I was doing my daily routine today, which usually starts off with a look at the morning market on Bloomberg, and then progresses to reading cnnmoney.com. One of the first articles I saw was Wow, I could've had a prime mortgage.
It discusses the fact that 15-35% of all people in subprime loans were given to people that could have qualified for prime loans. I knew this was an issue, but not to this extent. Towards the end of 2006 and start of 2007, I had 4, yes 4, clients that I was refinancing, and all 4 of them were perfect scenarios. Perfect credit, great income, easy deals. Every single one of them had prepayment penalties, when they were told that they didn't. There is no reason, at any Loan to Value (the amount borrowered, compared to value of the property), that they should ever have a prepayment penalty. Never. We have put people with foreclosures on the report, horrible credit, but with a really low Loan to Value, into Fannie Mae loans. This business is flooded with people that don't know what they are doing. I am not saying I have the answer all of the time, but I am confident that 95% of the time, I have done my due diligence on every persons situation, and have put together the best possible situation, with options for costs, to make sure the clients knows the options.
I am not joking whatsoever, this is hurting the business.
This is the first sign that you are in a "subprime" loan. A prepayment penalty is the first evidence. There are a few reasons that a lender or broker would put someone of this caliber into a subprime loan.
First, they are lazy. Often times they believe that subprime loans are easy to satisfy conditions, and overall much easier to get done. The reality is, that with Fannie Mae, documentation can be easier with a prime loan. The difference, is the underwriting process with a prime loan may take a little longer. Is it worth slapping a potential lifetime client with a prepayment penalty of 6 months interest, to save yourself 1 week for underwriting.
Apparantly so, 15-35% is a staggering number.
Second, They don't have any other options. One of the biggest subprime lenders of the early 2000's and even more recently, was Ameriquest. The reason I have some of the inside scoop is because my boss was an employee years back, and knew the ins and out of their operation. I have no issue with Ameriquest, though they have been killed in the media, but the reality is, as an employee of Ameriquest, you are able to sell Ameriquest product and that is it! They only offer high cost, high rate loans, because that is what Ameriquest needed to make a profit. It costs a lot to sponsor Major League Baseball, doesn't it? This speaks volumes for their training and salesmanship, to take a prime borrower and sell them something horrible. But, this is what has killed part of the market, putting good loans, into bad products.
Thirdly, Lenders believe that they can make more money on subprime loans. From my knowledge, maybe I am wrong, isn't it illegal to charge X person more than Y, just because they have different credit. I am not sure the regulation, but I am pretty sure that you have to give everyone the same deal, whatever you feel that should be. Help me out there, I can't find the law on it!?!?!?!?
So wouldn't it be illegal to make more from a subprime borrower? The only difference should be the fact that the rate will be higher, there is a prepayment penalty, and the margin and adjustment schedule for when it goes adjustable is different, on a sub-prime loan. Cost should be off the table, right?
The point of my writing is again to do your research as a consumer. People, though your loan officer may seem honest and can do a good job, aren't always what they seem. Ask you co-workers for advice, research on the internet (as you are doing right now!), and make sure that you are confident in what you are getting.
Knowledge is power in any business, but especially the mortgage business.
Jon Vetter
San Francisco Loan Officer, for your San Francisco Home Loan
Showing posts with label fannie mae. Show all posts
Showing posts with label fannie mae. Show all posts
Monday, June 4, 2007
There are four types of people...
Over the weekend I came to the realization that there are four types of people when it comes to credit. I think it is extremely important to find out who you are in the mix... Here are the four types:
1. People that think they have great credit, and do have great credit.
2. People that think they have great credit, but have bad credit.
3. People that think they have bad credit, and do have bad credit.
4. People that think they have bad credit, but have good credit.
In my experience, people are pretty aware of how they stand with credit, they have been told by people, banks or other, that they are strong, and use credit accordingly. However, there are people who really don't know where they stand. Check out my other blog on FICO scores and how they are formulated.
Credit, what is it, why is it so bad, why is it so great!
The issue with not knowing where you stand, is it puts you in a position to be taken advantage of. Fraud is one of the most horrible things to go through, and knowing where you stand will put you in a better position to question your situation, and make the best of it throughout your financial life. Check out my other blog on Fraud.
Real Estate fraud- How does it happen, why does it happen?
