Issue #45
August 20, 2010

Welcome To The Weekly Update And More


We received an email early this week proclaiming that stated income loans were going to be outlawed. My response back to the sender was, “Wow, who saw this coming?” The author did not realize that I was joking and replied back that it was happening. Just like the government to outlaw something that doesn’t exist anymore. News Flash “You cannot walk your T-Rex over the Golden Gate Bridge on Sundays anymore either.” Although stated income is now extinct, we have something very close which is the FHA Streamline refi. There is a lot to like here: no appraisal, we don’t run ratios (the lender does verify employment), and the borrower only has to show they have enough money to cover any closing costs (usually the lender is paying for the nonrecurring costs and the borrower is bringing money for impounds and interest). If you know anyone that has an FHA loan have them contact us, they will be able to lower their monthly payment, EVEN IF THEY ARE UPSIDE DOWN ON VALUE! Such a deal.

This doesn’t make sense!
While doing a refi for a borrower that currently has a first and second mortgage (2nd mortgage currently has a zero balance), we were informed that even though the 2nd has a zero balance the customer is going to be charged for cash out (about ½ point in fee),  if they had a draw on the line within the last 12 months, even though the current balance is zero. The only way to avoid the cash out fee is to close and remove the lien from the pre. Closing the second loan is easy; getting it off the pre is time consuming. We cannot believe or understand this stupid rule. Questioning this rule, we get that age old response,” I don’t have a good reason, it’s the Golden Rule.” OMG! 

This does make sense!

A question was raised this week about a borrower that has investment properties on his or her tax returns. One of the properties had a major remodel and showed very low cash flow on the tax return. It was requested that the 75% of the gross rent minus PITI method be used to determine the property’s cash flow,  in lieu of the actual numbers from the tax return. The response was, if the onetime expense of the remodel is documented the lender would allow them to use the 75% of gross rent method to calculate the property’s cash flow. A ray of sanity!

According to our editors, we only had one typo last week. Turn around times are sloooooooooow.