Commercial Finance- The Mortgage Meltdown

This has impacted non-bank lenders such as private commercial finance companies that provide hard money real estate loans, purchase order financing and accounts receivable financing. Most of these firms have raised their prices and their origination standards for safety and soundness of operations.

The bottom line: Bank lending can be replaced by other sources such as commercial finance companies to some degree. Hard money, purchase order financing and accounts receivable financing will help some businesses grow during these difficult times. But for the average borrower, businessman, or business owner these are difficult economic times, caused by the mortgage meltdown, which are here to stay for several years.

Copyright © 2008 Gregg Financial Services

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Problematic Issues With Your Mortgage? Don't Shelter Yourself

It's fair to say that many a homeowner at one time or another was unable to make their mortgage payment in full or on time. Financial happenstances occur and they're quite random in nature. Thus, it's almost unpredictable to foresee bumps in the road when it comes time to make those monthly mortgage payments; anything and everything can halt an individual from making their payments.. And it's not as if homeowners who are unable t o pay their mortgages are irresponsible, it's just a matter of poor financial luck.

If you are one of these unlucky individuals you should take note that not all is lost and that there is indeed hope. It's easy to shelter yourself in your home and avoid resolving such an issue with lenders or mortgage servicers, so don't get overwhelmed.

Communicate and Open Your Door, Let Assistance Walk In

Even in the worst case scenario where a mortgage problem may seem unconquerable and too overwhelming - where at end result an eventual foreclosure could occur - know that help is literally at your front door step waiting to speak with you. Simply by talking to your lender or mortgage servicer can do wonders for your dreary situation. By speaking with these individuals you will be able to ascertain and lay out a few alternatives to avoid going through a foreclosure, one of which these mortgage lenders refer to as 'workout programs.'

As the name 'workout program' implies, their purpose is to work out your mortgage problems, and better still, hash issues out while working in tandem with you to resolve the troubles at hand. What's done here could involve a number of things; a temporary suspension of payments, overall structural alterations to make debt for more payable or an actual transfer of the property deed into the lender's hands in place of a standard foreclosure.

Be Willing To Communicate To Benefit, Or Else Suffer

What's key to making the aforementioned workout programs actually begin and work well is to open lines of communication between yourself, as a borrower, and your lenders or mortgage servicers. If communication is only one way, with lenders taking initiative, and you don't contact your lenders back to become more informed of what can be done to better your mortgage payment position you will be isolating yourself from improving your current situation. If communication is initially one-sided and remains so, both the borrower and lender will suffer. The borrower will end up awaiting their eviction notice or foreclosure announcement and the lender will also suffer, directly so through incurred costs on following through with their borrower's eviction and/or foreclosure.

Take Necessary Steps Immediately When Trouble Arises

As most lenders are unable to help those in need because their borrowers are more or less slow and not proactive or responsible with monitoring their mortgages, they are pleading with borrowers to act when they know trouble is looming. It is preferred for borrowers to contact their lenders at the first sign of mortgage payment trouble. Otherwise, after 90 days of a payment's due date, mortgages can move into foreclosure and thus leave a borrower little options. The aforementioned is so because once a borrower receives a foreclosure notice, ameliorative options are few and far between.

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Important Tips for Finding Your First Home Mortgage Loan

Anyone who has gone through the process of buying their first home knows the combination of thrill and terror that can come with the experience. If you've never borrowed money for such a huge investment, feelings of confusion mixed with stress should not be a surprise. If you're a newbie home buyer, one of the most important first steps you should take is to remember that you should approach the entire home buying process with care and do your research before even looking at a house.

Here are a few tips for finding your first home mortgage loan:

Decide early on if you should apply for your mortgage with a direct lender or a brokerage company. If you choose to use a lender you could very well save some bucks since you'll avoid paying commission to brokers. But keep in mind that brokers have the knowledge and resources available to find mortgage lenders that best suit your situation. Brokerage companies will also deal with various administrative details that come with getting a home mortgage. This is usually part of what your fees include.

Do careful research and find out all about any programs that you may qualify for. If this is your first mortgage you may be able to take advantage of programs such as FHA or VA and other specialized federal loan programs depending on your location. Your mortgage lender will have detailed information on all of these different options available for you. They could be very beneficial to you with first time home buying and should not be ignored.

Another important step in the home buying process is pre-qualifying for your first mortgage. By exploring the pre-qualification process you will know from the get go exactly how much house you can afford and will be able to weed through the different homes on the market at the time. There's nothing worse than falling in love with a house and then finding out that you can't qualify for the money needed to buy it. Lenders both locally and online have free mortgage calculators that enable you to see how much you'll spend each month in payments. Take advantage of this important tool before looking for a home.

