Short Sales: How Do Short Sales Work and Why are Short Sales So Prevalent?
Short Sales: How Do Short Sales Work and Why are Short Sales so Prevalent?
I hope the below overview helps you understand the short sale process.
What is a Short Sale?:
A Short Sale, also known as a pre-foreclosure sale takes place when a homeowner needs to sell his or her home because they may be having a hard time making payments or are required to move and can't sell the property due to market conditions. If a full foreclosure process is executed, the homeowner will experience severely ruined credit. By conducting a Short Sale, the homeowner can reduce losses while having a easier time rebuilding credit. Homeowners in a Short Sale situation must seek out potential buyers at a price that the market can bear, not what is owed on the property.
When the buyer and seller are brought together, the first step is to decide on a fair price for the home. Often times the price can be 5-15% below market in order to generate sales activity in order to expedite an offer to purchase. The buyer will typically offer a settlement amount for less than what is due on the mortgage. Most Short Sale home sellers do not receive any net profits from the sale of the property because all of the funds are used to pay off the debt.
If the buyer and seller can agree on a price, they will enter into a contract. This should be prepared by a knowledgeable short sale Realtor and short sale transaction coordinator for the protection of both parties.
Approval by Bank:
Though the buyer and seller agree to the sale, the bank must approve the final price, market value of the property and terms. A Short Sale package outlining the settlement offer is sent to usually to several departments at the bank but will finally end up given to the head of the loss mitigation department. The bank's lawyers, REO manager or case managers will review the offer and determine whether or not the amount of the price is sufficient to negotiate down the mortgage balance. The bank will speak with its investors in an effort to secure approval for the Short Sale. Realtors and transaction coordinators often spend 3-4x more effort to close Short Sales for their clients. Short Sale sellers need to be committed to the process and their service providers. Sellers must also be very PATIENT with the process.
The likelihood of success will rely on many factors but mostly; the real estate market, the value of the property and the mortgage balance. Be prepared for a slow process- banks are very slow about getting back to buyers and sellers. Agressively pricing a home for sale is important in the beginning in order to quickly secure a purchase offer and commence the liquidation process. Banks sometimes take up to 6 months before giving an answer. If the bank agrees to the sale, that's when the ownership transfer starts to finalize.
Tax Implications:
Sellers should consult a tax attorney prior to listing a property for sale. You may have to pay taxes on the amount of the mortgage that was forgiven because of the short sale. In many situations, that will not be the case and tax laws have changed to make it easier for sellers to sell. You will want to know this information before deciding on a course of action. If you are the buyer of the property, you should rely on your Realtor to find out the status of the property: Many homes have hidden liens against them because of second and third mortgages. As a buyer you will want to have a clean title and the best way to do that is to work with a short sale Realtor.
Why are Short Sales so Prevalent?:
With the Wall Street initiated financial crisis came a collapse in housing prices. In some regions of the country property values tumbled 50%, cutting the homeowner equity in half.
Prior to the financial crisis, many homeowners utilized home equity loans and cashout refinance transactions to pay for many of lifes expenses. Some used the cash to improve their properties and others to buy material goods. Regardless of the reason, millions of homeowners drew down much of the equity in their homes. As a result homeowners ended up with too much debt and little to no equity. This impacted millions of homeowners across the country which has been the primary reason for so many foreclosures. Because so few homeowners understand Short Sales, they have been guided to take the less desirable path of foreclosure- it doesn't have to be this way.
If you would like more information regarding Illinois Short Sales, please call (847) 873-7295
QRM. Is 20% Down Being Pushed By The Big Banks?
Ahead of the Curve - Fast Finance Perspectives
(ok to use topics for your personal enewsletter)
1) QRM: The 20% Down Payment Regime
2) Best Spring Start Since 2007
1) QRM- Quality Residential Mortgage. The 20% down payment mandate for lenders that can't hold at least 5% of a conventional home loans liability. This would dibilate about 80% of the 1200 mortgage bankers in the U.S.
