Ken "Yes You Can" Cook

Unless you are facing or have faced foreclosure you may be astonished at what people go through - and leave behind - when they are facing foreclosure. To get an idea watch this short video then come back here.

If you are facing foreclosure there are so many things you can do. First you can contact Project Hope Now. It's a consulting group which will point you in many directions and even give some very good advice. They are a not-for-profit organization and you can get them at http://hopenow.com or by phoning 888-995-HOPE (4673).

When facing foreclosure people have a tendency to lose pride, lose hope and become depressed. Depression is powerful and can cause you to make some very wrong decision. One thing you NEVER want to do is to quit claim your property to a real estate investor (or anyone for that matter). This is almost always a scam. First of all chances are very high that you are "upside down" in your property which means you owe more than it is worth. Only a foolish investor will pay more than the current market value for most properties unless your property fits into the grander scheme. It's probably a 99.999% chance your property does not.

The scam there, often, is the scammer will get you to quit claim your property to them at which time they will rent it to a tenent. Instead of using the income and paying your payments like they promised they will pocket the funds and let the home go into foreclosure. They lose no skin and no sleep.

There are other scams and techniques you need to be familiar with and need to avoid. They all only just make bad matters worse.

Most importantly foreclosure does not sneak up on you. Reports indicate that as many as half or more of people who wind up foreclosed never even attempt to speak with the servicer or bank. There is no excuse for that. Even if they haven't been what you would consider "co-operative" at least tell them your situation, ask for a work-out, and try and save your credit if not your home.

I will talk to anyone facing foreclosure. I may be able to help. I may just be able to listen. Either way, I'm here. Call me on my dime at 866-946-0120 ext 101 - ask for Ken or email me anytime.

See you at the polls in November. I dare you to vote for inexperience in a time like this.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Here we go again.

Starting October 1, 2008 (that would be tomorrow if you are a timely subscriber) a major portion of HR3221 and other changes to FHA and other types of lender will go into effect. Now remember, FHA does not actually buy loans as do the GSEs Fannie Mae and Freddie Mac. In fact we have been taught that the FHA is the only government corporation that runs in the black using only funds generated by its own business. In other words it is not funded by tax payer dollars. We haven't heard a lot said about the liquidity, or illiquidity, of FHA during the last several weeks. But I digress.

We just finished a several month period where the FHASecure Refinance was supposed to have been king. FHA, in fact, claims hundreds of thousands of refinances using the FHA Secure yet I have read or heard testimony from not one person whom I know personally who closed one. Again, I digress.

The change on October 1 is the end of FHASecure and the inception of Hope For Homeowners. While I sit here waiting for a clear to close on my final seller funded (Nehemiah) down payment assisted FHA purchase I am answering emails in bunches from readers wanting to have more information about this new Hope For Homeowners. I am not going to pretend to have all the answers nor to presume the answers I have are what is actually going to occur - for many reasons, most of which I do not even yet know. Instead of treating this as an absolute like I did the FHA Secure I will operate under what we have been told and how we have been trained until I gain some actual experience.

What is Hope For Homeowners?

According to the official information Hope For Homeowners "will continue FHA's existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford". Of course this is also what FHA Secure claimed to "allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing".

While it all sounded good finding an investor to actually purchase the paper was a joke and getting FHA to offer any assistance there a waste of time. Some claimed to do hundreds or dozens and others just laughed. I heard Jim Beavers, one of the architects of the death of seller funded down payment assistance, whining because wholesale lenders and mortgage investors hadn't gotten behind the program. Then he issued sort of a "threat" and said, "If you didn't like FHASecure you're gonna hate Hope For Homeowners".

Well, Jim, they didn't. So it remains to be seen why anyone would want to participate in Hope. I mean from what I understand the value of the property is marked to market and any encumbrance above 90% of market value is expired. Our example for the remainder of this rather lengthy article will use an example of a borrower who owns a property which is currently valued at $185,000 but has a first mortgage of $190,000 and a second mortgage of $30,000 actively liened against it. Write that down somewhere if you need to as we move to answer our next questions.

