Georgia FHA Home Loans - (& Opinion)

Why does it seem this has become the motto of my own industry? If you live in one of the towns where JS from LF advertises heavily on the radio you've heard him say "Don't give a broker another penny of closing costs to refinance! It's a racket! It's a rip-off! Refinance with LF today and we'll pay your closing costs. Your closing costs won't cost you one penny and we don't roll it into the loan!" (paraphrased)

Raise your hand if you believe this is remotely true - I mean that it won't cost you one penny.

Okay, John, put your hand down.

This is only one of the most misleading statements I hear advertised or see advertised. It's amazing how some of the bigger companies advertise that they are "the only ones who can do this for you" when you can get the same loan from just about any mortgage broker on any street in America. 

Oh, sure. They'll pay the closing costs out of their commission by raising your interest rate high enough to receive enough Yield Spread Premium to cover those costs. However, let me add, if you are keeping the loan for two years or less this is a smart move.

Here's another one from the big guys: Fixed closing costs only $495 - go ahead, call them. Then compare their APR with ours. APR is the combined cost of your loan including commissionable points and closing costs over the life of the loan. See, what those huge national advertisers (dot coms) do is raise the interest rate enough to offset your closing costs ... same thing the other guy does.

Another funny is that several months ago the JS from LF guy was running his normal ads followed by a help wanted spot touting how his top performers make $400,000 per year. That's a pretty amazing feat considering he's paying your closing costs, too!

For anyone to remotely believe that any lender or mortgage broker can operate on anywhere less than an average of $2500 per loan is ridiculous unless they intend for the company to do so without employing top-notch professionals, the correct number of processors and underwriters, equip a facility with the best equipment available so clients aren't hindered by equipment malfunction, AND to spend the roughly $300 per FILE (closed or not) to chase down mortgage and real estate fraud. Business economics is a big thing to me since I'm charged with keeping things afloat. And let me tell you, at $2500 average per loan there is nothing left over at the end of the year and we are run fairly modestly.

Here are some other ones: Sure, we can close within 24 hours (so can we once you get off your tail bone and get us the docs we need!), Novation can't do that - only we can (wahooo - I always love that one), (this one is advertised regularly on craigslist): Guaranteed approval 100% financing - pretty sure the reason they don't put the name of their company, phone number, etc is because that's definitely lawsuit and criminal activity territory. This one is pretty misleading, too: Online approval in less than 5 minutes (honey, that's not an approval worth wet smoke - that's an approval that is only partly as good as your word NOBODY can guarantee your approval online ever - you may, however, accidentally fit the credentials for the loan for which you applied. You still have to be approved, just wait until the broker/lender calls you back and see.)

So I can smell the poopy when my so-called competition is lying to my prospective clients about what they can deliver. The idea the mortgage brokers should not be entitled to yield spread premiums is ludicrous. The idea that brokers, lenders and bankers should all be required to expose YSP is totally acceptible. Currently only brokers are required to do so - although we, as a lender, do the same. I also teach students in my seminars and workshops how to read the HUD-1 to see the exact amount of YSP going to the broker. Unfortunately you can't do that for most lenders and bankers.

I will say that RESPA desparately needs reform - the idea that any lender or broker can deliver accurate estimates within three days of application is only as honest as the applicant is with the loan originator about their income, assets and property value/details. This is the day of rapid information and it's time to change. However, GFE's are the greatest form of lying I have seen in the industry.

We often have a client who tells us a broker or another lender can beat our pricing (often by some ridiculous figure) so we do what anyone else does and ask them to show us a GFE/TIL (most of the time we never see a TIL so the most important part of the information is missing). The GFE's are routinely incomplete and with rates quoted that don't even exist.

So what should you do as a buyer or agent advising your client?

(A) Know what you're talking about with rates and the true costs to close a loan
(B) Verify from two or three sources that the estimates are fair if not completely accurate
(C) Be skeptical, at best, of what any LO is telling you especially if it's out of line with what others say

UNLIKE SOME FOLKS (wink wink) I do not think that the mortgage industry is totally corrupt. It is, however, a soured soup if taken all in one bowl. There are several litmus tests which I will blog soon. Right now my stomach is boss and I've written another one of those blog postings that makes my attorney say, "Explitive! Ken, what the explitive are you explitive thinking? You can't explitive single explitive handedly explitive clean up the explitive mortgage industry!"

