Ken "Yes You Can" Cook

As many of you have noticed, several emailed or called, I have not been very active from the mortgage standpoint for the last several weeks. Those of you who have known me for a while have known me as the outspoken, painfully honest lender from Novation Mortgage in Atlanta, Georgia.

After almost 9 years of holding the license, being the broker then the lender, then the broker, Novation Mortgage is closing our doors. Today, September 30, 2009, is our last day accepting loan applications. We have no regrets and outlasted all of our "direct competition" for what that's worth. We saw years where thousands of applications came in to our offices and we closed almost $1 Billion in home mortgages in Georgia alone.

As a lender we had the ability to close loans we may not otherwise have been able to close and as a broker we had the options to choose from a list of the best lenders in the nation. Our faithful relationships have been one of the reason we have made it two years longer than much of our competitors but unfortunately we can no longer service our clients because of the way the banks and big lenders are relating with brokers and smaller lenders and because of rules like HVCC and MDIA. Like them or not, agree with them or not, they are deal killers and are impeding the industry.

Hold still! I have interviewed with and met with many people over the last few weeks. Late night conversations with bankers out of California have been commonplace as have lunch meetings with local managers and Vice Presidents. Finally, I feel confident I have found a good home for my clients and my real estate relationships.

Midweek the first week of October I will announce the name of the company. In the mean time you can know that, should this deal consummate, by the end of the year they will be licensed in all 50 states and a federally chartered bank. Currently they are licensed in all the states I have been working in including Georgia, North Carolina, Florida and Texas as well as 23 others. The ones I know of for sure are Arizona, Arkansas, California, District of Columbia, Florida, Georgia, Iowa, Kansas, Louisiana, Maryland, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington.

In the mean time you have seen me writing about online marketing and that's not something I decided to "pick up since the market slowed down". That was my background until 2000 and one of the most important reasons NovaStar and Novation we successful. I will still be using my 20+ years experience of marketing and Internet development to help my industry partners be more successful. If you are an agent, appraiser or builder and we have not worked together call me and see what I can/will do for my strategic partners.

By Wednesday I'll be announcing the name of the new company and giving you regular updates of what can be done.

A good friend who has been in the business for many years asked a simple question of me today. It had mostly to do with credit score and what can be done. The answer was black and white - no room for gray - and his response was, "took the mortgage broker 3 months to figure that out. that's how long they tied up my listing!!!"

I have always given the truth even when the response truly does sting. When you give someone the facts and they say, "I'll just go somewhere else" or "well MY lender can ...". What I want to say is, "oh shutup you nitwit idiot" (because I'm human) but instead I say, "Best to you I wish you all the luck."

I can also tell you luck doesn't close loans. Neither do loan officers who lie to you, string you on and cost you time and resources. Not to mention end up pliffing off your customers.

I know for many years loan officers have "said anything to get the deal". I know this because I have had literally hundreds of people over the years come back to me, at or near closing or after the closing has been postponed umpteen times, saying, "You were right. They can't do what they promised." Of course the worst thing of all is when they promise you one thing, end up not being able to do it and countering with what I offered originally and you still going through with the deal ... that dignifies the way they treated you so they'll lie to the next person in hopes they'll settle for that treatment.

YOU CAN WALK AWAY AT THE CLOSING TABLE and the earth will not collapse around you. I know your agent wants their commission they have earned, the seller wants their money from the house they just skipped the last mortgage payment on and you have to be out of your rental house tomorrow. Guess what? You'll pay for that "bad" loan for many years so just calmly stand up, walk out, call the local lender who has an office you can drive to and go see them. Stop rewarding these liars for bad business.

Three common lies loan officers tell today:

1. I'm as busy as I have ever been
2. No problem I can get that done
3. We can close in two weeks (on a purchase)

Of course there are times when those are the correct answers. Here is a litmus test - if two or more experienced professionals give you one answer and the loan officer at mega-bank out in some state a thousand miles away tells you "sure, we can do that - we can do things nobody else can do" be very suspicious.

I have a sale closing coming up soon. Just after I locked the FHA rate at 5.25 (no dicount) on this purchase the father emailed and said "Everhome can do it for 4.75 with no discount and no origination". I knew that was not true because that rate was long gone. I also knew it wasn't true because that was about the best par rate ever and EVERYBODY gets paid. So I called Everhome and spoke with Jeff. Jeff was very helpful and curteous and laughed and said, "Sometimes the rates they advertise are a little outdated." I said, "Outdated? When did you ever do that rate with no points and no origination?" He said, "Me personally, never."

