Aaron's "What You Need To Know" Blog

Your Troubled Mortgage Options Today

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Mon, 08 Dec 2008 22:25:38 -0600

Nearly everyday someone calls me or emails me for mortgage advice on their current loan. They are either upside down in value or late on their payments and they want to know their options.

I am sure many of you get these same calls. I want to be as helpful as possible so I listen to their challenges and offer them the best advice I can.

There has been a tremendous amount of news lately about more Government-led proposals to try and stop some of the 2.25 million foreclosures that are estimated to happen in 2009.

Some of these proposals call for interest rates in the 3-4% range. Some call for loan modifications to make it so your payment is no more than 31-38% of your gross income. And there are more. However, none of these have been approved yet.

Here are examples of some questions I get asked and the answers I give based on what is available today.

Q: MY HOME IS $70,000 UPSIDE DOWN IN VALUE. I HAVE A FIXED RATE MORTGAGE AT 6.500%. I AM CURRENT ON THE PAYMENTS. CAN I REFINANCE IT?

A: No. Currently there are no realistic programs that allow borrowers who are upside down, and have never been late, and are in fixed rate mortgages, to refinance their home. (I will discuss Hope for Homeownership shortly)

Q: MY HOME IS $120,000 UPSIDE DOWN IN VALUE. I HAVE AN ADJUSTABLE RATE MORTGAGE AT 5.500%. I AM CURRENT ON THE PAYMENTS. IT'S GOING TO ADJUST NEXT MONTH TO 6.500%. I CANT AFFORD THIS NEW PAYMENT. CAN I REFINANCE MY HOME?

A: Maybe. Call your lender directly. Many banks today will modify your current mortgage into a fixed rate mortgage if you have an ARM that is going to adjust, raise your payment, and create financial hardship.

You want to take a close look at your loan however. Rates have come way down of late. In many cases today, your adjustable rate mortgage may actually be adjusting downward, making your payment less today. Call your lender and ask how the pending adjustment will affect you.

Q: MY HOME IS $60,000 UPSIDE DOWN IN VALUE. I HAVE AN ADJUSTABLE RATE MORTGAGE THAT RESETS IN EIGHT MONTHS. I AM CURRENT ON MY PAYMENTS. EVEN THOUGH ITS EIGHT MONTHS AWAY, I AM AFRAID OF MY ADJUSTABLE RATE MORTGAGE AND WANT A FIXED RATE. CAN I CHANGE IT?

A: Maybe. Call your lender directly. Some banks today will modify your loan into a fixed rate mortgage, at current rates, from an ARM. However, if you are current and are not in any risk today, the chance of this happening is not very good.

Q: I HAVE AN OPTION ARM. I WANT OUT OF IT ASAP. CAN I CHANGE IT?

A: Probably. Most of the large lenders who specialized in this product realize it wasnt the smartest loan in the world. Even if you are upside down in value, many will work with you to get out of it.

Call your lender to see what fixed rate options are available to you. Keep in mind, when you are paying 1%-2% interest for your loan today, and you ask them for a fixed rate, based on today's rates 5%-6%, this will likely result in your monthly payment going up substantially.

Q: MY HOME IS $90,000 UPSIDE DOWN IN VALUE. I OWE $300,000. IT'S WORTH $210,000. I AM CURRENT ON MY PAYMENTS OR A FEW PAYMENTS LATE. I WANT A PROGRAM THAT LETS ME REFINANCE THE HOME FOR ITS CURRENT VALUE OF $210,000 AND FORGIVES THE OTHER $90,000 THAT I OWE. WHAT CAN I DO?

A: There are currently more than 12 million homes in the U.S. that are upside down in value or very close to being upside down. You are not alone. There is an FHA program called Hope for Homeownership that does allow for this. However, there are very few cases of anyone being able to successfully negotiate this. The lender has to agree to forgive the $90,000. The response to this program has been weak. Not many are willing to do this. You can call your lender and try. I wouldn't plan on it happening however. You will want to ask them about any other options they are offering.

Q: I BOUGHT FOUR INVESTMENT PROPERTIES IN THE LAST FEW YEARS. THEY ARE ALL UPSIDE DOWN. I NEED HELP. I CANT AFFORD THE PAYMENTS ANYMORE. WHAT CAN I DO?

A: Call your lender ASAP. Ask for the "loss mitigation" department. Although many banks won't negotiation with investors, some will. If you can prove financial hardship, you may be eligible for some form of note modification. Be honest with them about your financial situation. You may be surprised by their willingness to help.

Q: MY HOME IS UPSIDE DOWN IN VALUE OR I HAVE A LITTLE EQUITY. I AM LATE ON MY PAYMENTS. I DON'T WANT TO LOSE MY HOME. WHAT SHOULD I DO?

A: Call your lender ASAP. Ask for the "loss mitigation" department. Communication is the key. As soon as you are late, call them and begin discussing what options they offer. Be honest about your current financial situation.

There are many note modification programs that are available if you can prove hardship.

Some of these programs include:

a repayment plan of your late payments at a later date
a promissory note for the late payments at the end of your Note
an interest rate adjustment that allows for a more affordable payment
a longer loan term
in very rare cases, possibly some forgiveness of principal

Q: WHAT ABOUT THE $700 BILLION BAILOUT PLAN AND THE GOVERNMENT? HOW DOES THAT HELP ME?

A: Someday it may. Right now it doesn't. The Government wants to stop foreclosures. So far, the $700 billion has been used to help the banks get more money to loan, not to save your home.

In order to help you in your troubled mortgage, the Government needs to get control of individual mortgages, like yours, so they can then reduce your principal and refinance you into a program like Hope for Homeownership.

The challenge is that nearly 75% of all mortgage debt is securitized in Bonds. The Government is looking into ways to buy these loans from Bond holders. However, these Bond holders are not going to give them away. They will want to be paid at a price they can live with. Until this is resolved, and the Government actually has individual loans, your options are limited to those offered by your lender.

SOME OTHER NOTES...

Many homeowners make the mistake of waiting until it is too late to ask for help.

If you have any questions about your mortgage and options, don't call your mortgage broker or real estate agent. Call your lender.

The Government and the Banks want to curb foreclosures. It's of dire importance to our economy. Programs and your options are changing rapidly. Even if you called a few months ago and they had nothing for you, if your situation has deteriorated, call again.

Although banks don't want to take your home in foreclosure, they will. It's important that you remain in communication with them regularly if your mortgage is troubled and your goal is to save your home.

THE BUYER'S GUIDE TO BUYING A BANK OWNED OR FORECLOSURE PROPERTY

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sun, 09 Nov 2008 19:38:40 -0600

My team recently developed this Guide for our buyer's who are buying bank-owned properties for the first-time. I thought I would share with you as well. I hope it helps.

THE BUYER'S GUIDE TO BUYING A BANK OWNED OR FORECLOSURE PROPERTY

In today's Real Estate market, in my city, nearly 80% of the home sales are bank-owned foreclosure properties commonly referred to as Real Estate Owned (REO) properties.

Buying an REO property is very different from closing on a traditional buyer/seller transaction. The process is much more cumbersome and several entities are involved in the REO transaction.

This can create more time and challenges for each of these entities to perform their function.

REO homebuyers can get frustrated during the process. Since the REO phenomenon started, customer service scores in title, escrow, banking and real estate have plummeted.

Together with my team, we have developed this short, simplified guide to help you better understand the REO transaction process. While this guide will not change the way the transaction occurs, it may help avoid surprises.

Buying an REO is a great way to save money and get a fantastic deal. Just be prepared.

What is an REO or bank-owned property?

A property acquired in foreclosure and now owned by the bank that foreclosed on the property.

How did this property become an REO?

The last owner of this home was not able the mortgage payments. The mortgage note holder seized the property and evicted the owner. In some cases, the bank attempted to auction the property and pay off the existing liens and mortgages. If that was not successful, the bank was then deeded the property by the Trustee. It is now an REO property.

How do banks sell REO properties?

The banks are not in the real estate holding business so they must sell these homes. Because most foreclosed properties are not successful at auction, REO properties have flooded the market.

In any market, if there is an OVERSUPPLY the market will depreciate. Because of the depreciated market, the banks are going to take a substantial loss on the property. They have independent, professional real estate agents that assist them is marketing and selling their REO inventory. The banks also assign asset managers who work closely with these agents.

How do banks price their REO properties?

When a bank takes over a property, they conduct their own due diligence to get an accurate depiction of the homes worth. They put forth a team of people to assess the current market value of the property through Real Estate Broker Price Opinions (BPO) and in some cases full property appraisals.

Based on these findings, they typically price the home within 10% of the current market value. Of course, there are always rare exceptions. Banks are in business to make money. If they cannot make money, they need to minimize their losses. Banks are looking for a certain "net amount" on each particular property. This "net amount" is based on their research of the current market value minus costs associated with the property. They have priced the home sell quickly but as close to market price as possible.

Many buyers make the mistake of thinking the bank is desperate to get rid of the property. They believe they can submit a low-ball offer and expect to get an acceptance or at least a counter-offer. Think again! Low-ball offers (below 10% of list price) are not typically taken seriously. They may be a waste of your time. Worse yet, you may be perceived as an illegitimate buyer. Banks own many homes in the same area, so this could adversely affect future offers you make on other properties owned by the same bank or listed with the same agents.

Be reasonable. Do your research with your agent and determine what the home is really worth. Make your offer according to value, not to list price.

How do I find an REO property?

There are thousands of REO properties in our market. There is only one way to effectively research them all in a timely manner...hire a professional real estate agent. The seller, upon the successful completion of the transaction, typically pays for the buyer's agent commission. This will cost you nothing, but may save you thousands.

Are REO properties damaged?

Some are. Many are not. It is important to inspect the home yourself before making an offer. Once you have viewed the property, consult with your lender about the damage the home has, if any.

It is equally important to have a professional home inspector inspect the property before you commit to purchasing it. Your real estate professional will refer you to a top quality home inspector. When the inspection is completed, your lender will likely need to review a copy of it.

Many loan programs will require repairs to be completed before you close escrow. If you do not have the money to do this and the selling bank is not willing to make these repairs, you may need to find another home.

What does "As-Is" mean?

Nearly every bank-owned property today is sold "as is." You will have to sign a waiver that states you are willing to accept the home like this.

If a bank is marketing their home "as is", there is a possibility that the home needs repair and they are not willing to make them. Have your Real Estate Professional give you a thorough run down on what "as is" means to you during a transaction and once you have closed on the property. In addition, consult with your lender before making an offer on an "as is" home. Not all loan programs will allow you to buy a home that needs substantial repairs.

I am ready to buy an REO property, what do I need to do to get pre-qualified?

If you make an offer on a bank-owned property, they may require you to be pre-qualified with a home loan consultant from their own bank. They do this for two reasons; assurances and opportunities.

They want assurances that you are truly qualified to make an offer. While you may be pre-qualified by another lender, they will want to review your credit, income and asset scenario in their own systems. It is not negotiable in most cases and the banks will not consider your offer without a pre-qualification letter from their own institution. You are not required to use this bank for your new mortgage loan; you just need to be pre-qualified through them. If this is unacceptable to you, you may want to reconsider making offers on bank-owned properties.

Second, they want to create a business relationship opportunity with you. Banks are in the business of making money. Do not let this discourage you. This is truly in your best interest. Many times, the Home Loan Consultants from these banks have been authorized to offer discounts and other incentives if you proceed with a loan from their bank.

In many cases, the bank is taking heavy losses on the property. If they can recapture the mortgage loan, at least it is not a complete loss. This creates an opportunity to parlay the great deal you got on the home with a great deal on your mortgage as well.

I am pre-qualified and ready to make an offer. What is next?

Your offer is submitted to the listing agent. The listing agent may have to submit to the Asset Manager, who works for the bank, and this is where the negotiation happens. It may take a few days for a response. Be patient. Do not bother writing in a short deadline for the seller to respond. They may not pay attention to it.

The bank will likely respond in the first 48 hours. Some banks take 3 - 5 business days. Once again, be patient. This is not your regular seller.

You will not get a response over the weekend or holidays. All offers submitted over the weekend will be presented the following business day.

As a rule of thumb, REO listing agents will tell you if you make an offer and do not hear back within five business days, the offer has been rejected. Do not wait around for the rejection or the counter. It may never come. Come back with a better offer or find another property.

What does "bring my highest and best offer" mean?

If the bank gets multiple offers, they may go back to all of the potential buyers and ask for each buyer's highest and best offer. This means come back with your best offer, as the bank will choose one at this point. In many cases, the bank will not return counter-offers after they have requested this.

If you are presented with this opportunity, it means you are in the running. You now have one more opportunity to increase the price or better the terms of your offer. You can choose to do nothing at this point but it may not get you anywhere.

I made a list price offer but they didn't respond, what gives?

Many REO properties, especially those listed below market value receive multiple offers. Some houses sell far above list price. The bank is like any other seller in the market. They can choose not to accept your offer if one comes in they think is better than yours is. If you offer list price and ask for your closing costs to be paid and another buyer offers list price and doesn't seek closing costs, the other buyer's offer is stronger.

How long will it take to complete my transaction and move into my property?

Traditionally, buyer and seller contracts are 30 days. However, this is not a traditional buyer/seller transaction. In today's REO property market, many buyers feel more comfortable with 45-day closings. Many banks have late fees of $100 or more per day past the contracted close of escrow date. These fees add up quickly so it is important to understand what problems can arise that may make you late.

What can make me late?

Aside from the regular loan process, which definitely takes longer in today's stricter lending environment, there are many challenges unique to REO properties.

When the previous owner of your new home was foreclosed on and the bank took possession, a "Trustee's Deed" was issued in the bank's name. If this process is not executed properly, it may cause delays when the county is trying to record the deed into your name. There is little that you can do about this except wait until it is corrected.

If a Home Owner's Association (HOA) manages the community, your title company will request an HOA demand on the property. This demand will ensure that the bank pays any association fees and fines at close of escrow. If they are not paid at closing, they will transfer with the property into your name and will then be your responsibility. This can take a lot of time and be complicated but is necessary that it is done and done correctly. For more details, ask your escrow officer.

For the most part, if the close of escrow is delayed by problems that are out of your control, the bank should not penalize you. Just be sure to do your part in a timely manner, and you should be ok.

I am in escrow and we discovered a bunch of repairs that need to be made to the home...what do I do now?

Many people that have lost their homes to foreclosure have been struggling financially. This usually means the home has not been kept properly and is in need of repairs and general maintenance. Other homeowners, once they know they are losing their home, damage the property on purpose.

When buying an REO property, you must be prepared to do some repairs. Banks may not agree to make these repairs. They may not pay for these repairs. This may require out-of-pocket expense for you.

They may be willing to help with some, but do not plan on it. Know what you are buying before you make your offer and be prepared to spend some money for repairs before you move in.

In most contracts, you can back out of the purchase if you find problems with the property or in loan qualifying in a certain time period. This is called the due diligence period. Make sure you know how long this due diligence period is when entering into a contract. Complete all inspections within that period so you can make an informed decision on whether or not to proceed with the purchase. It is important to respect these deadlines because they are strictly enforced.

Some repairs will be obvious when you visit the property. Others may be identified during the property inspection and the appraisal process. The inspector will identify repairs issues and may be able to give you a written estimate of the cost to repair the property. In some cases, an appraiser may also call for repairs to the property to bring it up to livable or safe condition.

Identify these issues quickly so you know what you are facing and have the opportunity to cancel if necessary. Again, this will help protect your deposit money.

Reconsider buying a bank-owned property if you barely have enough money for the down payment and closing costs unless you have arranged for repairs with the seller.

I have signed my loan docs and I am still waiting for my keys. What is taking so long?

Just like you executed many documents at your loan signing, the seller has a stack of closing documents to sign as well. Remember, the seller of your home is a bank or some other financial institution. It may take the representative who is authorized to sign off on these documents days or even weeks to get around to it. Your trusted and skilled escrow officer will make sure to stay on this for you.

So, there you have it. Complicated? Yes. Frustrating? Sometimes. Time-consuming? Quite often.

At the end of the day, hopefully, you are getting a new home for you and/or your family at a much-discounted deal so it will all be worth it.

The best tip we can give you is to remain positive and be patient. Expect the challenges. There will very likely be some. Together with your professional real estate agent and experienced escrow officer, we will all do our very best to get you through it successfully.

The Bailout .... Simplified.

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sat, 04 Oct 2008 15:09:54 -0500

This week the Congress passed the controversial $700 billion Bailout Bill. This Bill comes with blame and finger-pointing.

