HELOC In Trouble?

TransUnion's completed a research study on Home Equity Lines of Credit in the United States. Study here:
http://www.transunioninsights.com/helocstudy/

There are almost eight billion dollars outstanding on HELOC loans. Fifty percent of the total were originated from 2005 through 2007 at the height of the mortgage boom. Most have a ten year draw period with interest only payments until the end of the ten years. 
Some lenders in 2007 closed down HELOC available lines of credit. For example Bank of America reviewed Countrywide HELOC’s that they took over and on borrowers who were not using lines available, they arbitrarily closed the balance down, or decreased the line to the existing balance. Reasoning for this was most HELOC’s were underwater. Lenders used Broker Price Opinion valuations and online appraisal tools to mark properties with at risk HELOC’s. Many of those HELOC’s are now coming into time framed in the promissory notes that require principle and interest payments and catch up clauses. Will Americans be able to handle the jump in payments? Is there trouble ahead?
Certain market areas: Coastal with view, California Bay Area, and states where there was not a big bubble in property values will not be at risk. Borrowers can refinance the second into a new low rate first. 

Borrowers in pocket areas where the value has risen back to 2006 levels, can even find HELOC products that are amortized over thirty or forty years rather than the standard HELOC that will roll to a principle and interest payment amortized over fifteen after the ten year interest only time period. 
Others in markets that still have a long way back to valuations of 2006 (Arizona, Florida and Michigan) may see defaults.

If you have a HELOC that is adjusting and you want free advice how to fix it, please contact me I am happy to help

Stop The Ten Mistakes Buyers Make on Home Loan Application

Boston window

1)Lack of disclosure: Buyers need to be honest. Disclose everything that remotely affects the financing of the home.

I  can fix “broken deals”. I’m here to close your loan on time. But I can’t fix issues that aren’t disclosed.

For example: Just because an issue doesn’t pop up on a buyer’s first credit report, it does not mean it won’t raise its ugly head at the very end of underwriting. Layers of checks occur after the initial mortgage credit report.

Issues that involve past government contact, (i.e. tax liens, unpaid student loans, pending litigation, or criminal fines) often go undisclosed (particularly where there is a “remarriage”) and one (or both) of partners wish to hide their past from the new spouse.

Often these items are so far in the past they (conveniently) “forget” to disclose.  A CAVIRS is run at  closing and sometimes other checks to government data bases. You can be sure the ghosts come out of the closet

Cavirs is the LAST STEP of the “Quality Control” or QC process (after loan docs are drawn, signed and returned to the doc dept.).

Lying will can “sour” Underwriter on a file and may cause them to decline a marginal loan application even after you signed.

2) Lack of preparation/ cooperation.

I am the greatest loan officer when your borrower cooperates  with me.

If buyers aren’t providing information in a timely manner there are usually reasons why…

 Don’t spin your wheels with buyers who have not gotten preapproved.

Agents who remaining in close contact me aids to closing on time. As me to teach you to read a DU and an LP approval. Banks will only have access to one but as a mortgage brokers I can go a variety of ways.

3) Buyer’s go out and apply for credit (in anticipation of redecorating their new home) or make large purchases

I have seen borrowers who went to Car Max and they purposely run your FICO fifteen times through every lender that they can to block you from buying a vehicle elsewhere. Fifteen inquiries in one day can knock your score down one hundred points.

In addition to drastically lowering scores, new debt raises debt ratios.

4) Transferring money around without a “clear paper trail”.

After 9/ 11  the United States government has strict currency laws about funds in and out of accounts greater than five hundred dollars that are not payroll deposits.

If the borrower is receiving gift funds, put the funds into the receiver’s account ninety days before loan submission. This eliminates the need for a gift letter (and the giver’s subsequent documentation).

The problem with gifts is: givers must provide a proof/source of funds (bank statements) and often the giver resents / refuses to provide banking info. The gift person has to provide bank statements all pages.

The solution: Convince the giver to fax banking info directly to the loan officer so their privacy is preserved.

5) Liquidation of 401k or IRA accounts.

Borrowers need to begin the liquidation process inquiry three weeks before the close of escrow.

6) Illegible or Unsigned Documents

From an illegible purchase contract to “blacked out account numbers” on bank statements borrowers and sometimes agents submit unreadable documents.  Borrowers take smart phone photographs of small items such as driver’s licenses and argue about if they are legible.

7) Many loan officers simply prefer processing “refi” transactions.

Purchase transactions are more tedious and require much more attention to detail than refinances. Escrow must provide accurate fee structure before we disclose, and they are often under-staffed to gather this information the first day of the transaction. Home owner associations have become a mousetrap of fees and misinformation. Banks mostly refuse to get Condominium complexes back on the FHA approved list because the fines for errors are $250,000 and five years in jail. A small mortgage outfit will not take it upon themselves to make this risk. At Eagle Home Mortgage I have in house staff to gather the documentation and submit to HUD. I share the same break room with Underwriters in our same office, processing and funders.

8) Appraisal value comes in low.

With multiple offers on each property it’s tempting for sellers to choose the highest offer.  If the offer is all (or mostly) cash; it’s a good choice.

If the buyer has minimum down and a lack of capacity to make up the difference between sales price and appraised value there is nothing but to renegotiate with the seller.

Dodd-Frank legislation requires all appraisals to be conducted by an independent appraisal (arm’s length) service. Loan Officers CAN NOT speak to appraisers.

Appraisals are to REFLECT current home prices (based only on previously closed escrows) vs. LEADING home prices (based on future/anticipated close of escrows).

If the loan is FHA or VA, the appraised value is “set in stone” for at least the near future (no second appraisal is allowed).

