I have been seeing on the news quite a bit lately how the economic recovery is underway (I read something about Green Shoots months ago now, so logic dictates we are on our way to recovery, right?) but I am still being asked the question of “So what exactly is keeping me current on my mortgage?” more than just a few times a week from people living in many different states, not just here in Arizona.

http://www.flickr.com/photos/dr_j0nes/354386695/

Consider a local business leader here in Arizona who posed this question earlier this week as he thought about this problem. Derek is a local community leader, small business owner and has an abnormally large dose of common sense loaded into his neocortex:

The above person might qualify for the Obama 125% refinance plan, but at best that might only make their payment $1300/mo.  Not to mention that the banks are not just making the refinances happen.  They refuse to live up to their side of the bailout.  If instead a plan was in place to force lenders to readjust principle balances (not interest rates) to a point where the home owner was not completely underwater then perhaps the home owner might full well consider staying in their home.  At this point, I think someone in the above situation has NO SENSIBLE reason to stay in the home.  They have far more to gain crushing their credit and walking away.

Regardless of your loan amount, if you are having trouble making your mortgage payments and contact your lender about what your options are, these are generally the options you have in front of you:

• Continue paying as agreed
• Apply for a loan modification
• Start the process of doing a short sale
• Negotiate for a deed-in-lieu of foreclosure
• Foreclosure

If your loan balance is below 417,000, the Making Home Affordable plan has pretty well outlined what can and cannot be done. You can read through it (or hire help if needed) and know what to reasonably expect as an outcome. But keep in mind, each situation will be different – and each outcome will be different.

And if your loan balance is above $417,000 – this means that there is not currently a standard set of guidelines as to what to expect – which means anything can happen.

Regardless of what your loan amount is – or what your overall personal financial situation is…

I haven’t seen a plan that can help you if you find yourself in a situation where your house is worth 50% of what you bought it for and you now owe 150% or more of what it is worth.

But I will keep you posted if I hear of anything.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

One of the facts of the mortgage business today is that it can sometimes be a hurry-up-and-wait game. When it comes to buying a house, I have seen it more than once lately where the seller’s lender who has to approve the purchase contract (because it is a short sale or a bank owned property) takes months to approve the sale and then request/demand that the deal must close in 21 days or less.

It can sometimes be a game of wait, wait, wait… hurry.

Wait, Wait, Wait... Hurry!

I don’t really spend too much time wondering why this is, I just make the observation that sometimes it is.

Which makes it all the more important for you to ask this one important question of your loan officer up front:

“How long will it take to close my loan once I have everything to you that you require?”

By asking this simple question, then if you somehow end up in this situation where you have had to wait, wait, wait… hurry you will know if your loan officer is up to the task or not.

So if you are planning on buying a home in Arizona and find yourself in this situation – who do you call?

Not me.

Call these guys.

They promise with their checkbook that they can get your loan closed in 10 days or less.

Which in my opinion is absolutely-eye-popping-remarkable for today’s lending environment. They have managed to put all of the pieces together under that are required to do this and if it were up to me, I would put them on the Today Show for being able to pull it off on a consistent basis.

But they haven’t asked me to write on their blog.

Yet.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

“The lenders I work with are great. They get my loans done, customers love them and I really only have one complaint…

I wish they would blog.“

Craving Technical Mortgage Talk?

I have heard the above statement more than once from a Realtor – and usually I just smile, shrug and say something like “yeah, that is weird… just let me know if you ever need a guest post!”

The truth is that for some reason, being a loan officer and blogging seem to be a combination that only a few people have managed to balance, no matter what geographic market they work in. And of the loan officers that do end up writing about mortgage stuff, many of them don’t write enough about <insert your favorite mortgage-related technical topic> and just end up writing about funny stories that have happened to them.

I know, I probably fall into that camp – but sometimes writing about mortgages is kind of, well… boring.

