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500 Borrowers Looking For A Loan

by Peter G. Miller
November 25th, 2008

Here’s the strange part: Imagine if you had a product to sell and had buyers lining up for blocks. Wouldn’t it make sense to sell while you can?

I ask this question because several bits of information are so conflicting.

As we have reported, HUD received just 111 Hope for Homeowners applications in October, the first month of the program. More amazing, not one single loan has been approved under the H4H program to date.

Given the nationwide foreclosure glut you might expect different results, say 50,000 people asking for help under what has been billed as a foreclosure-prevention program. But nope, that didn’t happen.

And then you turn to News 10, ABC TV in Sacramento. It reports that a local lender, American Security Financial, “has collected more than 500 applications and none has been accepted.”

Huh?

If one lender in one community has found more than 500 borrowers with an interest in the Hope for Homeowners program then just imagine how many borrowers nationwide are interested. Keenly interested. As in, please help us avoid foreclosure.

FHA mortgages are one of the best forms of financing out there, but unfortunately not everyone qualifies. To help those with weak credit and missed payments we first had the FHASecure effort and now H4H. Neither has made a dent in the growing foreclosure problem.

The idea of saving people from foreclosure is not some sort of a handout. If you want to raise the value of YOUR home we have to reduce the inventory of unsold foreclosures. There are only two ways to slash the foreclosure stockpile, sell off what we have and make sure we stop adding to it.

The FHASecure and Hope for Homeowners programs were designed to help with the second part of the equation, the business about not adding to the problem. The FHASecure program as a foreclosure prevention effort is a total flop with no meaningful impact on the foreclosure problem.

Unfortunately, the Hope for Homeowners effort, even with the easing of program standards is heading in the same direction. Is this a problem? You bet. Here’s why:

Sheila Bair, the head of the Federal Deposit Insurance Corporation, the government agency that insures consumer bank accounts, says that in the next two years we could see another 4 to 5 million foreclosures.

What do you think will happen to local home values with so many additional foreclosures?

The demand for foreclosure assistance is overwhelming. There is a need to at least cleanse the system of toxic loans and to start re-building American home values. Alternatively, we can do what we’ve done to date: issue impressive news releases and resolve nothing.

For the full story, see Foreclosure Help Program is Hopeless, Say Brokers

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9 Responses to “500 Borrowers Looking For A Loan”

  1. s2kreno Says:

    The so-called “bailout” is turning out to be anything but–more like a handout from Paulson to a select group of lenders, to be spent on aquisitions ala PNC bank, bonuses for execs, and rewards to shareholders. No help for hapless homeowners. Paulson aid Neel Kashkari tries to justify it, saying the benefit of a stabilized market will “eventually” reach homeowners.

    The Treasury also maintains that boosting liquidity in the markets offers more bang for the buck because of the multiplier effect. However, this only works if the institutions actually lend the money, duh.

    And in any event, that reasoning is akin to a charitable agency deciding to spend money on helping starving people by purchasing seeds because that makes the money go further than just buying food. While seeds might be more cost-effective they do little good if by the time they grow everyone has already died. An improved economy will be cold comfort to those who have already lost everything they have.

  2. Angela Says:

    Dear Brian Montgomery, , Mr FHA!!!
    Well, once again FHA guess what? I just turned down client #4 because I don’t have an FHA license! Is this what you wanted. . client’s to be turned down because you and the banks are pushing out the small business mortgage broker shops. . . how about a another foreclosure because you won’t allow someone that has been in the business for 17 years to help their local community. How about making it available to all consumers who want or need to get an FHA loan Guess what. . now I hear you can buy FHA trigger leads. . . now, that’s just what we need. . !!! Don’t you guys get the fact that we need to get back to lending accross our desk and know who we are lending to in our community. . but NO!! you want to open it up to every Tom, Dick, and Harry to originate a loan because they joined a net branch?? These guys wouldn’t know a full doc loan to save their life!! Wake Up FHA. . you’re asleep at the wheel. . why not a bond?? Why would a small mortgage company that’s Inc. and with 2 w-2 husband and wife originators with integrity, ethics, and a great reputation in our small town originate these loans. . the 63,000.00 net worth does not say your saluable. . nor does it insure the client won’t get ripped off!! What is happening is now is net branch is making their loan officers charge the borrower additional 495.00 admin fee. . oh yeah. . you guys put out a new GFE that will save the client around 700.00 per file. . WHAT ARE YOU SMOKING??? All you need to do is not allow any YSP , no admin fee. . or junk fees . . I hear on these blogs all the time how many back points guys are getting on these FHA loans. . WAKE UP!!! You can’t teach ethics. . and shame on you for putting small business broker shops out of business. . and a new GFE is not going to change anything. . you still have the social engineers in our industry just destroying it. . !! Why not a bond for us with still perfect credit of 776 mid score instead of net worth??? When is this going to change??? Please tell me. . I also heard that these net branches throw the money in there just for the audit. . and then take it out. . and get ready to put it back there for there yearly audit!!! WHAT???? WAKE UP!!!
    YOUR DESTROYING A WHOLE INDUSTRY!!!

