Georgia FHA Home Loans - (& Opinion)

Since it happened again this week - twice - I thought I would review it for AR and others. If you plan on refinancing a property at a value higher than 80% or if you are still a self-employed stated income borrower (thank God we still have those in Georgia and Florida) it is advisable that you neither title your property in an LLC nor list the property for sale. Either of these actions could, and probably will, start a clock ticking that will need to tick down for 90 days.

It is true that only a few short months ago one could, if qualified, obtain a 100% of the appraised value cash out refinance on an investment property with stated income. This is no longer the case. Current conforming guidelines require the borrower to be able to fully document their income and assets and will allow up to 80% cash out refinance of the appraised value but generally on an occupied property (renter occupied investment) where the new mortgage payment does not increase the debt to income ratio above the required maximum.

As for limited liability company holdings of properties you'll have a title seasoning issue in most cases with conforming residential investment loans. For commercial properties with commercial mortgages this is not a problem. There were, once upon a time, lenders who offered financing through conventional streams to LLC's but those days are all but gone. 

As a general rule most lenders will want to see the property not listed in the last 90 days for listed properties and borrower only on title for the last 90 to 365 days depending on the lender. I know why you think you put properties into an LLC but I do ask you to examine the wisdom of that based on your investment model - not anyone else's. There are too many gurus teaching too many things that are not globally reasonable in every circumstance. Also, if you think you are getting asset protection by utilizing an LLC on a short term hold you really need to ask a different attorney about the level of protection you are actually getting and how an umbrella policy can help you. 

has decided that I am ignorant. All I am doing is waiting for him to prove it. As a typical left-wing driveler he has proclaimed my ignorance and, of course, if any of you disagree he has other labels for you. So Andrew the RE/MAX agent, prove me ignorant. Based on the statements I made here or anywhere else prove me ignorant.

Andrew is a symbol of misguidance. His offense at me is that I took offense at Barrack Obama's ignorant statements about mortgage brokers which fall in line with Barney Frank and Hillary Clinton who truly believe mortgage brokers have this amazing power to create loans.

Andy, since at least five people will read this post let's see your evidence of me being ignorant. 

As a buyer/investor the CNN crew has done you a tremendous favor where value is concerned. Now is likely one of the best times to find a legitimate deal in almost any market in the nation and here are a few powerful reasons for you to get your rump off the hump, put your feet in the street and make an offer TODAY.

1) There are thousands of stable markets all across the nation. Even in declining markets there are pockets untouched and are still demonstrating equity growth. These areas already have proven they are market resilient and worthy of investment grade purchases even for a primary residence.

2) Investment wealth is kind of like energy - if one body loses energy it is free to be utilized by other bodies. Likewise when one person loses on an investment or home, regardless of how sad that loss is, there is equity or some other potential left on the table for another buyer.

3) Interest rates are still phenomenally low. Even some of the ARM's that have already adjusted still have interest rates below what they were just 8 years ago.

4) There are plenty of properties that have been on the market for months and months. Sellers may have to come to closing with money just to sell them. A builder client of mine recently bought $70,000 to the table just to pay off the construction loan so he could sell a property $180,000 below the original listing price. 12 months ago someone may have paid the full $680,000 for the house but instead someone got it for $500,000

Novation Mortgage is a direct lender with FHA Licensing in Georgia, Florida and Alaska and is a nationwide commercial lender. See website for licensing details.

I have shouted for years about the fraud of cash back at closing on purchase and huge third party payouts to "bird dogs", "locators" and "consultants". Finally, INTERTHINX, a fraud detection and deterrence investigations company I am glad to call "my friend".

You may have read my exchange with a certain real estate agent from Corpus Christi last year. He was rude, absurd and threatened me. I sent him my home address, my home phone number, a picture of my house and a Google Map to my driveway. That was June 2006 - I'm still waiting Carlos!

Anyway, I digress.

Here is what I have always said, "It is defrauding the LENDER to have the LENDER pay for the acquisition of a property and have the FUNDS FROM THE LENDER disbursed to any third party who is not licensed for any reason at any time. It is also fraud to disburse ANY of the funds from the proceeds of the loan TO THE BUYER. This can only be a result of an overstated SALES PRICE."

Finally INTERTHINX is with me.

The second part of today's memo was just as exciting but will not be opened for discussion, at least not by me, so the perpetrators of this second type of fraud won't know we're onto them.

