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Pure Fitness on Warner and McClintock Sucks!
Sorry guys, this one is not mortgage related but it's necessary.
A little over two years ago, I signed up my wife and I for a membership at the Pure Fitness on Warner and McClintock in Tempe. At the time that I signed up, they were building a new facility in Chandler just minutes from our house. Like many of us, the start of a new year brought the motivation (albeit temporary) to get to the gym more often. The new year special of no sign up fees and knowing that there would be a facility very close to home was enough to get me to sign. Unfortunately, construction stopped on the new facility close to my house and it never opened. I have no problem with Pure Fitness for this.
A couple of months ago, I realized that it had been at least a year since I had gone to the gym. My wife had never gone since we got the membership. By the way, a gym membership is NOT a good gift for your wife for many reasons. So in November, I went in to the facility to cancel our membership. The person at the front desk had me sign the form to cancel and informed me that I could still use the facilities for another 60 days because they required 60 notice for cancellation and I would be charged for December. No problem.
Here's where thing go awry. The person at the front desks says that they will also refund half of the charges since I took the membership because my wife never went into the facility. I thought that was awesome. I did not expect it. Then she says, "oh wait, she didn't come in here but she used a few of our other locations in Chandler and in Mesa." For that reason, now she wouldn't refund anything for my wife's account. This really didn't bother me. My wife never used the other locations, but I didn't expect the money back anyway so I let it go. Besides, how could I prove my wife had never been there? Her computer said my wife had. I told her not to worry about it and lets just cancel. Then I signed the cancellation.
This morning, I pulled up my bank account and saw that I had been charged this month for the membership. And not the usual $19. It was $38. I looked at last month statement and sure enough, there's a charge for $38 in January that I had not noticed (shame on me). I immediately dropped what I was doing and went into the gym to ask them about it. The front desk person pulled up my account and showed me on her screen that I had cancelled in November. I told her that I was still being charged and she argued with me and that I was wrong and was not being charged. Her computer said so. So I went back to my office, printed my bank statement and went back to the gym and got to talk to the condescending and fast talking General Manager Katelin.
Katelin is clearly accustomed to these situations.
Before even asking me why I was there or what my problem was, she went into a barrage of all of the reasons that I was wrong and they were right. First she said that this must be my banks fault. She sees it all the time. It's their way of getting more fees from me.
What?!?! I don't think my bank makes money off of paying bills that are presented to them.
Then she explained that I need to make sure I keep enough money in my account so that it will be their when they take their payment. Ms. Katelin, my account was not overdrawn. I'm not complaining about that. I'm trying to cancel my membership!
Then she informed me that I have to cancel in writing by signing their form. Again, Katelin, I have done that. I did that back in November. She could sense my agitation. Again, I suspect this is not new to her from their customers.
Finally, she went and got the cancellation form that I had signed in November. "Here's your problem!", she said. "You didn't put your wife's name on the cancellation form so we kept her account open". Oh, and the double charge? A group discount did not apply anymore because I cancelled my membership. Nice.
Are you serious?!?! I told them I wanted to cancel both memberships. They filled out the form. I signed it. If they had cancelled BOTH memberships as I had intended, you would not be reading this right now.
The question here is what happened to good customer service? I understand and accept that I should have made double sure that both memberships were cancelled. However, I do not believe that I could have been more clear about wanting that when I went in to cancel. I cannot speak to experiences with other locations of Pure Fitness, but the business practices at the Warner and McClintock location are deceptive and unethical. Legally, I would not have a leg to stand on. I signed a cancellation without my wife's name on it. I get it, but Pure Fitness knew full well that I wanted her membership cancelled also and they chose not to honor that request or help me correct the error on the form.
The part they don't seem to understand is that one day their new facility close to my house will open. Now there is no chance that I will use it. By charging me $38 today for a membership that I cancelled, they have lost the thousands of dollars that I would have paid for a membership when it opens.
The Smooth Loan Process lesson for today: Pure Fitness on Warner and McClintock in Tempe sucks!