  3. s2kreno Says:

    What is this person smoking? It’s the lenders’ prerogative to do wholesale lending or not. And they have good reasons for shutting down wholesale lending–B of A found in their study that 4 of 5 loans that went sideways were originated by BROKERS–that is, originators whose own funds weren’t on the line and thus had little incentive to adequately vet their applications. So Angela, if you want to loan “across our desk” you have every right to–just put your own money on the line and stop expecting wholesale lenders or taxpayers to assume your risk.

  4. Angela Says:

    s2kreno,

    What do you mean by prerogative? I don’t what that word means? Are you a banker? If so that would explain your thought process. The AE’s that were in the field knew who was originating these loans. If you’re in the business how many opt-arm loans did you do? The “BIG” lenders were giving their AE’s and consiquently their brokers big money incentives to push this product! Do you think the broker’s made up these products? How about the preditory lending when the bureaus sell your client’s information the minute I pull a 3-file merge credit report? Can you imagine signing on the dotted line for the single most important committment you make in a life time and the person that made all these wonderful promises , rate,fees,term, type of loan is now no where to be found either in person or on the phone? Just ask your local title company how many times these internet leads/trigger bureau leads show up to the signing table? You like so many do not understand the small husband and wife broker shops that truly care about their local community. I don’t care if your a lender, banker, broker, loan officer you can’t teach ethics!! Do you understand why the net worth is required? It does nothing to secure your client. The state of Oregon is one of the few states that already regulates the mortgage broker with a required bond, education, and a proctored exam upon entry. What has your state done. . and Yes I would lend my own money out to these local people in my local community. What’s your back ground? Just a consumer? That would explain your ignorance in our industry. Any comments welcome!

  5. Peter G. Miller Says:

    Hi –

    Respectfully, in the context of a business $63,000 hardly seems like a steep barrier — about the cost of two cars. My plumber probably has $500,000 in inventory on hand.

    The real question is should we have any standards for lenders? If the answer is “yes” than what standards should we have?

    Peter

  6. Angela Says:

    Hi Peter, You sound like you know what your talking about and I have read some of your previous posts. What is your title? I did have the net worth. . but as you know with the market is what it is and I have incured more debt. My CPA states that I am almost there , but what if I need to live on the cash. . I can’t just put it there for the audit (like I hear allot of people do) then take it out and live on it until my balance in my accounts grow again, that is unethical and the reason we are in this mess because of unethical people. I can’t do that! Why not a bond? I have perfect credit and am Inc’d, w-2, have a wonderful office next to First American Title Company (in which my rent is $2,500.00 a month). Do I have to move from here and go back to work out of my house where I started? I hear FHA is letting people work out of there house now? Please don’t tell me truly this is the effort of the big banks to put us out of business and they are working with FHA to do this. If you have only 2 employees (husband and wife) why do we need all of that money in the bank. . I paid off my 2 cars and am willing to do what ever it takes. . but just my luck when I put out the monies for the audit and such. . the rules will change. . Does anyone know at FHA if there is a bond in the works for small broker shops. . or are small broker shops just going to have to close their doors? I am hearing every day people with there own small broker shops after 25 years having to go bankrupt and close? How can we stop this. . I am not talking about the large broker shops (with all the used car salesman) that never originated a full doc loan in there life time and have only been in the business for the last 5 years. . I am talking about seasoned brokers that have been doing this business and know what they are doing and only have their client’s best interest at heart!!! Please advise who I talk to. . maybe a phone#. . no one is responding to my emails at FHA. . so does anyone have a # that cares? NAMB doesn’t seem to care since the big banks are what funds this operation. Angela@themortgagehouseinc.net thx!

  7. s2kreno Says:

    Of course there should be standards for lenders. Some states require education, testing, licensing, and demonstration of ethics. Others have no requirements at all and even (like Florida) allow convicted fraudsters to work as loan officers! There should be national standards rigorous enough to protect consumers and investors. And REPUTABLE lenders should welcome them as they will restore trust in an industry that has become sadly tarnished. But ultimately its a free market and suppliers of money have a right to decide who they wish to do business with.

  8. Angela Says:

    Hi Peter, Yes, there should be standards. Do you remember when you could not even originate a FHA loan unless you were in the business for a certain amount of time and you had to know how to process them first?? I think in order to do these loans #1 You yourself should have good credit. #2 Demonstrate that “you” can and do always councel your client on the importance of good credit. #3 Have a varifiable history of being in the business and have passed an audit with your state and recv’d a 1 (the very best) or a 2 ( good but forgot to date a doc. or very minor violation) All of this and the audit from your state would be unannounced to see how you run your business. #4 The net worth should be based on how many LO’S are originaters in your office. (should be based on your net worth or a bond) . If you only have 2 w-2 employees a much smaller net worth or bond requirement. Trust me. . lender’s know who is doing what out there!! and so does your AE! Oh, , and no you can’t work out of your house to originate FHA and work out of your house like they allow today . . .If I worked out of my home I would have the net worth too. . I don’t, I have a nice professional office of which I pay $2,500.00 a month for. . I lock up every door put away all my files. . never discuss personal info with anyone other than my staff and am well respected in my community!!
    Remember “YOU CAN’T TEACH ETHICS!”

  9. Mortgages Says:

    You’re spot on. I like your web page. Great article concerning the loan.

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