Democrats blaming Republicans for deregulation. Republicans blaming Democrats for failing to reel in Fannie Mae and Freddie Mac. Our nation blaming Wall Street.

So who is really to blame?

Mortgage Lenders. Lenders who made exotic loans to people who shouldn't have gotten them.

Real estate agents. Agents who sold houses to people who should have been looking at cheaper homes where they didn't need an interest only loan, adjustable rate mortgage, or to "state" their income to qualify.

Congress. Democrats and Republicans. Aside from a few warnings from select members on each side of the aisle that fell on deaf ears, neither side saw this coming.

Wall Street. Based on historical data that told them that real estate never depreciates nationally, they created some of the most exotic loan products we have ever seen. Remember 100% stated-income option ARM's with 1.00% start rates?

Fannie Mae and Freddie Mac. For buying these exotic products in the name of shareholder profit.

Credit rating agencies. They gave investment-grade ratings to subprime loans. These high ratings encouraged the flow of investor funds into these securities, helping finance the housing boom.

The Government of the 1990's. The government pressured Fannie and Freddie to lower credit restrictions to create homeownership opportunity for lower income families and minorities, who were getting bilked by subprime lenders. The shareholders loved it as they sought more profit.

Is there any need to go on?? I am sure you can add a few more.

There will be a post-disaster Congressional Committee that will hold weeks of hearings someday. This will culminate in a nice, glossy, table-top, "What Went Wrong?" 800-page report that you can buy on Amazon for $29.95. Pre-order now for $24.95.

Today, we are being asked to pay a very big price for these mistakes. A $700 billion bailout bill that has been promised to save the economy....for now. There is anger. Many people don't understand how we got here. Many more don't understand why we need to do this.

Let me try and explain. These toxic mortgages, in combination with foreclosure losses, have driven many lenders and financial institutions out of business. For most that remain, their capital has been dramatically reduced.

Investors who provide capital have had their confidence shattered by these events and this has limited capital further.

This has created a situation where it is very difficult to get credit. There is a decrease in money to lend. This means credit is limited. Most Americans, rightfully or wrong, run their lives, their businesses, and their households on credit.

We could have done nothing. No bailout. We could have let the market sort itself and let all of the broke banks and institutions collapse.

What would have happened then?

People with debt would have had most of it forgiven. Those with savings would lose a big portion of it.

You would get title to your home for almost nothing and your debts would probably be written off. You would probably only lose your home if you didn't stay up on your property taxes.

The banks and financial institutions would drop dead. Currently there are over 100 banks on the FDIC watch list of institutions that could fail soon.

Small businesses that run on credit, which is most, would fail. Millions would go unemployed with nowhere to go and the economy would fail with the promise of returning someday.

The U.S. Government, with 11 trillion in debt, would likely collapse. We could start over.

One of my closest friends owns an air conditioning company with a staff of about 40. Some of whom have been with him since day one. 15 years.

They do large jobs for big companies. The average cost of a job is about $25,000 and they bill out $35,000 for this work. A profit of $10,000 per job. Nice little business.

However, these clients take, on average, 60 - 120 days to pay. Sometimes he is owed $500,000 or more at any one time. He has a credit line that allows him to make his payroll, pay his employees health care, his rent, utilities, etc. while he waits for his money.

Last week, he was told by his bank of 15 years that his credit line would be frozen at the end of October. He didn't do anything wrong. His business still thrives and is successful. He has never missed a single payment with the bank and is one of their very best customers.

The bank just couldn't keep offering it. He now has 30 days to find a new credit line, which is next to impossible today, or he will be out of business and his 40 loyal staffers out of work.

This is not an isolated tale. This is the norm. His is one business and there are 100,000's, if not millions, just like it. This is what Congress was faced with.

So, the bill passed. The "Emergency Economic Stabilization Act of 2008."

BOTTOM LINE: If you are late on your mortgage, in arrears, or struggling to make your mortgage payment on time each month, your loan is likely considered "toxic."

If your bank thinks your loan is toxic, they can now sell this loan to the Government, get it off their books, and turn it into cash for their other lending trade like credit lines for business.

This will free up capital that they can now lend to borrowers and businesses that need it, can pay it back, and get the economy flowing again.

The Government can then allow for you to refinance into the Hope for Homeowners program that started on October 1, 2008, they can work out your loan, or they can foreclosure on you and sell your home to the highest bidder to pay back taxpayers.

The lender can also have your loan insured by the Government to protect it from further deterioration. In that case, you will have to continue to workout your toxic mortgage with the bank you have now.

Let's break it down. Say you bought your home for $300,000 and you borrowed $300,000. Today, the home is worth $250,000.

You are behind on your mortgage, or you have missed a few payments in the past year. Maybe you have a few recent late payments or you pay late fees each and every month.

If any of these apply to you, your bank probably considers your loan "toxic."

Based on the Bailout Plan, your bank can now sell this toxic loan to the Government or get it insured. The bank will likely get somewhere between 20 - 70 cents on the dollar for it, depending on how bad your situation.

Let's say the bank get 50 cents on the dollar for your home. They sell your loan to the Government for $150,000. This gets the bank the cash they need for survival and to make good loans.

It's now easier for the Government to work with you to stay in the home. If they have to foreclose on it, they actually have a chance at profitability for taxpayers when they sell it to the next guy.

Some argue that the Bill makes it better for the Government not to work with you to stay in your home. It's much more profitable for them to kick you out, sell the asset as soon as possible, and limit taxpayer losses. In addition, the Note they are buying may not allow for any changes. This will be interesting to watch.

This Bill is certainly not guaranteed to work. Most experts agree this will not change the economy overnight.

However, many believe it's the first step in a very long road for recovery.

Here are some of the Bill's highlights:

Section 101. Purchases of Troubled Assets.

Establishes a Troubled Asset Relief Program ("TARP") to purchase troubled assets from financial institutions.

Section 102. Insurance of Troubled Assets.

Establishes a program to guarantee troubled assets of financial institutions.

Section 104. Financial Stability Oversight Board.

Establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under this Act and to protect taxpayers.

Section 105. Reports.

Tranche Reports: For every $50 billion in assets purchased, a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions is required.

Section 106. Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds.

Requires profits from the sale of troubled assets to be used to pay down the national debt.

Section 107. Contracting Procedures.

Allows the FDIC to be selected as an asset manager for residential mortgage loans and mortgage-backed securities.

Section 109. Foreclosure Mitigation Efforts.

For mortgages and mortgage-backed securities acquired, there must be a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs.

Allows use of loan guarantees and credit enhancement to avoid foreclosures.

Requires coordination with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

Section 110. Assistance to Homeowners.

Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures.

Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.

Section 111. Executive Compensation and Corporate Governance.

Provides that Treasury will promulgate executive compensation rules governing financial institutions that sell it troubled assets.

Section 112. Coordination With Foreign Authorities and Central Banks.

Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to this one.

Section 113. Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers.

In order to cover losses and administrative costs, as well as to allow taxpayers to share in equity appreciation, requires that the Treasury receive non-voting warrants from participating financial institutions.

Section 114. Market Transparency.

48-hour Reporting Requirement: The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction. There will likely be a website that reports all of the transactions.

Section 115. Graduated Authorization to Purchase.

Authorizes the full $700 billion.

Allows to immediately use up to $250 billion.

Upon a Presidential certification of need, may access an additional $100 billion.

The final $350 billion may be accessed if the President transmits a written report to Congress requesting such authority.

Section 116. Oversight and Audits.

Requires ongoing oversight of the activities and performance, and to report every 60 days to Congress.

Section 117. Study and Report on Margin Authority.

Directs the Comptroller General to conduct a study and report back to Congress on the role in which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis. (this is what you will pre-order on Amazon)

Section 120. Termination of Authority.

Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. Can be extended for an additional year upon certification of need to Congress.

Section 122. Increase in the Statutory Limit on the Public Debt.

Raises the debt ceiling from $10 trillion to $11.3 trillion.

Section 124. Hope for Homeowners Amendments.

Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

Section 125. Congressional Oversight Panel.

Establishes a Congressional Oversight Panel to review the state of the financial markets, the regulatory system, and the use of authority under TARP. The panel is required to report to Congress every 30 days and to submit a special report on regulatory reform prior to January 20, 2009. The panel will consist of 5 outside experts appointed by the House and Senate Minority and Majority leadership.

Section 131. Exchange Stabilization Fund Reimbursement.

Protects the Exchange Stabilization Fund from incurring any losses due to the temporary money market mutual fund guarantee by requiring the program created in this Act to reimburse the Fund. Prohibits any future use of the Fund for any guarantee program for the money market mutual fund industry.

Section 134. Recoupment.

Requires that in 5 years, the President submit to the Congress a proposal that recoups from the financial industry any projected losses to the taxpayer.

Section 136. Temporary Increase in Deposit and Share Insurance Coverage.

Raises the FDIC and the National Credit Union Share Insurance Fund deposit insurance limits from $100,000 per account to $250,000 until December 31, 2009.

Section 302. Special Rules for Tax Treatment of Executive Compensation of Employers Participating in the Troubled Assets Relief Program.

Applies limits on executive compensation and golden parachutes for certain executives of employers who participate in the auction program.

Section 303. Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness.

Extends current law tax forgiveness on the cancellation of mortgage debt.

You can read all 451 pages of it here:

http://www.house.gov/apps/list/press/financialsvcs_dem/essabill.pdf

The Good News and Bad From The Housing Rescue Bill

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Thu, 24 Jul 2008 15:28:17 -0500

Today, the Senate passed a bill many are calling the "Housing Rescue" Bill. The main purpose of this legislation is to attempt to help 400,000 homeowners avoid foreclosure while preventing the collapse of troubled mortgage companies Fannie Mae and Freddie Mac.

Within this legislation there are two components that have the potential to seriously affect your real estate business...and very soon.

The first is positive. The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

Although the refund would be reduced gradually for single filers with adjusted gross incomes above $75,000 and for joint filers with adjusted gross incomes over $150,000, this is a very nice incentive for those looking to buy a home for the very first time.

Now the bad news. This legislation bans non-profit down-payment assistance programs for FHA loans.

This means Nehemiah and AmeriDream will soon be unavailable. My understanding is this ban goes into effect on October 1, 2008.

To make matters more challenging, the minimum down payment required on an FHA loan will now increase from 3% to 3.5%.

Over 300,000 people have used Nehemiah in the last decade. Nearly one in every three FHA loans today uses some form of down payment assistance. These will soon disappear. This has the potential to dramatically affect first-time homebuyers and lower income borrowers.

Some are predicting another 10-20% decline in real estate sales and further depreciation as a result of this change.

If you have buyers who need 100% financing, and you plan on the seller gifting the 3% down payment through a down payment assistance program like Nehemiah, you will likely lose this option very soon.

There is no word yet on when the last day to apply for Nehemiah will be.

Regardless, you want to call these buyers ASAP (like tomorrow) and tell them their time is limited.

After October 1, 2008, they will be required to put 3.5% of their own money down or that from a family member, close friend or employer.

The last time FHA banned down payment assistance programs, Nehemiah and the others sued and won. There is very little optimism that will occur this time.

There will still be some limited options of going 100% like VA or the your local State Bond Program.

The Death Of The Down Payment Assistance Program??

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Fri, 11 Jul 2008 23:58:11 -0500

I am shocked at the posts today on Active Rain. A major shock wave was sent through our industry with the potential to dramatically hurt us all, yet all I see today are the "same old, same old" posts.

Buried in today's overwhelming Senate passing of the Housing Bill was language that will end private down payment assistance programs like Nehemiah and AmeriDream.

Based on the lack of anger and protest coming from here, I will have to assume that not everyone's business is so reliant on FHA today.

This year, at least 50% of my business has been FHA and at least 75% of these loans came with some portion of the down payment being gifted by the seller through a down payment assistance program.

If the House votes for this bill as well, and its certainly not guaranteed they won't, that will be THE END of 100% financing for nearly all of our clients.

"We are extremely disappointed and astonished by the full Senate's decision to ban privately-funded down payment assistance programs through the passage of its Housing Bill. This decision turns a blind eye to the overwhelming success of these programs and their role in helping hundreds of thousands of working families become homeowners," said the CEO of Nehemiah.

100,000's of families take advantage of these programs. Without the availability of this program, the opportunity for home ownership will disappear for many more families. First-time homebuyers and minorities will be most seriously affected. One-third of all FHA loans today have some form of down payment assistance.

According to HUD, borrowers who take advantage of down payment assistance programs are 3 times more likely to go into default than regular loans.

Backed by President Bush, HUD has been trying for over a year now to end these programs, and victory could be near.

A congressman from Texas was quoted last week, before today's vote, as saying, "You'll have enormous pressure from the Realtor and builder communities to not touch this thing."

If you use the silence from Active Rain as an example, apparently not.

There is a lot wrong with the Housing Bill but the worse part was this part of legislation.

If we don't speak up, as an industry, before this Bill hits the floor of the House, we will all likely see, yet another, dramatic decline in business.

UPDATE 7/23/2008: The House passed the Bill today. My understanding is the last day for down payment assistance programs will be September 30, 2008.

"The Gas Crisis Is Killing The Real Estate Business : To Drill or Not To Drill"

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Thu, 19 Jun 2008 00:18:20 -0500

"$5 per gallon?? Are you freakin' kidding me, man?"

These words were uttered today by my soon-to-be 16-year-old daughter as she contemplated the price that her driver's license will cost her later this summer.

She is appalled yet she has never filled up a car in her life. She is astounded yet it won't even be her money that fills up that birthday car each week.

President Bush has called on Congress to lift a 27-year old moratorium on drilling off the U.S. coasts and Alaska to reduce dependence on foreign imports and to try and offset sky-high energy prices.

Senator McCain has joined in and is now being called a "flip-flopper" as a result.

Let's move the politics aside. Let's also move the environment aside as well.

For the moment, let's not worry about the birds, the fish and other wildlife. Let's assume, as far fetched as it is, that there will not be a single human error made during this production and not one bird, or fish, or other wildlife will be killed.

Let's also assume, only for the sake of this post, that Al Gore is a nut and that not one thing bad will happen to affect our planet as a result of this drilling.

Let's be selfish for the sake of this post. Let's only worry about ourselves. Gas prices are killing your real estate business and hurting you and me financially.

Off-shore drilling is an interesting debate that too few are paying attention to. It directly hits you where it counts most. The good old, worn-out pocket book.

Some will argue that we won't see the effects for three to five years. Let's assume they are wrong. Gas prices may drop immediately. Competition the size of the U.S. will put fear into the foreigners.

Everyone agrees we won't start seeing this oil hit the pumps for around three years but the competition will shudder the day we announce it. Prices will drop much sooner. Maybe immediately. Let's just make that assumption for this post.

Bush says the oil we will get from lifting this ban matches 10 years of U.S. consumption. If we lift the moratorium in Alaska we can get another 5 years or so. McCain is opposed to including Alaska.

So, we can get another 10-15 years if we do this. Sounds awesome, right??

At what expense? Let's say we do announce it tomorrow. We are drilling away.

Let's make the far-fetched assumption that gas prices go all the way down to $2 per gallon by next Thursday. What happens then? America starts buying SUVs again and stops worrying about consumption. Yee-haw!! We are back!

RING, RING, RING. "Cadillac Barry? You know that Escalade I cancelled last week? Get me the bigger size, baby!!! Third-row seats AND room for my golf bag.....on a rush!"

GM then renounces the shutting of those SUV and truck factories. Others do the same. The mass production now planned for hybrid, electric and hydrogen-powered cars, which are now very possible, become not as important or urgent.

Who the heck wants a Hydro when you can get Hummer??

Most Americans, like we have proven for the last 20 years or so, don't worry too much about consumption. We have ignored the warnings.

We all read the boring articles in the last 20 years. Foreign dependence. Too much demand, too little supply. Artificially low pricing. Blah, blah, blah. Who cares? That doesn't affect me today.

"Cadillac Barry?? OK, I'll hold. I know how busy you are. (Muzak version of "Stairway to Heaven" inserted here..............................................)"

"Barry, my man! I want it in that great off-white color, Champagne something or in black. No red!!! Red is not a great Escalade color. Make sure it has the big tires and the bad-azz shiny rims I see when my kids are watching MTV! Those are sweet."

So we remove the moratorium and when these 30 billion or so barrels between Alaska and the continental shelf run out in the next 10-15 years we will be back where we are today, only worse. We won't have as many options. We played our last card.

