Be Scared! Be very very Scared!

On the theme of Halloween, I feel that it's a perfect time to talk about being scared in the real estate industry on a daily basis.  Scared of what?  Scared of going to jail of course!

I'm bringing this up because today, I may have lost a realtor partner, but I gained my freedom!

This conversation is becoming more and more prevalant and I'm only trying to EDUCATE those that don't realize that you can GO TO JAIL for things that you may have done in the past few years without blinking an eye.

EXAMPLE # 1 - REALTOR, BUYER AND MORTGAGE REP CAN GO TO JAIL

I was asked from one of my realtors to qualify a buyer a few months ago.  Unfortunately he is in the process of losing his home and would not qualify for a new mortgage at this time.  Today I received a call from the same agent who apparently had continued to show him properties over the following weeks (un- benounced to me) and was ready to put an offer in and needed a prequal letter from me.  And I was told not to worry because his daughter was going to buy it in her name.

WHAT?  Hold the phone mable!

So I request the information from the daughter only to find out that she herself lost her home to foreclosure a few years ago.  Now, she WAS able to obtain a new mortgage under FHA financing because of the time period that passed from her foreclosure, however..........obtaining an FHA loan would mean an OWNER OCCUPIED mortgage and she currently lived and worked 40+ miles away from the home her father wanted to buy (Los Angeles traffic which could be a 2.5-3 hour commute each way).

Dear Mr. Realtor....regardless of the fact that I KNOW she is not going to occupy the residence, even if i WANTED to pretend i didn't know, (which I won't do)  there is NO WAY an underwriter would BELIEVE that she was going to move and turn her 10 minute commute to work to a possible 6 hour daily commute.  And by the way, this is considered MORTGAGE FRAUD and YOU could go to jail along with me.  Mr. Realtor said, no I can't, I would just say that she TOLD me she was going to live there, so i didn't know anything.   You are defrauding the bank. This is OCCUPANCY fraud.

THIS IS WHERE MOST REALTORS ARE WRONG.......did you know that the FBI is sending agents to doc signings to investigate fraud on the spot?  Yes, you heard me right.  Did you know that if you play dumb, not only would the judge say "It's your JOB to know!", the FBI would go through all your emails and files to prove that you did know?  And that you would be prosecuted for conspiracy of mortgage fraud?  Do you look good in orange?  I sure don't.!

If you don't believe that the FBI is investigating in your backyard, here are just a few more examples.

EXAMPLE # 2  - PARALEGAL GOES TO  JAIL

Paralegal sentenced to 3 years in prison for her part in mortgage fraud:  her part? Preparing loan documents and doing doc signings for files that turned out to be fraudelent.  Full story HERE

EXAMPLE # 3. - BUYERS FACE 3 YEARS IN JAIL

Mesa police officer and wife arrested on mortgage fraud for pretending to separate in order to obtain a loan modification on their home in order to purchase a bigger home together.  They were facing 3 years in prison. He was forced to resign and she accepted a plea and they are both on probation.  .. Full story HERE 

And this.....have you seen America's most wanted .....how's this one look for your HEADSHOT? 

Yes there are more sophisticated fraud schemes, but the next time you think that things just don't seem right, it's your job to LOOK deeper and find the red flags...becaue IT'S YOUR JOB TO KNOW. 

So I say, LOSE a DEAL and SAVE your FREEDOM!

I will be keeping my realtors up to date with future arrests only to EDUCATE and PROTECT them with their careers, and both of our FREEDOM.

Just remember, no matter how bad you need the money.....it's not worth losing your freedom, your license, career, family, reputation and going to jail.  Think twice.....and save  your career hence your life!

Are you DEVOTED or DESPERATE?

I have been on both sides of this equation and I have struggled with boundaries when business gets slow.  But sometimes people in our industry cause the public to not respect our industry.

I just saw someone in our industry post on facebook that they were just heading to their clients house for an appt at 10:30 at night.  And proceeded to say it was because they would do anything (ethical and legal) for their client and very proud of it.

Hmmmm   Here is where the PERCEPTION can get completely crazy from one person to the next.

I know it depends on the particular circumstances but, for some in this industry, this client better be buying a multi- million dollar property who works 16 hour days and this is the ONLY time they can meet.

Or others, it might be a personal friend that you don’t mind going “out of your way”  to meet with and do a favor.  Hmmmm sounds crazy huh?

But I want to point out a different point of view………

I call one of the top attorney’s in town to defend me in a lawsuit that I couldn’t avoid…….he is well known and I can’t get an appointment for 3 weeks.   Some people’s first thought is…..he’s damn good and worth the wait……right?  Wrong?   Just a thought….

