Dan Polimino's Blog

Rarely is a movie sequel better than the original. I feared that HARP II (Home Affordable Refinance Program) would be another empty "cotton candy" promise from Washington with a lot of fluff and no substance. I am happy to see that I was wrong. Recent verified results are making me a lot more optimistic about this program to help homeowners and INVESTORS, who owe more than the property is worth and have been unable to refinance in the past.

Property owners may go to www.fanniemae.com to see if their property is eligible. At present, this program is only for conventional loans, and not for FHA or VA. If a property owner has a FHA or VA mortgage, it is worth checking to see if they qualify for a streamline refinance. FHA and VA streamline loans are characterized by relaxed standards that exhibit a lot of common sense that I though was gone from the mortgage industry. I recently witnessed an individual close two loans under the HARP II program for his primary residence and rental property. There were no upfront fees for an application or appraisal, and the customer service was first rate.

I was pleasantly surprised to see that HARP II may used for investment properties. Normally, property owners will let a rental property go into default instead of their primary residence. While I am not in favor of government funded bailouts for the fat cats, almost everyone involved in a foreclosure is damaged. Not usually mentioned are renters who are displaced and have to find a new place to live in a tight rental market. In some parts of the country it is easier to qualify for a mortgage than it is to rent a property. Hopefully, letting investors benefit from HARP II will result in fewer displaced renters.

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp                                   

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

Colorado Mortgage Broker License # 100019831

NMLS# 378621

Your Lender for Life!

When people you care about need a mortgage,

for purchase or refinance, please do not keep me a secret. 

Chances are, if you have been in the real estate market over the last four years, you would have looked at a foreclosure, bid on a foreclosure, bought a foreclosure or know someone who has. You may also know that the buying process of an REO (“Real Estate Owned” aka: foreclosure) can be exasperating for all parties.

I have represented more than my fair share of clients that have struggled with the process, including getting a response from the REO Broker, not the bank, but the Broker who is representing the bank and the asset. REO agents are Brokers that specialize in foreclosed properties. This has become big business for these Brokers over the last 5-6 years. These Brokers solicit foreclosed listings from banks and third party asset management companies. It’s not unusual for an REO Broker to have over 100 REO listings at one time. As such, we have seen a real deterioration in service from many REO Brokers. Now, let me say at the outset that I know many fine REO Brokers and have had a pleasant experience with a few. However, in recent months, I have been hearing more and more complaints about how REO Brokers are handling their business. The complaints from consumers and other Brokers go something like this:

• The listing Broker never returned a single phone call or email.

• When I did get through, I could only speak with an assistant and never with the Broker.

• I couldn’t get any information about the property, the status, or the bank before I made an offer.

• The Broker didn’t follow the procedures and process the paperwork through to the bank.

• They did not get back with me in a timely fashion.

• They only care about how many offers they get.

Some of these complaints are valid and again I want to reiterate that there are many fine REO Brokers doing business the right way, but I am sorry to say it’s not the vast majority.

The question I get more than anything else is, “Can anyone do anything about it?” and the answer is yes, you can. If you are experiencing problems and the REO Broker is unresponsive here is what you can do:

• Call the bank that owns the property and file a complaint against the listing Broker. Your Broker can usually obtain this information for you.

• If you think you have been wronged and have a valid complaint, you can file a grievance about the company or Broker with the Colorado Real Estate Commission.

• You can also file a complaint with the REO Broker’s managing Broker.

The bank is the best place to start because if they get enough complaints about a particular Broker, there is a good chance there will be a change or they’ll take away his or her business. Consumers and Brokers deserve better and can demand change, but change requires action.

Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost

I was speaking with a few of my brethren in the real estate business around the country and the conversation centered on ‘short sales.’ Apparently, short sales are not treated the same way from sea to shining sea. My friend in Atlanta, GA works exclusively on short sales and does quite well. In fact, not only does she list them, but she sells them and gets them under contract and closed in 30-60 days. When I heard this, I almost fell off the chair. I told her that in Colorado, we cannot get the banks to respond to short sale offers and generally, the closing time for a short sale in Colorado is 3-6 months, if you can get it closed at all. I was speaking with a colleague in Philadelphia, and he was telling me that his brokerage firm was having absolutely no problems getting the banks to respond.