IF YOU ARE THINKING OF COMMITTING MORTGAGE FRAUD

We are neither ignorant, stupid nor too busy to find you and prosecute you.

Love,
Dad

It usually isn't. Instant or equity. Once upon a time in a village near you there was a great and wealthy king. The king would build many homes and the people loved the king so they would quickly buy his new homes and sell their old ones for more than they owed on them. All the while the evil sorcerer lurked around whispering bad news on the cable news networks about how the wealthy king and the generous money makers were taking advantage of the little people.

One day while the good king and the generous money makers were asleep on their jobs the evil sorcerer sent his minions and dragons to chase away all the little people who had found pleasure in selling their savings to the money makers so suddenly the money makers had no more money to lend to the other little people to allow them to buy the homes from the great and wise king.

Instant Equity

It did exist, for a while. Now here is a sad truth in many cases - there is no such thing. Sometimes it's just not instant. Other times it's just not equity.

Equity has no value until it is converted to capital except on paper and their it is dubious at best. Until that equity has been converted to cash through the sale of the property or the leveraging of the value with a financial institution it's kind of like an imaginary friend. The owner gets joy out of it but it's worthless to everyone else.

In many markets today the reason a property is available "below market" is because the market has declined - not because the property still has the same value it did 2 years ago.

In cases where there really is equitable value it may not be instantly convertible - making it not really instant equity. Most lenders today are highly scrutinizing of the two things it would take to convert the equity: a no-seasoning cash out refinance or, for the next buyer, a value increase between the purchase and sale with no marked improvements to the property.

Don't jump all over me - I am fully aware there are workarounds and programs available. What I am drawing attention to is the higher likelihood that equity probably will not be instantly convertible to cash. In other words FLIPPING ain't HOPPING like it used to. It's not dead and it can still be done in certain areas with the right buy and the right management of the asset.

Warning to New Investors

You came a little too late, or early, to the game to flip in most market areas. The biggest challenge you may face will be your sales price and getting the lender for the buyer to pay it. Price increase from purchase to sales will be scrutinized. In other words if you buy it for $250,000 and put it on the market the next week for $400,000 the lender is going to be suspicious even if the buyer is making an equity investment of 20%.

Additionally, if you are buyer a "builder closeout" or a property in an area with declining values you are really going to have a challenge converting your equity through refinance or sales.

All of the above are reasons to work with a reputable agent like most Active Rainers and a reputable lender like Novation Mortgage. Novation will even look at the value based on lender resources with you before you make the offer.  

Keep the cold out, keep the heat in. The older the home the greater the battle and the more dangerous it can be. None of us want that cold breeze flowing in through closed windows and doors. We don't want the cold air and we do not want the increased utility bills. 

There is another side of that coin. We also don't want to be dead from carbon monoxide poisoning.

There are CO gas detectors. I have three in the big house and have them in my rental properties. These need to be checked and maintained per the instructions included with your unit.

IF YOU KNOW AN ELDERLY OR DISABLED PERSON do a great act of charity and go check their home. You can purchase a hand-held CO detector of a little higher quality and with more bells and whistles than just the alarms. The hand held meter can be had for under $200 and with that one investment you may be able to save many lives. Even if they are not threatened with death the poisoning can be pretty painful.

There are many people who cannot, because of health, age or finances, afford to winterize their home. I can winterize most of my rental space for under $50 per unit - not bad. I also install a CO alarm - not because there is any requirement but because it's the right thing to do. 

From The Sub-chapter:
"Let Me Listen To You" And Other Things You Can Say To Learn 'Stuff'

Likely it is that everyone reading this has been to at least one motivational speech or read at least one motivational book. One or two of you may have heard me speak. Bless you, the effects will were off eventually. Sales training and motivational sales workshops can yield great nuggets of power. It is those nuggets that we hold on to and use for the foundation for the formulation of our own approach. Here are a few of mine:

1. Sometimes when I have asked my first 5 Key Questions and there are still blanks I need filled in I will simply ask, "Why don't you talk for a minute and let me quietly listen to you?" You will be amazed at what people will tell you in answers to questions you would have never asked which may be very crucial to finding their motivation. I use this method frequently and generally when they finish, whether it takes 2 minutes or 10, I know something I would never have discovered through my normal interview.

