Happy New Year

December 28th, 2011

As we all take a break during the Holidays, we can reflect upon the events over the past year. It was certainly an eventful year–from global natural disasters to revolutions in many countries to the European debt crisis. Any one of many events could have brought our economy back into recession, yet we go into the New Year with some sense of renewed financial vigor. The recovery from our recession has been so painfully slow that it is hard to see the progress, but it is there.

Will real estate recover? We added almost 30 million people in the United States during the past ten years. Right now we are not building enough housing to accommodate this growth. Even those who have been unemployed for a while still need housing.  Some of them will be buying in the next year or so and I am already seeing a few of these purchasers in my practice.

During the past five years, we have survived by “doubling up” with two or sometimes three generations living under one roof.   But as the economy recovers, our children (and sometimes our parents!!) will be moving out and household formulation will accelerate. This all amounts to pent up demand. The statistics in real estate are starting to turn around with the inventory of existing homes for sale falling from 3.8 million in October of 2010  to 3.3 million in October of just this year. Yes, there is still a large “shadow” inventory of homes hanging over the market, but these are national statistics that don’t really apply much to our market area (at least not Brownstone Brooklyn).  New York City was one of the few places around the country already reporting increases in home prices, and it is well known that we are incredibly fortunate to have one of the best local economies in the country.

The bottom line is that early 2012 might well be a phenomenally great opportunity to purchase a new home with somewhat reduced prices and with financing at such incredibly low rates.

Thank you for taking the time to read my blog this past year and I look forward to providing you with informative and entertaining posts in the year to come.  Happy Holidays and Happy New Year,

Norman

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Proof Now Needed that Seller will be Paying Transfer Taxes

November 3rd, 2011

For those of you who have read my previous posts on the latest changes to Good Faith Estimate requirements (GFE), you are aware that my opinion of them is far from positive. Well now there has emerged a new hitch in the home buying process as a result of GFE requirements, this one, however, can be avoided if the right precautions are made. Universal Mortgage is committed to making the home buying experience as seamless and effortless/painless as possible, and while the rest of the post below is geared more towards my Realtor followers, it is just as important that potential and current buyers are at least aware of what is going on

I want to keep you abreast of a new requirement by some banks on underwriting a file (i.e sending the file to the bank) without a fully signed contract of sale. It turns out that because of the onus and penalties now required by the Federal Government on making mistakes on the Good Faith Estimates, some banks are now requiring a copy of the fully signed contract of sale to show that the State and City Transfer Tax will be paid by the seller. The assumption that the seller will be responsible for said tax is no longer valid, unfortunately. While we and the banks fully realize that in virtually ALL cases it is only the seller who pays this (with the exception of new construction/new renovation), the banks nonetheless are holding up the files until they receive full and unequivocal proof of who will be paying it.

The documentation needed is either the purchase contract specifically naming the seller as responsible for this fee or a letter from the seller’s attorney to confirm the seller is paying said tax. Without either one of these items, some of our banks simply will not let the file go to the underwriting stage and the file may even be suspended or denied if said items are not received in a timely basis. Most banks, of course, wont allow the file to be sent to them without the contract anyways. 
Given the above, if you want to move the file along without a fully signed contract of sale, then in most cases the said letter will be needed.

I realize that these new bank policies can be confusing to any buyer or Realtor. If you do have more questions about this, please feel free to:

  • Ask it in the comments section below
  • Post it on our Facebook Wall (www.facebook.com/universalmortgageinc)
  • Give me or any of Universal Mortgage’s brokers a call at 718-534-5600.

    We are here to help out any way we can.

Special Note to all Realtors: Since either the contract or the aforementioned letter are now being required by so many lenders, appraisals cannot be ordered until the borrower has received the GFE directly from the bank (and as mentioned, even if you try to send the file to the bank, they won’t proceed without the contract or letter). So, the time frame for appraisal ordering now is generally at least 4 to 5 days AFTER either we have gotten the contract or the letter indicating that the seller is paying the transfer tax. It will definitely seem like there are delays in just ordering the appraisal, but in reality, it all has to do with these new regulations.

