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Volume 2 - Issue 6
April 2007
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Determining the Acceptability of Property Seller, Builder, or Developer Concessions
Due to the slower 2007 real estate market, many property sellers, builders, and developers (sellers) are making large financial concessions or contributions to buyers in order to move their property or unsold inventory. We remind our Associates to use caution when reviewing seller concessions or contributions, as many appear to comply with the letter of the Real Estate Settlement Procurement Act (RESPA) but do not comply with the intent. Loans that offer unacceptable or improperly disclosed seller concessions or contributions are ineligible for purchase. The following information is provided as guidance.
Acceptable Concessions/Contributions
• Fully disclosed price reductions, many of which are done as sale contract addenda, are usually acceptable.
• Fully disclosed payment assistance programs may be acceptable, provided the programs use acceptable underwriting standards and do not inflate property values.
• Fully disclosed designer allowances are acceptable.
• Fully disclosed payments for costs or fees are acceptable, subject to specific program limitations.
Unacceptable Concessions/Contributions
• Seller credits or concessions such as carpeting or painting allowances, "sweat equity," or large, non-standard real estate commissions.
• "Silent" seller concessions in which the seller provides "decoration credits" after funding.
• Buyer incentives, such as (but not limited to) the following, unless they are fully disclosed on the HUD-1 as sales concessions with the purchase price adjusted, as appropriate.
The seller offers:
• No mortgage payment for 2 years, and buyers will get upfront cash back worth 2 years of mortgage payments.
• A rental guarantee for 5 years, regardless of whether the unit is rented.
• No property taxes for 2 years.
• No assessments for 2 years.
• A free home warranty for 1 year.
• Free property management.
We highly recommend that Associates reviewing any loan secured by a condominium conversion perform an Internet search to ensure that no unusual concessions or contributions have been offered or granted to the borrower.
Tips to Help You Discover Misrepresentation
On the HUD-1:
• Check for realtor commissions. If there are none, the loan is for sale by owner (FSBO). If the loan is FSBO, ensure that all FSBO requirements have been met.
• Recalculate the commissions. Typical realtor commissions end in round numbers instead of non-round numbers, such as 4.345%. If the commission is not a round number, the commission may have been based on something other than the reported sales price and may indicate seller manipulation.
• Check for large disbursements to non-creditor third parties, such as consulting fees or other such payouts. These sorts of fees are often used by property flippers to extract equity at closing from a property with an inflated value.
On the appraisal:
• Appraisers use the "Market Conditions" (Neighborhood section, page 1) to note any special builder or developer concessions made as a condition of the sale. Pay particular attention to this section, as well as to the "Analysis" and "Summary" discussions (Sales Comparable section, page 2).
• In the "Data Source" section, check the source of comparables used by the appraiser to support the value. Pay particular attention to any comparables listed as provided by "Project" or "Builder" instead of "MLS" or "Public Record."
Use of Limited Liability Corporations (LLCs):
• Check to see if an LLC is listed as the property seller. Some individuals set up businesses to buy open inventory and then sell it back to the builder or other family members as an "investment." If you suspect ownership misrepresentation, we will not fund the loan.
Out-of-State Investors:
• Check to see if out-of-state investors are the borrowers. Many schemes involve out-of-state investors, some using the FHA Section 8 Housing program to buy homes they believe will be rented out. These loans are high-risk, even when the borrowers live in the same area in which the subject properties are located. They are especially risky on cash-out refinances in which the borrower extracts equity from the subject property.
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AMS Golf Tournament May 4th
The Second Annual AMS Charity Golf Tournament will be held on May 4th at the Trilogy Golf Club at Power Ranch. The proceeds from this event will benefit Tavey Tenge and her family. Tavey is an AMS Human Resources employee who recently lost her husband.
If you have not signed up to golf yet, there are only a few spots left. If you are interested in playing please contact suzetteburon@amsaz.com as soon as possible.
We will see everyone on the course!
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Grilled Salmon Tacos
Ingredients:
1 pound fresh or frozen skinless salmon fillets, or white fish
8 ounces medium round red or white potatoes, cubed (1 cup)
1-1/2 teaspoons ground chipotle chile pepper
3/4 teaspoon sugar
1/2 teaspoon salt
1 cup purchased mild green salsa
3 tablespoons lime juice
3/4 cup thinly sliced green onions (6)
1/2 cup snipped fresh cilantro
12 6-inch or sixteen 4-inch corn tortillas, warmed
1/2 cup light dairy sour cream
Lime wedges
Directions:
1. Thaw fish, if frozen. Rinse fish; pat dry. Set aside. In covered small saucepan cook potatoes in enough boiling salted water to cover about 15 minutes or until tender. Drain and cool.
