Georgia FHA Home Loans - (& Opinion)

And we wonder how we lender's underwriters get such a bad name...

Dear LICENSED REAL ESTATE PROFESSIONALS,

I love you.

Signed,
Ken

Dear UNLICENSED BIRD DOGS,

You want respect? Earn it. Get a license and show me some E&O insurance. 

If we would all just take one minute and think about the extreme risk we take as lenders and even the risk brokers take submitting loans to us underwriting and stips would make a lot more sense. With all the secret activity that happens in an attempt to deceive us you would think that someone would say, "Hey, we're putting more risk on the lender than they are actually aware of, no wonder underwriting is getting so difficult!"

Cash back at closing - that kills us. Do you know what percentage of files which get cash back at closing lead to payment default? NEITHER DO I because we get lied to about the cash back!

BIRDDOG. Bird dog is a phrase that makes most licensed agents steam and boil. Be not dismayed. Bird dogging is not a billable expense even though some brokers and mini-lenders (brokers with a different title) would have you believe it is. The ultimate investor, however, does not like payouts to unlicensed individuals whether they are a contractor or a bird dog. WE ARE NOT STUPID!

We know what people do and try to do. We know what bird dogs and investors call "gray areas". We know why most contracts that are re-assigned are re-assigned. We know what it means when the seller recently received the property on a Quit Claim means. When we see an unrecorded lien or a "consulting fee" we pull the file. Period. You know why? WE ARE NOT STUPID!

What Prompted This Posting

I'm not sure how my corporate email address got on this guy's email list but he is obviously a bird dog and I get a LOT of leads from him. I don't do anything with the leads, I just see them and delete them. For some reason I haven't added his address to the spam filter but I never read his emails either. Until this morning.

I opened this little charmer:

I have a seller that is trying to sell their house and hard being difficult to work with but this is still a great deal. The house is on Gulf Blvd.  in Bellair yatch club, this house is right ccross the street from the beach. There are houses that have sold on this treet for over 4 million. This house appraised last year for 1.9 million. The seller wants 1,050,000. The seller refuses to pay commission. So please add 3% to purchase price to cover finders fees for he parties involved with this transaction.

"The seller refuses to pay commission." You've just got to love that statement. Maybe if you had a LICENSE you'd be DESERVING of commission because that would mean you've proven yourself at least a little bit to want to FOLLOW THE RULES!?!? JUST ADD 3% TO THE SALES PRICE!??!?!?!

Calming Down Now 

So if you are not a licensed and insured real estate professional you're thinking, "sounds like a good deal to me, I'd take it." You just became part of the problem. More and more we are wanting all purchase transactions to be handled by a licensed and insured professional. We cannot force that transaction but we can prefer it. Why? Read it again, licensed and INSURED professional. 

And the other red flag "appraised last year for 1.9 million" follow by "seller wants 1.05 million." Trust me on this one; if we get a sales transaction for $1.05 million and the appraisal is for $1.9 million we are going to take our time and look at the entire history of that property and everyone involved in the transaction from the seller to the appraiser to the title companies to the buyer. That's called Fraud Detection and Prevention and because of so many soured deals we are having to spend more and more time and more and more money on fraud prevention. 

And people want NO CLOSING COSTS! Ha! (You know what the truth about no closing costs is, don't you? It's a lie. There are closing costs and you are paying for them. Anyone who says otherwise is a liar.) 

Hello? (A) Who did the first appraisal? (B) Why would the seller only want 1.05?

Now, before you start extolling the virtues of real estate investing and finding a good deal be aware of the fact that I have been a real estate investor for many years, have written articles, been interviewed on radio, conducted hundreds of seminars and financed thousands of deals - and have hundreds of successful, happy clients.

And underwriters are criticized for protecting the lender's assets. 

Merry Christmas. I hope you wished for a clue.

Having a discussion with my wife last night as we sat around the fire pit, man's strange endeavor to bring a little of the wild into the city, she posed the question, "Why do you think so many agents and loan officers change jobs all the time at other companies?"

Great question! It probably has a little to do with why owners of other companies the size of ours have a net worth 5 times as great as ours; we reward our employees and associates to the highest level. If you read that as a braggadocios statement I so very humbly apologize. It's not just the financial compensation it's also how we all treat each other. We are, as much as possible, a family.

