Jose Luis's Blog

The Mortgage-Savvy Realtor

Jose Luis Ramirez (5 Star Mortgage, Llc) — Mon, 12 Mar 2007 19:27:30 -0500

I'm sure that your clients may have surprised you in the past with a lending question that you never expected. In this new economic climate, with Colorado topping the nationwide list of states with the most foreclosures, it doesn’t hurt to be informed on what to expect from as a buyer from a lending standpoint. As a Realtor you don't have to know everything in regards to mortgage programs, but it since most sub-prime lenders are curtailing operations or out of business, the lending picture has changed drastically. In Colorado, we had no licensing until the beginning of this year, which led to many fly-by-night operations and newly minted loan officers who stuck to a few programs they knew well and worked closely with the 2 or 3 lenders would waive requirements and hold their hands throughout the process. Both of those types are nearly all gone in our state, as result of the licensing requirement, and the subprime meltdown. These loan officers did not know how to pro-actively inform their clients about the market, the pros and cons of getting a loan with escalating payment that wouldn’t fit into their budgets, putting them in a bigger house than they could afford (using risky interest only, balloon, or ARM loans). They would just go the path of least resistance. These loans just set the clients up for a financial crisis that could end in foreclosure. Many times, the Realtor wouldn’t know to question such risky financing, but the impending foreclosure crisis will affect all of us.

A couple of things to remember:

Think back to your first transaction, or remember the first-time-homebuyer you first helped into a home. Many things that seems obvious to you and me make take much repetition to sink into the mind of a frenzied first-time homebuyer. Make sure you client is aware of what is happening in the market. Remember, some people may still be thinking that they can buy a house with the prevailing interest rate, stated income, and a low credit score. Most subprime lenders, like New Century, have completely done away with stated programs at low scores and even 100% financing; your subprime buyers may have to be coached for a few months on raising their scores and saving money for a down payment. Many “soft community second” programs, like CHFA or H2O, can help with down payment assistance in return for promising to stay in the house for a set period of time. Make sure your loan officer knows what they are doing as well; a CCMB certification from the Colorado Association of Mortgage Brokers, although rare, is always good to see.

5 Ways to Increase your Short-Sale Closings

Jose Luis Ramirez (5 Star Mortgage, Llc) — Sun, 11 Mar 2007 22:34:53 -0500

The first thing I should mention is that you shouldn't let any lack of experience in this area hold you back or intimidate you. In the preceeding 10 year period of booming real estate valuations record-low interest rates, short sales just weren't as common as they will be in this era of tightening credit guidelines and major lenders collapsing like so many dominoes. Their was no incentive for a foreclosing bank to agree to a short sale if they could wait it out, take the house back and sell it to recoup their investment completely. Now, with mounting foreclosures and record-high delinquencies, banks are much more likely to want to cap their losses at a preset amount, and your short-sale offer gives them that out. You won't be the only one with limited experience in this area, but if you jump in and start learning now, you may set yourself up to be the in-house expert and go-to agent.

1. Familiarize yourself with lenders. Your local banks will be the ones most likely to have a foreclosure representative in your area that you can go and speak to in person. They are also likely to be the easiest to work with and build relationships with. Likewise, some lenders, especially those with highly touted subprime "100%, One Loan, No MI", like Countrywide, may be ripe for the picking because of the structure of the loans they made, not their location. I can introduce you to key people at national lenders if you become a member of LinkedIn, the online professional network, or Jigsaw, the business card sharing network.

2. Conduct a Foreclosure/Short Sale Seminar with a knowledgeable Realtor. Sometimes the best way to learn is to teach; helping another agent prepare for and put on a seminar is probably one of the best ways to put this into practice. Offer your PowerPoint presentation or online marketing expertise in return for knowledge in the mechanics of getting these deals done, and you will both likely wind up with more business. Since short sales are so difficult and time consuming to complete, you will likely not encounter any difficulty in agreeing to share any leads; one or two deals will likely keep you as occupied as you want for the coming weeks.

