I've had a little experience with the real estate broker world. My mother was one. I have a license in my state, have had one since around 2006. I have a broker's license in fact.
First off, I'm going to demise the entity of Metropolitan Real Estate Group, and merge the broker's license over to Jeffrey Loyd & Associates LLC another entity that I have. I have feedback from a trusted advisor that this is the route to go. Metropolitan is certainly not wowing me in the branding department, so why not?
Now that I've made that decision, I'm going to have to establish that as the real estate brokerage entity. Tomorrow I call the New York State Department of State to begin necessary arrangements.
Meanwhile, I'm say a little something about how I plan to operate.
First of all, I plan to do commercial real estate only. I do not want to get involved in residential real estate even in this market. I do not plan to do things in the traditional manner. I don't want to list properties for sale, nor do I want to drag customers around looking at buildings.
What I want to do is work the phones, day after day (Monday through Friday) and with careful scripting, a robust CRM, a targeted area of concentration (geographic), and try to get enough people interested in buying or selling that I can effect a match. Or a meeting of the minds as they say.
Do I have all of this mapped out yet? No I do not.
Do I think this will be easy? No I do not.
Do I think that I can earn $ in this manner. Yes I do. It well suited to my personality.
Wednesday, July 23, 2014
Mortgage Business is a Drag
I'm making money doing loans for a big bank and I just cannot see doing it for much longer. The mortgage business is broken, very broken. No one likes it, least of all the banking customers who have to put up with it.
I'm thinking very seriously about moving into commercial real estate. I'm going to use this blog to develop my business plan. To craft my scripting and generally keep my notes in one place.
One public place.
Perhaps I will help someone in a similar situation, most likely not.
Perhaps I will receive some constructive criticism, most likely not.
Let's get started.
I'm thinking very seriously about moving into commercial real estate. I'm going to use this blog to develop my business plan. To craft my scripting and generally keep my notes in one place.
One public place.
Perhaps I will help someone in a similar situation, most likely not.
Perhaps I will receive some constructive criticism, most likely not.
Let's get started.
Tuesday, July 16, 2013
VIGODA - A Vignette for Film
Open on an office, a room full of cubicles, there are 5 young staffers (Courtney, Judd, Noble, Cindy and Ting) huddled around one young (Ryan) man at his desk.
Ryan: I called it the VIGODA Courtney: After Abe? Ryan: Huh? Judd (to Courtney): He doesn't know Courtney nods and scowls at Ryan Ryan: Know what? Courtney: You have no pop culture. Abe Vigoda was a...ah it doesn't matter, why do you call VIGODA? Ryan: It stands for Velocity In Gain Or Decrease Algorithm. It attempts to measure the speed at which a candidate's polling will increase or decrease in left leaning or right leaning districts, but not solid left or solid right districts. I'm trying to get a handle on at what point, the candidate gains traction or should be considered a loss for that district. Telephone rings on Ryan's desk. He answers. Ryan: (checking watch). He's right on time. OK, I'll be right there. (Hangs up telephone). OK, Barnes is here, I gotta do this. Cindy: The beacon of New Hampshire. How did you pull the interview? Ryan: (grabbing suit jacket from the back of the chair) Just luck I guess.
Conference Room (not large, speaker phone in the middle of the table. TV mounted on one wall, 6 chairs) Receptionist opens the door and shows an African American man wearing an American flag pin in his lapel into the room. Receptonist: Mr. Barnes, please have a seat anywhere you like. May I bring you anything? Roy Barnes: No, I'm fine, thanks.
Roy Barnes is the African American Republican candidate for an New Hampshire district where he is polling high and seems to be the one to beat. He is well groomed, well spoken, and obviously works out regularly. He is often photographed running or swimming, with his body on full display.
The door to conference room opens and Ryan, a young African American male hurriedly walks in. He is wearing a suit carelessly in contrast to Roy Barnes' meticulous stylish, yet conservative attire. Ryan approaches Roy with an outstretched hand. Ryan: Mr. Barnes, it's nice to meet you. I'm Ryan Hattern and I'll be conducting this interview on behalf of Thom Roy Barnes: You know (flexing arm) I work out a lot. Do you?
Barnes: Yeah, you look it. Where? I go to SportsClub so that I have access when I travel. Also they have an excellent steam room. You ever go there?
Ryan: Looking at his note to prepare for the interview Shakes head
Barnes: You should (leans back, and rubs his stomach) it feels great to take a nice long steam. I have some guest passes if you would like to check it out. Perhaps we could get a workout in too.
Ryan: Nods
Ryan: Ah, I'm pretty busy right now. So you are originally from Boston, is that correct?
Barnes: Yeah, I grew up in New Hampshire though. My family moved when I was 11. We own a farm up there. Majestic beauty, away from everything.
Ryan: And this is your first entry into politics?
Barnes: Yep, my first go.
Ryan: Can you tell me why you are running for office aside from the campaign rhetoric?
Barnes: What do you think about hitting the gym tonight?
