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Tuesday, April 13, 2010

Southern Nevada Realtors Mastermind Group facebook page

Henderson, NV - I just launched a facebook page - Southern Nevada Realtors Mastermind Group - for the purpose of having a forum where Southern Nevada Realtors could share their ideas and experience regarding marketing, short sale transactions, and anything else that my help fellow Realtors get more deals closed in a timely fashion.  I would like to get title people, CPAs and attorneys on the site as well to draw upon their expertise. 

There is a discussions page where you can start an original discussion or post a good article you have found (please give proper credit to the author).  I also have an Events tab where we can share events that would be of interest to those who are on the site.  Seminars, webinars, lunch-and-learns, and charity events  along with special entertainment would be good things to include here.

A links tab will allow everyone to share links to sites that will get us to a great article or a valuable resource.

I want this site to be of benefit to all the professionals who use it.  Feel free to make suggestions as to what else the site could have to benefit the community, after all, it is your site.

Thursday, April 8, 2010

Las Vegas and Henderson Realtors benefit from quality pre-approvals

Las Vegas and Henderson Realtors are benefiting from quality, underwritten pre-approvals, not just an automated approval. Let me start by saying I've never been a big fan of the term "pre-approval." What is a pre-approval? The term suggests that it's something before the approval yet what we are giving is some degree of an approval. Hence, it is a pre-fully underwritten approval but the true purpose of the pre-approval is for the buyer to be able to make a solid offer. It would make more sense to me for it to be termed a pre-offer approval or something along those lines.

That said, I spoke with a listing agent yesterday who said that his short-sale that has been going on since the Christmas holidays and it just blew up the night before and wondered if I could save the deal. The buyer and both agents were frustrated because they had an initial approval and the buyer even told me that he had given the loan officer all of his documentation months ago so why are they just finding out now? The reason is that most loan officers take an application, relying solely on the verbal information provided by the borrower and then pull credit an run it through the automated underwriting system. The approval letters most agents get is only based on verbal information which is usually not very accurate.
A small percentage of loan officers collect documentation and perform income calculations off the pay stubs and W-2s which is better but still not good enough. The thing that killed this deal was the non-reimbursed business expenses on line 21 of Schedule A of the tax returns. I was able to do a couple of things and restructure the deal and presented to my underwriter and I think we might be able to save the deal. The important thing to understand is that if you want to minimize your surprises during the escrow process, make sure your loan officer is analyzing all of the documentation. I have also seen deals blow up for information that was on the bank statements that wasn't properly reviewed by the loan officer. Las Vegas and Henderson Realtors benefit from quality pre-offer approvals, not from automated approvals with no real analysis.

If you are a Las Vegas or Henderson agent and would like to benefit from a quality pre-offer approval, you can have your clients apply here and click on the "Yes" button for the Patriot Act information and they can complete and application on line or they can call me. Additionally, if they would like to understand more about the mortgage process, feel free to go to the Client Resource Center and click on the Free Report to download it in PDF.
Alterra Home Loans, the company I work for, is committed to providing quality pre-offer approvals by allowing the loan officers to submit files to underwriting without subject property. This way, the loan officer's work is double checked by the underwriter so we are able to issue a solid approval subject only to a fully-executed offer and acceptance, an appraisal and title. In this case, Las Vegas and Henderson Realtors benefit from a quality pre-offer approval. Please feel free to comment and talk about your experiences or what you have heard regarding this.

Wednesday, March 31, 2010

Federal Reserve MBS buyback program ends today - may be time to lock

Just wanted to give all the readers a heads up - the Federal Reserve's mortgage-backed securities purchase program ends today.  This means that there will be less liquidity in this market leading to lower bond prices and higher yields.  Many analysts foresee interest rates trending upward from here.  If you are in a position to lock a loan, it may be a good day to lock it, at least relative to where rates may be going.  No one has a crystal ball, but I would err on the "better safe than sorry" side.

Make it a great day.

Saturday, March 27, 2010

There's a fine line...

If you watch someone who is really good at what they do - a great pianist or guitarist, a fantastic athlete, or a surgeon (I know, you usually don't get to watch surgeons) - they usually make it look very easy. Sometimes these things look so easy, we think we can do the same kind of thing without much effort until we try it ourselves and see how difficult it really is. This is when you have a very healthy respect for the talent they have.

