If you have ever been through a short sale, you may now be wondering “how long after a short sale can I get a new mortgage?”

In the case of Sharon Johnson-Smith, Academy Mortgage and Steve Alonso were able to get them into a new home with financing only one year after a short sale.

Have you had a short sale in the past and now want to get a mortgage? Contact Steve today to find out how.

Get a Mortgage One Year After a Short Sale

From: Sharon Johnson-Smith
To: Steve Alonso
Sent: Friday, January 13, 2012 11:12 AM
Subject: Endorsement

Hi Steve,

Here is our endorsement – and we mean it sincerely. -Sharon and Pinkie.

—–
And they said it couldnt be done My husband and I began to have our doubts, but Steve Alonso pulled it through.

We are elated about being able to get financing on a home after only ONE year since our short sale closing.

I was particularly doubtful after talking with several other realtors who were sure that it takes 2-3 years after a short sale before any lending institution will finance a mortgage.

I had serious second thoughts about going through with purchasing our new home, after talking with a couple of mortgage brokers who saw it highly improbably we would get financing this year.

However, Steve with his This will be done, attitude, actually did it. Thank you Steve for performing what was considered an impossible feat!

Sharon Johnson-Smith, REALTOR
480-893-0600
Fax:888-400-1956
West USA Realty
sjsmith100@hotmail.com
sjsrealestate.listingbook.com

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Here in Arizona, property flipping can sometimes be considered a sport.  But when it comes to getting financing on a house that has been flipped, there are certain red flags that Underwriters look for. Certain characteristics of a transaction may be red flags that may be indicative of an improper property flip scheme. These characteristics include, but are not limited to:

• Appraisal lacks sufficient analysis of all pertinent offerings or listings for the subject property, the contract of sale for the subject property, and the sales/transfer or listing history of the subject property and comparable sales.
• Comparable sales or listings used in the appraisal report are properties involving the same property seller and/or real estate broker as the subject property in an attempt to create an artificially inflated market.
• Transactions in which the property seller or any other party claims that the property was significantly renovated since being acquired by the property seller but the claimed renovations were not actually performed or cannot be sufficiently documented. Improper transactions often use inflated appraisals that falsely claim to be justified renovations.
  Transactions in which there appear to be unusually large profits for the property‘s market area without appraisal that provides a reasonable explanation and justification for the large increase in property value.
• Transactions in which the property was acquired by the property seller as a part of a distress sale in which the property seller, or a related party was a party to an option contract to purchase the property from the prior for an option price substantially below actual full market value. The option contract and the true market value of the property are typically not fully disclosed to the prior lender.
• Transactions in which the property seller, or an agent representing the seller, arranges or assists in arranging financing, settlement services or the appraisal, including some cases where the property buyer and seller are represent by the same real estate agent or broker (dual agency). Some improper transactions result from collusion between the seller, real estate broker, lender/loan officer, and appraiser to defraud an unwitting buyer.
• Transactions in which the contract seller is not the current owner of record.
• Undisclosed ― simultaneous, double, or back to back closings or escrows.
• Purchase transactions with undisclosed secondary financing, in which part of the purchase price is refunded to the buyer, or is quickly followed by a cash-out refinance. Such payments may or may not be reflected on the HUD-1 Settlement Statement.

Of course there are other things that Underwriters will look for when it comes to property flipping, but at least now you have a good idea of the basics.

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USDA Has Funds Available For Home Financing

There has been a lot of discussion and anticipation as to when Congress would re-appropriate funds for the USDA loan program and when it would come back.   Effective on June 1, 2010, USDA released its program to lenders under new conditions that would affect a homebuyer’s decision.  It will also affect how much buyers can purchase based on their DTI (Debt to Income) ratio.

The following are the major changes to the  USDA Guaranteed Rural Housing Loans program

• First: The USDA Funding Fee is no longer 2.00% (two percent)
• Second: The “NEW” USDA Funding Fee is 3.50% (three and a half percent)
• Third: The GUS System (Guarantee Underwriting System) is currently turned off.  This means that the homebuyer’s qualification will be strictly adhered to the USDA Guidelines.

