California Attorney General Demands All Loan Modification Firms Register with his Office and Post a 100K Bond

From the Orange County Attorney General’s Office:

Oakland — Continuing his fight against scam artists who “prey on” vulnerable Californians, Attorney General Edmund G. Brown Jr. today issued a directive forcing foreclosure consultants to register with his office and post a $100,000 bond by July 1, 2009. Those who fail to do so will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

“California is awash with con artists who prey on vulnerable families facing foreclosure,” Brown said. “By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world.”  Up and down the state, scam artists pose as legitimate foreclosure consultants, promising homeowners they will prevent foreclosure. In reality, these scam artists charge huge up-front costs, but don’t provide an ounce of help.

Earlier this month, Brown’s office prosecuted a scam artist who provided hundreds of homeowners with forged bank documents and directed them to send their mortgage payments to accounts she had created, instead of the homeowners’ lender. Additionally, Brown’s office has seen a significant increase in the number of complaints from homeowners regarding foreclosure consultants.

The registry unveiled today will provide Californians with information about potential consultants and recourse in the event that a consultant violates the law. All foreclosure consultants operating in California must post a $100,000 bond and register with Brown’s office by July 1, 2009 and submit the following information:

– Name, address, and telephone number;
– All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be
used in connection with their business;
– Copies of all advertising;
– Copies of each different contract the consultant will use with consumers; and
– A copy of its $100,000 bond.

Foreclosure consultants who provide proper information will receive a Certificate of Registration. Brown’s office, however, may refuse to issue, or revoke, a Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state’s foreclosure consultant laws, California’s false advertising, unfair or deceptive practices laws or other laws dealing with mortgages. If the company violates the law, a court may order restitution to victims out of proceeds from the $100,000 bond. After July 1, 2009, consumers can call the Attorney General’s office to determine whether the company they are considering dealing with has been issued a Certificate of Registration.

There is more in the press release including the names of several companies busted by his office.  California is asking all “foreclosure rescue” firms to register which includes the pre-foreclosure scam artists and also loan modification firms.  I wonder how long it will be before Washington State Attorney General Rob McKenna makes a similar move towards foreclosure rescue companies? Unlicensed loan mod firms out of California continue to make a run for Washington State homeowners (based on the phone calls and emails I continue to receive about this company which sends paperwork to another loan mod firm under a different name for processing,) even though loan mod firms doing business in WA State must be licensed under DFI.

Do you think this registration system will help California homeowners?  Should we consider a similar system for Washington State?

JBA Financial Group: Get Licensed or Get Out of Washington State

I heard a radio ad on KIRO 973.FM on Monday, April 13, 2009 at 11:45 AM during the Dave Ross show and again on Tuesday, April 14, 2009 at 6:02PM on the Ron and Don show.  The company was JBA Financial Group and they are advertising their loan modification services.  JBA Financial Group is not licensed to do business in Washington State, and they are not licensed as either a mortgage broker or consumer loan company according to the DFI database which is updated as of today.  I called JBA Financial. Here is how the conversation went:

Jillayne: “Hi, I’m a Washington State homeowner and I just heard your ad on KIRO 97.3FM here in Seattle.  I was wondering if you are licensed to do business in Washington State.”
JBA: “Well you sure sound happy. My name is X, what’s your name?”
Jillayne: “Jill.”
JBA: “Hi Jill, yes, we are licensed by the department of real estate and licensed by the department of corporations to do business in all 50 states.”
Jillayne: “Well on your website, it just says DRE-California. With all the news reports about predatory loan modifications, I want to be sure I’m dealing with a legitimate company.”
JBA: “That’s very smart of you.  As you can see on our website, we’re licensed to do business through the Department of Real Estate and that’s good for all 50 states.”
Jillayne: “No, I don’t think so. It just says “California” on your website, not “all 50 states.”
JBA: “Well you can call the department of real estate yourself and check us out.”
Jillayne: “No thank you, good bye.”

Newsflash for  JBA: The California Department of Real Estate does not give you approval to do loan modifications in all 50 states.