I drive an SUV. It currently costs me $120 per week in gas. I wish I could sell it tomorrow. I would be lucky if someone gave me 10 cents on the dollar for it. If this keeps up I may just donate it to charity, if they will have it.

I would love to save this weekly gas money and not see my car depreciate faster than a condo in Miami. My initial reaction to this news was drill it!! It's there. We aren't using it. We need it today. It can save us. Drill away!!!

However, then I look at my daughter. I am buying my first born her first car next month for her 16th birthday and to reward her for getting straight A's as a freshman. It was a challenge I made her on her 15^th birthday and she did it.

When I look at her and her younger 10-year-old sister, I am concerned for their future and the possibility of $10 a gallon or $20.

We need to bite the bullet now and change our ways. Like Tiger Woods' year-ending knee surgery, it will hurt now but we will be much better off in the end.

I don't know anything about energy production or its future. I just know what I read and I know a little about history.

In 1942, with far less technology than today, President Franklin D. Roosevelt called for 185,000 planes and 120,000 tanks to be built in 2 years so we could hurry into a war that Americans did not want to enter but were forced to. We met his demand and eventually became the world's superpower.

There are around 16 million new cars sold in the U.S. each year.

If President Bush had Roosevelt's vision, and less loyalty to the oil business, in my opinion, he would demand that the auto industry build 16 million new hybrids, electric or hydrogen-based cars in the next two years and he would ask Congress to subsidize this production.

He would then demand that gas stations and other businesses equip themselves to meet the challenges of these new energy platforms as well.

As Governor Schwarzenegger said today, ""California's coastline is an international treasure. I do not support lifting this moratorium on new oil drilling off our coast. We are in this situation because of our dependence on traditional petroleum-based oil. The direction our nation needs to go in is toward greater innovation in new technologies and new fuel choices for consumers."

I agree with The Terminator. How a man from Thal, Austria can have more vision for American than a man from Crawford, Texas is beyond me. I hate being political but be it McCain or Obama, let's all be thankful this period of history is nearly behind us.

"Cadillac Barry?? Let's cancel again. What do you have in a hybrid? Nothing. OK, call me when GM gets their act together........ What's that? No, we aren't hiring at my bank."

Mortgage Pro Week in Review - 05/12/08 through 05/18/08 - The Eclectic Mix

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Tue, 20 May 2008 10:11:17 -0500

Jeff Belonger honored me by asking me to write this week's Mortgage Pro Week In Review.

This assignment takes me back to Mr. Hamilton's 10th grade English class.

Mr. Hamilton, was in his mid 60's, with thinning, long, gray-peppered hair. He had black horn-rimmed Ernie Douglas eye-glasses.

Mr. Hamilton wore a "uniform" every day. Crisp white shirt, firmly starched, sleeves rolled. Black tie loosely knotted. Black slacks flared and flooded. White socks that peaked when he walked. Black worn shoes.

He was a disheveled hyper genius. He would run all over the room flailing his arms to make his point, and he loved creative writing. He was my favorite educator of all my scholastic years. I learned so much from him.

He wasn't my favorite teacher growing up. He will never compare with the beautiful, stunning, green-eyed, wavy auburn-haired Mrs. Gunderson.

Mrs. Gunderson was my fifth-grade homeroom teacher. She wore short, red mini-skirts, low-cut white knit sweaters that were too tight, and lofty outfit-matching heels, at the same precise moment in time that I was starting to pay attention to girls.

I can't tell you one thing I learned from Mrs. Gunderson in fifth grade.

Wait she did me one thing. Mrs. Gunderson taught me and many other boys that year that the deadly prospect of "coodies" from girls was nowhere near as horrific as how warm they could make you feel inside.

She was the coodie-killer. I would never fear them again.

Mr. Hamilton loved giving creative writing assignments. He taught us that a great writer could make the most boring subjects interesting. To make this point he gave us an assignment to write 200 words about the alphabet.

Not the history of the alphabet, but rather the story of "A," "B," "C," and so on...through "Z."

As each student read their prose, Mr. Hamilton's point was made clear. Even the alphabet could be made interesting through the pen of a great storyteller.

I think about Mr. Hamilton every time I read a great mortgage post on ActiveRain.

Can there be a subject more boring than mortgages? Seriously. ARM's, rates, the Fed, Bernanke, Margins, Indexes, Fannie, Freddie, VA, FHA.

Blah, blah, blah, blah, ZZZZZZZZZZZZZZZZZzzzzzzzzzzzzzzzZZZZZZZZZZZZZZZZZZZZZ.

That is why I am exciting to be asked to write this week's review of the best, most compelling mortgage postings. It's only my opinion and you may be surprised by some of my selections.

On behalf of the memory of Mr. Hamilton, all of these mortgage storytellers get an "A" for the week.

Mortgage Pro Week in Review -- 05/12/08 through 05/18/08

Prayer Request for Me and My Family Don Draughn is asking for your prayers as he moves his family and his business to a new state to be with his elderly, ailing parents in their time of need. I am not a deeply religious person. I have always felt my spiritually from within. However, I have tremendous respect for others and their faith. Don, I admire your courage and commitment to family and I hope it all works out for you. You can count on my prayers!!

Six Steps Originators Can Take To Thrive on Active Rain Without Writing A Blog Post Brian Brady gives you great marketing tips that are so incredibly easy to implement you will wish he didn't share them with the other 11,000 loan originators on ActiveRain. Brian needs to get out of the crazy business, where his talents are truly wasted, and start a Mortgage Coaching company Brian, sign me up at the discounted friend's rate of $499 for the first live seminar in San Diego.

The Home Ownership Roundtable will Save You From That ARM Loan! Darren Orshoff is crazy....crazy like a chicken!! You have to see this to believe it. Desperate times call for desperate measures. Active Rain goes American Idol with a crazy chicken dance and original lyrics. Check out Darren's daughter in the background. Darren didn't even realize she was there. I hope this works, Darren. That song will be in my head all week. "Call, Don't be a Chicken!! Cluck! Cluck!!"

So you think you are a smart shopper? Jason Sardi has immense talent as a writer. He skillfully challenges the first question every lender is asked on the very first call from a borrower, "what's the rate today?" Experienced lenders, like Jason, understand this question makes the borrower feel smart but the answer is a test to truly show how bright your lender actually is.

Will Do Mortgage Loans For Food (Yes, This Is Me) Melissa Breeland proves that a picture says 1,000 words. This picture, from seven years ago, reminds us all to "think outside the box" when it comes to marketing.

Finding Balance and My Motivation Tom Elder keeps it simple, sweet and very sincere. I remember the day I made the same decision as you Tom. Family over four hours of sleep. It's a much better life.

The Wedding Ring Question Justin Williams poses an interesting, thought-provoking question. I have been in real estate since 1994 and, obviously, have noticed all of the sexy pictures that agents and loan officers have on their cards and ads, but I never looked at the wedding rings. Let's face it. Sex, like in all sales industries, sells in real estate too.

Obama May Have A New Middle Name_Infanticide Bill Burress is asking you to join his crusade as he tries to destroy "The Monster" Barack Obama's campaign for President. In a "member's only" post, Bill attacks the Senator for his stance on a woman's right-to-choose as well as his middle name, Hussein. One of the best things about being asked to write Week in Review is you get a chance to read nearly every single blog written that week. I have been here a year and had no idea there were political rants that have nothing to with real estate on AR. Although I don't agree with all of Bill's political views, my only challenge with it is that he when he posts politically he does so "member's only." If you are going to blog politically on a real estate network, why not share these spirited discussions with the public? And if you can't share with the public, for whatever reason, in my opinion, the post belongs on a political network, not a real estate network. This post makes my list because, even though I disagree with it's content about the Supreme Court's 35-year interpretation of the 14^th Amendment and its protection of a woman's right to choose, I firmly believe in freedom of speech, as protected by the First Amendment. Bill, you can put me down as one of those "irrational people" contemplating a vote for that "monster," also known as the United States Senator from Illinois. For me, it's about the economy, health care, the housing market, and the war on terror. McCain and Obama will both get a long hard serious look from me on these four issues before I decide. And I am not afraid to say it in a public post.

Has The American Dream Been Poisoned? Janet Guilbault and I are in the mutual admiration society. What makes AR so great for me is that real estate pros get a chance to blow off some creative steam and show our writing skills. And Janet may be the best here. Who else could turn renting her daughter's home into a thought-provoking blog about the end of the dream of homeownership? Janet should really take a month off, travel somewhere off-the-beaten-path, deep in the jungles of South America, and crank out a novel. I would want to read the first print and there are about 90,000 other Rainers who would do the same.

An Open Letter to the Consumer - Show me a little respect Jeff Belonger reminds us of the importance of the timing of the good faith estimate. Jeff is so good at what he does, 40% of my business is FHA today but I would want him to do my own FHA loan. Jeff stays focused in a business where it's nearly impossible to do so. FHA, FHA, FHA, FHA. The program is like 100 years old. Until four months ago, no one wanted it. It comes with mortgage insurance even with 20% down. The loan limits were like $15,000. $25,000 in Los Angeles. Yet, Jeff stayed with it. And guess what? Today we live in an FHA world, he makes it interesting, and we all need to read Jeff each week to teach us what we need to know.

Just How Sleazy Was the Subprime Market? Karen George gives a strongly-worded, opinionated view of the sleazy, subprime market. Look at the picture of ad closely. Ironically it looks like an old-time horror movie poster. Reading this post gave me a sickening feeling in the deepest pit of my stomach. How is the world did we let this happen? It was so obviously destined for failure. I am embarrassed that I ever sold these products. Is there a Lender's Anonymous we can go to and get cleansed??

Anatomy of a foreclosure Barbara S. Duncan is not a lender. However she writes about a young man seeking a loan in Arkansas. Unfortunately, this story should be unique but its not. In fact, it's a common story that could be written be nearly every agent on Active Rain. After you are done reading Barbara, read Rey below and what we face today will all make sense.

Welcome to a Full Doc World Rey Gallegos teaches us how to cope in this new strange world of long ago where loan originators, processors and underwriters really have to work hard to make a loan fly. It takes a very strong, knowledgeable loan originator to succeed in today's lending climate. I work with him everyday and Rey has that strength.

Thanks for the opportunity to do Week in Review, Jeff!!

The next members for the Mortgage Pro Week in Review :

1. Matthew J Blum 05/19/2008 through 05/25/2008

2. Brian Brady 05/26/2008 through 06/01/2008

3. Joey Aszterbaum 06/02/2008 through 06/08/2008

Mortgage blogs by loan officers Here is a list of Loan Officers. If you are not listed, please email Jeff Belonger to be added. This way the person doing the Mortgage Pro week in review can try and find most mortgage related posts in one section. ActiveRain is growing rapidly and it is difficult to keep up.... If you think you have been ignored, you have not. This is open to all!!!

All About Mortgages/Mortgage Networking Here is a group that many loan officers post their mortgage related blogs in. A good place to learn more about the type of programs, new industry news, and sometimes some inside tips. Don't hesitate to join.

MORTGAGE PRO Week in Review A repository for the Mortgage Week in Review. Please don't hesitate in joining this group. And any volunteers for the mortgage week in review, please e-mail Jeff Belonger at jbelonger@ihmci.com

Get Your Offer Accepted! Insider Tips on Buying a Bank Owned Foreclosure Property

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Wed, 14 May 2008 23:01:01 -0500

About a month ago, I wrote about the frustrations some agents were feeling. They couldn't understand why it was taking so long to get their short sale offers accepted.

I received many emails thanking me. Many wrote the same thing, "Aaron, now if you could tell us how to get our offers on bank-owned foreclosure accepted, we would really be grateful!!

Here you go......

During the housing boom, thousands of people stayed on the sidelines as the Las Vegas and national housing market skyrocketed.

With home prices doubling and even tripling in some areas, some of these people ended up getting priced out of the market. Many feared they would never be able to afford a house every again. They were wrong. Their day has come.

Today, Las Vegas leads the nation in foreclosures. Home values are down nearly 30% from its peak. Prices are at their lowest levels in the last seven to eight years. And banks are the sellers of most of our inventory. This is the same in many cities.

Those who stayed on the sidelines during the last boom, as well as many investors, are hungry to make deals. Many more foreclosures are expected to flood the market in the coming months. This is creating a new, smaller, buying boom.

However, there is a tremendous difference between buying a home from an individual and buying a home from a bank. Failing to recognize these differences will likely result in a substantial waste of your time and your client's time. It is not uncommon today to spend tens, if not hundreds, of wasted hours with each other because your clients don't understand the difference.

I know agents who have now spent weeks and months with clients in a futile effort and no sale to show for it.

Let's try and end some of this today.

I spoke with Leslie Carver, an agent at Prudential Americana, and one of the top REO agents in Las Vegas today, about this very subject. An REO agent is one that specializes in representing bank-owned properties. There are not many REO agents in our market. Certainly not as many as you would expect. There are a ton of reasons why....experience being the biggest, but that's a topic for another time.

Leslie is a terrific, well-respected agent, who handles listings for many of the top banks in the country. Leslie and I have had transactions together in the past and Leslie has spoken to groups on this subject.

According to Leslie, the number one thing you need to understand today about making an offer on a bank-owned listing is you will likely only get one chance at it.

"Buyers need to present their highest and best offer," says Leslie. "In cases where we get multiple offers, it's a one-shot deal. The bank will take the best offer and probably not counter any of the others. Put your best foot forward and don't plan on a counter offer. It's probably not coming."

Another challenge today is buyers making low-ball offers 20% or more below list price.

On average, local experts say, bank-owned properties are selling within 10-15% of list price. Anything lower than that, if the property hasn't been listed longer than six months, is probably a waste of time.

The bank and their listing agent have done a lot of research before listing the property for sale. In many cases, the bank has received at least two BPO's (broker price opinion) and at least one actual appraisal before determining the list price.

I spoke with an asset manager who said, "We are not desperate like so many want to believe. We price our properties based on a lot of research in the local market and we expect to sell them at market value."

They list it to sell and, in most cases, the listing agent and asset manager at the bank are tied down to this price. The asset manager then has limited authority to go a bit lower if necessary.

Anything substantially lower than this price usually exceeds the asset manager's limited authority so the offer has to go back to bank management for approval. According to most experts, that's not very likely. Many asset managers simply reject it and don't even bother passing it on.

If a house doesn't sell over a certain period of time, the bank will usually lower it as much as $10,000-$25,000 at a time.

The best deals you can get are those that have been on the market the longest. Although there are many great deals sooner, Banks are most negotiable once the property has been on the market 90 to 120 days on the market.

The chances of you "stealing one" by offering 40 percent below the bank's asking price is remote at best.

According to Leslie, and others, buyers should forget the list price in determining their offer. Your offer should be based on the true value of the home. "Some people are afraid to make an offer over list," says Leslie. "In nearly every multiple offer situation today, the accepted offer is over list."

Buyers should get with their agents, make their own determination of the property's value, and make their discounted offer based on that figure.

For example, let's say you see a bank-owned property you like, it's been listed four weeks, and it's listed at $250,000.

You get with your agent and you believe the home is really worth $285,000.

You have to understand that the bank and their agent have done their research as well. Likely much more than you. They have priced it at $250,000 to move it quickly.

You want a 20% discount so you make your offer off the list price of $250,000 and not the $285,000. You are probably wasting everyone's time by making an offer of $200,000. $228,000, which is 20% off from the $285,000, has a chance. Probably not a great chance but certainly worth a shot....if that's your highest and best offer.

"Your offer has to be reasonable," says Leslie. "In many cases today, the banks are getting multiple offers. Don't let list price be the main factor. We have already listed it low. The low-balls won't even be considered."

Leslie says most REO agents today submit all offers immediately. However, the banks tell the agents it can take up to five days for a response. This can, and often does, result in multiple offers.

Some banks will not even review an offer until it's been on the market at least five days.

And while you are making your offer or waiting for it to be accepted, email is the preferred method of communication with the very busy REO agent.

"The banks and their asset management teams are automated today. We rarely speak on the phone with each other," says Leslie. "There are only a handful of REO agents in Las Vegas today and we are all automated too. Everything is online. Some agents are having a tough time making the transition but email is the absolute best means of communication in the REO world today."

The next biggest challenge today on making an offer on a bank-owned property is to know the offer rules of the property you are trying to buy.

Leslie says offers that come in where the listing information has been ignored are not likely to be accepted. If you want your offer to be taken seriously, read the listing carefully, and follow the directions.

For example, if the listing says you need an "approval letter from ABC Bank," and you send one in from XYZ Bank, the offer will probably not even be considered.

