Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must readbet on the mortgage meltdown) a must read

The End

by Michael Lewis Nov 11 2008

The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.

 

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.

 

 

I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

 

 

Then came Meredith Whitney with news. Whitney was an obscure analyst of financial firms for Oppenheimer Securities who, on October 31, 2007, ceased to be obscure. On that day, she predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend.

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

“A lot of people don’t get Steve,” Whitney says. “But the people who get him love him.” Eisman stuck to his sell rating on Lomas Financial, even after the company announced that investors needn’t worry about its financial condition, as it had hedged its market risk. “The single greatest line I ever wrote as an analyst,” says Eisman, “was after Lomas said they were hedged.” He recited the line from memory: “ 

‘The Lomas Financial Corp. is a perfectly hedged financial institution: It loses money in every conceivable interest-rate environment.’ I enjoyed writing that sentence more than any sentence I ever wrote.” A few months after he’d delivered that line in his report, Lomas Financial returned to bankruptcy.

 

 

Eisman wasn’t, in short, an analyst with a sunny disposition who expected the best of his fellow financial man and the companies he created. “You have to understand,” Eisman says in his defense, “I did subprime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn’t give a shit what it sold.”

Harboring suspicions about ­people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says.

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

 

 

Here’s where financial technology became suddenly, urgently relevant. The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.

 

 

But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.

The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’ 

”

And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ 

” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”

In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

Moses actually flew down to Miami and wandered around neighborhoods built with subprime loans to see how bad things were. “He’d call me and say, ‘Oh my God, this is a calamity here,’ 

” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”
This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.

A full nine months earlier, Daniel and ­Moses had flown to Orlando for an industry conference. It had a grand title—the American Securitization Forum—but it was essentially a trade show for the ­subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime-­mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. “There were like 6,000 people there,” Daniel says. “There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ‘You gotta see this.’ 

”

Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

A probability, said the C.E.O., and he continued his speech.
 
Eisman had his hand up in the air again, waving it around. Oh, no, Moses thought. “The one thing Steve always says,” Daniel explains, “is you must assume they are lying to you. They will always lie to you.” Moses and Daniel both knew what Eisman thought of these subprime lenders but didn’t see the need for him to express it here in this manner. For Eisman wasn’t raising his hand to ask a question. He had his thumb and index finger in a big circle. He was using his fingers to speak on his behalf. Zero! they said.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ 

”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

There was only one thing that bothered Eisman, and it continued to trouble him as late as May 2007. “The thing we couldn’t figure out is: It’s so obvious. Why hasn’t everyone else figured out that the machine is done?” Eisman had long subscribed to Grant’s Interest Rate Observer, a newsletter famous in Wall Street circles and obscure outside them. Jim Grant, its editor, had been prophesying doom ever since the great debt cycle began, in the mid-1980s. In late 2006, he decided to investigate these things called C.D.O.’s. Or rather, he had asked his young assistant, Dan Gertner, a chemical engineer with an M.B.A., to see if he could understand them. Gertner went off with the documents that purported to explain C.D.O.’s to potential investors and for several days sweated and groaned and heaved and suffered. “Then he came back,” says Grant, “and said, ‘I can’t figure this thing out.’ And I said, ‘I think we have our story.’ 

”

Eisman read Grant’s piece as independent confirmation of what he knew in his bones about the C.D.O.’s he had shorted. “When I read it, I thought, Oh my God. This is like owning a gold mine. When I read that, I was the only guy in the equity world who almost had an orgasm.”
 
On July 19, 2007, the same day that Federal Reserve Chairman Ben Bernanke told the U.S. Senate that he anticipated as much as $100 billion in losses in the subprime-mortgage market, FrontPoint did something unusual: It hosted its own conference call. It had had calls with its tiny population of investors, but this time FrontPoint opened it up. Steve Eisman had become a poorly kept secret. Five hundred people called in to hear what he had to say, and another 500 logged on afterward to listen to a recording of it. He explained the strange alchemy of the C.D.O. and said that he expected losses of up to $300 billion from this sliver of the market alone. To evaluate the situation, he urged his audience to “just throw your model in the garbage can. The models are all backward-looking.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

This was what they had been waiting for: total collapse. “The investment-banking industry is fucked,” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how fucked they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning you wake up: ‘Holy shit, I’m wrong!’ 

” Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just fucked; they were extinct.

Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

Truth to tell, there wasn’t a whole lot of hand-wringing inside FrontPoint either. The only one among them who wrestled a bit with his conscience was Daniel. “Vinny, being from Queens, needs to see the dark side of everything,” Eisman says. To which Daniel replies, “The way we thought about it was, ‘By shorting this market we’re creating the liquidity to keep the market going.’ 

”

“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

 

Putting the Current Mortgage Mess into Perspective

This week, shares of the two Government Sponsored Enterprises, or GSEs, imploded again: Fannie Mae lost 39% between last Friday and yesterday’s close. Freddie Mac tanked 46%. Freddie Mac fell to its lowest in almost 18 years … Fannie Mae to its lowest in more than 19.

It’s not just the common stock, either. Investors are dumping their preferred shares and they’re selling off Fannie and Freddie bonds. The message from the markets is coming through loud and clear: These companies are in big, big trouble.

So today, I want to focus on why this is happening, and what it means for your investments and your finances. But first, I need to provide some background on just who the heck Fannie and Freddie are …

A Primer on “Securitization” and the
“Secondary” Mortgage Market

Chances are, many of you hadn’t heard of Fannie Mae or Freddie Mac until recently. It’s not like these companies have bank branches after all. When you went to get your last mortgage, you probably got it from Bank of America, Citibank, Wachovia, or a local mortgage broker.

But behind the scenes, Fannie and Freddie play a crucial role in providing liquidity to the mortgage market. The two giants buy hundreds of billions of dollars worth of home mortgages from lenders for their own portfolios. That’s the “secondary” mortgage market at work (the “primary” market being where you and I get loans in the first place).

Failing giants Fannie Mae and Freddie Mac have hundreds of billions of dollars worth of home mortgages from lenders in their portfolios.

Fannie and Freddie also slap guarantees on bundles of home loans called mortgage-backed securities (MBS). Essentially, they promise to pay investors who buy MBS timely payments of principal and interest even if the underlying borrowers default on their loans. This is called the “securitization” process.

These processes grease the wheels of the mortgage market. Banks can make loans, turn around and unload them to Fannie and Freddie, then use the money they get back to make new loans.

During the housing bubble, vast quantities of home loans were also made and securitized by PRIVATE market participants, rather than Fannie and Freddie. This allowed the subprime and “Alt A” mortgage markets to explode.

Bottom line: As long as some investor further down the pipeline was willing to buy and invest in mortgages and mortgage bonds, front-end lenders and brokers were able to make more and more loans.

How Things Have Changed

But that was then. Beginning in 2007, the subprime market started imploding. Rising delinquencies on the underlying loans caused losses to mount on mortgage investments. Falling home prices only made a bad problem worse. Liquidity drained out the market as investors started dumping subprime mortgage bonds.

For a while, Wall Street and Washington tried to sell Main Street on this idea that it was a “subprime” problem only. They said it was “contained.” We told you the exact opposite — that the problems in the subprime market were only the start of a massive crisis that would work its way up the mortgage food chain.

Sure enough, we soon started hearing about emerging problems in Alt-A loans. Those are mortgages made to borrowers with higher credit scores, but other risk factors. For instance, a loan might be considered Alt-A if it requires interest-only payments, it’s made against an investment property, and the underwriter wasn’t required to verify the borrower’s reported income. One of the biggest Alt-A lenders during the bubble was none other than IndyMac, which, as we all know, just failed and was taken over by the FDIC.