Isn’t there something in the contract KIRO radio signs with advertisers that they have to be sure the company is following state law?  I asked KIRO this question and here is what a KIRO representative, who refused to be identified, said on Monday: Listener concerns should be directed to the attorney general’s office. KIRO has left a message for JB Financial to inquire about the status of their ability to do business in Washington State.  On Tuesday, the same KIRO representative emailed me confirmation that JBA has the authority to do loan modifications in all 50 states, which they received from the owner of JBA.  Here is the document.  There is nothing in this document that allows JBA to claim that it can do loan modifications in all 50 states.  If I can easily figure this out, why can’t KIRO or it’s parent company, Bonneville?

I also put in a call to JB Financial Group’s owner, letting him know that I was preparing this blog post. I received a phone call from their vice president, who informed me that JBA’s primary business is real estate investments and they only recently began doing loan modifications.  He did not know if JBA is licensed to do loan mods in Washington State. He referred me to the company’s CFO, “the strictest compliance person you will ever meet.”  The CFO was not able to talk long because he was, no kidding, in the middle of recording another radio commercial, so the president called me back. He said that he believes the California Department of Real Estate gives them approval to perform loan modifications in all 50 states unless a state contacted them and told them otherwise. Wow, so much for strict compliance.   He believed that because his company is “attorney assisted” they didn’t need to be licensed. I informed him that WA State gives his company no such exemption.  

I’ll be happy to update this post once I find out that JBA Financial  Group is actually licensed in Washington State to perform the services that they are advertising on the radio. 

During the last decade we had hundreds and maybe thousands of predatory lenders roaming around Washington State.  In some of our state’s investigations, there were NO consumer complaints filed against lawbreakers such as the case of Liza Bautista. It will take a village to shut down the predatory loan mod companies.  I’m hoping that the legitimate loan mod companies as well as radio advertising decision-makers will help.  The closest we can come to “legit” is to make sure they are, at minimum, licensed with the Department of Financial Institutions working under either a mortgage broker OR licensed as a consumer loan company, or otherwise exempt from the act such as attorneys and free HUD-approved housing counseling agencies.

DFI Releases Guidelines on Loan Mods and Sets Limits on Fees

Washington State Department of Financial Institutions has released an updated interpretive statement on loan modifications late this afternoon. People who perform loan modification services for Washington State homeowners must be licesed as a loan originator and under the supervision of a broker, or be working under a licensed consumer loan company.  Attorney have a limited exemption and non-profit housing counseling agencies are also exempt.  Real estate agents are not exempt.

 Licensees that charge a fee for loan modification services in advance of the services being provided must obtain a signed fee agreement for loan modification services from the borrower. Any fees paid in advance of services provided must go into the company’s trust account prior to disbursement, or be submitted to an independent escrow or title company to be held until disbursed at the instruction of the parties consistent with the fee agreement. Licensees are prohibited from collecting fees via direct access to a borrower’s bank account or via use of the borrower’s credit card.

A loan modification normally begins with a hardship analysis which is an examination of the borrower’s current mortgage, income, expenses, and ability to repay. The hardship analysis includes meetings or conversations with the borrower(s) and a determination of the borrower’s eligibility for a modification based on the particular lender’s eligibility requirements or the eligibility requirements of a federal modification program. The hardship analysis, sometimes referred to as “Phase I services,

Nice Caller Wants to Modify My Mortgage

I just received a very official sounding recorded message informing me that President Obama has a new program to help save my home–it’s NOT a refinance.  If my rate is over 7% or if I’m falling behind on my mortgage, I can be helped.  If I press 1, I’ll be connected immediately to a Restructure Specialist.  I’m feeling feisty…so I press 1.  

Immediately a polite gentleman boldly answered my questions.

Are you or do you represent my mortgage company?

No.  We’re a loan modification company.

If I understand Obama’s plan correctly, shouldn’t I call who I make my mortgage payments to for a modification?

Well you can, but the clients help receive better results.

Great!  Do you do this service for free?

No.  We don’t. 

