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The Niche Report - October 2010
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Issue 039
October 2010
TheNicheReport.com
Revisiting the FHA 203(K)
10 Bringing up the Rear: Treasury Secretary Timothy Geithner
543318 Want to talk about a Niche product?
TechspotCredit Monitoring & The Counsel of a Loan Officer.
FEATURE ARTICLE! What is Stopping Loan Modifications?Foreclosures continue to grow.
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ADCODE: MANRMN0910 a la mode and its products are trademarks or registered trademarks of a la mode, inc. Other brand and product names are trademarks or registered trademarks of their respective owners. All prices, terms, policies, and other items are subject to change without notice. Copyright ©2010 a la mode, inc.
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SubScribe Today for $19.99* (reg. $47.95) per year! The first 5,000 subscribers will receive the following:
* Use discount code tnr1999 to receive discount.
• TheNicheReportMagazine Receive each month thru 2010 & all of 2011! This is up to over12 issues!
• ActNow!OrbeforeJan.1st2011 After Jan 1st 2011 our discount code will expire. The subscription rate will then be $47.95 (12 issues/12 months)
• AFacebookBusinessPagebyBlitzlocal ($199value) Attract Realtor partners or potential local borrowers to fan your page. We’ll be providing Facebook ad dollars later in the year! First 5,000 subscribers only.
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6 October 2010
NICHE REPORTSCONTENTS Issue 039 October 2010
FOUNDER & PRESIDENT Robert Pegg [email protected]
CO-FOUNDER & PRESIDENT David Pegg [email protected]
MANAGING EDITOR Stewart Mednick [email protected]
EDITORIAL / CONTENT MANAGER Kristen Moser [email protected]
ACCOUNTING MANAGER Shawna Ingram [email protected]
ADvERTISING DIRECTOR Jessica Grizzle [email protected]
ADvERTISING SALES Heather Bopp [email protected]
PRODUCTION MANAGER Henry Suchman [email protected]
PRODUCTION ASSISTANT Dawn Exner [email protected]
COLUMNISTS & CONTRIbUTING AUTHORS Martin Andelman Karen Deis Molly Dowdy Frank Garay William Matz Stewart Mednick Rick Roque Brian Stevens Dennis Yu David Zuckerman
Revisiting the FHA 203(K)DAvID ZUCkERMANbranch manager weststar mortgage, inc.Want to talk about a Niche product?
10
Online Lead GenerationDENNIS YUceoblitzlocal.comHelp! My Facebook got Banned!
30
9 Steps to Landing Agent ReferralsMOLLY DOwDYevp of marketinga la mode, mortgage solUtions Div.Target real estate agents, but be picky.
14
Bringing up the RearMARTIN ANDELMANmanDelman mattersml-imploDe.comTreasury Secretary Timothy Geithner.
54
Center Stage with eMagicTHE NICHE REPORT
42
DEPARTMENTS
18 What is Stopping Loan Modifications?Foreclosures continue to grow.
09 FROM THE EDITOR'S DESk
26 FRANk & bRIAN SPEAk
33 TECHSPOT
37 RULES & REGULATIONS
40 TIP OF THE MONTH
50 LENDER & RESOURCE DIRECTORY
PRIME & FHA pg 45
COMMERCIAL pg 45
HARD MONEY & NON-PRIME pg 46
CONSTRUCTION pg 46
SERvICE PROvIDERS pg 47
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EDITORIALS / ARTICLES
To submit an article for consideration in The Niche Report, please send an email to [email protected] or call 866.964.2695. We are interested in original writings relevant to mortgage brokers and other real estate finance professionals.
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Published monthly by BODA Publishing, LLC PO Box 494, Bentonville, AR 72712 Phone: 866.964.2695 Fax: 703.991.2362 Email: [email protected] www.TheNicheReport.com
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With mid-term elections on the horizon, the TV airwaves are abundant with nega-tive campaign ads smattered with economy references. Each candidate for congress, governor, or even city council is focusing on the economy as this election’s hot button. President Obama even addressed the union stating that the economy is now the main focus of his administration … too little too late?
With grateful appreciation to our soldiers who fought in support of Operation Iraqi Freedom, President Obama, in the wake of the last combatant unit, the Fourth Stryk-er Unit of the Second Infantry, pulling out of Iraq, claimed the end of over eight years of battle, but was very careful to not repeat the mistake of claiming, “mission
accomplished,” because it is not. Over four thousand American soldiers, airmen, marines and sailors gave the ultimate sacrifice for freedom and democracy. Freedom and democracy define this great country, but also are used to tear it apart.
The freedoms used by banks and other Wall Street oriented financial institutions over the last five years have caused a significant influence to the current state of the recession. Ben Bernanke, the Chairman of the Federal Reserve, has struggled with rate reductions, social security funding and medicare equality issues; all topics contributing to the heightened sense of urgency the American public has expressed.