Every Friday at around noon you can expect a "catered" lunch. It may be catered by Pizza Palace, Chubway or a 4 star restaurant but we're having lunch together. That started over 25 years ago when, as a baby, I inherited management of a small handful of car stereo stores in metropolitan Atlanta.

The trip isn't too far to the answer why I began this practice and that was to keep employees who liked to tip the bottle or twist the weed from disappearing for the remainder of the day on Fridays. Of course that was the '70s and in this day and time employees no longer behave in such a manner (tic).

Another thing we do is to keep fairly open invitations to our home for our employees. They can, when not inconvenient, invite themselves over for a game of pool or darts, a soak in the hot tub or a tan in the gym. It is, after all, a result of their hard work and persistence which allows us to have a home suitable for that type of entertaining.

Then there are the Thursday morning staff meetings. I must admit they are staff meetings I don’t mind attending. Very rarely is there a public chastisement and when there is it usually includes me. After all, I am a part of the team.

The results, to me, are acceptable and are being improved upon by emerging leaders who are taking our attitude to the next level. All of this has a lot to do with why, even though our commission rate doesn’t seem as high as some of those shops where people constantly come and go and the shops themselves appear then disappear, we have some very faithful and highly compensated associates and employees. Our overall numbers are higher when comparing numbers of closing per year with shops 4 and 8 times the size of ours. Could it be that happy associates not only work harder they bring more value to themselves and the company?

I want to treat the people who bring the bread to my table in the same way I would like to be treated. That’s why in meetings private and public I am always direct and to the point. Generally speaking if I am in the process of terminating someone it does not come as a surprise to them (except the one we dismissed for the statement, “I work on commission so I’ll work when I want and how I want.”). Likewise if you are called into my office for a promotion you'll be excited to sit in that chair next to me on your side of the desk because you'll know you're getting good news.

Let me offer a challenge to you whether you are currently a leader or motivated to become a leader; think first then speak. Never challenge anyone to do something you wouldn't do and always find people who can do what you (alone) cannot. Hire slow and fire fast and always be transparent with your team. Never think that having an employee or team member who earns more on their paycheck than you is a problem. I love it when I hand out a paycheck ten or even twenty times the size of mine! It doesn't hurt me one bit and completely energizes the entire office. 

Make the industry a better place to live and we'll all reap the rewards. 

So this goes out to the few bosses I’ve had with the exception of Bill Head, but especially to Sam whatever his last name was, “I told you so.”

Evidently my post from yesterday disappeared between my hitting submit and the post being saved to the server and published - or was it because it contained some news quips on a rather fiery topic ... but that's okay because the CFA (Consumer Federation of America) Executive Director Steve Brobeck is in the news again today. 

Testifying before a subcommittee of the House Financial Services Committee in late July Brobeck railed on the NAR voicing his opinion that the entire real estate industry is run by insiders who don't care that 2.5 million agents make 7 million sales per year. He went on further to call the NAR a "cartel" controlled by "dominent brokers" who are mainly concerned with some $84 per year from around 1.3 million members.

You don't have to know me well to know that I think government regulation is, in most cases, a waste of tax payer's dollars and the demise of fair and acceptible business practices. You also know that I believe all loan officers (anyone who takes an application) should be required to be licensed and educated - by an industry group. Then if another group or watchdog group wants to sue the industry group - have at it!

I'm all about totally free enterprise. Furthermore I believe that educated customers are the best customers therefore I educate. I tell seminar and workshop attendees that people in my business who accept applications in many states are not required to be licensed. I also tell them that the idea that any person can take a 40 hour class and get their license is absurd and the major problem with my particular industry.

I think there is something to Mr. Brobeck's tales but I think the government needs to stay out of business and operate the courts that uphold the laws and let internal industry regulations and watchdog groups take care of business.

Oh - lobbying? I support a powerful lobby but I don't like the lobby system. At all.

You? 

There is a closing attorney with whom we regularly work. They are FANTASTIC at communication and follow up. From time to time at no regular interval I'll receive an email message from them which I'm certain is part of a blast but becaue of the interesting and information content I always read them.  This one I thought I'd share:

Strapless gown? What about a toob top?

Wait - before you start passing analyitcal judgment and consolations of hope overcoming feelings of inadequacy - let me tell you that I am, how should I say it, very convinced of my capabilities and proud of the evidence of my victories. Is that PC enough of an answer?

