Your Chicago Mortgage Guy

Looking Past April 1st and Dodd-Frank

If you are a Loan Officer right now, you are hearing a lot of doom and gloom about the imminent implementation of the Dodd-Frank legislation aimed specifically at our commission structure.  I could put up lengthy posts about this issue, but anyone that isn't in my seat isn't going to understand most of it, or for that matter, care very much.  But, I have been thinking about the positives that are going to come out of this, and there are many.  Not just for the Consumer, but for the Loan Officer and even our Realtor partners.

I previously posted a very concise article regarding the future of the Loan Officer and our industry in general.  I do not think that the Loan Officer is dead, but I do agree that the days of just writing loans, without any expertise, is over. 

There aren't many indsutries like Mortgage and Real Estate where you don't have to be a full time employee to participate in the process.  If you spend the time and money to get licensed as a Loan Officer or Realtor, I guarantee you that someone will give you a phone and a desk to sell mortgages or real estate.  Think about that.  Beyond the basic licensing requirements, you don't need any other background or knowledge to come in and do what we do.  Scarier still is that they do get deals.  I call these the 'Brother In Law' deals.  When you ask who they are using to buy a house and they say, 'Well, my Brother In Law is a first grade teacher, but he sells mortgages on the side'.  Really?  So, you are going to trust the single largest purchase of your life to a guy that writes maybe five or six loans a year?  Yes.  It happens all the time.

Our industry has changed so much in the past 18 months, that even the most seasoned in our industry can struggle to keep up.  We have added disclosures and compliance at an astronomical rate.  The smallest mortgage shops are doomed at this point.  There isn't any way that they will be able to keep up with the compliance part of the puzzle and the margins have become so slim, there just isn't any room for profit anymore.  The bulk of these firms are home to the lowest volume sales people, and they will not be picked up by the lenders left in the wake.  It's just to expensive now to justify bringing on sales people that aren't working full time.

This is a plus for the consumer.  We are already a pretty lean industry of sales people when compared to our numbers in the mid 2000's when we topped out.  Our ranks should be left with the most experienced sales people, the ones that have been out selling themselves as Mortgage Advisor's, rather than the sales people only concerned with the transaction at hand. 

It's never been more important to vet your Loan Officer.  It's well within bounds to ask how long they have been in the industry.  You should ask what their specialty is and what their volume is like.  An experienced loan officer is probably already sharing this with their potential clients and will likely have references ready to go to back them up. 

Now, the downside for the consumer will be reduced competition.  But, it's Friday and I think I'll leave you with the positives.  Check back next week for how this legislation will hurt the consumer.

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

 

Trader's Joe's in Portage Park?

If you live in the Old Irving or Portage Park area, there are whispers that we could get a Trader Joe's at the Six Corners.  Read the thread below, and if you can, please write to the coporation that own's Trader Joe's.  We could sure use it.

 

Letter writing campaign advocating for a Trader Joe's in Portage Park

 

As OIPA has written before, the former Bank of America (BoA) site at 4901 W. Irving Park in the 45th Ward has been sold to a developer.  According to reports in the Nadig Press, this developer has built for Aldi's and other food stores in the past.  It is our understanding that the firm is trying to assemble an entire city block--not all of it was owned by BoA--in order to build.

 

Many residents have expressed a desire for a Trader Joe's in that Portage Park location.  Both Aldi's and Trader Joe's are owned by the same company.  The Portage Park Neighborhood Assn. and the Friends of Portage Park are spearheading a letter writing campaign urging Trader Joe's to locate here, and OIPA wholeheartedly supports that effort.

 

Please use the sample letter below, or write your own citing specifics.  Why is this area a good match for a Trader Joe's and their product mix?  What are their criteria for locating new stores and how can we meet them?

 

Letters and/or emails should be directed to:

 

Doug Yokomizo

Head of Real Estate

626.599.3700 office

626.301.4431 fax


SAMPLE LETTER FROM PPNA & FOPP, to fax, snail mail or email:

Doug Yokomizo

Trader Joe's Company, Inc.

Corporate Headquarters

800 South Shamrock Avenue

Monrovia, California 91016

 

Dear Mr. Yokomizo:

 

Through our community organizations and neighborhood conversations, we hear of a possible development of an existing +3 acre property at 4901 West Irving Park Road, Chicago, IL 60641 by a group who, in the past, has developed Trader Joe’s Markets.

This particular site is ripe with benefits that include a designated Chicago TIF district to assist with development costs, active community and business associations, two active Chicago Parks, easy highway access with two intersecting 4-lane arteries that include bus routes and a recently completed $20 million streetscape beautification project that included new sidewalks and pedestrian amenities, paved roads, new street & pedestrian lighting, community identifiers and pedestrian friendly integrated planter boxes.

As a resident of the northwest side of Chicago, I am writing in strong support of this exciting possibility. I have no doubt that Trader Joe’s would be warmly welcomed and supported by our community and neighboring communities which has been documented and studied to not only have limited grocery options but also, on average, more expensive choices than other neighborhoods.

I hope this letter helps to convince you that Portage Park is the perfect location for a new Trader Joe’s and you’ll consider this site as an option toward your business expansion.

 

Sincerely,

 

Your name and contact info here

Pre-Approval!

Here we go again. Every Spring, as the first batch of contracts are signed, I get the calls from either Agents or Borrowers who now under contract, are finding out that they either don't qualify for the mortgage they thought they were going to get, or who are not at all happy with the monthly payment that was just put in front of them.

Admittedly, the Pre-Approval process is flawed. Most people these days start off on the internet. There are mortgage calculators on basically every Real Estate site on the internet. You can research lenders, programs, mortgage terms, all without leaving your cubicle. When your Realtor says you need a pre-approval letter, most people pick up the phone and call either the recommended Loan Officer, or their local bank and ask for a pre-approval for the maximum they can afford. The Loan Officer in turn, generally asks about income, assets, runs a credit report and sends out a very generic letter to a specific purchase price or loan amount. But here's the flaw. Most Loan Officer's never ask how much you are comfortable with on a monthly basis or, if you have looked at your own personal budget to come up with a number that fits. And what happens? You sign that contract for $300,000.00 only to find out the monthly payment eats into the $500 per month you had budgeted for your next vacation or your kid's college fund.

Why are we so afraid to talk about budgets? As a Loan Officer, we are guiding people through the single biggest purchase of their lives. As such, it's the largest monthly liability that they are going to carry. Why are so many mortgage professionals not broaching this with their customers?

The first question I ask a potential borrower when we speak is what they are comfortable with in terms of monthly payment. If they don't know, I ask them to think about that before we start talking about purchase price. It's easy to back into a purchase price range once you have that number and the amount of money being put towards down payment. Here's a dirty little secret. Realtor's don't want to sell you more property than you can afford. Especially considering the state so many of our past clients are in post bubble burst. A good Realtor does not care if they sell you a $200K home instead of a $250K home. What they do care about is getting a referral from you after close. They will not be getting referrals for very long if you are not able to make the monthly payment on the home that you have to live in for the next five years.

Just as important as monthly payment is knowing for sure that you meet current mortgage guidelines. It has never been harder for me to just say to someone, 'Congratulations, you are Pre-approved'. There are just too many things that go into the process now, and too many guidelines to follow. It has never been more important to get a credit check, have a loan officer look at your paystubs, W2's and assets, and even run the file through automated underwriting to make sure the loan will be approved. There are so many things now that can negatively affect the quoted interest rate, that it's imperative to get that out of the way up front. While your best friend may have just locked in 5.00% on a 30 Year Fixed, your particular situation could easily push that rate to 5.500% and change your monthly payment on a $300K loan by as much as $90 per month, before you figure in that your mortgage insurance just got more expensive as well.

So, if you haven't spoken to a loan officer, call one. If you have, but you don't feel like they went through your finances, or talked to you about your comfort level or budget, don't call anyone, call me!

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

 

 

ChicagoAgent Magazine - Ask A Lender

Well, I guess I made the big time!  Here's my article from this month's ChicagoAgent Magazine.  You can also find it here at ChicagoAgent Magazine Online.

Ask A Lender

6 December 2010 No Comment

For this issue’s Ask a Lender, Joe Burke, a vice president of mortgage lending with Guaranteed Rate, answers questions posed by Chicagoland Realtors.

Q: I have spent countless hours and marketing dollars on condominium listings this year, only to find out on more than one deal that the condominium associations are not eligible for conventional mortgages. Is there any way to avoid this?
A: It has long been the norm to prequalify our potential buyers, but the same can’t be said of the properties themselves, and that needs to change. It is the logical next step these days when so many condominium projects are not currently ‘warrantable’ by Fannie Mae and Freddie Mac.

When a mortgage application is taken and the property or collateral is a condominium, the loan application is basically split into two separate underwrites. The first is the borrower package, consisting of income, assets and credit. The second is the condominium package, which is deemed by Fannie Mae and Freddie Mac standards as either warrantable or non-warrantable. If the condominium project is deemed non-warrantable, it is difficult, or even impossible, to obtain financing.

So, how can this be avoided? By prequalifying your client’s condominium association. While there are variances from lender to lender, some are more conservative than others when interpreting guidelines, there are 10 questions that can be asked up front that should give you a reasonable idea if there are going to be any problems that crop up during the mortgage process:

1. Is there a ‘Right of First Refusal’ in the condo declarations?
2. Does the project allow for a buyer to purchase more than one unit with a single mortgage?
3. Is the condo association currently involved in any litigation?
4. Does the project contain any commercial space? If so, what is the square footage?
5. Does any single entity own more than 10 percent of total units in the project?
6. Are more than 15 percent of the total condo units 30 days or more delinquent on their monthly assessments?
7. Is the project a condotel, have a rental desk, daily or weekly rentals?
8. Are there any special assessments currently approved, or have there been any in the past year?
9. If a unit is taken over in foreclosure or “deed-in-lieu,” is the mortgagee responsible for the delinquent HOA dues?
10. Does the budget call for at least 10 percent of the operating cost to be put into a reserve account as a line item in the budget?

Some of these questions can be deal killers if you get a “yes.” Others can be harmless to the transaction with the right documentation. And a few, if apparent up front, can be corrected before the unit ever goes on the MLS. But they will all become a problem during the underwriting process at some point if you don’t ask the questions up front, because the lender will.
As a Realtor, it has never been more important to have a strong relationship with a loan officer, who can help to prequalify your clients’ properties before the MLS. When a challenge presents itself prior to listing, everyone in the transaction can be prepared, the listing can be priced appropriately and potential borrowers can be targeted appropriately.

Q: If my client’s condominium association is deemed “non-warrantable,” are there any financing options available?
A: Yes, Guaranteed Rate has access to lenders that will finance a non-warrantable condominium project, but they won’t necessarily finance any non-warrantable condominium project. For instance, if it’s the owner occupancy that is an issue, there are lenders that will allow financing in the project. They will generally require a higher down payment and have a more limited product array, but are still generally very aggressive when it comes to interest rates.

Joe Burke is a vice president of mortgage Lending at Guaranteed Rate. He has been a loan officer since 2002 with a concentration in first-time condo buyers. He can be reached at 773.742.6707 or joe.burke@guaranteedrate.com.

30 Days To Go....

It seems like just yesterday that the First Time Home Buyers Credit was extended through April 30th, yet here we are with only thirty days to go. 

In case you don't know, and I still get questions on this, you must be under contract by April 30th, with a closing prior to June 30th.  Both what I am seeing personally and what I am hearing from Realtor's out in the field, it's a mad dash for the finish line.  I have personally never written so many pre-approval letters in such a short period of time, but I haven't seen that many contracts yet.  That means my potential buyers are all still out there looking to write a contract. 

Advice from Your Chicago Mortgage Guy?  Don't wait until the last minute to write that contract.  You never know if there are going to be multiple offers, or worse yet, inspection or attorney review issues that end up killing your deal.  Since we basically only get one shot at this now, and only have 30 days left to take that shot, it's best you make an informed decision.  It's also best to be prepared.

What can you do to be prepared?  Line up your Lender.  Get Pre-Approved.  Talk to an Attorney and make sure they know that your contract is coming.  Ask your Realtor who they recommend for an Inspector and if you feel like you need to shop or vet them, do it before you write that contract.  We are about to get very, very busy with a lot of people who will be under pressure to do everything at once.  You don't want to be left on the outside looking in.

As always, contact Your Chicago Mortgage Guy if you have any questions or need any advice.

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

I Don't Mind Being The Bad Guy, But....

I've been doing this for eight years now.  It has never been as difficult to get a mortgage loan application from the actual application to the closing table.  When we get to the closing table and all parties are sitting around signing, it's pretty typical to beat up on the mortgage guy.  It doesn't bother me at all to be the punching bag, but it does say something about the level of customer service that our clients must be feeling.  So what's going on out there and how can we fix it?

If you ask any Real Estate Attorney or Realtor, they will tell you that there greatest frustrations are over mortgage contingency dates and getting documents to close in time to get final numbers to our customers.  Not their only frustrations, just there greatest frustrations.  As a loan officer, we concur.  So, where's the disconnect? 

During the underwriting process there are many documents that we have to hunt down in order to fully underwrite a mortgage application.  Insurance, Condominium Documents, and Questionnaires, just to name a few.  These documents typically don't come from one point of contact and there is no standard for how they look when you get them back.  One insurance certificate doesn't necessarily look like another and a budget from one condo association will not look anything like it's next door neighbor.  This is frustrating for everyone involved.  The loan officer or processor will collect documents that look like they meet the underwriting criteria set forth in the guidelines only to have the document sent back because it is missing proper verbiage or authenticity.  Some times these things can be caught, others, there was just a change in guidelines and the insurance industry just hasn't caught up yet. 

The only way these days to insure a smooth transaction is to have all parties, Realtors, Attorney's, Insurance Agents and Loan Officers, working together to get all items necessary as early in the transaction as possible.  That means providing the loan officer with the Declarations and By Laws during attorney review.  Getting a good contact for either the Condominium Association or Management Company at the time of application.  Ordering the Title Work in the first week of the transaction rather than waiting until there is a mortgage approval.  Filling out Condo Questionnaires during attorney review when the 22.1 is also being requested.  That way, if a document doesn't meet underwriting criteria, we know about it during the first underwrite, not when conditions are being sent over for final review.

I was having a conversation with an agent last week and she made a great point.  The process that we were used to from contract to close no longer jives with what is happening in underwriting.  She couldn't have been more right.  We need to completely change the way we are requesting and providing the documents necessary to obtain a mortgage approval so that it syncs with how an underwriter needs to see these documents.  Gone are the days of issuing a Clear to Close on a file and obtaining a Condo Insurance policy the day before closing.  We need to get everyone on board to make for a smoother process and experience for our customers. 

And if everything still goes wrong?  Well, I'm almost always at the closing and I have very thick skin.

Joe Burke

Your Chicago Mortgage Guy

joe@yourchicagomortgageguy.com

773-742-6707

Could Foreclosures be the new "Affordable Housing"?

If you live in an urban setting you know that the term "Affordable Housing" is essentially a term used to describe low income or government subsidized housing.  In Chicago, the CHA is famous for developments like the Robert Taylor Homes on the South Side and Cabrini Green on the North Side.  But, in recent years, the focus has been on mixed use developments.  Develpments that are not concentrations of Affordable Housing, but rather a wide range of units and income levels, within the same development.

So, as I was reading this weekends New York Times article regarding Squatters and Community Groups taking over Foreclosures, I couln't help but wonder, could foreclosures be the new "Affordable Housing"? 

Imagine, instead of letting foreclusures slip into disreapair, Local or Federal Governments setting up a program by which lower income families have the opportunity to buy an existing home in an established community.  While this idea would surely meet some pretty stiff resistance in some communities, it could help to steady home prices by getting these units off of the market quickly.  It would keep people from living secretly behind the boarded up windows and doing God knows what.  It would move these properties into the hands of people who want to keep the property in a state that conforms with their neighbors.  The sooner this extra inventory is absorbed, the sooner prices can return to a more stable range. 

I don't know, just an idea.  Maybe I should call Barney Frank.

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

Are Loan Officer's a Dying Breed?

Recently I was out buying some new shoes.  Here in Chicago you can still find a handful of "Old School" shoe stores that actually have Shoe Sales People on hand to help you pick out and fit a comfortable pair of shoes.  They still do the whole bit.  They sit you down, measure your foot, ask you about preferences and what you are looking for and then make genuine suggestions based on what you like.  As I was sitting there, all I could think about was Al Bundy and how kitchy it seemed to be getting this kind of service for a pair of shoes.  Then it dawned on me.  Is this going to happen to me some day?

There are a lot of ways to get information regarding Mortgages.  There are a lot of ways to go about applying for a mortgage.  Less and less though, does it involve sitting down in person and assessing your overall financial picture while putting together a plan that is right, not just in the short run, but for your overall financial health.  Anyone can go to Lending Tree or Di Tech to get online help with there mortgage these days.  It's simple and accessible.  It also takes away the 'sales' element that so many people are afraid of.  Just like you avoid sales people in a shoe store for fear the will try to sell you something, many people avoid getting advice from a mortgage professional for the same reasons.

And yet, I am not hurting for customers.  Even as overall Real Estate Sales have slipped, I am as busy with purchases as I have ever been in my career.  And that goes for my best Realtors as well.  The difference is this.  The big chain shoe stores and sporting goods stores spend all of there money on mass marketing and advertising.  They sell price and accessibility.  And, it works.  You see an advertisement for shoes in Sunday's paper, you go to the store, find your size and walk out with a new pair of shoes.  You just have to hope that the shoes fit the way they are supposed too.

The small shoe store spends there dollars on the sales person who probably has a very loyal base of professional customers that have been shopping with him or her for years.  They do this not just because they are getting a pair of shoes that fits, but because of the personal level of service.  I guess I am more inclined to go with the old business model.  It's one thing to walk around in an uncomfortable pair of shoes, but another entirely when it comes to having the wrong mortgage plan.

Beside, I like being waited on!

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com