Success Stories in a Tough Market

    Its no surprise to anyone that we are experiencing outright  difficulties and maddening frustrations with banks these days. Loan and mortgage applicants that would routinely have been approved a year ago are being turned down, and buyers even with excellent credit ratings and work history are having very tough times in getting the mortgage they want. It is almost as if only the super wealthy can get the “right” loan with relative ease.

Here are two examples of challenges and issues that we have solved for our realtors.

Example #1:

  One of our buyers in Park Slope was purchasing into a fully sold and owner occupied 4-unit coop building.  About two months ago, one of our major NY lenders indicated to us that they would have no problem in doing a jumbo loan for this coop.  We sent the file to them and the underwriter promptly rejected it saying that they could no longer do a 4-unit coop under the jumbo program. The guideline had changed only three days before their receipt of the file and there was nothing that they could do.

  We then went to lender #2 (another major NY lender) and we were elated when our account rep indicated that this should be a “no brainer”.  Excitedly, we sent the file there only to receive a similar rejection a week later.  This time, though, the reason was that they could have done a 5-unit building but not a 4-unit building. This is despite the fact that from the get-go we told them that it was a 4-unit building. 

  Then we tried a third major NY lender and, you guessed it, a third rejection.  A fourth major NY lender kept giving us assurances of an approval.  At the end of two and a half weeks, the underwriter finally declined the file based on “market conditions”. 

  Finally on our fifth try we found a small niche lender who gladly said yes.  We always knew about this lender but because their rate was higher than all the other lenders, we wanted to make sure that we tried all options before sending the file there.  The buyer and realtors and everyone involved in this transaction were absolutely thrilled.  Had the buyer gone directly to any of  the original four lenders, the deal would have been dead. 

Example #2:

  We had a buyer who wanted to go directly to the bank on a 90% condominium purchase in a 3 unit building where he was the ONLY  buyer in contract.  We warned him over and over again that going to a lender directly would be disastrous.  Despite our concerns, he went to Wells Fargo on the advice of a cousin of his good friend.  We called regularly to check the status of his approval.  Over and over again he said he had locked in the rate and got an approval and would be closing shortly.

  Six weeks later we got a panic stricken call from him indicating that Wells Fargo rescinded their commitment because he was buying into a 3 unit condo with 1 unit in contract.  Didn't they know this from the beginning?  Immediately, we were able to resurrect the file and we closed it with the very same lender (Wells Fargo) within just 8 short days.  EVERYONE THOUGHT THIS WAS A MIRACLE. Of course our buyers and realtors and the developer were incredibly grateful. 

             The two examples above are just the tip of the iceberg of what is happening out there with banks and most mortgage applications at banks.  To protect your deal, insist as best as you can that your buyers use a mortgage broker that you know and trust.  Otherwise, your chances of closing the transaction, at this in this market place, are greatly reduced.

 

 

The Return of the PMI

Yes, PMI is back and coming on strong! Even in this crazy, wild and challenging marketplace, mortgage insurance on files with just 10% down is READILY AVAILABLE!!!! Yes, that’s correct, old fashioned mortgage insurance with just 10% down for loans up to $729,750!!! And believe it or not, this applies to co-ops as well.

Why the sudden interest in 90% PMI? It’s simple: for many years banks thought that their home equity type loans and lines of credit would be their golden cow. What has turned out however, is that defaults and delinquencies on those HELOCs are FAR higher than ever expected and the losses and write-offs are monumental. There’s no insurance company or agency to protect the banks from these losses AND in many cases the banks can’t even foreclose because all HELOCs are in second lien position. So, what had been considered as a huge profit center for them is turning out to be a huge drain on revenue.

Mortgage insurance, on the other hand, is totally different. The banks are completely protected against default (that’s what the “insurance” is all about) and there is no secondary loan to worry about. The PMI company sets the guidelines as to the minimum standards that the borrower must meet in order to obtain approvals. Although the standards vary somewhat between PMI companies, most of the time the standards revolve around the following parameters:

Generic PMI Standards:
· Minimum FICO scores apply
· Maximum debt-to-income ratios can’t exceed around 38%
· Employment history must be strong
· Self employed allowed only as long as there is a two year history
· Appraisal scrutinized carefully
· Borrower must show at least 5 of their own assets in savings.

Since each bank and each PMI company has different nuances to approval guidelines, it is essential that your borrowers call me right away if they are planning on putting less than 20 percent down. Either I or my loan coordinator, Isaac Shalom, can quickly determine eligibility and then we will let you know about approvability. Since guidelines are constantly changing on both the bank and the PMI ends, it is crucial to insure that your customers call us for more information. My direct dial is 718.210.1140 and I am here to make every deal work.