QRM (Dodd-Frank) states that if a lender makes a conventional loan with less than 20% down payment, the lender would be required to maintain 5% of the loans liability. The concern is that smaller community banks and lenders wouldn't be able to maintain the reserves compared to larger publicly traded (stock funded) banks.
Wells Fargo campaigned for 5% liability on loans with less than 30% down in an attempt to increase requirements. This was an obvious attempt to impinge on smaller lenders. QRM does not apply to FHA or VA at this time. QRM rules are still evolving.
Is this rule redundant? Mortgage insurance has been available to protect banks faulty low down payment loans, and loan buyback requirements are in place to capture the remainder of the risk.
Low down payment as shown by the performance of zero down USDA, zero down VA and 3.5% down FHA are not the problem, debt ratios, faulty underwriting and low credit scores are.
2) The Spring market has kicked off and I'm starting to feel the velocity pick up quickly- thank goodness! The last six weeks have resulted in a triple in purchase preapprovals from the first quarter of 2010. Candidly, December and January seemed like a repeat of a down 2008-10 but the second half of Jan 2011 hit with a breakout in purchase preapprovals.
It appears that buyers (most) have a better respect for the preapproval and up front paperwork requirements.
80% of the healthiest buyers, that I've dealt with in the last six weeks have been glad to submit a full preapproval package. This seems to be mostly due to a better job buyer Agents are doing coaching their buyers about the requirements of a strong preapproval.
Every buyer should have a full preapproval- save your valuable gas and time by avoiding prequals whenever possible.
KUDOS to the agents that are emphasising quality and certainty from their buyersides.
Please feel free to use the above information in your enewsletters. If you need more topics, please call me. Here to help fund and close your transactions.
As always, staying ahead of the curve to keep you informed.
Gil Kerbashian
NMLS 197757
Residential Lending Since 1997
(847) 873-7295
FHA Credit Score Changes Coming
In February we were still funding loans down to a 580 credit score, now its 620 with most lenders. Some lenders are taking score requirements up to 640 and 660. The lending process is moving back to its technical book procedures. The changes are good because those that are buying now shouldn't experience defaults, and bad because many buyers aren't prepared for the rapid changes.
Regarding verifying down payment - Important: Any underwriting unit can ask for bank statements and official verification of deposits in tandem for the last 60 days up and through closing. NOTE: Any large deposits going into the account will need to be fully sourced, even if its a large deposit going into a giftors account. Cash deposits are not allowed. WHY?...
Recently there has been a slew of sellers kicking back the down payment to buyers in order to off-load properties. This has caused a tightening of down payment verification. Please take a moment to read the link at
Mortgage Disclosure Improvement Act
Mortgage Disclosure Improvement Act – 2 Months Early
by Richard Triplett, CMB
Effective on July 30, 2009, some of the provisions in the final rule for revisions to the Truth-in-Lending Act (TILA) become effective – 2 months earlier than the original date of October 1, 2009. The specific provisions effective by this “new” rule implement the Mortgage Disclosure Improvement Act (MDIA).
How did this happen? The final rule issued by the Federal Reserve Board on July 30, 2008 regarding the Truth-in-Lending Act and Home Ownership Equity Protection Act has an effective date of October 1, 2009. On July 30, 2008, Congress enacted the Housing and Economic Recovery Act which included provisions regarding MDIA. On October 3, 2008, Congress enacted the Emergency Economic Stabilization Act which amended MDIA. On May 8, 2009 the Federal Reserve Board approved final rules to implement the provisions of MDIA, as amended by the Emergency Economic Stabilization Act and applied an effective date of July 30, 2009. MDIA amends TILA, codifies early disclosure requirements and expands regulatory provisions. Confused yet?
The requirements that become effective for all loan applications received on or after July 30, 2009 are detailed below. These requirements are not applicable, and there have been no changes at this time to Home Equity Lines of Credit requirements. Additionally, MDIA requires additional language for adjustable-rate loans; however, this provision is still forthcoming by the Federal Reserve.