2. In small bowl combine chipotle chile pepper, sugar, and 1/4 teaspoon of the salt. Rinse fish; pat dry. Measure thickness of fish. Rub chile pepper mixture into fish. For a charcoal grill, grill fish on greased rack of uncovered grill directly over medium coals for 4 to 6 minutes per 1/2-inch thickness or until fish flakes easily when tested with a fork, turning fish after half the grilling time. (For a gas grill, preheat grill. Reduce heat to medium. Place fish on greased grill rack over heat. Cover and grill as above.) Cool slightly. Break fish into chunks.
3. In medium bowl combine salsa, lime juice, and remaining salt. Add potatoes, fish, green onion, and cilantro; toss gently to coat.
4. Divide fish mixture among tortillas. Top with sour cream; fold tortillas. Serve with lime wedges. Makes: 6 to 8 servings
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Joke Of The Month
A Mother's Dictionary
Bottle feeding: An opportunity for Daddy to get up at 2 am too.
Drooling: How teething babies wash their chins.
Family planning: The art of spacing your children the proper distance apart to keep you on the edge of financial disaster
Grandparents: The people who think your children are wonderful even though they're sure you're not raising them right.
Hearsay: What toddlers do when anyone mutters a dirty word.
Preprared childbirth: A contradiction in terms.
Show off: A child who is more talented than yours.
Sterilize: What you do to your first baby's pacifier by boiling it and to your last baby's pacifier by blowing on it.
Top bunk: Where you should never put a child wearing Superman jammies.
Whoops: An exclamation that translates roughly into "get a sponge."
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Troy's Tech Tips
Start up.
Imagine getting out of bed, and being asked to get dressed, make coffee, feed your kids, spin some plates, juggle some bowling balls and sing in a foreign language all at the same time. Now you have some idea of what you computer does every time you start it up.
When you start up your PC, there’s more going on than just your operating system. A good number of programs are also started – many of which you may not even use. This drain on resources can slow down your PC’s performance and rob you of processing speed and memory.
Want to weed out the unnecessaries? Windows users, go to “start,” “run,” and then type “msconfig.” Then select the Startup tab. Here, you’ll see a list of what’s starting up when you start your PC. From here simply uncheck the items you don’t want running when you start up. That’s it.
Just Do I.T.
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Benefit's Update
ATTENTION
Branch team Manager, Corporate Loan Officer and or employee under a branch please note we are no longer able to offer medical benefits to you. May is our Open Enrollment month and we have implemented this change for this plan year effective immediately.
You will still be eligible for dental coverage as long as you meet the eligibility requirements. Full time employees are eligible after 60 days from waiting date of hire followed by the first of the month.
Keep in mind only Branch Team Managers, Corporate Loan Officers, loan officers and processors are eligible.
We also offer 401k after your 90 days of employment or there after. Please call me to inquire. Magda Provencio 480 777-4125.
Corporate employees please be advised you will be notified about your medical benefits as soon as I have further information.
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AMSU
Calendar
You can download a full version of the calendar at: www.amsbank.com/AMSU/AMSU Brochure.doc
May 7th 2007 - Purchasing 9-12
May 9th 2007 - Marketing 9-12
May 10th 2007 - New Employee Orientation 10-4
May 11th 2007 - LPA/BM 9-10
LPA/Realtor 10-11
May 14th 2007 - Mortgage Ethics 9-12
Processor Training 1-5
May 15th 2007 - AMS Elite Training 9-12
Processor Training 1-5
May 16th 2007 - Compliance 9-12
Processor Training 1-5
May 17th 2007 - New Employee Orientation 10-4
May 18th 2007 - Bridge Score Training 10-12
Calyx Point 102 9-12
May 21st 2007 - Purchasing 9-12
LO Training 1-5
May 22nd 2007 - LO Training 1-5
May 23rd 2007 - Marketing 9-12
LO Training 1-5
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Forceful, Friendly Follow-up Builds Lasting Relationships That Pay Dividends
by Diana Ivas
Buyers consume a lot of time and often require a lot of hand holding, but that's no reason to avoid that important group of clients or forget about them once they get the keys to their new property, agent Diana Ivas says.
"Some realtors don't want to go out with buyers because buyers are very time consuming," she says. "Plus, you have to key into your buyers. I ask a lot of questions. Then I can key myself into whether they're a $150,000 buyer or a $1 million buyer - I can change the way I'm talking to them, attitudes and everything. You have to know how to talk to people and converse with people the way they want.
"This business is a lot of hand holding, so you do get to know your clients pretty well," she adds. "Hopefully they'll refer other people to you."
Ivas, whose firm, RE/MAX Elite in Hinsdale, Illinois, a suburb west of Chicago, includes her husband Chuck and a full-time administrative assistant, says she learned early on that asking questions and following up were important tools to build a successful real estate practice.
Some of the things she learned included asking a new client who has changed agents why they changed. She says the most common answer speaks volumes about the need to follow up throughout the transaction process.
"When somebody is listed with another agent and I get the listing, the first thing I ask people is 'what didn't you like about the other Realtor, why aren't you going back?'" she explains. "Probably the No. 1 answer is that they never called, they never followed up."