Now, even “prime” quality borrowers are falling behind on payments at a record pace. The delinquency rate on prime mortgages hit 3.71% in the first quarter of this year, according to the Mortgage Bankers Association. That’s the highest since the MBA started splitting out subprime and prime borrowers back in 1998. The overall delinquency figures go much farther back — to 1979. They show the same thing: A record high delinquency rate of 6.35%.

Home prices are way down, but they show little signs of bottoming out just yet.

As for home prices, they show little sign of bottoming out. Figures from S&P/Case-Shiller show home prices down 15.8% in May from the same month a year earlier. That’s the largest drop on record. Prices fell in all 20 metropolitan areas the firm tracks. Las Vegas (-28.4%), Miami (-28.3%), Phoenix (-26.5%), and multiple markets in California (-24.6% in L.A., -23.2% in San Diego, and -22.9% in San Francisco) are leading the way.

Lenders are responding by tightening lending standards across the board. That’s preventing many troubled borrowers from refinancing into new loans.

The Fallout for Fannie and Freddie

The result? Losses are surging at Fannie Mae and Freddie Mac. Fannie Mae bled $2.3 billion, or $2.54 per share, in red ink during the second quarter. That was the fourth straight quarterly loss, and much worse than the 72-cent forecast that analysts were carrying. Freddie Mac lost $821 million, or $1.63 a share. That compared with a profit of $764 million, or $1.02 a share, in the year-earlier period.

Other details weren’t pretty. Freddie Mac’s credit loss provision surged to $2.63 billion from $469 million a year earlier. The company also revealed that it had roughly 22,000 foreclosed homes on its books. That was the most in the almost four decades it has been operating.

Fannie Mae’s credit losses jumped 66% to $5.3 billion. The company said it will cease buying Alt-A loans and slashed its dividend by 86% to preserve capital.

Investors are responding by running for the hills. Not only are they dumping many of their existing stock and bond positions, but they’re also demanding that Fannie and Freddie pay up to borrow NEW money. One example: Freddie Mac had to fork over 1.13 percentage points in excess yield (over Treasuries with a similar maturity) in a five-year note sale earlier this week. That was up from 69 basis points in May and the highest in at least a decade, according to Bloomberg.

If you recall, Treasury Secretary Henry Paulson tried to assuage these kinds of fears a few weeks ago by obtaining the authority to buy an unspecified amount of equity in the GSEs. He also was granted the right to provide the GSEs with an unlimited credit line from the government.

Paulson suggested at the time that the mere existence of this authority would obviate the need to actually use it. This allowed the administration to suggest that the cost to taxpayers would be limited or even nonexistent.

But the market just isn’t buying it anymore. Investors are voting with their pocketbooks. They’re rendering a simple verdict — namely, that the GSEs probably don’t have enough capital to weather the mortgage crisis and cover all the losses they’re facing. So they’re going to need government support.

What is the ultimate outcome here? That depends on the credit markets. If Fannie and Freddie can keep raising money, even at more expensive levels, then they can drag this thing out for a while. But if debt and stock buyers completely step away, forget it. Who’s going to give Fannie and Freddie money to keep operating in that event? The government — or more accurately, taxpayers like you and I!

Frankly, several indicators I monitor are signaling that something is rotten in the state of Denmark. I already mentioned that spreads on Fannie and Freddie debt over Treasuries are widening out. I could also point out that financial stocks are rolling over again … that a measure of market risk called swap spreads is flashing “red” … or that Treasury prices are rising sharply again. These all suggest bond market players are piling into “safe haven” assets and fleeing risk.

What This Means for You and Me

For the housing market and the economy as a whole, this GSE crisis is yet another hot poker in the eye. Fannie and Freddie (along with the FHA) have become essentially the only game in town when it comes to the mortgage market.

Private market players on Wall Street have all but stopped buying and packaging subprime or Alt-A mortgages into bonds, and there’s little demand from end investors for that paper anyway. Meanwhile, the major banks have neither the appetite nor the capital on hand to lard their balance sheets up with conventional mortgages.