Soon after that, I did a little more research and began to realize that the banks were responding differently to homeowners in different states. Why would the banks be responsive in Georgia and Pennsylvania, but not in Colorado? I know agents these days use short sales negotiators in the selling of a home and we have used them from time to time. I think short sale negotiators are great and valuable. In the cases where we have used them, they have clearly earned their money and got the property closed in a shorter amount of time, but not in 30-60 days like in Atlanta.

I have been unable to get a bank to tell me why the difference between States, but one thing is clear in the whole process. There needs to be some type of regulation and reform on how banks handle short sales across the nation. For some time now, Realtors have been calling for a standard policy on short sales. I have heard various ideas like a 30-10 rule where the banks would have to respond to offers in 10 days after receiving the contract and then be able to close the transaction in 30 days. One thing is clear: the massive amount of short sales will soon be foreclosures, unless the banks make a concerted effort to change their ways, respond to offers, and get short sales closed.

Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost

Nature abhors a vacuum. With the tightening in the mortgage market we have seen an increase in portfolio and private, also known as hard money, loans to fill the void created since subprime mortgage products have become extinct. The good news is that borrowers who do not fit in the box for a standard FHA, VA, or conventional mortgage now have options. The bad news is that rates, liquid assets after the closing for reserve requirements, "skin in the game", etc., will probably be higher. Skin in the game is defined as the amount of equity or down payment one has. Once in a great there is still some common sense in the mortgage environment, although it is not very common overall. Fortunately we have learned from the past, and borrowers with a 580 credit score, who can not prove their income and need 100% financing will not qualify. We have enough foreclosures already and some borrowers are train wrecks waiting to happen.

A portfolio loan is a mortgage that is held by a bank, as opposed to a loan that is underwritten to a set of specifications that would allow it to be sold on the secondary market. An example of a loan that meets a given set of specifications, that would allow it to be sold in the secondary market, would be the good old boring (but a thing of beauty these days) FHA mortgage. Portfolio loans are mortgages that lenders plan to keep and not sell. These loans are written to a set of standards that make sense but do not fit into the guidelines for a FHA, VA, or conventional mortgages. An excellent example of a portfolio loan would be the US Bank products that have loan to values over 80% and do not require mortgage insurance.

Private money loans may involve people known to the lender before the transaction, or it may be an arms length transaction where there is no history between the borrower and the person who lends the money. An example of the first type is grandparents lending grandchildren money to purchase real estate to live in or for investment. The lender receives a return that is superior to what they were earning in a savings account, the borrower may acquire an interest rate that is less than they would pay on the open market and/or be able to get a mortgage they would not qualify for in the traditional mortgage arena. A true win-win situation for all involved. If you are considering doing this, I strongly encourage you to seek qualified tax counsel to make sure you do not run afoul of any IRS laws that may impact what interest rate you need to charge to family members.

In an arms length transaction private money loans, funded by individuals or private investor groups, often have a minimum of criteria to qualify for a loan. The first two questions that private money lenders usually ask is: 1) how will you pay me back, and 2) do you have AT LEAST 25% equity or cash for a down payment. The money may be for a fix and flip or a short term "band aid" loan. A band aid loan is used to cure an immediate problem such as a pending foreclosure, etc., while giving the borrower time to get back on their feet. Private money lenders have more flexibility when looking at a loan. One example would be to cross collateralization the loan to make the deal viable. Cross collateralization, also known as a "blanket mortgage", is when the loan is secured by more than one property or additional collateral. This does not happen in the traditional mortgage market. Most arms length private money loans are due in less than three years. Rates on private money loans vary widely. Some private money lenders are charging up to 14% annual interest AND four points to borrowers with a dismal track record. There is a relationship between risk and return and those with the gold make the rules. It is what is.  