Why would I pay you for this when I can call my mortgage servicer and do this for free?

Because you charge for our expertise.

How much does your expertise cost?

We have two convenient mortgage plans.  You can either pay $1899 or three installments at $699 each.

How did you get my phone number?  I’m on the do-not-call list. 

Our marketing department is calling everyone across the country with mortgages.

I couldn’t take it anymore.   I let him know that I was a Mortgage Originator who is versed on The Affordable Home programs and that I don’t condone this type of soliciting.    He told me he’s a mortgage originator too and then slammed the phone down in my ear.

There must be significant money in this industry to allow these companies to employ these solicitors.  I hope our State is agressive in regulating the loan mod industry to protect home owners from predatory actions.  

The recorded message on this phone call sounded so legitimate, I believe that people who are in desperate need of help would think it was coming from the Government.   If I didn’t have my background, and would not have known what to ask the gentleman on the phone, I’m sure he wouldn’t do anything to change that image.

The Making Home Affordable Program

The Treasury has revealed their plans as promised which address helping responsible home owners with higher loan-to-values refinance and home owners who are facing financial distress (and may not qualify for a refinance) modify their existing loan.

It appears that the High Balance Conforming Loan Limits will apply to “high cost areas” such as Seattle and Bellevue.   This morning, I’m seeing that banks and lenders are now implementing the new higher loan balance of $567,500 (vs $506,000) which was announced two weeks ago (I’ve received one notice this morning stating this will take place effective March 6, 2009).  Update 4/23/2009:  It looks like banks/wholesale lenders may not adopt the revised 2009 High Balance limits until closer to May 1, 2009 when Fannie will officially begin to purchase these loans.  The few banks who did step up to the revised limit early on, either never did or quickly retracted back to the $506,000 loan amount.

From FHFA Director James B. Lockhart:

Fannie Mae and Freddie Mac will also undertake Home Affordable Refinance, a program that is designed to reduce mortgage rates for 4 to 5 million people whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. The refinance option will allow borrowers that currently owe between 80 and 105 percent of the value of their home to refinance their mortgages.

With the refinance program, it appears to be along the lines of a streamline refi where an appraisal may not be required.  This is not uncommon for “well qualified” borrowers to have an appraisal “waived”.  They have disappeared in recent times…it looks like the waiver is back.    The Home Affordable Refinance program ends on June 2010.

I’m especially pleased with the Home Affordable Modification program which I’m hoping will put an end to unsavory loan mods that were predatory.   This program is geared towards home owners who are at “imminent risk of default” and are in “financial hardship”.   It only applies towards owner occupied residences and this is a “full doc” process where the home owner will have to provide two most recent paystubs, most recent tax returns and sign a 4506T.   Second liens holders will receive compensation when they extinguish their lien rights (mortgage).

Loans to be modified must have been originated on or before January 1, 2009 and this program will run until December 31, 2012.

What now?

Home owners in financial distress should contact their mortgage servicer (where the mortgage payment is sent to) right away.

Home owners looking to refinance should gather their income documents and contact their preferred mortgage originator…and please be patient.   Refinances are taking longer to process and close.  Every aspect of the real estate industry has reduced staff.   Hopefully these programs will recreate a some jobs in the real estate lending industry.

Treasury has doubled it’s buying of Preferred Stock in Fannie and Freddie to $200 billion each in an attempt to keep mortgage rates low.   What needs to happen is to have some of the price hits (LLPA) removed or modified so that these efforts will work “in concert”.

Twas the Night Before March 4: Mortgage Eve

Twas the night before

more information to follow

about the new refinances and cram downs

…almost too much  to swallow. 

Okay…I’ll stop with the rhyme simply because I can’t keep it going!   There are a lot of Mortgage Professionals and Homeowners waiting to hear if they will be helped tomorrow. 

According to the White House Blog, responsible upside down home owners with good credit may qualify to refinance with a loan to value up to 105% with a conventional 30 or 15 year amortized mortgage.  (I’m guessing most would and should opt for a 30 year amortized mortgage)…tomorrow:

  • When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009. 

