Patrick Randles

Aside from writing mortgages for Tucsonans, I also own a small manufacturing company that my father started in 1957. A.E. Randles Company, Inc. builds automation equipment used mostly in food plants, but also for the golf ball industry, battery industry and hardware industry. Chocolate companies have been using our equipment for over 50 years to fold their boxes.

Our website is WWW.AERandles.com

In 1957, My father started his business by getting a patent on an egg carton. 17 patents and 50 years later, his brainchild continues to do business in the U.S., Canada and abroad.

We have built close to 2000 machines over the years and our client list includes Titleist Golf Balls, Good Humor-Breyer's Ice Cream, Energizer Batteries, ConAgra Foods, Flowers Bakery, Godiva Chocolatier, Owen's Country Sausage, Tyson Chicken, SC Johnson, Farmer John's Meats, JM Smucker Company, Maxfield's Candy, New England Confectionary Company (Necco), Callaway Golf, Kraft Foods and hundreds of others.

Our top seller is called a Tray & Carton Forming Machine. These machines erect boxes for production lines. They often make 50 boxes per minute, 24 hours per day, 350 plus days per year. It is easier to see what it does than to explain it. Here is the Youtube link.

http://www.youtube.com/watch?v=Gf0lTza1q9s

A lot of these applications are "stand alone" while others have additional pieces of equipment.

One such piece would be a carton closer. Once again, it is easier to watch than it is explain:

http://www.youtube.com/watch?v=R65ZwTi38Zc&NR=1

When my father finally retired in 2004, we brought in a new design engineer to update and advance our equipment. It took almost 2 years to design and manufacture the first machine but we did accomplish our goal. Here is the link to the video. http://www.youtube.com/watch?v=D3_QQcdnzxs

The beauty of this machine is that while in the development stages, we got enough interest that it was sold. It made it to one trade show in Chicago (McCormick Place), went home and was finalized for the customer. Most of our equipment is a standard machine customized for the end user while this machine will be more of an "off the shelf" machine that can run a wide range of sizes. We are always happy when a prototype doesn't collect dust. Over the years, we housed several of my father's projects which typically had price tags in excess of six figures. I used to joke that my Porsche 911 Turbo was sitting out on the warehouse floor in the shape of a "cartoning machine".

I have been in the mortgage business for 2 ½ years in order to ease the payroll burden on the company and transition to a new career, if necessary. As the market in the U.S. for capital equipment has tightened, small manufacturers such as A.E. Randles Company have to take measures in order to make it through tough times. We are currently working 5 days each week with a crew of 10 full time employees. The upside is we have jobs, orders and a large customer base. Hopefully, we can make it another 50 years and I can give this business to my children one day.

_____________________________

Patrick Randles

Sunstreet Mortgage, LLC

Tucson, AZ 85718

(520)850-7485

There are only a few ways to get into a home for little to nothing down these days. USDA Rural and FHA $100 HUD Repo program are two such programs.

While USDA Rural is a sweet program, it isn't for anyone who wants to live in the middle of town (thus the "Rural" moniker).

Here is the basis for the program:

Buyer must purchase a HUD home (Housing and Urban Development).

A HUD home is a foreclosure on a home that was insured by FHA (Federal Housing Administration).

• $100 down payment. Unbelievable.
• Buyer may be eligible for incentives provided by HUD (closing costs, perhaps?)
• 30 year fixed rates are available.

These homes are offered initially to folks looking for a primary residence for 10 days If the property does not sell within the specified period of time, the home will be offered to investors as well.

There are also "Good Neighbor Initiatives" available for folks such as teachers, firefighters and law enforcement.

To read more:http://www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.cfm

If you have questions, feel free to e-mail me or give me a call.

______________________

Patrick Randles

Sunstreet Mortgage, LLC.

Tucson, AZ

(520)850-7485

Recently I had a complex file. Not only did the client want to purchase a primary residence within close proximity to their current home, they intended to qualify based on income from notes receivable. They also had dividend and interest income that had declined substantially between 2007 and 2008. Their current home is listed for sale.

