Thursday, August 16, 2007

The Day My Mortgage Died

I still have a job (so far), in case you were wondering.

I also have a lot of people who have signed loan documents and think they're closing on their houses tomorrow.

What I don't have, is anyone who will wire them the loan money.

As I said earlier in the week, people who are seeking government loans or standard conforming loans are fine. I have plenty of those. But for anything outside the proverbial "box" the choices are few and far between. Basically if the investor doesn't have the word "bank" in their name, they don't have enough money to honor their lock commitments (or they're simply too scared to spend what money they have left).

And the banks are sharply reducing what they're willing to do also.

I have people mad at me, saying, "But how can the investors not honor their lock commitments?! That doesn't happen!"

And I understand their confusion - I've never heard of such a thing either. But that's what has been happening the last two days. It's ugly out here.

As a result I had a chance to experience firsthand how easy it is for brokers to commit fraud. I was looking for a home for a borrower I can no longer get done in-house. And I called a wholesale lender, explained to the account rep that I needed a no-documentation loan because my guy is on temporary disability - which is not considered qualifying income - therefore I need a loan that doesn't ask for source or amount of income. (Permanent disability, on the other hand, is income we can use for qualifying.) So the rep (who does not even know me) said, "Oh, what you do is say that it's permanent disability -- no one will check -- and then you have to state how much it is, and make sure that you state enough to keep his debt-to-income ratio under 40%."

I would have told him that I'm not really prepared to risk going to prison for the sake of making $800 this week, but I was too stunned.

Here's hoping for less excitement next week.

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