If Fannie and Freddie have to slash their mortgage guarantee operations, or shrink the size of their loan portfolios, to preserve capital, what’s going to happen? The cost of home mortgages on Main Street U.S.A. will go up.

Despite clear signals that the Fed has no intention of raising rates, mortgage rates remain stubbornly high.

Heck, it already is. Despite the lousy economy and clear signals from the Federal Reserve that it has no intention whatsoever of raising the rates it controls directly, mortgage rates remain stubbornly high. A 30-year fixed rate loan goes for just under 6.5% right now. That’s not far from the multi-year high of 6.86% in mid-2006.

Bottom line: Mortgage credit will likely get pricier for some borrowers, and be cut off completely for others.

When that dynamic starts to change, I’ll do my best to let you know. But until then, I’m going to reiterate what I’ve been saying for a long time now … and throw something else into the mix:

1.       Drown out Wall Street’s siren song. Lash yourself to the mast if you need to. Do whatever it takes to avoid sinking your money into the financial sector.

 

2.       Play it safe when it comes to your own fixed-income investments — in other words, stick with short-term Treasuries rather than mortgage bonds, junk bonds, and the like.

 

3.       Don’t fall for the trite argument I’m starting to hear. It posits that the reason the financial stocks are falling is because of some vast conspiracy among short sellers to drive these companies out of business.

 

What a load of B.S. Short sellers didn’t make banks and brokers originate, buy, bundle, trade, and invest in all these crappy mortgages and mortgage securities. Short sellers didn’t force lenders to make stupid leveraged buyout loans or reckless commercial real estate mortgages.

And short-sellers most certainly did NOT go out in front of the public and repeatedly — REPEATEDLY — say they were done taking losses and didn’t need more capital … only to announce more losses and raise more capital a few months later.

The mess the financial industry is in is entirely one of its OWN making. This effort by some in Congress and the regulatory community to redirect the focus onto some nameless, faceless cabal of meanie hedge fund managers is patently ridiculous.

And by all means, keep your eye on Fannie and Freddie. They could really hold the key to the next big move in the markets.

Until next time,

Quint Cobb

 

Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate. 

IndyMac, Washington Mutual and Countrywide Offer Loan Relief Programs

IndyMac, Washington Mutual and Countrywide Offer Loan Relief Programs

In August, FDIC officials began to deal with the 60,000 mortgages passed due that were held by Indymac. And in September, FDIC officials began to deal with “toxic” loans held by Washington Mutual. And this week Bank of America announced they would begin modifying bad mortgages for nearly 400,000 Countrywide customers

The lenders are all launching loan modification programs, offering new terms and lower rates to more than 500,000 delinquent borrowers.

 But there is more to this story than there appears.

The most important thing for homeowners to be aware of is that when the lender contacts a homeowner directly they may not be offering the best possible loan modification results that they are entitled to.

The reason that the lenders will begin to contact delinquent homeowners directly is to try to clean up the “toxic” mortgages that they hold but also to limit the lenders losses.

When a homeowner signs a loan modification proposal, they often times are signing away future loan modification options and often times they are signing away the option to sue the lender.

By contacting the homeowner directly before the homeowner has had the chance to seek professional assistance (the lender limits potential future losses).

Amid intensifying political pressure that lenders are not doing enough to prevent foreclosure, a growing number of mortgage services are easing interest rates — six times more often than just a year ago, according to Credit Suisse.

The $700 billion federal rescue plan encourages banks to adopt plans like IndyMac’s, Washington Mutual’s and now Countrywide’s, offering new terms for loan payments on those facing foreclosure.

But this is also very good news for homeowners that are interested in a loan modification yet have not been late on their mortgage.

To be clear the banks will only begin reaching out to homeowners that are very close to foreclosure.