For Whom is Hope For Homeowners?

Now that you have a basic concept of what Hope is, along with a few dozen questions you did not have prior to reading the first few paragraphs, we can examine that same bit of information provided by HUD, "will continue FHA's existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford". We will simply take that statement apart and see who we can identify.

"Struggling families" is the first that is mentioned. I already know you do not have to be a family but you do need to be an American citizen or legal resident.

"Trapped in mortgages they currently cannot afford" could be ambiguous but you know there are guidelines. Without getting technical let's hit a couple of bullet points from HUD:

* Their mortgage must have originated on or before January 1, 2008;
* Their mortgage debt-to-income must be at least 31 percent;
* They cannot afford their current loan;
* They did not intentionally miss mortgage payments; and
* They do not own second homes.

When FHASecure first came out HUD wanted the homeowner to have missed a mortgage payment, or more than one, but only after the adjustable rate had increased and they could not have been late on any other payments. Hope has some differences but one similarity is that the borrower must be qualified for the loan with the exception of mortgage troubles. In other words bad credit borrowers because they have a slow payment history will not qualify.

Requiring the MORTGAGE DTI to be above 30% just goes inline with capping MDTI (lower ratio) in the same range as qualifying for an FHA loan to begin with except in this case having an MDTI higher than the normal requirement would be a key indicator that the mortgage is to heavy of a debt load for the homeowner and a signal they really need help.

To answer "for whom" it would be simple to say anyone who could qualify for an FHA insured home loan if their HDTI was less than 31% but who are in a mortgage that breaks the ceiling for their debt load. (If any of this is difficult to understand, confusing or you just have questions you can email me - I'm up most of the night - or phone me at 678-946-0100 during normal business hours EST).

How Can You Take Advantage of Hope For Home Owners?

Do a search for an APPROVED FHA Lender who is local to your area or region. Yes, there are unapproved loan officers making FHA loans and by using one you will almost certainly over pay for their services, you will not have the protection of the Federal Government should they hoodwink you, and they do not have direct access to all of the tools and information companies like my Novation Mortgage in Atlanta, Georgia. Check your state and if we are licensed and approved there I will be more than happy to work for you.

Although there are dozens of national advertisers, email spammers, flashing spinning website buzzy buttons, and even telemarketing calls, I strongly urge you to work with a local lender or broker from your area. Chances are the pricing between Ditech and Corner Mortgage will be equal or slightly different one direction or the other. As an example we normally beat Ditech, Wells Fargo and Countrywide with our overall closing costs and rates. If you do not know how to shop for a mortgage send me an email and I will send you a PDF flier that alerts you to tricks used by everyone but most "the big guys" to get you to participate with them.

Final Word

Don't wait around and see how it goes. This program is scheduled to run into 2011 but with the economy like it is who knows what changes could happen earlier.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

NOVATION MORTGAGE 678-946-0100 or 866-946-0120

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

It was June 18th and Europe was at war. The French army had marched through the region and wrecked havoc on many cities. The year was 1815. Under the leadership of Napolean they army marched against the "aggressor nations" as they were attempting to mobilize for an assault on Paris. In a town called Waterloo they found a great surprise: the liberators may have appeared unprepared but they delivered the final blow to Napolean's army.

The British suffered huge losses in the battle.

A financial market panic caused a liquidity problem.

Baron von Rothschild saw an opportunity and uttered his now famous and oft quoted (and misquoted) statement: "Buy when there is blood in the streets, even if the blood is your own." We call it contrarian investing. It is my personal style of investing and today, there is much blood in our streets. It is the blood of the American tax dollar - it is our own blood.

Is real estate a safe investment?

Historically speaking real estate is a sound investment. Most of all it is lasting. As a general rule real estate doesn't fall into the sea - although that does happen. Stocks go up and down in value, generally require all cash purposes, generally are not under your control, cannot be improved for better value, generally cannot be leased or tenant occupied.

Real estate can be all of the above. Financed, improved, let to tenants.