Ryan: I called it the VIGODA Courtney: After Abe? Ryan: Huh? Judd (to Courtney): He doesn't know Courtney nods and scowls at Ryan Ryan: Know what? Courtney: You have no pop culture. Abe Vigoda was a...ah it doesn't matter, why do you call VIGODA? Ryan: It stands for Velocity In Gain Or Decrease Algorithm. It attempts to measure the speed at which a candidate's polling will increase or decrease in left leaning or right leaning districts, but not solid left or solid right districts. I'm trying to get a handle on at what point, the candidate gains traction or should be considered a loss for that district. Telephone rings on Ryan's desk. He answers. Ryan: (checking watch). He's right on time. OK, I'll be right there. (Hangs up telephone). OK, Barnes is here, I gotta do this. Cindy: The beacon of New Hampshire. How did you pull the interview? Ryan: (grabbing suit jacket from the back of the chair) Just luck I guess.
Conference Room (not large, speaker phone in the middle of the table. TV mounted on one wall, 6 chairs) Receptionist opens the door and shows an African American man wearing an American flag pin in his lapel into the room. Receptonist: Mr. Barnes, please have a seat anywhere you like. May I bring you anything? Roy Barnes: No, I'm fine, thanks.
Roy Barnes is the African American Republican candidate for an New Hampshire district where he is polling high and seems to be the one to beat. He is well groomed, well spoken, and obviously works out regularly. He is often photographed running or swimming, with his body on full display.
The door to conference room opens and Ryan, a young African American male hurriedly walks in. He is wearing a suit carelessly in contrast to Roy Barnes' meticulous stylish, yet conservative attire. Ryan approaches Roy with an outstretched hand. Ryan: Mr. Barnes, it's nice to meet you. I'm Ryan Hattern and I'll be conducting this interview on behalf of Thom Roy Barnes: You know (flexing arm) I work out a lot. Do you?
Barnes: Yeah, you look it. Where? I go to SportsClub so that I have access when I travel. Also they have an excellent steam room. You ever go there?
Ryan: Looking at his note to prepare for the interview Shakes head
Barnes: You should (leans back, and rubs his stomach) it feels great to take a nice long steam. I have some guest passes if you would like to check it out. Perhaps we could get a workout in too.
Ryan: Nods
Ryan: Ah, I'm pretty busy right now. So you are originally from Boston, is that correct?
Barnes: Yeah, I grew up in New Hampshire though. My family moved when I was 11. We own a farm up there. Majestic beauty, away from everything.
Ryan: And this is your first entry into politics?
Barnes: Yep, my first go.
Ryan: Can you tell me why you are running for office aside from the campaign rhetoric?
Barnes: What do you think about hitting the gym tonight?
Tuesday, July 05, 2011
Fewer Borrowers & fewer qualify
I'm probably the last to say it, but while rates are at an all time low, it seems that very few can qualify. The ones that can seemed to have had their head in the sand for the past year or so. For unknown reasons, they just didn't refinance at any previous time. Maybe they were waiting for rates to get lower, not much chance of that according to the smart folks who opine on such things as inflation and the economy. Maybe they were waiting for their home to increase in value? The good people at Case-Shiller say, "fat chance." Maybe they were hoping their income would rise? It seems that's not going to happen that much either as corporations have been given the green light to hold the profits and pay the executives more without increasing the pay of the minions working tirelessly.
I know this comes off as negative, but where's the upside?
Sunday, September 19, 2010
MI Companies are back to making money, so why aren't they doing more
The mortgage insurance companies' losses are getting less and less.
According to WSJ, there are 10 reasons to buy a home
A Wall Street Journal blog article outlines 10 reasons to buy a home now. Take a look. For the full article, click here.
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
Brett Arends discusses why he thinks now is a particularly good time to buy a home.
2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.
5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.
6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.
9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.
Write to Brett Arends at the Wall Street Journal for more information about this article.
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
Brett Arends discusses why he thinks now is a particularly good time to buy a home.
2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.
5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.
6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.
9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.
Write to Brett Arends at the Wall Street Journal for more information about this article.
Friday, May 21, 2010
Sunday, May 02, 2010
Shortenin' Bread
Now that I've read Michael Lewis' The Big Short, read the recipe for a CDO short done by Dr. Mike Burry that he graciously left on his now closed money management firm's website, I think I have an idea about the Goldman Sachs case that is in the news. According to the individuals in Lewis' book, Goldman hadn't thought of shorting their CDOs and thought that these buyers were the dumb money until they figured out where the smart money was.
Another interesting aspect to this whole debacle is that CDO exist, on some level, because the army of originators on the street (such as me) couldn't provide enough debt to consumers to supply the machine's need for ABS (Asset Backed Securities), so they came up with CDOs, and then synthetic CDOs.
Another interesting aspect to this whole debacle is that CDO exist, on some level, because the army of originators on the street (such as me) couldn't provide enough debt to consumers to supply the machine's need for ABS (Asset Backed Securities), so they came up with CDOs, and then synthetic CDOs.
Saturday, February 13, 2010
New Year, New Deal? Hardly
This year is shaping up to be one of the hardest yet in the mortgag business. There's going be many, many more REOs (foreclosed houses that the bank owns) on the banks' books, likely driving prices downward further.
That's not the problem if that increases buying activity, but with double digit unemployment (real unemployment), uncertainty, tightening underwriting standards, destabilizing appraised values and unknowns yet to come, it seems like a good year to hide under the desk if you are a Loan Officer.
Even good Loan Officers are heading for the hills, and here in NYC, they are jumping from bank to bank seeking greener grass that likely doesn't exist. Files are stacking up against the weight of regulations, underwriting that requires over documentation, and audit after audit of every file. Jumbos and High Balance Conforming loans are seeing the worst of it, but conforming loans can be painful too.