I call a second attorney that was referred to me and he says he would do anything to help me, even come to my house after my husband gets home at 10 pm………….hmmmm  Would you consider him a go getter or Attorney with no clients that is desperate for business?  Again just a thought.

I need to see a doctor (nothing urgent but serious enough for a specialist)…..I call two that were referred to me…..One schedules an appointment for a week from today, the other says he’ll come to my house today………..opinions please!

It’s no secret that this business has become very difficult, but are you compromising your professionalism out of desperation?  My mentor once told me to make a schedule and stick to it the best you can.  Obviously there will be those times you can't but If you take Sundays off for family, make family  important enough to keep that day for them.  If you take control and give the client the options that you are available, 99% of the time, they will pick one of those times. And you will continue to be in control of your business and your life.

I have continued this practice even in today’s market and when I say “Sunday is my day off, how about Monday?” I have never lost a client.  As a matter of fact, I sometimes add and we are going to the beach. This starts a new conversation as to which one and have fun!  Now on another note, I’m a serial texter and my clients can always get a hold of me and ask questions at all waking hours.

So think of what your client might be thinking the next time you JUMP and ask how high on the way up....  

So my voite is.........don't dumb down the business and keep it real!

My loan officer talked a big game!  But they couldn’t  pass the Mortgage exam!

Lawyers pass the BAR exams in order to practice law.

Accountants, CPA’s and tax attorney’s all pass different tests in order to obtain their designations.

Dentists, Doctors and Surgeons pass a multitude of exams in order to practice medicine.

And NOW loan officers must pass extensive exams in order to originate loans!

IS YOUR LOAN OFFICER LICENSED OR JUST REGISTERED? 

What is the Difference?

There’s a lot of alphabet soup out there when it comes to registration and licensing.  DRE, DOC, NMLS etc.  What does it all mean? If a loan officer has their real estate license, does that mean they are LICENSED?  Nope! Not under the NMLS !

Effective July 1, 2010 all Mortgage Bankers and Mortgage Brokers Across the country will require their loan originators to be licensed through the NMLS (Nationwide Mortgage Licensing System) 

However! Based on an exemption in the laws, the big Interstate Chartered Banks do not require their loan originator working for a big bank such as Chase, Wells Fargo and Bank of America to be licensed. Currently they only require them to be REGISTERED with the registry.

The S.A.F.E. Act states:  The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the S.A.F.E. Act) requires the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and the Farm Credit Administration (collectively, the Agencies) to jointly develop and maintain a Federal registration system for individual employees of Agency-regulated institutions who engage in the business of residential mortgage loan origination. The statute requires these individual mortgage loan originators to be registered with the Nationwide Mortgage Licensing System and Registry (Registry), a database established previously by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the States.

Is your loan officer licensed?  You can find out here:

http://www.nmlsconsumeraccess.org/

 In order to get LICENSED, loan officers (not working for a Chartered Bank)  must go through extensive testing, background and credit report checks etc.

Here is a chart to show the differences between what is involved in getting licensed. Please note, that some Chartered banks require internal background or credit checks as they would ALL employees.  This only applies to the NMLS requirements for loan officers.

.I’ve come across many loan officers that talk a big game.  They bad mouth other loan officers, they rip their articles apart, they make it sound as though they are the only game in town.  Yet, I’ve recently looked up these bully’s only to find that they were unlicensed and unable to pass the National and state exams.

If you fail, you must wait 30 days to test again, if you fail a second time, you must wait another 30 days, and a third time?  You guessed it, you must wait another 30 days.  If you fail the 4^th time, you must wait to retest and  are unable to originate loans for 6 months!

I’ve heard of loan officers that have failed and are somehow still originating loans!  How Is this possible?  Well it all comes down to enforcement.  These loan officers are most likely putting the loan applications in another loan officers name (someone who is licensed) and they are probably working out a commission deal illegally under the table. 

So if you have applied for a loan, and the last page of the application is not signed, or is signed by a name you have never heard of?   Most likely that loan officer you applied with is not licenced and was unable to pass the tests or background checks.

DO you want to know of your loan officer is licensed?

So, the next time you speak with a loan officer that is talking a big game. 

Check to see if they have their NMLS license and make your own decision!

NMLS# 254430

No Cost Loans

I recently had a client mention that they saw an advertisement from one of the big well known banks about a no cost refinance.  How does this work?  Why would some companies charge fees to purchase or refinance and others do not?

Well it’s quite simple.  They ARE charging you, but you may not realize it.