Many people do not know that you can hold real estate in your self-managed retirement accounts. IRA real estate investing has kicked up a few notches as of late and there is much opportunity on the market today which make this a very valuable prospect. Single and multi-family housing as well as commercial properties have dropped in value significantly nation wide.

While many people are unaware of this tactic at all most are unaware that your retirement account can be the source of the down payment and it can be the mortgagor to finance properties held in it. Yes, it is a fact. With as little as 30% down payment coming from your self-directed retirement account you can achieve a long term, conventional style loan, to acquire and hold properties in your retirement account.

The loans are slower to get closed but just about as fast to get approved. They are made to the IRA and the rates are very reasonable for non-recourse investment grade loans.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

When some people say "creative finance" they mean "mortgage fraud". You do it and I catch you and you pay. When I say "creative finance" I mean getting financing by thinking outside of the box but within the law. To help you get focused let's first give some examples of mortgage fraud that some people would class, wrongly, as creative finance:

1. Making a false statement on your mortgage application. This would include saying you occupy or intend to occupy the property as your primary. It would also include overstating your income, assets or employment. A very common piece of mortgage fraud is for an investor to say they receive $XXXX in rent every month when in actuality they receive $XXZZ per month.

2. Providing false income documents. These are very easy to disprove today but people still try them. They think because they go online and buy them from someone online there is some magic way to make them harder to detect. Uhm wrong.

3. Providing false tax documents. Yes we actually got a set of 1040's that were completely falisified. When the Loan Officer asked the borrower to sign a 4506T she asked to speak with me. When I asked her if it would be a problem she said, "Well, yeah." So she left and I sent her file to Agent Law at the Atlanta Field Office.

4. Borrowing the down payment from some other source and indicating it has not been borrowed. Which leads us to the correct use of borrowed down payment.

One great form of creative financing is to borrow your down payment from a friend, family member, your retirement account or any other source. If the money is borrowed there will need to be a letter explaining how it is to be repaid. If you borrow it from a family member they can ask for repayment however including "when the propery is finally sold or refinanced" or "never, it is a gift". The latter is what is called a "gift letter".

Most people falsely believe than you cannot borrow your down payment when in fact you can borrow your down payment. The catch comes when adding the repayment to your debt-to-income (DTI) ratio. If there is no repayment required or repayment is required when you sell or refinance then it does not affect your debt-to-income ratio. If you borrow from your retirement account and your payments back to your account are, for example, $100 per month then that 100 must be added to your debt. So long as your DTI still fits into the guidelines of the loan you will still get your approval.

Another from of creative financing I am seeing today includes trading in your current house. Many builders are accepting trade-ins and allowing a portion of the equity to offset the purchase price. A builder friend/client in my area recently accepted the equity of a home as a trade in and the balance in cash. The builder ended up with a lower monthly payment ona vacant home and sold one with a higher monthly payment (his construction loan) and claimed a sale at nearly full retail.

Government housing grants and down payment programs. While seller funded DPA has been attacked and at least dealt a temporary defeat other less regulated forms of DPA still exist. Talk with your local mortgage broker (not bank or direct lender but broker) about your options.

Quit claim transfer. Although FNMA and FHLMC demanded an end to what they call "wrap around" mortgages or "subject to" deals the most important thing to them today is to get repaid. While the "could" call the not due through the process of activating the Due On Sale Clause (often referred to in error as the acceleration clause) it is highly unlikely they will do so in the current financial environment. Contact a local real estate attorney about how to structure these.

Seller financing. If the seller has the ability to offer true financing which means the property is titled in your name as the mortgagee and the seller becomes the mortgagor then you are doing a true seller finance. Many builders and big volume investors are in the position to do this today.

Family loan. If you are from a large family or have a family member with the means they may be able to purchase the property for cash (at a fantastic deal I may add) and let you repay them on terms just like a bank or lender would do.