2. Some prospects will come to you with their guard up and at times even their weapons out. Once you become a master of determining whether the fear causing this is from past experience, fear of the unknown, fear of not being in control, or fear of fear you will better know how to serve your prospect. I have found, among a few, a statement in the form of a command that opens the flood gates. I learned it from Mr. Green who operated Green's Five and Dime in my little town. This one simple statement can help disarm the prospect, calm their fears and expose their motivation and that statement is, "I've heard what you have said and I appreciate it. Please tell me exactly what it is you want me to make happen for you."

3. Sometimes we all forget we're not the only boat in the river. Many clients may already have had recent contact with someone else in our field. Some may be shopping, others may have been disappointed in the performance of someone before us. Many times I will ask this question early in the interview process and often just after the 5 Key Questions. This is one of those questions you need to practice and the reason you need to practice is so you will ask it then hush. "What have you done on your own to achieve your goal to this point?"

4. Have you ever tried and tried to discover the prospect's negative triggers? Why not try this simple method: tell them to tell you. How novel, right? "Tell me what you do not want me to do for you." Now this one takes a little practice because they will often ask, "What do you mean?" One possible guidance statement you can offer is, "Tell me you do not want me to call you every time I have an opportunity for you." Of course if they say, "I do not want you to call me every time you have an opportunity for me", you should respond, "Okay, how often would you like me to notify you when I have an opportunity for you?"

5. This one may be difficult for many readers especially those of you who have a very slick This Is What I Do presentation. This one also is not necessarily best for every situation but it is a good closer when your prospect is hesitant to become your client. "How can I earn your commitment to my services?" Once they answer and you know you can deliver it is pretty easy to extend your hand and say, "Thank you very much. I will do my best to fulfill all of your needs in a timely manner." 

I told Broker Bryant and Renee Burrows I am going to try and always be nice and supportive and a motivator so I'm going to be at least one of those three right now. Every day I get spam from someone in the industry telling me how they are leaving the industry (real estate/mortgage) and have found this great new opportunity. Here is where I am supportive, encouraging and motivating:

GET OUT NOW - please don't suffer through another day

All of you who can't get over how bad the industry is, get out. You act like this is the first time the industry ever cycled through a purge. It's the same creature with a few different features as we've seen at least 3 major cycles in the last 30 years. There is always a different root cause but it always turns out the same - excessive inventory, inflated prices, too many hands in the pie, then the government wants to over-regulate. So seriously, if your pay is diminished and you see no light do yourself a great big favor and get out of the business.

One reason I want you to get out is because fear doesn't help anyone. It doesn't help you, it doesn't help your clients and it generally drives the words you use which can be further damaging to the industry.

Another reason I want you to get out is because there are people who are still excited and motivated and who are taking care of business like never before. These people are stepping up to the plate and facing the fast balls and getting base hits - all of which are good for the industry.

One of the most important reasons I want you to get out is because with fear and negativity as your motivation stealer you may be more likely to facilitate fraud. You may be more likely as an agent to find a way to give the lender's money to the buyer at the closing (cash back is mortgage fraud and I don't care who says differently). As a loan officer you may be more likely to overstate income where it is still allowed or to falsify documentation.

So, as a preserving move for my industry please - go get a job somewhere else, doing something else, and leave the motivated professionals to the work of turning the industry around. 

Numbers often vary from source to source and are often hard to track. Entering 2008 it pays to have both eyes open and a head full of knowledge. So here for your enjoyment are the results of some very quick research in raw data overview format:

There are 56,290 homes listed in Atlanta with a median price of $204,990 which is down 1.4% in the last month.

Data from http://www.housingtracker.net - Chart by Ken Cook (I do not account for the spike and drop - they were in the data)

Fulton County has one of every 76 homes in foreclosure, DeKalb, one in 92; Gwinnett, one in 133; Cobb, one in 175 (Atlanta Business Chronicle citing RealtyTrac - notably not my most relied upon source).

According to MetroBrokers/GMAC there are 106,011 homes available today (that's nearly double the amount provided by housingtracker.net) 

Right on the top of the list in my home state of Georgia is the Newnan/Lagrange area. With the construction of a new Kia plant in West Point, Georgia over 5,000 new jobs will be added to the area as a direct result of the opening of the plant. The plant will begin test runs in mid-2008 and reach the full production of tens of thousands of vehicles by 2009. The plant will employ about 2,800 and five shops creating the parts needed for the factory, also in the complex, will employ an addition 2,600.

These people will need doctors, clothing, electronics, food, and - of course - housing.

That's my first pick for real estate investment but not necessarily the BEST. I am open to your pitches about your market.