Top of Mind Networks

Confessions of a Contract Processor: Freddie Mac Relief Refi-Can't Touch This!

December 3, 2009 by · 2 Comments 

Mary’s True Confessions: Remember when M.C. Hammer sang: “You Can’t Touch This”?…..was he talking about “Freddie Mac backed upside down mortgages”???

MC Hammer

Let’s travel back in time (no, not to the 80’s and working our parachute pants) to Spring of 2009.  There was a waft of new optimism in the air when Fannie Mae’s DU Refi Plus arrived (sound familiar?  if not, check out my last blog!). 

Despite the onset of HVCC and sharp decline in home values, Fannie’s new program immediately allowed brokers the opportunity to streamline refinance Fannie Mae owned mortgages, regardless of which lender owned the borrowers current mortgage, to a new lender of the broker’s choice.   Within a few weeks I noticed that many brokers had rediscovered that portion of their database that they had long ago given up on…..you know, that part of your database that you never thought you would be able to refinance again???  It was the black hole portion of your database.  The chasm filled with those purchase deals you did during the height of the real estate market.  That portion of 80/20 loans or perhaps the guy you helped get a large 2nd mortgageon his property shortly after the purchase of his new home and prior to the needle bursting the housing balloon.

 Well, Wahh-Lah! DU-Refi Plus was your new government program designed to help off-set the crappy earlier government regulation.  So more than likely over the past serveral months, you have turned and burned and closed alot of deals.  Most brokers considered it a mini refi-boom-if you can believe that!  But, the excitement and earnings kept them from noticing the numerous deals that did not qualify for DU Refi-Plus.  So, up until now, MC Hammer was right.  You couldn’t touch Freddie Mac backed mortgages in upside down scenarios.

Well Hammer, “times have changed”!  Now, Freddie is out with their streamline program and it rivals Fannie’s DU Refi Plus.  Before now, those upside down mortgages backed by Freddie but owned by lenders that no longer have wholesale departments (such as Chase, Citi, GMAC or IndyMac) were not able to refinance to a new lender.  Now those tasty little nuts that have been hiding inside your database are ready to be cooked over an open fire this Christmas.  So, get with the program and review these Freddie Relief highlights:

  • max LTV is 105%
  • CLTV is UNLIMITED!!  This should help that customer above with the enormous 2nd mortgage!
  • Debt ratios up to 60%
  • minimum credit score is 620

A.E. Lowdown: Lia Webster of Plaza Home Mortgage, Inc. comments_”My office just started doing these and they are a huge hit! One little helpful tidbit, the subject property can also be recently listed.  It needs to be off the market prior to application date but it can be as little as 1 day off!”  That is huge!!

 

If you have any other questions or need direction on where to go to take advantage of this program, give me a shout.  Quick Close Processing loves to help you close more loans!

Got any successs stories, processing tips or questions?? Send them my way, I would love to share with our readers!

Confessions of a Contract Processor: Get around HVCC with DU Refi Plus!

November 18, 2009 by · Leave a Comment 

Mary’s True Confessions: Under Estimate and Over Deliver!

Would you like to get paid quicker?

Increase your pull-through knowing you’ve sold a deal that is going to close?

Structure your deals once and not have to make changes to loan amount once appraisal comes in?

You already know that the government has committed tons of money this year to lower mortgage rates.  Furthermore, through HARP the government has put together special lending programs to help more people qualify. So have you figured out how to use the system to help you?

If this sounds interesting, get out your pencil and start taking notes!  Here is one way to make it work for you.  When you run a credit report, take note if it is a Fannie Mae loan and if so, have your processor run the file thru DU to see if you can get an Appraisal Waiver with DU Refi Plus findings.

Since the middle part of the summer we are hearing that processors have been getting appraisal waivers for their brokers thus eliminating the fingernail pulling pain HVCC imparted back in May.  My customers each have their own processor or at least a lead processor that they work with daily.  When taking applications, we are now encouraging them to run findings up front in order to see if we can gain waivers eliminating the need for an appraisal altogether!