Initial Fee Restrictions – collection of fees from a mortgage applicant are limited to a reasonable credit report fee prior to the issuance of early disclosures. Although the industry was preparing for this requirement due to TILA changes effective October 1, and the RESPA final rule, it is being applied early based on MDIA. This is one of the fairly significant changes of MDIA that will require a change in policy and potentially revisions to advance fee disclosures for lenders and brokers.
creditor’s offices are open to the public for carrying on substantially all of its business functions. The business day definition differs on the requirements for the waiting periods prior to consummation.
No Requirement to Complete Statement – early disclosures and subsequent disclosures must contain a clear notice stating “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application”. This language is already required on high-cost loan disclosures, but now applies to any extension of credit secured by the dwelling of a consumer.
Remember the timing starts from the issuance of the TIL Statement by the creditor. This is likewise a significant change due to MDIA requirements.
Three Business Days Prior to Consummation – Although creditors are already required to re-disclose the TIL Statement to a consumer when the APR is out of tolerance under TILA, it is typically done at the time of consummation. MDIA now changes this to a three business day time period prior to consummation using the definition of business day the same as the seven day waiting period. In this case, the consumer must receive the re-disclosed TIL Statement prior to consummation. Additionally, in this case, until you have receipt of a TIL Statement within this three-day time period prior to consummation by the consumer that is not out of tolerance, you must re-disclose until this requirement is met. This is also a significant change to the issuance of the TIL Statement.
Time Shares – for time share transactions, the early disclosure requirements apply but the seven-day and three-day waiting periods do not apply. The timing on early disclosures for time shares is applicable based on the receipt of the consumer’s application or before the credit is extended. Subsequent changes to terms beyond tolerance for time shares can be disclosed no later than consummation.
The Board of the Federal Reserve has also indicated a future proposal containing model disclosures and clauses regarding closed-end credit.
Disclaimer: The information presented in this article represents the opinion of the author and not that of AllRegs. This article is not meant to be nor should it be construed as advice of legal counsel. The applicability of the information contained herein will vary based on the nature of each lending institution's business, under what law it was created, and its loan products and procedures. Readers are strongly urged to consult with their legal counsel and/or contact local counsel as appropriate in the various states and jurisdictions to determine the applicability of the materials contained herein to the specific facts and circumstances of each organization's programs and products and to identify other law applicable to its business operations. The information contained herein was not reviewed or approved by counsel in the respective jurisdictions.
Read Previous articles in our Article Archive.
Above article written by Richard Triplett, CMB ALLREGS
FHA : What are Origination and Discount Points?
Definition of a "Point": A "Point" is a financial term used in the mortgage business to represent a percentage of the loan amount. One Point would be 1% of the loan amount, two Points would be 2% of the loan amount, so on and so on.
Origination points: Points charged to originate a mortgage loan. FHA allows a maximum of 1 point to be charged on FHA insured transactions.
Discount points: Points charged by the broker or lender to obtain a specific rate. To "buydown" a rate from 5% to 5.25% may cost 1 discount point.
Origination and discount points are labelled as such and must segmented into their own categories on the Good Faith Estimate.
Discount points DO NOT count towards the minimum statutory committment amount.
Mortgage Rates Now a-la-carte
Mortgage rates have gotten sliced and diced in very narrow catagories and credit score ranges. Last year we were able to pool 700 ficos with 650.. this doesn't hold true any longer. I've included the MAIN FANNIE MAE AND FREDDIE MAC matrix below for what we as mortgage lenders have to look at before we price a loan. There is also matrices for cash-out refinances, condo's, investment properties and 2nd homes.
Don't expect any of the mortgage rates you see in the paper or online to hold true. The mortgage rates you see online are "base" rates and are only offered to a very small percentage of the population with the highest credits scores and largest down payments.
