Blog with MAE Capital

A Lender’s Wish list

August 28th, 2012 3:34 PM by Gregg Mower

Occasionally I day dream and wonder what the lending world and our economy look like if some changes were made to our industry. When I talk about changes I am not really going overboard here but some little changes might just go a long way to improving the economy, but more importantly it would help the average person on the street. These changes are small and you may never have heard of the rule let alone the fix, as some things I will divulge will probably blow your mind.

If FHA were to lower the upfront Mortgage Insurance down from 1.75% to .01% and lower the monthly mortgage insurance from 1.20% to .55 on all refinances transactions not just on those endorsed prior to May 31, 2009. This would open the door for folks to lower payments across the board who had an FHA loan. Individuals would benefit from lower payments and free up tangible income to buy other things in this economy thus stimulating money flow and other sectors of the economy.

If banks would refinance those jumbo loans for those who have managed to pay their mortgage on time that too would free up additional capital to be used for other things in our economy. Currently, you can do this type of loan with loans held by FNMA and FHLMC cal a Home Affordable Refinance. This program discriminates against those that do not have their loans secured by FNMA and FHLMC. FHA will do what is call a streamline refinance but the mortgage insurance sis so high it makes it cost prohibitive for most people.

If banks actually foreclosed on homes, this would actually stimulate things as well. You might be thinking that is a crazy statement, but if banks freed up more inventory in the market for those that now can buy they would buy that increased inventory. Those facing foreclosure would have it done with and the clock would start ticking for their ability to purchase their next home. People do not realize that their credit is messed up until the day the foreclosure sale is complete and that is when the clock starts ticking for their ability to purchase another home. So by the banks foreclosing fast it actually would help our market out today and make the recovery happen faster.

Another part on my lender daydreaming list would include more common sense in underwriting. What I mean by this is that as a lender we currently have to source where every deposit over $250 came from on a person’s bank statements. This includes the sale of personal property, gifts, transfer of funds, anything over $250. Other underwriting issues I would change would be common sense looking at person’s tax returns. Did you know, if you write off uniforms, union dues, and other business related expenses a lender will have to average those expenses and count them against you in qualification. If you are self employed and write off everything on your tax returns but still manage to save money for a down payment you will be penalized by not qualifying for the amount you may want.

Currently, a Mortgage Broker may not give his client any kind rebate to the client above his or her negotiated compensation. What this means that even if your lender wished to credit more money to you to help close your loan or real estate transaction they currently cannot by law. Yes, if the Mortgage broker wants to give you money to close your transaction and take less for themselves it is against the law to do so. The government has come up with neat ways to slow commerce and hurt the consumer again. This has no political motivations as this was part of the Dodd Frank Act of 2008 Busch administration implement during the Obama administration. It is government as a whole trying to regulate everything and getting very little right.

That is just a few things on my daydreaming list. I don’t want to dore you with the little details, but know if there was a little more common sense in evaluating people’s financial situation the economy as well as all individuals would be better. This would be a case of less is more.

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Posted by Gregg Mower on August 28th, 2012 3:34 PM

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CA DRE #01913783|NMLS #806170

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