Posts Tagged ‘loan’

It’s about products and process

By Rick Soukoulis | February 7th, 2011 0 Comments

It’s said that the pendulum tends to swing too far in either direction, and while I don’t know if that’s true in physics, it’s certainly true when it comes to mortgage products.

Let me explain.

For a long time, we had very limited mortgage products. There were basic fixed rate loans and a few adjustables. Then the pendulum started to swing.

In the mid-part of the recent decade, the subprime world was incredibly innovative in creating new mortgage products. These new mortgages had bells and whistles galore, and they had every feature imaginable.

The only problem was that all those loan products forgot one big thing, to take the borrower into consideration.

The loans had features meant to appeal to Wall Street, but lost in the shuffle was whether the loans were good for borrowers or not, whether a borrower could actually afford these loans.

When the subprime world blew up in 2007 and 2008, the pendulum swung back in the other direction, and that’s where we are today. Today’s borrower has very few choices, and like the proverbial baby getting thrown out with the bath water, a once legitimate-adjustable loan barely exists. It’s as if the sub-prime adjustables ruined the very concept of variability.

Today’s borrower, however, wants more choices. I talk to our Bankers every day as this seems to be a real theme they are hearing from borrowers.

As a result of this, Western Bancorp has decided to go back to the future, and we have come out with a variation on the original California Variable, a wildly popular loan type not seen since the 1980’s.

We call it the Safe AML

These are the loan features we are bringing back:

Very Low payment changes:
Payment caps are the feature of adjustable mortgage loans that control affordability. Our safe AML’s adjust cap is a .50%. Converting our .50% cap into dollars looks something like this: for every $100,000 dollars borrowed the most a payment could increase or decrease during any adjustment period is about $28.00.  It’s very affordable.

Affordable life cap of 7.25%:
Life caps are also very important as they protect borrowers from huge increases over time. Most life caps on adjustable rate loans today are between 9% and 11%. The safe AML’s life cap of 7.25% and this is only 1.5% over today’s 5.75% fixed rates. At some point in the future, the borrower could have a payment slightly higher than today’s fixed rate. This is a worst case scenario, however, and it’s not a bad trade off.

Low 3.5% start rate:
Again, today’s Jumbo fixed rates are around 5.75% to 6.00%, so our start rate is way, way lower. This wildly increases the borrowers buying power.

The safe AML allows for a qualifying Debt-to-income ratio of 50%:
Because we have designed a loan that is so safe for consumers,  we can allow their new mortgage payment to be as much as 50% of their income. Your buyers can get more home and more affordable payments.

Loan amounts up to $2 million!
We love Jumbo loans. We feel very strongly about the local market and as a local banker we are making a bet on supporting the high end.

We created this loan at Western Bancorp, and not only is it a good loan for the borrower, it shows what I believe is a major strength of the mortgage banker: The ability to take an innovative idea and turn it into a specific loan. My hope is that other Bankers will follow our lead and create mortgage product that help increase home sale and affordability.

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Intero Insider: HAFA Spells Relief … Or Does It?

By Gino Blefari | May 4th, 2010 0 Comments

At the beginning of April, the Federal Government introduced new measures aimed at helping Americans avoid foreclosure. Sort of lost in all of the news about how great the real estate market’s been doing, Home Affordable Foreclosure Alternatives (HAFA), are designed to help struggling homeowners who, regardless of effort to keep their homes, simply can’t afford to.

“A short sale would really help … if only the bank would agree.”

Now, maybe it will. Banks already participating in the Government’s HAMP program are required to participate in HAFA, as well. Mortgage holders have been notoriously difficult to deal with when it comes to short sales. One hand doesn’t know what the other is doing, approvals take virtual eternities (if they ever come at all), homeowners who’re feverishly trying to sell their homes or face the spectre of foreclosure are lost in a sea of confusion about how to proceed in the process.

With a glut of foreclosed homes (over a million at last count), banks are having to rethink their options. Each foreclosure costs banks upwards of $100,000 more than a short sale, but until now, they’ve not been enthusiastic about approving them.

The HAFA program should make things a bit easier on everyone. Whether it’ll work is another matter altogether.

The new guidelines institute a timeline, so that all parties involved will know about what they can expect and when. Sellers will be able to get pre-approval and know what the absolute bottom-line acceptable prices will be. Junior lienholders, who typically get left out in the cold and who are, typically, the factors in denying short sales, will be able to recoup some of their losses. Improvements are definitely being made to the system (although “system” is far too precise a word to pin on the old way of doing things).

A major benefit to HAFA is that it will, hopefully, allow homeowners to leave their properties with their heads held high, and with their dignity intact by fully releasing them from the liability of their loan.

In California, which has been one of the 4 states hardest hit by the foreclosure crisis, there’s a bit more to the program.

The recipients of $700 million dollars in additional aid, the State of California has proposed assistance to low-to-moderate income level homeowners through means such as principal write-downs for those who owe more on their home than it is worth (it’ll be interesting to hear reactions from people who are in the same situation but who are still making their payments on time), relocation assistance, subsidized mortgage payments, or temporary aid for the unemployed who are at risk of foreclosure.

They are, sadly, many more homeowners affected by this crisis that won’t be helped, for one reason or another, by this program or any other.

If you’re a homeowner in distress, please contact your lender. Ask your Intero real estate professional. Find out what alternatives you have before it’s too late.

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Mortgage That Matters: A MORTGAGE IS NOT A COMMODITY

By Rick Soukoulis | February 9th, 2010 0 Comments

From time to time I hear people saying that the mortgage loan officer is a dinosaur.  The reasoning is that a mortgage is commodity, that every mortgage has the same criteria, and that they are, therefore, mere commodities.

By extension, the argument goes, borrowers do not need humans involved in the process, and that they can benefit from reduced costs by eliminating the human element from the equation.

When I hear this argument, I wonder if the person ever got a mortgage.

If they had, they’d know that the “human element” is critically important and that many, if not most, borrowers would never be able to buy a house without assistance from the Realtor and the loan officer.

As an example, think about all the subtleties of various loan programs.  Let’s assume a borrower goes online and choose Program 1-A and gets turned down.  He then applies for Program 2-A, Program 3-A and Program 4-A, getting turned down at each of them.

At this point, does he get so discouraged that he simply gives up?

Had their been a loan officer and Realtor involved, he’d have known that of the ten programs offered, he only qualified for the tenth one.  A knowledgeable loan officer could have steered him right away to program 10-A and made certain he chose the right loan program to match his individual situation.

One argument for eliminating the human element also has to do with the reduced number of programs. The argument is that loan officers were needed 2-3 years ago when there were hundreds of programs, and the borrower needed help choosing among all these choices.  Now, they, say, it’s either a conventional 30 year fixed or an FHA 30 year fixed, and anyone can choose between these two.

Again, no one would say this if they’d tried getting a loan recently.  Awhile the number of programs has, indeed, shrunk, it’s a heckuva lot more than two.  And more importantly, while there maybe be fewer programs, they’re all much harder to qualify for.

A good loan officer can help borrowers choose the right program and help them qualify for that.

And no computer program can ever do that as well.

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