Today was staff meeting day. I have 3 great awards for performance by staff members. One is a Team Leader and the other two are Mortgage Professionals. (In some companies they would be called Loan Officers but I'm currently, highly dismayed at what passes for a Loan Officer - these are trained, experienced, accredited people who are capable of advising clients with a wealth of information on how to make the decision best for their future, not the LO's checkbook). But I digress.

Yesterday I promoted a young lady from Processor III to Senior Supervising Processor. She does a bang up job. Her files are clean clean clean and she has a great concern for compliance as well as t's i's and pennies. As in she crosses them, dots them, and matches them up. She was a little surprised and flattered. The truth is it's because of people like her that Novation Mortgage is growing when others are cutting back and, more importantly, our rate of return clients and referrals is stellar. It's my entire staff - I owe my continued success to each and every one of them.

When I say that I am inadequate it's an admission from my oh so humble heart that I need good people. For example, if I were to decide to build a house I would immediately start hiring professionals: site planners, architects, permit go getters, etc. It would be absurd for me to assume that I could do everything on the building list to get that house finished in any reasonable amount of time.

Could I do it? Probably. Eventually. Should I? Not.

Real estate agents, appraisers, mortgage folks, stagers, all of you people, I appreciate what you do. I probably don't want to do it myself. I also fully comprehend that you likely don't get the respect and kudos you deserve from your clients. In fact, especially among stagers and agents, you are often replaced by the clients themselves. I said replaced, I didn't say adequately.

Aha! Now you see what I mean. Yes, I can originate loans, quote rates, send RESPA, order the appraisal, insurance and title, stack the loan and submit it to myself to underwrite. I can perform QC and FraudBlock. I can order the closing, draw the docs, submit the fee sheet and approve it. I can wire the funds and get the closed package, stack it and report it. I can even service the loan all by my baby self.

I'd probably do one a month.

Which brings me to my point. I really am inadequate of reaching the lofty goals I have set for myself without the assistance of a great team. 

This may get offensive. If so I do not apologize :)

I, like any other self-respecting business person, make more commission on a higher value deal that on a lesser value deal. So you would think that as a lender/broker I would want the highest loan amount I could possibly squeeze out of an applicant. If you thought that, however, you would be mistaken. (Mistaken also means wrong.)

You would further be inclined to believe that when accepting a loan submission from a broker to be funded through our lending arm that I would also prefer to have the maximum loan amount available for the applicant. This also would be an incorrect assumption - or wrong presumption.

Far more important than these is to have a pleased, viable, return client who is eager to refer their friends to Novation Mortgage. Keeping clients viable is why I spend so much time on AR ... er, I mean doing research and tweaking my publications and seminar material.

What happens becomes somewhat of a dilemna to me even though the customer is always right. (Except of course when they are wrong.) You'll need to know that we are a subprime lender although we broker A Paper deals as well and do quite a number of them. I chose to only be a subprime lender because that is the area of the lending industry wherein you find the most "trouble". I will tell you that I generally make between 2 and 3 points on every subprime deal on the broker side (origination and yield) and on the lender side we get one or two more points depending on how hot the secondary market is and how good the secondary packaging is. I don't do this business as a charity - I do it because it needs to be done and, yes, I like feeding my family. I tried poor and it's really not for me. I also disclose YSP on direct lender loans as well as on brokered loans and teach my clients how to understand and use YSP to their benefit.

You don't like that pricing? You save up your pennies and you be the lender. Those numbers are fair and required to run a reliable business. 

So, I bring a prospect into one of the regularly scheduled workshops which generally includes about a dozen or so other folks. These are 2.5 hour shops done in one of our conference rooms, for no charge, with the intention of "smartening up" prospects and turning them into intelligent borrowers. It doesn't always work out that way.

I spend no less than 15 minutes talking about debt-to income ratios and why, even though subprime allows up to 60% in some cases, it's so important in making the right decision for you. I strongly recommend that you keep your spending under 40% of your gross income. This includes your credit cards, cars, student loans, etc, and your home. THIS MAY MEAN LIVING IN A MODEST HOME. But I can promise you that if you live within your means and employ some very basic wealth management skills it won't be too long until living within your means has much better results than you may have expected.

I think all they hear is "Wealth Management Plan".

One of the hardest things to do is to convince people they really can't afford a purchase when the industry says they qualify. Yes, I know most LO's/brokers/lenders and agents are cool with that. Bigger sales price/loan amount = more commission. I'm not stoopid. The other thing to do is to convince Bobby Blue Collar that he actually does need and deserve a wealth building plan. I bet he'd jump on it if their were no such Robin Hood ripoff as Social Security.

