We Received Your Payments On Time but are Foreclosing Anyway!

I'm really seeing something wierd going on here:

• Mortgage Compaines blowing up. 
• Mortgage companies thriving. 

Clients are making the shift.  Big box lenders are so big that they're collapsing on top of their own clients. 

I'm dealing with a top three lender rignt now...

As an Attorney!

I've been contacted by the client.  The lender had been accepting the mortgage payments, cashing them in and, oh yes.....reporting to the credit bureaus that they hadn't made a payment for nine months and therefore the big box lender began the foreclosure process.

I've spent hours upon hours with the client getting disconnected repeatedly.  I'm an attorney looking to help my client, but many disconnections....we called again and again and the bank representative gave us their name and number.  Each time we'd call back and invariably each extension was invalid, or surprisingly enough, "Crystal doesn't work at this extension."....can you say....

 C'mon now!!!!

I call the president of our company and told him of the fiasco.  He found a high up contact in that top three fortune 500 mortgage company to investigate the my client's allegations.  What's such an paradox is that they're suing a client for foreclosure claiming that she's failed to make payments.  In the mean time she's provided all the statements and cancelled checks to prove that she's never been late with them.  As an attorney, I've told her that she has a cause of action against this mortgage company since they they're destroying her credit by reporting he not only as late, but also in foreclosure when the proof is contrary. 

But Now???  How about an Update!!!!!

The latest as of this week????  This big box today agreed....to an extent and said the following...

We acknowledge that you've made your payments and made the payments on time.  We just don't know where the money is within our company. 

Are You Friggin Kidding Me!!!!! That's one caring mortgage company. 

"We acknowledge that you've paid on time, but we're not ready to clear your credit or stop the mortgage foreclosure until we can figure out what we did with your money?" 

There's a Major Shift Gooing on with Consumers now!!!!

Mortgage Companies are shooting up the list of the top 100 even in a market when big box lenders are collapsing and more are poised to collapse, great companies are rising to the top.  Why?  Because consumers are begging for someone to care about them. 

It used to be that consumers wanted the lowest rate on the block.  Now they want a good rate, a really good rate, but for the biggest financial transaction of their lives, they'll trade a little rate to have qualified people investing in their families.  They want a relationship.  They don't want crappy service for a lower rate. 

There are a lot of great companies out there that offer great rates and exceptional service.  They might not be the lowest rate in town, but they're fair and they will create a relationship with the client that will inevitably end up with a client for life.  Big box????  Transactional, not relational.  I'm sorry, I'll take relational over transactional any day.  It may not be the cheapest rate in town, but to the client, it's a lot more cost effective.  And with the biggest investment in your life isn't it good to have a relationship as well as a point of contact?

Larry Bettag - Regional Vice President, Midwest Region

Illinois FHA Specialist

630-417-7172

  

               

An Illinois Residential Mortgage Licensee

 

Almost Chicken and Dumpling Soup

How Not to Sell a Haunted House

Whether chains are rattling, the floor is shaking or there is simply the knowledge that an evil deed was committed on the premises, you could possibly be dealing with a haunted house, or a "stigmatized property" sale. 

Since liability issues on these types of transactions vary from state to state - what is the guiding principal for selling a haunted house? 

In 1991, a case in New York provided some legal precedent on the matter. 

Stambovsky v. Ackley

The owner of a house, Helen Ackley had reported the existence of numerous poltergeists in her home and had, in fact, publicized these occurrences in Reader's Digest and a local newspaper on three occasions. As a result, the home was placed in a five-home walking tour in the city and received an enormous amount of publicity.  She even referred to the home in a article as a "Riverfront Victorian with ghosts." 

Some of the interactions Ms. Ackley described to reporters included ghosts waking her each morning by shaking her bed.  When spring break arrived she loudly proclaimed to the spirits that she did not have to wake up early anymore.  On this, she insisted that they listened to her requests and the bed immediately ceased all shaking.  

Despite the local notoriety, an unknowing buyer, Jeffrey Stambovsky signed a contract to purchase the home. On an agreed upon price of $650,000 he made a $32,500 down payment.  Since Mr. Stambovsky was not from the area he claimed to have ignorance of the widely known haunting tales. 

When the buyer subsequently learned of the haunting stories, he filed for a request of the rescission of his contract for the sale and also sued for damages citing fraudulent misrepresentation on the part of Ackley as well as the Realtor®. 

In ruling on this case, the court stated that since the existence of ghosts in the home had been widely reported, as a matter of law, the house was haunted. 

However, the court dismissed the fraudulent misrepresentation action and stated that the Realtor® had been under no obligation to disclose the haunting to any potential buyers. The court affirmed that the law of caveat emptor (let the buyer beware) applied in this case so the buyer did not prevail. 

