in Florida lack any form of hands-on training for newly licensed individuals, leaving it up to the licensee to learn as they go. Many of these same mortgage companies offered few mortgage loan programs, with little guidance from their companies, many licensees choose to take the path that leads them to quick loan closings.

Enter the subprime mortgage lender.

Subprime mortgage lending offers a breadth of loan programs with liberal guidelines towards credit and income, offering higher loan to values than most conventional loan programs. Unlike government mortgage loan programs with stringent underwriting guidelines towards credit and income, subprime lenders offered underwriting guidelines that are loose in comparison, making it much easier for consumers to qualify for most programs. High risk mortgage loans required high risk interest rates, including costly prepayment penalties to the consumer. For those licensees whose companies did not offer more competitive, less risky mortgage loan programs such as FHA, VA, or Conventional, subprime mortgage loans meant closing loans and earning commissions, regardless of the overall benefit to the consumer.

Subprime mortgage lenders made it possible for mortgage brokers with little or no knowledge of residential mortgage lending to earn big commissions with little work involved on their part.

In 2000, the state of Florida had just over 20,000 licensed mortgage brokers. Today, there are over 81,000 licensed mortgage brokers licensed in the state of Florida. These numbers do not include the multitude of unlicensed Loan Originators working under licensed mortgage lenders, many of whom do not reside in the state of Florida.

The correlation between the heated mortgage refinance market of 2003-2006 to that of the dramatic increase in the number of newly licensed mortgage brokers in Florida is unclear, however the large number of mortgage loans originated through subprime mortgage lenders by untrained, inexperienced mortgage brokers during this same time period does give cause for concern.

Studies have shown that many consumers who received subprime mortgages with high interest rates & prepayment penalties would likely have qualified for a low interest, fixed rate government mortgage loan such as FHA.

Ultimately, the choice of mortgage broker or mortgage lender falls squarely to that of the consumer. Choosing an inexperienced mortgage broker to originate your mortgage loan or choosing a mortgage lender who offers a limited number of loan programs that may be unbeneficial to the consumer is exactly their choice.

Regardless of how uneducated or inexperience a mortgage broker or loan originator may be, it is up to the consumer to choose the mortgage loan program that best fits their needs, and not that of the mortgage broker or mortgage lender. Absent the legal language of most contractual agreements, there is nothing that obligates the consumer to choose a mortgage loan that is unbeneficial, or a mortgage payment that is unaffordable. Shopping for the mortgage that best fits their individual needs requires research that is not limited to rate shopping.

Experienced mortgage brokers that offer a wide array of mortgage loan products that includes low, fixed interest rates, no prepayment penalties through FHA, VA,& conventional mortgage programs gives consumers the choices they need to make better decisions about their mortgage financing needs. High pressure sales people with little or no knowledge of residential mortgage lending do a complete disservice to consumers as well as the mortgage industry.

With many of the subprime mortgage lenders out of the mortgage business completely, perhaps a tide may be turning that will force many mortgage brokers and loan originators to either learn the residential mortgage lending business the way it should be learned, or get out of the business all together.

Either way, the consumer will benefit, going forward.

Mike Sikorski, MBA, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Florida 33952

Phone 941-206-6000

Email Mike@FloridaRealty.net

Homebuyers turned away due to lack of credit or credit scores do have a rather unconventional way to be approved without traditional credit or even a credit score.

Nontraditional credit is a widely used form of credit verification used by certain mortgage lenders for loan applicants who prefer not to use traditional forms of credit such as credit cards or car loans yet can provide a payment history on similar forms of ‘nontraditional" credit.

For several years now, mortgage lenders have recognized that loan applicants who choose to use non-traditional credit in place of traditional credit should not be penalized or discriminated, since proper verification of these non-traditional forms of credit can be treated to that of traditional forms of credit.

Non-traditional credit falls into two distinct categories that provide balance in assessing various forms of non-traditional credit. The categories are as follows:

Category I: Rent payments for an apartment or home, and utility bills such as electricity, water, telephone, propane gas, or cable TV. Rental payments made payable to a property management company for a home or apartment will usually require a Verification of Deposit, with no additional documentation required. However, if rental payments are made directly to a family member or private individual, 12 months of cancelled bank checks will be required. A letter of credit from utility companies will suffice as acceptable non-traditional credit.

Category II: Insurance payments, such as life, medical, automobile, & renter's insurance; child care providers, school tuition; department, furniture, appliance stores; specialty stores, rent to own; medical bills not covered by insurance; and Internet/cell phone services; savings accounts with regular monthly deposits (payroll deductions are not permissible) Personal loans from an individual with repayment terms in writing and supported by cancelled checks for 12 months are acceptable.