This month, loan modifications, or the lack there of, is a topic of the featured article. William Matz explores and enlightens the reader on the subject of foreclosures and why lenders have not been willing or able to help modify existing loans in lieu of foreclosure. If you are outraged by the government and financial sector handling of foreclosures, or the creation of them, then this article is for you.
I do not want to overshadow the usual fantastic line-up of monthly columns and articles presented in this issue, I just want to bring present that the recession is rolling down hill faster everyday. Some say it is a “sec-ond dip.” I say the dip never ‘undipped’ it is just dipping at an increasing rate. This election can be pivotal to the long term financial condition of this country. Matz writes about congressional influence and how government agencies have not created a system that works…yet. Perhaps soon.
Stuart Mednick
FROM THE EDITOR'S DESk
9TheNicheReport.com
MEMBEROfficial
An estimated one third of today’s existing home sales are some form of distressed sale. Whether a short sale or foreclosure, these homes often suffer from
functional obsolescence, deferred maintenance, vandalism, and outright theft. The result is that the property fails to meet the perspective homebuyer’s expectations and the lenders underwriting guidelines for the minimum required condition of the subject property. This new reality presents a unique niche for today’s Loan Officers currently originat-ing, or wanting to learn how to originate, FHA 203(k) rehabilitation loans.
Unlike the traditional FHA 203(b) or 203(c) programs, the 203(k) program is used to rehabilitate and repair one to four unit single family properties. The Department of Housing and Urban Development’s (HUD) end goal with the 203(k) loan is to expand homeownership opportunities and to revitalize neighborhoods. In layman’s terms, the 203(k) program is a rehab loan.
For Loan Officers currently originating traditional FHA loans incorporating the 203(k) into their product mix merits consideration, especially if the Loan Officer’s business model is purchase and Real Estate Agent centric. If you operate a Realtor referral base business model, reflect back on the transactions in which you receive the appraisal report and there are more pictures of deficiencies than pictures of the homes used as comparable sales. While the Realtors work through the bureaucracy of dealing with an asset manager to determine whether or not the bank will even pay for repairs, the appraisal report is being torn apart by the Underwriter who manifests each deficiency into another loan condition requiring inspection, certification, remediation, and testing.
By offering the 203(k) program you avoid these types of issues. The traditional FHA loan requires that the
subject property meet standards for health and safety prior to settlement. The 203(k) program allows for repairs, to be made after settlement, in order to bring the house up to HUD standards. Further, the homeowner’s personal wants and desires can be included into the rehab project. HUD is fairly liberal on the realm of remodeling a new homeowner is allowed, provided the repairs are not considered to be a “luxury.” For example, you cannot place a hot tub on the deck, but you can place a Jacuzzi bath in a bathroom. If the homebuyer wants to replace the current kitchen countertops with granite, even if the current countertops are perfectly functional, that should not be a problem with the Underwriter.
At settlement a repair escrow account is created, as part of the new mortgage, to facilitate the payment to the contractors for their work to the subject property. The repair escrow account includes funds to make pre-determined repairs and improvements to the property, a contingency reserve for cost overruns; inspection and title update fees and a few other miscellaneous items. A key benefit to the homebuyer is having just one mortgage loan and payment to cover both the purchase of the house and to fund the improvements from the repair escrow account. No longer do homebuyers have to utilize savings or high-interest credit cards to make home improvements. To implement these repairs and improvements HUD requires that work start within 30 days of settlement and finished no later than six months after settlement.
To determine the base loan amount for a 203(k) loan, add the purchase price to the repair escrow amount and reduce by the minimum down payment of 3.5 percent or more. For a standard FHA loan the appraised value must equal or exceed the purchase price to avoid having the borrower make up the difference or having to have the
bY DAvID ZUCkERMAN
Want to talk about a Niche Product!?
REvISITING THE FHA 203(k)
10 October 2010
NicheReport.indd 1 12/10/09 8:43:00 AM
Full digital copy available only to premium subscribers. For full access please subscribe at http://thenichereport.com/subscribe-to-magazine/
If you are already a premium subscriber and haven’t yet seen or read the digital copy, please send us an email at [email protected]. Include full name and order number.
SubScribe Today for $19.99* (reg. $47.95) per year! The first 5,000 subscribers will receive the following:
* Use discount code tnr1999 to receive discount.
• TheNicheReportMagazine Receive each month thru 2010 & all of 2011! This is up to over12 issues!
• ActNow!OrbeforeJan.1st2011 After Jan 1st 2011 our discount code will expire. The subscription rate will then be $47.95 (12 issues/12 months)
• AFacebookBusinessPagebyBlitzlocal($199value) Attract Realtor partners or potential local borrowers to fan your page. We’ll be providing Facebook ad dollars later in the year! First 5,000 subscribers only.
• TheSuperStarAudioInterviews ($47permonthvalue) ALL subscribers get access to interviews of high performing loan officers by Mortgage Marketing Animals marketing guru Carl White.