Transparency - YES! Price control HECK NO! Educated borrowers - YOU BET! I educate for free, regularly.

I can't really say for sure if this is the World's Most RIDICULOUS Blog Posting but it sure feels like it. And I reserve the right to ridicule myself at my leisure.

Those of you who know me personally will probably think it is and find this a laughable expose with which you will haunt me for weeks if not months. In fact, it's a little embarassing to write about but because I have no phone and only occassional Internet connection from where I am I'll spend most of my lunchtime writing this absurd posting about this preposterous state of indecision. Yet, here I am and look: There you are reading it!

I'm posting about naming my home for Pete's sake! See? I warned you.

We've been in our custom built home for about 6 months and with the holidays upon us now feel the pressure to apply a name. Why? I guess just because! Actually our home is fairly large and it just seems odd for it to not have a name. The grounds crew have a name for it but I don't think I should put that on a sign out front.

It could name itself, I suppose. By the way, my mom was once in a convalescent center which "named itself" Hill Haven and my dad used to own (or built) a trailer park called Hill Haven - yikes! But even though this is a haven and it is on a hill I refuse to fall for that trick.

We have indoor gardens, outdoor gardens, indoor ponds and outdoor ponds, there are two kitchens and several guest rooms. There is a rather famous tributary stream which feeds the Chattahoochee river on the west side of my property called Sope Creek but there are dozens of things named Sope Creek from here south so that's over abused. Still, it just seems odd to hear people say, "We're going to the Cook's house for the holidays." It would just seem more likely to ask, "Have you seen the ponds at La Sana?" Or maybe "We walked the paths through the garden at Running Brook last Sunday and had a spot of tea with the redneck and his princess bride."

See what I mean? Maybe it's that my wife is Native American (as in a blood born Kenaitze tribesman with a rich history of leadership - in fact, her sister is one of the last native speakers of A'din'a E'a'na or however they spell it - but I digress) and it's not uncommon for her people to name places. It could be that I am of English decent and the naming of manor homes is in my bloodline. Or maybe I'm just a nuvo-riche nerd looking to fit in. I would make huge fun of myself if I were my friend! See what kind of logic I'm wasting my time with here? 

So, here I am toiling over a name for our estate. How ridiculous is that!? A former biker and rock musician toiling over a name for a home when there is actual work to be done. Ah, one of the many blessings of success I suppose.

Maybe I'll be a real American and pay someone else to think of a name. Meanwhile I should go out and feed the poor or something.

I suppose if you are going to make erroneous comments with non-factual supporting data there is no better way to do so than to post anonymously. We're having a better exchange of ideas and opinion backed by factual data than I've encountered on AR or any other blog in quite some time. Jeff Corbett and I have had some great exchanges and Bryant Tutas is always there to chime in as are many more of you.

Then there is the anonymous poster who commented on Starbucks has nothing to do with Mortgages with an apparently cut and paste diatribe which had font too small for my old eyes to read and another (quite possibly and probably the same) anonymous poster who commented on Ding-Dong: Multi-Level Mortgage Calling by indicating that WLG (World Leadership Group - an MLM mortgage opportunity (http://www.wlgweb.com/) is the number one mortgage company in the nation. Really! That's a news flash. I imagine the real top 100 or so would find that an interesting fact. Especially Wells and Countrywide who, basically, dominate. (We'll catch up one day!)

Thing is I agree with the content of the posting by the Anonymous in Starbucks ... as a lender we spend more and more every year on QC and Fraud Detection in an attempt to limit our exposure to that type of fraud. So why post anonymously? However, Anonymous who posted to Ding-Dong was completely wrong. Same person? Maybe. Since I've had very few anonymous postings and two of them come within a matter of minutes from each other. 

I suppose if you wanted to post something so wrong you'd want to hide your identity as well.

Dan Grammatica asked the question in his posting Anonymous Comments
Ben Kakimoto reached it on The Truth in Blogs
David Eiglarsh counter-attacked in Bad Apple Needs To Go Away

Feel free to post anonymously but at least be truthful, honest and provide some actual facts to back up your post. And if you have facts and honesty ... why Anonymous?