With declining property values, high loan defaults and lower credit scores so common now you will be better served working with a mortgage person you can first trust and one that has access to many lenders. Access to many lenders will help you find the right rate and approval for your particular needs.
As you can see on the below matrix 720 credit scores with lots of equity home owners are getting the best rates. This matrix applies to conventional loans only not FHA or VA loans. FHA and VA loans offer there own risk based adjustments. Guideline changes have been almost non stop since the end of 2007 due to the disrupted nature of mortgage lending.
Below adjustments are strictly for addtional points added for risk based add-ons. 1 point equals 1% of the loan amount. EX: 1 point for a $100,000 loan is $1,000, 2 points for a $100,000 loan is $2,000, and so on.
A borrower that doesn't want to pay risk based 'points' can typically increase their rate to absorb points. It usually costs a .25% increase in rate to eliminate 1 point.
Example: .25% increase in rate may eliminate a 1 point charge, .50% in rate may eliminate a 2 point charge. A 5.0% rate may have a 2 point charge or the client may pay 5.5% rate with 0 points.
The below risk based point adds are national guidelines that apply to all conventional mortgage lenders. Some lenders can add on their own additional "regional" risk premiums.
Clients can choose to incur the below addtional points or a higher rate to offset any additional points that must be charged due to additional risk.
| Fanne Freddie Conventional Conforming Adjusters | Increase rates or charge borrower below points or a combination of point/rate | |||||||||
| LTV% | <=60% | 60.01-<=70% | 70.01-75% | 75.01-80% | 80.01-85% | 85.01-90% | 90.01-95% | 95.01-97% | ||
| LTV / FICO Adjusters: All Products w/Terms > 15 Yrs | ||||||||||
| >=740 | FIXED/ARM | (0.250) | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | n/a | |
| 720 - 739 | FIXED/ARM | (0.250) | 0.000 | 0.000 | 0.250 | 0.000 | 0.000 | 0.000 | n/a | |
| 700 - 719 | FIXED/ARM | (0.250) | 0.500 | 0.500 | 0.750 | n/a | n/a | n/a | n/a | |
| 680 - 699 | FIXED/ARM | 0.000 | 0.500 | 1.000 | 1.500 | n/a | n/a | n/a | n/a | |
| 660 - 679 | FIXED/ARM | 0.000 | 1.000 | 2.000 | 2.500 | n/a | n/a | n/a | n/a | |
| 640 - 659 | FIXED/ARM | 0.500 | 1.250 | 2.500 | 3.000 | n/a | n/a | n/a | n/a | |
| 620 - 639 | FIXED/ARM | 0.500 | 1.500 | 3.000 | 3.000 | n/a | n/a | n/a | n/a | |
| <620 | FIXED/ARM | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |
|
ADDITIONAL CONVENTIONAL CONFORMING ADJUSTERS CHARGE A HIGHER RATE OR BORROWER MUST PAY ADDITIONAL BELOW POINTS |
|||||||
| LTV > 90% <= 95% | 0.250 | ||||||
| 15 -year FRM w/ 120-month term | 0.250 | ||||||
| Investment Property LTV <= 75% | 1.750 | ||||||
| Investment Property LTV >75% <= 80% | 3.000 | ||||||
| Investment Property LTV >80% <= 90% | n/a | ||||||
| 2 Unit Property | 1.000 | ||||||
| 2 Unit Second Home Cash-Out refi <= 75% | 0.500 | ||||||
| 3 & 4 Unit Property | 1.000 | ||||||
| Secondary Financing | |||||||
| 75/20/5 LTV>65%/CLTV>90<=95% & FICO>=720 | 0.250 | ||||||
| 75/20/5 LTV>65%/CLTV>90<=95% & FICO<720 | 0.500 | ||||||
| 80/10/10 | 0.250 | ||||||
| All Other LTV>75% & FICO>=720 | 0.250 | ||||||
| All Other LTV>75% & FICO<720 | 0.500 | ||||||
| Non-escrowed (except CA, IA, IL, MN, NJ, NY, OR) | 0.250 | ||||||
| Temporary buydowns >80% LTV w/no MI | 1.000 | ||||||
| Condo > 75% LTV | ALL PRODUCTS W/ TERMS > 15 YRS | 0.750 | |||||
| Low Loan Size Adjuster | |||||||
| $0 - $49,999 | 0.500 | ||||||
| $50,000 - $99,999 | 0.250 | ||||||
This is The Best Time Ever to Buy a Home in Illinois!