So I thought I would let you know who the perfect loan officer blogger is for anyone who needs technical-mortgage-related information downloaded daily into their brain… only he isn’t a loan officer – he is the Director of Capital Markets at RPM Mortgage and his name is Rob Chrisman.

Rob simply provides the best daily commentary on what is going on in the mortgage market that there is. He has been helping me sound educated for about a year and a half just by adding me to his email list and he was probably the secret-behind-the-curtain for many loan officers long before I heard about him.

So if you can’t get your loan officer to talk technical to you… now you can get your daily dose of mortgage expert from the best in the business.

Shhh, don’t tell anyone – let’s keep this little secret to ourselves so other people think we are smart.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

No matter how you look at it, most loan officers I know would tell you that getting loans done hasn’t gotten any easier recently and they generally don’t see easy street anywhere in the near future.

A few recent comments I have heard from loan officers:

“You think your turn times are bad — try explaining to someone that you should be able to get their loan done in 90-120 days! (He wasn’t kidding)“

“You aren’t going to believe this – today, my company decided that they were going to change the seasoning requirements on USDA and VA loans regarding loan flipping and didn’t give anyone any warning. I had four of those deals in the pipe!“

And a few comments that I have had from some local Realtors:

“There’s a ton of stupid walking around <insert company name>… But I’m not sure if it’s different anywhere else.”

“What are the chances that my deal can fund on Tuesday? No, wait – don’t tell me — I know what you are going to say… 50/50.”

“The underwriter is asking for things that make zero sense. It makes me question their general ability to function.”

And if my brain hadn’t went semi-numb to these kinds of conversations recently, I am sure  I could probably fill up another page or two with  similar comments.

I think I have at least a decent idea of what it must have been like to be a Firestone tire dealer in 2000.

These recent comments have been weighing pretty heavily on my mind and I probably brought them with me into our weekly sales meeting this week. One of the agenda items in the meeting was each loan officer was going to share their homework from the previous week where we were each supposed to come up with our unique “angle” on how we were going to give our elevator speech to prospective clients.

Honestly, everyone’s ideas seemed tired to me. You have heard them all before.

“We have the lowest rates…”

“No one can do a loan cheaper than I can…”

“I can get a loan done in 15 days and no one can do them faster than me…”

All I could think to myself during the homework-sharing session was… Bleh.

I wasn’t even going to say anything, but then my manager kind of forced me to speak by directly asking what I thought would be a good angle.

I tried to play it off and said “guys, I don’t know – those all sound pretty good to me”.

“No, really Justin, what do you think a good angle would be when telling a customer why they should use us and not the loan officers down the street…“

“How about… We Suck Less?“

The room immediately went silent and no one said a word. They just all looked at me with eyes as big as baseballs.

I shrugged, but didn’t say anything. What, did they think I was kidding?

For about 10 seconds, I was sure I was going to get a(nother) trip directly to the principals office for being what I thought to be authentically honest.

And then it happened.

My 62 year old friend and fellow loan officer broke the deafening silence in the room with an exhale and a low mumble:

“Hell, I think that just might work“.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

From the “Huh?” files comes this request from a client’s loan underwriter:

Please provide the following:

1) Fully completed and executed Lead Based Paint Notice to Purchase Agreement.

Of note, the home being purchased was built in the year 2000. Lead based paint ceased to be manufactured in this county c. 1978. The Residential Lead-Based Paint Hazard Reduction Act of 1992 requires the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978.

But you want a completed disclosure for a home built some 22 years later. The Federal Government doesn’t require this, why do you?

2) VA Addendum to the purchase contract signed by buyer and seller stating the borrower is applying for a VA loan.

Uhm, what “VA Addendum”? No such addendum exists in the Arizona Association of Realtors form library. If I might, I’d like to draw your attention to line 70 of the purchase contract where the little box next to “VA” is clearly checked under “type of financing”. That this is a VA loan is also noted on line 10 of the purchase contract. So we need an “addendum” for what purpose?