She says that once she takes a listing, she will tell sellers that whenever there is a showing, to contact her with the name and telephone number of the agent doing the showing. She will call the agent to find out what the potential buyer said and then call the seller with that information.
"It's their house, they want to know that information," she says. "That comes directly from me."
If the agent who showed the property fails to call Ivas back, she will still call the seller and let them know. "It usually means they're not interested," she says.
"Besides calling, every two to three weeks I send them (sellers) an activity report printed from our computer base that gives the showings, what the customer said," Ivas adds. "Then they'll also get all the ads I did, the flyers, the open house information."
Once a home is under contract, Ivas says her husband Chuck is sure to be at the inspection and then she touches base with the sellers about 60 days before the sale closes to find out if the sellers need anything.
When the transaction is complete, the focus shifts to the buyer - if it is one of her listings or a buyer she has represented.
She starts out by sending out a monthly mailing that includes a personal letter inquiring how the buyer is doing and asking whether the buyer needs anything. These efforts help strengthen the relationship Ivas has already developed and often pay back with referral business.
"I've had people, before the sale even closed, tell me that they gave my name to someone else," she says. "I just received a letter from somebody I sold a house to two years ago. What I think (the follow up) does for myself and my business is that I have more impact on my sellers and buyers directly because I'm talking to them the most."
The majority of Ivas' business is done by referral but she doesn't stop there - using the Internet and other technology to keep in close contact with existing clients and potential ones.
"I do cold calls and warm calls myself too," she adds. "Calling expired listings - that's still part of my program, my system." She does some FSBO business but she doesn't actively pursue that market.
"It's very time consuming and for me, a much better return is expireds," she says. "You call them, they were on the market, they know what the market's all about and now you can make a better change for them."
No matter where the client comes from, Ivas says her goal and the goal of her firm is to make each one a "raving fan."
"We want people to have fun with the experience and we try to make it as stress-free as possible because it is very stressful," she says.
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Regulator Endorses GSE Subprime Help - OFHEO director policy summit testimony
By SAM GARCIA
The regulator of Fannie Mae and Freddie Mac has endorsed their commitments to help subprime borrowers facing imminent foreclosure -- noting the two companies have more than $1 trillion in funding capacity available.
James B. Lockhart III, the director of the Office of Federal Housing Enterprise Oversight, made his comments at the ICBA Policy Summit today in Washington, D.C., according to a copy of the transcript released today.
Three goals the director outlined were enhanced supervision of the two government-sponsored housing enterprises, statutory reforms strengthening its regulatory powers and continued support of a national secondary mortgage market policy, according to the transcript.
While problems in the subprime market, which represents 15 percent of the overall mortgage market, are not good news, "I believe the problems will be manageable within existing markets, mortgage servicer's practices and financial institutions including community banks and the GSEs," Lockhart said. "We are going through a typical end of credit cycle correction."
Noting that the subprime sector is bearing the brunt of the correction, the director said the problems aren't surprising given the rapid increase in subprime share -- from 10 percent in 2003 to 28 percent in 2006.
He blamed looser underwriting guidelines, including soaring debt ratios and stated-income lending, for subprime problems.
"Mortgage lenders not regulated at the federal level contributed to that deterioration in standards," Lockhart said. "Some of this recent lending supported unsustainable speculation by investors and, at the same time, put some people into mortgages that they could not afford."
Subprime defaults had been concentrated in the rust belt and Gulf states but are now rapidly growing in California and Florida, the transcript said. These markets, which have the highest share of subprime loans, have experienced the most rapid home price decline.
Last week, Fannie's and Freddie's chief executives told the House Financial Services committee they were each taking steps to help prevent an expected surge of foreclosures.
Fannie's chief talked about HomeStay -- a new initiative with relaxed credit requirements that will help borrowers facing imminent payment shock refinance without first having to clear up unpaid bills that show up on their credit reports. The Washington, D.C.-based secondary lender said it will increase the number of lenders able to offer the program from 500 to 2,000.
Freddie's chief testified that the company will this summer offer consumer-friendly subprime mortgages that may include 40-year fixed-rate mortgages and ARMs with reduced margins and longer fixed-rate periods.
"I was especially pleased to hear that they are going to roll out their existing programs to many more lenders," Lockhart commented on the companies' commitments.
The two secondary lenders have the funding capacity and capital positions to buy, guarantee and sell additional mortgages packaged as residential mortgage-backed securities, the regulator added.
"They have enough excess capital above the current regulatory requirements to securitize over $1 trillion in additional MBS," he said. "They also have room within the caps to buy new subprime loans and hold them. Their combined excess retained portfolio capacity could fulfill their tens of billions of dollars of commitments over the next several years."
Lockhart noted Fannie and Freddie can also sell over $700 billion of their own RMBS they currently hold -- providing even more available capital for a subprime mission.
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