Homes across the state continue to be sold at all times low, which means their is no better time to buy a home than now.
According to the Illinois Association of Realtor's, the average selling price of a home in the Chicago land area has dropped 11.5 percent, a substantial decline from a year earlier. With the average selling price at $135,000, potential buyers continue to benefit.
With the number of banked-own homes remaining over 25,000, it seems that this trend will only continue.
In addition to the low trending costs of homes, an FHA loan continues to be a bright option. Through an FHA loan, potential home-buyers can land the house of their dreams with a minimum down payment, and interest rates that continue to remain low as well. Do not hesitate to take advantage of this opportunity!
First Time Homebuyer Down Payment Assistance
Home Loan Process Video:
Getting Your First Time Homebuyer Down Payment Assistance.
**First time homebuyer is someone that hasn't owned a home in that last 3 years.
Buying your first home can be an exciting and intimidating process. With the HomeSmart down payment assistance program and my support you can own the home of your dreams. Great service plus a little help with the down payment and/or closing costs is a great way to buy a home!
For an overview of the program and the necessary steps to obtain HomeSmart assistance, please see below.
Program Overview:
The down payment assistance program is designed for qualified buyers who have limited funds for down payment and/or closing costs. The program has several features:
•A first mortgage with an affordable interest rate.
•A silent second mortgage up to $6,000 for down payment and/or closing costs.
•Variety of loan products including FHA, VA, USDA and conventional loans.
Programs steps and process:
Step One: Determine if you meet the program qualifications
-You must be a first-time homebuyer. A first-time homebuyer is defined as someone who hasn't owned a primary residence within the last three years. Exemptions to the first-time homebuyer requirement:
— Veterans: If you are a veteran, both you and your spouse do not have to be first-time homebuyers.
— Targeted Area: Homebuyers purchasing a home in targeted areas of the state are exempt from the first-time homebuyer requirement.
Call for targeted areas.
-Your total household income and the purchase price of your home must be under the program limits. Call for income limits.
Step Two: Pre-approval: Furnish your credit application along with your supporting documentation: www.realestateloans.com/gilsapp.pdf
Step Three: Look for a home
Once you are pre-approved for a loan, you can start looking for a new home.
Once you find a property and sign a contract, you and I will compile a loan package for final review and approval. The information will be reviewed by our staff. The average time to complete this process is 30-45 days.
Congratulations
After your loan package is approved, you will close (transfer of the property to you from the seller). Congratulations - you are now a homeowner!
Jumbo Home Sales Pick Up Steam. Prices For Other Catagories Level Off.
Pace Of Home Sales Picks Up
Per the National Association of REALTORS® Existing Home Sales rose 8 percent in August from the month prior, and 19 percent as compared to August 2011. 5.0 million existing homes were sold last month on a seasonally-adjusted year over year basis.
Sales increased across all price points, and home inventory dropped. At the current pace of sales, the nation's 3.58 million homes for sale would be sold in 8.5 month's time. That's a month faster than July and below than 1-year average of 9.1 months.
Jumbo Market Remains Strong
Luxury home sales were strong in August led by house worth more than $1,000,000. Home sales in the million-plus range gained 12% year-over-year, and the next price point lower: $750,000 to $1,000,000 showed similarly gains.
Falling mortgage rates have helped the luxury market. Historiclly-low mortgage rates have lowered housing payments substantially.
Should I lock my mortgage interest rate - youtube video.
What are FHA Closing Costs?