3) You’ve asked the loan officer to supply five additional comparables over and above what the appraiser is using. Of course we still don’t have an appraisal, so we should… guess what comps the appraiser used? This begs the question of course, as to why you need five additional comparables and what you plan to do with them. Are you going to formulate your own opinion of value? Use them to second guess the appraiser? Wallpaper your cubicle? The loan officer, not being either an agent nor an appraiser, is consulting with a second appraiser now to meet this ridiculous request. It’s hard enough these days to get one appraiser to determine a value, now we get to involve two. Oh the joy.

And what if there aren’t five additional comparables – reasonable, good comparables that is.

Here’s the deal… I can get you this stuff (assuming you can provide this phantom VA Addendum you insist on having). I’ll inconvenience myself, the buyer, the seller, the seller’s agent and the loan officer. Processing needless paperwork will add to all of our work loads (your own included), and of course add time to the transaction. We’ll do all this because of some asinine policy at your lending institution. 

Here’s a thought… apply some common sense. Don’t ask for another form of information that you already have and for Pete’s sake, don’t ask for stuff you can’t possibly need.

Oh, but it’s policy.

Well it’s a stupid policy.

Think. Change the policy. Stop going about your day-to-day activities without engaging your brain. Raise your hand in some meeting and say, “This policy is ridiculous, why don’t we change it?”

If you have ever been a boss in Corporate America before, chances are that you have had the privilege of sitting down and having the “it just isn’t working out” conversation with one of your employees.

Or maybe you have even been lucky enough to be on the receiving end of one of these conversations (a wise man once told me that you hadn’t lived until you had been fired from a job) and from time to time still think back on the big event.

In Corporate America, the actual meeting or conversation of a boss firing an employee can happen in a variety of ways: from The Apprentice style board room meeting with a big “You’re Fired!” at the end or maybe just a quiet conversation with a truly sad goodbye. No matter what the style is, one thing is usually certain — the message has been communicated.

But in the field of real estate, getting fired by a client is different than being fired by a boss – much different.

You see, when you get fired in the world of real estate the client usually doesn’t tell you that you have been fired, they just solve their problem with some other solution. This usually involves going to one of your competitors and getting their need met by someone they feel can better meet their need.

So if you are a Realtor and your client fires you – guess what? Chances are that the client is still going to buy or sell a house. Ok, so there are buyer broker agreements and listing agreements to help a little bit in the case of a Realtor and a client but what if you are a loan officer? Or maybe an escrow officer? Or an appraiser?

The point is this: if you are in the position where you have clients and work in the field of Real Estate, don’t expect a “things just aren’t working out…” type of conversation, chances are you will just hear less and less from your client until ultimately you don’t hear from them at all.

How do I know all this? I am in the middle of getting fired by a client of course.

She just won’t tell me.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

Warning: Mortgage Rambling Ahead.

From the Inbox:

Hello, I working with a reporter at <Insert National TV/Media Company Here> tomorrow on a story that is essentially a consumer’s guide to finding the lowest possible mortgage rates with a focus on the difference in rates between smaller community banks and the larger banks. Why are smaller banks often able to offer lower rates and is there any tradeoff between going with a smaller bank vs a larger one?

We have some theories – mainly that community banks have less overhead and are therefore are likely willing to take a lower margin but just wanted to get some other opinions.

Boy, did she just open up a can of worms there.

In plain English: How do consumers get the best deal on a mortgage?

My reply:

In the mortgage business, you have mortgage brokers, mortgage bankers and federally chartered banks.

Mortgage brokers are just that — they don’t loan their own money, they just broker the deals out. Mortgage banks lend their own money by getting warehouse lines of credit from the big banks (generally) but they don’t do stuff like savings accounts, credit cards, etc. Then the federally chartered banks do everything – mortgage lending, credit cards, savings accounts, etc.

As of right now, the mortgage brokers and mortgage banks are regulated by each state.  The federally chartered banks are regulated by either the OTS or the OCC — so they don’t have to “answer” to the various state regulators.