I used Everhome because I have the data to back it up in case somebody wants to challenge me on it. Not to throw Everhome under the bus because it is almost everyone who advertises (adverlieses) rates. If you see a rate or service advertised online you can almost certainly not believe it. Supposedly the FTC is taking care of that but I haven't heard anything lately. There are other names, too, who have promised the sky and couldn't even deliver a crack in the sidewalk.

BUT YOU DO IT TO YOURSELF - I know, I take the phone calls:

Me: "Thank you for calling Novation Mortgage, Georgia's FHA Loan Experts. This is Ken how may I help you?"
You: "I just want to see what your rates are today."
Me: "Fantastic, are you looking to purchase or refinance?"
You: "Uhm refinance. So what are your rates?"
Me: "Is this a home you are living in or an investment home?"
You: "Uhm it's the home I live in. What are your rates?"
Me: "That's great are you looking to take cash out or just rate and term?"
You: "For Pete's sake, dude! Just tell me your rates!!!"

What you just did was tell me nothing more than a lie was going to help you at all. What if you wanted cash out? Waht if you're looking for an FHA streamline? What if you want to go to a 15 year loan instead of a 30 or vice-versa?

RATES ARE SUBJECT to many variables. You need to be shopping for much MUCH more than the rate. So when you're really serious about service and cost that beats anyone you can name you're ready to deal with a mortgage professional and get the quality service you deserve. Or you can keep dealing with order taking operators at some mega-bank three states away. I digress.

So how are you to know?

Find someone you can trust in your LOCAL area.

Find someone who can give you CUSTOMER references (not just agent references).

Find someone who has a LENDER's LICENSE PERSONALLY (not crucial but helps).

No, it's not a joke. I came up with this idea and my friends Jason Crouch ("heck ya, let's do it") and Jeremy Blanton ("I'm all over it") kind of kicked me into gear with it when they jumped on board so quickly.

Times are tough and there is no denying it. Sure we can have "positive thoughts" and "draw in good energy" and one way of doing that is by joining Jason, Jeremy and myself along with thousands of others to put this into motion.

Instead of completely rewriting the hundreds of words already written please take just a moment and read the Social Media House website. Here are some excerpts ...

(Updated) I WILL SHAVE MY HEAD! If we raise $10,000 by Sunday, June 21 I will shave my head on YouTube! (If we raise $15,000 I will shave my face, too). If we raise $25,000 I will do it wearing an orange diaper with the Twitter bird drawn on my very white chest!

Here is what we are doing - we are going to restore this home to good living conditions. Once the renovation is complete we are going to advertise for people to recommend a family or individual who they believe deserves the opportunity to live rent and utility free for a maximum of one year in the home. We, the Social Media Community are going to prove to the world that we believe in giving. We believe in “paying it forward”.

Not only will we provide the home rent free but, provided donations are high enough, we will also pay generously toward the utilities. Since there are no or very limited management fees all contributions after the rehab will go directly to covering the costs of the home.

The home is already in my possession, rehab has already begun and we three are already itching to do the next one. Essentially we'll be helping someone or a family of someones to have a respite from the damage they have endured in this collapsing economy.

Who Will Live There?

Someone one of you recommends perhaps. You may have a family member or friend who has been devastated financially because of circumstances which blindsided them. They may have recently experienced a personal tragedy or be in greater need for some reason truly outside of their control.

The selection process is quite simple and I will detail it in another post. Submissions will be screened and you will be allowed to vote for the final candidates. For this first project we will accept applicants from local community and faith organizations. Selection will be blind meaning you won’t know anything about the people except why they are in a hardship. Since it is NOT a charitable organization there are a lot of hoops we will not have to jump through until it becomes a charitable organization but for complete fairness sake you will only see a few paragraphs about the people excluding names, ages, etc.

Who Will Not Live There?

Drug abusers, people abusers and anyone who is in their situation because of abuse of the system, self or others.

When Does This Happen?

Now. Right now. We must have the home ready for the back to school season in the even you select a family with school children. Target date for selecting the occupants is August 1 which is approaching rapidly! Meanwhile the renovation must be completed. I have already started but there is much more work to be done. We already have volunteers standing by to get it done.

Partners and Friends

We are working together with the Georgia Coalition to End Homelessness and the many institutions they serve. We will also accept applications from local faith based organizations as well as individuals. The most important criteria is that we find applicants who are not and have not been abusers of the system. Help us raise $25,000 on Twitter, Facebook and others as you see fit. All we need is 1000 people to give $25 each and the house will be finished and ready for people of greater need. Feel free to give as little or as much as you can.

For underwriting this project you will receive the following:

• Donations of $10 will receive a text link back to your URL from the Social Media House web pages.
  