This business is tough, 7 days a week tough, but, sick as it may seem, I enjoy it.
That's not the problem if that increases buying activity, but with double digit unemployment (real unemployment), uncertainty, tightening underwriting standards, destabilizing appraised values and unknowns yet to come, it seems like a good year to hide under the desk if you are a Loan Officer.
Even good Loan Officers are heading for the hills, and here in NYC, they are jumping from bank to bank seeking greener grass that likely doesn't exist. Files are stacking up against the weight of regulations, underwriting that requires over documentation, and audit after audit of every file. Jumbos and High Balance Conforming loans are seeing the worst of it, but conforming loans can be painful too.
This business is tough, 7 days a week tough, but, sick as it may seem, I enjoy it.
Saturday, December 05, 2009
Fannie & Freddie are pushing more loans back to lenders
According to WSJ, Fannie and Freddie are making banks buy back poorly underwritten loans that have soured.
No wonder we have pre-closing audits, pre-funding audits, post-closing audits, post-post closing audits and so on and so forth. The documentation that borrowers must provide almost never ends at this point. Properly prepare borrowers for the onslaught of documentation requests. Banks don't want loans on their books when they could have sold it to Fan/ Fred.
No wonder we have pre-closing audits, pre-funding audits, post-closing audits, post-post closing audits and so on and so forth. The documentation that borrowers must provide almost never ends at this point. Properly prepare borrowers for the onslaught of documentation requests. Banks don't want loans on their books when they could have sold it to Fan/ Fred.
FHA Loosening Condo Approval Guidelines
Haven't posted in awhile. Business has been pretty good lately, despite all the whining I do on this blog.
FHA is changing some of their condo guidelines which should play well in the NYC market. First off, they are lowering the required pre-sales to 30% which will help many of the new developments offer FHA loans until they reach that magic 51-70% threshold needed for FNMA approval. Another nice thing is that they are willing to allow condos with a right of first refusal clause in their by-laws if it's shown that it's not used for discrimination. That will play well in NYC where almost all of the condos have this clause.
There are a few pull backs in the new guidelines as well, such as a 50% concentration limit, and the requirement that the condo be transferred into the hands of the Homeownwer's Association 12 months from the time of the first sale. This doesn't matter as much to existing condo buildings, but new development condos will hate it since they may not be finished with construction within that timeframe.
All in all, I say "thanks."
FHA is changing some of their condo guidelines which should play well in the NYC market. First off, they are lowering the required pre-sales to 30% which will help many of the new developments offer FHA loans until they reach that magic 51-70% threshold needed for FNMA approval. Another nice thing is that they are willing to allow condos with a right of first refusal clause in their by-laws if it's shown that it's not used for discrimination. That will play well in NYC where almost all of the condos have this clause.
There are a few pull backs in the new guidelines as well, such as a 50% concentration limit, and the requirement that the condo be transferred into the hands of the Homeownwer's Association 12 months from the time of the first sale. This doesn't matter as much to existing condo buildings, but new development condos will hate it since they may not be finished with construction within that timeframe.
All in all, I say "thanks."
Friday, October 02, 2009
Is Fannie Taking Another Run at Mortgage Insurance?
I just read this here.
It would great if there was a way to get mortgage insurance for condos and coops with 10% or less down.
It would great if there was a way to get mortgage insurance for condos and coops with 10% or less down.
Thursday, August 20, 2009
Take the Good with the Bad
FHA Mortgagee Letter 2009-19 dated June 12, 2009 has a few good things in it, and a few bad things. I'm not sure if overall it's good for the high rise condo market.
First, I'll mention the good stuff. First off, Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act regulation in 24 CFR 100. That is a major plus for the New York City market where all condos have the Right of First Refusal in the By-Laws. In fact, this has been one of the main reason there are so few NYC condos that are FHA approved. If this goes into effect, there will be an onslaught of condos that are approved.
Next there has been a change in ground up new construction condo approval, in cases where a building permit and a certificate of occupancy (or its equivalent) are issued by a local jurisdiction that performs a minimum of three inspections (typically the footing, framing and final) neither an Early Start Letter nor a HUD approved ten-year warranty plan is required. For those jurisdictions that do not issue a building permit (or its equivalent) prior to construction and a Certificate of Occupancy (or its equivalent) upon completion of construction, a condominium unit that is one year old or less must have either an Early Start Letter (with a minimum of three inspections by an FHA Roster Inspector) or be covered by a HUD-approved ten-year warranty plan (with a final inspection by a FHA Roster Inspector) to be eligible for high-ratio mortgage insurance.
All condominium types are eligible to follow this process (e.g. Multi-family). Projects are still required to be on the FHA-approved condominium list.
This may mean that New York City condos may be approved for the full boat of FHA financing. Any condos in the NYC market that have been applying for FHA approval have been requesting approval for 90% maximum financing due to the expense of the 10 year warranty on all of the units in the building required to go to 96.5% financing. When there are 200 units that warranty can get expensive.
And now for the bad. I'll start off easy with FHA will not accept a temporary Certificate of Occupancy; all units within the building
(where the specific unit that is security for the insured financing is located) must be complete. Developers usually want to start closing as soon as the Temporary Certificate of Occupancy (TCO) is issued. There is usually a significant delay between the TCO and the Certificate of Occupancy that could stretch longer than it should. Remember these are controlled by bureaucracies.