Mr. Stambovsky subsequently appealed the case and won a reversal. 

On appeal, the court stated that a "haunting" was not a condition that a buyer could fairly be able to ascertain  through even the most thorough of home inspections.  In this case, "the most meticulous inspection would not reveal the presence of poltergeists at the premises or unearth the property's ghoulish reputation in the community."

It further stated that the seller had taken unfair advantage of the buyer's ignorance.  Since she had taken it upon herself to inform the community at large of numerous spirits roaming rampantly throughout the home, she owed no less to her perspective buyer. 

The judge then rendered a somewhat entertaining opinion using the following phrases:  

"In his pursuit of a legal remedy for fraudulent misrepresentation against the seller, plaintiff hasn't a ghost of a chance," I am moved by the spirit of equity," "In this instance - who you gonna call?" and "The notion that a haunting is a condition which can and should be ascertained upon inspection of the premises is a hobgoblin which should be exorcised from the body of legal precedent and quietly laid to rest." 

I have no knowledge of whether or not the parties in question had any appreciation of the judge's sense of humor. 

However, Mr. Stambovsky was finally let out of the deal and had his deposit fully refunded. 

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Copyright 2009 - Claudette Millette, President, TheBuyersCounsel - 800-392-1446  - E-mail    

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Pre-Approval, Approval, Conditional, Cleared - What the ____?!

Ancient Mortgage Proverb: No deal is ever 100% certain until the loan is completely paid off.

There exists a chasm in communication, familiarity and point of view between agents and loan officers. Sometimes we try to act like it does not exist and we really wish it was not so. I know this chasm exists, just as you do for many reasons, because I have had real estate agents - very good agents - try to convert to loan officer at my companies and I have seen this chasm immediately appear. Sales are fairly and generally black and white, go or no-go, yea or nay. Either the seller accepts the offer, counters or declines. Every agent I have seen try to become a loan officer has had a difficult time adjusting to the different levels of approval.

There are different levels of approval with virtually every mortgage application to loan process and agents we really need you to do your best accept them even if you don't understand them. Otherwise you're going to continue driving the loan officer (me :) nuts and forcing the weaker ones to lie to you or avoid you. Let me help you not contribute to their delinquency by briefly explaining some of the levels of loan approval and addressing how I handle them individually.

First please recognize the average loan has many human and non-human touch-points. It's not just the loan officer or just the loan officer and the underwriter. There are also as many as dozens of other humans plus automated systems involved. If the loan application is not approved by each and every one of these processes as required by the lending or insurance (mortgage insurance) guidelines the application will be denied and the deal will be done.

I don't care who the loan officer is, where they work or what they say - these are constants and work the same way at every lender/bank/broker unless the person you are talking to has the money in their personal checking account and are personally making the loan - something a loan officer does not have the authority to do for any lender.)

[See the edit notes at the end of this post.]

Application Approval - these are generally worthless. These are generally called a pre-approval and sent on a letterhead from the bank, lender or broker. These are often given only after accepting the application and examining the credit history of the applicant(s). At this point nothing has usually been verified or even documented such as income, assets and job history. (I do give these and I explain this is a CREDIT ONLY pre-approval and I have verified nothing except credit and payment history.)

Credit Only Approval - see above.

Automated System Approval (Application Stage) - this is also generally worthless. The loan officer generally has not verified income, assets and job history at this point. This is where most "approval letters" are issued on that official looking FNMA Pre-Approval sheet. (I give these as well and explain I still need all the documentation and several verifications of documenation from the appropriate source.)

Underwriter's Opinion Pre-Approval - again basically worthless for the same reasons. (I give these ocassionally when there is a borderline issue as in tax returns for example.)

Underwriter's Conditional Approval - this is where the loan officer should have a very good idea if this application will be approved. There can be as many as 3 or more weeks between the Application Approval and this date because this is the first time anyone has looked at the complete application package which will include: income documentation (pay stubs, tax returns, etc.), asset documentation (bank statements, retirement account statements, letters of verification), employment verification, rent/mortgage verification, appraisal, insurance documentation, inspection (if required), fully executed and legible purchase agreement, and whatever else is needed. THIS IS STILL NOT AN APPROVAL! There will be conditions and until the conditions are satfisfied this is not a loan.

Clear to Close (or Cleared to Close) - this is it. This is the first time ANYONE can assure this will be a finalized transaction and it does have an expiration - usually 7 to 10 days after the approval.

-Side note about conditions. I had a first time home buyer ask me about "Conditions" the other day. He's a young and single man so I used an illustration I thought he could easily understand. I said, "Suppose you finally get up the courage and ask that pretty girl out on a date. She tells you she will go out with you if you drive a red sports car, pick her up at exactly 7PM and take her to the most expensive restaurant in town." I needed to offer no further explanation of conditions.