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Rates – Is That All There Is?

June 8th, 2011

With the current state of the economy it is no wonder that those in the market for purchasing a home are becoming hyper vigilant rate shoppers.  Not only will they call every bank in town in search for the lowest rates available but will even look online.

One might think, a rate is a rate is a rate, the lower the better no matter where it comes from, end of story.  This unfortunately is simply not the case, especially when dealing with all the subtle nuances of buying in New York City. The problem with dealing with a lender on the basis of rate alone is that all the other factors (experience, reputation, knowledge of the area you are buying in, etc.) are unknown, and that can lead to disaster.

One shocking number you should be aware of off the bat is that virtually 70% of all online applications never make it to the closing table!

Why does that happen? I have included a list below on some bait and switch rate tactics and other issues that someone only using rates as a factor for choosing a lender could face:

  • Just because a low rate is posted does NOT mean you will actually qualify for it. Many of those low rates you see banks post are reserved only for those with a credit score above 740 and sometimes 780!  This alone, rules out over 80% of the population from getting this rate.
  • With self employed or highly commissioned borrowers, getting those low rates are even more problematic with the online rate sources and oftentimes with bank clerks as well.  The on line firms, IF YOU CAN GET SOMEONE ON THE PHONE (see my nightmare story here), cannot screen tax returns at all.  Nor are they trained to do so. So, they merely accept the income levels as provided by borrowers with no screening or evaluation of the returns whatsoever.  As anyone who is self-employed can attest, more often than not, these borrowers write off sometimes 50 to 75% of their gross earnings.  A borrower might say that he or she earns $200,000 per year (and with THAT income would qualify), but in reality, it is more like $75,000 (and with this income they don’t!).
  • Many borrowers are reluctant to discuss “taboo” lending subjects such as self-employed less than 2 years, money under the table, undisclosed gifts, getting money from overseas, etc.  By not including this information in the application however it can directly lead to it being declined.

Issues Specific to Property Types in New York

No matter where you plan to buy, the points I just listed are important to keep in mind.  Those who are planning to buy in New York City, though, have a few other complicating factors to keep in mind.  In many cases, going online or with clerks at a bank branch, you may be doomed before you even start when going through them for a loan. Here are some of the NYC issues:

  • 3,4,5 unit co-op buildings (AKA Brownstones). You may recall a blog posting I had on this a few months ago, which can be read here.  Basically what the issue here is that Fannie Mae will not buy loans on co-ops with less then 5 units and an individual bank will not finance more then 20% of a given building. For 5 unit buildings that means there will be 5 different lenders for the building.  For a building with 3 or 4 units, a single unit already is more then 20% of the building AND Fannie Mae will not get involved. Going directly to a lender for this type of property is a waste of time, you need an independent mortgage broker who is familiar with the area on your side to even stand a chance of approval.  (I should also note that Universal has successfully closed every single small unit co-op that we have been challenged with.)
  • Even if you are not buying a small co-op, have perfect credit, all of your income is reported, AND you have plenty of money in the bank, you are still at risk of being declined when working with an online company or bank.  Most of these businesses rely on “standard” recorded sales prices comparables to determine appraised value, not Real Value. This means if you are buying a house for $2,000,000 when a block away a house just sold for $900,000, on paper it looks like you are spending over $1,000,000 too much for the property value of the area.  It does not matter that the $900,000 house is in disrepair and is significantly smaller.  The result of such blind comparisons is that the loan is either declined or requires a significantly greater amount down.

Still not convinced to avoid shopping for a loan online or going directly through a bank?  Ok how about this scenario:

You have great credit, you have great verified-income, you are buying a standard $1,000,000 home, and you are going to put 50% down.  Clearly in this scenario even if you go with one of those low rate online companies or through a bank you will get approved without an issue…WRONG!

The problem here lies with a general lack in customer service.  Now you may say “I can deal with poor customer service if it means a lower rate.”  The problem is you really can’t.  These online companies and banks make their profit though taking on as many clients as possible, and any delay on working with your application could result in miss deadlines and ultimately a declined loan. When you take into consideration that it is not even in the banks best interest to lock you in at those low, low rates, is it really any wonder that those deadlines are frequently missed?