And now for the question of “why do people get a better deal at smaller banks…”

The truth is, that in the mortgage market, what kind of “deal” a consumer gets almost always comes down to the loan officer who is pricing the deal out.

A consumer could go to Small Bank, USA and shop rates from two different loan officers and get two different rates – and you might be surprised at how different they could be — even at the same bank!

I then went on to speak about secondary marketing, investor pricing and some other things that I won’t get into before you fall asleep reading this but I saved the one little secret for TPREG that everyone really you really want to know… the two most important questions you can ask your loan officer that will give you the best chance at getting the best deal on your mortgage.

Here are the two questions to ask your loan officer that will give you the best chance at getting the best deal:

1. Do you have access to direct investor pricing?
2. Do you have in-house underwriting and doc drawing?

The reason questions give you the best chance at getting the best deal on a mortgage is relatively simple: Fewer hands in the money pot that could lead to higher rates and faster turn times which can lead to shorter lock periods.

If the answer to both of these questions is no, remember it doesn’t mean that you are getting a less-than-optimal “deal”, it just means that the loan officer has an anchor tied to both legs as he swims out in the ocean.

But if it were me… and I was shopping for a mortgage… I would make 100% certain that my loan officer could answer yes to the above two “most important” questions you can ask.

In my opinion.

And yes, I have seen a few Ironman loan officers with two anchors tied to their legs out-swim a loan officer with no anchor weighing him (or her) down…

But not very often.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

As the number of foreclosures across the nation continues to set records, there is a sub-set of society that is being impacted that most people don’t first think of when they think of foreclosures…

Renters.

It is becoming more common for someone to have signed a rental agreement with a landlord who at some point during said agreement becomes delinquent and allows the property to go into foreclosure. What kinds of rights do you have if you are a renter in this situation?

According to Valley Real Estate Attorney Christopher Combs, here is what is possible should your landlord go into foreclosure and you still have a period of time left on your lease:

Under a new federal law that took effect May 20, the bank generally would have to honor the lease of bona-fide tenants.

One of the exceptions to the new law is that if the bank sells the home to a buyer who will use the home as a primary residence, the bank can then furnish a 90-day notice of eviction to the tenants.

In regard to your liability as the landlord, if your tenants are evicted, you can be held liable for your tenants’ monetary damages, such as higher rent and moving expenses, due to the early termination of their lease.

Who says all the smart people live in Silicon Valley?

Ok, so there are plenty of people with over-sized brains in Silicon Valley… but the first solution that I have seen to attack this problem was actually developed by a local company right here in the (Southeast) Valley.

At LemonLandlord.com you can actually monitor whether or not your landlord is in foreclosure. From what I understand, not only did the idea get grown here right in the Valley, but the back-end technical work was done by the Tech-Wonk-Super-Stars at Integrum which is one of the founding/anchor companies of the phenomenon known as Gangplank.

If you are renting a property in today’s market, I don’t see how it doesn’t make sense to keep an eye on your landlord.

Just in case.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

The one with the least interest controls the relationship.

In any negotiation, I have found that remembering this simple rule helps me not only remember which side of the motivational fence I am sitting on during the negotiation, but also to understand the other parties actions.

There is a show playing all across the valley right now and it is produced in large part by the new HVCC (Home Valuation Code of Conduct) rules. Depending on your perspective, it could be classified as a horror, drama, comedy, suspense, thriller or documentary. But no matter what genre you put it in, one thing is certain…

The appraisal management companies have the least interest and they are in control.

While the above may sound like a good idea from the outside looking in, consider a couple of my random thoughts on Twitter this week as I was watching the show:

One of the best things that I can say about the new HVCC laws is that it has taken me the loan officer out of the line of fire. Trust me, when an appraisal doesn’t come in at the sales contract price, people start asking questions. People whose livelihood is on the line.

What is the definition of a “market”? I always thought it was when you had a seller who is willing to sell something at a given price and a buyer who is willing to buy something at said price. That might be true for most things, but in today’s Real Estate world, you get to make sure that an appraiser “feels” like the seller should sell at that price and buyer should buy at that price.