These types of fraud can happen, you must put yourself in the position to educate yourself to avoid the pain that these types of situations can put you through. It starts with credit. Know your score, know your positives and negatives, and don't let someone tell you otherwise. If in doubt about what someone tells you, ask someone else, a friend, or someone in the Real Estate business, for advice.
These questions came to my mind this weekend when at an Open House. I met a family that was looking to possibly buy the property, and the parent's were going to co-sign for the son on the loan, so that he could qualify.
Check out my blog on the reality of Co-signing... Credit and Co-signing Advice
The family was under the impression that the son would not qualify on his own because of issues with his credit. After going through his situation, I had a hunch that he might not be that bad off. One issue with credit, over a year ago, may have had the time to recover, and put him in the position to qualify. We went through the application, and last night when looking at his credit, it turns out he was strong enough to qualify. Submit it to Fannie Mae, PooF!, we have automated approval.
So we took them from possibly putting the parents on the loan, to now qualifying the son on his own, and not having to refinance at a later date to then put the son on the loan. That is a $3000 plus savings, plus they lock in a rate on today's terms, not what terms are like in the future.
Knowing your credit is extremely important, know where you stand, and find a reputable person in the mortgage business that you can trust. Without using someone qualified to offer you all of your options, you are setting yourself up for future issues, which in Real Estate, always adds up to future costs.
I may not be the person for you, but I think it would be a shame to not find out. You need to find someone that can give you ALL of your options, not just the standard options. Work with someone that thinks outside of the box.
Jon Vetter
Mercury Lending, Inc.
444 De Haro Street #130
San Francisco, CA 94107
650-465-5846 (Cell)
For your San Francisco Home Loan, from a trusted San Francisco Loan Officer.
1. People that think they have great credit, and do have great credit.
2. People that think they have great credit, but have bad credit.
3. People that think they have bad credit, and do have bad credit.
4. People that think they have bad credit, but have good credit.
In my experience, people are pretty aware of how they stand with credit, they have been told by people, banks or other, that they are strong, and use credit accordingly. However, there are people who really don't know where they stand. Check out my other blog on FICO scores and how they are formulated.
Credit, what is it, why is it so bad, why is it so great!
The issue with not knowing where you stand, is it puts you in a position to be taken advantage of. Fraud is one of the most horrible things to go through, and knowing where you stand will put you in a better position to question your situation, and make the best of it throughout your financial life. Check out my other blog on Fraud.
Real Estate fraud- How does it happen, why does it happen?
These types of fraud can happen, you must put yourself in the position to educate yourself to avoid the pain that these types of situations can put you through. It starts with credit. Know your score, know your positives and negatives, and don't let someone tell you otherwise. If in doubt about what someone tells you, ask someone else, a friend, or someone in the Real Estate business, for advice.
These questions came to my mind this weekend when at an Open House. I met a family that was looking to possibly buy the property, and the parent's were going to co-sign for the son on the loan, so that he could qualify.
Check out my blog on the reality of Co-signing... Credit and Co-signing Advice
The family was under the impression that the son would not qualify on his own because of issues with his credit. After going through his situation, I had a hunch that he might not be that bad off. One issue with credit, over a year ago, may have had the time to recover, and put him in the position to qualify. We went through the application, and last night when looking at his credit, it turns out he was strong enough to qualify. Submit it to Fannie Mae, PooF!, we have automated approval.
So we took them from possibly putting the parents on the loan, to now qualifying the son on his own, and not having to refinance at a later date to then put the son on the loan. That is a $3000 plus savings, plus they lock in a rate on today's terms, not what terms are like in the future.
Knowing your credit is extremely important, know where you stand, and find a reputable person in the mortgage business that you can trust. Without using someone qualified to offer you all of your options, you are setting yourself up for future issues, which in Real Estate, always adds up to future costs.
I may not be the person for you, but I think it would be a shame to not find out. You need to find someone that can give you ALL of your options, not just the standard options. Work with someone that thinks outside of the box.
Jon Vetter
Mercury Lending, Inc.
444 De Haro Street #130
San Francisco, CA 94107
650-465-5846 (Cell)
For your San Francisco Home Loan, from a trusted San Francisco Loan Officer.
Subscribe to:
Posts (Atom)