I’ve heard nothing as of yet…    I have a lot of questions that I hope will be answered soon.

This from Kenneth Harney’s article on Sunday:

In a letter to private mortgage insurers Feb. 20, Fannie and Freddie’s top regulator confirmed that there would be no requirement for refinancers to buy new mortgage insurance, despite exceeding the 80 percent LTV threshold.

James B. Lockhart III, director of the Federal Housing Finance Agency, described the new refinancing opportunity as “akin to a loan modification” that creates “an avenue for the borrower to reap the benefit of lower mortgage rates in the market.” Lockhart spelled out several key restrictions on those refinancings:

• No “cash outs” will be permitted. This means the new loan balance can only total the previous balance, plus settlement costs, insurance, property taxes and association fees.

• Loans that already had mortgage insurance will likely continue to have coverage under the existing amounts and terms, thereby limiting Fannie and Freddie’s exposure to loss. But loans where borrowers originally made down payments of 20 percent or higher will not require new insurance for the refi, despite current LTVs over the 80 percent limit.

• The cutoff date for the entire program is June 10, 2010.

The “no cash out” factor is concerning.  Refinances where a second mortgage and/or HELOC is included (being paid off) that was not obtained when the home was purchased, is classified as “cash out”.  Even if the second mortgage was refinanced as a rate-term (only to reduce or fix the rate–the home owner never saw a dime of equity from their home in the form of cash).    It appears as those home owners with second mortgages will only be able to subordinate the second mortgage…and good luck with that!  

Banks have yet to adapt the higher conforming loan limitseven though it’s been announced by HUD and FHFA…I’m hoping we’ll see this tomorrow as well “in concert” with the unveiling of Obama’s mortgage plan.

Obama’s plan promises lower mortgage rates…butthese rates are fighting Fannie Mae and Freddie Mac’s LLPAs (huge price hits, such as the 0.75% hit to fee with condos over 75% loan to value).   Why not just get rid of some of these adds that are making rates unactracting…or atleast consolidate some of the brackets.  Is there really a difference between a home owner with a 739 and 740 middle credit score?

We’ll know tomorrow if there is a Mortgage Santa Claus and if he left any goodies under the tree.

President Obama’s Foreclosure Rescue Plan: Loan Modification Analysis

Underwater homeowners looking for a bailout from President Obama’s Foreclosure Rescue speech might be wise to think very carefully about all the possible consequences of grabbing the new loan modification offer. The White House press release on the full plan is located here. President Obama’s plan offers homeowners in trouble a helping hand, at the expense of all the other taxpayers who didn’t speculate, but let’s put aside our outrage for now. Instead, let’s look at whether or not the loan modification program is a good decision.

Clearly everyone is in a unique situation but there are some commonalities within the group we’ll call People Seeking Loan Modifications. I am openly stereotyping for the purpose of making this blog article general instead of case study specific. People Seeking Loan Modifications (PSLM) are typically folks who had a certain level of income when they purchased the home, and today that income has been dramatically reduced. Some may be facing a rate increase or a payment recast if negative amortization has pushed the principal balance to, say 115% or 125% LTV. Most purchased at 100% LTV, some decided on interest only loans, or interest only for a set period of time, in order to achieve a lower payment, speculating that future appreciation would bail them out at the next refi. They have two big problems: Negative equity AND an unaffordable payment.  PSLM typically have other consumer debt as well as mortgage debt. When income drops off a cliff, PSLM use credit cards to pay for routine expenses. By only offering a modest rate reduction, I predict that the re-default rate on these new loan modifications will be easily over 50% and I’m being optimistic. A rate reduction only solves half the problem. Their monthly housing expense has been reduced but their other expenses have not gone away. (If When the banks are nationalized it will be a lot easier to offer rate reductions on credit cards and perhaps that will be in the next bailout proposal.) There IS a solution for the typical loan mod seeking homeowner; President Obama wants principal balance cram downs in bankruptcy. Now the homeowner has to make a sacrifice: Trash my credit record for 10 years with a BK in exchange for getting a financial matrix reboot.