3. Prepare a newsletter on the subject. Putting your ideas and knowledge in written form vastly increases their potency; prepare a short question and answer sequence that you can print out in brochure or newsletter form. You can then it convert to email, online, and other language versions as well. (I'd be more than happy to help anyone who would like one translated into a Spanish version, by the way, as long as you own the copyright:)

4. Institutionalize your knowledge. Other agents in your office or your network will be likely going through the same process, albeit with different lenders. One of the best ways to share this knowledge is through a wiki, where everyone can access and edit pages about their experience. Wikipedia has grown into a world-class reservour of knowledge by using this method; it's a picture-perfect example of harnessing the intellectual power of groups. In that same vein, there are some great ActiveRain blog posts; John Occhi, David Petrovich, Kristal Kraft, and Damion Flynn, to name a few, have written particularly informative and detailed pieces on short sales.

5. Get your name out there. In today's Denver Post, there's a short article about a local Realtor Jackie Garcia offering a short sale on the front page of the Real Estate section. It's an almost perfect marketing piece. Besides being virtually free, it offers a short introduction to short sales, the listing and its location (a high-end gated community), sets up tremendous value proposition with a comparison of the surrounding homes sale prices, and it instills a sense of urgency by playing up the impending foreclosure angle. I'm sure that in addition to inquires about the house for sale, she'll receive inquiries from people in foreclosure wanting her to list their homes in the same way.

Please let me know if you have any thoughts or would like to share your experience in this area, either in the comments, at jose.loan@gmail.com, or if you'd like to give me a ring at 719-360-2397. Also, I'd like to add, almost as a disclaimer, that I'm hardly the doom-and-gloom type; to the contrary, you can see my upbeat assessment of this year's potential and my discounting of the "Massive Foreclosures" headlines in my early blog posts. I had a subprime lender's employee contact me after my "50+ Lenders Floundering" post and tell me that other bloggers covering the meltdown and myself should quit piling on his employer as he (or she) didn't want to lose their job. That's the last thing I want; after all, as a mortgage broker, I work for/with lenders as well: they are the ones that cut my paychecks. Cascades of tighter lending guidelines and lenders' collapses make my job much harder, but I'm trying to look for opportunites in this new landscape instead of burying my head in the sand and pretending that it hasn't changed. The glass is half full over here! Anyone want a drink?
Cheers,
Jose

3 Ways to Avoid Getting Caught in the Subprime Maelstrom - updated

Jose Luis Ramirez (5 Star Mortgage, Llc) — Wed, 07 Mar 2007 05:16:07 -0600

Unless you've been sleeping under a rock and avoiding ActiveRain for the past weeks, you've probably caught wind of the meltdown that's been happening in the subprime lending sectors, with 30+ lenders shutting their doors and many more in trouble. It's fairly obvious that rising credit guidelines and risk premiums will make it harder to get your buyers approved; far less obvious are the steps you should take to survive in an interest rate and lending environment the likes of which we have not seen in perhaps 10 years. Here's a few tips that from me on how I think the top professionals will weather the storm; please share your thoughts with me too.

1. Become a Short Sale Expert. Working with a distressed seller and a reticent bank with a pending foreclosure on its hands meets no one's definition of a fun and easy sale, but creating this skill set early could reap great dividends. Developing a good working relationship with your local bank representatives will likely set you on a course for steady business in which you and only you are the local expert.

2. Start Creating your Buyers. Now is the time to start creating new buyers by having First-Time Home Buyer Seminars, Credit Repair Seminars, and coaching these new would-be buyers to expect higher down payment and credit requirements early. A good lending representative and perhaps a financial planner would be great partners to have to help you pull these off successfully.

