A few weeks ago, the Fed made an emergency rate cut of 75 basis points followed by another 50 basis point cut at their Jan 29th meeting. Mortgage rates plunged briefly but then turned and exploded higher in a climb that lasted several weeks and carried the 30 year fixed back up into the 6.25% range. Consumers were confused, and many lost out as they waited and hoped for rates to fall even further.
The 30 year fixed stands at 5.875% once again this morning as Bernanke?s testimony yesterday and the stream of economic data point to economy with the brake pedal mashed against the floorboard. With oil brushing up against $102 a barrel and the specter of inflation dancing gleefully on the horizon, the Fed still seems more concerned on balance about the recession that ?we?re not in?, which tells you something about how bad things look to them.
Mortgage Rate Forecast
Rates are improving this morning, but don?t wait for them to plunge. This is just part of the weekly cycle of volatility that consumers will have to watch carefully in order to lock in a good rate. The driver for mortgage rates isn?t the Fed action, not the recession, not even liquidity; it?s all about risk.
Forget about watching the 10 year Treasury for clues about mortgage rates. The correlation that existed was due to the fact that investors thought mortgage back securities and the U.S. Treasury 10 yr Note held about the same amount of risk. Guess what they think now.
Sunday, September 9, 2012
SACRAMENTO REAL ESTATE: PRICES FIND THE BOTTOM
What emerged as a brief flurry of activity appears to have developed into buying trend. Sacramento prices?at least in some areas?may have finally found a bottom.
How do we know this? Although the activity seems highly concentrated in the bank-owned property arena, it has become common for buyers to have competition. Investors and first time buyers are competing for properties at the bottom, often driving up prices beyond that asked by the bank/owner. According to agents I know, there are many all-cash offers among the buyers out there.
MORTGAGE HORROR STORY OF THE WEEK–MORTGAGE FRAUD MEETS FSBO
It’s not that I want to keep beating the mortgage fraud drum, it just keeps falling into my lap.
Furthermore, I figured that as a mortgage broker with almost two decades of experience, I could easily steer clear of trouble. After all, if I can’t recognize mortgage fraud, who can?
But today I learned a double lesson. Mortgage brokers and FSBO sellers are both at risk of getting caught up in mortgage fraud. Without even knowing.
What happened?
This morning, a woman called in and asked to speak with “the broker”. Hmmm….sounds like trouble. Although reluctant at first to explain, she finally spilled the beans. Here’s what unfolded.
The woman is a FSBO seller here in Sacramento, and her sale was supposed to close today. She had grown concerned, however, because nowhere in the paperwork was there any disclosure of the cash she was giving back to the buyer after the close. She told the escrow officer she wanted the credit disclosed in writing, but she was told to keep quiet or her loan would not fund. Is your Spidey sense tingling yet?
Originally, she had asked $440,000 for the home. But the buyer offered her $500,000, with a $60,000 cash credit back after the close. The credit would be disguised as a payment directly through title from the seller to the buyer’s son-in-law, a local underwriter for a well known subprime lender. Handled this way, the credit would be invisible to the lender. And as always with loan fraud, this was a 100% financed, owner-occupied, stated income loan. So the borrower was borrowing $60,000 more than she was actually paying for the home. The seller was told this was perfectly fine.
The Epiphany
Here’s the astonishing thing. Despite the fact that this buyer is a past client of Big Valley Mortgage, her loan officer had no clue about the arrangement. How could that be? The buyer had approached the loan officer for help with a “rush”. The deal had fallen apart with another lender and had only two weeks left to close. To hide the credit, the buyer had used an out of town appraiser and escrow officer. Presumably the appraiser cooked the books. Certainly the escrow officer willfully defrauded the lender.
After learning the truth, the loan officer immediately called the escrow officer to cancel the transaction. But the escrow officer had already requested funds and released the Deed to record! And just like that, the unwitting FSBO seller and loan officer had committed mortgage fraud.
The Lesson
Mortgage brokers need to be alert to the signs of fraud, things like hurried deals, unfamiliar partners in the transaction, and the absence of Realtors as a second set of eyes and ears. It isn’t unusual in today’s Internet world, for buyers to gather a team of people that are not local or acquainted. But a local team may be a buyer or seller’s best defense against problems.
And FSBO sellers now have one more thing to watch out for when operating without the help of a real estate professional.
Epilogue
Fortunately, a call to the lender was sufficient to reverse the transaction and cancel the deal before the police showed up. But it was close.
Got an opinion or thought on this? Leave a comment below.
Got a question or need help with a loan? Shoot me an email.
Like the article and want to read more? Please subscribe via email blog blast or RSS feed for automatic delivery of my regular articles on mortgage related topics.
« Purchasing Sacramento Short Sales–A Waste of Time?