So before HVCC when an appraisal would come in lower than contract price (I can’t tell you how rare this was), I became the punching bag guy who was supposed to “fix” it.

Now that we have HVCC, when an appraisal comes in low for <insert reason>, I have multiple people calling me asking me what I think they should do… because they know that as a loan officer, I really can’t even talk to the appraiser anymore.

So I offer up my best advice,  give them a pep talk and send them into the ring to negotiate/justify/fight for what they think is a fair market value.

And more often than not, they generally get bludgeoned by an appraiser – or even worse, some kind of “appeals committee” at the appraisal management company who doesn’t really care.

But if you stop and think about the appraisers perspective for a moment, any  logical business person would tell you that they really have no incentive to care.

Heck, if you put yourself in a typical appraiser’s shoes, as a result of HVCC:

1. Their income has been significantly reduced as a result of the appraisal management company agreements (note: this does not mean it is cheaper for the consumer – just the opposite)
2. Many of their clients can’t talk to them anymore
3. Now rather than having multiple clients, there really is only one decision maker (the appraisal management company) who decides who gets what work.
4. Great work will not necessarily result in more work.

Can you really blame them? HVCC handed almost every appraiser in America a pay cut and a boss. A boss that doesn’t make any sense and has his hand in their pocket.

And unfortunately for us all – there is only one group of people who currently are less interested than appraisers…

The people who made the HVCC laws.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.

All over the valley, I am seeing clients “lose out” when putting offers in for a home – mostly in the sub-$200,000 range. Bank owns the property, puts it on the MLS, the offers pour in and more often than not I see my clients (those that don’t have enough cash to buy the property outright) lose out to cash buyers.

If I had to pick a number of the average times I see someone who wants to live in the home and finance it with a mortgage have to put in an offer before they actually “win” and get the offer accepted… I would guess anywhere between 3 and 5 times.

That means anywhere from 3 to 5 times the buyer falls in love with a house, puts an offer in and just hopes that the seller (usually the bank) accepts the offer. When you hear that, what is the first thing that you think of? If you are a real estate agent, you might think of how many times you are going to have to drive around to look at properties.

The first thing I think of?

I hope the property appraises for whatever they offered to “win” the bidding.

The second thing I think of?

I hope that I can get at least one underwriter to agree with the appraiser and not cut the appraisal for some reason.

If you are someone who is interested in buying a house but find yourself losing out in the current bidding wars going on and decide to bid over asking price – be aware of what potentially could happen even if you win the bidding.

If your offer is accepted, the next step is to have  your property appraised. Remember, appraisals are just one person’s opinion of value – and you may be surprised at how different “opinions of value” can be. A normal person might think “seller is willing to sell at X, buyer is willing to buy at X, property must be worth that much, right?”

Not always.

Lately I have seen more than one appraisal come in under contract price – even as much as $50,000 under contract price (that is a high % when we are talking an under-$200k home) and if your appraisal comes in short, you basically have these options:

1. Cancel the contract because the property did not appraise for the sales price
2. Get a different appraisal done
3. Negotiate with the seller to lower the sales price to the appraised value
4. Bring the difference between appraised value and sales price to close in cash

So if your appraisal comes in at sales price, you should be fine, right?

Maybe.

But more than once lately, I have submitted a loan to an underwriter who decided that they didn’t agree with the appraiser on what the value of the property and decided to just “cut” the value to what they thought it should be.

Now if you find yourself in this situation, there is one thing that any good loan officer knows – it isn’t a bad idea to submit the file to multiple lenders if you have concerns about the appraised value. Lenders don’t particularly like this because they may end up taking the time to underwrite the file and it may close with another lender – but it is one of the dirty-little-secrets of how to deal with an underwriter who doesn’t like an appraised value.

And in my experience, as long as you do what is best for the client, everything else will fall into place.

About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.