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Friday, February 26, 2010
Wednesday, February 24, 2010
The Smooth Loan Process #2010-20
GFE Stands For Gone From Estimate
Back in my day (I love it when my dad says that), GFE stood for Good Faith Estimate. As most of us know by now, the Good Faith Estimate has undergone some changes that are mandated by HUD. The spirit of it was good. The execution is leaving a lot to be desired. The idea is to give the borrower a clear and concise summary of the terms of their new loan. That way there are no surprises at closing and no surprise interest rate changes after closing. Sounds reasonable, right?
Well, sort of. If we assume that the cause of all of the foreclosures in the Country were due to an unclear disclosure of the terms of the loan, then new forms would be warranted. HUD would have you believe this. I would say that's a stretch even for the most cynical of us. Using myself as an example, I have never had a client tell me that they were surprised by their payment or their terms when they got to closing. I have managed to accomplish this using the old GFE. Most other Loan Officers will tell you the same thing.
Maybe it's the Loan Officer and not the form?
For most buyers, the two most important things about their financing is the payment and the total out of pocket cash to close. These are two items that are mysteriously missing from the new GFE. How does that make things more clear?
I know that HUD's intention in mandating the new GFE was to prevent the dishonest loan officers from changing the terms on buyers before they got to closing. Unfortunately, HUD has made it easier for those dishonest loan officers. If we don't have to give you your payment or your total out of pocket costs, then what prevents me from changing the terms (other than ethics)? If the terms changed, how would you know?
The Smooth Loan Process lesson for today: Request an old GFE along with the new GFE from your Loan Officer. The old one is more clear.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Back in my day (I love it when my dad says that), GFE stood for Good Faith Estimate. As most of us know by now, the Good Faith Estimate has undergone some changes that are mandated by HUD. The spirit of it was good. The execution is leaving a lot to be desired. The idea is to give the borrower a clear and concise summary of the terms of their new loan. That way there are no surprises at closing and no surprise interest rate changes after closing. Sounds reasonable, right?
Well, sort of. If we assume that the cause of all of the foreclosures in the Country were due to an unclear disclosure of the terms of the loan, then new forms would be warranted. HUD would have you believe this. I would say that's a stretch even for the most cynical of us. Using myself as an example, I have never had a client tell me that they were surprised by their payment or their terms when they got to closing. I have managed to accomplish this using the old GFE. Most other Loan Officers will tell you the same thing.
Maybe it's the Loan Officer and not the form?
For most buyers, the two most important things about their financing is the payment and the total out of pocket cash to close. These are two items that are mysteriously missing from the new GFE. How does that make things more clear?
I know that HUD's intention in mandating the new GFE was to prevent the dishonest loan officers from changing the terms on buyers before they got to closing. Unfortunately, HUD has made it easier for those dishonest loan officers. If we don't have to give you your payment or your total out of pocket costs, then what prevents me from changing the terms (other than ethics)? If the terms changed, how would you know?
The Smooth Loan Process lesson for today: Request an old GFE along with the new GFE from your Loan Officer. The old one is more clear.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, February 18, 2010
The Smooth Loan Process #2010-19
Loan Modifications Are A Disaster
We want to hear about your successful and not-so successful loan modifications. Let us know what's happened to you so we can spread the word. This is one of the not-so successful stories.
I have a friend named John who purchased his home in February of 2008. Just like the rest of us, he has seen the value of his home decrease since he purchased it. He is an a fixed rate loan and is able to afford the payments. In March of 2009, John contacted his loan servicer to inquire about a modification. He had heard that the HAMP program had been instituted and he wanted to see if he would qualify for it.
As it should have happened, John's mortgage servicer put him on the trial payments for three months while they processed his application. To his credit, John knew there would be the possibility that the modification would not be approved so he saved the money that would have gone to the regular payment while he was making the reduced trial period payment.