The key to whether or not a loan modification under the new program will work rests with the homeowner: What is the homeowner’s income today v. when he/she obtained the mortgage loan? Many of these folks have been laid off, some were living on extended overtime as a regular part of their monthly income, others were commissioned salesmen with flatline commissions during 2008, some had to take mandatory salary reductions, and still others have had NO disruptions in income but were qualified at the teaser rate of an Option ARM. What if the homeowner has no job at all? Does the homeowner get a zero percent interest rate loan? I’m thinking no, so how do we underwrite this loan and make a determination if this loan mod will fail? PSLM are high risk borrowers and re-defaults will likely occur. But the theory goes that if we can slow the foreclosures to the pace of a river instead of a flood, then doing so *might* help stabilize neighborhood home values and prevent even more foreclosures.

The Tim at SB reminds us to consider that when speculation occurs, foreclosures are a natural part of the solution and may not always be a negative, especially when a homeowner is far better off renting a similar home for far less than the (even modified!) mortgage payment. Home values fall and people who can afford to purchase do so. This begs the question: Do modified mortgage payments really help homeowners? The answer is, it depends on the homeowner.

In order to project future performance, it is important to visit past efforts in helping homeowners face foreclosure.  Past performance: FHA Secure: Projected to help 80,000 Actually helped 266. Hope for Homeowners: Projected to help 400,000 actually helped 312. Projections for President Obama’s loan modification program are that it may help 3 to 4 million homeowners. I project it will help far less. Perhaps we’ll break a thousand this time. This new plan appears to be a bailout for the banks, disguised as a bailout for homeowners. Same siren as FHA secure and H4H, she’s just wearing a different dress.

Will this piece of the Foreclosure Rescue package from the President help stabilize falling values? No. Instead, it will just flatten out the cliff diving and extend the pain that much longer.  From CR:

“For homeowners there are two key paragraphs: first the lender is responsible for bringing the mortgage payment (sounds like P&I) down to 38% of the borrowers monthly gross income. Then the lender and the government will share the burden of bringing the payment down to 31% of the monthly income. Also the homeowner will receive a $1,000 principal reduction each year for five years if they make their payments on time. This is not so good. The Obama administration doesn’t understand that there were two types of speculators during the housing bubble: flippers (they are excluded), and buyers who used excessive leverage hoping for further price appreciation. Back in April 2005 I wrote: “Housing: Speculation is the Key [S]omething akin to speculation is more widespread – homeowners using substantial leverage with escalating financing such as ARMs or interest only loans.” This plan rewards those homebuyers who speculated with excessive leverage. I think this is a mistake.

Another problem with Part 2 is that this lowers the interest rate for borrowers far underwater, but other than the $1,000 per year principal reduction and normal amortization, there is no reduction in the principal. This probably leaves the homeowner far underwater (owing more than their home is worth). When these homeowners eventually try to sell, they will probably still face foreclosure – prolonging the housing slump. These are really not homeowners, they are debtowners / renters.

Government Intervention in Foreclosure

This is Part Four of a series of articles on foreclosures.
This article does not constitute legal advice.
Foreclosure laws vary from state to state.
Homeowners in financial distress should always hire legal counsel. Call your local state bar association for a referral.  Reduced or free legal aid may be available in some states. Ask for a referral from your state Bar Association or through a LOCAL HUD-Approved Housing Counseling Agency.

In this article we will address current government intervention as well as discuss possible future intervention programs. For other preventative measures, check out the other parts of this series:

Part one: Foreclosure; Losing the American Dream
Part two: Options for Homeowners Facing Foreclosure
Part three: Loan Modifications
Part four: Government Intervention in Foreclosure
Part five: Foreclosure; Letting Go and Rebuilding

Current government intervention in the foreclosure process has taken many forms. Some states such as California, Florida, New York, New Jersey, Massachusetts, Philadelphia, and Illinois have discussed, proposed, or passed legislation in favor of a foreclosure moratorium.  In order to avoid state mandates, some companies placed a temporary halt on foreclosures over the holidays. These companies include Indymac, Countrywide, WAMU, and loans held in the Fannie/Freddie portfolios.  Recall that during the real estate bubble run-up, government backed loans fell out of favor. Many subprime loans are held by lender/servicers in pools of mortgage backed securities. The foreclosure moratorium didn’t reach those homeowners.