Until further notice from the USDA, the program will be manually underwritten, meaning the underwriter is responsible for all the checks and balances provided by the USDA’s guidelines.  GUS will not be utilized to determine a homebuyer’s credit & income qualifications.

For more information, please contact us at 480.344.3671

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Loans:  Tighter Lending Restrictions That Affect Real Estate Transactions

The last couple of years have brought with it tighter lending requirements that have prevented many potential homebuyers from qualifying for a home loan.  What you may or may not know is that there has not been one specific period in which these changes have taken place rather it has been at best a dodge ball tournament.  It is a matter of when and at what hour! 

The amount of requirements imposed by the large investors who purchase pools of Mortgage Backed Securities, aka MBS are scrutinizing these pools of loans for what in their eyes are less than desirable borrowers.  The changes are consistently changing weekly, daily and sometimes hourly. 

Despite the efforts by Fannie Mae, Freddie Mac, FHA and the VA to tighten their guideline requirements, the investors have and continue to impose layers of what they believe are an insulation to any unforeseen risk.  These layers are called “Guideline Overlays”.   These so-called “Overlays” have paralyzed parts of the industry and has left many Loan Officers, REALTORS and potential homeowners scrambling to ensure their loan is approved let alone keep the deal in one piece. 

Timing can be everything when it comes to “Overlays”.  It is not uncommon to have a client pre-approved one day to only have him denied at the underwriter’s desk on the next day.   Although it can be complex, the reasons are simple.   The time between a pre-approval and a final approval, a guideline can change within a moment’s notice, forcing the underwriter to deny the loan.  We use the word “Force” since the same underwriter very well would have approved the loan before the mandate.  The financial goal behind an underwriter’s decision is to ensure the salability of the loan.  Who is going to buy this loan on the secondary market (Wall Street)?  Thus the lender and underwriter is forced to comply to the investor’s overlay requirement. 

Overlays have definitely made the mortgage process of obtaining and approving a home loan more stressful and also have limited the access to home loans to the consumer. 

Example of overlays:

FHA says:                           

A borrower must have a minimum FICO score of 580

Investor says:

We will not buy any loan that has less than a 620 FICO score

FHA says:

We are waiving the 90 day seasoning rule.

Investors say:                   

We will not buy any loan that exceeds 120% of the property investors purchase price

Some investors say:      

We will buy the loan so long there are (2) two independent appraisals conducted that support each others findings.

Fannie Mae says:            

We are limiting the DTI (Debt to Income) Ratios to 50% Max.

Investors say:                   

We are limiting the DTI to a 45% Max.

Some investors say:      

We will allow up to 50% DTI, only if they have a 720+ FICO Score

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For anyone who has bought a home with the intention of flipping for profit…. or would-be FHA home buyer that has fallen in love with a property that is being flipped by an investor, you know well that the FHA anti-flipping rule has caused some grief for you.

Up until now, if you were a buyer, that was obtaining FHA financing to purchase a home, you wouldn’t be able to make an offer on a property that was being sold by an investor (flipper), unless that investor had owned the property for at least 90 days.

If you were that investor that recently acquired a property, and turned around to list it for sale, you only had two types of buyers that you could market to: Conventional financed buyers and cash buyers.

Unfortunately, most property flipping happens within the price range of the FHA home buyer, and with FHA accounting for more than 60% of financing transactions in many markets, there was headaches for both sides.

This has changed.

For all purchase contracts dated after February 1st, 2010, FHA has waived the flipping rule.  Private Sellers and Investors can now sell their properties to FHA buyers without having to wait 90 days.  There are a few rules to keep in mind, but believe me, these are fair and this is good news.

• The transaction must be Arms-Length.  There cannot be an identity of interest between the buyer, seller, or any other parties participating in the transaction.
• In cases where the sales price is 20% or greater than the seller’s acquisition, the lender must justify the increase in value with supporting documentation of renovation, repair and rehabilitation work.
• If no such work was performed the appraiser must provide an appropriate explanation of the increase in property value since the prior title transfer.
• The lender must order a property inspection and provide that report to the home buyer. Buyer’s may be charged for the cost of this inspection.