Here are some of the tricks of the trade: Under estimate the value BELOW the original purchase price…..lower it to the minimum possible LTV without obtaining a price hit.  Here are two actual examples:

Borrower A bought  a house in 2008 for $380K putting down 76K or 20% down.  The loan officer told the processor that the loan was going to a particular lender that had no pricing hit for 95%LTV on their DU Refi Plus program.  The processor ran the file with an expected value of $321K, slightly under the 95%LTV.  Bam!  Findings came back with an appraisal waiver!  That is the way to get a file going!!  No HERA disclosures were needed!  No HVCC appraisal to wait on!  Full file was processed the next day and sent to the lender…  the loan closed two weeks later and everyone got paid…quicker!  Again, under estimate and over deliver on quick turn times!

Feeling skeptical??  Check out borrower B:

Borrower bought house on the coast of South Carolina for 88OK six years ago.  He told the LO his house was worth a million plus.  The homeowner had a busy schedule traveling out of town routinely and didn’t know when he could accommodate the appraisal process.  The purpose of the loan was to pull cash out!  Seriously, his loan amount was $298,000 and he was pulling cash out to $365,000 and subordinating a $190,000 HELOC.  The processor ran the estimated value at $610,000 (just slightly under 60% LTV giving the broker extra compensation) and got an appraisal waiver!  If you’re not reading closely here are the variables: Cash out; subordinating a 2nd of $190K.  Oh, and by the way, the 2nd lender gave no grief on not having an appraisal for the subordination.  File closed quickly with no expensive, slow appraisal needed!

So work closely with your processor up front and have more success.  Keep your fingers crossed and try it!  You could get paid quicker and move solid deals forward!

Processor Clue of the Week:

This is not going to work for every deal and who knows what the “secret” criteria are, but it saves lot’s of time for everyone if it comes back with a waiver…..Worth a Shot!  processor/atlanta, ga.

Penny for Your Thoughts (Send us your question and we’ll give you our two cents!):

Chris in Norcross asks: when do originators in Georgia have to have completed their 20 hour licensing hours and pass the Federal and State test?

This is a very common question and here are the facts: To become or remain an originator in the state of Georgia, you must register with and provide to NMLS your proof of completion of the required 20 hour pre-licensing course as well as pass both the state and federal test by March 31st.  It is important to note that this is the drop dead date.  If you submit on time as an existing MLO, the state of Georgia will allow you to continue originating until approval is either issued or denied.  If you DO NOT submit by the March 31st deadline, you cannot originate during the wait period.  If you are a new MLO entering the industry, you may not originate until approval is issued.

Got any success stories or processing tips??  Send them my way, I would love to share with our readers!!

Confessions of a Contract Processor: HERA leaving you Dazed and Confused?

July 29, 2009 by · 3 Comments 

Mary’s True Confessions:

This morning I woke up with the sole intention of wrapping my mind around the new HERA/RegZ requirements that go into effect this Thursday, July 30th (better late than never right!).  I dedicated time to absorb multiple lenders interpretations and their plans for implementation of this process by reading their powerpoint presentations, bulletins and tutorials… all which left me a bit Dazed And Confused!

It appears that each lender has a different interpretation of the law which seems par for the course.  The most daunting part of the process is determining how each lender will view the law when determining a file can go to underwriting; when an appraisal can be ordered and how many days a file has to sit if the loan amount, rate or APR are modified.  Seriously, trying to understand each lenders “take” on these rules would have given Albert Einstein a migrane!  And yes, this law is supposed to result in a better informed borrower and help curb deceptive lending practices by not allowing borrowers to be charged an up front fee including an appraisal fee prior to a waiting period.  Will this end up helping any borrower or will it just add even more days and perhaps a couple extra weeks to the loan closing process? 