Remember, during the mortgage loan application process there's no such thing as a stupid question. If you don't understand a term or any of the jargon involved in real estate, then by all means ask your lender or broker for clarification. You'll need to know the difference in the types of interest rates and the many fees that may be charged. You can possibly avoid paying certain fees by educating yourself and shopping around.

Although buying a home seems like a daunting task, don't forget that it's just like buying anything else in life, only one of the bigger investments you'll make. Go into the process with your eyes wide open. Know what you're getting into. Do your research and you'll get a good deal. Make your first home purchase and finding your first home mortgage loan as enjoyable as possible.

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Not Completing Your 1003's? Don't Expect Your Mortgage Cases To Close

People often ask me what I believe is the single biggest hindrance to a new mortgage loan officer's success. I respond without hesitation and say, "For a new mortgage loan officer to succeed they must be willing to change and adapt with the industry. They need to know what their job is and be willing to learn what it takes to succeed." Status quo and doing what they were doing a year ago will certainly doom them in today's mortgage marketplace.

The last 6 months to a year, the mortgage industry is different than it has ever been before. In fact, it is so different; many people don't understand their job anymore. I believe that as an LO, you have to have an understanding of what your actual job is and at least some basic training requirements necessary to succeed in the industry before you can set yourself up to actually be a loan officer.

Before you can hang up a sign that says, "I'm a mortgage broker or I'm a loan officer", ...thinking that because it's easy to get a license and to become a loan officer, you need to realize that in the mortgage industry it's not always easy to know what is required of you, unless you have the proper training.

It used to be straightforward to be a "loan officer" and the industry formerly would support people who didn't have a concept of what they were doing. This was because the mortgage industry simply could not hire enough people to take all of the mortgage applications. There were millions and millions of loans being written and virtually any "warm body" could write them.

The AE's helped the new LO's, their lenders helped them; when they needed help, they had someone that they could call to "bail them out".

Because two-hundred thirty-six lenders have dropped by the wayside in the last year and the market is as tight as it has been in years, most companies cannot afford to pay for AE's or Reps to do the work that the LO's should be doing.

These companies have a fraction of the mortgage activity that they use to have. Consequently, they have underwriters who are completely overwhelmed by the influx of government loans because this seems to be the product more of our lenders are encouraging.

The real problem comes when you couple the emphasis on FHA and VA government loans in the industry with LO's who are trying to submit government loan applications and think they can submit them like they did during the sub-prime era. This is unconditionally no longer the case.

So what you have are people who have no experience submitting government loans that are presenting documents to more than one lender because they may have been denied previously. Quite often the LO needs to restructure and re-submit the loan, basically because the loan officer doesn't really understand how to properly submit the 1003.

They don't understand because they were never forced to learn during the crazy days of the sub-prime marketplace.

History has thrust us into a position where our loan officers now need to know how to originate loans. LO's all over the country are sitting by themselves with a very limited support system, which is made up of fewer "support" people than it ever has had in the past.

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What Happens When a Second Mortgage Forecloses

In most cases of foreclosure, it is the first mortgage company that initiates the process. The second mortgage may file its own foreclosure in order to protect its interest in the property, but even this is somewhat uncommon. The second lender would much rather work with the homeowners to find a solution to avoid foreclosure entirely, if possible. However, if the homeowners are simply too far behind on the second mortgage but up to date on the first, there is a good chance that the second lender will declare foreclosure on the house.

Any lienholder can try to force a sale of the property through foreclosure, but usually only the first mortgage will get paid off through the proceeds of the sale. This is because there usually just are not enough proceeds at all for even the first lien to be paid in full, let alone extra ones after that. It just makes more sense for the second mortgage to try to work with the debtors to find a solution, since they would most likely not get anything from a sheriff sale. Especially with the declining real estate market right now, second mortgages may have loaned tens of thousands of dollars more than the home is currently worth, which guarantees they will not receive anything from a sheriff sale. County foreclosure auctions usually consist of very low bid amounts and few bidders, resulting in properties selling for far less than their current market values.

If a participant at the foreclosure auction placed a bid and won, the proceeds of the sale would be distributed like any other foreclosure, regardless of which mortgage company actually began the foreclosure process in the courts. The property taxes would be paid first, since the bureaucrats need to get their hands on the money as quickly as possible. Then the first mortgage would be paid off with as much of the proceeds as are left. Unfortunately for second mortgage companies and other junior lienholders, the winning bid at auction is usually not even enough to cover the entire first mortgage. In fact, most of the time it is one of the banks that bids on the property to ensure that they will be able to sell it after the foreclosure if there are no other bidders.

After the first mortgage is paid off in full, though, then any other liens, including the second mortgage, would be paid in order of when the lien was filed with the county recorder. If there is enough money to pay all of the second mortgage, then they get all of the rest of the money until their lien is paid in full. Then anything remaining goes to other liens or to the homeowners as their gain from the sheriff sale. If there is not enough to pay off the second mortgage (or even all of the first mortgage), then the second will not be paid off at all or in full. It will be up to the mortgage company to sue afterwards for a deficiency judgment after the foreclosure has ended (an unlikely occurrence).

Thus, just because it is a second mortgage who begins the process of foreclosure, it will not really change the order of how the liens are paid off through the foreclosure auction. Any bidder at sheriff sale, whether the bank or a third party, will still end up with a title that has had the liens on it discharged through the county foreclosure auction. And the homeowners will have to move out of the property at the appropriate time or be faced with the possibility of a forced eviction. No matter which mortgage company initiates the foreclosure, the process will move through the court system in exactly the same way.

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Compare Fixed Mortgage Rates - How to Get the Best Rate from Your Lender

When getting quotes from competing lenders it's always hard to know who's telling the truth and who is giving the real interest rate when they quote you. To be completely sure you really do need to ask several lenders to quote you to be sure you are getting the best deal. The first thing to understand when comparing fixed mortgage rates is that interest rates never change and are always constant.

What's that you say? Rates change daily don't they? Not really, a 5% rate on a 30 year fixed mortgage has always been available regardless of the market. What changes is the cost of that rate to the retailer (Mortgage Company) and eventually the borrower, these are called points. What we are seeking from the mortgage company is the par rate; this is the lowest interest rate that does not require us to pay points.

Everything revolves around the "Par rate". The par rate has no cost to you and no profit for the lender. Very rarely will a lender quote this rate unless they are trying to "low-ball" you in hopes of raising it later. When a lender sells a rate above "par" she makes a profit. When she sells a rate below par it represents a cost to the lender that she usually passes along to the borrower in the form of points. These are the interest rates that are usually advertised on mortgage web sites, and that is why you are usually told you can't have that rate.

Most borrowers are aware that the mortgage company needs to make a profit and to stay in business, after all they aren't philanthropist. The intelligent shopper will seek to manage the amount of profit in the deal as opposed to having to argue about rates and closing costs. Most mortgage companies buy their money from the same sources, meaning their rates should almost be identical. Therefore, if you are reasonably sure you have the "par rate" then you have effectively narrowed the discussion down to the closing costs. Once you have the lender negotiating their profit you have the upper hand!

So how do we find this magical "par rate" from the lenders? It's simple, you ask them. This is where having 3-5 lenders to work with pays off. When you speak with experienced lenders they are going to ask you a series of questions to pre-qualify you to a rate. Rates have add-ons so to speak. The lender begins with a par rate and then adds and subtracts from that rate depending on your specific loan situation. It will be a little tedious going over the same questions with 3-5 lenders but the payoff is worth it. Once the lender feels comfortable that she knows your situation she will usually quote you an interest rate.

Rest assured this rate will NOT be a par interest rate. You should respond to her verbal quote "is that the par rate?" She will probably be taken back that you know to ask this question. What you want to convey to the lender at this time is your willingness to pay higher closing costs to get the lowest rate. It should be sort of like this "I realize my closing costs may be a little higher but can you quote me the lowest rate that is available without having to pay points?" The lender should volunteer the information, if not, next!

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3 Easy Steps To Getting A Mortgage

Step 3: Apply for a Loan

The application process is the easy part - provided you've gathered the documents necessary to prove claims you make on the application.

The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).

The lender will run a credit check to determine your credit status, but you'll have to supply additional documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance and other documentation. A lender that deems you creditworthy will likely hire a professional appraiser to make sure the value of the home you are about to buy is truly worth your loan amount.

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Hope For Delinquent Homeowners: FHA Secure Mortgage Refinancing

With the recent popularity of Adjustable Rate Mortgages and Interest Only mortgages followed by a rise in rates we have seen epidemic amounts of foreclosures as home owners try to cope with higher payments. Many homeowners are delinquent on their mortgage and fear that because of the damage to their credit scores they will not be able to refinance. A new FHA program may be the answer to their problems.

The Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family, multifamily, manufactured homes and healthcare facilities. FHA-insured mortgages do not come with prepayment penalties, have no teaser rates nor balloon payments. They are offered at market rate with terms up to 30 years and are fully amortized, meaning that you pay towards principal and interest every month.

How can FHA help homeowners keep from losing their homes?

FHASecure gives homeowners with non-FHA adjustable rate mortgages (ARMs), whether current or delinquent and regardless of reset status, the ability to refinance into an FHA-insured mortgage. With the new FHASecure program, the lender will not automatically disqualify you because you are delinquent on your loan, and the lender may offer you a second mortgage to make up the difference between the value of your property and what you owe.

This program is available whether your current or delinquent on your mortgage payments. In fact, FHA encourages homeowners facing reset to refinance before they fall behind. But even if you do fall behind, you may be eligible. There isn't a limit on how far behind you can be on your mortgage or how many payments you've missed. Whether you're current, one month behind or multiple payments behind, the amount you can refinance will depend on the value of your property and how much you owe and if the lender, or another eligible source, is willing to take back a second mortgage to help bridge the gap between what is owed and your home's value.

Interest-only mortgages are also eligible for the FHASecure program. If you are current on your mortgage, you are eligible for an FHASecure refinance; and if you are delinquent, the default must have been due to the payment shock of an interest rate reset or, in the case of an Option ARM, the "recasting" of the mortgage to fully amortizing.

If your current mortgage has a prepayment penalty you will need to take a look at the equity you have in your home. If you do not have sufficient equity in your home that would allow you to include the prepayment penalty and/or other refinancing costs into your new FHA mortgage, then you should ask your lender to consider a second mortgage to pay the difference or negotiate a short payoff on your existing loan. Offering either of these options is at the discretion of the lender.

Facing Foreclosure?

It is possible that FHASecure may help homeowners already in foreclosure but each situation is unique and depends upon the value of your home and how much you owe, and if the lender is willing to offer a second mortgage. Homeowners facing foreclosure are strongly encouraged to talk with their lenders, possibly with the assistance of a HUD-approved housing counseling agency, to determine the best course of action. To find a HUD-approved housing counselor, please call 1-800-569-4287 or search online at www.fha.gov/fhasecure.

FHA does have maximum loan limits that are vary by location. FHA's geographical loan limits and how much it can insure are established by law. Although the FHA-insured mortgage cannot exceed those loan limits, when a lender is willing to combine a first and second mortgage, the amount of the second could exceed the maximum loan limit for your area.

If the value of your home is now less than what you still owe the mortgage lender considering the refinance would have to be willing to accept a short payoff on the existing loan OR to hold a second mortgage to make up the difference needed to pay off the existing mortgage and the home's value.

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FHA Mortgage - A Better Deal

I have several web sites that allow readers to submit questions about mortgage guidelines and loan options. I received this question from Donald in Toledo, OH., Sunday morning.

"What would happen if someone else used my social security number for a utility bill and I never lived at that address? This happened about five years ago when I found out about it. Will this hurt the underwriting of the house I am trying to buy"?

During our conversations it turned out that this "utility bill" turned into a collection. Fortunately it was five years old. I also learned that his credit scores are: 615, 625, and 652.

Answer:

The first thing you want to do when you find out something like this is dispute it with all the credit bureaus: Equifax, Trans Union, and Experian. This process is much easier than it use to be years ago thanks to the Internet. Each of these company's have a web site full of information you should understand about your credit, credit scores, and how to improve them. You can file your dispute on line from their web site.

The Government mandated a few years ago that every person be entitled to one free credit report each year, ...from each bureau. This is a wonderful thing because years ago you were not allowed to even look at your report. You were really up that well known creek and just guess who had the paddles. Get your report once a year from each company and take the time to review it. There is only one web site you can get these reports from and that is annualcreditreport.com.

If your credit scores are high enough this 5 year old, small collection should not prevent a loan from being approved. Since most underwriting is now performed on an automated system you may be required to provide an explanation and supportive documentation or you may even be required to pay the collection.

In this particular case the credit scores are not really bad but they are not really good either. These scores are actually a little low compared to the average. This is a very good example as to why you should monitor your full credit report every single year. Don't wait to check your credit untill you are applying for a loan.

I don't have a clue what Donald's employment history is or what his debt to income ratio is or how much he is putting down. These factors all play a part in loan approval and could be considered compensating factors if all three are very strong.

However, knowing what I do know, my recommendation would be that a conventional loan with a high loan to value (small down payment) would be difficult and the interest rate, if it were approved, would reflect the low scores. I would recommend an FHA loan. The interest rates are excellent and require only a small down payment. Again, this is assuming the other factors are in line.

FHA mortgages are wonderful. They are very forgiving about credit, require a low down payment, and they have some of the best rates on the market. I might add one thing here about the interest rate. At this point in time the par rate is equal to or lower than a conventional loan (depending on the lender) so if the company you are working with is charging you a much higher rate they may be taking advantage of your situation thinking you don't know any better. Please, shop interest rates.

Fannie Mae has just announced additional pricing tiers based on credit scores and loan to values. This pricing is effective June 1, 2008.

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