And here's the rub: Transfer of control of the Homeowners Association shall pass to the owners of units within the project no later than the earlier of the following:
1. 120 days after the date by which 75 percent of the units have been conveyed to the unit purchasers, or
2. One year after completion of the project evidence by the first conveyance to a unit purchaser. This means that the entire building needs to sell 51% and be turned over the Homeowners Association (HOA) within 1 year of the first sale. No pre-construction sales for buildings wanted to be FHA approved and with the current market sales velocity, it's hard to say whether a 300 unit condo tower is going to sell enough units in 12 months. This seems to be a deal killer and the builder's associations are fighting the whole mortgagee letter based on it.
It's too bad that we got the acceptance of the Right of First Refusal with this at the same time. We almost had something that saved the NYC condo market.
First, I'll mention the good stuff. First off, Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act regulation in 24 CFR 100. That is a major plus for the New York City market where all condos have the Right of First Refusal in the By-Laws. In fact, this has been one of the main reason there are so few NYC condos that are FHA approved. If this goes into effect, there will be an onslaught of condos that are approved.
Next there has been a change in ground up new construction condo approval, in cases where a building permit and a certificate of occupancy (or its equivalent) are issued by a local jurisdiction that performs a minimum of three inspections (typically the footing, framing and final) neither an Early Start Letter nor a HUD approved ten-year warranty plan is required. For those jurisdictions that do not issue a building permit (or its equivalent) prior to construction and a Certificate of Occupancy (or its equivalent) upon completion of construction, a condominium unit that is one year old or less must have either an Early Start Letter (with a minimum of three inspections by an FHA Roster Inspector) or be covered by a HUD-approved ten-year warranty plan (with a final inspection by a FHA Roster Inspector) to be eligible for high-ratio mortgage insurance.
All condominium types are eligible to follow this process (e.g. Multi-family). Projects are still required to be on the FHA-approved condominium list.
This may mean that New York City condos may be approved for the full boat of FHA financing. Any condos in the NYC market that have been applying for FHA approval have been requesting approval for 90% maximum financing due to the expense of the 10 year warranty on all of the units in the building required to go to 96.5% financing. When there are 200 units that warranty can get expensive.
And now for the bad. I'll start off easy with FHA will not accept a temporary Certificate of Occupancy; all units within the building
(where the specific unit that is security for the insured financing is located) must be complete. Developers usually want to start closing as soon as the Temporary Certificate of Occupancy (TCO) is issued. There is usually a significant delay between the TCO and the Certificate of Occupancy that could stretch longer than it should. Remember these are controlled by bureaucracies.
And here's the rub: Transfer of control of the Homeowners Association shall pass to the owners of units within the project no later than the earlier of the following:
1. 120 days after the date by which 75 percent of the units have been conveyed to the unit purchasers, or
2. One year after completion of the project evidence by the first conveyance to a unit purchaser. This means that the entire building needs to sell 51% and be turned over the Homeowners Association (HOA) within 1 year of the first sale. No pre-construction sales for buildings wanted to be FHA approved and with the current market sales velocity, it's hard to say whether a 300 unit condo tower is going to sell enough units in 12 months. This seems to be a deal killer and the builder's associations are fighting the whole mortgagee letter based on it.
It's too bad that we got the acceptance of the Right of First Refusal with this at the same time. We almost had something that saved the NYC condo market.
Sunday, July 19, 2009
The media is myopic
I'm watching CNN this Sunday morning, and they've elected to continue their extensive coverage of one of their own's death. Walter Cronkite died the other day, a sad event much as anyone dying is. But a historic event? I think not. The man was a news reporter, perhaps even a good one, though I wouldn't really know being too young to truly remember his reporting style. I've seen less coverage of a statesman dying, or of the thousands that are unjustly dying throughout the world right this very minute. Is CNN covering this? Of course not. They cannot see past their own noses, they think they are newsworthy. I thought the whole point of the reporter was to observe and report. Since when did they become the news? If Mr. Cronkite was the reporter and newsman they are saying he was, would he be embarassed right now?
Friday, July 17, 2009
It's really this bad...
I know the Loan Officers out there may have horror stories of their own, but I need to purge. It seems like between the new regulatory microscope, the everchanging financial picture of the mortgage insurance companies, the constant unsurety of condo and coop building approval guidelines, and the unwillingness to pay for good underwriting staff, it's a miracle that loans actually close.
In New York, where an attorney is required to close on behalf of the bank, you can add to the list bank attorney staff members who think it's OK to treat the borrowers who actually pay their fee rudely.
Here's my day.
Today an underwriter on one of my files decided to call my borrower on a coop refinance and berate him about the way that he prepares his tax returns. The underwriter has a high school education, and my borrower is a corporate tax attorney with 10 years of experience. Net result: I had both of them screaming at me about the other with my manager included. Great.
Our coop approval department, yesterday, asks for the sponsor's cashflow statement if the last amendment to the Coop Offering Plan is over 12 months old. Today he says that he needs both the sponsor's cashflow statement the last amendment dated August of 1999. I'm just trying to get the building approved before the mortgage contingency expires so the borrower doesn't lose his $73,000 contractual deposit if he cannot close his loan. Guess who's yelling at me now: the coop approval guy apparently because he doesn't know his job, the buyer's attorney, the broker, the managing agent of the building and the borrower. Even better.