Example: Borrower makes $5000 a month in income with $600 a month in credit debts (car, student, etc).
How much home can the above borrower buy with various FHA overlays?:
Regular book FHA: $175,000
Big Bank FHA: $197,000
Gils Expanded FHA: $257,000
Don't let your borrower lose the bigger deal because the bank is afraid to lend. Economy is improving and we're bright on the future.
Existing Home Sales Rise More Than Expected in March
Sales of previously owned U.S. homes rose more than expected in March, a trade group said on Wednesday, raising cautious optimism a recovery may be in sight for the housing market.
The National Association of Realtors said sales rose 3.7 percent month over month to an annual rate of 5.10 million units after an upwardly revised 4.92 million unit pace in February.
Economists polled by Reuters had expected sales to rise 2.5 percent to a 5.0 million-unit pace from the previously reported 4.88 million unit rate. Sales have now risen in six of the past eight months. Courtesy CNBC.
Is a 60 amp fuse panel ok for FHA?
A: Electrical Service:
1. May be either circuit breakers or fuses.
B: Mechanical Certifications:2. Appraisers should examine the electrical box to ensure that there are no frayed or exposed wires.
3. Existing 60-amp service is acceptable if it appears that this is adequate amperage for the appliances present in the property, or those considered "standard" if the present appliances appear to be less than found in the "standard" home.
4. Knob and tube wiring is acceptable if found to be in good condition and a minimum of 60-amps.
Electrical, plumbing and/or heating certifications may be called for by the appraiser when he/she cannot determine if one or all of these systems are working properly. An appraiser should not arbitrarily call for such certifications as they are still responsible for checking on the adequacy of these systems at the time of appraisal.
The certification must be done by a home inspector, an inspector from the local building department, an FHA compliance inspector, a professional in the specific field (e.g. electrician, plumber) or any individual deemed to be qualified by the Direct Endorsement underwriter. (Also see "Utilities Not On")
C: Heating:
1. General: ALL habitable rooms must have a heat source. This does not mean that each room must contain a heating device but that each room must receive sufficient heat. (Exception: Homes located in the Caribbean, Hawaii and the Florida counties of Lee, Charlotte, Glades, Hendry, Palm Beach, Collier, Broward, Monroe and Miami-Dade do not require heat if, the lack of, is "typical" for the market area and does not adversely affect the marketability of the property.2. Wood Stoves and Solar Systems: Dwellings with wood burning stoves or solar systems as a primary heat source must have permanently installed conventional heating systems that can maintain at least 50 degrees Fahrenheit in all living areas and those containing plumbing systems. These systems must be installed in accordance with the manufacturer’s recommendations.
3. Floor Heaters: Due to the inherit dangers of a floor heater it is highly recommended that floor heaters in need of repair be replaced with another permanent heat source.
4. Non-Conventional Heating Systems: All non-conventional heating systems, such as space heaters and others, must comply with local jurisdictional guidelines. Often these are not acceptable as the primary source of heat.
5. Propane tanks must be a safe distance from the dwelling. Leased tanks are acceptable when not offered for sale. Propane fired furnaces located in a crawl space area is not acceptable.
How Bad Do Subprime Borrower Home Loans Get??
Even Batman would have been exhausted fighting the Subprime Duo...
"Please Gil, I need you to get this one closed for me".
Condo A cancelled
Condo B closed
1) 1st lender (BofA- Agents inhouse lender) loan officer directly deposits borrowers appraisal payment to Loan Officers own personal account (against Federal laws). Deposit for appraisal now considered void because it was inappropriately handled by original Loan Officer with BofA.
2) BofA processed the file for over 30 days before declining the loan (case number decline follows borrower in FHA system for subsequent underwriters to view online) Borrower antagonistic regarding loan process and becomes a regular complainer early on.
3) Realtor requests rush underwriting review from Broker to make up for lost time with BofA.
4) Broker needs to make repeated attempts to get appraisal- BofA complicates appraisal transfer.
