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Good Times!

By
Mortgage and Lending with Mortgage Magic

For all of my fellow professionals out there, isn't it great to be busy??  Looks like good times again.  I don't mean a few more applications, I mean the phone ringing non-stop!  I consider myself fortunate in that, through many years of experience, I've been able to build a loyal client base.  Also, it's my good fortune to have developed friendships with a reliable group of finance related professionals (a couple of CPA's, financial planners, etc.) who refer business to me regularly.  Unfortunately, realtors have been in the same boat as us lenders, but I think a boost to the purchase market will lag a bit so I don't expect to hear much from them just yet. 

Whereas everything in life seems to have a certain balance or "yin and yang" if you will, so too does this market.  Even good times have a little down side.  While it's great to be talking with multiple clients again each day, with today's tighter underwriting standards, it comes as no surprise that a few of them are not as qualified as they were.  Here in Silicon Valley, with its high cost of living, thanks to median home prices close to $700,000, many people have side jobs and some of those jobs provide pay in a manner that is difficult to verify.  Even with good scores, assets, and consistent, although not fully verifiable income, there are some loan applications for which I have not yet been able to find a home. 

Something else I've noticed lately; even with what appears to be a "slam dunk" loan, and would easily have been so a year or two in the past, I've had a problem or two.  By "slam dunk" I mean loans with 700+ scores, below 75% LTV and fully documented income yielding low ratios.  It seems that with such applicants, if they are self-employed or have K-1 or partnership income in addition to a traditional W-2 employment, underwriters seem at a loss to understand the tax returns!  Maybe it's because we have opted for the simplicity of stated income loans, rather than the additional paper work associated with fully documented income loans, to such an extent that underwriters have forgotten how to analyze a tax return.  Maybe many of today's underwriters simply weren't around when fully doc'd loans were the norm so they're not as well trained on tax returns.  We had just such a loan last week that was declined by a lender for insufficien income when the true debt ratio was 32%!!  It was clear they didn't know how to analyze the client's tax returns.  We contacted the client's CPA, after the client advised him to expect our call, and secured a letter advising the true income and how it was calculated.  After a three day delay because of the inability of the lender to accurately read the returns, they approved the loan.  By way of reference, this was a loan with a LTV of 61%, for a professional couple making over $200,000 per year with middle scores of 741 and 735 respectively.  Would have been no problem if stated income were still widely avalilable.  Of course, the demise of stated income loans can, at least in part, be credited to the abuses by some of the "bad actors" within our own industry.

Like I said, good times appear to be back, even if to a somewhat lesser degree than over the preceding four or five years.  That's as it should be.  With short rates appearing to be heading even lower and long rates near historic lows, and perhaps with room for even a bit lower still, we have the opportunity to make a great 2008.  Make sure you do what you can to make this year great in as many ways, other than just business, as you can for as many others as possible.  Remember what you do comes back to you.  Do good things!