Buyers Choose Your Lender Carefully

We closed three sales yesterday. That’s the good news. The bad news is two of them did not fund and there are two very unhappy buyers. I represent the sellers on both of them and while they did not fund on time, I had prepared my sellers that this could happen.

What’s the moral of the story? Not all lenders are created equal!

I’ve originated mortgages as a mortgage loan officer with a mortgage brokerage, as a mortgage banker, and at an FDIC insured bank so I’ve seen all three sides of the mortgage business. Locally I know a number of good lenders who know how to get mortgages completed and can get them done on-time. Lenders like Joe Boggs with Integrity First Home Loans always deliver. Sadly Joe is the exception in the business rather than the rule.

The two sales that did not fund were the fault of the lenders not managing the process or simply over-promising on what they could deliver.

Buyers need to carefully screen any lender before they decide to use them for a mortgage. Many brokers, bankers, and even large regional/national banks cannot deliver on-time. Personally, I only recommend lenders who deliver time and time again.

As agents, we want our clients to be happy with their home selling or buying experience and we surround ourselves with vendors who help us deliver that level of service.

Looking for a good lender? Talk to your agent.

Click here for our list of good lenders in the north Dallas area.

Photo licensed from iStockPhoto

Mortgage Fees Would Rise Under Payroll Tax Cut Deal

Homebuyers, beware. 

In exchange for a two-month tax cut, the Senate on Saturday approved a permanent increase in fees attached to mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). 

Read more:

Can I Buy a House after a Short Sale or Foreclosure?

Short Sales 101

This is a common question among distressed homeowners we work with. It’s an easy question to ask, but the answer is complicated and constantly changing.

There are many variables involved when trying to figure out when someone will be able to purchase a home after a foreclosure or a short sale; however, the general guidelines that FHA, Fannie Mae and Freddie Mac follow when considering a loan after a short sale or foreclosure are:

Short Sale with FHA loan
• Can purchase right away with no mortgage default/late payments
• 3 year wait if in default or late payments at the closing
• Reduced wait if the borrower has re-established good credit and can show more qualifying circumstances *

Short Sale with Fannie Mae Loan
• 2 year wait if the borrower puts 20 % down
• 4 year wait if the borrower puts between 10% to 20% down
• 7 year wait if the borrower puts less than 10% down
• 2 year wait if the borrower can show extenuating circumstances and puts more than 10% down *

Short Sale with Freddie Mac Loan
• 4 year wait before being able to get a loan
• 2 year wait if the borrower can show extenuating circumstances *

Foreclosure with an FHA Loan
• 3 year wait before being able to get a loan
• Reduced wait if the borrower can show extenuating circumstances and re-establishes good credit *

Foreclosure with a Fannie Mae Loan
• 7 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
• 7 year wait for a 2nd home, cash out re-financing, or an investment property

Foreclosure with a Freddie Mac Loan
• 5 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances *

*Qualifying/Extenuating circumstances are not applicable in most situations

This list does not cover all circumstances so always talk with an experienced mortgage professional about your specific situation.

Tom Branch, Broker, CDPE, SFR

Source: Townsquare Financial

Mortgage Fraud Trends Part 3

Mortgage Fraud Trends

In Part Two of the series, I presented four types of Fraud for Profit Schemes. In Part Three, I will present the final four types.

Inflated Appraisals – An appraiser purposely completes an appraisal based upon false or misleading date in order to over- or under-state the value of the property. This scheme usually involves the buyer, loan officer, or real estate agent and their knowledge of the misrepresentation.

Foreclosure Schemes – A person offers to assist an underwater or preforeclosure homeowner. The scheme almost always involves transferring the deed to the property. The homeowner is usually asked to pay substantial upfront fees for the service.  The person pockets the up-front fees and then quickly sells the property. The homeowner is left without recourse since they no longer own the home.

Equity Skimming – This scheme almost always involves an investor. The investor uses a straw buyer to purchase the property. Shortly after closing the straw buyer signs a deed transferring ownership to the investor. The investor makes no mortgage payments but rents out the property collecting the rent until the property is foreclosed upon.

Air Loans – The scheme has no real property and no real buyer. Both are imaginary and devised, almost always by a mortgage broker. The broker originated the loan on behalf of the lender with the intent to generate profit from the fraudulent mortgage. After closing, no payments are made on the loan and the lender is left with nothing to foreclose on.