AR is a place for professionals to learn from each other. Sometimes that means a spirited eschange of differing viewpoints. But if you're going to post, at least be woman or man enough to let others see who you are ... even if you DO intend to lie. 

Sorry Jeff! I had to do it ... 

If you were invited to a jaliggy (a great and wonderful picnic type party with music, games, food & drink) because they were giving away a new Cadillac to everyone who showed up you'd probably be highly interested in going. However if you read the fine print that says a jaliggy starts out by everyone (who ever was late on a payment and cannot bring proof of income and assets for the last two years) driving a nail through their big toe you wouldn't (unless you are extremely odd) be nearly as interested in going unless you had never been late on a payment and had that documentation. However, even if you have those issues, to you the pain may be worth the gain just to get that car. Pain, in this case, is for people who are unworthy of highest regards because of their credit and work history.

Just because the press calls some forms of lending predatory or unethical doesn't make it so. Yes, the broker and lender may have allowed 4 points in commission on the same loan they allowed just 1 point to a better borrower - that does NOT make it predatory. It costs far more to build a bridge over a canyon than to build a flat stretch of highway on the same amount of flat dirt. The press likes to call stated income loans mortgage fraud, too.

I don't give much creed to stories or blogs on lending by people who don't have a financial or banking background or education so biz rag articles only get me to more defend MY business than they do to believe what many authors mimic from other authors about lending practices because, quite frankly, most authors are going to be clueless about the process, the business economics and the industry. When I call them on a comment about "the mortgage industry" they say "we don't mean you". Listen, when they say things like "the mortgage industry" that's ME. That is PERSONAL to ME. By saying "the industry" they are including KEN COOK and NOVATION MORTGAGE. When reports say unethical lending practices let's name names - WHO is unethical? I mean name the COMPANY and the PERSON working for that company. It's easy to say all purple people are too lazy to work and all green people are nothing but theives. Or all southerners are dumb-butt rednecks and all Californians are socialist-communists. But it's not true.

Jeff  says for every one of me (the Ken Cooks)  there are 100 unethical predators. I disagree completely because I know a lot of people in my industry and I would trust well over 95% of them with my own finances. Maybe we'll get NAMB to give us some figures on how many predatory lenders/brokers there are. I can tell you this, though, if I'm outnumbered 100 to 1 then you need to be referring all of your clients to Novation Mortgage because somebody is getting hurt and we won't hurt them.

You cited the report that predatory lending costs Americans over $9 billion a year. I submit that every penny of that could have been avoided by having only educated borrowers negotiating the contract. I push hard - VERY HARD - for licensing and testing of LOAN OFFICERS before they can ever accept their first application. But do you know who the BIG OFFENDERS are? Do you know that MORTGAGE BROKERS are held to stricter disclosures than CHARTERED BANKS? Do you know that federally chartered banks are exempted from disclosures that would land your neighborhood loan officer in prison for not providing?

I  AGREE THERE ARE PREDATORY LENDERS but I insist that market education is the key. You can arrest every predatory lender, burn their office down, strike their name from the phone book and two days later their is someone else there to "fill the gap". Unless ignorance on credit and debt management is put before convicting predatory lenders it will never be stopped. Predation is where unethical scum in MY INDUSTRY takes advantage of an ignorant borrower and without wiping out that ignorance you'll never stop predation in the lending industry.

Never.

If anyone has enough passion about lending practices to post here then they should have enough passion to help in the FREE and NON-OBLIGATED education of the general public using actual historical and statistical EVIDENCE - not just fears and hearsay.

I can further say that if regulations came into play which forced lenders to give the same treatment to high risk borrowers as low risk borrowers you'd have (a) almost every small lender get out of the industry and (b) a lot of people who could have owned homes no longer qualifying. There is predation - absolutely. But predation is not the leading cause of foreclosures and family hardships. The leading cause is non-prime lenders trying to make everyone happy by letting borrowers who otherwise could NEVER have owned a home have a shot at it. I mean get realistic: we are now allowing borrowers with a 580 middle score, mortgage lates, bankruptcy, judgment, medical charge offs and worse buy brand new homes with no down payment.

Isn't that what the public wants - a shot at the American dream?