State moratoriums give homeowners more time to possibly refinance into a Hope for Homeowners loan or complete a short sale and the moratorium also gives banks more time to get caught up on all the backlog of foreclosure paperwork

Financial Economics Analyst Edward Vincent Murphy, in his Sept 12, 2008 report “Economic Analysis of a Mortgage Foreclosure Moratorium,

Lending Woes: A Deeper Consumer Analysis

This may seem like an odd analogy, but I remember this story about my Mom when she was having her 7th baby.  She was in “a ward” with only curtains drawn around each bed.  She overheard some people telling the lady in the bed next to her that she should have “her tubes tied”.  They were explaining the procedure to her.  My Mom jumped out of bed, ripped open the curtain of the woman next to her and yelled  “I want one of those!!!”  The people were embarassed and said, “I’m sorry but we’re only allowed to offer these to single women on welfare having their third child.  You weren’t supposed to hear that.”

Yes…I’m suggesting that to some extent The Information Age is in part responsible for the Subprime Crisis.   Subprime loans did not come into being in late 2003.  2003 is the year more people said “I want one of those!!!”

Couple that with the fact that the World as it IS has come to the conclusion that spinning words (like Death Tax vs. Estate Tax) is a persuasion tool. We used to say, “You can’t get a good loan, but we can find you a BAD loan, if that’s what you want.”  Most people said, “No, thank you…we’ll wait.”  Loans had letters that were easy to understand.  A Paper  = most lenders.  B through D Paper was a different lender for buyers with one or a few correctable issues over the short term.  Z Paper was basically the Mob with a license to lend.

People understood the alphabet, and they knew that a C-Mortgage was not as good as an A-Mortgage.  Life was more Transparent back then.  The need for Transparency today is largely due to the fact that professionals hide truth behind more persuasive language.  Don’t get me started on Listing Agent vs. Agent for the Seller.  Everytime I hear a buyer say “The listing agent was MY agent, looking out for me (and I heard it twice in the last 4 days) I want to scream. How the heck can you believe that “the agent for the seller” is looking out for you, the buyer? Maybe because they use the words “listing agent” for that reason. But that’s a different, though related, subject.

Couple that with small businesses (who only offered Sub-Prime loans) getting gobbled up by larger “one stop shops”.  All of a sudden the lender could give you an A Paper loan or a C Paper loan without a loan denial in between. When there was a loan denial in between, the buyer had a legal out with the Finance Contingency.  When the approval came…but it was for “a bad loan”, the buyer was locked into the transaction with no legal out.

Couple that with Real Estate Agents only caring if the buyer could get a loan, period…without caring on what basis.  Couple all of THAT with the fact that many Finance Contingencies did not give a buyer “a legal out” if they could not get a conservative “A Paper” loan, but could qualify for a SubPrime loan.

There are many factors that contributed to this mess.  Perhaps a fuller understanding of how the world changing in many and small ways led do the catostrophic consequence, will help all people who played a small part in the Country’s demise, change their small part in The Crime of the Decade.  In the end it was mostly No victims; no villains, just a lot of small tweaks and changes that snowballed into a Crisis Situation.

Let’s go back to the world as it was for a minute. 

1) Conventional Loan = 20% downpayment, 28% of gross income for housing payment, 36% of gross income for total recurring debt including the housing payment.  An 8% spread for debt payments.  If debt payments equalled 10%, then the housing portion was reduced to 26%.  There were no Credit Scores.  All credit issues were underwritten by hand and each and every negative item was explained by the buyer, in writing.  A separate letter for each negative item.

2) FHA Loan = slightly more lenient terms and dramatically reduced downpayment requirement.  The biggest reason to use FHA vs. Convential being the downpayment requirement, not the looser standards as to ratio and credit issues.  Almost no downpayment – 3% vs. 20% at the time. 

The first change was a long time ago! It started as a quiet whisper, like the people talking behind the curtain in the next bed from my Mom.  Some people were getting loans with only 5% downpayment, conventional.  When I started in real estate in 1990, most people’s perception was that they needed 20% downpayment or FHA.  Few knew that they could get a 5% down conventional.

The beginning of all of these problems goes all the way back to there.  Conventional lending guidelines made FHA less desirable.  The primary purpose of FHA was low downpayment…no longer a big spread between the two.

THEN in the early 90s, the lenders started stretching ratios from 28% to 33% of gross income on “the front end”  BUT the back end was only stretched to 38%, at first.  Stretched ratios entered the scene ONLY for people with little or no debt payments (just like tubal ligations being only for single women on welfare).  It had a stated and targeted “appropriate” audience.

When cars started costing more, lenders had to start figuring out a way for people to buy a house who already owned a car.  In many cases in the early nineties (before car leasing became popular, and probably why car leasing became popular) most young couples who each owned a car, could not buy a house.  The two car payments sucked up their whole back end ratio and subtracted from their front end ratio.  “I thought we could get a mortgage for 28% of our gross income or 33% of our gross income?”  “Well, yes…but the combined value of your two new cars is almost as much as the house you are trying to purchase!”

Everyone agreed that people needed both cars and houses…so ratios grew and grew and grew.  So, Sniglet, the changes in FHA are NOT fascinating at all. In fact FHA hasn’t changed all that much.  What’s happening is that lending standards on the Conventional side are creeping back to “The Way We Were”, putting the spotlight back on FHA, which is closer to the way IT was IF you cut out “automated” approvals.

Before you even think about buying a house, get your “other debt” issues down to no more than 10% of your gross income.  If you make $45,000 a year and your wife makes $25,000 a year, and you each have a car with a $400 monthly payment, you are spending 14% of your gross income on car payments!

Of course this Rise and Fall story would clearly fill a book.  But until everyone understands that a bailout or bandaid in ONE area only (or two) is not going to fix what ails this Country, we cannot have HOPE…and HOPE is what we need more than bailouts and fixes.

As I said in one of my previous posts: “2009 will not be a year of great change.  It will be a year of Great Hope for Change, one small step at a time, via you and me acting the best we can in each moment.”  Falsely creating hope with “Talking Points” and “Good News” articles is NOT the solution.  Expecting any one source to be the Messiah, is NOT the solution.  Every single person doing their part to improve the situation…is the only long term solution.  That means YOU!

Stop looking for someone else to come up with an answer.  Get out your teacup, and start emptying out your own little piece of the ocean.

I kissed a girl once. I was almost 50 years old and was in the middle of a divorce from a 20 year marriage.  I just wanted to make sure before I started over again, that I wasn’t starting out on a faulty premise that had been “fed” to me.  2009 is the year to test your foundations…so that when “The Rocovery” does come…it isn’t the old mess wrapped up in a bright shiny red bow.

Loan Modification Salesmen in WA State Must Be Licensed LOs, Mortgage Brokers, or Work at Consumer Loan Companies

From the Washington State Department of Financial Institutions:

DFI Advises Homeowners To Verify The Licenses Of Anyone Offering Loan Modification Services Before Hiring Them

OLYMPIA – The Washington State Department of Financial Institution’s Consumer Services Division advises homeowners who are delinquent on their mortgage to be cautious about using the services of someone offering to help them work with their lender to modify the terms of their home loan.

The Department of Financial Institutions (DFI) has received a number of inquiries regarding the legality of providing this service in this state. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions. Additionally, under applicable law, the loan modification provider associated with mortgage brokers have a fiduciary relationship with the borrower and must act in their best interest.

“DFI is concerned that homeowners in desperate situations may pay substantial fees for loan modification services and not take advantage of the HUD-approved counseling services offered for free by numerous non-profits,