By the way, you can differentiate between a private money lender and a predatory lender. A private money lender is interested in getting his money back, while the desired outcome for a predatory lender is to acquire the property through a foreclosure. A true predatory lender wants the loan to default. Private money lending appears to fall within a gray area of the law, and private money lenders are not bound by the same stringent guidelines as banks or mortgage companies. If you choose to go this way, make sure you understand everything about the proposed new loan. Pay particular attention to when it is due, prepayment penalties, etc. Never forget that "if it looks too good to be true, something is wrong".

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

Your Lender for Life!

When people you care about need a mortgage,

for purchase or refinance, please do not keep me a secret.

Every spring right around March, I start hearing all the alarms, all the warning bells, and all the Doom Sayers crying, "The Foreclosures Are Coming, The Foreclosures Are Coming!!!" They go on to alert the public that the banks are getting ready to unload a massive amount of foreclosures on the market. As a result, home prices are going to fall, the market is going to be flooded, and the economy will be depressed. Every year for the last four years, I have heard this same narrative and every year, IT HAS NOT HAPPENED. Why?

All anyone needs to do to understand why this has not happened and why it is not going to happen is study up on banking and balance sheets. You see, banks are healthy right now (plenty of cash) and so are their balance sheets. The balance sheets are important to the banks’ shareholders and investors. Let’s say that the bank has a lot of foreclosed properties on their balance sheet, priced at "X." Chances are, when the bank releases those homes on the market, they are not going to sell at "X"; they’ll sell considerably cheaper at "Y." Once that happens, the bank will need to maintain the balance sheet by writing down the loss. Now, the bank can do this without upsetting too much of the balance sheet and investors if they do it a little at a time. What they can't do is dump 100, 200, or 300 million dollars of property on the market at one time and then write down that loss in one lump sum. That would upset investors, shareholders, and the balance sheet. Instead, what banks do is slowly release a few foreclosures at a time into the marketplace and then write down those losses, never really turning the balance sheet upside down. This is exactly the formula that they have followed for the last four years.

One bank executive told me that he is under enormous pressure from the public to release his foreclosures to the marketplace, but will not do so for the reasons I mentioned above. So the next time you hear people sounding the alarms that the "foreclosures are coming," don't believe them. They haven't for the last four years and they are not likely to do so in the near future. As long as the banks are flush with cash, I would expect the process to remain the same.

Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost

HUD, in conjunction with NeighborWorks America, announced Monday a new program to help homeowners facing foreclosure due to involuntary unemployment, underemployment, economic conditions, or a medical condition. The program will be available for 27 states across the country and Puerto Rico. The Emergency Homeowners Loan Program (EHLP) provides for an interest free loan which pays a portion of their monthly mortgage for up to two years or $50,000, whichever comes first. The EHLP program will include missed mortgage payments (including principal, interest, taxes, and insurance), or past due charges, AND attorney fees. I think it was a wise idea to include attorney fees in this program because the last time most attorneys worked pro bono (for free), Latin was the common language. 

Obviously the potential for scam artists to try and profit off of the misery of distressed homeowners is real and an area of deep concern. Borrowers should be very, very, careful about mail solicitations, or radio and TV ads requiring consumers to pay upfront fees or membership fees. More information about this program may be obtained at www.FindEHLP.org or by calling 1-855-FINF-EHLP (346-3345). Homeowners should look at the website. If they need help go to a HUD approved counselor or contact the loan officer or real estate agent who were involved in the purchase of the home. True professionals provide service to their clients before and after the sale.

I would encourage applicants to put their contact information such as name, email address, and file number on every document they provide. Emailing seems to work better than faxing, but if you must fax I would put Page 1 of 10, 2 of 10, etc on the top right corner if all information provided. Keep the information you have provided organized and accessible, and follow up to make sure it arrived. Everyone involved in this process needs to be on the same page, and the people who will be processing the applications are not mind readers.

NeighborWorks America, www.nw.org, is the nation's leader in affordable housing and community development. It is involved with more than 235 community development organizations in all fifty states, the District of Columbia and Puerto Rico. It is a legitimate organization that I admire.

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

Your Lender for Life!

When people you care about need a mortgage,

for purchase or refinance, please do not keep me a secret.