Mister VA's Mortgage News

The Adventure Begins

Now in Florida for a month, it is time to look back and forward.  I have taken the Florida Mortgage Broker Pre-licensing Course.  A lot of it was review, but every state has different laws and the focus on the Florida statutes was interesting.  I have taken and passed the Florida State Exam.  And I will be starting with Aim Mortgage out of Bradenton as soon as my license is issued.  I will resume offering VA loans, FHA loans & Reverse Mortgages to clients in my area.  And, as I promoted in one of my earliest entries, I will 'hit 'em where they ain't' by calling on a couple of rural counties about 80 miles away. [October 2006].

I have a lot of people to meet, calls to make, things to learn and loans to originate.  The last 90 days was a time to pause, reflect, re-focus and to plan.  Meeting people no matter what you do is important.  For me, that would include on the golf course, on the basketball court through my association with officials in a new area, in class, through trade associations & discussion groups, at church, and wherever else I might go.  And so now, the adventure begins.

Is YOUR Loan Officer Qualified?

There has been a boatload of changes in the land of mortgage lending.  And not just from the underwriting standpoint, either.  As a consumer, you have heard about mortgage brokers, mortgage originators, loan officers, mortgage consultants, etc., and it is probably hard to tell the difference.  As a general rule, there are 3 types of Loan Officers--Mortgage Brokers, Mortgage Bankers & Mortgage Lenders.  The first category is the one that is in the news as your resident scapegoat for the mortgage morass.  A Mortgage Broker is one who acts as an intermediary between you and the lender and works with a number of lenders to find you the best loan.  They generally do not make the loans or approve them.  Loan Officers who work for a Mortgage Brokerage firm are also known as mortgage brokers.  Many brokers have gone through certification programs through state associations in advance of regulations.

Mortgage Bankers generally approve loans and fund them through borrowed money called Warehouse Lines.  Loans are closed in their names, but they are not a depository--they only deal with mortgage loans.  Loan Officers for Mortgage Bankers usually only have their own company product line to offer, but they may also act as mortgage brokers.  Many have furthered their education and qualifications through state associations to become certified as well.

Mortgage Lenders are banks, credit unions, etc.  They lend their depositors' money and will purchase loans from brokers for packaging and resale on the secondary market along with those originated by their own Loan Officers.

Whatever you call them, the point of contact for you, the consumer, is the Loan Officer.  No matter who the employer is, Broker, Mortgage Banker or Lender, the Loan Officer is the individual who will guide you through the application process, point out various loan products, help you in meeting conditions for closing and answering your questions along the way.  Recent changes are requiring licensing, registration, education and testing for Loan Officers.  However, not all Loan Officers are going to need to fulfill all of those requirements.  Bank Loan Officers are exempt from some of them.  The rationale is that banks are already regulated enough.  [We have seen how that has worked out in recent months.]  For the best consumer protection, ALL should be subject to the requirements.  And not just some of them.

Eventually, that may happen.  But in the meantime, you can inquire of YOUR Loan Officer as to what they have done to further their qualifications to offer you the very best service.  Some of the worst offenders could very well be hiding within the Lenders' walls, and until the playing field is leveled, and ALL Loan Officers must be licensed, have background checks, etc., you will need to ask the questions yourself.  Your mortgage is a big commitment.  Make sure your Loan Officer has made a big commitment, too.

The Spoilers: FHA & You

We have all heard the expression "One bad apple spoils the whole barrel" or something similar many times.  And the Federal Housing Administration, which is an insuring agency, is not immune to the many changes occurring in underwriting.  And much of it is due to 'bad apples'.  The bad apples could be loan originators migrating from a life of subprime lending to the next mother lode, which they perceive to be FHA.  They could be borrowers looking for shortcuts to credit repair [instead of trying to make payments on time].  They could be lenders trying to get as much business in the door any way they can.  And so forth.  But, the Early Payment Defaults [those who never even make the first payment] are dictating changes in the way lenders and HUD do business.  And that affects the consumer directly.

FHA is denying insurance to poorly underwritten loans.  And that means lenders are having to hold onto those loans, perhaps for as little as a year if the loan is paid as agreed for that length of time, and perhaps for much longer.  And that is putting a squeeze on available funds.  Lenders, in turn, are imposing their own requirements, sometimes called 'overlays', to the program.  These overlays may restrict borrowers with lower FICO scores from accessing the program.  Which means a broker and consumer will have to search harder to find a lender willing to lend.  580 was the magic number for a long time for FHA.  Scores lower than that required a 'manual underwrite' with no tolerance for anything outside the guidelines. 31/43 ratio guidelines were tightly adhered to in those cases, for example.

Many lenders either had pricing adjustments for lower scores or simply raised the minimum to 600.  When even loans perfectly underwritten were rejected for sale, some lenders raised the bar to 620 or higher.  Even streamlines for refinancing were affected.  And that program was designed for borrowers to have lower payments & a smaller chance for default!  And that is not all.  Now HUD [who oversees the FHA program] will restrict cash out refinances to 85% of the value of the property.  Previously, 95% was allowed.  With PMI companies turning up their collective noses at most conventional cash out refinances over 80% LTV [loan to value], it really leaves consumers, even those who have great credit scores, with little alternative to waiting it out.

Mortgage insurance, though less than conventional rates bring, has gotten slightly more expensive.  But, FHA is still one of the best ways nowadays to finance the purchase of a new home.  Not all purchasers should use the program, but many should, and it behooves you to only consider brokers or lenders who make the program available to you.  Be prepared for more than a few hoops, though, especially in areas hard hit by the housing crisis.