A minimum of three (3) credit references, including at least one (1) from Category I, must reflect 12 months of the most recent activity from the date of application. Credit from Category I is considered most important since it is the greatest indicator of a borrower's future housing payment performance. Borrowers with no credit references contained within Category I is considered insufficient by most underwriting standards.

All forms of non-traditional credit will have to be verified by an independent credit bureau. As each item of credit is verified, it will be added to your credit file as a Non-Traditional Mortgage Credit Report in the same manner as a traditional mortgage credit report. The name of the credit reference, as well as the date of opening, high credit, current status of the account, payment history, and any unpaid balances will be required for consideration by most mortgage loan underwriters. Although non-traditional credit will not trigger a credit score as required by most banks and similar lending institutions, a clear, consistent credit history reflecting no accounts delinquent more than 30 days in the most recent 12 month period will be treated similar to that of someone with good to very good credit scores.

It should be noted that borrowers who wish to apply for a mortgage loan using non-traditional credit will also be required to occupy the property as their primary residence AND may be required to have a minimum of two month's cash reserves at the time of loan settlement.

If you have been turned down for a mortgage loan by a bank or similar lending institution due to insufficient credit but have sufficient non-traditional credit, you may be able to finally purchase the home you have always wanted but could not get due to insufficient credit. With home prices more affordable now than in years past, now may be the best time for you to finance your next home using non-traditional credit. Loan programs are available through qualified mortgage lenders offering low, fixed interest rate mortgage loans as well as low down payments.

For more information about how non-traditional credit can benefit you, please call (941) 206-6000.

Mike Sikorski, MBA, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Fl. 33952

(941) 206-6000

Mike@FloridaRealty.net

How far will you go to get the dream home you have always wanted, or the lowest interest mortgage available? Are you willing to claim assets you do not have, or income that you truly cannot prove to be true? If so, you could be facing a lengthy prison term and a very heavy fine.

The moment you sign a loan application that contains fraudulent information as it relates to income, debts, or assets, you have committed mortgage fraud. Even if you are turned down for a mortgage loan, or if a mortgage loan does not close, you can still be subject to prosecution for mortgage fraud.

It is illegal for a person to make any false statement regarding income, assets, debt, matters of identification, or to willfully overvalue any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution. The Federal Bureau of Investigation investigates these crimes where individuals could face up to 30 years in prison, a $1,000,000 fine, or both.

The following are examples of what is considered mortgage fraud:

* Providing false names, addresses, and Social Security numbers.

*Providing fraudulent documentation regarding income, such as Federal income tax returns,

W-2's, 1099's, and pay stubs.

*Intentionally overvaluing assets or failing to disclose debts or other liabilities

Even the submission of a loan application to a bank or mortgage lender that contains fraudulent information is considered Bank Fraud; put the loan application in the mail to the mortgage lender, it becomes Mail Fraud; send the application to a mortgage lender by facsimile (fax) or email, it becomes Wire Fraud.

Dishonest consumers and unscrupulous mortgage brokers have been known to go to great lengths to get a mortgage loan by means of fraud, simply to get a lower interest rate or a higher loan to value mortgage loan. Sometimes consumers and mortgage brokers will work together to commit mortgage fraud, and a mortgage broker may decide to take it upon themselves to commit mortgage fraud. You may be an unwilling participant to mortgage fraud, but if you put your signature on a loan application that may be inaccurate or fraudulent, you are just as guilty as the mortgage broker, and you both could end up paying a very heavy price.

There is home for sale or mortgage you have to have that is worth to the lengths of committing mortgage fraud. There is an excellent chance that you could get caught committing mortgage fraud, even before a mortgage loan has closed. In fact, most instances of mortgage fraud are caught at the very beginning; at the time the loan application is made.

Banks and most mortgage lenders are highly trained to look for various types of mortgage fraud, by analyzing your loan application and income documentation, looking for red flags that could be some form of mortgage fraud. For example, the income tax returns you provide to a mortgage lender can be verified for accuracy through the IRS in as little as 48 hours, verifying the income you are claiming on the tax returns you gave the mortgage lender is the same as you are reporting to the IRS. The advent of computer software programs such as tax preparation & payroll software easily purchased at your local office supply store have given banks and mortgage lenders even more reason to scrutinize your tax returns, w-2's, 1099's, and pay stubs, looking to make sure everything is where it should be.

If your bank or mortgage lender catches you committing fraud, they may not even tell you about it. They could simply turn your loan application down and not say another word. It's when you get a knock at your door from an FBI agent or some other law enforcement official that you know you have been caught.