3. Slash Marketing Costs Now. With so many homes on the market, traditional marketing may be a case of too many dollars chasing too few buyers. Are you taking advantage of free listings on Zillow.com, Oodle, craigslist, LiveDeal, Propsmart, GoogleBase, Trulia, HomeGain, and not to mention blogging your listings on Localism.com? No? Then why are you spending bucketloads of cash on traditional (read: print) advertising when the ROI on free advertising is limitless? Failure to do this quickly enough may see you in a cash crunch when listings you've dumped huge advertising money into won't sell.

Hopefully this perks up a few ears and sparks a few ideas on successfully navigating the impending foreclosure wreckage. If you have any comments or questions, I'm all ears.

50+ Wholesale Lenders Now Belly-up or Floundering - updated - list keeps on growing

Jose Luis Ramirez (5 Star Mortgage, Llc) — Tue, 06 Mar 2007 02:33:09 -0600

Realtors: be aware than pre-approval letters you may have received previously from mortgage brokers may not be worth the paper they're written on, as the wholesale lender who may have approved the scenario is likely no longer in business or tightening its guidelines. Prepare your buyers to have to come up with higher down payments, especially if their credit is shaky. The conventional wisdom is that the freefall we saw in wholesale mortgage stocks last week was isolated to subprime and would likely not reverberate throughout the capital markets. I think that assessment is wrong and this meltdown will have serious repercussions in our industry. There are now over 50 lenders in serious trouble or out of business, and nearly all the remaining lenders are or will be tightening their credit guidelines, making it much harder for consumers, even ones with good credit to purchase or refinance homes.

Accredited Home. Panic selling; analysts are fearful about liquidity and have downgraded rating from "hold" to "sell"; $100 million drop in annual net income expected; missed earnings filing deadline with the SEC.

Acoustic Home Loans. A harbinger of the broader meltdown, Acoustic Home Loans ceased accepting new loan submissions last year; buybacks were a major factor in collapse, according to BusinessWeek.

Aegis Funding. Subprime unit has closed and a consolidated operation is reportedly handling prime, slimmed down subprime and expanded Alt-A offerings.

Alliance Home Funding. Closed. Parent has folded mortgage brokerage into bank and "taken pre-tax charge of $680000 and an after-tax charge of $449000 to wind down the Alliance Home Funding operation," according to fourth-quarter earning statement.

Ameriquest. Parent ACC Holdings had to beg Mass. Gov. Deval Patrick, former director, to help get them a life-sustaining line of credit from Citigroup to avoid shutting down. They've shut most of their offices, laid off 3,800 people, and have settled with 30 state attorney generals for $325 million over predatory lending practices.

Ameritrust Mortgage Company. Shutdown, according to email to brokers: "Effective Monday, March 05, 2007 the subprime wholesale division of Ameritrust Mortgage Company is no longer in operation. Due to market conditions, our warehouse provider, Washington Mutual, ceased funding for subprime loans."

Argent. Owned by ACC Holdings but may be acquired by Citigroup as part of a deal for working capital and a credit line for ACC if it falters.

Axis Mortgage & Investments. Parent Biltmore Bank of Arizona closed this wholesale subsidiary in November 2006 due to "current lending environment and current conditions of the real estate market."

Bay Capital/Clear Choice Financial. Press release on January 12, 2007: "Clear Choice has...announced that it is insolvent and in default on numerous obligations…. officially closed the mortgage lending offices of its wholly owned subsidiary, Bay Capital"

Central Pacific Mortgage. Shuttered its door because it was apparently unable to make February's last payroll, mostly due to rising buyback costs.

Coast Financial Holdings. Distressed because of developers unable to complete construction has put $110 million in loans in jeopardy for loans for 480+ homeowners.

Coastal Capital. Shut down; owner & president indicted in Duke Cunningham scandal.

Concorde Acceptance. Closed as of January 31st, 2007.

Countrywide. Stock in a freefall after announcing that close to 20% of its subprime loans are in default. $600 million worth of stock sold by insiders. Reportedly in talks over a merger or alliance with Bank of America.

DeepGreen Financial. Closed as of January 31, 2007 by parent Lightyear Financial, a private equity firm.