Rent to own/Lease to own. I always recommend having a reputable real estate attorney look over the terms of the lease with you to make sure you are getting what you think. Unfortunately a trick of many investors is to wrap you up so tightly into a lease with an option to purchase that you lose your deposit and your tenancy at the end of the first term.

Why did I say call a broker instead of a bank or lender? Believe it or not in many states the broker is more regulated than the bank or lender. In most states, for example, lenders and banks can get a "pass" for being a federally chartered institution and their employees, too, are exempted. Most important to you at the borrower level is that once a lender or bank has said "no" that's the end of the line. Go to another lender or banker and start all over. With a broker the switch to a different investor can be seamless. There is also a false belief that all brokers cost more than all banks or lenders because brokers are "middle men". There is no basis in truth and a study of over 1,000,000 closed loans bears this out.

Whatever you do, shop. If your agent has recommended only one lender find the other two on your own. But do your homework and become an educated borrower. Many national advertisers are well known in the industry for bait and switch tactics. Read this recent post for a little insight there.

There are ways other than calling a broker, bank or lender to get financing that are ethical and legal. Stick to the law and ethics and you won't have to wonder who is calling or knocking on your door.

See you at the polls in November. I dare you to vote for inexperience in a time like this.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

It happens. And if you don't have a very firm grasp of the onion like layers of the loan process it is very difficult to understand why. Therefore to begin let's look at the steps in the process of a loan:

1. Loan Officer accepts an application from the borrower. In the case of a local broker the LO is the person who will be your liaison for the duration of your file. For the national behemoths the LO is more like an operator who just accepts your order.

2. Your credit history is examined and a preliminary credit decision is issued. While this is not your approval it is erroneously referred to as an approval even by people in the industry to get you on the hook. When you hear anyone say you can get an approval in as little as 15 minutes you should hear the sound of the hook sinking into your mouth. What you actually get at this time is a "pre-qualification". It's not worthless but it's not worth a loan ... yet.

3. Your file, now known as a "1003 and credit" is exported into an underwriting engine either through a third party provider or inhouse. Most underwriting engines are provided by a mortgage insurance company, GSE or government program. A "conditional approval" is then received or some other level of approval or denial is issued. This approval is better than a pre-qualification but in the vast majority of cases this is still not good enough to let you stop working (as a borrower).

4. You are given a list of "stips" which are stipulations required to fulfill the approval. If you and your property can meet the stipulations of the approval then all is good! In about 40% of the files on people with good credit, income and assets, and a property acceptable you'll get to closing with no bumps. If, however, even one stip cannot be "cleared" the file may be "dead". Dead means the approval turns into a denial.

From step one to step four as many as 23 people touch the loan. No your loan officer does not work alone nor do they disappear when you hang up the phone only to reconstitute on demand when you need to speak with them. Just as real estate agents don't actually live at the Open House and you don't beam into existence just to do your job. The long road leads to the point that there are many "moving parts" to a loan most agents aren't even aware of. That is not a slam on them just like it is not a slam on most loan officers to say they have no idea how much work the average real estate transaction requires on the sales side.

A great rule of thumb is to wait for the words "Clear To Close". If you hear those words before you, as a borrower, have sent copies of your paystubs or tax returns, copies of your bank statements or an appraisal has been done then dismiss them as rumor and tell your loan officer/processor/CSR you don't believe it is possible to have a clear to close at this point. Exceptions include refinancing at the same lender where your existing loan is or refinancing from an FHA loan to an FHA loan.

Of course there are always exceptions and a good mortgage broker will often do a lot of things you never know about in the course of getting your loan to close. They may take care of some of the stips on their end without your input or knowledge. Yes I *always* recommend dealing with a broker or a lender who also brokers. Why? A denial from a lender like Countrywide or Wells Fargo is a denial for you. A broker or brokering lender, like my Novation Mortgage (licensed to do home loans in Georgia and Florida and commercial nationwide hint hint) can simply move your "file" to the next investor and get it closed without you ever knowing provided the interest rate does not change. A high volume broker can save you money, time and much stress.

See you at the polls in November. I dare you to vote for inexperience in a time like this.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender