Mortgage World Update: Crisis Not Over Yet!

Recent Mortgage Transactions (GONE WRONG)

Mortgage World Update: Crisis Not Over Yet!

San Diego, California

An account and update on the world of the mortgage industry. The credit crunch is not over yet, but showing signs of improvement.

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Recent Mortgage Transactions (GONE WRONG)

Posted at Mortgage World Update: Crisis Not Over Yet! by Cyrus Khadivi

Oct. 7, 2007

Tagged with: credit crunch, cyrus khadivi, freedom lending group inc, land lot, mobile home, mortgage update, purchase, refinance problems

Starred by: 1 Member

A Recent Transaction Gone Wrong:

Example of a Market Under Stress

Scenario 1:

Borrowers: 740 and 750 fico
Income: Fully documented, self-employed
Assets: Each borrower had over $150,000 in liquid reserves
Worth: Each borrower was worth about $4mill with all business assets
Transaction: Borrowers wanted to buy a 10 acre lot of land 18 miles away from their primary home. The property had a mobile home and a barn (signs that it is NOT a primary home). It was a rural piece of land simply being purchased by two strong borrowers putting 20% down, to use as a getaway home/vacation home/2nd home for their families for offroading, camping, etc.

These borrowers were essentially the ones banks LOOK for (or should look for) in this market. Buying a property, putting money down, excellent FICO scores, awesome assets and worth. All in all, they depict GREAT borrowers of money! However, after shopping this loan with everyone from Flagstar to Wells Fargo to commercial lenders to private investors, we found they all would walk the walk with, "yes that fits in our guidelines...just submit it!" And the end result was some bogus finding. Each one had their own specific reasoning or finding. But the point is that the credit crunch has definitely reached out to the strongest borrowers even.

To prove this fact, we had them walk to their local bank whom they have over $300k in business accounts with, and their bank would not even do the loan!

Fortunately, this was about 1.5 months ago and things are getting better. Banks are realizing they need to make money again; interest they collect on money borrowed is an easy stream of income which they can in return invest and make more. So they are lending more of this money now and borrowers are qualifying a bit easier.

Until the next blog, make it a wonderful day! Enjoy Columbus Day!

Cyrus Khadivi
Managing Partner
Freedom Lending Group, Inc.

www.freedomLG.com

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User Comments

1. RE: Recent Mortgage Transactions (GONE WRONG)

Written by: salazarloans

Oct. 8, 2007

Cyrus,

I could easily do this loan. Let me know if you would like for me to pre-approve any of these type of situations. Also, I could easily beat most of the competition. I would be happy to give you and your clients top notch services.

Javier Salazar -Premier mortgage- Branch manager

salazarloans@yahoo.com

765 532-8739

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2. RE: Recent Mortgage Transactions (GONE WRONG)

Written by: Robin Hauck

Oct. 8, 2007

You presented the loan incorrectly. The property must be at least 50 miles away from the primary residence to be a second home.. And the fact that it has a mobile home on it is a negative. Very few lenders will touch 10 acres with a mobile home on it. Try representing the loan application as simply vacant land that happens to have a couple outbuildings on it. That will put the loan application into its proper classification: LAND -- NOT Residential. Then simply find any lender that does LAND loans. Your terms and credit will work just fine, assuming it appraises for the selling price. Flagstar and Wells Fargo don't do land loans, only residential.

Robin Hauck, Broker

Texas Mortgage Company

Robin Hauck, Brok

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3. RE: Recent Mortgage Transactions (GONE WRONG)

Written by: Cyrus Khadivi

Oct. 8, 2007

You actually misinterpreted everything. A 10 acre parcel with a mobile home that is stationed on concrete and double wide is NOT land. It is a MOBILE HOME. Also, IRS code defines a second home as able to be 1 mile away from your primary home. Fannie Mae classifies it differently. You would think IRS is kind of a legitimate entity, right?

10 ACRES with land can be a residential LOAN. If it were 10 acres and no mobile home and no barn, yeah true. Thanks again.

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4. RE: Recent Mortgage Transactions (GONE WRONG)

Written by: Robin Hauck

Oct. 12, 2007

Yes, you're right. A doublewide on a permanent foundation has to be classified as a Mobile Home with land. But lenders usually want a second home to be 50 miles or more distant, and some will require that the property be in a resort area. Their reasoning is that they want to prevent buyers from buying rental properties at owner-occupied interest rates and terms.

The lenders set their own criteria, which has no relation to the IRS Code. And as you point out, the bar to get a loan has been raised in the past few months. One result of the so-called "Mortgage Meltdown" is that many lenders now do not do ANY loans where the word "Mobile Home" is present because these loans are considered riskier than loans on brick homes in a subdivision.

In this case, because the buyers have such good credit and money in the bank, I think they could easily get a loan with 10% to 20% down. Good credit and money in the bank would offset some of the properties negatives, like being a mobile home and with 10 acres. You would still have to pay a little higher interest rate and search for a lender who will still loan on mobile homes. And, you would have to buy it as a "Non Owner Occupied" property. Trying to get it as a Primary Residence or as a second home would never work.

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