I'm also totally against the absurd idea behind fixed commission pricing. Just thought I'd throw that in.

Let's take a look at how an acquisition transaction can create trouble for the client and everyone depending on the deal to stay liquid into the future. Here, in a flash, is what you hear from a client who has prequalified for a loan when there is no subject property in play and they are about to start shopping (I know, that's a pipe dream. If you're a Loan Officer you probably found out about the deal 3 weeks before the contract closing date): "Look honey! We can get a house worth up to $450,000!"
Here is what the truth is: At 55% DTI they can indeed (but should not) qualify for a rather nastily priced (due to risk) $450,000 loan. This is where I say, "Well, yes, that's what the industry says. What does your plan for creating and maintaining wealth say?" 

Client: "Wealth plan! Are you kidding? We don't have any wealth! We live paycheck to paycheck!"
Me: "Right. I see that. (And I see why you never will unless it's an accident.)"
Client: "We can spend that much and our equity will build faster because it's a more valuable home - like you said in the workshop."
Me: "I did say that. I also said that if you leave yourself with no disposable income, which is what a payment on a $450,000 loan would do, it could completely devastate your wealth plan and financial well-being with even the slightest bump in the road."
Client: "What about one of those Payment Option ARMs you talked about in the seminar. You know, the one with the low minimum monthly payment?"
Me: "You mean the one I recommend for people who actually have equity in their home, are investment savvy, don't need that loan just to be able to afford the home and don't live paycheck to paycheck?"
Client: "Yes, that one! How much would our payments be on that loan?"
Me: [What I really want to say, "Are you STOOPID? Do you know how many months it will be before I send the sheriff to your house to deliver foreclosure papers? I know if we COULD do that, which we CAN'T because you have NO DOWN PAYMENT, you would go out and buy a new Lexus for her and Harley for yourself with the difference between the full payment and the minimum payment!"]
Me: "Actually, Mr. Client, you would need a little down payment to create equity in the property so that we could qualify you for the better POA solution. If you want the 100% POA solution it is available but I recommend you not even think about it in your current situation. Let's get back to the plan you and I developed during the workshop and get you started moving up through the ranks by purchasing the correct home for your wealth plan. Okay?"
Client: "That's okay. I've been talking to another lender. I'll just go through them."

Okay - so that's an almost imaginary event but it's very similar to more than one encounter. I think it is important to all of us, prospective clients included, to realize that the problem is not that these loan solutions are available but that MAY doesn't mean MUST and CAN doesn't mean SHOULD.

The mortgage industry is constantly slammed because of the increased number of foreclosures due mostly to high priced non-prime mortgages. And, the industry to a great deal is guilty: Guilty of providing what the public demands but is generally too unreliable financially to handle. Out of over 2200 loans I've seen 5 foreclosures. Is that because I'm something so great? Something above others? NO! It's because I educate my clients and never stretch the limits of reality. The two first payment defaults we had were totally explainable although not acceptible. One man literally lost his job within days of the closing - though he had the reserves he chose not to pay his new house payment (risk), and the other man owned several rental properties that almost all suddenly developed costly repair needs or vacancies. Again, he had the reserves he just chose to put them to work somewhere other than paying us back.

If you are a BUYER (homeowner or investor) I will teach you how to shop for and acquire the best mortgage for you and how to develope and maintain a wealth building plan (yes, you need one) for NO COST TO YOU and NO OBLIGATION to do business with me.

If you are a REAL ESTATE AGENT  I will teach you how to talk to your clients for NO COST TO YOU and NO OBLIGATION to do business with me.

If you are a MORTGAGE BROKER or LOAN OFFICER I will teach you how to talk to your clients for NO COST TO YOU and NO OBLIGATION to do business with me.

We're currently in the final stages of creating a powerful online education tool for just this purpose. I hold regular webinar/teleconferences at quite an expense to me. You can email me through AR at anytime and you have my office number 678-946-0100 (where you WILL have to leave a message because I get at least 100 phone calls a day - so you'll have to wait for a return call also).

I want everyone to respect my industry because it earns respect. I want every buyer to enjoy their home and manage their risk and exposure so they can add to society through personal gain. I want every real estate and mortgage professional to know that integrity is the foundation of honor and the lack of it is no foundation at all. 

Set a bookmark for http://www.reiuniversity.net - we're still working on it but it's worth bookmarking now: