I watched the CNN Special tonight on the mortgage meltdown being busted. I was hoping for some new insight and information but it turned out to be a poor regurgitation of what we have already heard. I guess I was looking for more of an expose’ than a group of industry insiders playing blackjack.
I thought it was very interesting that the mortgage broker on the show said 7 out of 10 calls he is getting right now are from people who are upside down on their homes - we are seeing a very similar number. I checked out his company – Lenox Financial, they just got FHA Approved in February – I wonder how they are doing with it so far. Having access to FHA’s 97% LTV Refi is considerably better than a Conventional 90% in today’s declining market.
The interview with the former Ameriquest employee was interesting. The roll played scripting for objections was insightful, the amazing part was how open he was about knowing it was a lie. It is fairly common for sales people to practice overcoming objections, but at least do it with answers you believe in. When he said ”if I can show you how to save 60 or 70 thousand dollars would you be interested?” and then was so glib about it being a lie it made me angry. The ironic part is I HAVE saved someone $60,000 or $70,000 before – by refinancing them AWAY from a garbage Ameriquest Loan. Companies like that water down the true power of a the mortgage as a financing tool. People think the savings is B.S. when in fact a low rate can save tens of thousands of dollars over a subprime loan.
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Values in Florida continue to decline, this can have a big impact on reverse mortgages. The GREAT thing about a reverse mortgage is that once you close, your house value can go down and your benefits do not reduce.
Seniors in Florida who have been considering a reverse mortgage should act quickly before more precious equity is lost in this declining market. These turbulent market conditions are creating a rare situations where sooner is better.
For more information on Florida Reverse Mortgage Loans check out www.efreverse.com
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A few more lenders set a minimum 580 credit score this week on FHA mortgages. My prediction that this would spread through the industry is coming true. “FHA The New Subprime” – lenders are protecting themselves from this thought the only way they know how - minimum credit scores.
Once a few of the national wholesale FHA lenders set this minimum the rest are almost forced to follow. The last man standing so to speak, will receive an imbalance of loans under a 580 shifting their portfolio.
Think about it this way:
There are 5 FHA Lenders in the world and 1,000 FHA loans and 50 of them are under a 580. All of the lenders are happy at a 5% rate of loans under 580. Suddenly the number of FHA loans under 580 jumps to 100 – 10%. Each lender is getting 200 loans and 20 are under a 580. Suddenly lenders 1 and 2 decide they don’t want loans under 580 any longer – so the 40 low credit score loans they were getting move to lenders 3, 4 and 5. Lender 3-5 are now each getting 213 loans and 33 are under a 580 – they just jumped up to 16%. So lender #3 gets spooked because low score loans jumped above 15% and they stop taking them. This pushes more loans to lenders 4 and 5 – 250 loans each and 50 are under 580 that’s 20%! Finally lender 4 gives it up and the last many standing is getting 300 Loans and 100 are under a 580 – 1/3 of their FHA Production, up from only 5% a few months prior.
Once a market move like this happens it is only a matter of time before it effects everyone.
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Many people who are unable to meet the net worth requirements to get FHA approval are making a move to Net Branching, also called Affiliate Branching. It is much faster than getting an FHA Approval, an existing FHA Approved Broker/Lender can have you up and running as a branch very quickly and in some cases at a fairly small cost.
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This may sound like some lame sales pitch a loan officer would use to force a consumer into making a decision, but unfortunately this statement is currently very true, particularly in Florida. There are currently two forces at work that are disqualifying more and more homeowners each day from being able to refinance at the best rates. If you are holding our for a certain rate you may end up unable to take advantage if you wait too long.
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I talked about it a few weeks ago and it is happening. We have seen a slew of lenders put a minimum 580 credit score on FHA Loans because they were getting flooded with Subprime crap. Unfortunately this is effecting normal FHA Business and is going to make it more difficult for borrowers who need FHA loans to get them.
Additionally I know the underwriting times have gone crazy too. We are hearing 20 – 30 days for FHA underwriting at the big lenders and the wholesale lenders where brokers have to send their files. This is one of those time I love being a small independent lender because I am still able to give 24 HOUR FHA UNDERWRITING to my loan officers and it is giving them a huge competitive advantage in the market.
We can close a loan faster than they can underwrite it… pretty impressive to Real Estate Agents in the current market. I am still not sure on the under 580. We are continuing to offer them on a limited basis, but we are having Senior Management review all of the loans below a 580. My biggest fear is that there will be no services left who want the under 580 loans. At that point we will have to look into servicing our own loans or putting a minimum score in place.
We’ll see….
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A new set of Fannie Mae loan level price adjustments have hit the market for Conventional Loans. These move to further punish lower credit scores and greatly increase the cost of accessing equity through a cash out refinance. These adjustments are going to push even more borrowers into FHA as FHA becomes much cheaper than Conventional Loans in many LTV/Credit Score combinations.
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Some of my readers have asked about my company.
Our name is R P Funding, you can access our HUD Approval here: R P Funding FHA Approval, or website R P Funding
We currently have two offices in Florida, but we are in the process of opening a third and expanding into Mississippi and Georgia. We are a small Direct Endorsement Lender, giving us the power of being a full service lender with the flexibility of a privately owned company.
We are looking for the right managers to fuel our further expansion.
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Yes! A Full Eagle can broker FHA loans. The difference, that confuses most, is the relationship this creates in FHA Connection. When a loan correspondent establishes a broker relationship with a lender it is entered into FHA Connection as a Sponsor to Correspondent Relationship. If a lender attempts to enter a Full Eagle into FHA connection under this relationship – It Doesn’t Work! This leads many to believe that a Full Eagle cannot broker, but this just isn’t true. You have to enter to relationship into FHA Connection a little differently.
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