The best way to avoid a low appraisal is for the listing agent to show up for the appraisal appointment armed with comparables in hand, and to provide those to the Loan Officer.  

Often appraisers have their own lock box key (it does speed the appraisal process) allowing appraisers to bypass the contact with agent. Listing agents do not give them access to wander in.

9) Verification of (previous) employment.

Many buyers working for large corporations must be verified thru automated systems.

If the borrower has a job change, this process will be repeated if we’re to count overtime, bonus or commission to qualify.

Some companies only verify “gross wages” in which case we need to have all the past 2 years of paystubs to count the additional income. Tax returns must not show employee expenses to match up and use the overtime, bonus and or commission.

10) Borrower leaves town, takes a vacation or thinks they are all done. The loan process is no longer simple. More paperwork is always going to be required if your deal goes past thirty days as the paperwork becomes aged/ old.

 

 

Closing Sales Quickly

CLOSING SALES QUICKLY | Caroline.Gerardo

Get Your Offer Accepted

Building a deeper business together

The real estate market in Orange County California has heated up with little or no inventory available. Properties are receiving multiple offers.  I have some strategies to get your deal closed.

 

Do you want an amazing fast time frame to close a mortgage loan?

How to get your offer accepted in this current market when inventory is at a historic low?

How can you know if house will appraise for current market sale price?

How can you beat a “cash offer”?

 

Before you make your offer Borrower has loan Approval with either DU or LP findings. This means the only things necessary to close are appraisal, a good contract and title. This plan details how to get your offer accepted by the sellers in a market where there are many competitors.

First:

We sit down and set a strategy for closing quickly on the ideal home for the clients. I can meet with the clients in their home, my office or by telephone. Upfront we must all understand that this is a time consuming and many pieces of paperwork to execute. Borrowers must have their bank statements in pdf formats, and I can teach them how to save the statement and download to email to my secure email. Secondarily all their income information for the past 24- 30 months must be available to submit before they make the offer. Choices such as vesting should also be prepared with thoughtful planning. Once all this is submitted to Underwriting we should have a Loan Approval (not a pre-qualification or pre-approval) ready to show with the offer in two days. If there are credit issues to address, the client must repair these before making an offer.

 

Second:

Offer is made with attached DU or LP findings that itemizes Borrower has submitted all documentation to close. Offer releases appraisal contingency in seven days. Offer releases loan contingency in ten days. Offer states Borrower can close in fifteen days.  Offer notes that seller’s agent, listing agent agrees to meet appraiser in person on day two or three with comparables on paper and property specifications. Offer also releases contingencies on day nine. I suggest you make the offer in person and have the client release a personal statement that I will help you write. Listing agent and escrow/ title must be prepared to work quickly.

Day One: Signed conformed contract is emailed to C. G. and she orders appraisal. Email to Borrower and both agents confirming appraisal ordered and escrow has been contacted. Estimated HUD 1 ordered from escrow, also preliminary title report and title particulars to subject property.  Escrow and Title agree to provide all documentation in 48 hours.

Day Two:   email agents and borrower confirming appraisal appointment has been made (assuming this is not a Sunday)

Day Three: Appraiser visits home, measures the property receives information from listing agent. Title policy, escrow instructions and HUD1 are emailed to C. G.

Day Four/ Five appraisal comes in at sales price; loan is submitted to Final Underwriting. *  Day Seven Final Loan approval is completed

Day Nine: Loan Documents out to escrow, Borrowers sign that day, funds wire transferred for balance

Day Ten: Funding and recording

Fifteen Day Turn time is met assuming there are weekends that delay recording/ wire/ funding that must be done on a work day

 

What if you know there are no current comparables for subject property? If value is an issue, Client should already have been aware that comparables have not yet closed and they may choose to put additional down payment. We will review appraisal for any errors or omissions.  Conventional Loan 75% loan to value first 18% down minimum 10% second; allows for some wiggle room if appraisal comes in low.

 

I will be sharing these tools at the OCAR Orange County Association of Realtors meeting tomorrow morning, Thursday at Ball Park Pizza in Laguna Niguel at 8:00 AM I am also supplying breakfast.

 

 

 

Underwriting: Estimated turn time for all new purchase loans submitted to Underwriting today: 2 business days (16 business hours) Estimated turn time for new refinance loans submitted to Underwriting today: 2 business days Estimated turn time for new PTD and PTF-UW conditions submitted to Underwriting today: 8.00 business hours Pre-Close Audit: Estimated turn time for loans that received clear to close underwriting status today: 8 business hours Closing: Estimated turn time for new doc requests submitted to closing today: 8.00 business hours HUD-1 Pre-approval: Estimated turn time: 4-6 business hours Funding: Table/Wet Funding Loans: Closing doc request must be submitted and accepted 16 business hours before requested fund date. All PTF-UW conditions must be uploaded in Nile by 9:00 AM MT the day of funding or funding could roll to the next business day. PTF-HUD conditions must be cleared by 1 PM MT or funding cannot be guaranteed based on warehouse cutoff times. Non-Table/Dry Funding Loans: Closing package must be received the day before requested fund date. All PTF-UW conditions must be uploaded in by 9:00 AM MT the day of funding or funding could roll to the next business day. All other PTF conditions must be received by 11:30 AM MT the day of funding or funding could roll to the next business day.

Other tools and strategies to get your offer accepted:   All cash buyers can refinance without waiting six months, terms and loan to value depending on product, property, FICO, occupancy type, loan amount… terms and conditions vary   Caroline Gerardo 23041 SW Birch Newport Beach, California 92660 Mortgage Banker NMLS 324982 (949)784-9699