I finally (who knows how in this environment) get a file to the underwriter to clear to close. She doesn't understand how our condo approval database is set up, or she cannot read, I'm not sure which. So she continually requests condo approval. I don't know this at first, so I keep sending her the condo approval screenshot from the database, which she doesn't know what it says, so she asks for condo approval, and a round and round we go. Meanwhile, it's a Friday, and 4 days before the buyer is contractually obligated to close or forfeit his down payment of $46,000. And who's yelling at me? You got it: the borrower, the underwriter, her manager, my manager, the broker and both attorneys. Yay!
I have one of those Fannie / Freddie prime loan modifications that the Obama adminstriation said was going to help the homeowners. All conditions were submitted with the file. Well, there isn't much to submit other than an application and title. But wait for it...I need a subordination from another major bank. After 2 months and many fruitless faxes, I finally receive the subordination. Now this is a rubber stamp approval and we close, right? Right? Wrong. We are into our second rate lock extension (borrower paid I might add) and I still cannot get the underwriter to approve this file to close. If I ask, I get laughed at, like I'm some kind of idiot to even ask that a refinance that will save our customer hundreds of dollars each month get closed.
This was all before 12pm today, when I couldn't take it anymore and left the office. No, the mortgage industry isn't broken, no way.
Fact is, I could go on and on about issues like these, condo approval wants an appraisal to be amended prior to condo approval, the appraiser (after I go through all the hoops of getting the operations staff to actually submit the request, I've so painstakingly prepared for them in a manner that allows them to quickly review, and push "send" - that's 3 days right there folks) says that the 'as of ' date won't be effective if that is done and thus won't amend the appraisal. Now I'm not taking about a valuation change, nor am I talking about changing anything that isn't on the questionnaire that was completed by the managing agent, reviewed by the developer, signed off on by the developer's attorney and approved by our condo approval department. It's actually not even a change, it's requesting that a box that had "unkn" which is possibly short for "unknown" be marked with the actual data for the purposes of condo project approval. Now if as a commissioned loan originator I'm so bad, fraudulent, and unscrupulous that I cannot be trusted to send a fax to an appraiser (according to HVCC) then why is everyone running this stuff through me? Why doesn't condo project approval reach out the appraiser themselves and request the change. And when the appraiser says "no", make a business decision about what they are going to do. Leave the buyer hanging and add to the housing woes, or go with the questionnaire information and approve the building so that people who want to can buy an apartment and grease the wheels of our sputtering economy.
Bottom line, the loan is going nowhere fast. It doesn't matter where I work because I know people at all major banking institutions who have much, much worse stories to tell. They cannot even pick up their phones anymore. They have run out of excuses, gone past sounding like moron, and are now just weeping...
Oh, and let me end with this one last potshot at the Real Estate Brokers out there. I have a deal that was approved today. I've had the conversation with the broker several times in which I assure him that I'm only paid if the loan closes, I don't get a salary, I'm only paid a commission on closed loans. So today, I say the underwriter told me that it would be approved late yesterday or first thing today. That's literally what the underwriter told me around noon yesterday. Today at around noon, no approval. The broker has the gumption to ask me to ask the underwriter when the approval will be done as if I hadn't spent the morning begging in such a manner as to bring everlasting shame upon my house and family. Is he kidding me?
Man, some people really don't spend much time listening do they? I've told him at least 3 times I don't get a salary and that I'm only paid if the loan closes, what makes him think that I didn't ask the underwriter a thousand times by 9am that morning? He just pressures people because he has no other value to add. People who are good at their jobs are being hammered into bits by the mediocrity of the lending world, there are excellent attorneys, brokers, loan officers, underwriters, closers, buyers, sellers, builders and everyone else out there. At what point do we get to do our jobs?
In New York, where an attorney is required to close on behalf of the bank, you can add to the list bank attorney staff members who think it's OK to treat the borrowers who actually pay their fee rudely.
Here's my day.
Today an underwriter on one of my files decided to call my borrower on a coop refinance and berate him about the way that he prepares his tax returns. The underwriter has a high school education, and my borrower is a corporate tax attorney with 10 years of experience. Net result: I had both of them screaming at me about the other with my manager included. Great.
Our coop approval department, yesterday, asks for the sponsor's cashflow statement if the last amendment to the Coop Offering Plan is over 12 months old. Today he says that he needs both the sponsor's cashflow statement the last amendment dated August of 1999. I'm just trying to get the building approved before the mortgage contingency expires so the borrower doesn't lose his $73,000 contractual deposit if he cannot close his loan. Guess who's yelling at me now: the coop approval guy apparently because he doesn't know his job, the buyer's attorney, the broker, the managing agent of the building and the borrower. Even better.
I finally (who knows how in this environment) get a file to the underwriter to clear to close. She doesn't understand how our condo approval database is set up, or she cannot read, I'm not sure which. So she continually requests condo approval. I don't know this at first, so I keep sending her the condo approval screenshot from the database, which she doesn't know what it says, so she asks for condo approval, and a round and round we go. Meanwhile, it's a Friday, and 4 days before the buyer is contractually obligated to close or forfeit his down payment of $46,000. And who's yelling at me? You got it: the borrower, the underwriter, her manager, my manager, the broker and both attorneys. Yay!