Conflicting Credit Scores Cause Confusion »
This entry was posted on Monday, January 29th, 2007 at 1:18 pm and is filed under Loan Fraud, Sac Real Estate, True Stories. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
3 Responses to “Mortgage Horror Story of the Week–Mortgage Fraud meets FSBO”
Lucy Says:
And that sounded like such an innocent deal. Thats terrible that someone could have been taken like that. She was just getting change back, right? Not! Seems to be an alarming trend, the mortgage fraud business. Ralph Roberts is quoted in the Swanepoel Trends Report by saying that more and more people are being sent to jail on charges of bank fraud and conspiracy to commit mortgage fraud. I am concerned that this will get worse before it gets better. What do you think?
Marc Says:
Yes Lucy, just small change. $60k is no big deal.
I believe it will get worse before it improves. There is just too much money involved. I am worried too that scammers will target For Sale By Owners, trying to take advantage of a naive consumer who may be unaware for this stuff. An increasing awareness is the best defense, so I’m on my soap box a lot with Realtors and clients getting the word out.
Thanks for commenting!
Furthermore, I figured that as a mortgage broker with almost two decades of experience, I could easily steer clear of trouble. After all, if I can’t recognize mortgage fraud, who can?
But today I learned a double lesson. Mortgage brokers and FSBO sellers are both at risk of getting caught up in mortgage fraud. Without even knowing.
What happened?
This morning, a woman called in and asked to speak with “the broker”. Hmmm….sounds like trouble. Although reluctant at first to explain, she finally spilled the beans. Here’s what unfolded.
The woman is a FSBO seller here in Sacramento, and her sale was supposed to close today. She had grown concerned, however, because nowhere in the paperwork was there any disclosure of the cash she was giving back to the buyer after the close. She told the escrow officer she wanted the credit disclosed in writing, but she was told to keep quiet or her loan would not fund. Is your Spidey sense tingling yet?
Originally, she had asked $440,000 for the home. But the buyer offered her $500,000, with a $60,000 cash credit back after the close. The credit would be disguised as a payment directly through title from the seller to the buyer’s son-in-law, a local underwriter for a well known subprime lender. Handled this way, the credit would be invisible to the lender. And as always with loan fraud, this was a 100% financed, owner-occupied, stated income loan. So the borrower was borrowing $60,000 more than she was actually paying for the home. The seller was told this was perfectly fine.
The Epiphany
Here’s the astonishing thing. Despite the fact that this buyer is a past client of Big Valley Mortgage, her loan officer had no clue about the arrangement. How could that be? The buyer had approached the loan officer for help with a “rush”. The deal had fallen apart with another lender and had only two weeks left to close. To hide the credit, the buyer had used an out of town appraiser and escrow officer. Presumably the appraiser cooked the books. Certainly the escrow officer willfully defrauded the lender.
After learning the truth, the loan officer immediately called the escrow officer to cancel the transaction. But the escrow officer had already requested funds and released the Deed to record! And just like that, the unwitting FSBO seller and loan officer had committed mortgage fraud.
The Lesson
Mortgage brokers need to be alert to the signs of fraud, things like hurried deals, unfamiliar partners in the transaction, and the absence of Realtors as a second set of eyes and ears. It isn’t unusual in today’s Internet world, for buyers to gather a team of people that are not local or acquainted. But a local team may be a buyer or seller’s best defense against problems.
And FSBO sellers now have one more thing to watch out for when operating without the help of a real estate professional.
Epilogue
Fortunately, a call to the lender was sufficient to reverse the transaction and cancel the deal before the police showed up. But it was close.
Got an opinion or thought on this? Leave a comment below.
Got a question or need help with a loan? Shoot me an email.
Like the article and want to read more? Please subscribe via email blog blast or RSS feed for automatic delivery of my regular articles on mortgage related topics.
« Purchasing Sacramento Short Sales–A Waste of Time?
Conflicting Credit Scores Cause Confusion »
This entry was posted on Monday, January 29th, 2007 at 1:18 pm and is filed under Loan Fraud, Sac Real Estate, True Stories. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
3 Responses to “Mortgage Horror Story of the Week–Mortgage Fraud meets FSBO”
Lucy Says:
And that sounded like such an innocent deal. Thats terrible that someone could have been taken like that. She was just getting change back, right? Not! Seems to be an alarming trend, the mortgage fraud business. Ralph Roberts is quoted in the Swanepoel Trends Report by saying that more and more people are being sent to jail on charges of bank fraud and conspiracy to commit mortgage fraud. I am concerned that this will get worse before it gets better. What do you think?
Marc Says:
Yes Lucy, just small change. $60k is no big deal.
I believe it will get worse before it improves. There is just too much money involved. I am worried too that scammers will target For Sale By Owners, trying to take advantage of a naive consumer who may be unaware for this stuff. An increasing awareness is the best defense, so I’m on my soap box a lot with Realtors and clients getting the word out.
Thanks for commenting!
100% FINANCING WITH VA: CAN YOU HAVE 2 VA LOANS??