This is brand new and developing, so we wanted to make sure that you got the good news before you started your weekend.  If you have any questions regarding this, or anything else, please feel free to contact me.

More details from HUD

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Arizona FHA Streamline Now Requires Minimum 620 Credit Score

Yesterday, it was announced that virtually all lenders in the US now require a minimum credit score of 620 for the Arizona FHA Streamline refinance loan program. TB&W made the announcement that they were moving their minimum credit score requirement for all Arizona FHA streamline mortgage refinance loans to 620.

Details Of The Announcement of New Credit Score Requirements For FHA Streamline Refinance Loans

FHA Streamlines (credit and non-credit qualifying) and VA IRRRL’s with Credit Scores below 620 must be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered to TB&W within 10 days after closing Loans in this category locked on and after July 13, 2009 will require a minimum FICO of 620. Clients will be required to obtain a 3 Repository credit report and utilize the standard method of determining qualifying FICO.

Any Conventional, FHA (including Streamline Refinance), or VA (including IRRRL) loan that exceeds $417,000 with a Credit Scores below 660 must be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered to TB&W within 10 days after closing Loans in this category locked on and after July 13, 2009 will require a minimum FICO of 660. Clients will be required to obtain a 3 Repository credit report and utilize the standard method of determining qualifying FICO.

In addition, any previously announced minimum Credit Score requirements that TB&W has put into place, that did not have a specified Closing date, will be required to be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered within 10 days after closing. Therefore, any loan, regardless of whether it may be locked, registered or approved, that has a qualifying credit score below 620 (with the exception of those loans that have specified higher FICO requirements) must CLOSE (Note Date) no later than September 15, 2009.

TB&W will continue to allow non-traditional credit for those borrowers with no useable credit for the loan programs that allow the use of such credit in accordance with published guidelines. TB&W is fully aware that these limitations may result in the inability for a particular loan to meet these specified deadlines. TB&W will work as diligently as possible to accommodate all loans in the pipeline. We will be unable to grant any extensions or exceptions to these requirements.

Arizona FHA Streamline Refinance: What This Announcement Means

Although the FHA guidelines do not officially require a minimum credit score, virtually all lenders (and all of the major lenders) in the US are now requiring a minimum of a 620 credit score. TB&W was the last major US lender who was not requiring a minimum credit score. There may still be a few smaller lenders who are still able to do a Arizona FHA refinance streamline loan with no minimum credit score, so be sure to ask your loan officer in order to know for sure. The rules change all the time!

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Yesterday HUD issued Mortgagee Letter 2009-15 which gave official guidance on how exactly you can turn the 8000 Tax Credit for new home buyers into cash to help you cover your closing costs and possibly part of your down payment.

Home Buyer Tax Credit Monetization: How To Claim The 8000 Tax Credit

While many people have many questions, I decided to cover the most popular ones that I hear.  What people are asking me about the first time home buyer tax credit being used as a down payment:

What Do I Fill Out To Claim The 8000 Tax Credit?

In order to claim your tax credit, you will need to obtain the IRS Form 5404 from the IRS.gov website.

Can You Assign The Tax Credit To Someone Else?

The IRS will only issue the tax credit to the taxpayer, not a third party. You cannot assign the claim for this credit to a third party.

Can You Use The Tax Credit For Your Down Payment?

The hot topic recently is “can I use the tax credit for my down payment?” and the answer to that question is technically yes – but – you cannot use the tax credit to cover the first 3.5% of your down payment, you must come up with that on your own or have it gifted to you from a blood relative.

Once you come up with the initial 3.5% down payment that is required by FHA, if you would like to use the 8000 tax credit to add to that down payment, that is allowed.

Who Will Provide The Bridge Loan / Monetization Of The Tax Credit?