Maybe these regulations will not be that big of a deal and perhaps what has my head spinning is a cummulative effect of all of 2009’s set-backs.  Seriously, is this what the industry needs?  Potentially longer turn-times?  

For the purpose of this weeks column I will try to screw my head back on tight and cover just the basics of this new facet of our industry!

Mary Eyler

This Weeks Topic: HERA/REG Z

Industry Grapevine:

Ok- here are the basics of the new HERA rules for your review.  Keep in mind that each lender will have their specific interpretation and guidelines to adhere/add to:

  • Loan Submissions Requirements: Required on all purchases and refinances of primary residences and second homes.  Investment properties not included.

 

  • Fee Payment and Collection: No fees other than a reasonable credit report fee can be collected upfront until the borrower has received thte Initial Truth In Lending Disclosure.

 

  • Ordering Appraisals: The appraisal cannot be paid for by borrower until the 4th business day after initial disclosures have been sent.  No Post Dated Checks allowed!  Appraisal can technically be ordered, but no fee can be collected up front.

 

  • AP Changes: An increase in APR of more than .125% will require re-disclosure of the TIL and GFE at least 3 business days before closing.

 

  • Waiting Periods for Loan Closings: Initial TIL must be provided at least 7 days before loan can close.  Borrower has 3 days to review appraisal before they can close (some lenders will allow borrower to waive that right). Redisclosure of TIL with any changes adds 3 addl days to closing.

Processor Clue of the Week:

Due to the new rules, the processor and LO need to be partners more than ever before.  They need to be speaking the same language and presenting a united front to the borrower, real estate agent, etc. with regard to timeframes and manage those expectations accordingly.  This means a marked increase in communication between loan officers and processors as well as all parties involved in transaction-especially during the next 30 days.  Setting proper expectation with the customer upfront will save LOTS of time and headaches! For real estate agent partners- a heads up to make sure they are writing contracts with realistic closing dates will be invaluable and possible save future relationships!

 A.E. Lowdown:

With the new HERA requirements, Anne Davis with Walker Jackson, emphasizes that it is important to get your borrowers email addresses to expedite the disclosure process.  According to her company’s interpretation of the law, if you are closing in your name (lender status), an email receipt will serve as proof of disclosure receipt by client.   This means you can order and collect fee from borrower on appraisal the same day email is sent. 

If you are a broker closing in Walker Jackson’s name, they must receive the package first, but can immediately email the disclosures to the borrower if that information is provided.  Otherwise, they must mail the package which kicks in the 3 day wait period.

Oh, and by the way, post dated checks are a “NO NO!”

So to expedite the turntime, it would behoove you to get accurate email addresses on all of your borrowers!  Thanks for the tip Ann!

 

Penny For Your Thoughts: (Send us your questions and we’ll give you our two cents!):

Mike A. writes: “What is the deadline for me to comply with Red Flag Rules and what all is involved?” 

The deadline for training and implementation is August 1, 2009-this Saturday!  Must have employees trained on fraud detection, written program to detect and respond to potential ID theft and annual updates and review of program.  Let us know if you need help with identifying a provider to help with this service.

Still looking for your Success Stories to Share with our Readers…….I know there is Positive News out there-So Send Them Our Way!

Confessions of a Contract Processor: Happy Vs. Crappy Dollars

July 20, 2009 by · Leave a Comment 

Mary’s True Confessions:

 There’s a game we play each week at my Rotary Club meeting called “Happy Dollar, Crappy Dollar”. The point of the game is to donate a dollar for each Happy or Crappy thing that happened to you over the past week.  I have to tell you, week after week, our club collects way more money for the good things that have happened than bad.  And when someone DOES donate toward the crappy, it is something not that serious and sometimes even comical.  For instance, one of our members donated a Crappy dollar for missing the easiest putt at his local putt putt tournament!