To obtain a loan for the purchase of a home or to refinance your current loan there are costs involved to all the parties doing the work.  It costs everyone money….. Period.    There are fees for processing, underwriting, appraisals, title, recording etc. (for a complete breakdown, contact a trusted advisor)

Whether or not you realize you are paying for these fees is the question.  Do you really think any company would just give you a product or loan for free when it costs them money to do it?

That is what they advertise, and I’m going to explain how it’s done.

There are two ways for the bank/mortgage company to do this.  See examples below based on a 400,000 loan with $3500 in fees.  (Fees are estimates only, without an impound account and will vary depending on your particular scenario)

1.        Normal 400,000 loan,  with you paying the costs out of pocket

2.       Same loan, adding the costs to the loan amount.

3.       Same loan, keeping the loan amount the same (making you think it’s free) but adding the costs to the interest rate.

So which is the best way to go?  Well it depends on your situation.  If you don’t have the funds to pay the costs up front to keep your payments the lowest, then I would recommend the second option.  We would then add the costs to the new loan amount.  The third option, which is what most banks will advertise as a no cost loan (Keeping your loan amount the same) is the most costly loan because the interest is higher.

See below the difference in interest you would pay over the 30 year term.  The overall cost from paying the costs out of pocket isn’t much different than adding it to your loan amount although the payments are slightly higher.  But adding it to the interest is the highest overall cost. Although you are borrowing the same loan amount, the interest in the long run is much more over the long term.

So in conclusion, is it really a no cost refinance?  I think NOT!

So that old saying of……If it seems too good to be true?.......you know the rest……

This is why it’s imperative to deal with a professional mortgage consultant like the mortgage myth busters who will give you a written a loan analysis of your situation so that you can make an educated decision and know exactly what you are getting before you proceed.

Show me your assets!  Yep that's what I said. 

I'm talking about your assets to close!

If you or anyone you know is planning on buying a home, you need to read this. 

 In addition to a credit check, verifying your income and inspecting the property, your mortgage company will be verifying your money.

 Stated income and stated asset loans have pretty much fallen off the face of the earth, and investors have gotten stricter when it comes to verifying your assets.

Now what is going to be verified?   Since things have gotten very challenging, it's best to assume that they will verify anything and everything regarding checking, savings and retirement accounts for the previous 2 months.  We will need to show exactly where all the money is coming from for the down payment and closing costs.  Any large deposits must be documented.    In the past, some investors would consider anything over 1,000 as large.  Now it's anything over and above your normal payroll/income deposits.  We will request the last two months bank statements when you apply and you will need to keep us updated throughout the process as you receive more statements.  

If you are applying for an FHA loan, you are allowed to get a gift from a family member for the down payment and/or closing costs.  However, it must be fully documented with a gift letter, and proof of transfer from the donors account to your account.  The most recent change is that FHA is requiring us to document any large deposits that may be in the DONORS account prior to the transfer of the gift.  So you can no longer give cash to your brother and have him gift it back to you because there is an obvious cash deposit right before the transfer. If you do have cash or "mattress money" and don't plan on purchasing for more than 3 months or more, deposit it into your account as soon as possible so that it's been there for at least 90 days before you need to apply for the loan.

If you are applying for a conventional loan, you will need to document that 5% of the sale price is from YOUR OWN funds which is being used for the down payment.  You must also show where the money is coming from for the closing costs (which can be a gift) PLUS two months reserves.  Reserves are to show that you have at least two months mortgage payments in the bank after you purchase the home.  Again, any large deposits must be fully documented.

If you are applying for a VA loan, there is no down payment required, but the closing costs must be documented and can be a gift or paid for by the seller.

In the past, as long as we DOCUMENTED that you had the funds, you could just show up with the money from anywhere else and it wasn't questioned.  Now, we need to show the actual withdrawal from the exact same accounts that we verified when you go to closing.  For example, if we verified 10,000 in your savings and 2,000 in your checking and you wired 12,000 from your savings because you made a transfer in order to wire for closing?  You will need to show the transfer from checking to savings before the loan can fund.

Sellers contributions towards closing costs can be used, but vary from loan to loan.  Check with your loan officer at the time of pre-qualification.

So although it may sound daunting, as long as you are educated up front and have all your money in place, it won't be so difficult down the road.    The best thing to do is get it in a savings account and keep it there!  Don't be transferring money back and forth and driving your mortgage company nuts trying to figure it all out like some psychopuzzle.

I was in foreclosure and got approved for a mortgage?

No way! That's impossible right?  But it's true!  I was drowning in debt, my medical bills were through the roof and my home was in the process of being foreclosed on.  I didn't even have to prove income or have them run my credit report!

This is a real life scenario of a 78 year old widow with a home mortgage of 198,000 that was currently in foreclosure.