FHA will permit FHA lenders and other approved government organizations or non-profits to issue you a bridge loan in exchange for a second lien on the property.

If I Take This Bridge Loan, Do I Have To Make Payments?

You might, it will depend on who you get the money from.

If payments on the loan are going to be required on the loan before 36 months, then your monthly payment will have to be considered in your debt ratios when qualifying for your first mortgage.

If payments are not required by the lender before 36 months and you decide to just “not pay” by the deadline you agreed on, the loan will convert into a “soft second” mortgage – at which time principal and interest payments will start to be required.

Is It Possible To Get Cash Back At Closing?

No. The tax credit advance, when combined with getting an FHA loan may not result in you getting any “cash back” when buying the home.

How Much Will Using Your Tax Credit For Down Payment Assistance Cost?

Any costs to you from the lender or organization who “purchase” your tax credit are supposed to be “reasonable”. FHA has even went further on this issue – they have said that any amount charged to you over 2.5% of the anticipated credit are considered excessive.

As an example, if you were going to receive a $6,000 refund, after all fees associated with the transaction, it should not cost you more than $5,850.

If You Wish To Use The $8000 Tax Credit For A Down Payment or Closing Costs:

If you are planning on using the 8000 tax credit for part of your down payment or closing costs, be ready for these things to happen when getting your file ready:

1. You will be required to complete the IRS Form 5405
2. The lender will contact your employer and review your pay stubs to confirm there are no outstanding garnishments
3. The lender will ensure that you have no unpaid student loans or other debts that could offset the 8000 tax credit – including IRS debts
4. The lender will have to validate that all requirements to receive the tax credit have been met

Other Resources:

HUD Official Announcement

Official Mortgagee Letter 2009-15

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When you are in the process of getting a mortgage, at some point your loan officer will “lock” your loan. When your loan is locked, essentially what happens is that your loan officer has let the lender know that you have completed the initial paperwork for a loan and that you intend to close it within the lock time frame.

Each lender has different lock time frames – but typically they are in 10,15,30,45 or60 day increments.

What does it mean to extend a lock?

It means that for whatever reason, when your loan officer initially locked the rate, he needs longer to fund your loan.

Say for example that when your loan officer initially locked your loan, he locked it for 30 days, but now it has been 28 days and you are still 7 days away from your loan funding.

What happens is that your loan officer will contact the “lock desk” at the lender and extend your lock for as long as needed.

And the longer the lock is extended, the more money it costs – usually.

Does it cost money to extend a lock?

Yes and no.

Yes, it costs money, but under most circumstances that I have seen the loan officer just ends up “eating” the cost. Not always, but most of the time. I guess it only seems right – heck, the loan officer is the one who recommended how long to lock your loan in the first place.

So if your loan officer tells you that it will cost you money to extend your lock and it wasn’t because of anything you did – email him this article and have him call me for a ridicule session for wanting to charge you for his screw up.

Those calls are always fun.

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I always knew it was a fact, but I chose to leave it somewhere deep in the dark recesses of my mind in places I don’t like to shine the light on very often.

My adventure of torturing my boss using the Zillow mortgage marketplace started shining a strobe light on the problem, but I could still remain “enough in the dark” that I was still comfortably numb.

And then my friend Brian Brady did it. He brought up the words fiduciary relationship.

And now the light is bright in what used to be a deep, dark corner of my mind.

“Me Inc.”

If you are a loan officer, you are essentially a one man entity. You are in the customer service business and the relationship is between you and your customer – no one else.

If you actually have a boss, chances are that he doesn’t really care about anything except for you producing loans. If you think he does, go ahead and try not producing for a while.

Most likely, you are a 100% commission employee who doesn’t get paid unless you actually fund a loan. If you do get a base salary, it is likely just enough for your employer to cover their minimum wage liability because your company has figured out that this is the best way to reduce their exposure to the minimum wage laws — and I wouldn’t count on a raise anytime soon.

Which means that you absolutely, positively have no responsibility for company loyalty, teamwork, company stability or company goals.

You are responsible for getting your customer the best deal possible on their mortgage and charging them enough to make a living at it.