Ultimately, whether you are planning to purchase in NYC or elsewhere (but especially in NYC) you need a proven and reliable mortgage broker on your side, not only to help you avoid the tricks and trappings of banks, but also to help make sure you are providing all of the information you need to provide.  Unlike with banks directly (who pay their branch managers based on loan applications brought in, NOT closed), it is in an independent mortgage brokers best interest to get you the best rate you qualify for and they make sure that your file gets closed and funded within the time-frame needed.

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Universal Mortgage Makes 2010 Top 200 Originators List

April 29th, 2011

I am very pleased to share with you that I, along with others of the Universal Mortgage Team have, for the third consecutive year, ranked highly in several categories in the annual Top 200 Originators list.  The year’s list was again compiled and released by Scotsman Guide, which is a monthly publication for mortgage originators and nationally recognized resource for the profession.

Here are some of, but not all of, Universal Mortgage’s National rankings:

Overall Volume of Loans Closed

  • Norman Calvo ranked 13th
  • Mark Maimon ranked 55th
  • Edward Ades ranked 86th

Top purchase volume

  • Norman Calvo ranked 5th
  • Mark Maimon ranked 15th
  • Edward Ades ranked 21st

What makes the actual numbers so significant is that despite all of the pronouncements in the media on how impossible it is to get mortgages these days, the loan officers at Universal Mortgage are simply amongst the very best in the nation.  These rankings show how skilled they are at making sure that their applicant’s files get approved AND closed.  Indeed, banks are throwing curve balls at us day after day after day, but because of our experience, diligence and perseverance in details, we are able to overcome nearly all the obstacles that they put in front of us.

These national rankings  puts the three of us WAY ahead of the loan originators from Wells Fargo, Bank of America, Chase, Met Life Home Loans, and other much larger companies.

These annual rankings are certainly a feather in our cap, but the true meaning behind them is simply that we, as a group, have much more clout with our lenders than the vast majority of other loan originators out there.

Simply put, if you are looking for the best loan officer out there to handle your loan, who would you choose?  Someone who hasn’t even made the list, someone who is a novice in the industry, or someone like Edward, Mark, or myself, who has had years and years of experience dealing with all of the myriad issues that are inherent with mortgages these days?   Anyone in the industry can quote interest rates and fees , but who are the ones that can be relied on to get the job done and actually close the loan?  The numbers certainly speak for themselves!

To see the full 2010 Scotsman Guide’s Top 200 Originator List please click here.

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Good Faith Estimate Forms Continue to Confuse

April 4th, 2011

I am always pleased when the New York Times agrees with something I have brought up in my blog several times since last summer when the changes were announced (see my posts on April 26th, July 16th and August 25th, 2010).  The point of consensus is in regards to how terribly confusing the new Good Faith Estimate forms are.

Here are the problems and issues in a nutshell:

1.     Many of the standard “simple” fees are lumped together into one total sum. The old good faith estimate that had been used for over 30 years was much clearer on nearly every single line (fee) item.

2.     Oftentimes, since banks are running scared of having to pay these costs themselves, some are now including the SELLER paid transfer tax as a BUYER paid fee, thereby nearly doubling the section for “transfer fees” on the form.  This can and will scare the heck out of nearly every borrower.

3.     Banks are now, once again because of the fear of having to pay the amounts themselves, WAY overestimating certain fees, sometimes by more than 20% so that they can be “safe” on the estimates. If the actual costs come in just a bit higher then their estimates, they would have had to pay for the costs themselves, which clearly they do not want to do.

4.     Because most files are now underwritten by computer modules and technology, the “systems” that are used to approve a loan simply do not and can not understand the inflated and over exaggerated fees. So, if a borrower now needs $20,000 more in funds to close because of these over exaggerated fees, and let’s say he doesn’t have the “additional” funds” readily available, the computer will DENY/decline the file because of lack of funds!!  This has happened over and over again!

