Georgia FHA Home Loans - (& Opinion)

I have a rule of thumb: avoid any process that involves a loop hole in regulatory matters.

There are three things happening today in the wide open that I predict will be completely eliminated with or without federal prosecution of violators in the near public. In the mean time just because everyone else is doing it doesn't tempt me in the slightest. Surely some who read this will be either supplier or consumer of these services and I have no intention of personally offending you if you do. I do, however, call these practices into question and lobby for their cessation. They each are ethics violations from the get-go. And yes, thank you, I am qualified to be the ethics police.

Negative Number 1 - Approved FHA Lenders Paying Unapproved Brokers for "Referrals"

True, you can pay a broker who is licensed in the state where the property is located, an origination fee. However, there is a reason FHA wants their originators to be approved - and yes, they DO want their originators to be approved regardless of what that lender told you. My guess on this one is that it will end with one big bang and a fizzle. Chances are nobody will be hugely fined ... but they may. Currently I know of at least 5 mid-sized pass-through lenders using this tactic. One says, "Oh we have HUD's stamp of approval." That's not HUD's statement. HUD's statement is, "yes, we are aware of this and there are some loopholes that will be closed soon." Why would it be okay since it is fairly difficult to get approved with HUD to accept a loan application from an unapproved party - ever? The REASON there is an approval process is to make sure the ORIGINATOR is held accountable for what they say and do.

Negative Number 2 - You Only Pay For Leads on Loans That Close

This one I know for a fact will end up with fines, loss of license and criminal prosecution. It is a direct violation of RESPA and anyone who says it isn't doesn't know RESPA. Yes, I know what you do, there are a couple of ways to do it and neither one are ethical. So you create a "marketing account" and you get all the lead you want for free. However, when one lead closes then you deduct $200 or $350 (whatever the negotiated rate) from the marketing account but it's not tied to one specific closing. WRONG! It is very tied to one specific closing and you even indicate it in your emails and marketing material. You and the lead buyer will eventually meet the reaper on this one.

Negative Number 3 - Referral Rewards Paid Through Marketing Company

Someone very dear to me phoned the other day and said she wanted to check out an opportunity she had been approached with. It's a new type of title company that will allow the mortgage broker, who is also a partner with the company, to order and manipulate title on line. According to the people behind it this is new and no-one else does it - they indicated during her "interview". First they are not correct, there are other title companies already doing this and have been for some time. But they have a magic way of rewarding the loan officer for using there services that they say doesn't violat RESPA. They have a marketing company and that marketing company will pay the loan officer $100 directly for every referral. My advice to her? Act like you are walking on a thread across the top of a volcano because that one will not hold up in court.

Now, to those of you reading this and steaming out of your ears let me relate a little history to you. I have long taught real estate investors and consulted lenders in the methods of real estate investing and the use of the "subject-to" acquisition of a property. I have had heated exchanges of information with so-called (self-labeled) gurus who cite the Garn-St. Germain Act as a protective shield agains the lender accelerating the debt on a Quit Claimed property. I use this example just to say, "I'm always right when I type or talk." Here, from the supreme court, is the final word on Quit Claimed properties and the acceleration of the debt:

The right to cure a pre-petition mortgage pursuant to § 1322(b) does not grant a debtor rights which the debtor did not have pre-petition. The Garn-St. Germain Act’s prohibition of enforcement of a due-on-sale clause does not operate as a means to modify the rights of a creditor with respect to a debtor who was not a party to the mortgage. The Supreme Court’s holding in Johnson should not be extended to third parties attempting to cure mortgage defaults. Thus, § 1322 cannot be implemented to cure defaults of a mortgage to which the debtor was not a party. Therefore, cause exists to modify the automatic stay. Source: http://www.ilnb.uscourts.gov/opinions/JudgeBarbosa/Henderson.pdf

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE. 

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Challenge: let's list every industry whose participants are required to fully disclose all of their profits PRIOR TO or AT the time of the sale directly to the client ...