In the ongoing quest to unearth the few remaining 100% home loan options, I wrote a recent article about VA loans called 100% Financing: Focusing on VA. Since then, I have been asked numerous times whether or not a veteran can have two VA loans.
The answer is yes and yes. Now I know that the question above refers to two VA loans and not two questions, so let me explain the two yes answers. As most lenders and veterans already know, a veteran can have two VA loans in succession. Once a VA loan has been paid off and the property sold, VA eligibility is reinstated and reusable. On a one time basis, a veteran can even pay off the VA loan while retaining the property.
But the second part of that question is much more interesting. (va housing)
Can a Veteran Have Two Concurrent VA Loans?
In this down market, it is not unusual for a homeowner to want to buy a new home while waiting until the market improves before selling the current home. So can the veteran purchase a second using her VA entitlement while retaining the first?
Yes, often they can. The key is how much of the entitlement was used to buy the first home. As I stated in my previous VA post, the maximum amount of the entitlement shown on each veteran’s Certificate of Eligibility is $36,000. That represents a 25% VA guarantee on the old $144,000 loan amount. But those figures are obsolete. There is a bonus entitlement of $68,250 available to the veteran buying a home valued at more than $144,000. The two entitlement amounts total $104,250 which is 25% of the current conforming loan limit of $417,000. Got it?
Let’s look at how this worked out for a recent client of mine.
Example
A recent client of mine bought a home 8 years ago in Southern California for $120,000. Of his available $36,000 entitlement, he used only $30,000 (25% of the $120k). He came back to Sacramento recently from overseas duty and wanted to buy a $290,000 home while retaining the SoCal financed home as a rental.
Because the price of the new home exceeds $144,000, the veteran has 6,000 remaining of his original entitlement plus the bonus entitlement of $68,250. That total ($75,250) equals 25% of $297,000, so he has enough remaining entitlement to cover the full cost of the new home. He could buy a more expensive home by simply making up the difference in cash.
As more veterans return home, questions about VA are arising more frequently. My next post will focus on CalVET loans, available here in California.
Leave your questions or comments below, and join in the conversation!
ShareThis
The answer is yes and yes. Now I know that the question above refers to two VA loans and not two questions, so let me explain the two yes answers. As most lenders and veterans already know, a veteran can have two VA loans in succession. Once a VA loan has been paid off and the property sold, VA eligibility is reinstated and reusable. On a one time basis, a veteran can even pay off the VA loan while retaining the property.
But the second part of that question is much more interesting. (va housing)
Can a Veteran Have Two Concurrent VA Loans?
In this down market, it is not unusual for a homeowner to want to buy a new home while waiting until the market improves before selling the current home. So can the veteran purchase a second using her VA entitlement while retaining the first?
Yes, often they can. The key is how much of the entitlement was used to buy the first home. As I stated in my previous VA post, the maximum amount of the entitlement shown on each veteran’s Certificate of Eligibility is $36,000. That represents a 25% VA guarantee on the old $144,000 loan amount. But those figures are obsolete. There is a bonus entitlement of $68,250 available to the veteran buying a home valued at more than $144,000. The two entitlement amounts total $104,250 which is 25% of the current conforming loan limit of $417,000. Got it?
Let’s look at how this worked out for a recent client of mine.
Example
A recent client of mine bought a home 8 years ago in Southern California for $120,000. Of his available $36,000 entitlement, he used only $30,000 (25% of the $120k). He came back to Sacramento recently from overseas duty and wanted to buy a $290,000 home while retaining the SoCal financed home as a rental.
Because the price of the new home exceeds $144,000, the veteran has 6,000 remaining of his original entitlement plus the bonus entitlement of $68,250. That total ($75,250) equals 25% of $297,000, so he has enough remaining entitlement to cover the full cost of the new home. He could buy a more expensive home by simply making up the difference in cash.
As more veterans return home, questions about VA are arising more frequently. My next post will focus on CalVET loans, available here in California.
Leave your questions or comments below, and join in the conversation!
ShareThis
STILL HERE; JUST LITTLE TIME FOR BLOGGING
Wow, that was a long time-out! After writing consistently for a year and a half, the market meltdown and the ever increasing effort of getting loans closed on time finally gobbled up all my blogging time.
That said, there is more than ever to write about, more change coming faster all the time, more information to get out, tightening lending rules, and more broken glass to side step on the path to home ownership.
But blogging has been therapy, and I’ve missed it, a chance to pause and process the news that hurls by daily and ponder for a few moments what it means to me, to consumers and Realtors, and to the business.
So I’m back.
That said, there is more than ever to write about, more change coming faster all the time, more information to get out, tightening lending rules, and more broken glass to side step on the path to home ownership.
But blogging has been therapy, and I’ve missed it, a chance to pause and process the news that hurls by daily and ponder for a few moments what it means to me, to consumers and Realtors, and to the business.
So I’m back.
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