Mortgage Fraud

In a Wall Street Journal article 6-20-08, FBI Mortgage-Fraud Probe is Looking at Big Firms.  The following is a summary of the article.

‘Some 19 companies, including mortgage lenders, investment banks, hedgefunds, credit-rating companies and accounting firms, are being looked at.  Mortgage fraud is an area the FBI is aggressively pursuing.  The Justice Department and FBI officials announced 400 individuals have been criminally charged for their roles in home-lending schemes, with 60 arrested in one day.  Real estate developers, brokers, agents and appraisers were among those charged, along with lenders, lawyers and so-called straw buyers.  “Operation Malicious Mortgage” swept up criminal investigations from March 1 through mid-June, and produced 144 cases nationwide.  FBI officials estimated the losses from the alleged scams reached $1 billion.  Two former Bear Stearns & Co managers were also indicted from misleading investors about Bear hedge funds that ultimately collapsed, causing more than $1 billion of losses. 

Mortgage fraud cases are on the rise as the FBI cases lead to indictments.  in 2003 they had 436 cases, and in 2007 they have 1,200 cases.  There are another 1,400 investigations under way, and they will continue to prosecute and bring those individuals to justice including prison terms where appropriate.’

As a 29 year mortgage professional, I am tired of the fraudsters ruining the mortgage business.  I applaud the FBI and look forward to the clean up of our industry.  Fraudsters be ware - the FBI is watching!

FHA has raised their loan limits

Affective March 6^th of 2008 FHA has increased their mortgage loan limits. Here the site to check out your local county loan limits http://www.fhaoutreach.com/

Companies that specialize in Leads

Question:

“I like to get your advice on how to get more clients these days. I’m in California I been doing loans for 14yrs. I have always strive to give my clients the best product available. Based on your experience as a professional for the past 30yrs. what have you found to be one of the most effective ways to generate more leads? There’s a lot of companies offering their leads. How good are these sources?

Your valuable input will be greatly appreciated.”

Answer:

This is a very topical question. We have done some research and with our experience have found the following to be very helpful.

As far as lead sheets, be sure of what you are buying. A loan originator

using a call sheet from a lead generation company is just as liable under

the law in regards to how the leads were developed. Loan originators may be

held liable to Do Not Call Registry law violations from purchasing a list

from the lead generating company. Verify that your potential clients are not on the “Do Not Call Registry”.

Also you need to ask questions about the lists. What are the demographics

of the list. How many others have been sold these leads? Does the company

offer exclusive ’single user’ lists? What are the guarantees regarding success?

What is response rate or closing ratio predicted? These are just a few of the questions

you must know when using these types of lists

Title companies offer ‘farm lists’ for the specific criteria you request.

These lists are offered free by most title companies. You will have to

do more work as you will have to ensure they are not on the ‘do not call’

registry, and then develop the lead yourself.

A 2-3% response on cold-call direct mailers is considered good. So

it’s a numbers game and accurate targeting with direct mailing and

cold calling is crucial.

One key thing loan originators learn is that every client they serve is now

a referral source and possible repeat business in the future. That being

said, it is crucial for achieving steady reliable business is to have

constant contact with past clients to remind them how professional you are.

Referrals are the best and easiest way to generate new leads. In addition

it’s a warm lead which increases the prospect to client ratio. When was

the last time you reached out to your past clients and asked them for a referral?

This should be scheduled for no less than 6 times a year. It is much cheaper

to keep a client than to develop a client.

You may want to combine Newsletters and marketing pieces. Newsletters are

not a ‘call to action’ as is a marketing piece. All correspondence need to ask for

the referral and have a meaning or purpose for the approach to the recipient.

For attracting new clients you will need to adapt to what your target market

is looking for. Who is it you want as a client, must be identified, besides

anyone that wants a mortgage loan? A target market may be “First Time

Homebuyers” or “Senior Citizens”. Become the expert in that area and focus.

Know the programs that are designed for what ever group you are targeting.

Then you set up marketing campaigns that targets these clients.

To help loan originators attract their target market, MTGTNA offers two lead

generating tools. “Home ownership Question and Answer Session” presentation

designed for attracting first time homebuyers and existing homeowners that

may want to refinance into better loan programs. Attendees will receive the

basic necessary information to qualify and how the mortgage cycle works.

Your attendees with have the necessary information to qualified for the best loan

to serve their purposes. The attendees with be able to see how their income and/or

credit affects their ability to qualify for a new mortgage.