1. Mortgage Brokers
2.

Well, I just can't seem to think of any others. Here is a list to choose from - see which of these can be added to the list above:

1. Dentists
2. Doctors
3. Lawyers
4. Auto Dealers
5. Airlines
6. Movie Theatres
7. Banks
8. Home Builders
9. Clothing Retailers
10. Restaurants
11. Phone Companies
12. Computer Retailers
13. Sears, Macy's, Belks, etc.

I really get sick of the YSP bashing. Here are some YSP/Mortgage Broker facts:

1. YSP does NOT increase the interest rate the borrower qualifies for. YSP is added to the WHOLESALE rate which the borrower does NOT qualify for. Compare rates to rates and closing costs to closing costs and you'll see that mortgage brokers are on the average with the bank and direct lenders.
2. Banks and direct lenders make MORE PROFIT per loan than brokers. It costs nearly $2800 to originate a loan and that cost is absorbed by the broker.
3. Banks are foolish for wanting to shut down brokers because of the two preceeding facts. The men and women who ran the banking industry in the 70's and 80's when brokering became popular had experienced banking BEFORE brokers as had the general public. The little peewees running the banking industry today have no idea what the industry was like BEFORE brokers and think they will end up capturing some huge profits ... boy are they dumb.
4. Mortgage Brokers can only submit the loan to the final investor for consideration. Yes, there are scumballs in the mortgage industry but the banking industry is loaded with them. Mortgage Brokers do not create loans - they only match their applicants with what is made available by the banks and lenders.
5. Brokers work FOR THE BORROWER - not the bank and not the seller. This is one reason some big bankers are lobbying so hard and spending millions of dollars to eliminate mortgage brokers..
6. ONLY mortgage brokers are required by federal law to fully disclose all of their profits directly to the borrower at or before the time of the "sale" (closing).

I am available for public comment. 678-946-0100

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

It has just been a short while since Nehemiah, the not-for-profit corporation who has long helped families and single borrowers get into a home using FHA and their 3% down payment assistance. According to FHA chief, Brian Montgomery, said, "In these transactions, home sellers - or any entity that would profit from a sale - give 10% or 20% of the sale price to buyers, who can then use that cash as a down payment."

10%? 20%? Wow - we never did one over 3%

So what do you think? Should programs such as Nehemiah, be allowed to continue? If allowed to continue should they be capped at 3% or some other number?

In case you are not familiar with DPA like Nehemiah they essentially raise the sales price by 3% and use that amount as a down payment on the property which is simply refinanced into the loan. It's not a grant like some people call it - it's a loan and the buyer repays it.

What are your thoughts?

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Sound tempting?

Let me give you some advice: If commercials like that excite you chances are you're a big old sucker fish with a number #0 hook through your lip and you're being reeled toward the surface. There are at least countless millions, if not billions, wasted every year given to fast talking, slick motivators who literally are stealing money from investors who could have used that money (as much as $20,000 to $50,000 to enter these "as seen on TV programs) to start a very successful investment career.

Kind of funny, isn't it, how these people say you can do this "without one penny of your own money" yet they charge from $2000 to $5000 just to attend a weekend boot camp and then sell you more things just because you really need to know these other $20,000 worth of tools and strategies to make it? Well, it is funny and they are laughing all the way to the bank.

REAL ESTATE INVESTING IS NOT A GET RICH QUICK SCHEME

Can it happen? Rarely, VERY rarely. Especially in today's market. This is probably the best buy and hold market of your lifetime. I haven't seen an opportunity like this since the late 1960's and interest rates are lower today than they were back then! In fact, today you can buy an investment property at rates and down payment amounts that it took to buy a primary residence back then, rates are even lower!

THERE ARE MORE SCAMS TODAY THAN I EVER REMEMBER!