Keep in mind, the seller is a bank. They understand the lending challenges today. They don't want to waste any time as time could mean further depreciation and costs. Your offer needs to come in from a respected lender whose bank they recognize. Quite often they want you to be approved by their own institution.

If the listing asks for "proof of funds on all cash offers" and your offer doesn't come with the proof attached, plan on rejection.

"The banks are so automated that if an offer comes in without a mandatory offer condition, the bank's advanced system may reject it automatically without review from the asset manager," Leslie says.

Know your property as well, Leslie advises. The bank hasn't been in the property. However, when there is something wrong with it, they usually know about it through the listing agent.

So let's say you make an offer on the property, yet you don't address the challenges. This makes your offer very weak and will likely result in it being rejected or not even considered.

For example, you are buying the home and you are doing an FHA loan. FHA requires that the home be marketable, sound, secure, and safe.

Some of the items FHA will require to be fixed are broken windows, rooms without flooring, faulty plumbing, broken entry and exit doors, missing A/C units, etc.

So, you love the home but it has a few broken windows and there is no flooring in the master bedroom.

You meet with your lender and you decide an FHA loan is best for you. You don't tell the lender about the window and floor. Then, you make an offer, yet you don't address the windows and flooring in your offer.

The REO listing agent is usually a very experienced agent who works with banks. They know their lending guidelines. They know FHA. They know these fixes will cost money and they have usually prepared the seller to make these changes for you.

Let's say, they have estimated the cost to fix these items at $2500.

They know you can't close your FHA loan without fixing these items, yet you make no mention of them in your offer.

Another offer comes in right behind yours. This buyer is also doing an FHA loan.

He makes an offer at the same price as yours but his offer mentions the repairs. The offer calls for the repairs to be done prior to close. His lender has even written the repairs into the pre-approval letter.

This offer is actually much stronger than yours. The seller knows you have done your research and your lender knows what he is getting into. The seller has the confidence in the buyer that he knows the property, has done his research, and has his lender on-board. Confidence means contract.

You need to know what you are buying and what it will take to close your loan before you make your offer. If not, the listing agent will likely see right through it and probably reject your offer without counter.

As opposed to individuals selling their homes, banks are exempt from real property disclosures because they have never lived in the home. You will want to pay for and order your own inspection report, even before making your offer, and be prepared to walk if the damage is too extensive.

Be patient. Banks may accumulate multiple offers before responding and will never answer an offer over the weekend. Plan on five business days from the day you make your offer. If you don't hear anything by then, it's probably been rejected. Email the listing agent to confirm this.

Be careful. Many people today write an FHA offer with a 30-day close. A week later, they get the offer accepted with a $100 per day late fee, yet they are too afraid to counter the close date.

You have now given your lender 21 days to close an FHA loan. The bank knows you have very little chance of pulling that off today and now are going to get a little extra money out of you.

For a multitude of reasons, many of which I have written about in previous newsletters, this may not be enough time today.

This can be a very costly decision. When the bank accepts your financial terms, and imposes a late penalty, if you are doing an FHA loan, it's important to get the 30 days from the full execution of the sale contract, not the original date of the offer. The banks understand these timelines and will very likely grant you this window.

If you don't negotiate it upfront, plan on paying it. Once they have agreed to your offer, there will likely be very little negotiation on late fees, no matter what the reason.

I have pre-qualified buyers that have made 30+ offers and have had none accepted. This is a monumental waste of your time and theirs. Your time is valuable and it costs you money.

The opportunity to help buyers who sat on sidelines last time is tremendous. However, their time is valuable too and many feel as if they have already waited years. The longer it takes you to deliver them a home, the more likely they will find another agent who can.

If you want your offers on bank-owned properties to be seriously considered, follow these three rules:

•· Make your highest and best offer based on market value, not list price.

•· Make a complete offer by following the seller's rules as written on the property's MLS listing.

•· Know your property, the repairs it will require, how they affect your financing, and address them with your lender and in the offer.

And then be patient. In no time, you will be a new homeowner.

The business has changed. We should all learn the tricks and trades of the new world. Knowing how to make real, time-saving offers on bank-owned properties needs to be lesson #1.

Financing Your Luxury Home in Today's Challenging Lending Climate

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Wed, 07 May 2008 22:13:00 -0500

As we all know, the U.S. is in the midst of a credit crunch. Financing has become more restrictive in all areas of the housing market. The luxury market is no different.

Here is what you can expect today when financing your luxury home:

For sales prices $1,250,000 to $2,500,000 plan on at least 20% - 25% down, having good credit, and be willing to fully disclose your personal and business income and assets. The lower your credit score goes, the higher the down payment required. If you have to go with a stated income loan, plan on 25% - 30% down.

For sales prices $2,500,001 to $3,750,000 plan on at least 30% - 35% down, having very good credit, and be willing to fully disclose your income and assets. If you have to go with a stated income loan, plan on 40% - 50% down.

For sales prices over $3,750,000, plan on 40% to 50% down, regardless of your income and asset documentation.

Be very cautious when picking a lender in the high-end today. You wouldn't trust a financial advisor to handle a large investment portfolio that only had experience with small portfolios.

If you were picking a financial advisor today, you would likely ask for references and you would interview at least two to see who best understood your needs and who made you feel most confident.

The same is true in high-end residential lending.

You want an experienced high-end lender at a bank with a special banking division that understands and can visualize the financial, big-picture complexities of the luxury-home buyer and deals with these types of transactions daily.

One advantage we have in the luxury market is that experienced lenders in the high-end usually do not follow the same rigid guidelines of their lower-priced counterparts.

Because these loans will probably not be sold in the secondary market and will be held in the bank's investment portfolio, these lenders tend to review the overall portrait of the loan, and the financial strength of the client, before making a decision on financing.

Unlike the past, don't just assume you have to go with a stated income loan because you are self-employed. Lenders in the high-end market are skilled at going over your finances, in detail, with you.

Often they will consider your business tax returns, cash-flow reports, and other investments, as well as your personal returns, to help them make an informed decision. You may be surprised what you actually qualify for.

Although the lending markets have changed, there is still money readily available for quality, high-income, high net-worth borrowers buying luxury homes.

How to Avoid the Top 5 Challenges of an FHA loan

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sun, 04 May 2008 23:30:45 -0500

It feels like nearly every deal we do today in my market involves an FHA buyer buying a bank-owned property. Although buying activity is great, this is a buyer/seller combination with its complexities.

Spurred on by government-backing, during the credit crunch, and one of the only low-down payment options today, the FHA loan has experienced explosive growth in recent months.

At the local branch of the retail bank, where I work, nearly 40% of all of the loans today are FHA. Company-wide they are predicting 50% FHA loans very soon.

However, like all loans, there are potential land mines in the FHA loan that threaten your purchase deals. You may have deals current in escrow where your buyer is going FHA that are currently in jeopardy and you don't even realize it.

Here are the top five challenges you face with FHA loans:

CHALLENGE #1: The Property Flip

For those that haven't run into this yet, you probably will very soon.

When processing an FHA loan, we have to perform a title search to see how long the owner of the subject property has owned the house.

If the owner has owned the house for less than 90 days, it's considered a "flip."

The 90-day window ends from the day the seller signs a new contract. If your contract is signed before the seller has owned the property 90 days, the file has to go to HUD for an exception. FHA will only make an exception if the property is a Bank-owned REO.

To make matters even more challenges, if it's a Bank-owned REO property, and you seek the exception, the bank has to either be State or Federally chartered for the exception to be granted. Not all banks are.

REO properties owned by Fannie Mae and Freddie Mac are exempt as well. If the bank-owned property is not State or Federally chartered the home cannot be sold to an FHA buyer before 90 days.

We are seeing a ton of buying activity in foreclosed homes. Some tell me its 80% of all resale purchases today in our market. In many of these transactions today, FHA buyers are purchasing an REO.

The bank foreclosed on the previous owner, has taken possession of the property and is the new owner.

The bank then turns around and puts it on the market with a real estate agent, and, fortunately for them, gets an accepted offer within 90 days of taking possession.

This then requires the buyer's lender to send the file for FHA for a flipped-property exception.

FHA is taking as many as 10-15 business days to approve the exceptions in our market. You can imagine what those 10-15 business days can do to your close of escrow date.

The Solution

When making the offer, have your trusted home loan consultant look up the subject property on the County website, or get with your title rep, and identify which bank owns it, how long, and if they are State or Federally chartered.

If they owned it for less than 90 days, prepare the buyer to get their conditions into the lender as soon as possible so your lender can submit the loan to FHA as soon as possible.

Also, you may want to ask for a 45-day escrow from the bank, on FHA loans, so you don't have to stress about getting an extension at a later date.

If the bank is not State or Federally chartered or has some other exemption, and they haven't owned it at least 90 days, you may want to consider financing other than FHA.

CHALLENGE #2: The Appraisal

With prices in decline and values dropping all over, its hard to comprehend you could have appraisal challenges today. However, it can happen on FHA loans where the buyer is requesting the seller to participate in Nehemiah's down payment assistance program.

It is FHA's pet peeve, and one of the reasons for the costly law suit they eventually lost, but buyers are making offers over list price to cover their down payment for the down payment assistance programs like Nehemiah.

This can mean an inflated offer that the home's value does not support. The listing agent and the seller certainly did a fair amount of research before listing the home and now your offer may be above appraised value. Banks will only loan on the lesser of purchase price or appraised value.

We are seeing appraisals coming in under purchase price because of this and sellers and buyers then having to renegotiate or cancel their deal.

The Solution

Be very careful. Know your property's true value before making your offer. There is a lot of sales activity lately. Pull comparable sales, preferably in the neighborhood, to make sure the sales price of your offer will be supported by the appraisal.

CHALLENGE #3: The Repairs

In most cases, FHA will not allow withholds for repairs (they do have a special program that sometimes allows for this but that's a newsletter for another time). They will also not allow a buyer to get cash-back at closing for repairs.

Often, we will see an addendum that states the seller will pay up to $2000 for a "flooring allowance" or an "appliance allowance."

It is very challenging to credit this to the buyer on an FHA loan.

If the property is in poor condition, repairs have to be done prior to closing. Examples are broken windows, broken doors, "green" pools, missing air conditioners, exposed electrical wires, power not turned on, holes in walls, etc. Essentially anything that affects health, safety and habitability of the home.

The Solution

Don't request a credit for repairs. You can request the seller pay for more in closing costs, provided it doesn't exceed 6%. The seller can participate in the Nehemiah down payment assistance program (3%) and they can still pay up to another 6% towards closing costs on FHA loans.

You can also consider asking for the sales price to be reduced in place of the credit.

If you want the repairs made prior to closing or they are required to be made before closing and you aren't sure what exactly needs to be repaired, simply wait for the appraiser to be finished with the appraisal and then get with the seller. The appraiser will detail these repairs for you in his report.

If you are aware of some of the obvious items that need to be repaired, before the appraisal, you can request the seller take care of it.

If the seller is unwilling to make obvious repairs that are required to be made for an FHA loan, then you may want to reconsider your interest in this home or make the repairs yourself, prior to close, assuming the seller gives you permission.

Making the repairs yourself, prior to close, is often a challenge. Sellers, especially banks, don't usually like the liability of letting you or your workers into the home while they are responsible from an insurance perspective.

CHALLENGE #4: The Broker Transaction Fee

Many real estate companies today charge a Broker Fee or Broker Doc Prep fee. This is usually a $200 - $500 fee that helps the real estate company cover some of their hard expenses.

Usually, the buyer pays this at closing. However, on an FHA loan, this is not commonly permitted.

The Solution

FHA will allow the buyer to pay this on an FHA loan, provided that it is disclosed on the signed Buyer/Broker Agreement prior to going to contract. Yet another reason to get a signed Buyer/Broker Agreement.

CHALLENGE #5: The Non-Titled Spouse

It happens all of the time. For one reason or another, we do a loan for a married couple and one of them decides not to be on the loan. On an FHA loan, the lender is still required to pull a credit report for the spouse that is not going to be on the loan.

Even though the non-titled spouse's credit cannot be considered in the credit-decision process, nearly all debt incurred after marriage, will have to be included with the borrower's debt. This can certainly affect debt-to-income ratios.

Installment debt incurred prior to the marriage by the non-titling spouse doesn't necessarily have to be included in the borrower's debt. However all revolving debt, regardless of when the non-titling spouse incurred the debt, has to be included.

The Solution

Your trusted home loan consultant needs to address this prior to issuing the approval letter. You don't want to spend hours driving your clients around looking at homes to ultimately discover that the loan can't be done because of the non-titled spouse's debts.

Also, you will want to structure the contract correctly. You want to know who will be on the contract and who will not, so your lender is not scrambling around at the end of the transaction getting addendums signed adding or removing a spouse.

The FHA loan is back and more popular than ever and is the first choice for many borrowers today. But like all loans, they have their own unique sets of guidelines. Knowing these five challenges will save you and your clients and lot of time and "11^th hour" aggravation.

The Scapegoat of The Mortgage Crisis : The Dastardly Stated Income Loan

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Fri, 02 May 2008 13:15:22 -0500

There have been many scapegoats in history.

Steve Bartman, the Chicago Cub fan who many believe cost the Cubs a trip to the World Series for the first time in nearly 60 years.

Bill Buckner, who made an error at first base that Red Sox fans believe cost them the 1986 World Series.

According to legend, some ancient cultures would sacrifice criminals in response to natural disasters.

I won't mention the political scapegoats. For many, even their mention is painful.

Scapegoats have been with us throughout history. Some people need them to give a face to catastrophes that are beyond rationalization.

To make the unexplainable easier to explain. To make it so we can look in the mirror and not see the problem.

If you read the comments in Active Rain, it's pretty clear. The scapegoat in the $900 billion mortgage crisis is the stated income loan.

It's all the stated income loans fault!! Liar loans. Borrowers being deceitful to qualify for homes they couldn't afford. Agents pushing loan officers to "go stated" to get their deals done. Unethical loan officers making up income to get the borrower's qualified.

Its soooooo obvious. That's the reason for the mess!!! Off with its head!!!!

The truth cannot be any further out in left field than one of those Sammy Sosa towering home runs hit out on Waveland Avenue in the incredible McGuire battle of ‘98.

The stated income loan has been with us many, many years as the loan of choice for the self-employed borrower. It came with a few stipulations. You had to be self-employed. You had to have great credit and a nice-sized down-payment. At least 20% down.

And historically, those loans had a very low default rate similar to full doc loans,

Then came the Millennium. A new century with new hope, spirit and revitalization. And with each year, the stated income loan became a little easier to get.

A little less credit needed. A little less down payment. A little less information about your job.

I can remember banks, backed by Wall Street, offering 100% financing for stated income borrowers with 620 credit scores and being salaried was acceptable....oh, yeah, one day out of bankruptcy OK too!!!

Did I sell those loans? Of course. And as opposed to many here, I refuse to apologize.

I believe, when you are in sales, you sell the products that you have in your inventory.

In my opinion, and many others, 100% financing for all borrowers, of all documentation types, all the way down to a 580 credit score and below fueled the greatest real estate explosion in history.

Speculators fueled it even more just as they had the stock market and tech stocks of the late 90's.

And just like the stock market, prices got too high for the investors to make money, they left, and we ended up with too much supply for the demand.

Depreciation set in. People had none of their own "blood" in the deal or even worse they had actually "profited" by draining the equity of their home in the hot market, so they walked.

Or their ARM that they had agreed to because they wanted the "lowest payment possible" and would simply "refinance" later adjusted and there was no longer a refinance opportunity.

There are villians and victims scattered all over this warfield.

The stated income loan is a small player in the colossal economic and emotional damage that the market is experiencing.

And like all scapegoats, history will eventually expose the truth.

Moises Alou played left field for the Cubs in 2003. He was the guy who was about to catch the second out of the 8th inning. The Cubs would be four outs away from their first World Series in 56 years with their best pitcher on the hill.

Steve Bartman, reached out for a foul ball, got in Alou's way, and in a nanosecond, destroyed the dreams of Cubs fans everywhere.

A few weeks ago, Alou, who now plays for the Mets, was talking to a reporter after a game. He told the guy, "The funny thing is I wouldn't have caught it anyway."

How Long Must You Wait To Buy A Home After Short Sale or Foreclosure?

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Thu, 24 Apr 2008 00:12:06 -0500

People ask me weekly, "If I let my home go into foreclosure or sell it in a short sale, how long until I can buy again?"

The answer is.... a long time. Plan on a minimum of three years and as many as seven or more.