The best way to avoid mortgage fraud is to not be a party to fraud. If you apply for a mortgage loan, provide only accurate and truthful information from the start. Make sure the loan application that you place your signature on is truthful and accurate. The signature on the loan application is you attesting that the information provided by you is truthful and accurate. Make sure the bank or mortgage lender you choose is, honest, & trustworthy. Check references, question their experience in residential lending, and try to avoid overzealous mortgage brokers bent on getting you a mortgage loan at any cost. Even when you attend the loan closing, make sure the loan application you sign is truthful and accurate. Any information on the loan application that may be untruthful or inaccurate becomes valid at the time you sign that loan application. If there is incorrect information on the application at your loan closing, it is better to put the closing off until the loan application is corrected. It could possibly delay the loan closing from happening all together, but it could help avoid having to answer questions later, and save you from a lengthy prison term and heavy fine later.

There is no dream home or low interest mortgage you have to have if it means committing mortgage fraud, and there are no second chances if you are caught committing mortgage fraud. The home or mortgage you receive today through mortgage fraud could offer severe consequences later. That knock on your door could likely be someone holding a badge in one hand with handcuffs in the other.

Mike Sikorski, MBA, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Loss Mitigation Specialist

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Fl. 33952

Phone (941) 206-6000

Mike@FloridaRealty.net

Getting a mortgage loan approval is about to get a lot tougher as both Fannie Mae and Freddie Mac have opted to toughen underwriting guidelines for conventional mortgage loans as a direct result of the current housing and mortgage crisis.

Revised mortgage loan underwriting guidelines will call for higher credit score requirements, increased private mortgage insurance premiums, and lower loan to values (LTV's) for cash out refinance mortgage loans. In addition, risk factors such as previous bankruptcies, foreclosures, and previous mortgage payment delinquencies will require longer recovery periods for conventional mortgage loans.

How a particular mortgage loan application is submitted for approval will depend largely on whether the application is submitted electronically through Fannie Mae's Desktop Underwriter (commonly referred to as DU) or non Automated Underwriting Submission.

Loans submitted through Desktop Underwriter typically require fewer loan stipulations, making it easier to get approved quickly. Non-Automated Underwriting, which requires an experienced mortgage loan underwriter to review the loan application, requires greater scrutiny and typically takes longer to get an approval; however, manually underwritten loans are more forgiving for loan applicants with lower credit scores, unlike DU which prefers higher credit scores.

A loan officer or mortgage broker will typically have only one opportunity to submit the loan application correctly, since choosing the wrong option could have very negative effects to the loan applicant.

The following is a review of the new changes to the underwriting guidelines:

Debt to Income Ratios: Currently DU will accept debt to income ratios of up to 45% of the loan applicant's gross monthly income. The new DU guidelines call for more conservative debt ratios. The exact debt ratio will be determined based upon the applicant's credit scores and other risk factors. Non-Automated Underwriting guidelines will typically allow for no more than 36% of the loan applicants gross monthly income.

Mortgage Delinquencies: An applicant who has been no more than 60 days late on their mortgage in the last 12 months is "Ineligible" for loan approval, where previous guidelines allowed for a "Refer with Caution". The new changes apply to manually underwritten loans as well.

Foreclosures: loan applicants who have a previous foreclosure must wait a minimum of 5 years AFTER the foreclosure was satisfied, unless extenuating circumstances existed, which would allow a minimum of 3 years for consideration. Applicants will be required to put down a minimum of 10% AND have a minimum middle credit score of 680. Applicants applying for a cash-out refinance will be required to wait a minimum of 7 years after the foreclosure is satisfied to obtain a conventional mortgage loan.

Bankruptcies: Applicants who have filed for bankruptcy in the last 24 months or a bankruptcy that is not yet discharged regardless of the bankruptcy filing date are no longer eligible, whereas previous guidelines for consideration for applicants with compensating factors.

Cash out Refinances: Loan applicants with credit scores below 700 can expect to pay a minimum of 1 point for mortgage loans using more than 80% of the property's appraised value. Lower credit scores coupled with higher loan to value loans will require loan applicants to pay as much as 4 points.

Although Fannie Mae and Freddie Mac are tightening up on their underwriting guidelines, there are still several very viable financing options that are more forgiving with credit issues, credit scores, and debt to income ratios. FHA mortgage loans are growing in popularity, making it possible for applicants to qualify for financing with more liberal underwriting guidelines. And there are still several loan programs available that fall in line with Fannie Mae and Freddie Mac, offering higher loan to values and debt to income ratios.