I have one of those Fannie / Freddie prime loan modifications that the Obama adminstriation said was going to help the homeowners. All conditions were submitted with the file. Well, there isn't much to submit other than an application and title. But wait for it...I need a subordination from another major bank. After 2 months and many fruitless faxes, I finally receive the subordination. Now this is a rubber stamp approval and we close, right? Right? Wrong. We are into our second rate lock extension (borrower paid I might add) and I still cannot get the underwriter to approve this file to close. If I ask, I get laughed at, like I'm some kind of idiot to even ask that a refinance that will save our customer hundreds of dollars each month get closed.
This was all before 12pm today, when I couldn't take it anymore and left the office. No, the mortgage industry isn't broken, no way.
Fact is, I could go on and on about issues like these, condo approval wants an appraisal to be amended prior to condo approval, the appraiser (after I go through all the hoops of getting the operations staff to actually submit the request, I've so painstakingly prepared for them in a manner that allows them to quickly review, and push "send" - that's 3 days right there folks) says that the 'as of ' date won't be effective if that is done and thus won't amend the appraisal. Now I'm not taking about a valuation change, nor am I talking about changing anything that isn't on the questionnaire that was completed by the managing agent, reviewed by the developer, signed off on by the developer's attorney and approved by our condo approval department. It's actually not even a change, it's requesting that a box that had "unkn" which is possibly short for "unknown" be marked with the actual data for the purposes of condo project approval. Now if as a commissioned loan originator I'm so bad, fraudulent, and unscrupulous that I cannot be trusted to send a fax to an appraiser (according to HVCC) then why is everyone running this stuff through me? Why doesn't condo project approval reach out the appraiser themselves and request the change. And when the appraiser says "no", make a business decision about what they are going to do. Leave the buyer hanging and add to the housing woes, or go with the questionnaire information and approve the building so that people who want to can buy an apartment and grease the wheels of our sputtering economy.
Bottom line, the loan is going nowhere fast. It doesn't matter where I work because I know people at all major banking institutions who have much, much worse stories to tell. They cannot even pick up their phones anymore. They have run out of excuses, gone past sounding like moron, and are now just weeping...
Oh, and let me end with this one last potshot at the Real Estate Brokers out there. I have a deal that was approved today. I've had the conversation with the broker several times in which I assure him that I'm only paid if the loan closes, I don't get a salary, I'm only paid a commission on closed loans. So today, I say the underwriter told me that it would be approved late yesterday or first thing today. That's literally what the underwriter told me around noon yesterday. Today at around noon, no approval. The broker has the gumption to ask me to ask the underwriter when the approval will be done as if I hadn't spent the morning begging in such a manner as to bring everlasting shame upon my house and family. Is he kidding me?
Man, some people really don't spend much time listening do they? I've told him at least 3 times I don't get a salary and that I'm only paid if the loan closes, what makes him think that I didn't ask the underwriter a thousand times by 9am that morning? He just pressures people because he has no other value to add. People who are good at their jobs are being hammered into bits by the mediocrity of the lending world, there are excellent attorneys, brokers, loan officers, underwriters, closers, buyers, sellers, builders and everyone else out there. At what point do we get to do our jobs?
Thursday, July 16, 2009
Morgan Loan Mods are slow like everyone else
I read in the WSJ today that Morgan's servicing unit (Saxon - remember them from the heydays of subprime?) has modiified only 6% of their servicing portfolio. That's not a surprise. Modifications, even the FNMA, Freddie MAC prime loan modifications are put on the back burner at all the major banks that I know of. These loans actually don't require much to close, less than a traditional refinance, but for some reason despite the easy approval process, they take much, much longer to get looked at.
It's odd since it's my understanding that the gross margins are actually pretty good on them. I guess it's just one of those things.
It's odd since it's my understanding that the gross margins are actually pretty good on them. I guess it's just one of those things.
Tuesday, June 23, 2009
The Condo Approval Morass
It's not enough to qualify and approve the borrower, nor has it ever been, but when someone is buying in a condo or coop, the building must also be approved. This has become increasingly more difficult as condo / coop approval departments are overloaded increasing turn times, but also as Fannie Mae and Freddie Mac begin enforcing rules that up for years were not enforced.
One major hurdle with existing condos and new development condos is a line item in the budget for reserves that equals 10% of the budget. In most, if not all, of the other states in the Union, this is not an issue. But here in New York, it's becoming increasingly more of an issue. New York City has always gotten away without creating a reserve funds for 2 reasons. The first is that the NY Attorney General's office, which approves all condo offering plans, doesn't require it. The second is that here in NY the argument was made that if the budget ran low, or if a capital improvement was needed, there would be a special assessment to pay for it. Fan/ Fred went along with this, but not anymore.
So most budgets on new developments (though they are faster to change, needing the sales) and existing condo project don't have a reserve line item in the budget. They frequently have a contingency line item, but it doesn't add up to anywhere near 10% of the annual budget.
What do you do? Create a reserve analysis, that's what. You'll have to show that the contingency is enough for the capital improvements without a special assessment to the condo owners. This can be done by aggregating the amount that the contingency will accumulate in the next years before any major improvements or repairs need to be done. This is especially useful with new development where the assumption is that since it's newly built, it will be 10-25 years before the building will require a new roof, exterior work or other major expenses or improvements.