What if we had to donate Happy or Crappy dollars for everything that happened to us during our work week in the mortgage industry?  Sure, there is a lot of turmoil and change going on right now that makes it difficult to see the pot o’ gold at the end of the rainbow.  Are you one who looks on the bright side or do you participate and wallow in the fear?  One of my favorite books is Norman Vincent Peale’s “The Power of Positive Thinking”.  Peale believes that if you think positively, you set in motion positive forces which bring positive results to pass.  Positive thoughts create an atmosphere for the development of positive outcomes.

Now don’t get me wrong.  I’m not a goody- two- shoes, sticking my head in the sand to ignore the set backs that the new rules and regulations have posed on our industry.  But in the end, isn’t our jar better filled with dollars of appreciation for the hard earned, positive accomplishments made during our work week?  The “crappy” things that happen don’t deserve credit or our attention.  They are in the past and should remain so as we move closer to our next step towards success.

So, throw those happy dollars in a jar and expect the best…

Mary Eyler

This weeks Topic: HVCC

Industry Grapevine:  (contributor: Jennifer Williams, Processor, Quick Close Processing)

Rumor has it….An 18 month moratorium is coming for the HVCC regulation. Well, this is partially true and partially false.  On June 25th of this year, a Democrat from Mississippi introduced legislation to halt the HVCC mandates for a period of 18 months.  It was co-sponsored by a Republican from California and has been referred to the House Committee on Financial Services where it will be further dissected before it can even be brought to a vote.  It could also die in committee, never to see the light of a vote!

So, what does that mean for you-processing and originating as a broker or banker?  I think we all know the negative impact this legislation is having on our industry-disconnect between the market area and the appraiser due to proximity which is causing major cuts in value, appraisers we have worked so hard to build relationships with are now either forced out of business completely or must merge with a larger company and take a pay cut to continue to earn a living.

The consumer is not aware of the negative impact until they start the loan process.  First it takes longer just to get the appraisal ordered because of the multiple people it must go through before it is even assigned to the appraiser.  The fee is 20-30% higher in most cases.  Then it takes longer to get the report completed and back to the loan officer only to find out the value has come in so low it potentially ruins your deal.

Can a moratorium really fix these problems?  Only if the legislators work with the industry leaders to get it right on the second try.  There needs to be accountability by the AMC’s to make sure they are using appraisers who are “in tune” with a subject property and it’s market area.  There needs to be an acceptable alternative to an AMC in area’s that an AMC appraiser is not available.  What happens after the 18 months is up?  What if no workable solution has been determined?  Did we simply delay the inevitable?  And, are any lenders willing to buy the loans that were done without an HVCC appraisal? 

Stay tuned for more updates to this blog so we can all stay as informed as possible on what is happening!

Processor Clue of the Week: Dealing with HVCC has its internal headaches.  Now the borrowers are always billed up front; the customer is given no priority for scheduling; loan officers get lousy feedback on scheduling; poor service when appraisal conditions need to be met.  Lately, we’ve now noticed that the consumer (your customer) is becoming as frustrated as we’ve become.  Our processors found that when the customer is prepped on the front end about the potential appraisal delays and the potential for the value coming in conservative (conservative is the new  vocabulary word for ”low” in 2009) they are happier during the refinance process.  In contrast, we notice that when the Loan Officer doesn’t discuss the HVCC changes with his or her customer it causes anger and mistrust which results in a less than happy customer during the refinance process.  Honesty is the best policy!

A.E. Lowdown: My friend Sue Hamilton is an Account Executive with Advanced Lending Network.  She has a tip for making sure appraisal conditions are worked in a timely basis.  “It has become apparant that if conditions come back on an appraisal, some lenders are going after those conditions themselves, while others expect the loan officer/processor to obtain.  BE SURE to clarify with your lender the procedure they require.” Otherwise, you potentially waste valuable time two ways: chasing conditions that the lender is already taking care of OR assuming a lender is handling when really the ball was in your court all along.

