Archive for September, 2007
RSS Feed Issues
September 6th, 2007 Categories: Random
The XBroker RSS Feed has been down over the past few days but the problem has since been rectified.
Sorry to all those who haven’t been getting their X-FiX…
If you aren’t an RSS Feed subscriber, show your love for the site and click the big orange icon in the right sidebar!
Regards,
Jeff
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Upcoming Additions to The XBroker
September 4th, 2007 Categories: Mortgage News, Random, Real Estate Technology
Below are a couple of updates and services pending to the site…They will be under open construction until I work the bugs out on a live basis, so please don’t mind the mess over the next week or so…
Speaking of mess, this Wordpress site was hacked up beyond all recognition this past Sunday afternoon for about 4 hours…so much so that I had to completely restore it’s database from scratch to make it work again. I still don’t know the cause (probably an agent of The Mortgage Cartel or just The Man trying to silence a brotha :)), alas it’s a lesson to back-up your work with regularity!
Mortgage X-Ray.
Either myself or another very qualified mortgage professional will review anyones current mortgage qualification/ transaction to insure 100% transparency and related disclosure of true wholesale rates and fees. Further, we will negotiate a flat fee for service on the borrowers behalf. Through our negotiation, if we cannot save you a dollar amount that exceeds our fee ($250), we will rebate the difference. Finally, we will maintain involvement through three milestones of the mortgage qualification process:
First, we will review the initial Good Faith Estimate (GFE) and Truth In Lending statement (TIL) for cross referencing the specific individual financial and credit information against common wholesale lenders program and rate pricing matrices. This step insulates borrowers against deceptive marketing tactics and lays the ground for an open relationship with the originating broker/banker.
Second, we will review an updated GFE and TIL doc, after RESPA submission and upon lender approval. This step insures any deviations from the first version of the docs are consistent with logic and not profit.
Third, we will review the lenders rate lock pricing sheet, final GFE, TIL and HUD-1 closing statement 36 hours prior to the closing date as a final measure of compliance.
So you have nothing to lose and you get to scare your mortgage professional straight 
I’ve decided to roll out a manual version of RateSpeed. It’s an anonymous pre-qualification form that will give anyone a solid idea of what their specific credit and financial situation qualifies for in todays market. Within 24 hours of submission you can expect a spreadsheet with the following information: interest rate pricing (5 levels deep), amount of rebate for accepting the corresponding higher rate than one qualifies for (YSP), corresponding payments, broker/banker flat fee for service, and approximate 3rd party closing costs.
RateSpeed submissions are free. If one wishes to pursue a mortgage via the RateSpeed form, we will pair them with a (relatively) local broker/banker who contractually adheres to a 100% transparent policy using the measures outlined in the Mortgage X-Ray above.
Warning, do not try and take a RateSpeed generated spreadsheet to an unaffiliated mortgage broker or banker and expect to negotiate a similar deal…while it may seem simple enough, it won’t happen and you’re then subject to becoming another manipulated victim.
Note: The automated version of RateSpeed has been encumbered by the mass exodus of lenders and brokers due to the current credit recession and daily underwriting guideline changes. The method of automatically aggregating real time wholesale interest rate pricing has been tweaked and is due for a mid October release. The technology is being developed as a Widget/Gadget for qualified mortgage professionals to host on their own web-sites (for a nominal fee, of course).
Note 2: E-commerce functionality has recently been added to the XBroker as well. All the recent updates are a little raw right now, so bear with us…were saving the mortgage world one person at a time 
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The Great Mortgage Correction Part II
September 3rd, 2007 Categories: Mortgage News
In the first installment I outlined the ‘house of cards’ the industry created for itself during the ‘refi boom’. Thin margins coupled with decreased business volume proved to be the death of many conduit lenders and horse-blinder brokerage owners. We’re still in the relative middle of this market correction, with about 6-9 months before things really flush themselves out. ARM’s are continuing to adjust (up) and underwriting qualifications are getting stricter or eliminating (available) mortgage programs by the day.
Instead of wallowing in main stream Media’s emotional stress press, time is better served to start thinking, engaging in constructive dialogue to then implement solutions and solve these problems.
I have a few suggestions, which aren’t meant to be hard arguments toward a static solution, rather they’re threads that should be dissected and expounded upon.
1) Expand FHA Qualification Criteria and Increase Education (for Brokers, Bankers, and Consumers).
FHA loans are akin to ‘Sub-Prime Conventional’. Many people incorrectly identify FHA mortgages as loans for first time home buyers only, which is not true. Although first time home buyers are typically well suited for an FHA loan since they are less likely to have ‘seasoned’ traditional credit history’s and thus would not qualify for a Conventional loan, they are often a superior choice than loans in the true Sub-Prime market. So why have they been such a ‘quiet’ option? FHA loans require a manual underwriting practice, which effectively means more work for the mortgage professional.
With the explosion of Sub-Prime lenders (via Wall Street) and their loose underwriting standards, the easy Sub-Prime approval factor far outweighed the FHA loans time consuming (yet) proper diligence in the mind of the transaction based mortgage professional…Turn and Burn was the prevailing industry philosophy and FHA loans didn’t ‘work’ under those conditions.