5) Entire loan file and supporting documents need to be rebuilt with Broker for new submission.
6) Borrower credit shows Bankruptcy plus credit late pays after Bankruptcy.
7) Borrower has numerous "cash" non-payroll deposits into bank accounts. Cash deposits can’t be sourced and are not useable.
8) Broker must arrange for additional down payment assistance gift from family to overcome cash deposits and low funds to close.
9) Borrower has 8 months on current job.
10) Debt ratios over FHA guidelines requiring waivers during period of underwriting retraction.
11) Borrowers credit score drops during processing delay at BofA. Borrower credit score now below requirements.
12) Broker needs to rebuild credit scores – loan underwriting delayed due to credit rescore process.
13) Condo association paperwork slow to come from Attorneys. BofA never ordered condo dox after 30 days of processing the file- BofA didn’t realize (even with appraisal in hand) that the property was a condo.
14) Loan underwritten and approved for property A but Freddie Mac doesn’t grant contract extension due to excessive delays from BofA.
15) Property A transaction cancelled. Realtor time and processing expenses lost.
16) Contract for 2nd property secured two months later.
17) Broker must directly secure condo association information on 2nd property.
18) New file being documented for 2nd property. Borrowers wife -Co-borrower goes on maternity leave for six weeks. HR information shows inconsistency with what borrowers initially claimed as maternity pay. Antagonism from borrower regarding “importance” of pay during maternity leave.
19) 2nd property file underwritten and approved but subsequently denied due to borrowers pay inconsistencies.
20) Repackaged loan and sent to next lender for review and approval. Approved 3 days later.
21) File clear to close but Freddie Mac places foreclosure moratorium on property.
22) Borrower calls six weeks later stating moratorium released, opened file with underwriter but later told moratorium actually not released.
23) Moratorium released three weeks later, file updated and prepped for close.
24) Broker clarifies closing procedures one week in advance of closing. Sellers and buyers attorney’s disregard Brokers instructions regarding closing cost prorations on delinquent homeowners association fees.
25) Condo association management did not renew HUD/FHA condo approval. Underwriter notifies broker that file must close the next day or loan is declined due to FHA condo approval expiriation. Broker contacts principles to expedite closing. Secures closing time with title company. Makes special request for rush to get dox to closing.
26) Broker calls Title company to confirm closing. Title officer states buyers told by their agent not to come to closing because loan dox weren’t there yet. Loan dox arrive an hour later but no one there to sign at 3pm.
27) Loan dox signed slowly due to argument regarding association assessment fee delinquencies from prior owner. Sellers should have paid but buyer was forced to pay because issue wasn’t resolved prior to closing. Buyers attorney thought he would “negotiate” fees down "at the table" or threaten to "walk".
28) Borrower calls Broker blaming Broker for HOA assessment fee claiming Association fee Brokers fault. Borrower must do drugs.
29) Loan documents slow to be signed and loan not funded at 6pm
30) Phone calls from Borrower to Broker into evening of the closing about matters that should have been easily rectified at the closing table. Traveling closer not communicating with bank funder.
31) At closing, borrower wants commissions reduced to pay for HOA delinquency fees. 6 Months of work hinges on what should have been a simple closing.
32) Next day: Loan dox missing signatures upon funding review.
‘traveling’ closers phone goes to voicemail at 9:30am next day. Documents need to be corrected but no one other than the Broker is following up to insure funding process executes
33) Everyone is notified of missing signatures, documents signed and loan funds.
Expanded FHA
3) Sock! Pow! Zok! How Bad Can Subprime Get?.. Actual Case Study
Example: Borrower makes $5000 a month in income with $600 a month in credit debts (car, student, etc).
How much home can the above borrower buy with various FHA overlays?:
Regular book FHA: $175,000
Big Bank FHA: $197,000
Gils Expanded FHA: $257,000
Don't let your borrower lose the bigger deal because the bank is afraid to lend. Economy is improving and we're bright on the future.
