The Importance of Having a Will

April 14, 2011 by 1 Comment

My father passed away last December after a battle with skin cancer and COPD.  He was not a financially wealthy man.  He was rich with love from his daughters, grandchildren, family and friends.  I'm not sure if he was being optimistic or was in denial about his health, he never created a will despite his failing health.

A few weeks after we buried Dad, I went to his bank to see what I was suppose to do.  At the very least, I wanted them to know that he was no longer living and to close the account to prevent any charges or activity that should no longer be happening.  The person who "helped" me wouldn't even speak to me without a will.  In fact, he hinted that if I opened an account, it might be easier to assist me.  I was so upset and emotional that I stormed out.  I was looking for guidance and received nothing…silly me.

If you don't create a will, then the State of Washington has specific laws as to what will happen with any real or personl property and who will be the beneficiary of the estate.  This is referred to as "intestate".   Dad's "estate" is probably is not enough to hire an attorney over.  If there's anything to help reimburse the cost of his burial, we'll be pleasantly surprised.   

By the way, this site has been the most helpful that I've found so far with trying to figure out what to do: This site has been probably the most helpful that I've found so far regarding Dad's estate:  http://www.wa-probate.com/

If you're drafting or updating your will, you may want to consider an estate planner or attorney who specializes in this matter to help you determine if you need a trust and to avoid possible death taxes. 

Please take time to create a will for you and your loved ones.  Make sure your wishes are honored and let someone know where your will is.  If you have a will, when was the last time you updated it?   Please don't leave this matter up to Washington State laws.  If my Dad would have had a will, I believe this issue would have been easily resolved by now.

Filed Under: Financial Planning

Avoiding Suprises with Funds Due at Closing

April 12, 2011 by Leave a Comment

EDITORS NOTE:  This is an updated version of this post which was written at a time when mortgage originators could more freely use the Good Faith Estimate as a tool to communicate with their clients.   Due to HUD's 2010 GFE and the accompanying restrictions, this is no longer probable.  In fact, nowhere on today's Good Faith Estimate is funds for closing disclosed!  Seattle area borrowers and homebuyers can still avoid surprises at escrow…hopefully these "updated" tips will help!

Your closing date on your new home is a couple of days away, your feeling a little case of the jitters…the last thing you want to deal with is to be surprised with what funds are due at your signing appointment with the escrow company.   

Here's how you can clear up the funds to close issue:

  1. Your Mortgage Professional can provide you with an updated worksheet atleast 5 days before closing to review your funds due at closing.  The worksheet may seem similar to what was used when you were obtaining quotes from your mortgage professional prior to locking or being in contract with your purchase and sales agreement.
  2. Verify with your Mortgage Professional if the worksheet is factoring in your earnest money deposit, deposits with the lender and any other credits (from the seller or real estate agents, for example).
  3. Request your Mortgage Professional obtain an estimated HUD-1 Settlement Statement from the escrow company at least two days before closing to review it for any corrections or modifications for both of you to review.  
  4. Bring a copy of your Good Faith Estimate with you to your signing appointment.  Page 3 of your estimated HUD-1 Settlement Statement will reflect if there are any discrepancies between what was quoted on your last Good Faith Estimate (which can only be reissued under specific circumstances).  Some fees have different tolerances which the mortgage company may be held responsible to "cure".

What if there are errors?  Try not to panic. Depending on how much time there is prior to the scheduled funding, the lender may be able to redraft loan documents if needed.   A majority of our loans are funded within our credit lines so unless it involves someone having to be re-approved for a higher loan amount, loan documents can be emailed fairly easily to the escrow company.   Often times, it could just be correcting a few documents and not the entire loan package.

The closing table can be an emotional time.   It's in your best interest to have as many of the details worked as far in advance as possible.   If you have questions or concerns, speak up.  This is not the time to be bashful.   This is your mortgage and one of the largest financial transactions you will make in your lifetime…get involved and take action!

Filed Under: Escrow and closing

What If the Government Shuts Down

April 8, 2011 by 1 Comment

I'm getting a lot of questions from Seattle area real estate agents, home buyers and home owners about what may happen with regards to mortgages in process.   Here's a few potential issues that I see:

  • 4506T (tax transcripts that are ordered from the IRS) may not be issued.  All conventional, FHA, VA and USDA loans require 4506Ts prior to funding. 
  • FHA loans may not be able to obtain insurance.  Our company CAN FUND FHA and PROCESS loans.  Obtaining the FHA insurance takes place after funding.
  • Transactions where HUD is the seller may be impacted. 

If you have a mortgage transaction in process, you may want to check with your mortgage originator to see if there are any possible implications to your transaction.

Hopefully this is a moot point post and our elected officials in Congress can come to an agreement on our budget.

Here's a 44 page outline of HUD's plans in the event the Government shuts down.  Hat tip to Kary Krismer.

Filed Under: Current Affairs

I’m at Angelina’s Restaurant in West Seattle this afternoon for Jerry’s Kids

April 7, 2011 by 1 Comment

Around 11:00 today I will be at Angelina's Restaurant in West Seattle to raise funds for the Muscular Dystrophy Association aka Jerry's Kids.   All donations are tax deductible and this is a very worthy cause.  If you can spare $10 or $20, please consider "bailing me out".  

You can click this link or give me a call or email… I don't think the folks at MDA are planning on comfiscating my cell phone!

Thank you!

UPDATE:  Here's my MUG SHOT! 

Dajail

Please bail me out with your donation and help King County kids who are dealing with MDA.
 

Filed Under: Charity

The Day After the Fed’s Rule on Loan Originator Compensation

April 6, 2011 by Leave a Comment

Poker Like it or not, the Fed’s rule on how mortgage originators can be compensated is in full effect today.   It’s hard to tell exactly how much this has impacted mortgage rates as mortgage backed securities are being beat up pretty hard from fears of inflation (rates would be higher today regardless of the Fed’s rule).

[Read more…]

Filed Under: Rant, The Fed - FOMC Tagged With:

Survey Says: Consumers Do NOT Want Higher Mortgage Rates

April 3, 2011 by Leave a Comment

I posted a survey last week with three questions regarding loan originator compensation for people who either have or who are considering obtaining a mortgage.  Here are the results as of 7:20 this morning (click image for a better view).

LOComp1 

80% of those who took the poll would rather allow their mortgage originator to have the freedom to price rates as they choose and to be able to use their commission to help with cost after locking (typically at closing).

20% would rather that rates were detached from the LOs commission and are willing to pay a slightly higher rate in order to have this "protection" and have the LOs commission restricted from being allowed to go towards any cost.

The results are overwhelming.  Consumers would much rather leave mortgage originator compensation alone.  They do  not want government interference with how a mortgage originator is paid.   Many mortgage originators do not want this rule either even though many will actually receive a "raise" since their commission will be fixed (no pricing leaning on an easier loan) and their commission is forbidden to be used in the transaction for anything (including helping out paying for an extension or other closing cost).

The Fed's Rule on "LO Comp" has been delayed by dramatic intervervention late Thursday (the eve before the the rule was to go into effect) by the U.S. Circuit Court.  We should have more information this Tuesday.

As of right now, you'll find that some mortgage companies and banks are proceeding with the rule and others are holding back until more is learned on Tuesday.  This can make a significant difference in your interest rate so you may want to check with your mortgage originator if you're locking on Monday if they are proceeding with the Fed LO Comp rule or not. 

Mortgage Master Service Corporation is delaying following the Fed Rule on LO Comp until we learn more on Tuesday from the Circuit Court Judges.   This means that I have freedom to price and lock your rates as I see as "fair" for at least one more day.

I will be posting mortgage rates tomorrow morning on my blog "as usual".  It could be my last mortgage rate post where I'm able to quote rates based on how I want to price them.

Related post:

The Feds Loan Originator Rule is a bad April Fools Joke on You, the Consumer

Filed Under: Polls, The Fed - FOMC

Happy April Fools

April 1, 2011 by Leave a Comment

It's no joke.  Today marks my eleventh year as a mortgage originator for Mortgage Master Service Corporation.  When I began in 2000, the only mortgages I originated were FHA, VA and conventional.  I was really fortunate because I had developed many strong relationships from being in the title and escrow industry for 14 years and that "JVs" had not yet really popped up.  I was fortunate.

The "jv's" I'm referring to are the joint ventures by several of the big real estate companies to create their own mortgage, escrow and/or title companies.   Broker owners like to do this because they have a captive audience with their real estate agents and the JVs create a great deal of income for them.  Many broker owners do everything in their power to steer business to their in-house joint-ventures. 

When I began in the mortgage industry, a great deal of my business was helping first time home buyers in areas like Federal Way, Des Moines and Renton since most of the agents I worked with as a title rep were in South King County.  Many of my first clients, I still work with today.  I'm so greatful to the agents and home owners who have referred business to me over the years.

I'm also thankful that I began my mortgage career BEFORE subprime mortgages plagued our industry.  Don't get me wrong, I still believe that for the most part, there are no bad mortgages (I never originated an option ARM and the few stated income loans I did, my clients actually made the income); there is bad applications or uses for the mortgage coupled with bad (or no) advice.  Subprime loans were misused by borrowers, loan originators, real estate agents and appraisers who lacked a moral compass or justified bad decisions by "every one else is doing it…it must be right".   Subprime made up a small portion of business for clients who found themselves in a "subprime situation" and/or who did not want to take the time to work on what ever was causing them to be "subprime" for qualifying (lack of credit, income or assets).  I would say many became lazy and impatient.  Fueled with rising home prices, many lost reason.  I do think subprime will come back…disguised under a different name, like "non-prime".  And there are many qualified home owners who could use a little "sub-prime" guidelines to help them keep their homes.

Today, new rules created by the Fed regarding how I may be compensated will go into effect.  This was suppossedly created to help predatory lending by not allowing LOs to increase a rate to make more commission.  I'm totally fine with having my income no longer a part of the conversation.  I am bothered that with how the Fed has structured this rule, mortgage originators can no longer use their commissions to help out with borrowers closing costs after the loan is locked (paying extensions, for example).  Consumers will wind up paying for what the Fed (and Frank Dodd this summer) has done.

Dadog  
I do plan on sticking around in the industry for at least another eleven years assuming our industry is not regulated to death.  I love being a mortgage originator and helping people meet their financial goals and desire to be home owners.  Thanks to everyone for your continued support, your referrals and for reading my blog.

PS: One more reason why April Fools is special to me:  Five years ago today, I married my sweet heart.

I hope your April Fools is as happy as mine!

Filed Under: Current Affairs

Calculating Bonus Income

March 30, 2011 by Leave a Comment

Here's a question from one of my readers (not one of my clients) regarding how bonus income is treated for qualifying for a mortgage:

I am trying to close on a property and the loan processor is giving me a hard time about my income.  I am suppose to make $53,000 this year.  Last year I made $50,000 according to my W2.  My base salary is locked at $32,000 with the other income being a commission or bonus based off my offices profit.

Currently the loan processor is taking my year to date bonus/commission and dividing it by 12.  She is stating that this is how they are the bonus income is annualized so it is making it seem like my projected income for the year will be 32,000 + approx 5,000 = 37,000.  This is making my income to debt ratio pretty low.  Do you have any advice on how I can get this adjusted or if this is actually the correct way my income should be calculated?

Lenders are looking for trends with income.  Since your base income is a salary, the processor can give you credit for the entire amount.  If your additional income is bonus or commission, then lenders may go back 24 months to create an average bonus/commission income.  If your income is trending lower, best case–the lender may use the current average for your commission/bonus income.  Lenders are looking for "stable" income…if the income is considered unstable, there may be issues.

Most lenders will typically go back 24 months including year to date bonus income; and average it since this type of income fluctuates and is not a guaranteed fixed amount.   Hopefully your bonus income in 2009 is close to what your 2010 bonus income was and shows a positive income trend.  You need to document that you've been receiving your bonus income for a minimum of two years.   

2009 = $20,000 Bonus Income

2010 = $23,000 Bonus Income

3/31/11 = $5,000 Bonus Income

$48,000 divided by 27 (24 plus 3 months) = $1778 monthly bonus income.

If the base salary is $32,000; your loan application will reflect base monthly gross income of $2667. (32k divided by 12 months).  Even if the base salary was lower in previous years, the current base (assuming it's a bona fide salary) is what is used to determine current monthly income for qualifying for a mortgage.

$2667 plus $1778 = $4,445 averaged monthly income (based on the example above).

Another factor to keep in mind is that lenders will pull 4506 Request for Tax Transcripts so if you write-off significant amounts of your business expenses, this may deducted from what the lender uses for your income. 

Verification of Employment forms (VOE) will be sent to your employer to verify that your bonus is likely to continue.  If your lender is relying on a Verification of Employment for your bonus income, they may annualized it (divide the current year to date amount by 12 months) instead of using an average.  Plus, if your employer indicates that the bonus income is not likely to continue, it should not be used for qualifying purposes. 

Dear Reader:

It appears to me that the processor is "annualizing" your bonus income ($5000 divided by 12 = $417) instead of averaging.

Talk to your mortgage originator about supply documentation (last two years tax returns, W2s and/or 1099s) to support your income to see if this will change how the processor is calculating your income.   

Good luck!

Filed Under: Dear Rhonda, Underwriting and Qualifying
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