DomesticBank. Stopped wholesale operations on 3-2-06, according to their website.

Doral Financial Corp. Has agreed to pay a penalty to settle fraud charges with the U.S. Securities and Exchange Commission for a close to 1 billion overstatement in earnings. On March 2nd, 2007, said it will post losses for 2006 and warned on of a cash crunch if it is not able to refinance $625 million in debt.

Eagle First Mortgage. AZ regulators shut them down citing illegal lending practices. Has until 3-14-07 to wind up operations.

Encore Credit/ECC Capital. Was supposed to be sold to Bear Stearns for $26 million; ECC wound up paying Stearns $7 million to take it off their hands.

EquiBanc. Closed by parent Wachovia after "intensive strategic review."

Fieldstone. Closed 6 operation centers; had to restructure lines of credit; bought by C-Bass (MGIC & Radian Group) after losing more than 70 percent of it's value.

First Franklin. Acquired by Merrill Lynch from National City

Franklin Financial. Apparently has shutdown its wholesale operation as of 5pm 2-28-07; retail may be still alive

Fremont General. FIL (Fremont Investment and Loan, its subprime subsidiary) has been ordered to cease-and-desist by the FDIC

FundingAmerica. Closed as of January 19, 2007, little information available on their website.

GMAC. Major layoffs in ResCap; looming writedowns for subprime loan portfolio; may take a large ($1 Billion) hit to cover bad loans made by ResCap.

Harbourton Mortgage Investment Corp. Closed as of December 20, 2006, according to company press release "HMIC was forced to take these actions when it was unable to satisfactorily resolve mortgage repurchase claims."

Home 123 Corp. A subsidiary of New Century; two dozen offices shuttered and 200 jobs cut as of January 17, 2007.

Ivanhoe Mortgage. Unable to fund operations due to a shortage of cash, according to CEO John Cassel

Lender's Direct Capital Corporation. Closed wholesale operations due to "lack of demand" effective 2-8-07.

Mandalay Mortgage. Notified its brokers that it has exited the nonprime wholesale mortgage business. A message on its Web site said no new loans will be funded after Jan. 31, 2007.

Master Financial. From email to brokers: "Effective March 14th, [2007] Master Financial will cease its wholesale loan origination operation including accepting new applications for mortgage loans and funding loans in its pipeline."

Merit Financial. Shut down because of "rising interest rates". State regulators investigating.

Meritage Mortgage. Business shut down by parent NetBank. Staff acquired by LIME Financial.

Millenium Bankshares. Winding down all mortgage lending activity by the end of 2006 to "avoid the risks normally associated with mortgage banking activities," according to press release.

MLN (Mortgage Lenders Network). Has filed for Chapter 11, issued a cease and desist order Jan. 24 by Connecticut banking officials.

NetBank Inc. Laid off the remaining portion of its staff in December after shutting down its subprime subsidiary Meritage.

New Century. Stopped funding; criminal probe; in breach of debt covenants and trying desperatly to get waivers; restating '06 earnings downwards; 10 class-action shareholder lawsuits; may be in "death spiral", according to analysts.

Novastar. Seriously impaired; likely no dividends in 2007, no taxable income through 2011; many shareholder lawsuits.

Option One. Owner H&R Block has publicly announced it will be sold by end of March 2007.

Origen Wholesale Lending. This modular home lender is transferring its wholesale operations to its correspondent partners.

OwnIt. Ceased operations in December 5th 2006, Filed bankruptcy December 28th.

Popular Financial Holdings. Parent shutting it down and completely exiting wholesale subprime to "focus on profitable businesses".

Preferred Advantage. Closed completely when parent National City sold First Franklin.

ResMAE. Filed Chapter 11 bankruptcy; assets purchased by Citadel Investment Group; being hounded by Merril Lynch for more than $300 million in bad loans.

ResCap. Laying off about 1,000 people; may force former parent GM to take a $950 million hit due to "loan loss provisions", according to terms of its sale to Cerberus Capital, says Marketwatch.