The article is from the March 24, 2011 issue of the New York Times, entitled Problems With New Good Faith Estimate Forms, by Lynnley Browning. It is such a well written one that I wanted to make sure that everyone reads it. Please go here to do so.

The article mentions a little known fact that many lenders and brokers are now offering simplified and easier to understand closing cost worksheets.  At Universal Mortgage, we’ve been doing this for years already to make the process simpler and easier to understand.  Whenever someone calls me for a generic pre-qualification or, if they have a specific property in mind, or if they want to compare closing costs and loan programs, we send out our simplified version and, in addition we also send out the new mandated form required within 3 days of the date of the mortgage application. I have found this to be invaluable for everyone because of the clarity and precision that our form provides.  I only wish the Federal Government could do the same.

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End of a Nightmare, Start of a Great Year

January 21st, 2011

When I last posted, way back in 2010, things were looking pretty bleak. I was stuck in a refinance quagmire that started way back in July. I had violated my own rule of never going directly to a bank instead of using a reputable mortgage broker (I won’t ever do it again!!). The nightmare that followed included an inexperienced sales rep, incorrect records of my account, a loan officer that disappeared, and silence—lots and lots of silence. I had not heard from anyone at the bank in nearly a month! No updates, no progress on the loan, no checking in to see if I had any questions, NADA.

Then at the beginning of December I received an email requesting the same information and documents that I had already given them three times!!  They asked for things that I had thought we resolved months earlier.  I was beginning to feel that I was stuck in a cycle that would never end.  What was supposed to be a simple refinance application had somehow ballooned into half a year of paperwork and hellish incompetence.

Fortunately, I did not give up, and continued to demand results; my file, after all, was one of the most perfect files around.  Finally, when things seemed to be in the middle of yet another standstill, the loan was approved and the nightmare was over at the very last hour of the very last day of 2010.  It was a perfect way to end the year and I felt that with my refinance behind me and the refinancing craze of 2010 behind all of us, that 2011 should turn out to be a great year.

Here are some reasons why we, in Brownstone Brooklyn will see a pretty darn good year for real estate:

1. Homes and apartments are more affordable than they have been in quite some time.  The combination of lower rates and slightly lower prices makes for a strong, affordable market for both first time buyers and step up purchases

2. The economy is improving and jobs are being created, unlike the previous three years. As the economy improves, household formulation and the need to purchase a home, will rise as well.

3. While credit standards are tight, the worst is over and underwriting guidelines will start to become a bit easier. Along the same lines, as rates have crept up, refinances are down and mortgage banks will once again concentrate their focus on purchases.  They will be competing for fewer loans because they will no longer have the “easy pickings” with refinances.  This will make for a stronger mortgage market and easier underwriting.

4. The population is growing and our area is in incredible demand!  With our neighborhoods at the very top of “Best Places to Live in New York” (and probably in the nation!) we will have a very strong and steady supply of buyers in all price ranges.

I look forward to being a part of this upcoming strong and wonderful year with all of you.

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Happy Holidays and a Wonderful New Year

December 21st, 2010

This past year has been a momentous one for the housing industry in general, and for me personally.  I am honored to have you all along for the ride as I shared my thoughts on all the challenges we are facing in mortgage underwriting issues and especially with the new appraisal system and good faith estimates.

I still feel strongly that we are continuing our rise out of the housing crises that seems to have plagued us these past few years. On a personal note, I am ever hopeful that my own refinancing nightmare will one day see its happy conclusion. Regardless of what the future holds for any of these topics, rest assured, I will be here thinking, sharing, and working along with you to find new insights and opportunities in the ever-changing world of mortgages.

The first order of business for 2011 will be an update on My Nightmare with Part 4. Yes, regrettably, there is a Part 4! Until then, I would like to wish you all Happy Holidays and a wonderful New Year and once again remind you to be sure to “like” Universal Mortgage on Facebook so that you do not miss a single entry in 2011.

Thanks!