The other lead generating tool is a “Homebuyer ‘Knowledge is Power’

Seminar” presentation designed to attract first time home buyers. Special

knowledge of the loan programs that are targeting this market is crucial.

Both will require you to generate the people to attend. This professional

presentation for your prospects will have an appreciated value.

To help you in making your marketing plan, please access our website for the

free Goal Sheets offered on the Benefit page. www.mtgtna.com They will help

you plan your marketing approach and set your goals. While your at our

website join the ‘Professional’s Club’ so you can be included in our email

database. Then you will receive our special offers, discount coupons, and

other industry information. Our Linda Williams just finished an article that

outlines the response to this question of leads. It outlines the ‘10 steps

for Marketing Success’ and has 32 lead sources listed. We will be notifying

the club members when this article will be available on our website.

So you want to be a DE underwriter?

Professor’s Answer:For information on becoming a DE Underwriter, the FHA website www.fha.gov has the information. The professor found this link to help you start. Go to the following link to receive the handbook 4000.4 which outlines the DE program. http://portal.hud.gov/portal/page?_pageid=33,716773&_dad=portal&_schema=PORTALNow scroll down the page to the area regarding different Single Family Handbooks (which means guidelines) with their reference numbers to the left. Choose 4000.4 DE Program, and open the manual. Then page down to chapter three which discusses the requirements for an underwriter. The entire manual describes the whole DE program for the lender. This should be the current information as to what is expected, although if you get involved with the program, you’ll need to make sure you get any updates to the manual from FHA.

Your local HOC (Home Ownership Center) office can give you more detail information and would be the best source for information. You can find out your HOC office at www.fha.gov, or in the left margin of the above link. Remember you will need a Mortgage Banker to sponcor your application to FHA.

Thanks for ‘asking the professor’, and we enjoy helping you wade through the mortgage information madness to find your answer!

Avenues for business development

We all remember the “good old days” when if you answered the phone, took an application, got the basics to the processor, and then went on to the next prospect. Let me see, that was 2004 through 2006.  Oh yes those were the days.

Then it was 2007, home values declined and adjustable mortgage rates moved up.  No more easy money as the mortgage industry slowed.

Now it is 2008, a new dawn of opportunity.  Homeowners will want to take advantage of the low fixed rates, and others will take advantage of the low priced housing market. Tap into this refinance market and help the consumer get a fabulous low fixed rate. 

To determine the new payment you will need to know the “margin” and the “index”.  The margin and index is set at the time of closing based on the loan product.    The margin does not change during the loan amortization, but is added to the index to determine the fully indexed rate.

You can find the index and margin on the mortgage note.  The margin will be shown as a percentage and the index will be identified by name. The index is the only variable factor, and the current index factor can be found easily.  Do a search on the internet or look in the financial section of the paper. Common indexes are LIBOR (London Inter Bank Offered Rate), COFI (Cost of Funds Index), COSI (Cost of Savings Index), MTA (Monthly treasury average), or one year CMT (Constant Maturity Treasury) with terms of 1, 3, 6, or 12 months.  Hybrid arms have longer fixed period before adjustments start.  

From your client’s monthly mortgage statement, get the balance of the current mortgage. Add the and the margin to establish the new rate.  Now determine the new payment based on current balance and adjusted interest rate.  Ideally the refinance should lower their payment as the adjustable rate payment should be higher after the adjustment period.

Remember that the current value of your client’s property will need to reflect an equity position of at least 5% for most refinance loan programs.  Some lenders prefer at least 10% equity.  Check with your wholesale representative or guidelines.  The borrower’s repayment pattern will also impact the percentage of equity required and loan program.

With these low rates, now is the time to improve your borrower’s position with a low fixed rate.  Conforming loan programs offer the best rate and terms, and require full documentation of your clients income for proper debt ratios.  When no additional ‘cash out’ is taken on the loan, the automated systems may be lenient with the debt ratios.

Some new mortgage programs are being offered due to the federal government’s intervention.  FHA Secure program with new higher loan limits, and Fannie Mae and Freddie Mac’s revised programs.  Let me emphasize the point of qualifying the client to match his/her real budget with the payments required to sustain the loan.

As a mortgage professional, leaving the borrower in a better position after loan closing is the goal.  It also builds client trust and referrals.  So don’t miss this new year of opportunity.