1. Residency Status

First of all, this property would not qualify as a primary residence. Nor as a 2nd residence. It qualifies as an investment property and we all know what that means. A big down payment and a higher interest rate. The end result is that the cllient needs to sell their existing home or at a minimum, have it under contract in order for a lender to consider the new property as a primary residence. Even this is hit and miss depending on the lender.

2. Notes Receivable as Income

From there, we struggled with what could be counted for income. The client had two notes receivable for land they had sold. Here is the rule: The note must have been in effect for 12 months. The client must be able to show receipt of these funds either through tax returns or bank statements and the kicker is that the payments must continue for 36 months from the date of the application.

One note was ongoing for the next 40 months and the other had 34 payments remaining. You can guess the result. Only one counts as income.

3.Interest and dividend income

According to conventional guidelines, an average of the last two years as shown on a tax return is what can be counted as income. Client will need to show that this income will be ongoing. (I.E.: they can't be using the funds for the down payment). The problem with this is 95% of Americans with such income had a huge decline between 2007 and 2008. We are finding that the lenders will take the lower of the two numbers if that is the case as opposed to the average. This can be often be the difference between an approval and a decline.

My Recommendation:

If you know your client has a complex financial situation including multiple properties, get them with your lender early. Tell them to bring their tax returns for the last 2 years so the loan officer can review their financial position. What your client puts down as income on the application may not be what an undwerwriter counts on their behalf. This can make all of the difference in the world to all parties involved.

It has been a while since stated income loans went away. It is my theory that there is a place for these loans and that this is a valid loan product. What I mean by that is that there is a formula out there that can make this offering profitable and have "acceptable" losses. Today we will talk about the why and the how.

As loan officers, there is often discussion of products that we would like have available. They include higher limits for conforming loans, zero or nearly nothing down products, 2nd mortgages to help the client avoud mortgage insurance and stated income products. Personally, a conservative version of a stated income loan and a higher conforming loan limit would help my clients and the real estate market in general.

Why?

The reason we need this product is that some percentage of qualified buyer's have been removed from the pool of eligible candidates. For the most part, these folks are not eligible to purchase a home or refinance an existing property. Under my proposal, these are candidates with high credit scores, cash flow and assets. What they are lacking is a tax return that reflects income. Small business owners in particular are notorious for taking every deduction available (and then some). Come the end of the year, their tax planner instructs them to make capital purchases, adjustments to inventories or balance sheets to reduce their tax liability (taxable income). The client fills out the application and when the underwriter reviews the tax returns, the loan is declined because either the debt ratios are too high or they show no income at all.

I have some examples that just don't make sense to me.

Example 1: Small business owner with a 2nd job. Client has an 800 credit score. College Degree. No debts other than a mortgage. Assets in excess of $500,000 including roughly $100,000 in cash. The business has been struggling for several years and after the loss, the client shows zero adjusted gross income. Ironically, not only does he have W-2's reflecting income in excess of $120,000 annually, he gets every dollar of tax withheld returned to him. Last year, he received checks in excess of $12,000. He can't refi his house. The part of this that kills me is any one of his hourly employees can go out and purchase a home or refinance an existing mortgage. If things really get bad at that business, who is more likely to lose their income: the hourly employee or the owner?

Example 2: CPA and financial planner. Looking to purchase a $400,000 home with 25% down. Had $130,000 in receipts last year and more the previous year. After expenses, he shows about $5,000 per month in income. Has a brokerage account with $600,000 in assets but has a line of credit against this account (balance is $200,000). This line of credit accrues interest but does not have a minimum payment. Fannie Mae guidelines require a minimum payment be assessed against his income. We work diligently to figure out a way to reduce his debt ratio. Can we pay off his car with a $7,000 balance to get the numbers in line? No. Since it is a lease, we aren't allowed to do this. Guess what? Client doesn't qualify for the loan.