While much has changed in the past few years, many of these schemes are alive and well. We recently had a client who lost their home to foreclosure. They were approached by a Loan Modification Company who offered to file a lawsuit to stop the foreclosure. As part of the deal, the homeowner was to pay them $2500 and sign over the deed to the property. Thank goodness they called me prior to going ahead with the deal!

Tom Branch, Broker, CDPE, SFR

Mortgage Fraud Trends Part 2

Mortgage Fraud Trends

In Part One of the series, I presented an overview of mortgage fraud outlining Fraud for Housing and Fraud for Profit Schemes.

The Federal Bureau of Investigation (FBI) has identified eight different schemes that are commonly seen in the US real estate market.  Part Two will cover the first four schemes.

Property Flipping – In this scheme a property is purchased at deflated prices through false documentation, deflated Broker Price Opinions, and deflated appraisals. The property then has minor cosmetic work complete and is sold at a much higher price. This scheme usually involves several individuals. Kickbacks to the individuals involved in the scheme are common. An older variant involved the appraiser on the buyer’s side with over-inflated appraisals. These are less common since the implementation of HVCC.

Silent Second – In this scheme the buyers do not have enough funds to close the transaction. The seller agrees to carry a second, undisclosed loan for the down payment amount. Some sellers go so far as to deposit the funds in the buyers bank so it looks like seasoned funds to the lender. According to the FBI, this type of fraud is more prevalent with builders than a traditional resale seller.

Nominee Loans / Straw Buyers – A straw buyer is a person who purchases a home on behalf of another buyer. They have no intention of living in the house and are simply “lending” their good credit and financial status. In return, the straw buyer is compensated for taking part in the scheme. This usually takes place with higher payments to the straw buyer over the amount due on the note.

Fictitious / Stolen Identities – The buyer uses a false or stolen identity to qualify for the mortgage. The buyer poses as the borrower and uses their credit and documentation to qualify for the mortgage.

In Part 3, I’ll cover the final four schemes.

Tom Branch, Broker, CDPE, SFR

Mortgage Fraud Trends Part 1

Mortgage Fraud Trends

As an NMLS licensed Mortgage Loan Originator, I did my eight hours of annual continuing education today.  While much of it was specific to the lending community, I found the section on mortgage fraud trends to be very interesting and applicable to a broader audience of real estate professionals.  This blog will be the first in a three-part series on Mortgage Fraud Trends.

There are two kinds of fraud categories:  Fraud for Housing and Fraud for Profit.

Fraud for Housing takes place when a buyer commits fraud so they can purchase a home for their personal use. The fraud is committed though forged/altered documents or otherwise leading the lender to believe they have the income or assets needed to purchase the home. Some buyers are helping out family members and purchase the home as their residence but intend for a family member to reside and make the mortgage payments.

Fraud for Profit schemes usually involve multiple individuals such as appraisers, lenders, real estate agents, and closers. The intent of these fraud rings is to make a profit through inflated appraisals or fraudulent documents/identities.

The FBI has identified eight different kinds of Fraud for Profit Schemes in today’s real estate market:

  • Property Flipping
  • Silent Seconds
  • Nominee/Straw Buyer Loans
  • Fictitious/Stolen Identities
  • Inflated Appraisals
  • Foreclosure Schemes
  • Equity Skimming
  • Air Loans

The Federal Bureau of Investigation (FBI) typically does not investigate Fraud for Housing but has stepped up enforcement of Fraud for Profit rings.

In the next part in the series, I’ll cover the first four Fraud for Profit Schemes.

Tom Branch, Broker, CDPE, SFR

California Real Estate Broker Sentenced to 68 Years

The Associated Press is reporting that Kathy Chen, a California real estate broker, was sentenced to 68 years. Ms Chen was convicted for using stolen identities to purchase 35 homes and then intentionally defaulting on the mortgages to steal $17.5m.

Prison Cell

Licensed from iStockPhoto

The 49-year old Chen was found guilty on 136 felony counts including conspiracy, grand theft, and forgery. Warrants have been issued for her boyfriend and brother who authorities believe have escaped to Mexico.

The crimes were committed between 2005 and 2007. I don’t think that 3 to 5 years of living the high-life is worth spending the rest of her life in prison.

Crime doesn’t pay.

Tom Branch, Broker, CDPE, SFR