Rose Mortgage. Posted on its website: "EFFECTIVE IMMEDIATELY ROSE MORTGAGE CORPORATION IS CLOSED."

Sebring Capital Partners. Shut its doors as of December 5th, 2006 due to rising defaults, according to company employee quoted by the Denver Post.

SecuredFunding. Ceased funding "based upon market conditions and limited product availability", according to website.

Silver State Mortgage. Per their website, shut down nationwide wholesale operations as of February 14, 2007.

Summit Mortgage. "Came to terms with a difficult business model in an unforgiving economy."

Trojan Lending. "Effective as of the opening of business on Monday March 5, 2007, Trojan Lending has ceased its wholesale mortgage operations and will no longer be underwriting or funding wholesale mortgages nationwide."

I think that we will see an even bigger spike in foreclosures as it becomes harder and harder to get customers approved, and customers who are locked into 2/28 and 3/27 subprime adjustable rate mortgages (the "Exploding ARM's) won't be able to refi as credit tightens and rates go up even higher. That loud hissing sound? That's the air coming out of the housing bubble. Let me know what your take is on the repercussions for our industry and the best steps to take going forward. A hat tip to The Mortgage Lender Implode-O-Meter Blog and the Bakersfield Bubble.

Subprime Meltdown - Why New Century is Different

Jose Luis Ramirez (5 Star Mortgage, Llc) — Sun, 04 Mar 2007 13:03:49 -0600

I just got a long-awaited email from New Century announcing they are no longer doing high CLTV subprime loans. I had been expecting something along those lines (if not along the lines of an imminent collapse), and not just because of the meltdown at at leat 30 other subprime lenders. As you can see from this post from over two years ago, their conference calls with analysts had long since raised questions about their accounting being by-the-book. In addition to creating an in-house REIT to basically sell its loans to itself and book high profits from those sales, New Century would borrow $1 billion for one day every quarter just so it could show the cash on its books. Add to that the alleged insider dumping of the stock, to the tune of $24 million in sales, and you see the reason why the New Century situation is different: it's a criminal case, fraud.

Colorado Springs Real Estate

Jose Luis Ramirez (5 Star Mortgage, Llc) — Tue, 06 Feb 2007 20:56:59 -0600

The real estate market in Colorado Springs is, contrary to recent headlines, in excellent shape. The much-hyped factoid that Colorado is leading the nation in foreclosures is due directly to our "deed of trust" and Clerk & Recorder process. When someone fails to pay their mortgage (or deed of trust in this state) the law compels the Clerk and Recorder to initiate the foreclosure process immediately. The process will likely take another 4 to 6 months, and the property will likely be sold or "redeemed in this period, but nonetheless it is counted as a foreclosure. In other states, the mortgagor will initiate the court process and it will not be counted as a foreclosure until the process is completed. The other reason that the headlines seem so scary is that they are reporting the total number of foreclosures, which are indeed higher than in the 90's. However, there were much fewer homer and homeowners in Colorado and the rest of the nation, due to our massive expansion and the all-time high homeownership rate. So, as a percentage of actual homeowners or actual homes the foreclosures rates are actually no where near an all-time high. The underlying fundamentals of the market are quite strong, with average home prices holding relatively steady and about a six month supply of homes on the market.

I had posted this on my profile but I decided this might be a better place since it may be rather time sensitive. (I believe that by the summer we'll probably have five months or less supply on the market in this county, among other things).

Hi all!

Jose Luis Ramirez (5 Star Mortgage, Llc) — Tue, 06 Feb 2007 16:06:32 -0600

I just wanted to introduce myself as this is my first blog post. My name is Jose Luis Ramirez and I'm a mortgage broker in Colorado Springs. I was excited by the capabilities of this platform and couldn't wait to get going, especially when I saw the success of Sabine Pyrchalla and Mariana Wagner from my county, both of whom have done a great job in their respective profiles and are quite advanced in their blogging. Cheers to them and to Web 2.0!