Here's where things go awry. The trial period is supposed to be three months. John's trial period ended up extending to December. Nine months total. His mortgage company stated that the back log of files prevented them from processing things faster. No problem, that makes sense. John still continued to bank the money that would have gone to the regular payment.
Then John called to check the status in January as he had done every week for the past nine months, by the way. That is when he was informed that the modification had been declined. He never received a letter or any correspondence from the servicer. He asked them what he should do and was told to continue making the reduced payment for February. He was told that even though he was declined for the HAMP program, the servicer would still try to get him approved on their own "in-house" modification.
Two weeks later, he called to check status again. This time he was told that he was also declined for the in-house modification but they were working on other options. John was done with it. He asked that his application be withdrawn and asked for the amount of money he would need to send to bring the loan current according to the original terms. Remember, he saved the money just in case this happened. The response to his question was shocking. The servicer told him that they could not tell him how much money he owed because they have started foreclosure proceedings! He would have to talk to the attorneys that are handling the foreclosure.
In a nutshell, John applied for the program and supplied every thing that was requested from him and made the payments he was instructed to make. In the end, he did not get his modification but he does have ruined credit (see episode #2010-9 for more on that http://bit.ly/2010-9), a foreclosure notice on his house and thousands of dollars in attorney and late fees.
Now, I'm no fancy big city modification negotiator, but it seems to me that the servicer should have sent a letter that said something to the effect of "Sorry your application was declined. Please send us the money you owe. We'll give you a few days to send it."
If they had done that, this episode would have been about the new Good Faith Estimate. Now you have to wait until tomorrow for that.
Let me know how your modification is going.
The Smooth Loan Process lesson for today: HAMP is only 7% successful. Know what you're getting before you apply.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
We want to hear about your successful and not-so successful loan modifications. Let us know what's happened to you so we can spread the word. This is one of the not-so successful stories.
I have a friend named John who purchased his home in February of 2008. Just like the rest of us, he has seen the value of his home decrease since he purchased it. He is an a fixed rate loan and is able to afford the payments. In March of 2009, John contacted his loan servicer to inquire about a modification. He had heard that the HAMP program had been instituted and he wanted to see if he would qualify for it.
As it should have happened, John's mortgage servicer put him on the trial payments for three months while they processed his application. To his credit, John knew there would be the possibility that the modification would not be approved so he saved the money that would have gone to the regular payment while he was making the reduced trial period payment.
Here's where things go awry. The trial period is supposed to be three months. John's trial period ended up extending to December. Nine months total. His mortgage company stated that the back log of files prevented them from processing things faster. No problem, that makes sense. John still continued to bank the money that would have gone to the regular payment.
Then John called to check the status in January as he had done every week for the past nine months, by the way. That is when he was informed that the modification had been declined. He never received a letter or any correspondence from the servicer. He asked them what he should do and was told to continue making the reduced payment for February. He was told that even though he was declined for the HAMP program, the servicer would still try to get him approved on their own "in-house" modification.
Two weeks later, he called to check status again. This time he was told that he was also declined for the in-house modification but they were working on other options. John was done with it. He asked that his application be withdrawn and asked for the amount of money he would need to send to bring the loan current according to the original terms. Remember, he saved the money just in case this happened. The response to his question was shocking. The servicer told him that they could not tell him how much money he owed because they have started foreclosure proceedings! He would have to talk to the attorneys that are handling the foreclosure.
In a nutshell, John applied for the program and supplied every thing that was requested from him and made the payments he was instructed to make. In the end, he did not get his modification but he does have ruined credit (see episode #2010-9 for more on that http://bit.ly/2010-9), a foreclosure notice on his house and thousands of dollars in attorney and late fees.
Now, I'm no fancy big city modification negotiator, but it seems to me that the servicer should have sent a letter that said something to the effect of "Sorry your application was declined. Please send us the money you owe. We'll give you a few days to send it."
If they had done that, this episode would have been about the new Good Faith Estimate. Now you have to wait until tomorrow for that.
Let me know how your modification is going.
The Smooth Loan Process lesson for today: HAMP is only 7% successful. Know what you're getting before you apply.