The same can be true in business. I'll be the first to tell you that doing mortgages today is much more difficult than it was pre-July 2007. However, I don't have very many problems with most mortgages that I do and when I do have a challenge I am usually able to find the solution, if there is one (some people just can't qualify without major credit repair, or a JOB). The problem is that there is a fine line between wanting your clients to understand that it's going to be tough to get their mortgage done (you want them to get the idea that they need YOU on the job for them because NO ONE else can get it done) and letting them think that it will be a smooth transaction - if they think their case is easy enough then they may think that they don't need an expert and they may be tempted to go somewhere else, perhaps to someone who is quoting ridiculously low rates that aren't real.

Conversely, if they perceive that their file has challenges that you may not be able to overcome, they may panic and start calling around to other loan officers who may, with minimal information, lure the business by saying that it should be no problem, thereby putting their mind at ease. Crystal clear communication is very important to help clients understand the true challenges that are unique to their case that must be overcome while instilling confidence that success will be the ultimate result.

Don't Assume: We all know what happens when we assume. I always tell my partner that "stupid" costs. I haven't come across a situation where someone's stupidity hasn't cost me money - usually it's not mine (thankfully). When assumptions are made about a potential client especially to the extent that the loan officer decides not to take an application, stupidity is reigning. I'll illustrate this with a true story. A Realtor that I work with called to refer a client to me that needs to close very quickly. A couple of large lenders dropped the ball and the listing agent had persuaded the buyer's agent to try his lender. She called and the that lender was very negative toward the buyer's agent because of an on the credit report for which she already had a letter correcting the error. The buyer's agent immediately called me and asked me if I would be willing to give it a try and the credit was O.K. (no need for the letter) and we got an approval. We have the file moved to the front of the line to try to close it on time and we won that business and hope to earn more of the listing agent's business.

The buyer's agent commented to me that she didn't think that the listing agent's lender cared much about him if he wasn't willing to step up and do everything he could do to help close that transaction. He is basically cherry picking the easy deals. We all like low hanging fruit, but we need to support our partners and do what we can for our potential clients. What do you think about all of this? I'd love to know your thoughts. Please post a comment.

Friday, March 26, 2010

Who you know or what you know, which is more important?

Those of us who are in sales need to develop relationships with our customers and / or our referral partners in order to earn business and develop loyalty. In situations when I have been the consumer, I have turned to people who were experts on the product I was buying and then rewarded that expert by buying from them. People who take the time to educate themselves on the products they sale can then offer a better buying experience to the consumer and I believe that should be rewarded.

My pet peeve are the sales people who get business simply because of who they know. Admittedly I am jealous of the business they get, but I also can't help but feel sorry for their clients who don't really get very good service. This wouldn't be such a big deal if we were just talking about toilet paper, but we are talking about buying and financing real estate and using the wrong people can ultimately cost thousands of dollars. Even if the consumer gets lucky and doesn't pay any more, I believe the consumer deserves a competent professional who can provide the expertise they deserve.

I know of three top producing loan officers who each close 15 transactions or more per month and I know either from first hand knowledge of because I know people who worked for them that these loan officers don't really know the business that well. In fact, I have heard that these loan officers don't fill out their loan applications and they don't understand the basics of a loan, let alone advanced mortgage planning strategies. The only reason they get so much business is because of their relationships. Good for them that they have developed them, but it seems like such a disservice to the client that a Realtor or builder would refer a client to a loan officer that doesn't really know the business and, therefore, can't offer the best service.

In my opinion, customers deserve to deal with professionals that can explain all aspects of the transaction to them and any choices they may have. Continuing education, formal or informal, should be the norm, not the exception. We should expect excellence and honesty from everyone in all of our dealings and when the occasion occurs that we fall short, we should accept the responsibility and make it right. Don't get me wrong, relationships are important and having a good relationship with a processor and underwriter can help get things done more quickly. However, we shouldn't rely solely on our relationships; it is a disservice to the customer. We need to provide excellence. What do you think? Please share your thoughts and comments for all to see.

Tuesday, March 9, 2010

Problems with the new GFE

In my previous post, I talked about some issues with the new GFE. I didn't tell you that I almost had to eat $100 for an appraisal shortage in addition the the $97.50 that I ate for the transfer tax. Initially we were trying to do this loan as a conventional loan since the LTV was (considerably) under 80%. However, on 12/12/2009, FNMA capped the DTI at 45% so this borrower could no longer qualify for conventional financing. When I changed the loan program in my loan origination software to an FHA loan along with changing the closing cost scenario, the new cost for the more expensive FHA appraisal was not changed, for some reason. So even though the actual cost of an FHA appraisal is $450 (at least in southern Nevada), I was going to have to pay the difference between the quote of a conventional appraisal ($350) and the $450 FHA appraisal except that we were within the 10% tolerance of that section of fees.

Painting the Picture:
In theory, the new GFE was supposed to make things simpler for the borrower. In actuality, we went from a single page GFE that disclosed costs as well as credits and gave a bottom-line figure that was accurate if the loan officer did his job properly to a three page GFE that doesn't account for credits thereby not providing the client with a bottom-line number. Additionally, the new GFE has no signature line which means the loan officer can gloss over this form in favor of the other forms that now go with the new GFE such as the old GFE, now called the "Initial Fees Worksheet" - also no signature line - and the "Itemization of Amount Financed" which does have a signature line but does not show any credits.

In all, the situation is far more confusing and because of the tolerance standards and the need to quote worst-case scenario, the borrower doesn't necessarily get a more accurate figure and since the credits (if the seller or lender is paying any of the costs) do not show on the new GFE, the borrower doesn't get a true picture of what they will need to bring in at the close of escrow.

My guess is that if our lawmakers did consult with people in the industry (I'm guessing they did), it was people who haven't been on the front lines working with the forms and borrowers for a while. I'm thinking about starting a petition to change the new GFE to something that actually serves the borrowers and our industry in a way that works for everyone. Let me know your thoughts and experiences with the new GFE by commenting below. Do you think it needs a change? We'd love to hear your thoughts.

The New 2010 GFE - Good intentions? Maybe. Good execution? No way.

How many people love the new Good Faith Estimate? Don't raise your hand, we can't see them. Comment below and share your thoughts and experiences regarding the new GFE; let us know who you are - Realtor, loan officer, borrower, concerned citizen, etc. As for me, I can't stand it and think that the implementation of it is a great argument for term limits for our lawmakers. Here are a few of my initial thoughts based on my 16 years of experience in the business as well as my first-hand experience with the new GFE. First of all, I have always known what my fees are and the only time they have changed is 1) if the rates changed and the borrower's rate wasn't locked, or 2) if the borrower wanted to changed the structure of the deal such as buying the rate down or minimizing closing costs. Hence, as far as my fees were concerned, they were never an "estimate." The fees that I didn't have control over were what I was estimating. I say this because the lawmakers on capitol hill had the wisdom to make a "No Tolerance" policy as to the variation of the lender's fees. The problem is that they couldn't even get that right. For instance, if my GFE shows a no point (higher rate) deal and the borrower decides that he would like to buy the rate down, I can not go back and charge a point to give him a lower rate. Stupid I know, but everyone I have spoken with concurs that this is how the law was written.

In essence, loan officers are forced to quote a worst-case (highest fee) scenario or risk curing (paying) the shortage out of their own pocket. Case in point: I just closed a loan for a lady who I have been working with since about May of 2009 (yep, about 10 months). The loan was $69,000 on a $128,000 purchase. Over the 10 months or so, I worked up a number of scenarios with different purchase prices. Unfortunately for me, I forgot to change the Transfer Tax to the appropriate amount for the final purchase price and underestimated it by $97.50. Even though it is customary in southern Nevada for the seller to pay the Transfer Tax and even though I get no commission or benefit from it, and even though it is a tax that would be paid regardless of what lender she used, I had to cure the shortage. THIS MAKES ABSOLUTELY NO SENSE TO ME.

The credit crisis and the subsequent housing market free-fall did not happen because of underquoted transfer taxes (as well as similar items). The debacle occurred because too many loan officers were selling the option ARM and didn't understand how it worked. It occurred because banks and lenders were offering 100% financing on investment property homes for people with 620 FICO scores on stated income loans or 100% financing on owner-occupied homes for people with 560 FICOs. Of course there was lots of loan fraud that exacerbated the problem.

Here's what I think: most of the loan officers that caused the problems are no longer in the business - they were in the business for the easy money which is GONE. We need a reasonable GFE that is SIMPLE and provides the borrower with a good approximation of his costs. See my next post for the more specific problems with the GFE. Don't forget to leave your comment.

Wednesday, February 24, 2010

FHA nixes the 5% down proposition

HUD had been considering a change to the down payment requirement for the increasingly popular FHA loan. Currently at 3.5%, they were considering raising the down payment to 5%. Perhaps realizing that this would hurt an already fragile housing market and slow the recovery, they decided against this idea.

They are, however, considering another change which would increase the annual mortgage insurance premium to .85%. Currently the rate is .55% for loans over 90% LTV, which is the majority of FHA loans. Recently, the up-front mortgage insurance premium was increased from 1.75% to 2.25%.

If you are interested in a home that doesn't qualify for FHA financing because it needs repairs, the FHA 203(k) rehab loan is a great way to go. The streamline version allows for up to $35,000 in repairs and the full 203(k) allows for repairs up to the total FHA loan limit. Additional benefits may be realized because there may be fewer people bidding on a home that needs repairs and the improvements that are done to the home would customize that home to the buyer's taste.

I'd love to know your thoughts on this post or any of my other posts - agree, disagree, or indifferent. If you have any questions, please feel free to contact me by checking out my website at

Friday, February 19, 2010

Tick tock tick tock tick tock - that's right, the time is running out on the free money the government is offering to first-time home buyers as well as move-up buyers. If you want to qualify for the homebuyer tax credit (up to $8000 of FREE money) then you need to be in contract by April 30, 2010 and you need to close by June 30, 2010. Don't miss this opportunity to get a house at a great price with great rates and have the government 1) reimburse you for all or most of your down payment, or 2) pay for some new appliances or furniture, or 3) fund your Roth IRA.

If you are in the Las Vegas area and would like your own password-protect home search website with real-time access to the MLS and lots of other great information like school information, shopping, satellite imagery and a host of other great features for free, please email me and I'll be happy to contact you to get you set up - no other home search website compares to the Home Buyers' Scouting Report.

If you or a friend are renting / leasing a home from an individual and that home gets foreclosed, the lender is obligated to honor the lease. Make sure you are protected by 1) having a lease and 2) paying your rent on time and with either a check or money order to prove your on-time payments. This way, if the lender wants to get you out, they will more than likely have to incentivize you to move - that usually means a nice chunk of cash!!

Finally, the new lending laws that HUD implemented on January 1, 2010 provide for the borrower to get a credit toward closing costs via the YSP / SRP that brokers and bankers get. If you or a friend are in the need of a mortgage, make sure that you understand the complete workings of the new HUD / GFE combo by using a reputable, competent mortgage professional who can fully explain everything in great detail so that you will fully understand all of your options.

I'd love to get your ideas, thoughts, comments, etc. Please feel free to leave them by clicking on the comment link. Have a great weekend.

Thursday, February 11, 2010

Game on...sort of

Typically I write stuff that pertains to the mortgage industry in an effort to keep my clients and Realtor partners informed of things that might impact them. Today, however, is a different story since I am writing about what I love to do when I am not working as a Certified Mortgage Planner / Loan Officer.

There are lots of things I love: 1) family, 2) music, 3) sports, etc. However, this weekend I'll be traveling with my family to Palm Springs to participate in the Palm Springs Century ride. I've been doing a fair amount of riding over the last several months and I've always had an affinity for riding but I've never done a century ride. For those who don't know what that is, it's a ride of 100 miles or more. The ride in Palm Springs is 102 miles and the weather is supposed to be wonderful. My goal is to do it in less than 6 hours but I really hope to average about 18 miles per hour which would put me across the finish line at 5 hours 40 minutes. Since this is a first, I can't say that I have any real idea of how I'll do. I can tell you that I'm committed to doing my second one to raise money for the American Diabetes Association - this ride will take place in Las Vegas in the beginning of April. My hope is that I can get many of the Realtors I work with (and anyone else who wants to) to contribute to the ADA.

At any rate, the Palm Springs Century starts at 7:00 a.m. on Saturday morning which means I hope to be finishing sometime between 12:30 and 1:00. If for some reason you happen to be in the area, I'd love to see you. Otherwise, you may look at your clock around 1:00 and think that I have hopefully finished the ride and have dismounted under my own power:)

I'll be back next week with a report on how it went as well as more insight into the mortgage / real estate industries. Ciao for now.

Friday, February 5, 2010

Just be honest with us, please.

The media is at it again: trying to put a positive spin on the jobs numbers. The facts are these: 1) unemployment did drop from 10% to 9.7% which is good on the surface; 2) initial jobless claims unexpectedly rose 8,000 from the previous month's figures to a seasonally adjusted 480,000 - experts expected 460,000; 3) a person is no longer counted in the unemployment statistics after six months; and 4) six months ago the initial jobless claims number was north of 600,000 so it makes sense that since that number falls off and is replaced with a lower number, the unemployment rate would fall.

Economists estimate that the real unemployment rate is probably above 17%. This figure includes those who are counted in the unemployment statistics as well as those who have fallen off the chart because they filed for unemployment insurance more than six months ago. It also includes under-employed people - those who need to work full time but have had their hours cut back to part-time, and many of those people have also lost their benefits (many of our local casino workers are in this situation). The estimate also includes people who were not employed and would like to get a job but can't - my wife, for instance.

While it's important to be positive and to act in a manner that will help our country - spend if you need something, don't hoard your money - it is also important for the media to report the truth. Too many people in our country take what our media says as gospel. When they distort the truth, as they have since the credit markets froze in July of 2007, they will lose all credibility when the citizens of our country learn the truth. Then it will be like the boy who cried wolf - when the media really needs to get a message out, no one will listen because they weren't honest with us all the time.

I'd love to get your comments, ideas, and opinions. Please feel free to leave any of these by clicking on the "comment" link.

Thursday, February 4, 2010

Calling all cars...please respond to a CRASH

I'm a pretty positive guy and I like to try to find the silver lining in the dark clouds. Sometimes it's pretty tough, though. Today, for instance, we see that there was an increase in the number of initial jobless claims. In fact, it is now estimated that this recession (are we still in it or are we out - I'll get to that in a minute) will probably cost us another 1,000,000 jobs before it's all said and done. As for the recession, there is a group of economists that officially declare whether the recession is over and they have not done that yet.

As for me, I think it's pretty clear that we are still in it despite the recent GDP reading of close to 6% annual growth. I personally think that figure was (highly) skewed by the bailout money and the holidays. However, the silver lining is that we are more than 2.5 years into the crisis that began the recession when the credit markets froze and the housing bubble popped. Each day we are in it is one day closer to getting out of it.

On an even more positive note, the free money from the government that is the homebuyer tax credit is still in play - at least until April 30th for getting a house under contract and June 30th to close on the house. Free money is a great thing and the more people buy homes and use that money for stuff for their homes (and perhaps to invest a little for retirement), the better we are going to be relative to getting out of the recession. There is no simple solution to a complex problem; ultimately we will all be hurt by this and make sacrifices (many of us already have). But we are a resilient country and our citizens are behind that resiliency. I believe that sooner rather than later we will right this ship and get back on the path to growth.

I'd love to hear your comments and ideas. Feel free to leave them.

Friday, January 22, 2010

Customer Satisfaction Survey - what does it mean for the customer?

There is lots of lip service nearly everywhere you turn regarding customer service, excellence, accountability, integrity, ethics, and nearly every other buzzword being bantered about by the news media and companies who advertise on these platforms. The problem is that by the time you figure out that it's only lip service, you are usually too far along in the process, in many instances anyway, to do anything about it. To make matters worse, many of these companies don't have any legitimate channels for you to communicate your dissatisfaction.

I submit that companies that offer guarantees as to their product or performance are more likely to make good on their promises or at least get closer to their promised level of performance. Companies who care enough to go to the expense of a customer satisfaction survey after the transaction has closed are even more likely to care about getting it right in the first place and making corrections when things don't go right. No person or company is perfect and it is unrealistic to expect perfection. However, we should expect to be treated with respect and with a certain level of competency. The company I work for has set minimum levels of performance for each position and employees who don't meet that minimum standard will be coached to achieve the minimum (preferably higher) or will be asked to leave. We also have standards of excellence where we earn bonuses and certain other benefits if these standards are met. This is putting your money where your mouth is. I can tell you that every employee at every level is more keenly aware of our performance and what we need to do to 1) continue working at the company and 2) earn bonuses and other benefits.

You have probably heard that a person's pay isn't the most important thing when it comes to job satisfaction. The sense of achievement and worth along with a healthy dose of respect usually trump an employee's pay. While we all like to earn a good living, a feeling of accomplishment is something that money just can't buy.

The next time you are shopping for a product or service or referring a friend to someone for a product or service, consider if the company can back up their promises with a guarantee and consider if they really care by following up their service with a customer satisfaction survey.

Feel free to leave your comments, experiences and opinions on the matter. I'd love to hear them. If you like my blog, you can subscribe to my podcast by going to and clicking on the "Podcast" link at the top and then the subscribe icon. See you next time.

Thursday, January 21, 2010

More changes for FHA announced

FHA has announced that a number of changes will be made in an effort to get the insurance fund back up to the level mandated by congress. The changes that were announced will take effect in the summer. The up-front mortgage insurance premium will be increased from 1.75% to 2.25%. The amount sellers can contribute to closing costs will now be capped at 3%, down from 6%. The down payment requirement for people with a credit score of 620 or greater will remain at 3.5% but for those with a credit score of 580 or less, a 10% down payment will be required. The odd thing is that this is how the release was announced - there is a window between 580 and 620 that was not discussed or addressed. Less than 1% of all FHA loans funded last year had a credit score below 580 and there were also very few (relatively speaking) with credit scores between 581 and 619. Studies have shown that FHA loans with credit scores below 620 have significantly higher default rates so many lenders have elected to implement a minimum score of 620.

As for the insurance fund, the current balance is about $3.6 billion which is roughly .5% of the $685 billion in outstanding FHA-insured loans. Congress has mandated long ago that the fund maintain a minimum balance of 2% of the outstanding loans that are insured. This would mean that the fund needs to be around $13.7 billion. Hence, the fund is about $10.1 billion short of the mandate.

I'll post more news as information becomes available.

Have a great day and feel free to comment or contact me if you have questions regarding the new FHA guidelines or mortgage financing.

Tuesday, January 19, 2010

FHA 203(k) and 203(k) Streamline: AKA "The rehab loan."

Many homebuyers are passing up opportunities for homes they would really love simply because they are listed as "Cash- only" or "Conventional financing only." While the standard FHA 203(b) loan does have more stringent property requirements than conventional loans, the 203(k) rehab loan allows for buyers to fix the problems that would have otherwise kept the home from qualifying for FHA financing. In the process, the buyer also gets a more updated house and one more to his or her liking because they have finished things according to their tastes.

The 203(k) streamline loan has a maximum improvement amount of $35,000 and structural repairs are not allowed. This version is for things like new carpet, paint, cabinets, fixtures (toilets, sinks, etc.) and other more minor items. This is a great way for a buyer to update an older home or one that has deferred maintenance.

The full 203(k) loan has a maximum rehabilitation amount up to the loan limit of FHA which means the old house can be torn down and rebuilt if necessary. This is the obvious choice for homes in need of major repair to make it livable.

Key elements of the FHA 203(k) Rehab loan are:
  • bids must be from a licensed contractor
  • all work must be done by a licensed contractor
  • draws are handled by escrow (2 for the streamline and up to 7 for the full 203(k))
  • buyer has more choices and usually less competition on homes that would require these loans
  • buyer can customize the home and make it their own
  • the loan looks and feels just like any other FHA loan to the borrower other than having either a slightly higher rate or cost - depending on how the deal is structured.
Here's how it works: if a buyer agrees to a purchase price of $100,000 and the home needs about $20,000 worth of work based on the bids, then the total cost would be $120,000. The appraiser would appraise the home subject to the work being completed and would have a copy of the bids to complete the appraisal. Assuming the appraisal comes in at $120,000, the down payment requirement would be 3.5% of $120,000 or $4,200. The seller can still contribute up to 6% of the purchase price toward closing costs.

Changing gears: The deadline for the homebuyer tax credit is fast approaching. In order to qualify, a buyer must have a home under contract by April 30th and must close by June 30th. This is free money for those who qualify; first-time home buyers will receive up to $8,000 and current homeowners looking to move can receive up to $6,500. If you are thinking of buying a home, now is the time.