The sad truth is that in this welfare mentality state where big executives (I'm talking about ethical people who care) create thousands of jobs are lumped into the same category with liars and theives who overstate earnings are being eaten by the press because the press, that great socialist undercurrent rotting away at the core fiber of America, and the PRESS, my friend, is demanding that slobs, no gooders, uneducated spend thrifts receive the same treatment at the same price as those who care enough about themselves and their families to tenderly care for their financial well-being and credit worthiness.

ENOUGH IS ENOUGH.

Why don't we just say to heck with the poor slobs with crappy credit and low income people? Let's go back to requiring a 640 minimum middle score and 20% down? Let's throw away all of the non-prime and alternative document loans. Because THAT'S WHAT IS GOING TO HAPPEN if these so called anti-predatory lending acts keep popping up without the representatives authoring them and voting on them listening to ME - I mean, the industry. I applaud Illinois for requiring borrowers to go to class before they go to closing - KUDOS! But as long as you have borrowers who don't care about themselves and a lending industry still willing to help them then you will have HIGHER COST LOANS! I can make it really personal to any elected official voting on a law requiring lenders to further limit the cost of their high risk loans by providing examples from your world. Just call me - 828-354-4053

You want no predatory lending? Let's get rid of PREDATORY BORROWERS too. And let's get rid of unequal legislation letting federally chartered banks skate by secretly while mortgage lenders and brokers get fried under the microscope.

How much did MORTGAGE FRAUD cost the country in the same period as predatory lending cost $9 billion? (Which buy the way is subjective ... that may not have all been predatory.) ONE BILLION that is DOCUMENTED! And we only uncover the tip of the iceberg because most mortgage fraud goes undetected for months or years. Furthermore, that figure only counts the cost in defaulted loans which have been positively tied to fraud. It doesn't include the billions of dollars every year spent on Quality Control, appraisal reviews, automated fraud detection and the hours and hours they require.

BOTTOM LINE

If you want high risk borrowers to own real estate and you don't want lenders to charge for the gamble then either (a) establish some kind of non governmental social fund that doesn't steal out of my pocket to help pay closing costs and offset higher interest rates or (b) we'll just go back to the way it was. 640 credit, no late payments, 35% DTI, 20% down and fully document income and assets.

Yes, I'm hot under the collar. But still smiling!  Something needs to be done but it MUST be the RIGHT thing so as to allow everyone access to good housing in America.

EDUCATE - DON'T LEGISLATE 

Well, shucks, boy! You can own your own mortgage company.

NO EXPERIENCE NECESSARY - that's exactly what the spam I get in my email regularly tells me. And it is one of the most frightening phrases I've ever heard in relationship to the industry of which I am so proud to be part. For most Americans their home is the single most costly and valuable purchase they will ever make. There are literally thousands of loan solutions available which confounds the minds of even the brightest and more experienced Mortgage Professionals.

Of course the reality is that in many states not just anyone can be a loan officer. If you've read any of my blogs anywhere you know that I am pushing for licensing of everyone employed in the mortgage industry for the sole purpose of requiring at least the minimum level of continuing education. To work for me you either need a degree in banking and finance or a minimum of 2 years experience to work as a Loan Originator II or higher. We do have a training program from which you do not graduate unless you have completed a minimum of 6 months and have closed a minimum of 24 loans. Then you can start to work on your own.

So let me honestly ask: Do you really think just anyone should be advising you on your home mortgage? Is it really okay if you went to a home decorating party hosted by this person and while they are doing they added, "I'm also a Loan Officer and we offer a great opportunity there as well. Does anyone want to refinance?" Do you think maybe if they went to a sales rally every month which included 15 minutes of some kind of training or they watched the company authored DVD on the mortgage industry that you can now trust them to lock you into a mortgage on which your entire life and wealth management plan is based?

I mean maybe I'm wrong here because I've never been to a WLG meeting. I've never read any of their training manuals. I have looked at their website and the websites they allow their associates to have and quite frankly it disgusts me and disturbs me. http://wlgweb.com/  

If you are a WLG rep please help me. Help me believe that you deserve to be in the mortgage industry because from what I have seen from the few exposures I've had with WLG reps, they certainly did not.

Here is a way to help me have a modicum of faith in your system. Sure, it's a pop quiz. Anyone who deserves to be in the industry at even the base level should be able to finish this little quiz in less than 5 minutes without needing to reference any source. Seriously, I'm not kidding. If you don't know these answers off the top of your head and you call yourself a mortgage professional you are not. You may be in training but you're not ready to be guiding people's decisions on their mortgage:

1) How do you calculate APR?