Fannie Mae, the largest backer of mortgages in the world, recently sent a harsh message to borrowers for walkaways and other foreclosure situations.

Plan on waiting five years and then having good credit and a nice sized down payment.

The walkaway trend is popular here in Clark County (Las Vegas) and other areas where many homeowners find themselves upside down on their loans. These people owe tens of thousands more than the current market value of their houses.

In some cases, they are upside down by hundreds of thousands.

Some homeowners, who put little to no money down, think they may be throwing good money after bad. So, even if they can still afford the payments, they are simply choosing to walk away.

Fannie Mae will now prohibit foreclosed borrowers from getting another mortgage through them for five years, unless there are "documented extenuating circumstances." In those rare cases, you can buy again after three years.

No word on if this is the same on "settled" accounts like short sales, but most experts say to expect the same guideline.

Extenuating circumstances are life events that are "out of your control" that create a financial crisis, like death of the primary wage earner, medical-related illness to the primary wage earner or, sometimes job loss of the primary wage earner.

Extenuating circumstances are judged on a case-by-case basis and are challenging to prove. You will have to document this tragedy through death certificates, medical records, letters from the former employer, and you will have to prove that this event, and this event alone, this led to your financial demise.

It's not a common exception and underwriters are usually pretty skeptical when faced with it. Be prepared to provide an extensive paper trail of documentation.

Getting in a bad adjustable rate mortgage or the market turning downward is not an extenuating circumstance.

Even after five years, Fannie Mae will require borrowers with foreclosures to make at least a 10 percent down payment. They will need a minimum FICO credit score of 680 for a new loan.

Freddie Mac counts foreclosures for seven years. FHA is currently at three years but it is expected they will increase this soon as well.

The bottom line, once again, as I keep preaching, is to avoid foreclosure and short selling when possible. There is nothing positive accomplished from either strategy. Note modification is the way to go.

If there is no way to avoid the foreclosure or short sale, plan on renting, leasing or leasing-to-own for the next three to seven years.

Just Another Media Blunder--- Can You Really Believe Anything You Read Today?

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sat, 19 Apr 2008 19:09:48 -0500

I was a journalism major in college. I then went into real estate in 1994.

I can remember as far back as my sophomore year, in Journalism 101, my professor, teaching us "Rule #1 in journalism." Confirm your facts and check your sources.

Failure to do so, we were taught, destroyed the credibility of you as a reporter, but equally as important, the newspaper or news entity you were working for.

Therefore, you can imagine how appalled I was at a story that was in my local newspaper, the state's largest paper, The Las Vegas Review Journal, on Thursday.

"Law seen hindering home ownership - State Assembly bill killed stated income loans"
http://www.lvrj.com/business/17842284.html

As you know, Las Vegas is a city that consists heavily of tipped employees.

The article detailed how although our home prices have declined to the point where many people are now possible buyers once again, these people can't get loans today because "they can no longer use so-called stated income loans, or loans based on income other than reported wages."

The source for this story was a local mortgage broker.

The basis of the article was State Assembly Bill 440, which as of October 2007 made it illegal to "knowingly or intentionally make a home loan, other than a reverse mortgage, to a borrower including, without limitation, a low-document home loan, no-document home loan or stated-document home loan, without determining, using any commercially reasonable means or mechanism, that the borrower has the ability to repay the home loan."

I blogged on this topic when the law was passed and the Mortgage Commissioner wrote a very public letter to all lenders letting us all know that stated income loans were not illegal.

Are Stated Income Loans Illegal In Nevada? NO! A Letter From Our Mortgage Lending Division Commissioner

Many banks did stop offering stated income loans at that time but some did not. Many still offer stated income or reduced doc loans today, in Las Vegas, including two of the nation's top three lenders.

The Las Vegas economy is driven by tourism and real estate. It's our business.

It bothers me that a reporter for the business section of the biggest newspaper in our state, would write a story about stated income loans not being available when they are.

It bothers me that this inaccurate story comes at a time when the last thing we need is more fear and confusion.

It bothers me that the source for this article would be a mortgage broker and the "facts" were not checked.

At best, this is sloppy reporting with mistakes that even a middle-school newspaper reporter wouldn't make. At worst, it could be interpreted as "fear-mongering."

The real estate business has made its way onto the front page headlines in the past year because the public has a tremendous appetite for it. It deserves to be covered with the same integrity, dilligence and fact-checking as any other news story.

This story saddens me. Because of my background, I want to be able to trust the news. I believe in the medium and I often argue with those who claim, "you can't believe anything you read or see on the news."

I am starting to wonder.

Shortening the Short Sale Process and Get Your Offer Accepted Faster

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Tue, 15 Apr 2008 23:43:22 -0500

In our Las Vegas market today, more than 75% of all resales are foreclosed properties and short sales. I must hear this comment five times weekly.

"Aaron, why does it take so long to get my short sale offer approved by the bank? I don't get it! It's FRUSTRATING!!!"

In a normal real estate transaction, you simply need a "meeting of the minds." You get the buyer and seller to agree, you get them both to sign the contract, and 30 days or so, after a bit of hard work, the home is sold.

In a short sale, there are far more people involved. The "meeting of the minds" involves many more than two.

We are in the midst of what is probably the worst real estate crash in history. Hundreds of thousands of foreclosures and short sales are hitting the market.

Your short sale request goes through the bank's Loss Mitigation Department. It can take some time based on the volume of short sales the Loss Mitigation department is dealing with. We all know these banks are understaffed in this area and it's very difficult from a business perspective to add personnel in areas that, by their nature, are costing money to begin with.

By now, you have heard about mortgage-backed securities. Understanding a bit about it will help you understand the potential challenge of getting a short sale offer accepted.

When you got your $300,000 mortgage from ABC Bank they may have packaged it with 300 other loans into one big $100 million package and then sold it to investors. These were investors of all sizes. Maybe one investor put in $20 million, maybe another one put in $5 million, maybe another one $500,000. So let's say there are 14 investors in that $100 million package of 300 loans. They didn't invest in one loan. They invested in a package of 300. The investor who invested $5 million into a $100 million package has a 5% interest in the package. That means he is 5% invested in your $300,000 loan.

Although, one company, ABC Bank, in this example, may be servicing all of these mortgages, meaning they handle the customer service, billing, payments collections, and such, it doesn't mean they own the mortgage and can make the decision.

Yet, this is who you call with your short sale offer. It's not very likely ABC Bank can make this decision on its own. It may have to go back to the investors. All 14 of them.

So now, today, when you want to make a short sale proposal on one of these properties, and you call ABC Bank and then get mad when you don't get an answer right away, can you see why it's not so easy?

They may have 14 calls to make on your one loan and depending on the agreement, they may need 51-75% of the investor vote to get this accepted. That can take some time. Months even.

This is not the case on all properties but on many today.

Can you even begin to imagine the pressure and workload these loss mitigation people and the people around them in these positions face today? Think about the calls they get from borrowers all day, every day. Consider the destroyed dreams they have to hear about.

Think about the pleas they get from the single mother begging them not take her house and send her and her children out on the street. Or the recently-unemployed man pleading for a few more months to find work. Can you imagine listening to the cries of the proud man of the house who is trying to keep a roof over his family's head?

Many experts say the single biggest reason for short sales failing to get approved is the inadequate staffing of loss-mitigation departments. I am certainly not envious of their role today and I am confident turnover is very high. It is important that you give them time to do their jobs. And if your buyer doesn't want to wait, move on.

Here is how it works from the seller side of a short sale and what the bank is considering. You will want to consider the same before taking the listing:

•· Is the seller deserving of a break, due to financial hardship caused by unforeseen circumstances such as job layoffs, divorce or illness?

•· Is it cheaper to simply foreclose on the home, make any necessary repairs and then sell it through a real estate agent?

•· They are going to order a Broker's Price Opinion (BPO) from one of the agents they use. This will give them some idea of what the property is actually worth in the current market. The lower the broker's price opinion, the more likely the mortgage lender will approve a short sale.

•· How many other properties do they, as a bank, and as investors, currently have in default? How many other properties does the seller have in default?

•· Are there are co-signors who can be held responsible for the balance owed on the mortgage they can go after instead?

So you get an offer on your short-sale listing. What can you do to move this process along as fast as possible for your seller and the buyer??

MAKE YOUR FIRST COMMUNICATION ORGANIZED AND COMPLETE

First impressions are most important. When you first make contact with the loss mitigation contact, make sure you know exactly what you are asking for.

Make sure you have already gone over the pros and cons of a short sale with your seller and he is completely agreeable to this process.

You will want to have a signed "Authorization To Release Information" form signed by your seller, giving you permission to deal with the bank on their behalf, in your hand, and ready to send to the Loss Mitigation contact on that very first phone call.

You can "Google" this to find a form but I found a very good, simple one here: http://www.real-estate-short-sale.info/Release_of_Information_Form.html

Be as friendly as possible with the Loss Mitigation specialist. Cut right to the chase. Ask him whether he even thinks a short sale is a possibility here.

Ask him what additional information he needs to successfully complete the process. Let him know you will be diligent in taking care of all of the details for your seller. Give him confidence in you that he isn't wasting his time.

They are going to ask your seller for a "hardship letter." This hardship letter can make or break your short sale. You want this to be well-thought out and well-written. You can get some writing tips on this at www.SaveMeFromForeclosure.com.

Have your seller write this letter, in detail, and in his own handwriting, before you make the first call. Review the letter with your seller and be a tough critic. Does it sound like it's a hardship letter to you? If you were the bank, after reading this letter, would you release your client from potentially hundreds of thousands of dollars?? If not, ask them to rewrite it. This letter, by itself, could be the difference between a successful short sale or an eventual foreclosure.

They are also likely to pull your seller's credit to verify his financial hardship. They will probably ask for current pay stubs, copies of medical bills, checking and savings account statements and more.

This will all take time so have as much of it in your hand when you make that very first contact to the loss mitigation department.

BE PROACTIVE TO THE PROCESS

An agent I know, who is very successful in short sales, submits the following items to the bank with his short sale package. I spoke with a loss mitigation specialist who described what this agent does as "a blessing":

•· The listing agreement

•· The fully-executed purchase agreement with all addenda, as well as all addenda for the short sale, and a reasonable closing date

•· The hardship letter from the seller

•· A pre-approval letter for the buyer from a nationally-recognized lender (he doesn't have to use this lender but this is to move the process along with a sense of comfort for the bank)

•· Last 2 month's paycheck stubs from the seller

•· Last 2 year's tax returns from the seller

•· Last 2 month's bank statements (all accounts, all pages) from the seller

•· A current tri-merged (3 bureau) credit report of the seller. You can get one at creditreport.com.

•· A current financial statement for the seller detailing their income, assets, liabilities and expenses

•· His own well-prepared market analysis

•· His own BPO (offered as an additional opinion, not as a replacement to the one the bank will also order)

•· A well-thought out letter written from him detailing why he believes this short sale is a good business decision for the bank with all of his contact information

After he submits this package, which he always does via Next Day Air, he makes contact with the loss mitigation specialist to confirm he received the package and then establishes reasonable follow-up contact timelines with him to determine when an answer will be expected.

This agent claims he has never received an answer on a short sale in less than 21 days and, in some cases, far less.

KNOW YOUR CLIENT AND THE BUYER

When you get the seller's information, like his hardship letter, tax returns, bank statements and credit report, don't just send it in without studying it yourself first.

Loss mitigation specialists say one his biggest challenges today are agents who submit short sale offers but have no idea about their seller. They just expect offers to be accepted because they believe the offer is financially "reasonable." That may not the case.

Review your seller's information as if you were the bank and then set your own expectations. If the seller has $40,000 in liquid assets and is making $100,000 yearly with a credit score of 680, and has never been late on the mortgage, your short sale proposition obviously isn't going to as strong as if he is broke and in serious financial trouble.

The experts say another big reason why short sales are failing to get approved is the homebuyer's qualifications. Talk to the buyer's lender and his agent. Get a solid pre-approval letter or, better yet, a credit-approval letter, which is more detailed than a pre-qualification letter.

Make sure your buyer is just as qualified to buy this house as the seller is desperate to get rid of it.

DON'T BE YOUR OWN ENEMY

I have heard of short sale agents sending in offers or short sale packages, demanding answers in 48-72 hours, and then following that up with non-stop voice mail messages and emails when they didn't get the response in that timeframe.

I have heard of other agents leaving nasty messages and threats to the loss mitigation specialists like "if I don't hear from you in the next day, my client is just going to walk from this house!!"

This is not your regular buyer/seller transaction and you are best advised to not treat it as such.

Be courteous and accepting to the timeframes necessary to successfully negotiate a short sale. Be respectful and considerate of the difficult work, challenges and pressure of being a loss mitigation specialist in today's high-volume mess.

There is a lot of work to be done and a lot of information to be dissected before a decision can be made. Be a helpful part, not a difficult component, of the decision-making process.

DON'T GET BLINDSIDED

It is very important that the seller of a short sale be 100% honest with his real estate agent. Know the liens on your seller's property. Know the promises and broken commitments he has made to his lender so far. Know how many months they are in arrears.

Most importantly, know if the seller has made any financial commitments of late that will kill this short sale offer before its starts and will be a monumental waste of your time.

An agent client of mine recently spent weeks working with a seller and then successfully negotiated a short sale purchase agreement. He developed a great relationship with the loss mitigation specialist and was confident a deal would be secured.

Upon the bank's review of the seller's credit report they noticed that the borrower just leased a new Mercedes three months prior for $1100 per month. The seller had told my client that he had that car for over a year. Needless to say, the deal was denied, and my agent friend wasted a lot of valuable time.

Banks understand that short selling may be more beneficial to them today than repossession in a foreclosure.

If you are active in helping the process and understanding of the details and requirements, it will become far less frustrating for you and, hopefully, less time-consuming.

The Costly Comparison of Dated Good Faith Estimates

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sat, 12 Apr 2008 19:38:57 -0500

On Tuesday, a real estate agent asked me to prepare a Good Faith Estimate for his client. The quote that day was 5.75% for a 30 year fixed. Very competitive.

When I followed up the next day, the client said I was being compared to another large retail bank, that also handles his family's checking and savings. I assured him I would beat their quote.

I advised him, "in today's market of extreme volatility you want to make sure you compare good faith estimates within hours of each other. Rates can change daily, sometimes a few times in a day, and there have been big swings lately in the very same day." He said he understood.

The agent emailed me late yesterday (Friday) that they had chosen the competitor, their personal bank. Even though we had the same rate on our Tuesday GFE, supposedly their fees were $301 less than ours.

I asked what rate they locked at yesterday. He said "5.750%, like you both quoted on Tuesday."

We would have done it at 5.500%. He was bummed for his client.

By not getting an up-to-the minute GFE before making their decision, the client, a lower-income, first-time home-buyer, will now spend $50 more per month than they should have and potentially $18,000+ over the life of the loan because they didn't have it re-priced after three days.

Understand that there are rate changes through each business day. The rate on your GFE is only good for that moment in time. Or if you have a very generous lender, that entire day.

Before you pull the trigger today, get up-to-the minute pricing quotes from all of the parties you are considering. The markets are volatile and you could be rewarded.

How Long Is "Too Long" For a Return Phone Call and Why is Voice Mail Bad??

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Wed, 09 Apr 2008 19:46:20 -0500

A good long-time client of mine suggested today that I was "too busy" for his referral business. This is because the last three times he has called me he has gotten my voice mail.

In each case, I returned the call no later than a few hours later however he was discouraged I didn't answer immediately. I also suggested that email is sometimes answered faster.

There is no doubt in my mind that you should answer your phone immediately when you can.

However, what is an acceptable turnaround time for a return phone call when you are not available?? An hour, 2 hours, half a day, same day?

I have a three-person team and if I am in a loan app or with a client, or dealing with loans in the pipeline, it may take a few hours for me or one of them to return a phone call after you leave a message.

However, for some people today, this is unacceptable. I don't understand the impatience.

When I call my Doctor or Accountant or my Attorney, he rarely answers at that moment. I usually have to leave a message with a member of his staff. In most cases, they return the call that day. In some cases, they take a day or two or three.

I researched them all before choosing them. They all came highly recommended from trusted friends or associates. I trust them. I respect their professionalism. I know they have other clients. Yet, I am loyal to them.

I am certainly not going to change doctors, accountants or attorneys because I got their voice mail the last three times I called them and they called me back the same day.

That kind of impatience could jeopardize my life, health and financial well-being.

The very best real estate agents and lenders I know are the busiest today. This is because, like my doctor, accountant, and lawyer, they are very good at what they do. As a result, they get busy.

These agents and lenders may not be as easily reached right this very minute. However, they all answer their calls and emails the same day...usually within an hour or so.

Is it more important today to talk to someone right now, at this very minute, and risk the quality of the professional or is it more important to get someone talented as soon as they are available in a reasonable time-frame?

I choose the latter.

Credit Score Truths and Tax Myths of A Short Sale Vs. Foreclosure

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Tue, 25 Mar 2008 23:32:47 -0500

Recently a group of loan officers at my bank were gleefully boasting about developing a marketing strategy. They were going to be the "preferred lender" on foreclosure tour buses.

The company had to remind them that, as a lender, to specialize in financing the purchases of foreclosures and short sales is nothing to be joyous of. There are real lives at stake here. Real families and the nation's top, most respected, financial institutions are being destroyed as a result of this mess.

These homes are the end result of what will likely be a TRILLION DOLLARS lost by banks and firms on Wall Street. To the point where, some say, our nation's standing as the world's greatest economy could even be in jeopardy.

If you are a top REO salesperson or lender, yes, you should be proud of the success you have earned in this challenging situation. However, it's also important to remember to keep in mind the tragedy that creates this opportunity.

When life gives you lemons you make lemonade. Much of our business today is related to the listing, selling and financing of homes that are being sold "short" or homes that are bank-owned as a result of foreclosure.

Foreclosures and short sales are the biggest part of many of our businesses today. And this is what I am hearing:

"Your credit score won't drop as much on a short sale."

"You won't have to pay taxes on the debt forgiveness of a short sale."

"A short sale is nowhere near as bad as a foreclosure."

"Banks never come after you after a foreclosure"

How many of you have said any of these to you clients? Are you certain any of the statements are true?

At this point I am sure I don't need to tell you the difference. A short sale usually occurs when you sell your home before it goes into foreclosure but for less than you owe on the mortgage. A foreclosure usually occurs when the bank takes your home for lack of payment.

Either way this is very difficult on the homeowner. A dream has been lost. They are losing the home they live in, one they vacation in, or one they had dreams of making money on as an investor.

This is why I am a bit troubled by the information that mortgage professionals and real estate agents are giving their clients when discussing the decision to let the homeowner's property go.

First let me say this. To lose any property you have signed a personal note for, like a mortgage, without meeting your obligation is bad....really bad.

The difference between short sale and foreclosure, like one expert put it, is like the difference between getting hit by a bus or a train. You don't win by doing either. There are minimal differences on the homeowner.

#1) WILL MY CREDIT SCORE DROP LESS IF DO A SHORT SALE INSTEAD OF A FORECLOSURE?

The short answer is "don't count on it." No one can answer this question for you correctly and that is because every case is different.

The scoring model for all three of the credit bureaus is unique and the courts have ruled time and again that they don't have to share their methodology with the public.

How your credit will be affected all depends on how it is reported by the homeowner's lender. If they report it correctly, and most will, your credit is going to be hurt badly because of it.

Let's say I have a credit card with a major electronics store and I owe them $5,000. Times get real tough for me and I can't keep paying the $300 per month interest payment, so I call them to negotiate to pay them a lump sum of $3,000 one time to cancel my account.

If they report this correctly, it will show up as a "SETTLED" for less than owed, which is horrible for my credit and will cause my score to plummet.

Now I call them and try to negotiate with them to report this to the credit bureaus as "paid" and not as "settled" so it won't hurt my credit at all. Do any of us honestly believe the electronics store or the lender of a home will go for this?

It's certainly worth a try. You may be saving the bank $100,000's in a short sale vs. a foreclosure so it's worth asking. I know many agents are making the request of banks on behalf of their short sale clients. However, I haven't heard of any being successful in this.

Keep in mind your credit score is a snapshot at the moment of your credit worthiness and how risky you are to loan money to today. Credit score experts say a settlement, of any kind, for less than the amount originally owned, is the same as a collection, repossession, foreclosure, charge off, etc.

Now, this kind of settlement may be better from a lending perspective when you go to buy your next home years from now but not from a credit score perspective. However, that remains to be seen as well.

If you are thinking about calling your bank today to try and arrange a short sale, you have to understand that, typically, they won't even consider this if your payments are current. Lenders will be more agreeable to negotiation if your payments are late or in arrears because the risk of you failing to stay afloat is more obvious.

As soon as you are late on your first mortgage payment, your credit score is going to nose-dive. And as each month passes, it will get worse and worse.

Now, keep this in mind as well. You have seen inquiries in the past from your credit card companies and your insurance company for cars, house, etc. These companies randomly check your credit from time to time to analyze how risky you are now vs. how risky you were when you first became their customer.

So as soon as you start to miss those mortgage payments, your score will plummet, one of your other accounts will likely run an inquiry to check you out, and see you are now a greater risk than you were when they first gave you money.

These companies have a right, based on this change in your risk, to raise your interest rates, charge you more for your insurance premiums, and limit your credit based on your current risk. Be prepared to have your credit lines reduced substantially without notice.

That may make this time even more challenging for you financially.

It's going to take a lot of positive credit activity, over a long period of time, to bring your score back.

Even if the bank lets you enter into a short sale today although you aren't late, which is rare, the short sale will likely and eventually look as bad if reported correctly, even if it reports slower.

Many short sale experts believe that it's easier to rebuild your bad credit after a short sale than a foreclosure, but all agree your credit will be very bad once the sale is complete.

Don't listen to those who say your score will drop "between 80-100 points." Plan on your score being in the 400's to low 500's as that's where I see most of them today. 670 or so is an average credit score today.

The bottom line here is the only real chance you have to save your credit is to try and negotiate a short sale, without missing a house payment, and then trying to negotiate with the lender to not report it as settled for less than owed.

It's an extreme long shot, some say even impossible, but if you can pull this off, you may have saved your credit from destruction.

#2) WILL I BE ABLE TO BUY ANOTHER HOME QUICKER IF I DO A SHORT SALE INSTEAD OF A FORECLOSURE?

Once again, chances are no. Keep in mind, lenders make mortgage loans based on your ability and willingness to repay the loan. We determine this based, primarily, on your past credit history. Especially your past mortgage history.

It's going to take some determination and time for your credit to be repaired to satisfactory condition.

If you couldn't successfully live up to the terms of your last home loan, why would a lender believe this new one will be different?

The next time you buy a house, your loan is going to have to be sold to another investor. That investor will have guidelines for the loans they will buy. Most of these guidelines today don't allow home purchases unless you are at least two to three years out of foreclosure. They look at short sales the same way.

When your next loan goes through underwriting as it always does, underwriters will analyze your credit report. When they look at your previous mortgage trade line and see "settled," they are going to immediately recognize this as a short sale.

Plan on renting for two to four years before buying another home, based on today's guidelines, and only if there are very few other blemishes on your credit report over these years.

#3) IS IT TRUE I AM NOT RESPONSIBLE FOR DEBT FORGIVENESS IN A SHORT SALE BECAUSE OF THE NEW MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007?

First let say, IN BOLD, I am not a tax professional. It's of the utmost important that you seek the advice of a tax professional before proceeding with a short sale or foreclosure.

The Mortgage Forgiveness Debt Relief Act of 2007 was primarily started so that people, who were upside down in their homes, could refinance their home using an FHA loan and then the second mortgage holder would write off some of their loan to enable this. This kind of loan hasn't caught on because most lenders didn't go for it.

Now, today, some tax experts have interpreted this Act to help you get tax relief in a short sale. So your ability to write off this debt depends on the interpretation of the IRS and your accountant. Here is how it can work.

Let's say you bought your home, as a primary residence, in 2005 for $300,000 and you did 100% financing. So you borrowed $300,000 and today you short sold your home for $240,000.

It used to be that, in a short sale, the amount of the lender's loss could be reported to the borrower as income, creating an income tax liability for the borrower. You would be 1099'ed for the difference of $60,000 in this case.

This means you had to declare that $60,000 short-fall, as taxable income, to the IRS and pay taxes on it at year's end.

Then came this 2007 bill and now, many argue, and interpret, you don't. This may or may not be accurate.

HOWEVER, let's say you bought the same home in 2005 for $300,000 and your house went up in value to $500,000, so you took out a home equity line of $150,000 that you didn't use to improve your home, so now you owe a total of $450,000.

Now today you short sold your home for $320,000. You will NOT likely get debt forgiveness tax relief for the home equity line. This lender loss is now reported as income to you, so get ready for a huge tax liability at year's end.

For the debt to be forgiven, according to the Act, the house must have been used as a primary. The debt must have been used to buy, build, or make substantial improvements to the home.

Home equity loans where the proceeds were not used to buy, build, or improve the residence are not forgiven. Second mortgages and home equity lines used to purchase the home can be forgiven. Also, mortgages for second homes and rental properties do not qualify.

The bottom line here is before you do this, meet with your accountant to discuss the ramifications. There are too many possibilities to go over here.

If you get a 1099-C form in the mail, after a short sale that looks like this, http://www.irs.gov/pub/irs-pdf/f1099c.pdf, you need to head to your accountant immediately.

Once again, I am not a tax professional. It's of the utmost important that you seek the advice of a tax professional before proceeding with a short sale.

#4) BASED ON ALL OF THIS, WHY WOULDN'T I JUST LET MY HOME GO INTO FORECLOSURE?

For one, because you are giving the lender a chance to recoup some of their money. It is far cheaper for a lender to negotiate a short sale with you and your buyer than it is to rack up attorney fees and other costs in a foreclosure.

Foreclosure can take eight months to a year and in a declining market, your decision could cost them $100,000's more than a short sale.

The next reason is because some believe, as we discussed earlier, it may be easier to rebuild your credit after the process. Your credit will likely be destroyed either way, but the road back to a respectable credit score may be shorter in a short sale, according to many experts.

Finally, and probably the top reason for a short sale, is depending on what kind of loan you have, and in what state, the lender may be able to go after you personally for a deficiency judgment at a later date. In Nevada, where I live, lenders have three months after the sale to try and obtain a deficiency judgment.

This means if you owed $300,000 and he was only able to sell your home for $150,000, he may be able to come after you for the $150,000 difference plus legal fees and more, which could force you into bankruptcy.

There are only two ways out of a deficiency judgment; pay it or bankruptcy. Many lenders and real estate agents are wrongfully advising their clients by saying that "banks rarely come after you."

It's mostly true that banks don't come after you but they can sell the obligation to aggressive, debt collectors for pennies on the dollar.

For example, let's say you were foreclosed on and the deficiency after sale was $100,000 and the bank gets a deficiency judgment against you. You owe them $100,000. They don't have the manpower to collect on everyone today so they sell this debt to the Law Firm of John Q. Collector for $5,000-$10,000. Whatever the firm collects, they keep. I can assure you there are firms out there today trying to get lenders to secure deficiency judgments so they can buy these notes.

Aggressive law firms that specialize in collections can go after you with everything they have to collect this debt or force you into BK. Because this is a judgment, enforceable in a court of law, they can possibly seize your assets and garnish your wages.

In addition, second lien holders, like the ones who gave you the 20% on your 80/20, who usually don't get anything at all in a foreclosure, like a house to liquidate, in many states, can still likely come after you for the Note you signed with them for years.

The bottom line is you should try and do anything possible to try and avoid a short sale or foreclosure like a loan-workout program. I have blogged about note modification before.

The banks are very negotiable today and mostly want to try and help you stay in the home. That should be your first option.

If not, your next call should not be to a real estate agent or mortgage lender but to an attorney and an accountant.

Mortgage Rates On A Roller Coaster!! Why This Is Happening??

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sat, 08 Mar 2008 10:39:26 -0600

What a crazy week. Good news with the FHA loan increases. Bad news in the mortgage markets.

For those of us in the mortgage business a long time, it is very challenging to describe what we are going through.

Last Thursday rates were near a 2008 high. On Friday they shot so low they were near a year low. By Monday, it was over. And by this week's end, they are all over the place.

Why is all of this craziness happening? It used to be very easy to predict what mortgage rates would do in a day. You would watch the movement of the 10-year Treasury bond. If the yield fell, rates were probably going down. If it went up, rates were probably going up.

Today, it's not a consistent barometer. Not even close.

Today, the mortgage market is $1 trillion, with a "T", short in capital.

This is the way today's mortgage market works. Investors, like hedge funds and mortgage real estate investment trusts, buy mortgage securities. Bulk packages of loans. They finance a lot of these purchases with borrowed money.

Today there is little confidence in these home loans, because of the foreclosure mess, that back these mortgage securities.

Because they are worried about these homes going into foreclosure, the banks that finance most of these mortgage investments for these investors have started to pull back and they are imposing margin calls.

They are demanding more cash or more collateral to back their loans from these investors.

This has made it very difficult on these investors. So some highly leveraged mortgage investors have to sell assets to meet margin calls.

When you are forced to sell anything in life, it pushes the prices lower. This then sparks more margin calls, which then means more selling and more lower prices.

At the end, when debts fall, yields rise on the mortgage backed-securities, and then you have higher mortgage rates.

We are at a 23 year high on the difference in the correlation between mortgage securities and the Treasury bond. And, as I said above, that used to be a pretty good barometer.

If you didn't follow all that financial mumbo-jumbo, don't worry about it. The best lesson today is to understand we are in un-chartered territory. The markets are incredible volatile.

If your buyer gets quoted a rate they can live with, they need to lock it that day!! It may, literally, be gone tomorrow.

Now Is The Time To Quit The Real Estate Business or Energize and Specialize

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Fri, 29 Feb 2008 23:23:48 -0600

I had a close friend in college named Phil. In the 1970's, Phil's dad, an immigrant, started a little Italian restaurant in Florida. It was a small family business and the food was terrific.

As a young boy, Phil worked there with his family. Phil bused tables until he turned 16. At 16, he became a waiter. He would go to high school all day and then wait tables at night. He would do homework during breaks.

People came from all over to eat there. The business grew more than they ever dreamed. They expanded the restaurant and soon they bought the hotel behind it. They opened two more restaurant locations.

When Phil graduated from high school he went away to college. He did this for one reason. He was determined to study business so that he could go back and further expand the family company. The family business was all he'd ever known and was all he ever wanted to know.

When he graduated, in the late 80's, Phil went back home. His Mom and Dad went into semi-retirement and Phil took over the business. It was very successful and lucrative for Phil.

In the 90's the tech business started to take off. Phil felt like the restaurant/hotel business, while profitable for him, was feeling stale. It wasn't fun and exciting for him anymore. It was a job....a great job, but still a job. He was bored and depressed. He hated going to work everyday. He didn't feel like there was much growth potential in it personally or professionally. He wanted to get in the tech business.

So, one day, he called a family meeting. Phil tearfully told his Mom and Dad he was quitting after over 20 years with the company. He wanted to do something in the tech business. His parents reluctantly accepted his resignation and put his younger brother, who had also gone to college, in charge of the company.

It was a very courageous move. With no experience at all, Phil went to work for a small software company. He was making very little money and he started on the ground floor but he had incredible renewed energy and passion.

It turned out to be a great decision. Today, he is the Vice President of large publicly-traded tech company.

How does this story relate to the real estate business? Because I read something this week and it made me think of Phil and his story of courage and passion.

Seth Godin is a marketing genius. His books make the New York Times best-selling list and his blog http://sethgodin.typepad.com/ is one of the most-read marketing blogs in the world. Many on Active Rain have commented on Godin before.

Godin wrote a very popular book, called "The Dip." In this book, he challenges the old adage, "winners don't quit, and quitters don't win."

He argues that this is simply wrong. Every new project or job starts out fun and exciting and then it gets hard and less fun. If it gets to a real low point of really hard and not fun at all, this is called "The Dip." Once the dip occurs you have to ask yourself the very serious question of whether the goal you had originally set out on is worth the hassle, pain and stress.

When you face "the dip," are you simply in a temporary rut that will get better if you keep pushing?

Or will it never get better no matter how hard you push?? He calls this the "cul-de-sac."

Godin says that being able to escape these dead ends quickly while staying focused and motivated is what really counts when striving for success.

If you are truly at the dead end and there is no coming back, there is no disgrace in quitting to concentrate on something where you do see opportunity.

Seth's book reminded me of Phil. Phil quit the only business he had ever known and disappointed his family. However, he wasn't a loser for quitting. He became a big winner because of it.

Last week Seth Godin wrote about today's real estate on his blog. The post was called, "Advice for real estate agents (quit now!)" Check it out at http://sethgodin.typepad.com/seths_blog/2008/02/advice-for-real.html. Others here have blogged about Seth's post.

His words, I believe, should be read by everyone in our business.

In the blog, he writes about the many people who joined our business in recent years and made their success, in large part, because of low interest rates, speculators, and easy loans. He calls them the "order takers" and he is truly encouraging them to quit the business.

Those days are over and will not be coming back soon.

However, for the rest of us, who want to be in the business long-term, respect what it takes to be successful in this business, and where "whining" is not an option, he believes there is a tremendous opportunity in "micro-specialization."

A new agent told me recently about calling her broker's assistant to order new business cards. She is concentrating solely on high-rise condos and has immersed herself in learning all she needs to know about them.

So, on her business cards, she requested to put "High-Rise Condo Expert" as opposed to "Real Estate Agent." The assistant told her, "we really frown on that here; you don't want to limit yourself that much." Hogwash.

Godin argues that kind of thinking today is the thoughts of an "order-taker."

Godin writes, "you're either the best in the world (where ‘world' can be a tiny slice of the environment) or you're invisible." And, Godin adds, if you are going to make that kind of commitment you have to give up everything else and obsess over it.

Become an expert in something. It is very difficult today to be everything to everyone like "Las Vegas' Best Real Estate Agent" and be successful.

However, being the "Top Condo Expert in Henderson" or the "Strip High-Rise Condo Expert" may be narrower but, likely, more effective.

The market is all about foreclosures today. If you were known as the "Foreclosure Expert of Summerlin," a very popular master planned community in Las Vegas, you would probably need more assistants today.

How about the "Golf Course Homes Foreclosure Expert," the "Custom Home Foreclosure Expert," or the "Under $200,000 Foreclosure Expert?"

There is so much excitement surrounding the resort corridor of our city. Palms Place and Trump Tower will soon open their doors and CityCenter is not far behind. Who will stake their claim as the "top resale expert" in these buildings? How about in your city? Where are the previously hot now fallen communities?

How about being an expert in homes for large families? Or an expert in homes for single mothers? If you were looking for a condotel on the Strip who would you call? How about an age-restricted condo in North Las Vegas? Why can't it be you?

It is my dream to someday buy a condo at the beach in San Diego. I especially like the Mission Bay/Pacific Beach area. So, like all dreamers, when I need to motivate myself, I visit some websites and look at the listings. The websites I visit are the "condo experts in Mission Bay/Pacific Beach." Their offices are down there and I can tell they know the area.

"San Diego's Best Condo Agent" has no chance to earn my business.

If you are going to take Godin's advice and become the "foreclosure expert in Summerlin," you may have to stop going on listing appointments in Anthem, another once booming area in Las Vegas.

Once you make that commitment to be the "best in the world" you have to immerse yourself in it. Move there, be there, meet the neighbors.

Now, I know a lot of you will disagree with this and say "business is business and I am not turning down any of it." I am not blaming you one bit. But if it's not working out as you want today, what makes you think it will work out tomorrow?

Godin goes on to describe a new website for real estate professionals to help achieve this kind of focus, "Mayor of Your Own Zip Code." You can get started by visiting here http://www.squidoo.com/welcomerealtors.

Or how about simply reintroducing yourself to your clients??

Godin writes, "according to the National Association of Realtors, 91% of all Realtors never contact the buyer or the seller of a home after the closing. Not once. Wow. Someone just spent a million dollars with you and you don't bother to call or write?"

Godin then adds, "the opportunity during the current pause (and yes, it's a pause) is to find, one by one, the people who would benefit from hearing from you and then earn the right to talk to them. Earn the right to send them a newsletter or a regular update or a subscription to your blog. NOT to talk about what matters to you, but to give them information (real information, not just data) that matters to them. Some of you will stick with the standard business card with the standard photo, the standard office and the standard ad strategy and the standard approach to making the phone ring. It's going to be a long haul if that's your route."

The greatest use of your time in the next few weeks could be to put together a list of every person you sold a house to over the past few years and start sending them valuable information they can use. If you don't have this list, call your favorite escrow company. There is data on every home sold and the broker and salesperson on record. Even though you didn't keep it, it's still available to you.

Maybe today's real estate market is not the business for you. Maybe you simply don't have the enthusiasm for it to try new things or to execute the tried and true marketing methods that your broker has been pounding in your head the past few months.

Maybe you long for the days of being a very well-paid "order taker" and you just plan on waiting for it to happen again.

There is no shame in quitting this business to move on to something that's more exciting and fun for you. It may bring you the financial rewards you so hopefully sought on that first day of real estate school and realized when the market was on fire.

There is no shame in trading in a career you hate or don't see a future in for one you may love and excel in. It may be time to quit. Or its time to energize and specialize.

Which one are you choosing?

Foreign Investors Are Buying U.S. Real Estate - Loans Not as Difficult As You May Think

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Thu, 28 Feb 2008 22:50:44 -0600

I have a very good friend who lives in England. When Ricky Hatton fought Floyd Mayweather here in Las Vegas in December, he flew out with a group of friends....for the weekend.

Now I have a personal belief that any flight over 3 hours requires at least a three-day stay-over. They flew about 10 hours for 2 nights just to see the fight. Crazy.

When I asked him, "why in the world would you do this?" He said, "Aaron, everything in America today is half-priced!!"

When he got home from his Vegas Weekend, he emailed me to tell me that even though Hatton lost, they had a great time.

He wrote about how he and his buddies even went out and bought extra suitcases. They filled them up with all of the great clothes they had bought....at half price.

With the dollar so weak, and falling real estate prices in most areas, foreign investors are coming here to buy second homes and invest. Many successful agents are marketing to this niche in tourist areas like Las Vegas, New York, Florida, California, etc.

Here is some of what you need to know about the financing from one of the nation's top foreign national lenders.

Qualifications for Foreign National

Documents Required to Prove Foreign National Status

Valid (Unexpired) Foreign Passport for each borrower
The Foreign National does not have to be in the United States at the time of application or closing.

Housing Payment History

They cannot have been late on their own personal mortgage or rental in the last 24 months.

Previous BK and Foreclosure

Standard guidelines for any Bankruptcy
Foreclosure is an automatic denial for a Foreign National

Max Loan Amount

$1,000,000. However, exceptions are made on a case-by case basis.

Income Documentation

Full Doc usually requires 25% down on loan amounts under $650,000

Full Doc usually requires 35% down on loan amounts over $650,000

Stated Doc usually requires 30% down on loan amounts under $650,000 (35% if soft market)

Stated Doc usually requires 35% on loan amounts over $650,000 (40% if soft market)

Cash-Out refinances are usually not allowed.

Reserves

Plan on 6 Months for all Loans under $650,000
Plan on 12 Months for all loans over $650,000

Credit

If they have a U.S. credit history, 700 minimum FICO score with at least 24 months on all 3 trade lines- all must be satisfactory payment history.

International Credit Report required to be pulled, if possible.

If nothing shows up there then they can use U.S. non- traditional trades - 3 trade lines or they can get three credit letters from their home country.

The credit letters may be from a financial lending institution or a creditor or a combination.

Getting A High End Mortgage - Super Jumbo Loans for Luxury Homes Made Easy

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Fri, 15 Feb 2008 00:02:32 -0600

Even with the slowdown in the real estate market, the high-end (over $1 million) seems to be remaining pretty steady overall.

In the past year or so, I have closed over a dozen loans in the high-end luxury market. They have ranged from $1,000,000 to $5,250,00 in Nevada, California, and Utah. Most were in the $1.5M - $3M range.

Some of these were second homes. I am currently working on one for nearly $8M.

So, what's the biggest difference today between securing a loan for $400,000 vs. one for $4,000,000. Although 100% financing at $4M is no longer available as it once was, in my view, there is not as much as you would think.

Here is what you need to know, in my experience.

1) The loan to values will likely be lower. Although you can still sometimes get 100% financing in some areas for loans up to $417,000, once you pass $1,000,000, plan on between 5% - 30% down as you climb the loan scale. Once you pass $3,000,000, plan on 30% down.

2) Plan on proving your income through tax returns or putting even more down as you climb in loan. A $2M loan that requires only 20% down with a full documentation of your income may become a $2M loan that requires as much as 25-40% down if you have to state your income. Securing a stated income loan over $3,000,000 today is very challenging. If you can prove your income, the sky could be the limit.

3) As the loan amounts climb, it's likely, so will your credit score requirements. Although some loans are available in the millions for scores as low as 620, once you get past $3M, you may want to plan on 700 scores or higher.

4) The rates aren't likely as bad as you think. With good credit, solid tax returns and reserves, you may find the rates to be very competitive with regular jumbo loans. Because of the lower loan to values, you will likely get the pricing benefits of these higher down payments.

5) The higher you go, the chances are more scrutiny will be placed on your cash-flow. If you are looking for a loan over $3M, your bank statements and reserves will likely be scrutinized as much as your tax returns. The lender may want to make sure you have a steady flow of cash coming in to make these payments. Your current bank statements could tell this tale better than last year's tax returns.

6) The loan programs may be limited. In the place where I work, once the loan amount gets over $1.5M, today, a 30 year fixed rate mortgage may no longer be an option. However, you can likely choose between a 5, 7. or 10 year ARM. This is probably a temporary condition of the credit crunch and the limited ability to sell the loan in secondary.

7) The customer service will likely rise to a very personal level you would expect at this loan size. Once the loan amount hits $3M at my bank, in my experience, a team of seasoned high-end experts, at the top levels of the institution, get involved. They partner with my team to make sure you get immediate results and prompt attention...even to the point where you may be offered special insurance policies specifically designed for the higher income client.

8) The loan will likely be given every consideration. Once you get to these levels, like an FHA loan, in my opinion, the overall strength of the loan is looked at more than hard guidelines. As a result, the guidelines end up in second position to the ability of the borrower to repay. If you can show your debt to income ratio is very low and you have a substantial down payments and reserves, your credit score may not be as important as the strength of your ability to repay.

9) The loan can likely be done very quickly. Loans this size, because of the incredible personal attention they receive, and today's technology, can be done in the same time as a regular conventional loan....in a matter of days or weeks.

If you are working the luxury home market, or buying an estate home, it's important to associate with a lender, preferably in your area, who has an extended, proven track record in the high-end.

Although many of the high-end buyers have cash or don't need sizable loans, with the rates are as low as they are today, most may want to weigh their low-interest financing options before exhausting that kind of cash.

I have made it sound pretty easy here but, like every niche in real estate and lending, experience counts.

After Locking, Don't Come to Me When Rates Go Down and I Won't Come to You When They Go Up

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Wed, 30 Jan 2008 23:22:03 -0600

I have done a lot of loans over a lot of years. I pride myself in making the often-complicated loan process one of ease, simplicity and understanding. I have built my business this way.

However, I have never heard the question I heard today. At first I was just surprised. As the day went I was dumbfounded and perplexed.

This really nice lady, Arlene, whom I did a loan for recently, called to ask me a very simple question.

She bought a new house late last month. We did the loan application just before the New Year, we locked her at 5.500% for a 30 year fixed with a 2 point buy-down, and we closed escrow last week.

Most people don't call the week after they close, so I was surprised to hear from her today after the Fed's half point rate cut.

"Aaron, I see that rates have dropped again," Arlene asked. "Is there any chance the lender will give me the new, lower rate?" Keep in mind, she closed escrow last week and is now in her new home and she wasn't calling to see if she could refinance this quickly.

I spent the next 20 minutes explaining how rate locks work, how loan docs work, what the close of escrow means, but then I was left in astonishment.

"But Aaron, the rates went down," Arlene pleaded. "And I just closed last week. Isn't there some kind of grace period? That's only fair!"

I had to spend another 10 minutes explaining why that wasn't possible.

This is not a dumb woman but it got me thinking "Are the borrowers really that out of touch with what goes on in the loan process?"

Mortgage rates are tied to the bond market. The bond market trades like the stock market trades.

Bonds trade up and down all day, every business day, just like stocks do. This means mortgage interest rates basically do the same. They move up and down all day.

Some days they trade with such small variations that rates don't really fluctuate much. Other days, especially in recent days, they can swing with huge variations.

Last Wednesday, for example, what was a 5.250% 30 year fixed in the AM, was a 5.625% 30 year fixed by day's end.

So, let's say today at 4:30pm, we locked your rate on a 30 day lock. This means if rates go up tomorrow, or the next day, or the day after, or any other day for the next 30 days, you will not be penalized. We won't raise your rate. You are protected from that by locking.

However, if rates go down tomorrow, or the next day, or the day after, or any other day for the next 30 days, you will not be able to take advantage of that.

Locking means your rate is locked in from going higher or going lower, unless there is a dramatic change to your loan program, which is highly unlikely. Or unless you have to extend which is a topic for another time.

Let me give you an example to give you a clearer understanding.

Let's say you want to buy stock in Microsoft. You call your stock broker and say, "I want to buy Microsoft. What is the price for a share today?" He says "It's $32 per share today." You say, "Great! Give me 10 shares!" He then takes the money out of your account, $320, and buys you the stock.

You now own Microsoft for $32 per share.

If Microsoft's stock goes down to $9 per share tomorrow, you can't call the broker up and say "cancel that trade, give me my money back and now give it to me at $9 per share." You have committed at $32. That is basically the same principle as locking your rate. You have committed at the interest rate you locked in at.

The only advice I can give you is the advice I received when I bought my first home.

Don't try and time the market because it rarely works. If you like Microsoft at $32 a share because you think its going to $50, buy it now, and don't wait for it to drop to $25 because it may not get there and you will have missed out on the gains.

If you are happy with a 30 year fixed rate at 5.750%, lock it when you can, because if you are waiting for it to go to 5.250% again, it may never happen either.

Once you lock, if rates go down before you close, don't look back in anger, be happy with what you got.

Once you lock, we won't come to you if the rates go up, please don't come to us if rates go down.

Don't Panic or Be Afraid!! Simply Let Your Adjustable Rate Mortgage Reset or Adjust

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Sat, 26 Jan 2008 16:27:02 -0600

Interest rates are at a four-year low. As a result, my phone has been blowing up for the past week with people looking to refinance.

A nice woman named Phyllis called me this week to refinance. She has a 5 year adjustable rate mortgage at 6.500% that is scheduled to reset in the next month and she is literally freaking out.

"Aaron, when my rate goes up next month, I won't be able to afford this home any longer."

I did the research on her home. Her loan amount is $275,000 and the house is worth about $260,000. Obviously, she can't refinance.

In case you don't know, here is how adjustable rate mortgages adjust. You add the index you are tied to, likely the LIBOR, on the date of your reset, and the margin you agreed to when your loan closed, which should be somewhere between 2.000 and 3.000, and that's your new rate. Rates can adjust up or down.

It may stay that way for six months or a year, depending on your Note, and then it will do it again.

My first reaction, as it is today, was note modification through her bank. However, first I asked her if she knew what index her loan was tied to or what her margin was. She didn't know. I had her fax me her Note.

It turns out she is on the LIBOR Index and her margin is 2.250%. Based on the LIBOR today of around 3.25 and her margin of 2.25, her rate will actually likely DECLINE by a full point.

Her rate is going to adjust DOWN to 5.500% or so from 6.500%. Phyllis is going to save nearly $220 per month for at least the next year.

She was in happy tears when I called to tell her.

Before you "freak out" about your ARM adjusting, pull out your Note or call your lender to find what index you are on and what your margin is and then calculate the new rate.

To see where your index is today, you can "Google" any of the indexes and get today's index rate. Add this to your margin and there you go.

Based on the way rates and indexes have been coming down of late, you may be very surprised where your loan really stands today.

Fannie Mae's Potential Deal Killer - The Dreaded, Declining Market Box

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Mon, 14 Jan 2008 23:30:22 -0600

The company where I work recently had an incredible real estate auction here in Las Vegas.

Over 200 bank-owned properties were sold. Thousands of home buyers attended to bid over two days. Some even had to watch the auction from a big-screen television in the next room....it was that crowded.

I was one of a handful of lenders chosen to represent the company and there were a lot of deals done that weekend.

All of the properties received bids that weekend and although not all of the offers were accepted, it really re-affirmed my belief that we are not experiencing a slow market. What we are experiencing, I believe, is an over-supply of over-priced product with more limited financing options.

The buyers are out there. They simply want deals they can afford.

So the successful buyers get their contracts, we start the loan process, and in the middle, we all get a announcement from Fannie Mae announcing a new guideline relating to "declining markets."

This new guideline officially starts tomorrow. January 15, 2008.

Many banks, including mine, are enforcing it on all loans, not just conforming Fannie loans $417,000 and under but jumbo loans as well.