• Donations of $25 will receive a 200x200 graphical link.
  
• Donations of $50 will receive an editable entry with graphics and text.
  
• Donations of $100 will receive an editable page and a mention on Social Media Edge Radio.
  
• Donations of $250 will receive an editable page and a 5 minute guest appearance on Social Media Edge Radio.
  
• Donations of $500 will receive a 25 megabyte blog account for 12 months, an editable page on the Social Media House web pages, and a 5 minute guest appearance on Social Media Edge Radio.
  
• Contributors who donate more than $1000 each will be promoted during the 2 hours plus of video including selection of the first recipient of the 12 months free living grant.
  
• If you want to name the project a contribution of $25,000 will get that done (the Your Name Project). Call for details, we’re flexible. You also get everything mentioned above
  
• If you want to name the home for 3 years (the Your Name House) a contribution of $50,000 and it’s yours to name plus you get everything mentioned above: hosting, radio show, project name and exclusive Major Sponsor credits on the video.

Video post production is being handled by Robert Lewis of The NBA Channel.

We have hashed and re-hashed what the First Time Home Buyer's Tax Credit (FTHBTC) is and is not. Some are still confused and I am not even about to breech that subject of whether or not it can be used as a down payment. If you look good in orange feel free to try that out yourself. What I do want to tell you is, as of this date, an indisputable fact:

If a buyer does not close on their first home before December 1, 2009 they will not be eligible for the Federal First Time Home Buyer's Tax Credit of up to $8000.

Mark These Words

In November of 2009 (this year) my phone, fax, email, copy machine, and front door will all get a work out of people having to close before the end of the month. Many of these people will miss the deadline because underwriting will get jammed, loan officers will be backed up and probably appraisers, title companies, closing attorneys, etc., will also likely be over loaded.

If You Are A Buyer

#1 - Before you even pick up the phone to call an agent call your local FHA lender. Local ... let me repeat that LOCAL. Nobody will be able to answer your questions more accurately and anticipate any bumps you may experience and you can drive to their office look them in the eyes if need be. Your agent may know some basics about prequalifying you but they do not know what the underwriting engines may say once your information has been input into the automated system.

#2 - Start making offers as soon as possible. I know everyone wants to close in 14 days but in today's economy and real estate market that is pretty much unreasonable. We have had purchases close in 28 days and we have also had them go over up to as long as 45 days mostly due to valuation issues. That's another thing you have to consider if the appraisal comes back lower than your offer you'll at least have to go back to the negotiation table with the sellers which could add another 2 weeks to the process.

If You Are An Agent

Most of us do not like to be "pushy" but your First Time Buyers are going to need to be helped along if they want to take advantage of this offer. Whatever you do, do NOT let your offers go over into November. I can all but guarantee you will miss the deadline. Beyond that you better not be calling any loan officer on November 15th pressuring them because I can guarantee they will be swamped trying to get all the late comers closed on time.

A Closing Word

Someone reading this post will be involved in a transaction with an FTHB who will not close in time and will not get their FTHBTC. Someone will want to blame it on the lender even though they waited until the last minute to submit. Between you and I you better have your full package including an executed and legible copy of the sales agreement to the lender before November 1, 2009.

Don't say you were not warned.

Scenario: Buyers find a home they really like in a neighborhood they love and the price is perfect. It just needs a few things like maybe a new roof or new HVAC system and they're in! Since it is either a bank REO or a distress sale there is no way the seller is going to make the repairs. Even though the total work needed is less than $35,000 the buyers (a) cannot get a loan approval because of the needed repairs and (b) don't have the money to do the work anyway.

Meet your friend, the buyer's friend, the seller's friend and my friend: 203k FHA Streamline Renovation Loan.

The 203k streamline has the same qualification factors and loan limits as a standard FHA loan. The "streamline", in this case, refers to the limited amount of rehab (maximum $35,000) and not the documentation to qualify as on an FHA streamline refinance 203b. Generally speaking, at least with my Novation Mortgage, the borrowers will need a minimum credit score of 620 (middle), sufficient income, 3.5% of the loan amount in down payment from their own funds or a qualified gift, and to be buying a primary residence.

The 203k streamline does work in conjunction with the Energy Efficient Mortgage (EEM) and is available to first time home buyers.

The one thing the 203k streamline does not like is structural repair.

"FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser."

This program is also permitted to be used in conjunction with HUD owned homes even the HUD $100 down purchases in Georgia and possibly other states.

When working with a 203k streamline mortgage it is important to work with a mortgage broker who has experience with the program and who can explain each "moving part" as you need to know. They take a little longer to close, require a little more patience and can be very rewarding to all parties involved.