Coming UP Next Blog:

Weekly Attitude Adjustment: (Send us your success stories and keep the positive momentum going!)

AND

 Penny For Your Thoughts: (Send us your questions and we’ll give you our two cents!):

Confessions of a Contract Processor: USDA is the WAY I SAY for ZERO DOWN PAY!!

July 7, 2009 by · Leave a Comment 

As the owner of a contract processing company, one of my responsibilities is to not only make sure my processors pipelines are full, but to also keep my eyes and ears open for trends in the marketplace to help our broker customers get more loans.

The buzz that keeps popping up in conversation over the last couple of weeks has been the opportunities with USDA. Not that it hasn’t always been around-it’s just that now it is one of the only non-downpayment programs left!

You may be well aware of its benefits, but to bullet point the key points for your reference, here are the highlights:

– NO DOWN PAYMENT! No Cash Contribution from Borrower
– Loan up to 102% of appraisal Value
– No MI
– 30 year fixed rate loan-conforming rates!
– NO RESERVES REQUIRED!
– NOT Limited to First time Homebuyers!
– NO limit on CLTV
– No minimum credit score!

And more……………….
More lenders are getting on board as te need for a wider scope of options becomes necessary to help consumers.

Check it out for yourself! USDA website is easy to navigate and to the point: http://www.rurdev.usda.gov/fl/guarrhs.htm

    TIPS FROM OUR PROCESSOR:

Here are some valuable tips from a processor on our staff who has been working USDA loans:

1. Income and property eligibility needs to be checked for each file to make sure it doesn’t exceed the guidelines (Income eligibility is for total household members over the age of 18….be careful on that one!)

2. 2% guarantee fee can be financed in

3. RD forms need to be complete….specifically RD 1980-21. The RD forms are found on the lender’s website. The broker needs to have the borrower sign the 1980-21 but the lender fills out the rest.

4. Loans have to be underwritten through GUS(USDA version of DO) or whatever the lender uses (the lenders I deal with do this for us)

5. Need to determine if closing costs and prepaids will be financed in

6. Make sure to inform appraiser that it is a USDA loan

7. I have used Primary and Guaranty Trust for lenders

8. Loans are about the same level as an FHA.

After the lender issues approval then the loan has to go to RD for approval…..plan accordingly! It depends on how busy RD is as to how long they give approval.

There it is a nutshell! Hopefully this can help add to your stable of options to help your customers, marketing efforts and pipeline replenishment!

Confessions of a Contract Loan Processor: "To Lock or Not to Lock, that is the Question"

June 3, 2009 by · 3 Comments 

 

Over the past several months, the loans submitted to my company for processing that aren’t locked has increased.

This is due in part to several factors.  Rates have been at record lows because of the Federal Reserve purchasing mortgage backed securities (mbs) and treasury bonds.  Customers have been hesitant to lock into a rate because rates have been stable to declining….the thought process has been “when will the rates bottom out?”.  Loan officers are fearful of locking into a rate and not knowing when the file will actually be underwritten….turntimes could range from 30-60 days and sometimes even longer because of the backlog with lenders.  If they lock into the rate, the chance of having to extend the lock are more than likely causing extension fees.  All of these reasons have merit and it is easy to understand this viewpoint.

However, last Wednesday 5/27, rates increased more in a single day than they have in years (nearly .75% to the rate).  Check out this article that describes the uptick in rates: http://money.cnn.com/2009/05/29/real_estate/Mortgage_rates_going_up/index.htm?postversion=2009052916

Now, those who were floating loans are praying for a rebound.  With rates at their elevated level, the ones in process may have a difficult road to closing.

BELIEVE IT OR NOT, THIS IS AN OPPORTUNITY TO SELL MORE LOANS!!  Yes, it’s true!  And here are a few of the reasons why:

1. CUSTOMERS NEED TO ACT NOW and LOCK WITH YOU!  Wednesday’s events illustrate that we may have seen the bottom.  Rates in the upper 4’s may not return.  With where rates are now, many borrowers are still able to be helped.  Encourage those sitting on the fence to lock into the still historic savings opportunity.