That’s it.

I have went over the different types of loan officers and some of the ways that loan officers are paid before. Both of these are important, but in today’s competitive, transparent market that Zillow’s mortgage marketplace is helping to create, they probably take a backseat to one other topic:

Do you as a loan officer have access to direct investor pricing?

If you do, congratulations. You are probably in the best situation that you can be in. Whatever the big investors are paying on any given day, you are aware of any “holdbacks” that your company is taking and you can be competitive with the other loan officers in a transparent marketplace.

If you don’t have access to direct investor pricing, you are at a disadvantage to those loan officers who do – possibly a severe disadvantage.

Consider these two rate sheets. Guess which one is the one where loan officers have access to direct investor pricing?

Now consider these top Zillow Mortgage Marketplace lenders:

The only way that John, Greg, Robert, John or Kat is able to have this much success on Zillow’s mortgage marketplace is to have the best service at the best price for any given mortgage product. Secondary marketing managers also call this best ex (short for best execution).

I have never talked with any of these loan officers, but I wouldn’t be surprised if many of the top lenders on Zillow don’t have direct access to investor pricing… and if they don’t, they are at a minimum leaving tens or even hundreds of thousands of dollars on the table that they could either keep for themselves or pass on to their clients in savings.

In simple terms, secondary marketing departments across the US are “making” money from loan officers and customers and can easily be cut out if the loan officer knows where to look.

People are used to shopping around for the best deal. People on Zillows mortgage marketplace shop for mortgage deals. People on Nextag shop for the best deal on a bigscreen TV. People shop for car insurance rates.

Shouldn’t you shop around for somewhere that you can get direct access to investor pricing?

Michael Dell did it with computers and he was called a revolutionary and built a company out of it.

You as a loan officer have the chance to find a place to work that provides direct access to investor pricing and become locally known as the loan officer with the best rates because you “go direct”.

Give great service and have direct investor pricing and you can make a living on Zillow’s mortgage marketplace because in their transparent marketplace, you will shine like a bright star if you have those two things.

Or you could choose to leave the light off in that deep, dark corner of your mind and choose not to think about it. Heck, I did this for years.

But if you ever need to borrow a flashlight to look around a little when it seems to you that all of the lights are turned off, call me.

You can borrow mine.

Note: This was originally published on Zillow’s Mortgages Unzipped — but I figured I would try to help as many people as I could understand the concept of direct investor pricing, so re-posted it here.

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Ah, the mortgage business.

If you were to meet me for lunch or dinner, sit down with me and chat about the mortgage business and how things are today, at some point in the conversation the topic of “HVCC” (Home Valuation Code of Conduct) would surely come up.

When discussing the topic of HVCC, these are just a few of the possible reactions that you might get from anyone who works as a Realtor or Loan officer and is dealing with HVCC:

• Gagging
• Choking
• Waving arms wildly
• Going into a tirade

Ok, sure — there may be some who are happy about this, but I just haven’t met anyone who actually has something positive to say about it.

In short, the HVCC takes away the ability of the loan officer to order an appraisal for your loan. Currently if you have an FHA loan, the loan officer can still order the appraisal, but I think it isn’t too far fetched to think that someday that may not be possible any longer and all appraisals will be ordered through an Appraisal Management Company. In this case a mortgage bond may just be your best bet.

Appraisal Management Companies are not “bad” per se – but I can assure you that customer service is not really their cup of tea. AMC? Think DMV. As in Department of Motor Vehicles.

Here is a must-see video for anyone in the Real Estate field who is still a little fuzzy on how the HVCC will impact them:

If you were to ask me about my my personal opinion on the HVCC over our lunch break while we were eating lunch? I would ask you this question:

Have you ever arrived at the scene of an auto accident before the ambulance/fire trucks arrived? Remember that feeling you had in your stomach?

Now you know how I feel when you ask me questions about HVCC.

UPDATE: My friend Mark Madsen does a great job of explaining it as well — see what he has to say about the HVCC and what impact it may have.

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