The solution: Bring Stated Income Products back.

How?

Tighten these programs up.

1. Require 12 months worth of payments in reserve. If the payment (PITI) is $2,000, customer is required to have $24,000 in liquid assets. Cash. Not retirement funds and not something volatile like individual equities.

2. Require 20% or 25% down payment. I am a firm believer that folks with lots of money invested in something are more likely to find a way to keep payments current.

3. Require a 740 credit score. Minimum of 5 years credit history.

4. Require 5 years in the business

5. Allow assets to be "annuitized". Use a conservative rate of return such as 5%. This would allow retirees with assets back into the picture. Fannie Mae allowed this in the past, but for the most part, not any longer. There are exceptions.

6. Primary Residence only

7. Fixed rate products only- No ARMs.

8. Self Employed only- We don't want this product so a wage earner can say that he or she makes $10,000 per month in order to qualify for a home.

As a lender, I want each loan to make sense and feel confident that the client will have more than a reasonable chance of making their payments. If someone at Fannie Mae were being proactive, they would figure out a way to make these programs work again, thus helping the small business owner and the real estate market at the same time.

______________________

Patrick Randles

Sunstreet Mortgage, LLC

Tucson, AZ

(520)850-7485

As I approach my 40th birthday in November, I am trying to set some goals for the upcoming months. For over a year now, I have told myself that I would get back to my college weight of 185 pounds. I tipped the scale 2 weeks ago at 209 pounds. So I have set out to drop 24 pounds in the next 90 days. While we are at it, I will introduce you to a running friendly community, Oro Valley, AZ. It has been my home for 15 years.

I'll give you a few basics about Oro Valley:

Founded in 1974.

43,000 residents

7 miles north of Tucson, Arizona

Ranked #44 of "top 100 places to live and launch a business "by Fortune Small Business Magazine

Considered one of the Southwest's most affluent communities with the median family income being very high for the region.

To put some of this into context, I was a competitive high school cross country and track runner. I ran a mile in under four and 1/2 minutes on a few occasions, finishing fourth in the state meet my senior year. I weighed 149 pounds when I finished high school and I stood 6'4" tall. A stiff breeze may have knocked me over. See below.

Aside from the fact that I had yet to pass the 150 mark on the scale, aren't the shorts nice? My kids keep asking where my hair went.

22 years, no running, a car, a mortgage, a wife and 2 kids later, I am just a tad under 210 pounds. My shorts are better. My hair, not so much. At least I don't have to pay a barber.

When I gave up running, I picked up basketball. In college, we played against the University of Arizona players during the offseason from the late 80's into the early 90's. That was really a treat. I still pine for the days of Lute Olson, Sean Elliott and Steve Kerr. I loved to run full court for hours until I got into my thirties when I got glasses and the aches and pains were becoming an issue . I gave into a sport I had always called a "sissy sport"- golf.

Four years ago, I trained for 6 weeks and ran a 1/2 marathon here in Oro Valley. During that time, I dropped to 190 pounds and felt pretty good out on the road. I ran 1:35 over a hilly 13 mile course. Not too bad.

That brings us to 2009. For the past two weeks I have been hitting the road at 5 AM. Oro Valley has done a fantastic job of building biking and running trails that go for miles. Several even have mileage markers.

I am grinding through the miles and I can tell it is getting easier already. After my four miles this morning, I was at 203 pounds on the scale. Only 18 more to go.

Views from the jogging path.

I am not much of a dieter as I love all of the foods you aren't supposed to eat so this is the best option for me. I am looking forward to the challenge of dropping this weight before my 40th on November 3rd and I certainly enjoy the scenery of beautiful Oro Valley, AZ. It remains to be seen if I can work through the aches and pains and stay motivated long enough to get back to my college weight.

__________________________

Patrick Randles

Sunstreet Mortgage

Tucson, AZ 85718

(520)850-7485