2) Would you rather have (as a borrower) a lower INDEX or a lower MARGIN?

3) What is a form 214?

4) What do the initials RESPA stand for and why is this important to you?

5) How do you quickly calculate DTI and what is the maximum allowable DTI under FNMA guidelines?

6) When would you use a 1008 and what is it?

7) Briefly describe the duties of a CLOSER at a TITLE COMPANY.

8) As a general rule if the FEDERAL PRIME RATE goes up or down, what happens to an INTEREST ONLY ARM?

9) What is the KEY TRIGGER to start the clock ticking on RESPA?

10) What do the initials GFE and TIL stand for?

11) How many GFE's are sent to the borrower during the loan process and when are the sent? Is that all that you send or should the borrower expect something else?

12) If I am a secondary marketing auditor what do I look at and when?

13) If a client asks for a 100LTV with no piggy and no PMI on a NOO with no PPP, what do they want?

14) Does RESPA apply to modular homes in Florida where two senior citizens will spend their retirement years IF they plan on leaving the home to their children as an investment opportunity?

15) When does the lender see the HUD-1?

16) What is a HUD-1b?

17) Which party can you disclose the borrower's credit score too: (a) The listing agent (b) The buyer's agent (c) Both.

AS AN APPLICANT (borrower) I would recommend you give this little pop-quiz to your loan officer right there in front of them. I mean they are about to ask you 162 questions and you're going to trust them enough to give them your complete identity and financial history. They are going to know what you have in your bank accounts, your 401(k), your IRA. They are going to see how many late payments you've made and if anyone has a judgment against you. They are going to know your most hidden financial secrets. The least they can do is to answer these questions for you. I'd say if they missed 5 or more you may be headed for a problem. If they miss 1 or 0, they at least have an idea of what they are talking about and likely have some experience and/or good training in the mortgage industry. 

I just read an AR Forums posting http://activerain.com/forumthread/828 which starts out with "Nationwide---Credit Report Atlas (CRA) is the first credit-reporting company that offers a one-stop shop of supportive services and solutions for the mortgage industry.  CRA has combined three imperative services, credit reporting tailored to the clients needs, loan leads from twenty four hours to thirty days old, and an automated service that generates the cold leads into warm ones, thus creating a complete package of services that all mortgage companies need and use on a daily basis to obtain, create & close home loans."

Mortgage Professionals

Do you know what the FACTA/FCRA says about this type activity? Can you be held liable for violations of FACTA/FCRA if you purchase leads from a lead company which is FACTA non-compliant? Is there any regulation governing mortgage leads based on credit score - also known as "trigger" leads?

People With A Credit Score (That's YOU!)

Do you know your rights under FACTA/FCRA? Do you think that getting multiple offers for mortgages from companies you never applied with after applying with your local mortgage broker for a refinance loan is acceptable? Do you know how that happens? Is it legal or illegal?

Everyone

Let me encourage you to understand the FACTA/FCRA and how it affects you. Credit and identity fraud is not the only subject covered under FACTA/FCRA.

http://www.ftc.gov/os/statutes/031224fcra.pdf

It's fairly new to help lenders limit market exposure to a single borrower. As a direct lender for real estate investment loans we don't have this stipulation on our inhouse loans however many of the lenders to whom we sell 100% real estate investment loans have recently added the underwriting guideline known as Rapid Acquisition.

RA is a very simple formula and you'll know whether it may be a question of concern on your next deal if you know:

Have you or your buyer client purchased more than 2 properties in the last 12 months or 4 properties in the last 24 months?

If you answered yes to either of the questions then there are lenders who may not allow you to access their 100% real estate investment loans. There are also lenders who allow an exception for buyers with more than 2 years of landlord experience. Ask your loan office. If they are experienced in real estate investment funding then they will know the answer. If not you may just get popped in mid-stride. If you know the lender's name you can email me and I'll tell you if I know the answer. 