The bottom line is this: If you do your job right, the loan officer does their job right, the title/escrow agency does their job right, the appraiser does their job right, the inspector does their job right, the insurance company does their job right, the buyer's employer does their job right, the buyer's current mortgage company or landlord does their job right, the person giving the gift (if there is a down payment gift) does their job right, the IRS does their job right, the borrower's accountant/CPA does their job right, the seller does their job right, the appraiser does their job right, the HOA does their job right, the inspector does their job right, the processor does their job right, the underwriter does their job right, the closing co-ordinator does their job right, the funder does their job right, the seller's agent does their job right ... that's most of them ... then within a few days to a few weeks we'll meet at the closing table. Until then NOTHING is certain.

Now do you still want my opinion or do you want to wait for the truth?

[Edit notes: When I write the pre-approval is worthless I mean as far as the actual final approval - go to the bank and cash your check. Nobody's pre-approval means the application and entire transaction will be approved. A true mortgage professional will follow protocol and verify as much information as possible before issuing a pre-qualification. I was trained to do it that way many years ago and have trained all my staff members to do so as well. However, there are dozens of moving parts outside of our control. The pre-approval, even the best one, simply means there is no reason at that point in time not to proceed with the process of the application.]

Ken Cook - Nationwide Specialist - Information/Marketing - FHA Home Loans
678-439-8683

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Rates - APR - Points - Fees: How the Playing Field is Still "Crooked"

I talked to a client today who was shopping me against some other lenders. I don't blame people, and frankly if I think someone else has a better offer and they are legit, I advise "my client" so and have no hard feelings.

In the scenario today, said client was offered 4.5% with no points. I told him it wasn't possible, but lest I be ignorant, I dropped by this other lender's website. Indeed, the lenders website quoted 4.5% with no points and an APR of 4.878%. The website gave the assumed loan amount and purchase price. So I went and did the math. What did I find out?  To make the rate and APR accurate, I had to add 2.25% in points ON TOP OF all of the regular fees (title, appraisal, etc.).

In other words, even though the quote was 4.5% with zero points, the TRUE cost was 4.5%, plus typical closing costs, PLUS 2.25% in additional fees/costs.

Please send me your Goofy Good Fake Faith Estimate!

There are several issues with this scenario

1. APR is supposed to HELP consumers, not confuse them. Clearly this bank (a large bank at that) is charging hefty fees instead of points. This brings us to our next point ...
2. Points are tax deductible costs - most other fees are not. Charging high fees in lieu of points is an injustice to the consumer. We see rates quoted with NO POINTS to make them look better to consumers. However the total cost is ultimately higher than a lender that is straight forward, charging the same dollar amount but in the form of points. A loan with the same cost in points (versus fees) is a far better deal, saving a consumer hundreds or thousands in tax deductible costs.
3. APR is "pliable" - Certain fees are calculated into the APR calculation, others are not. Do not assume lenders don't play with the "names" of fees to artificially lower their APR's. That doesn't seem to be the case in the above example, nonetheless keep this in mind.
4. Lastly, said bank WOULD NOT give the buyer a good faith estimate without having him apply for a mortgage. OK, not so crazy, but the good faith estimate would not be given for 3 days. And if the bank charged an application fee? That would just be another deceptive way to lure a consumer in and tie them to the bank.

Any lender should be able to offer you a good faith estimate (GFE) in a fairly short amount of time, 24 hours or less, allowing some time for when a lender is very busy. Assuming the lender is honest and accurate with their fees, you should be able to see the true cost of their offered rate. You should be able to see, as in the above scenario, that their rate of 4.5% with no points really has a lender fee of $4,119 (Actual additional cost based on their APR). This same week I had another rate shopper send me a goof good faith estimate with 1% in points and $2,100 in application fees. THIS IS NOT NORMAL or fair to you as a consumer, especially on a purchase loan.

I am not angry for losing business, because I didn't lose business. I am however angry because of the lenders and loan officers that mislead and decieve consumers who are just looking out for themselves by rate shopping. What we often see, is that many consumers that search the world over for the lowest rate, actually end up paying much higher costs via deceptive lenders. Consumers can be blinded by a low rate, not allowing them to see the true cost.

 

---

Steve Kappre is a Mortgage Planner with Treasury Mortgage. Steve specializes in;

• All areas concerning NJ First-Time Home Buyer Mortgages, grants, down payment assistance, tax credits, and more.

• Reverse Mortgages

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

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Why Loan Officers Kill Deals, Cost You Time and Money and Anger Customers

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).

 

Ken Cook - Nationwide Specialist - Information/Marketing - FHA Home Loans
678-439-8683