Jeff Rickard

In the spirit of Denver Real Estate and what is great in a community, here is my first restaurant post. Virgilio’s is a great little pizza place located in Lakewood next to a King Soopers. Besides pizza their other Italian food is also tasty; garlic knots, pinwheels and baked ziti with meatballs are my favorites. Debra and I were taken to Virgilio’s by Mark and Gayle Eskanos, a top Realtor team from Metro Brokers. They both love food and have a knack for finding “joints” with amazing fare. Oh, by the way make sure you get a Moretti beer at Virgilio’s, they come in a frosted glass. For a complete review of Virgilio’s check out John Lehndorff from the Rocky Mountain News.

Sometimes, the best intentions ……… BACKFIRE!

Many of my clients have had to endure much unfounded stress because of misinformation about reverse mortgages. This bad information can prevent seniors, whose financial problems could be solved by obtaining a reverse mortgage, from learning more about them. In this article I am taking the opportunity to clear up some of the misconceptions I have often heard.

• At the end of the loan, the lender gets the property.

REALITY: The borrower always retains title and ownership of the property.

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Beginning in September we are going to see some fairly significant changes in credit scoring with the release of the FICO 08 scoring model. While Fair Isaac regularly “tweaks” its models to coincide with consumer behavior and economic activity, two of the changes we will see with the new scoring model are the most dramatic changes since the 1980’s. Approximately 60-75 million consumers will be affected by these changes. Continue Reading »

It is a goal of www.5280mortgageguide.com to pass on as much valuable information as possible. To do that I have always had a goal of having many guest contributors that can talk as an expert in their field. You will begin to see more content coming from guests and I want you to be aware that I have great respect for these individuals and am confident that you will find their information valuable. Please check under About Us to see a biography on our guests.

Jeff has asked, and I’ve agreed, that I contribute to his blog and provide a technical voice to an already wonderful and informative site. I’ve decide that I would start with a couple of the questions I get a lot and then see where the muse takes us. So, without further adieu…

One of the most common questions I get asked these days is: What is a Blog?
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It is in your best interest as a Realtor to begin to schedule closings in the afternoon, especially at the end of the month. There is a new player that is taking their time in reviewing the loan before releasing funds. That new player also does not recognize the urgency that we as mortgage people or Realtors sometimes put on a closing. At this point due diligence and caution are the industries priority.

With all the turmoil in the mortgage world we are seeing changes and increased involvement in all aspects of the business. This increased involvement by previously transparent players will slow down the process of closing a loan, at least for the time being. As a Realtor or client, what was once invisible to you will now have an effect on how you do business. One of these transparent players that are under a lot of pressure lately are warehouse banks.

What are warehouse banks? All mortgage companies that are closing loans ultimately are getting their money from the financial markets by packaging loans and selling them on the secondary market. But before a loan finds its way to Wall Street the loan is parked at an interim bank on a line of credit. The interim bank is the warehouse bank. Using their line of credit mortgage companies will close loans in their own name everyday until they can deliver them to the secondary market. When a mortgage company closes a loan today it may sit on a warehouse line for a few weeks while waiting to be transferred to an investor. This goes on every day; money flows out and then flows back into the warehouse bank. No matter the size of the mortgage company they rely on short term credit until they can deliver their loans to Wall Street.

So, what’s the problem? With the liquidity in the secondary market drying up and loan programs changing at a moments notice, warehouse banks are getting stuck with loans that can now not be sold. That is a very big problem for warehouse banks, a problem that is really unprecedented.

How are they reacting? By becoming involved in the loan process, by analyzing the products sold to a borrower and by wanting multiple places of delivery for loan products. What this means is that people who were not really involved in the day to day business of originating a loan are now analyzing all transactions. New procedures that have never been part of the business model are now in effect. Niche products that have only one purchaser on the secondary market are being scrutinized.

Eventually we will get a handle on the new processes but until then be aware.