Another hot button is the pre-sales requirement for Fannie Mae approval. This has increased to 70% of the units for most developments. This is coupled with a new math in determining the pre-sales in a building as well. Sponsor held units are now counted, whereas before they were not, also any rental units (here in NYC some apartments in a conversion are rent regulated making it difficult to remove tenants) are now counted. Before they were not. Also any investor owned units are not counted. So what you have left is all of the owner occupied and second home units in a building. That can be tricky for areas like Miami, LA, SF, Vegas and NYC. This is on top of an already down market, so it's reducing the deal flow even more, since many banks will not offer financing in a building that is not approved by Fannie Mae. Even if the mortgage is not being sold to them, it's considered the gold standard for condo / coop approval.
If the building is a ground up new construction and less than 200 units, then it's possible to get it approved at 51% pre sold. If it's a conversion of any size then it's more likely to be 70%. There is a process by which Fannie Mae will do a full review of the building and approve it at a lower pre sale, but generally speaking it needs to be at least 51% pre sold (remember these need to be owner occupied or 2nd home buyers) and have good sales velocity. Also the developer needs to pony up a $1200 application fee along with $30 per unit for the review. There is quite a bit of documentation that is needed as well.
If that wasn't enough, the scrutiny of the building's insurance coverage has also gotten a bit tougher. The Fidelity Bond coverage is a bit more restrictive, also if the building's coverage does not cover an individual unit from the studs in, then the homeowner will need to buy insurance to make up the difference.
Managing Agents don't seem to be stepping up to the plate in this changing world either. They aren't completing questionnaires fully so that the building can be properly assessed. This is despite the fact that in NYC, they charge a fee for its completilon, sometimes as high as $125. They need to understand that they are doing their owners a disservice by not completing the questionnaires and providing as much information as they can to help the approval process along. Everyone in the process understands that it's a hassle, but it's not the man on the street's decision, it's much, much higher up than that.
One major hurdle with existing condos and new development condos is a line item in the budget for reserves that equals 10% of the budget. In most, if not all, of the other states in the Union, this is not an issue. But here in New York, it's becoming increasingly more of an issue. New York City has always gotten away without creating a reserve funds for 2 reasons. The first is that the NY Attorney General's office, which approves all condo offering plans, doesn't require it. The second is that here in NY the argument was made that if the budget ran low, or if a capital improvement was needed, there would be a special assessment to pay for it. Fan/ Fred went along with this, but not anymore.
So most budgets on new developments (though they are faster to change, needing the sales) and existing condo project don't have a reserve line item in the budget. They frequently have a contingency line item, but it doesn't add up to anywhere near 10% of the annual budget.
What do you do? Create a reserve analysis, that's what. You'll have to show that the contingency is enough for the capital improvements without a special assessment to the condo owners. This can be done by aggregating the amount that the contingency will accumulate in the next years before any major improvements or repairs need to be done. This is especially useful with new development where the assumption is that since it's newly built, it will be 10-25 years before the building will require a new roof, exterior work or other major expenses or improvements.
Another hot button is the pre-sales requirement for Fannie Mae approval. This has increased to 70% of the units for most developments. This is coupled with a new math in determining the pre-sales in a building as well. Sponsor held units are now counted, whereas before they were not, also any rental units (here in NYC some apartments in a conversion are rent regulated making it difficult to remove tenants) are now counted. Before they were not. Also any investor owned units are not counted. So what you have left is all of the owner occupied and second home units in a building. That can be tricky for areas like Miami, LA, SF, Vegas and NYC. This is on top of an already down market, so it's reducing the deal flow even more, since many banks will not offer financing in a building that is not approved by Fannie Mae. Even if the mortgage is not being sold to them, it's considered the gold standard for condo / coop approval.
If the building is a ground up new construction and less than 200 units, then it's possible to get it approved at 51% pre sold. If it's a conversion of any size then it's more likely to be 70%. There is a process by which Fannie Mae will do a full review of the building and approve it at a lower pre sale, but generally speaking it needs to be at least 51% pre sold (remember these need to be owner occupied or 2nd home buyers) and have good sales velocity. Also the developer needs to pony up a $1200 application fee along with $30 per unit for the review. There is quite a bit of documentation that is needed as well.
If that wasn't enough, the scrutiny of the building's insurance coverage has also gotten a bit tougher. The Fidelity Bond coverage is a bit more restrictive, also if the building's coverage does not cover an individual unit from the studs in, then the homeowner will need to buy insurance to make up the difference.
Managing Agents don't seem to be stepping up to the plate in this changing world either. They aren't completing questionnaires fully so that the building can be properly assessed. This is despite the fact that in NYC, they charge a fee for its completilon, sometimes as high as $125. They need to understand that they are doing their owners a disservice by not completing the questionnaires and providing as much information as they can to help the approval process along. Everyone in the process understands that it's a hassle, but it's not the man on the street's decision, it's much, much higher up than that.