It does not apply on government loans like FHA and VA.

As you may know, there is a box on the standard appraisal form called the URAR (Uniform Residential Appraisal Report) that asks the appraiser if the market is "stable," "declining" or "increasing."

If the appraiser checks the box on the appraisal report that says the market is "declining," and most of Las Vegas, my hometown, is at this point, the down payment of the selected loan program has to be increased by 5%, even if the appraisal comes in at or over value.

You can read about it here: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/pdf/declmktsmaxfinfaq.pdf

This has been a real killer for many buyers recently and will be even bigger here shortly.

For example, let's say the loan program you want allows for 100% financing. And you need 100% financing. If the appraiser checks that box, the most financing you can now get is 95% financing.

Even if the purchase price of your home is $200,000 and the appraisal comes in much higher, let's say $245,000, if the declining market box is checked, you still have to put 5% down.

Although many lenders are looking at reconciling these kind of challenges, today the appraisal of the home means nothing compared to this. The market condition of the neighborhood and if its declining means everything.

I am doing a loan in San Ramon, CA. According to the California Association of Realtors, San Ramon, is one of the least declining areas in all of California.

In fact, while the rest of the state depreciated by nearly 10%, from last November to this November, San Ramon depreciated by less than one-third of one percent.

The purchase contract was for $1.35M. The appraisal came in at $1.37M. The declining market box was checked however. The appraiser believes that although the home is a good price and fair, the values in the neighborhood are declining. So even though the appraisal was over the purchase price, he believes the market is in decline.

Although we argued this with as much data as we could find, including the fact that average home in the neighborhood sold in less than 60 days, he won the argument. The recent sales in the neighborhood, though sold relatively quickly, had been in decline.

The borrower, who had qualified for 10% down, and the loan guidelines allow 10%, now was required to put 15% down. It almost blew up the deal.

OK, so what can you do to avoid this and not get blind-sided at the 11th hour like we all hate so much?? Be prepared early in the process!!!

1) Ask the lender what the highest loan to value your borrower can qualify for and qualify him for that program at that loan to value so you may have some cushion if necessary. Ask your lender to qualify him at the maximum allowed by the loan program.

If your borrower is putting down 10% and that's the max the loan program allows for, have a conversation with him immediately to let him know of the challenge that may be just ahead.

If they are doing 100% financing, and they need 100% or close to it, strongly consider switching to FHA and a down payment assistance program. As mentioned, government loans like FHA and VA do not have this guideline.

2) Know what loan program your client is going for and communicate with him early about this guideline. If the client is buying an investment home and the max loan guideline allows for 90% financing, prepare him that he may need to put 15% down to qualify. If the max allowed is 80%, prepare him for 25% down.

3) You are not likely going to get this "declining market" answer until the appraisal is in and that may be too late.

Therefore, meet the appraiser at the property and ask him what he thinks. I would ask him bluntly, "do you think this neighborhood is declining and will you be checking the declining market box?" If he says "yes," try and gather evidence that disproves this opinion. Many experienced appraisers will consider well-thought out evidence and comps that make your case.

2) Check and see what the most recent sale was in your neighborhood and call the agents involved to see if they had to contend with this issue. If a loan closed in there in the past few weeks, its likely they had to deal with this challenge. Information early is important.

Officially, this guideline does not start until tomorrow January 15, 2008. However, many lenders have been dealing with it for a month already.

Be prepared. Know your market and the neighborhood where you are selling and warn all of the parties early in the process.

Just because your lender says you have a loan, you are pre-qualified, and you meet loan guidelines does not mean the home you are buying and the neighborhood where it stands meets the same guidelines.

You may be penalized for buying a property in a declining neighborhood and you may be asked to bring in more money than you had planned or were already approved to.

I have been warning all of my buyers of this for weeks now. A few of them have said to me "but I am approved with 5% down, why do I now have to put down 10%?"

Its very hard to explain to them late in the process that its not them, its the property. You want to do it early.

How to Get Real Meaningful Loan Status from Your Lender

Aaron Gordon, Home Loan Consultant, Las Vegas, NV (Home Loan Consultant) — Mon, 07 Jan 2008 00:06:31 -0600

A lot of my business comes from previous clients who have the trust and confidence in me to refer me. A good percentage of these referrals come from real estate agents. Some of these agents have trusted me month-after-month for years.

I am very appreciative of these relationships. As a result, I work very closely each day with real estate agents, on both sides of the transaction.

The buyer's agent is usually the person who refers me but I also make it a point to call the listing agent very early in the transaction to introduce myself and provide him/her with my contact information.

As a result, I usually get at least one call weekly from both agents in the transaction.

Now there are some agents and clients who never call. They trust us to do our job. They know we will handle the challenges as they come and that we will communicate these challenges when it's necessary. They wait for updates from us. However, that is pretty rare.

My first real estate coach, when I was a sales agent, told us that you should call and check on your client's loan status at least twice a week. When I got in the mortgage business, I really felt that if you had a good, experienced lender, twice weekly was a little much. I believe weekly makes a lot of sense.

I have worked along side many lenders and here is an example of how the status calls normally go. This may not apply to all of you but I am sure most of yours are fairly similar.

WEEK ONE CALL: "Mr. Lender, can I get a loan status on Joe and Mary Buyer?"

LENDER ANSWER: "Loan is going well. Appraisal has been ordered. The loan is pre-approved. Shouldn't be any problems. Have a great day!!"

WEEK TWO CALL: "Mr. Lender, can I get a loan status on Joe and Mary Buyer?"

LENDER ANSWER: "Loan is going well. Appraisal is in. Value is there. Shouldn't be any problems. Have a great day!"

WEEK THREE CALL: "Mr. Lender, can I get a loan status on Joe and Mary Buyer?"

LENDER ANSWER: "Loan is almost done in underwriting. All looks good. I look forward to closing next week! Shouldn't be any problems. Have a great day!"

We close the loan and all is good in the world. Obviously if the loan faces challenges, the conversations don't quite go like this and are much more detailed.

In my entire career, I am very proud to say, I have had less than five loans declined after I did the loan application and determined we could do the loan. However, most of those occurred this year with rapidly-changing loan guidelines that changed after application. This is not to boast. Many experienced direct lenders and retail bankers out there can make similar claims.

However, as a result of the "uncertainty" in the lending market today, these generic answers, provided by me and the other lenders, are really no longer acceptable.

Transactions are too few and far between. Too many deals are being rejected by underwriters at the 11^th hour. There is too much riding on each of these deals today for your lender to be casual in his response. Even if he believes his answer to be true, today, to best serve your client, you really need to know the actual loan status.

Look at the agent example questions above. They are the same each week in the process. "Mr. Lender, can I get a loan status on Joe and Mary Buyer?"

I believe the reason why you, as agents and borrowers, are asking the same broad question is you are a bit unsure about the actual questions you should really be asking. And why wouldn't you be? You aren't a lender. You don't know our job aside from that we get you money and you expect us to do it to the best of our ability.

However, when you call your lender and ask "can I get a loan status?" wouldn't you prefer that the answer had meaning and substance?

I am going to give you the checklist of questions you should really be asking when you make this loan status call. These questions assume a 30 day escrow and checking in with the lender once weekly.

If your escrow is shorter, or you are having this done on a rush, obviously you need to adjust the timelines for these questions.

QUESTION #1 (week one): "HAVE YOU RECEIVED THE CONTRACT AND ALL OF THE ADDENDUMS?"

As lenders, if we don't have the contract and all of the addendums, we will likely face numerous challenges and delays. Without it, in many cases, we cannot determine loan amounts or loan programs for qualification. We will also have difficulty ordering the appraisal as most appraisers require it before they will set your appointment.

If we don't have all of the addendum's we simply cannot process the loan correctly and there may be something in those addendum's, like closing costs incentives, or other items, that could potentially alter the loan program and pre-approval you have gotten.

FHA loans, which we will all be doing a lot more of in 2008, also have some special requirements and forms, especially if you are using a down payment assistance program. It's important to get on these early in the transaction.

QUESTION #2 (week one): "HAVE YOU GOTTEN THE PRELIMINARY TITLE REPORT FROM THE TITLE COMPANY AND/OR A TITLE COMMITMENT?"

If we don't have clear title, we obviously will face challenges in lending. It's important that we get a look at this report as soon as possible in the transaction to ensure we will be able to get you your loan in a timely manner.

We also want it early so that if there is a challenge like a lien for unpaid property taxes, judgments, child support, or more, we can at least join forces with your title company representative to start working on the solutions.

QUESTION #3 (week two): "HAVE YOU VERIFIED HIS EMPLOYMENT, HIS INCOME, HIS ASSETS AND HIS RENTAL HISTORY?"

Although all loans don't require all of these, these third-party verifications can be the most time-consuming part of the loan process. Not all employers and banks are as accommodating to these requests as we would like them to be. It's important that you make sure this has been accomplished.

There is nothing in the loan process, aside from the appraisal, that has the potential of killing your transaction more than a borrower who wasn't truthful about his income, employment, and assets. It's important to get these answers confirmed as soon as possible.

QUESTION #4 (week one or two): "HAVE YOU ORDERED THE APPRAISAL?" "IS THE APPRAISAL BACK YET?" "DID IT COME IN AT VALUE?" "IS THE NEIGHBORHOOD IN A DECLINING MARKET?"

Appraisal questions seem to be fairly common and a lot of you already ask. However, it's still important for you to ask, especially in today's market.

There is a box on the standard appraisal form called the URAR (Uniform Residential Appraisal Report) that asks the appraiser if the market is "stable," "declining" or "increasing."

Fannie Mae issued a new guideline on "declining markets" in the middle of December 2007. If the appraiser checks the box on the appraisal report that says the home is in a "declining market," and a lot of the country is at this point, the down payment of the selected loan program has to be increased by 5%, even if the appraisal comes in at or over value.

You can read about it here, if it interests you: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/pdf/declmktsmaxfinfaq.pdf

For example, I am currently doing a loan for a buyer who is buying a bank-owned foreclosure property. The loan program allows for her to go to 100% financing and that's what she originally wanted to do. She bought the home from the bank for $200,000. The appraisal came it at $235,000 but with the "declining market" box checked. I challenged the appraisal but, unfortunately, lost my challenge.

Fannie Mae guidelines now require she come in with 5% down, which she is happy to do, but this is definitely going to be a serious challenge for your buyers in 2008, especially those who require 100% financing.

Let's say your buyer is doing a stated income loan, which most lenders allow 95% financing on today with good credit, if the buyer buys a home in a neighborhood that is "declining" in value, according to the appraiser, the max loan amount will be 90%.

A very large lender recently announced that it is classifying Clark County, where I live, as "Severely Distressed" meaning they are forecasting our market to continue to decline greater than 15% over the next 12 to 18 months. They are going to make internal adjustments on every loan they do to protect themselves.

You need to ask your lender for that appraisal as soon as possible so you can deal with the challenges early. Just because your buyer meets program guidelines today does not mean the property will.

Government loans do not have the same appraisal guidelines. This is yet another reason to look at FHA first when assisting borrowers with little to no money down.

QUESTION #5 (week two or three): "HAVE YOU SUBMITTED THE LOAN TO UNDERWRITING?" "HOW LONG DO YOU EXPECT UNDERWRITING TO TAKE?"

Depending on your lender in today's market, underwriting can take one day to two weeks or more.

In my office, where we have three underwriters, it's usually underwritten in a day or two.

However, if you are working with a mortgage broker, who has to send it out to bank elsewhere, or out-of-state lender, this can be a lot longer.

I just recruited an experienced broker (an Active Rainer by the way) to come join my team. He told me that underwriting times at most of the banks where he used to broker are averaging 6-8 working days before they even release conditions. Then another 2-4 working days to review conditions.

This is 8-12 working days on top of processing time. The last loan I did as a correspondent lender, before moving to retail banking, was in underwriting a total of 18 days.

In all fairness to your lender, if it's not a "slam-dunk" loan, and not many are today, he really has no idea how long your loan will be in there.

The more challenging the loan, the longer you can expect underwriting to take. You should ask him to give you an idea of how long he thinks he will be in underwriting based on his recent experience but don't hold his feet to the fire on that answer. It is mostly out of his control at that point.

QUESTION #6 (week two or three): "HAVE YOU GOTTEN THE PRIOR TO DOC CONDITIONS FROM UNDERWRITING?"

Once it comes out of underwriting, there will be "prior to doc" conditions that must be met by your buyer. Loan docs will not be drawn until those conditions are met.

It's up to you if you want to know what these conditions are but keep in mind, a mortgage loan is a private, financial transaction between the client and his lender. As his agent, if the condition involves personal finances, you may not be able to be told about it.

If the condition relates to the privacy of your client's finances, unless you have expressed permission from your client that allows this information to be shared, I wouldn't expect the answer.

In addition, I would frown on any lender who would willingly share this information without permission. If he lacks that professionalism, you can be assured that carries through his business and your loan could be in much more difficulty than you think.

QUESTION #7 (week three): "HAS THE BORROWER CLEARED ALL OF THE PRIOR TO DOC CONDITIONS?"

If he has cleared these conditions, loan docs will soon be on their way to the title company and closing should be very near.

QUESTION #8 (week three): "ARE THERE ANY PRIOR TO FUNDING CONDITIONS THAT I NEED TO BE CONCERNED ABOUT?"

There are "prior to doc" conditions, which are usually more serious because the underwriter is not willing to let the borrower sign without them. The underwriter does not want to put anyone in the uncomfortable position of signing their loan docs and then failing to get a loan. As a result, the prior to doc conditions are usually the most challenging of the conditions.

Sometimes there are also prior to funding conditions. These are usually fairly simple conditions between the lender and the escrow and title companies, but sometimes they can involve the borrower.

Although docs will go out and the borrower can sign, the loan cannot fund until these are met. When you sign your loan docs it's always a good idea to ask if there are any pre-funding conditions.

IMPORTANT NOTE: I have seen a lot of very aggressive loan officers push underwriters to get loan docs out with difficult prior to funding conditions simply to relieve the pressure they are getting from their clients. That can result in the borrower signing but then waiting days and sometimes weeks for funding. You want to check on this with your lender.

QUESTION #9 (week three or four): "HAVE THE LOAN DOCS BEEN SENT TO TITLE/ESCROW?"

It's a simple question but for some reason most agents seem to call title and escrow for this answer.

I am always surprised when a title/escrow rep calls me and says the agent is calling them to check on loan doc status. We prepare loan docs in the office next to mine. Your lender either prepares the docs in-house, like we do, or they order them from a lender if they are a broker. The source of this information is the lender. You are much better off going direct to the source, and saving time, with this question. Ask your lender, not your escrow officer, if loan docs have gone out.

QUESTION #10 (week four): "HAVE YOU HAD A CHANCE TO REVIEW THE SETTLEMENT STATEMENT?"

This is a biggie and I highly recommend you call your lender and ask him this on every transaction.

By the time your transaction gets to this point, hopefully, your lender has developed a strong, trusting relationship with your client. As part of this we have provided him a Good Faith Estimate and, aside from your net sheet, that's the only thing he has seen that represents his costs in this.

As you know, no matter how hard you and I try to be as accurate as possible with our GFE's and Net Sheets, this final settlement statement is going to look slightly different that what we provided.

Therefore it's important that we get a look, prior to signing, to be able to analyze the differences, if any, and to be able to communicate these differences clearly and with confidence.

In my experience, and I make sure I communicate this very early in the process the borrowers understand these are just estimates. However, when the day arrives they want clarity from you and me on every charge, line by line.

In addition, sometimes items in the settlement statement can affect the finality of the loan. I recently did a loan where the seller was contributing the 3% maximum towards closing costs. However, as part of an addendum that was not disclosed to us properly (see Question #1), he was also having his entire special improvement district (SID) fees paid off which amounted to another $12,000 in seller contributions. We had to change his loan program and re-draw his loan docs as result.

Obviously there are many other questions you can and should ask your lender. I am not suggesting that you ask all of these each time. However, today, you want to ask pointed questions that require real answers so you really know where your transaction stands.

I am always happy to provide updates to the agents on my transactions and I would welcome the 10 questions above at any time.

It's important to understand that some of these answers may not be available to your lender right when you call, and may require him getting with his processing team or underwriter, so I highly recommend emailing him instead.

Email allows us some to time to research the answer for you and get you a complete and comprehensive answer.

In today's tougher lending climate, if you choose to call for a loan status, you want real information. Using the questions I have provided as a guideline, you are less likely to get blind-sided later in the process.