 

Signs of a Turnaround?

As readers of this blog are aware, I have recently re-located to the St Petersburg, FL, area.  And as most of you are also aware, Florida has been one of the hardest hit with the housing crisis.  When we started to consider Florida as a destination for re-location, I stressed that certain areas of Florida were off-limits.  I believed [and still do] that areas with rampant speculation AND over-building would take longer to recover.  The Tampa Bay region, I reasoned, was more fully built out, and the equilibrium between housing demand & supply would be reached more quickly.

Some things are learned by observation and not by the news media.  And those observations are better indicators than the doom and gloom that pervades our airwaves.  I have signed up to take a mortgage broker licensing course and will follow through with the exam in a few days.  I was not sure what I would experience, but the day went by quite quickly and the school's instructor marveled at the size of the class.  There were 25 optimists in the room.  And added to the enthusiasm of the instructor, there was reason to feel positively about things.

At the lunch break, I took a walk around the block.  It was quite a walk.  Up MLK to 62nd Ave N, then over to 4th St N, down to 54th Ave N & then back up MLK to the class site.  Expecting that I would see a myriad of for sale signs, foreclosure notices and overgrown lawns, it was quite the opposite.  I saw 3 or 4 properties with for sale signs and no telltale signs of an abandoned property.  Quite a different story from what I was led to believe about all of Florida.  Does that mean there are no problems?  Of course not.  But, it sure does seem like there is something to feel optomistic about.  There are definitely some signs of a turnaround.

The Last Game

My last game of the season before heading south was in the far northeastern corner of Vermont at Canaan High School.  It was a season-ending game for both schools.  The Cabot Huskies were the visitors that evening.  I always have enjoyed working games in Canaan.  I have done a lot of mortgage business over the years and as I surveyed the crowd, I could see some of my past clients in the stands and even on the coaches bench.  So, to call one more game in that gym to end my last full season of basketball officiating in Vermont was fitting.

My partner for the evening was Don Taylor who had helped me as a new official several years ago, but I had not worked with him since I moved up to a varsity schedule.  It was also fitting that a final snowstorm hit for the ride home as I was leaving the next morning.  The game was a fun game.  The girls on both teams hustled and played good defense.  As the clock wound down, Cabot held a 28-22 lead.  Cabot held the ball and worked it around and then a final shot was taken just prior to the game ending horn.  It went in and as the trail official, my last call was to signal the basket 'good'.  And my 6 year experience in calling games in Northern Vermont WAS good.

Working With a Professional

The most important financial transaction you will ever have is the purchase of your first home.  If it is financed with a mortgage loan, then it really increases the level of scrutiny you need to use.  It is not about hearing what you want to hear.  It is about hearing what you NEED to hear.  A true professional is interested in what is important to YOU.  And, even if it means no transaction for the loan officer in his pipeline, good advice is what you really need.  You want to be ready to buy that first home.  And you do not want to face adverse circumstances by making wrong choices.

A good loan officer is one who will present various options to you and will spend time reviewing your credit history.  He will not try to shoehorn you into a loan that you are not ready to assume.  You will not be herded into the program that works best for the loan officer.  And, sometimes, that means that the absolute lowest rate is not the best thing.  A loan officer that is making a promise of the lowest rate may not be able to deliver that rate.  And you may end up paying a higher rate by working with someone who only tells you what you want to hear.

Sometimes, you just are not in a position to buy a home.  You need to get ready to buy and a good loan officer will be honest with you and give you guidance in how to get ready.  You do not want to be a statistic or a headline in a foreclosure story in 6 months or a year.  You want to be a successful homeowner.  And even if it means you should wait, good advice should be heeded.  I have recently moved.  Where I lived before, I counseled many prospective homebuyers.  Some who were not ready, heeded my advice and got themselves ready and became successful homeowners.  Some, however, went elsewhere.  I would see the transactions in the land records and shake my head.  Many went to a rival loan officer.  And the ones I was sure were not ready would often end up as foreclosure statistics.

Financing a home is important business.  Be sure you are working with a professional.

Road Trip: Back to the Roots

Although I was born in Delaware, I only spent the first 17 months of my life there.  And even though, I really do not remember much if anything about my time there, whenever I have driven to NC to visit my folks, I have made it a point to drive through Delaware rather than simply staying on I-95.  My Dad used to be the manager at Bombay Hook National Wildlife Refuge in Leipsic, DE, which is just outside of Smyrna.  This trip was no exception as I stopped at the State Rest Area on US 13.  While inside, I heard a couple talking about Bombay Hook, so I stuck up a conversation with them since I actually lived on the refuge over 50 years ago.

Part of the mission of the refuge was to help with the Atlantic Flyway for waterfowl.  As I headed through Smyrna and Clayton on State Route 6 toward Maryland, I saw an amazing site.  A huge white cloud near the ground.  As I crossed into Maryland, I discovered the cloud was snow geese.  Many were resting on the ground, but just as many were in flight, which created an image similar to what you see above.  We all feel a pull of the place of our roots, no matter where those roots may be.  Delaware has that effect on me.  Even though the other 'hometowns' of St. Albans, VT,  Woodland [Baileyville], ME, & Newport, VT, have a unique place in my heart, something about the place of birth is compelling beyond explanation.  I may never pass that way again, but I have enjoyed each trip passing through.