Norman

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My Nightmare: Part 3

November 17th, 2010

Last time ended with me waiting for my document review to go through. I waited, and waited, and waited for a response. I gave her three more days, and called and then e-mailed. This time, I got a response the next day. She told me that the underwriter wanted more material and gave me the list. The most important thing, she said, was proof that my home equity line of credit was against my New Jersey property! I laughed this time, saying, “But we discussed this before, I told you that YOU, YOUR BANK, issued the home equity that I am still currently paying on this condo to YOU!” She sensed how angry and frustrated I was getting and said she would discuss it right away with the underwriter.

I got an e-mail from her the next day and here, line by line was my response:

Thanks for your quick response.

Here are the answers to your questions:

1) Please let me know what entities you need K-1s for (list them out for me, please). To my knowledge, I am not a partner in anything.

2) I mentioned before that the HELOC is NOT on the property at Old Queens Court, in Eatontown, NJ. Rather, it is on our subject property (the condo that you are financing for me in Florida) and there is no balance.    I am attaching a pdf of that account to show you.   The mailing address is 17 Old Queens Court only because that was my primary residence when I originally took out the heloc with my original purchase of the Florida condo.   Please remember that I want this HELOC re-subordinated to the new loan (I had mentioned this before, too, so perhaps the underwriter did not get this request from me?)

3) Attached is the E-Trade statement

That should do it.  Please send to me (e-mail is fine) a copy of the appraisal for the property.  Both me and my wife are eager to see what it and how it appraised.

Lastly, I know that interest rates have fallen and I never had the opportunity to decide whether to lock in or not.  I would like to have my rate reduced, please, to the prevailing rates as I know they are much, much lower.

Many thanks for your help.

Norman

I am now two full months into the refinance application and as of yet, I am still not approved, there still are “issues” on my file and I am beyond belief frustrated. My processor answered the above e-mail relatively quickly and said that my loan officer would get back to me shortly about the interest rate (mind you, I didn’t even know that I had a loan officer, because I never spoke to one).  Next Week: A Visit From the Ghost of Lending Past

Two weeks ago the story took its break with me waiting for a response, last week was much the same.  If you are noticing a pattern of exceptionally long periods of waiting for the bank to do their job, please take this lesson to heart; Go to a bank, prepare to wait forever!!.

Two days go by and no call from a loan officer, so, I e-mail my processor to ask what’s up. I get a response the next day that I should hear soon.  Another day goes by and no call, so I call and e-mail, and here is my response (this is directly copied from my processor’s email to me):

Hi Norman,

It looks as though your loan officer does not work for xxxxxxxx anymore, as I cannot find him in the system. The main number is 888-823-6667. Give that number a call and someone can help you with the interest rate.

Also, I need to know who your flood insurance is through so I can get some information on that. I am still waiting on your HO6 policy as well.

Let me know if you have any other questions.

Thanks,

“It looks as though your loan officer does not work for xxxxxx anymore, as I cannot find him in the system”. Can you imagine how irate I became at hearing that?? Nearly 10 days had gone by since my initial request for a lower rate and the bank CAN’T fine my loan officer, someone whom I never spoke to before and whose name I never knew?? Then, the issue of flood insurance came up again! This lender, by the way, has over 75 mortgages in the same condo building and has the flood insurance already for the building. They are acting as if they don’t even know this building, yet they were the lender who gave the project approval on the condo when it was being built!

Okay, so I’ve called the number three times, I’ve reached out to my loan processor four times and havent’ heard back. Can you imagine? For all I know, maybe the processor doesn’t work there anymore? Who is actually working on my file? Does someone really care about my file? Is there a loan officer who is responsible or is it the “company/bank”?

I’ve always said that you need to have a responsible mortgage broker working on your file, someone who can take charge and get things done,  someone who will communicate with you all along the way up through the closing. Without that, you are just a number, just a cog in a huge bureaucracy, with nowhere to turn.

At Universal Mortgage, my staff and I are always attentive to every one of our clients at all times. There is always someone to call or email, and responsiveness is our trademark.

I should have known better. At least now I know from cold, hard experience what it is like to go to a lender directly and how inferior the service is (AND, I might add, the rate at the bank was FAR worse than what we are offering as a broker).