Every state has their own statutes, codes and laws. This one is the California Civil Code §1710.2 which "states that death on a property need not be disclosed if it occurred more than 3 years prior to a sale. [The statute does NOT say that a death within 3 years must be disclosed.] If a death occurs on a property within 3 years, and the circumstances of that death are material (it was a gruesome or offensive death, or affected the reputation of the property), it must be disclosed." (Reference).

What better topic for the Halloween weekend!

So what does your state say? Is it a requirement? An option?

I personally know of 5 people who have lived in my home who have died in the last 20 years. My wife says she sees "stuff". I never really "see" anything but I've definitely had the feeling someone was in the room with me. Doesn't matter if it's night or day. So if I sell do I disclose? No way! I keep the property and open a Haunted Hotel!

Seriously. What is required of your seller? The mortgage lender doesn't care I can tell you that for a fact. We have no option for disclosure. Your real estate authority, however, probably does have a ruling. Can you get in trouble if you don't disclose in your state?

Here's one thing about the California code that does bother me: "Civil Code §1710.2 also absolves anyone from liability for nondisclosure of AIDS related deaths, regardless of how recently the death may have occurred." Same reference.

You've got to be kidding me! I can't catch murder, it's not contagious. I can't catch a heart attack or most forms of cancer. But I can aquire AIDS through contact with certain bodily fluids and someone may have died in my new home just last week from AIDS and left all sorts of fluids behind (I know it's a stretch but the gruesome details which are in my mind include involuntary release of fluids including sneezing on my countertops) and you're required to tell me someone was murdered, died from a heart attack or cancer but not AIDS? Well, we are talking about California. Just another reason to never live there. 

Here are just a couple of other state links for comparison:
Arizona - required only if asked
South Carolina - not required
Florida - no liability
Minnesota - not required

Final quote: "Sellers should disclose grisly facts about the house, so they will not be "haunted" later. Even if not required by state law, in order to soothe the spirits of prospective buyers and avoid lawsuits, the seller should be upfront about their home's paranormal guests or ghoulish histories. In a sellers' market, ghosts tend to fade and may even disappear." (Reference).

Bottom line: If you are a seller and you know, just go ahead and disclose. If you are buyer and it concerns you ASK! Then if the seller is not forethcoming and you meet Casper in the hallway at midnight you may be able to move and force the seller to buy back the property. 

What I'd really like to hear are YOUR GHOST STORIES! (But the comment on AIDs seems to be a much hotter topic!)

Ever want to shout into the horse's mouth? Had brokers blowing deals for you? Underwriting drive you nuts?

Here's your chance. I am the Cheif of Operations which means I make policy. We're a fast growing wholesale lender based in Atlanta (Marietta) GA - coming soon to a mortgage broker near you if we're not there already! 

I've always said I'm not in the mortgage business. I'm in the service business and mortgages are my product.

If you could create the guidelines and establish the service at a major lender, what would you add or take away from the lending experiences you've had? What's important to you? 

I'm ashamed that swift justice has not been served in my community. Of course you must understand that I support the death penalty and I like the Texas model.

"Two parents have filed a complaint against the judge presiding over the trial of their daughter's alleged murderer, saying that she hasn't made enough progress in the case.

Wayne and Linda Brown's daughter, Lori, was found slain along with a co-worker in a real estate sales office in Powder Springs on Nov. 3, 2003. Five days later, authorities arrested Stacey Ian Humphreys in the slayings.

Humphreys hasn't gone to trial, and Cobb Superior Court Judge Dorothy Robinson hasn't heard proceedings in the case since a motion hearing more than a year ago." - Atlanta Journal & Constitution today.

http://www.mugshots.com/Criminal/Killers/Stacey+Ian+Humphreys.htm - the eyes of the killer?

http://sca.cobbcountyga.gov/meet_judges.htm#robinson - the stalling judge?

Is Dot Robinson stalling for time for the DA to produce the best possible prosecution or what? 

Lori and Cyndi ... I'll help see that justice is served. Anybody want to help?

Here's the contact information for Judge Robinson:

(770) 528-1843 Peggy Massey (Administrator)
(770) 528-1845 Barbara Murphy (Law Clerk)
(770) 528-1844 Pam Mutuku (Ct. Rept.)
(770) 528-1881 Fax Number

Patrick H. Head, District Attorney
10 East Park Square
Marietta, GA 30090
(770) 528-3080
(770) 528-3030 fax
Email: cobbda@cobbcounty.org