Harold Perkins
The Mortgage Advantage
480-831-1588
Harold@HaroldPerkins.com
Sunday, February 7, 2010
The Smooth Loan Process #2010-17 (Super Bowl Edition)
The Economy Needs the Colts to WinWe all know that the Denver Broncos are the only team in the NFL worth anybody's attention. Unfortunately, they are not in the Super Bowl this year so I will be rooting for the Colts. Looking back over the past 10 years, when the AFC team wins the Super Bowl, interest rates decline in the week following the game. It's true, check it out. When the NFC team wins, interest rates increase. We all like low interest rates, so we have to root for the Colts.
For the record, I don't like the Colts but I'll have to root for them for the greater good.
Tomorrow will be the 10th time the Big Game has been played in Miami. The AFC Team has won six of the previous nine games in Miami including twice by the Colts. History is on the Colts side in this one.
Other teams that will lower interest rates if they win are the Philadelphia Flyers, the Phoenix Suns and the Arizona Diamondbacks. I bet you didn't know that.
The Smooth Loan Process lesson for today: Root for the Colts if you want lower interest rates.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
For the record, I don't like the Colts but I'll have to root for them for the greater good.
Tomorrow will be the 10th time the Big Game has been played in Miami. The AFC Team has won six of the previous nine games in Miami including twice by the Colts. History is on the Colts side in this one.
Other teams that will lower interest rates if they win are the Philadelphia Flyers, the Phoenix Suns and the Arizona Diamondbacks. I bet you didn't know that.
The Smooth Loan Process lesson for today: Root for the Colts if you want lower interest rates.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Thursday, February 4, 2010
The Smooth Loan Process #2010-16
The Seller Does Not Own The House I'm Buying
One of my favorite shows on TV is Flip That House. Reality TV is great for watching other people's train wrecks of lives. The show features investors that "fix and flip" houses. In our current real estate market, the flippers are a key component to recovery. Even HUD has realized how important the flippers are to the Real Estate Market by temporarily waiving their anti-flipping rule a few weeks ago (visit my 1/17/10 episode for more info).
Just like everything, there are good flippers and there are bad.
First, the good. An investor goes to the public auction or trustee sale and purchase a foreclosed property well below its market value. The investor remodels, repairs or upgrades the home and sells at the current market value. If it's done well, the investor makes money and the buyer gets a like new home at a fair price. Win-win. As a lender, we have no problem with this because the increase in price to the buyer can be justified and accounted for in the improvements that have been done to the property.
Another example is the investor that purchase the property as a short sale. The investor finds an owner who is underwater on his mortgage. The investor helps negotiate the short sale below market value with the sellers mortgage company. While the short sale is being negotiated, the investor markets the property for sale to another buyer at market value. The investor uses his own money to complete the short sale, then gets his money back along with his profit when the buyer closes. In this example, the investor is marketing the property and probably has a contract to sell before he owns it. Normally, we would not like this. After all, you cant sell something you don't own. But if it's done properly, the contract with the buyer will not be executable until the investor closes on the initial transaction. The seller sells the house rather than going to foreclosure, the investor makes a profit, and the buyer gets the home at a fair price. Win-win-win. Well, sort of a win to the seller. He would still have to deal with a short sale on his credit.
Now the bad. An investor that purchases a property at market value and does very little or no improvements to the property and sells it at a higher price. Lenders will have a problem with that. An increase in price has to be justified for us to lend on it.
Or the short sale investor that uses his buyer's loan proceeds to pay off the original seller. Lenders are not okay with this. Purchase mortgages can only be used for the purchase of the home. If the investor tries to use the buyer's money to close on his transaction, then not only are we financing the price of the home, we are also financing the investors closing costs and profit. That's not acceptable to a lender. The house is the collateral for the loan. Not the investor profit and costs.
The Smooth Loan Process lesson for today: Make sure the seller owns the house you are purchasing before you go to closing.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
One of my favorite shows on TV is Flip That House. Reality TV is great for watching other people's train wrecks of lives. The show features investors that "fix and flip" houses. In our current real estate market, the flippers are a key component to recovery. Even HUD has realized how important the flippers are to the Real Estate Market by temporarily waiving their anti-flipping rule a few weeks ago (visit my 1/17/10 episode for more info).
Just like everything, there are good flippers and there are bad.
First, the good. An investor goes to the public auction or trustee sale and purchase a foreclosed property well below its market value. The investor remodels, repairs or upgrades the home and sells at the current market value. If it's done well, the investor makes money and the buyer gets a like new home at a fair price. Win-win. As a lender, we have no problem with this because the increase in price to the buyer can be justified and accounted for in the improvements that have been done to the property.
Another example is the investor that purchase the property as a short sale. The investor finds an owner who is underwater on his mortgage. The investor helps negotiate the short sale below market value with the sellers mortgage company. While the short sale is being negotiated, the investor markets the property for sale to another buyer at market value. The investor uses his own money to complete the short sale, then gets his money back along with his profit when the buyer closes. In this example, the investor is marketing the property and probably has a contract to sell before he owns it. Normally, we would not like this. After all, you cant sell something you don't own. But if it's done properly, the contract with the buyer will not be executable until the investor closes on the initial transaction. The seller sells the house rather than going to foreclosure, the investor makes a profit, and the buyer gets the home at a fair price. Win-win-win. Well, sort of a win to the seller. He would still have to deal with a short sale on his credit.
Now the bad. An investor that purchases a property at market value and does very little or no improvements to the property and sells it at a higher price. Lenders will have a problem with that. An increase in price has to be justified for us to lend on it.
Or the short sale investor that uses his buyer's loan proceeds to pay off the original seller. Lenders are not okay with this. Purchase mortgages can only be used for the purchase of the home. If the investor tries to use the buyer's money to close on his transaction, then not only are we financing the price of the home, we are also financing the investors closing costs and profit. That's not acceptable to a lender. The house is the collateral for the loan. Not the investor profit and costs.
The Smooth Loan Process lesson for today: Make sure the seller owns the house you are purchasing before you go to closing.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Wednesday, February 3, 2010
The Smooth Loan Process #2010-15
We'll Just "Say" I'm Going to Live There
One of my favorite Harold-isms is "If it doesn't make sense, it's probably not true". This came to mind the other day when my wonderful 13 year told me that the dog was the one the unlocked himself from his kennel, opened the freezer, ate a piece of chocolate, closed the freezer then locked himself back in his kennel. My son actually said this with a straight face. I like that the dog remembered to close the freezer.
Well, that doesn't make sense.
Same goes for whether your property that your purchasing is going to be owner occupied, second/vacation home or an investment property. Owner occupied properties get the best terms. Investment properties will require a larger down payment, higher closing costs and higher interest rate than the owner occupied properties. Second homes fall in between.
Statistics show that owner occupied loans have a lower default rate than the other two. It's in the bank's interest to make sure that if someone says they will live in the property, all of the provided documentation will support that. There are those people out there (Loan Officers included) that will try get better terms on the investment property they are purchasing by saying that it will be owner occupied.
First, the definitions. Owner occupied is just that. The person/people on the loan will actually live in the property as their primary residence. Technically, only one person on the loan has to live in the property. For example, parents co-signing for their kids. The parents are not living in the house but it is still owner occupied because the kid, who is on the loan also, is living in the house.
Second home is a home that is used by the owner to live in but not their primary residence. The general rule of thumb is that a second home will be located in a different metro area from the primary residence. In Arizona, it makes sense to have a primary residence in Phoenix and a second home in Flagstaff. It does not make sense to have a primary in Chandler and a second home in Glendale. Same metro area.
Investment is any property that will not be occupied by the owner. A property to be rented is obviously an investment property. Less obvious is a parent that buys a house for the kid to live in but the kid is not on the loan. This is an investment property even though it's family.
The bank underwriter is going to clue in on the intended occupancy of the property by the documentation that is required for the loan. For example, the source of your down payment. The source of the down payment is the single biggest indicator of your intent to occupy. If your down payment comes from the sale of your current home or from your savings, you are probably going to occupy. If your down payment comes from "some guy" who is not family, it's going to be questioned. Mysterious down payment is not normal for owner occupied homes so it doesn't make sense.
Another example is the person that "says" there are relocating from another State. But he does not have a new job or family or anything in the new State that would motivate him to move. That doesn't make sense. The address on your tax returns, w-2's, bank statements, pay stubs and driver's license can all be indicators of what the actual intent to occupy is going to be.
Of course, these are all just indicators and every scenario is different. Ultimately, if you tell the truth, you'll be fine.
The Smooth Loan Process lesson for today: If it doesn't make sense, then it's probably not true.
Bonus Lesson: You don't have to have a good memory if you tell the truth (I say that to my son all the time too!).
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
One of my favorite Harold-isms is "If it doesn't make sense, it's probably not true". This came to mind the other day when my wonderful 13 year told me that the dog was the one the unlocked himself from his kennel, opened the freezer, ate a piece of chocolate, closed the freezer then locked himself back in his kennel. My son actually said this with a straight face. I like that the dog remembered to close the freezer.
Well, that doesn't make sense.
Same goes for whether your property that your purchasing is going to be owner occupied, second/vacation home or an investment property. Owner occupied properties get the best terms. Investment properties will require a larger down payment, higher closing costs and higher interest rate than the owner occupied properties. Second homes fall in between.
Statistics show that owner occupied loans have a lower default rate than the other two. It's in the bank's interest to make sure that if someone says they will live in the property, all of the provided documentation will support that. There are those people out there (Loan Officers included) that will try get better terms on the investment property they are purchasing by saying that it will be owner occupied.
First, the definitions. Owner occupied is just that. The person/people on the loan will actually live in the property as their primary residence. Technically, only one person on the loan has to live in the property. For example, parents co-signing for their kids. The parents are not living in the house but it is still owner occupied because the kid, who is on the loan also, is living in the house.
Second home is a home that is used by the owner to live in but not their primary residence. The general rule of thumb is that a second home will be located in a different metro area from the primary residence. In Arizona, it makes sense to have a primary residence in Phoenix and a second home in Flagstaff. It does not make sense to have a primary in Chandler and a second home in Glendale. Same metro area.
Investment is any property that will not be occupied by the owner. A property to be rented is obviously an investment property. Less obvious is a parent that buys a house for the kid to live in but the kid is not on the loan. This is an investment property even though it's family.
The bank underwriter is going to clue in on the intended occupancy of the property by the documentation that is required for the loan. For example, the source of your down payment. The source of the down payment is the single biggest indicator of your intent to occupy. If your down payment comes from the sale of your current home or from your savings, you are probably going to occupy. If your down payment comes from "some guy" who is not family, it's going to be questioned. Mysterious down payment is not normal for owner occupied homes so it doesn't make sense.
Another example is the person that "says" there are relocating from another State. But he does not have a new job or family or anything in the new State that would motivate him to move. That doesn't make sense. The address on your tax returns, w-2's, bank statements, pay stubs and driver's license can all be indicators of what the actual intent to occupy is going to be.
Of course, these are all just indicators and every scenario is different. Ultimately, if you tell the truth, you'll be fine.
The Smooth Loan Process lesson for today: If it doesn't make sense, then it's probably not true.
Bonus Lesson: You don't have to have a good memory if you tell the truth (I say that to my son all the time too!).
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Tuesday, February 2, 2010
The Smooth Loan Process #2010-14
Big, Big Fraud From A Big, Big Bank
From the files of "I can't make this stuff up". A few months ago, we had a client that was purchasing a new build from one of the big builders that you have heard of. The buyer's best loan option was FHA. The FHA appraisal was done on the property and it came in $3000 less than the purchase price. When the buyers requested that the sales price be reduced to the appraised value, the builder informed them that the reason the appraisal came in low was because they used the wrong lender.
What?!?! It seems that the builder's opinion was that we intentionally influenced to the appraiser to bring the value in low. As wonderful as I think I am, I do not have the ability to change sales data in the area to influence the comps. That would be illegal. And for what? An extra $30 on my commission? I don't think so. I'll switch to domestic beer to save the money instead.
Then the buyers were told that if they switch their loan to the Builder's preferred lender which is a big, big bank that you have heard of, then they could "make sure" the appraisal comes in at the sales price. Seriously! So the buyers have just been told that Builder will do the very thing that they accused us of doing, but they'll do it better.
Here's the good part. FHA and HUD have systems in place to prevent this kind of thing from happening. Once an FHA appraisal is done, it stays with the property for 120 days. This is tracked with case numbers that are specific to the property. The borrower has the right to change lenders but the old lender has to transfer the case number to the new lender in order for the transaction to be completed.
We were never asked to transfer the case number, but the transaction has closed now with the big, big bank that you have heard of. How did they do this?
This big, big bank that you have heard of issued a new case number so that HUD would not be aware of the existing FHA appraisal. When they issued the case number they used a DIFFERENT property. Processed the appraisal and loan for the WRONG property. Then at closing, switched the property address on the closing documents so that it was correct for the buyers.
All of this information is available through public records and FHA Connection.
Wow! All of this over $3000. I don't think that the buyers knowingly participated in this, but they are involved now. Unfortunately, they did not have a Realtor representing them to point out that it doesn't make sense to use a lender that will "make sure" the appraisal comes in where it needs to.
The ironic thing to me is that this all happened at the same time that I was taking my licensing class in ethics. The same class that the big, big bank Loan Officers do not have to take because our government feels that they are big enough to monitor themselves.
The Smooth Loan Process lesson for today: Fraud is the worst of all the F words.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
From the files of "I can't make this stuff up". A few months ago, we had a client that was purchasing a new build from one of the big builders that you have heard of. The buyer's best loan option was FHA. The FHA appraisal was done on the property and it came in $3000 less than the purchase price. When the buyers requested that the sales price be reduced to the appraised value, the builder informed them that the reason the appraisal came in low was because they used the wrong lender.
What?!?! It seems that the builder's opinion was that we intentionally influenced to the appraiser to bring the value in low. As wonderful as I think I am, I do not have the ability to change sales data in the area to influence the comps. That would be illegal. And for what? An extra $30 on my commission? I don't think so. I'll switch to domestic beer to save the money instead.
Then the buyers were told that if they switch their loan to the Builder's preferred lender which is a big, big bank that you have heard of, then they could "make sure" the appraisal comes in at the sales price. Seriously! So the buyers have just been told that Builder will do the very thing that they accused us of doing, but they'll do it better.
Here's the good part. FHA and HUD have systems in place to prevent this kind of thing from happening. Once an FHA appraisal is done, it stays with the property for 120 days. This is tracked with case numbers that are specific to the property. The borrower has the right to change lenders but the old lender has to transfer the case number to the new lender in order for the transaction to be completed.
We were never asked to transfer the case number, but the transaction has closed now with the big, big bank that you have heard of. How did they do this?
This big, big bank that you have heard of issued a new case number so that HUD would not be aware of the existing FHA appraisal. When they issued the case number they used a DIFFERENT property. Processed the appraisal and loan for the WRONG property. Then at closing, switched the property address on the closing documents so that it was correct for the buyers.
All of this information is available through public records and FHA Connection.
Wow! All of this over $3000. I don't think that the buyers knowingly participated in this, but they are involved now. Unfortunately, they did not have a Realtor representing them to point out that it doesn't make sense to use a lender that will "make sure" the appraisal comes in where it needs to.
The ironic thing to me is that this all happened at the same time that I was taking my licensing class in ethics. The same class that the big, big bank Loan Officers do not have to take because our government feels that they are big enough to monitor themselves.
The Smooth Loan Process lesson for today: Fraud is the worst of all the F words.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Monday, February 1, 2010
The Smooth Loan Process #2010-13
Debt Ratios--The Most Exciting Part of Your Application
Actually, debt ratios are not very exciting at all. They are important though, especially in this new age of mortgage financing. By new age I mean fully documented loans since the demise of the three Russian sisters (SIVA, SISA and NINA).
These days (just like the old days, by the way), we have to verify that your income will support the house payment along with your other debts. Every loan program has it's guidelines as to what the debt ratios should be. In most cases, the guidelines can be expanded based on the overall strength of the borrower. There are two kinds of debt ratio to talk about. Front-end and Back-end. The front ratio is the percentage of total gross monthly income that is being used for the monthly house payment. The house payment is principal and interest, property taxes, homeowners insurance, mortgage insurance (if applicable) and HOA. The back is the percentage of total gross monthly income that is being used for all monthly debt.
The monthly debts that are considered in the ratios are the minimum monthly payments on credit cards, student loans, auto loans, personal loans and alimony or child support to name a few. Things like phone, insurance or utilities are not considered in the ratios. Essentially, if it's a loan of some sort or payments ordered by a court, it's going to count in your debt ratios.
Guidelines for FHA are 31/43. Front ratio of 31 and back ratio of 43. Some very strong borrowers get approved up to a back ratio of 55, but that is rare these days. 50 is pretty much the reality of things now.
VA and USDA loans are 29/41. Again 50 is pretty much the max for a very strong borrower.
Conventional loans are 28/36. With less than 20% the loan will not be approved if the back ratio is over 41% in Arizona. The MI companies will not allow it. With 20% down or more, 55 back ratio is the max.
These are just guidelines. Nothing is set in stone and there may be strategies to lower your debt ratio to help with qualifying. Please dont assume that you will not qualify if you think your debt ratios are higher than 43. Call your Loan Officer and have him/her take a look.
The Smooth Loan Process lesson for today: Debt ratios are just one piece of the puzzle. Talk to your Loan Officer to get the full picture.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
Actually, debt ratios are not very exciting at all. They are important though, especially in this new age of mortgage financing. By new age I mean fully documented loans since the demise of the three Russian sisters (SIVA, SISA and NINA).
These days (just like the old days, by the way), we have to verify that your income will support the house payment along with your other debts. Every loan program has it's guidelines as to what the debt ratios should be. In most cases, the guidelines can be expanded based on the overall strength of the borrower. There are two kinds of debt ratio to talk about. Front-end and Back-end. The front ratio is the percentage of total gross monthly income that is being used for the monthly house payment. The house payment is principal and interest, property taxes, homeowners insurance, mortgage insurance (if applicable) and HOA. The back is the percentage of total gross monthly income that is being used for all monthly debt.
The monthly debts that are considered in the ratios are the minimum monthly payments on credit cards, student loans, auto loans, personal loans and alimony or child support to name a few. Things like phone, insurance or utilities are not considered in the ratios. Essentially, if it's a loan of some sort or payments ordered by a court, it's going to count in your debt ratios.
Guidelines for FHA are 31/43. Front ratio of 31 and back ratio of 43. Some very strong borrowers get approved up to a back ratio of 55, but that is rare these days. 50 is pretty much the reality of things now.
VA and USDA loans are 29/41. Again 50 is pretty much the max for a very strong borrower.
Conventional loans are 28/36. With less than 20% the loan will not be approved if the back ratio is over 41% in Arizona. The MI companies will not allow it. With 20% down or more, 55 back ratio is the max.
These are just guidelines. Nothing is set in stone and there may be strategies to lower your debt ratio to help with qualifying. Please dont assume that you will not qualify if you think your debt ratios are higher than 43. Call your Loan Officer and have him/her take a look.
The Smooth Loan Process lesson for today: Debt ratios are just one piece of the puzzle. Talk to your Loan Officer to get the full picture.
Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com
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