My saga is still continuing. Now I have to escalate this to “someone” in management. My processor said someone will be calling me soon…….

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My Nightmare: Part 2

November 15th, 2010

When we left off, I had just learned that woman I had made first contact with at the bank had only been working in the industry for a few weeks. Unfortunately, rather then thank her for her time and end the conversation then and there, I allowed it to continue.

She explained to me that we “had” to lock in the interest rate because the bank was so busy that there were no other options. “Don’t worry” she said, “the rate lock is for 90 days so we can certainly close in time”. I told her that I didn’t want to lock in because I felt that interest rates would fall further, but she said I had no options. This was my second mistake and a further indication that I should have ended the relationship and move on to a different lender.

My application proceeded through the system and I waited and waited for the next steps. A week and a half went by and all I got were some disclosures with no cover letter explaining what to do. I finally received a phone call from my processor two weeks into the application who wanted to discuss some “discrepancies” with me. She wanted to know why I told the interviewer that my home equity line of credit was against my Florida property when it should be on my New Jersey property. I chuckled and told her to go back to her underwriter; the home equity and the first mortgage were taken together at the time of my condo purchase in Florida. I further explained that I didn’t have a home equity in New Jersey at all, so I don’t know why they were making that mistake. Furthermore, she told me that since I currently don’t have flood insurance, I would have to get it myself, and that this would be “very expensive”. I told her that since the condo building already has flood insurance I don’t pay for that separately, and that the bank is very familiar with this because they currently have my loan!! She said she would check into this.

We went on to discuss documentation requests and I sent them everything. I figured a week was long enough to review things, so I didn’t wait this time for communication from the bank. I called my processor. No call back. I called again and emailed on the same day. I finally got a response three days later, apologizing because she has been so overwhelmed. I asked about my file review and she indicated that the underwriter still hasn’t gotten to my file, but it should be looked at in the next few days. More delays.

Next time: If Patience is a Virtue then Call Me Saint Norman

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My Nightmare Begins: Part 1

November 10th, 2010

Over the next few posts I will be telling an ongoing cautionary story that clearly illustrates the dangers of going directly to a bank for a mortgage.  I am embarrassed to say this is an entirely true tale that happened to me, or more accurately IS happening to me.  Hopefully, this story and all of my current travails will hopefully illustrate the importance of having an independent mortgage broker on your side when it comes to all things to do with home loans.

It all began about five months ago when rates, in general, plummeted to levels that even I, after 28 years in this industry, have never seen. I knew that it was time to refinance both of my properties. I knew that I could have my staff do the work on my primary residence here, but my Florida condo was another matter. I had to either go directly to a new lender myself, find a mortgage broker in Florida, or take my chances with my current lender and just refinance directly through them.

We were able to close on my refinance here in NJ in 23 days flat. Isaac Shalom, my loan coordinator, orchestrated all of it and I closed with no hassles, no issues and the absolute best rates in the marketplace. Florida is, and remains, quite another story. I am still in the midst of refinance hell.

Here is my nightmare story:

Despite all of my admonishments that it is unwise to go directly to the bank yourself, that is precisely what I did (a VERY large, national bank). I couldn’t have Isaac or anyone on my staff broker the loan back to them because of banking regulations in Florida, so I felt that this was my best option. I could have gone to a broker down there, but I felt that it would have been overkill. I thought that I more than anyone certainly can get this done expeditiously, right? After all, the paperwork is the same — I had just started my refinance on my primary residence here and it was going very smoothly.

I made the first call. After being on hold for 10 minutes, I hung up and called later that day. It wasn’t so bad this time and I honestly got a very pleasant telemarketer who walked me through the application quite professionally. Then she mentioned that she’s been working in the mortgage industry for only three weeks and was hired because the bank wanted to expand its hours (8 AM until midnight) to capitalize on all of the refinances going on. She indicated that nearly everyone in her team had less than two months worth of experience.

Okay, I should have ended everything right there. The nightmare was about to begin.

Next Time: What Did I Lock Myself Into?

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