For a FREE brochure offering tips on shopping for a mortgage as well as the many differences in mortgage loan programs, please call 941-206-6000.

Mike Sikorski, MBA, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Loss Mitigation Specialist

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Fl. 33952

Phone (941) 206-6000

Email: Mike@FloridaRealty.net

The loan approval that you receive today could fail to close due to the lack of follow through required by consumers and their loan officers as stipulated directly within the loan approval itself.

A loan approval contains several stipulations by a mortgage underwriter that requires the verification of a number of issues primarily dealing with income and credit. Failing to meet the stipulations of the loan approval EXACTLY as written in the loan approval will likely change your loan approval into a loan denial.

Job Loss or Job Change. Proving you have the ability to pay a loan back to a lender is probably the most important attribute to a loan approval. Losing your job before your loan closes is a serious setback that could cancel your loan approval automatically.

Even if you experience a change in your employment status, a mortgage loan underwriter will need to re-evaluate your entire loan application to ensure that you still qualify for the initial loan approval. A loss in income could result in a lower loan amount, which could require you to accept less money if you are refinancing a mortgage on your current home, or put down more money if you are purchasing a home. Worse yet, a loss in income will likely increase your debt to income ratios and likely disqualify you from the initial loan approval all together!

I have known several instances where consumers either changed employers or lost their jobs entirely, and failed to disclose this to their mortgage lender, thinking that no one will notice. Mortgage lenders will re-verify your employment up until the day of your loan actually closing, so it is highly advisable that you tell you are upfront about any change in your employment status. Failing to disclose a change in employment has caused many loan underwriters to turn a loan down automatically.

Failing to disclose a job change to your mortgage lender could result in lengthy delays to your loan approval getting to the closing table. Some loan underwriters may question why you failed to disclose a job loss or job change, viewing this as an attempt to deceive or defraud the mortgage lender, which could result in an immediate loan denial.

Low Credit Scores. The current real estate and mortgage crisis has caused many mortgage lenders to re-evaluate the risks they are willing to take with consumers whose credit scores are below 600. Several mortgage lenders are honoring some loan approvals with credit scores below 600, but there is no guarantee that the approval will be honored 30 days after the approval was initially offered. Applying for new credit while your loan is in process could also decrease your credit scores, potentially causing your loan approval to be denied.

Increased Consumer Debts. The purchase and finance of a new automobile or adding new credit cards while your loan is in process will likely change your debt to income ratios, making the loan you initially were approved for no longer affordable.

Excessive Monthly Housing Expenses. The monthly housing expenses calculated within your loan approval contain estimated costs for the principal and interest payment, as well as calculations for property taxes, hazard insurance, flood insurance, and mortgage insurance. The underwriter verifies these expenses, and depending on your debt to income ratios, cannot happen.

Failing To Lock In Your Interest Rate. Floating interest rates during a turbulent economy is a gamble almost not worth risking. Interest rates can change daily, and depending on various events happening worldwide, the interest rate for your loan approval could change rapidly, thus changing your loan approval as well.

Three of the items above are easily avoidable, if you follow through by taking the necessary steps to ensure that these issues do not occur:

*When you find a good interest rate, lock it in immediately. Most mortgage lenders will honor interest rate locks for 30 days, giving you sufficient time to process your mortgage loan and clear all conditions set forth by the mortgage loan underwriter.

*No Major Credit Purchases. Smart loan underwriters will pull an updated credit report just before your loan is set to close to make sure nothing dramatically has changed on your credit report. Avoid major credit purchases at all costs before your loan closes.

*Review Monthly Housing Expense Budget in Your Loan Approval. Verify the interest rate that you applied for is the same interest rate available for the loan approval you were given. Property tax calculations are based on worse case, so use the amount due March 31, not when discounts apply in November. New construction home purchases with property taxes levied on land only will be given an estimate of future property taxes based on similar homes in the area. Verify annual insurance premiums for any potential cost increases.

Consumers faced with the prospect of a job of a change in employment should strongly consider contacting their loan officer to verify that the original loan amount applied for is still possible; a loss in income will certainly have an effect on the original loan approval, and could require a loan approval for a lesser loan amount, or worse yet, a loan denial.

The loss of a job without a job to replace it will almost certainly require a loan denial.

Mortgage loan approvals can be very tricky, especially for those consumers who may run the risk of falling into any of the issues above. Knowing how to avoid these potential pitfalls will certainly create shorter path in getting to the closing table. Working with an experienced loan professional will certainly help you to accomplish this.

Mike Sikorski MBA, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Loss Mitigation Specialist

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Fl. 33952

941-206-6000

Mike@FloridaRealty.net