What we’re left with is a large portion of professionals in the industry who have never originated an FHA loan. Expanding the approval process to accommodate some of the consumers who should have been offered an FHA loan in the first place, and increasing mandatory education requirements amongst mortgage professionals regarding how to effectively originate this class of mortgages is a way to clean up some of this Sub-Prime mess.
A few FHA underwriting guideline amendments that could assist this process:
Get more subjective with consumers credit and finance circumstances.
If their credit was damaged by a maturing ARM, show leniency.
If a consumer is currently behind on their payment, find a way to refinance them. (I read the front page of the USA Today a couple days ago; the snippet I caught said that President Bush was approving or suggesting changes to FHA qualification guideline and that it could help up to 80,000 home owners…that’s a start).
Increase the FHA loan limit to account for 100% financed (inflated value) homes.
2) Raise the Conforming Loan limit (by local market).
As the news turns we hear more and more how it’s not just the Sub-Prime market getting whacked…the Alt-A sector is under heavy pressure too. Low personal finance acumen and deceptive marketing transcends class, race, religion, sexual orientation, political preference, etc…
The people mostly reported on are the underprivileged who are losing their homes because their mortgage payments went from $600/month to $1400/month, but the same dynamic is happening to people who had ‘good’ credit (680 FICO+) and are today watching their payments go from $1400/Mo to $4000/Mo (or worse).
Raising the Conforming loan limit (currently at $417,000) is a little complicated, for the same reasons $500k will buy you 1000 ft2 in California and 5000 ft2 in Missouri. The complications could be mitigated by implementing some due diligence in relation to local demographics. Real estate is local (i.e location, location, location) in nature, while it all may be created equal, it is not valued as such. Conforming loan limits tied to sound local economic conditions makes sense. If the average home value in a certain set of zip codes is over the conforming limit, raise it to a well diagnosed mean.
A 700 FICO score, stated income stated assets type borrower is far more dangerous than their Sub-Prime counterpart because of their overall borrowing power. These are the people who have driven home values to the moon. A 680+ FICO score pretty much got one whatever they wanted, with few exceptions. Lenders would fall all over themselves to write 680+, $750k, No-Doc mortgages. Loans of this type often came with golf outings, drinks, lunches, pens, notepads, etc from the lenders account executives. Never mind that the borrowers last homes purchase price was $190k or their next credit lines max limit was $3k…$750,000, no documentation? NO PROBLEM! Let’s grab drinks and celebrate since we probably just made each others month...
Everyone from the top down was highly incentivezed to sell loans of this caliber. What gets lost in all of the finger pointing is this ‘class’ of borrower also faces foreclosure and bankruptcy. There are far less tears shed for these borrowers but the repercussions are the same...simply move that decimal point. In the end, it’s not fair to ignore these borrowers, they need help too.
3) Punish Consumers Who Willingly Take Part In Mortgage Fraud.
Thus far the witch hunt to burn the perpetrators of mortgage fraud has been very isolated to the mortgage professional, with good cause. While a majority of borrowers are true victims, unknowingly hung by a mortgage pro whose only goal in the process was to make as much money as possible, there are also plenty of borrowers willing to chance the crime of mortgage fraud because they ‘gotta have that house’. This is especially prevalent in the Alt-A sector of the market…borrowers are well aware that they do not qualify under conventional guidelines and willingly lie and falsify all the way to the closing table. The lines between need and want are blurred beyond logical recognition for these folk.
It takes two to tango…
Misrepresenting occupancy intent.
Propping up ’straw’ buyers.
Fake CPA letters and tax returns to allow for Stated Income programs (and much more house).
Borrowing down payments without proper disclosure.
It’s very possible to dupe the mortgage pro in a transaction, although they willingly engage in a don’t ask don’t tell policy when it comes to these issues. Nonetheless, if a borrower knowingly takes part in a transaction that is fraudulent they ought to answer for their actions and be punished accordingly. Making an example out of a few greedy borrowers would minimize such fraudulent actions MUCH faster than only pursuing the professional.
As a side note…Dropping the Fed Overnight Rate is no solution to alleviating this credit recession, I wish the news would get off this topic. Interest rates are a commodity, wrapped up in bonds that are driven by the overall economy. Since we are currently in a particularly bullish equity market right now, savvy investors aren’t interested in low yield Mortgage Backed Securities when there are far greater returns to be had in Mutual Funds (hence the rise in rates and thus yields) Looking at the market right now, fixed rates are lower than ARM’s…what does that succinctly say? The days of conventional mortgage rate predictors are gone. It’s a game of pure emotion… resistence and support, fake ceilings and false floors…just like the stock market.
Part III. Long Term Changes and Why Fair Isaac Isn’t so Fair.
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Grievous Actions by ‘The Man’
September 2nd, 2007 Categories: Random
Someone hacked ye ole XBroker blog. Content and layout will reappear soon…
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