The new Colorado laws that I discussed on September 1, 2007 have spawned the first of many new disclosures to come. The Colorado Tangible Net Benefit Disclosure states that it is the duty of the mortgage broker not to recommend or induce a borrower to enter into a transaction that does not have a reasonable, tangible net benefit to the borrower. All in all this is a pretty good form, it is worth a read.

The question I have is does this really protect the consumer from the mess we are in now?

The new loan will enable me to buy a home. How many people did we put in homes that really should have waited?

The proceeds of the new loan will be used for purposes that are of such importance to me that I am willing to obtain a new loan, even if that loan has terms that may not be as favorable as my existing loan. Examples include, but are not limited to: medical expenses; home improvements; avoid foreclosure; or to pay educational expenses. How about going to The Leadbetter golf academy? Of course that would be under home improvement.

You would think that the spirit of this form or the spirit of the law that created this form would keep you from going from a fixed loan to a negative amortization loan so I could get cash out to do something stupid. But the truth is if you check the appropriate boxes you can do just that.

The motivation of this post was a question asked to me by a borrower and their Realtor on Friday. Why didn’t the loan guy I was dealing with know about the option you offered me?

There appears to me to be a silver lining in all the turmoil we are seeing in the mortgage business. The reappearance of knowledge as a value. Knowledge has not really been needed in the mortgage world for several years now. If you could fog a mirror we could get you a loan, well maybe not me, but someone would do “whatever” it took to get you a loan. I do want you to know I will do “whatever” it takes to get you a loan too, except commit fraud. Unfortunately that little caveat did cost me business.

The mortgage industry not only lowered the bar for the borrower but we also lowered the bar for the loan officer. Anyone who wanted to be a loan officer or even own their own mortgage company could do so in a day, especially in Colorado where there was no real regulation until a couple months ago. These loan officers, mortgage brokers, etc. did not need any knowledge to be in the industry, if they had potential borrowers and wholesale representatives or experienced processors, they were in business.

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With higher risk loan types known as C, B, and Alt-A gone or going the old standard is back in style; FHA. The interesting part of this is that if you are a loan officer or a realtor who as come into the business in the last five years you may have never done or been involved with an FHA loan.

A loan product that had a lion’s share of the business several years ago almost disappeared for the last five years. So why is it back? There are many reasons, here are the top 7:

1. It is a non FICO score driven program, so lower scores still have a hope of getting financing. A solid credit explanation letter can help an underwriter understand a credit glitch.
2. Non-occupant co-borrower is allowed. Mom and Dad, or other family members, can co-sign on your loan if you are short of qualifying income.
3. 100% of the down-payment, closing costs and pre-paids can be a gift.
4. If you qualify for down payment assistance from approved sources you can get 100% financing.
5. If you are buying a home that needs work you can do an FHA 203(k) loan and finance the purchase and repairs in one loan.
6. You get a loan that is traditionally much more conservative than C,B or Alt-A loans and there is no prepayment penalties.

7. If you lack credit history, even no FICO scores, we can use non-traditional sources of credit to qualify.

FHA is a great option and maybe the only option for awhile, so take the time to find an FHA approved lender.

What is happening in the mortgage business these days as a result of the rising foreclosure rates and the increase in Colorado’s fraudulent loan rankings?

The answer is “a whole lot”! On Friday June 1^st, 2007 multiple House and Senate bills were signed into law by the Governor. These bills are an attempt to make sure that the consumer is protected and fully educated to the loans that they are acquiring. They are also making an effort to rein in aggressive and often abused loan qualification guidelines, as well as, mortgage brokers who are not considering the buyers “true” ability to qualify for a loan.

Many months ago a bill was passed that required all mortgage brokers to be registered with the Division of Real Estate, this bill did have an exception to the rule that allowed employees of FHA lenders and correspondents to be exempt from the process. That has now changed, that exemption has been removed. So all loan officers are now going through the process of registration. That includes fingerprinting, background checks and posting a $25,000 bond. Loan officers from national bank firms are still exempt from that process. Continue Reading »