Sunday, May 31, 2009
HVCC Sucks
Recently New York Attorney General, in an effort to raise his image, fight corruption and save the American consumer from themselves, went to Fan/Fred and created the Home Valuation Code of Conduct that all mortgage originators (big and small) must abide by. On the surface, it sounds great. Greater appraiser independence, less commissioned individual involvement. Without going into how Mr. Cuomo decided that appraiser's were blameless in the recent fraudulent housing sales (it seems that every fraud ring includes at least one), the fact that the one party, the Loan Officer, who knows everyone in the transaction is completely (and I mean completely) removed from the coordination of the appraisal is crazy. Who do you think everyone, buyer, seller, seller's attorney, buyer's attorney, buyer's agent, seller's agent and even in house operations staff is going to call when the appraisal hasn't been scheduled in a timely manner? You got it...the Loan Officer. The one person who literally can do nothing. The one person who doesn't know who the appraiser is, what is their email address or telephone number or any other information. And the one person that the 3rd party vendor (owned by the banks) won't speak to or include in the process even as a spectator.
The break down is in the logistics. Loan Officers are the 3 monkeys in this case (see no, hear no, speak no). And we are the only party who's sole job is the coordinate all the players in the process. I guess Mr. Cuomo didn't think that through went he ran to Fan/Fred with his brave new idea.
Another aspect to the HVCC, is if there is a mistake on the appraisal, say for instance the appraiser noted that the unit appraised was 4B when it should have been 4FB or E4B. We cannot make a quick call to have it changed, nor can we contact the 3rd party vendor to have it changed, no the (currently overworked, can you say refi boom?) operations staff is the only one who can have it changed. And who fields all of the complaints when this isn't done for 3 weeks? You guessed it, the Loan Officer.
I agree with the gist of the HVCC, Loan Officers (including Mortgage Brokers) shouldn't have leverage over appraisers on the valuation of the home. Appraisers have licenses that can be held over their heads (not to mention felony charges) on these issues. But for the Loan Officer not to have access to even the 3rd party vendor to make a correction, make sure the correct phone is on the order, follow up on a order that is taking 4 weeks, is lunacy. Now the pendulum has swung too far to the other side. If we, as consumers, want to have our purchase and refinance transactions close within our lifetimes, we're going to have to have some Loan Officer input.
The break down is in the logistics. Loan Officers are the 3 monkeys in this case (see no, hear no, speak no). And we are the only party who's sole job is the coordinate all the players in the process. I guess Mr. Cuomo didn't think that through went he ran to Fan/Fred with his brave new idea.
Another aspect to the HVCC, is if there is a mistake on the appraisal, say for instance the appraiser noted that the unit appraised was 4B when it should have been 4FB or E4B. We cannot make a quick call to have it changed, nor can we contact the 3rd party vendor to have it changed, no the (currently overworked, can you say refi boom?) operations staff is the only one who can have it changed. And who fields all of the complaints when this isn't done for 3 weeks? You guessed it, the Loan Officer.
I agree with the gist of the HVCC, Loan Officers (including Mortgage Brokers) shouldn't have leverage over appraisers on the valuation of the home. Appraisers have licenses that can be held over their heads (not to mention felony charges) on these issues. But for the Loan Officer not to have access to even the 3rd party vendor to make a correction, make sure the correct phone is on the order, follow up on a order that is taking 4 weeks, is lunacy. Now the pendulum has swung too far to the other side. If we, as consumers, want to have our purchase and refinance transactions close within our lifetimes, we're going to have to have some Loan Officer input.
Sunday, April 19, 2009
Bring back the stated income and 100% mortgage
Though there is an argument (often made by mortgage loan originators) that there must be a minimal risk underwriting box that for stated income and high loant to value products, these loans don't seem to be coming back any time soon.
Self employed borrowers are feeling like victims of banks' current underwriting guidelines when it comes to documenting income. Their Adjusted Gross Income (AGI) is much lower than the money their business brings in. Frequently self employed borrowers taking 2 positions when it comes to what their income is. When they file their tax returns, they use every write-off the IRS allows in order to bring their taxable income to the lowest it can be. That is legal and that is fine, however, know that what is written in the line on the tax return labelled Adjusted Gross Income, is the income that can be used with some slight variations. Often that isn't enough to qualify for a mortgage that the borrower wants.
There can be a few items (paper loss type things) that can be added back to the borrower's income. Items such as, depreciation, and home office use, can be added back to the borrower's income, but other than that, the AGI is the income that is used to qualify self employed borrowers.
Self employed borrowers are feeling like victims of banks' current underwriting guidelines when it comes to documenting income. Their Adjusted Gross Income (AGI) is much lower than the money their business brings in. Frequently self employed borrowers taking 2 positions when it comes to what their income is. When they file their tax returns, they use every write-off the IRS allows in order to bring their taxable income to the lowest it can be. That is legal and that is fine, however, know that what is written in the line on the tax return labelled Adjusted Gross Income, is the income that can be used with some slight variations. Often that isn't enough to qualify for a mortgage that the borrower wants.
There can be a few items (paper loss type things) that can be added back to the borrower's income. Items such as, depreciation, and home office use, can be added back to the borrower's income, but other than that, the AGI is the income that is used to qualify self employed borrowers.
Saturday, April 04, 2009
We Reward The Risk Takers...
I guess the feeling is that we have to. I just finished an article on Forbes about D. Andrew Beal and Beal Bank. He stayed out of the fray during the go-go years from 2004 until 2008, originating no real estate loans. Now his bank is solvent, capitalized and ready to buy loans from other banks who need the $. And of course, there is no TARP money for him, no Fed assistance of any kind. The ratings people thought his model was unsustainable while greenlighting such winners as Lehman, and Bear.
It boils down to who has the most power.
It boils down to who has the most power.
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