Her financial planner suggested that she contact Skyline Financial Corp. who offered her a reverse mortgage.  Her home was worth 470,000 and we were able to approve her for a mortgage of 320,540.00.  She used this new mortgage to pay off the old mortgage, cover the closing costs of 3,000 and deposit $119,000 in her bank to cover medical bills and have plenty for future living expenses.

A recent Wall Street Journal article reported that high levels of credit card debt and mounting health care bills have contributed to bankruptcies among 55+ year old which are at an all time high.

A reverse mortgage allows a  borrower who is 62 years or older to draw a certain amount of equity out of their home.  They have the choice to take it as a lump sum or as a line of credit with monthly installments to them.  They do not have to make any monthly payments and they do not have to qualify with income or credit.  This loan is based only on the borrower's age and equity in the home.

This is a great way to help someone who is facing losing their home, who couldn't get a home equity line of credit because they couldn't afford to pay it back.  There are many people that are unaware this program even exists.  It's our job to educate and help people that are in a bad situation, and this program could help change their life.

You want the facts, and nothing but the facts?  I'm proud to be a part of this group that is helping clients, realtors and anyone in the real estate/mortgage industry get the right answers!

Welcome Drew!  I'm looking forward to working with you in helping to educate the industry and the public on the facts. It's a phenomenal group that not only keeps us all in the loop but keeps us laughing therefore not going loopy!  lol

One Year in Jail and a $10,000.00 fine?

You heard it!  That is the price for mortgage fraud.

I don't know about you, but my red hair clashes with orange!

This is serious folks!  How many of you have had clients who were CLEARLY buying an investment property, but obtained financing as an owner occupied home?  Ok none of us want to admit it, but let's be honest.  This happened ramp-idly in the past, but NO MORE!  If caught, it comes with a mandatory $10,000.00 fine and one year in jail.

You can not as the realtor say to the judge, "But I didn't know!"  Because the judge will say "It's your job to know". 

And it is.  It's our job as mortgage professionals and realtors to ask the appropriate questions, to structure the deals properly. It's not only our job to protect the banks against the risk of foreclosure, but it protects all of us and our economy.  If the last few years doesn't convince you of that, I don't know what else can.  Oh yeah...3 square meals.

I just today received a phone call from an investor who said "off the record, my partner has never owned a home".  I was wondering if we could put it in his name."  I said, Of course you can, but "Off the record, it comes with a $10,000 fine and 1 year in jail, so I'm not willing to be a party to that."  He immediately said, "never mind I have the 20% down".  I thought to myself....." well that was easy"  

There are many different ways to involve yourself in mortgage fraud and just because you dance around the topic and don't put anything in writing, doesn't mean you aren't privy to what is going on.  Let's just say it like it is.....

IT"S MORTGAGE FRAUD! 

 And if you don't think they are looking for and prosecuting all parties, read the mortgage fraud blog and see up to date instances.

So a word to the wise.  Those of us that have hung in there and protected our careers in this industry.

  Let's continue to "do the right thing".

What's the deal? I thought FHA waived the 90 day property flip rule?

In January, I posted a blog FHA 90 day flip rule lifted.   This blog gave some pertinent details  about alot of the guidelines surrounding the waiver.  And this is just more proof that active rain is a great place for us to share information amongst industry professionals. 

The reason I say this is because I have recently had a situation surrounding a property flip.  I got that excited call from the realtor.  They got the house!  I'll send you the contracts as soon as I get them back.  I proceed to meet with the clients for 2 hours until 10:30 at night going over figures and disclosures.  I lock the rate in the next morning and proceed to spend hours uploading the entire file to turn in.

One day later, I get a call from the realtor saying she is faxing me the contract - oh and by the way, the listing agent said I should mention something about the seller buying the house at auction last month because it might change things for you?  I hope not.

It might change things?  IT CHANGES EVERYTHING!  You see, not all investors have adopted the flip rule.  And the ones that did, have their own guidelines and/or overlays.  It changed the investor I could lock it with, the market was tanking and I already told them I got them a great rate, I had to completely Re-disclose 70 pages and another two hours with my engineer first time buyer.  If I began to start to give you ALL the different combined requirements all the different investors that actually WILL do a flip - it would look like this...

 So I won't bother.  I am just going to advise that you check every property profile on every FHA deal you have and if the deed was transferred in the last 90 days from your contract, check with your lender! And if they require a second home inspection - ALL repairs must be done whether or not the buyer and seller agreed upon just a few. Find out exactly what the requirements will be up front and you will not be caught off guard.

So although there are some myths about FHA mortgages it is still a wonderful way for first time buyers to get into a home.  Just stay up to date on the changes and rules and you will be able to be the expert your buyers needs.

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