Everything is advertised everywhere today from "Become A Certified Loss Mitigator" to "Flip To Get Rich Quick" (those phrases are used generically and not intended to indicate any particular individual or company of scumball scam artists). Wrap around mortgages are now openly despised by Fannie Mae and, in fact, FNMA has given lenders an ultimated to initiate acceleration on properties which have been transferred subject-to without a new mortgage. Even on the ones that are not being foreclosed when the subject-to owner goes to refinance the loan they can't do so using FNMA money -the refinance MUST be done by the person who's name was originally on title when FNMA made the loan to purchase the home.

CAN YOU GET WEALTHY IN REAL ESTATE?

MASSIVELY! And now, while properties are at a very low price and a huge number available, is the time to start building your investment empire. Financing IS available to real estate investors and the rates are reasonable. You can even hold properties in your IRA!

Don't get me wrong, there are flips happening today (one of the Flip stars happens to be a client of mine and let me just say Flip is a television show made for entertainment and you really need to look at his website and see that the houses that supposedly flipped are still flopping around on his website). We all know the Sam Leccima show was full of lies - you think the other ones aren't?

DON'T GET CAUGHT UP IN THE EMOTION

Emotion is your biggest enemy in real estate investing. The time to get excited is when the deal is done and your plan has succeeded! What's that? You don't have a plan? Don't laugh - most don't. And of those who do most don't have it written down. Write down your plan and your model. Write down WHAT you want to do (your model) and HOW you want to do it (your plan). Then get with an industry professional who isn't charging you to look at your plan and see if it makes sense. There are great people all over this Active Rain website who can help you.

Get with a MORTGAGE PROFESSIONAL who has done at least 20 investment deals in the last 6 months and find out what they have available to you AFTER you give them ALL of your information. If they are like me they won't work with you if you're trying to "work the system". You be 100% honest with them and they can help you. Companies like my NOVATION MORTGAGE are much more than just a mortgage company they are real estate investor support systems offering training, support, analysis, consultation, and finally the mortgage (and that's the only way we get paid - the rest is timely, accurate and no extra charge!)

Get with a LICENSED REAL ESTATE PROFESSIONAL who has been in the industry in that particular market area and understands you don't want paint, carpet and azaleas, you want rust, leaks and mud puddles and you want them below market value. Seriously, there are agents who simply cannot conceive what you are trying to do. Ask around town with other investors or your loan officer. DON'T TAKE MORTGAGE ADVICE FROM YOUR AGENT (sorry friends) because there is NO WAY they can keep up with all the changes like a loan professional who is in the industry and on the job FULL TIME.

By the way, there are part-time loan officers - RUN! FLEE! GET AWAY! Work only with legitimate loan officers from legitimate companies who actually have an office and history of performance. In Georgia you can look them up on the Department of Banking and Finance website.

This could go on and on but I'll stop it here. If you have any questions you can always email me through this system. Don't email me with opportunities or MLM's or a chance to be a part of the biggest boom in mortgage payoffs in history (Money Merge) because I will report you to SpamCop. Sorry - I had to add that - I have been inundated with that one opportunity through Active Rain lately. I'll write my article on that soon enough - another HUGE waste of money for most of you.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE. 

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

I alluded to this several weeks ago (sorry for my absence I was quite sick for nearly 3 months) and now the time has come. The Mortgage Insurers are broke and have to fix it. This is nationwide regardless of the strength of your market area. According to most Mortgage Insurers the entire nation is in a declining market. What a great time to be a real estate investor!

General Specifications:

As previously notified, after today you will no longer be able to obtain commitments for mortgage insurance on loans with LTVs greater than 97%. Therefore, the following 100% LTV programs will be discontinued:

· FNMA Flex 100
· FNMA MyCommunityMortgage
· FNMA MyCommunityMortgage Community Solutions
· FNMA HomeZown
· Freddie Mac 100
· Freddie Mac Home Possible
· Freddie Mac Home Possible Neighborhood Solutions.

Please note that programs and mortgage insurance are still available for loans with LTVs up to 97% for qualified borrowers and properties.

This is not forthcoming - it is here NOW.