2. ASK FOR REFERRALS: As an opportunity with your customers that DID lock in with you and have closed a loan with you in the past several months, send them a letter and thank them for moving forward with you.  Explain that it would be a shame for friends and family not to take advantage of this opportunity for the lowest rates they will probably see for years to come.

3. NEGOTIATE BETTER TURNTIMES: With your lenders for your locked loans: In the aftermath of Wednesday’s activity, I spoke with one of my lender account executives and asked her view on the situation.  She told me that she talked to her manager and was able to prioritize the locked loans in her pipeline above other loans that were floating.  She said that their company has “caught on” and realized that a lot of floated loans won’t close if rates go up like they did on Wednesday May 27th.  In order to protect their business unit, she  would need to start prioritizing files that are locked. After all, lenders are just like loan officers, processors and title companies-if the file doesn’t close, they don’t get paid either!

So to lock or not lock that is the question.  I hope I was able to shed some light on some current reasons for locking and closing!

Mary

BOOM – That's the sound of our closing cannon!

May 7, 2009 by · Leave a Comment 

Is the next refi boom now…?

Here is why I think our closing cannons will be blazing soon!

For the first time since Thanksgiving week 2008 mortgage brokers and processors can or should see light at the end of the tunnel.  Seriously, most mortgage loan officers thought that the waterfall of money was going to hit them in the face because of low rates last December!  Instead, what happened, at the same moment new problems arrived!  Lenders immediately feared that loans would be paid off early causing them to nearly yank yield spread premiums from most coupons on the rate sheets.  Appraisals dropped like rocks along with the incomes and credit scores of borrower’s.  Most importantly the lead-times of all lenders exploded… giving borrowers more time than ever to sit back and ponder the loan application they had in process (in other words they continued shopping!).  As a result, lenders, brokers, processors worked and re-worked and often re-re-worked/submitted files.  A month or two later, nearly the whole industry reported their highest ever fall-out for their careers.

So, why the all of a sudden do I show optimism for us?

Well, simply put:  DU Refi Plus; Freddie Mac Streamline; and believe it or not, HVCC (yes, that’s right).

DU Refi plus and Freddie Mac streamline allow borrowers to refinance their loans without mortgage insurance up to 95% loan to value!  Amazing!  Internally, my company experienced brokers having a 29% fall-out rate for the same period of time (November through March) for loans with LTV’s exceeding 80%.  Brokers, out of necessity, had us move files from one lender to the other because of the lenders cutting the borrower’s home values.  We found that if we submitted and, often times, triple submitted the file, finally one lender would be “o.k.” with the original appraiser’s value.  This escalated the issue of lengthy underwriting turn-times.

So, while loan officers, lenders, and processers toiled; loan applications changed hands for sixty days before any closed.  With the on-set of Fannie and Freddie’s new programs there is no reason to pull a loan.  All lenders offering DU Refi plus allow for loan to values to be up to 95% (some select lenders will go to 105%) without mortgage insurance providing the borrower did not originally have mortgage insurance on their loan.    This program should be a waterfall of money for rate and term refi’s.

Now with all that said, the Home Valuation Code of Conduct (HVCC) “scare” could in reality be a little less scary if you consider a couple of potential positives.  With the DU Refi Plus, you will now have 15% to 25% leeway on your appraisals when doing a rate and term refi!  Better yet, when your customer commits to you and decides he or she wants to go with you he or she pays for the appraisal upfront and that appraisal (I’m told) is mostly non-transferable.  This will hopefully discourage the borrower from shopping once he or she has paid $375 for their appraisal.

Only time will tell if these changes will help us all close more loans and satisfy more customer’s requests.  As for me I’m very optimistic!  See you next blog.