But the change in attitude and policy by the banks is great news for all homeowners that would seek a loan modification, especially when they have professional negotiators presenting their case.

For those banks and lenders, the loss incurred on the interest they’re collecting is, for now, less costly than the effort it might take to sell a foreclosed home at a reduced price.

“In some cases, the length of the loan will increase, it depends on the circumstance,” said John Bovenzi, CEO at Indymac. “This idea is to make the loan more affordable for the borrower so they can sustain payments and stay in their home.”

The rate of foreclosures doubled from June of last year, according to RealtyTrac, an online market of foreclosure prosperities. The increase in foreclosure signals the growing number of homeowners who are struggling to make payments on their homes. It is also making it very difficult for homeowners that have not been late on their mortgages to qualify for a refinance (due to plummeting home values in their area).

Those who have been making payments on their mortgages — if only barely — will not get a break on their interest rates directly from their lenders.

It may seem unfair to reward those who failed to make payments, while leaving those who are paying out in the cold, but Bovenzi defended Indymac’s program.  

“If you live in a house and foreclosure signs are going up around you, it is hurting your property value,” Bovenzi said.

On Monday, Bank of America agreed to reduce interest rates on up to 400,000 mortgages nationwide.

Once again, the banks are only reaching out to homeowners that are very close to foreclosure.

However, any homeowner can qualify for loss mitigation and loan modification as long as they present a lender or servicing company with a strong enough case that it makes more financial sense to modify the mortgage than to let it run its current course.

It is clear now that loan modification (for those that present a solid case) is a much more attractive option for lenders than the alternative.

This is great news, but on the other hand for homeowners that have been considering loan modification may find themselves in a very long line and it would appear that there is no time to waste.

 

 

 

While there is no clear-cut solution to solving the mortgage crisis, the loan modifications offered by IndyMac and others have been a step in the right direction to make loans affordable and more manageable for borrowers.

Since Monday’s announcement, Bank of America will have more than 5,000 employees assigned to re-work mortgage loans. 

Many homeowners will begin to get letters from Countrywide addressing their mortgage and their options.

A copy of what the letters will look like is attached below.

The most important thing for homeowners to be aware of is when a lender contacts a homeowner directly they will not be offering the best possible results or outcome.

The reason that the lenders are contacting homeowners directly is to try to clean up the “toxic” mortgages but also to limit their losses.
When a homeowner signs a loan modification proposal, they often times are signing away future loan modification options and often times they are signing away the option to sue the lender.

By contacting the homeowner directly before they have the chance to seek professional assistance (the lender limits the potential losses).

For example it is better for the lender to add past due payments on to the back of the loan than to be forced by professional negotiators to “forgive” late payments or “reduce” principle balance.

 

Notice in the example Countrywide Letter below where it talks about Countrywide’s idea of a Loan Modification.

The way they define Loan Modification is (adding past due payments to loan balance).

 

This is not what a Loan Modification is or should be.
This is another example of why we need to work with professional assistance to guarantee the best possible results.

See below:

 

 

It is an excellent sign that lenders will begin contacting delinquent homeowners directly to discuss modifying their loans.

 

And this is also good news for anyone that is interested in modifying the terms of their current mortgage.

 

The main point here is that while lenders will begin contacting some homeowners directly, in order to obtain the best possible results, homeowners (regardless of whether or not they are late on their mortgage or not) absolutely need professional assistance to help negotiate the best possible terms for a loan modification.

 

The lenders are more interested in protecting their assets than they are with the individual needs of their clients.

Fed to cut rates (possibly to 0%)

Fed: New rate cut likely, with record low within sight
Friday October 24, 9:29 am ET
By Chris Isidore, CNNMoney.com senior writer

The Federal Reserve is widely expected to cut interest rates again next week. But could the Fed soon go where it has never gone before and bring them below 1%?

Even a cut to nearly 0%, a rate where the Bank of Japan left rates for much of the 1990’s, is not out of the question, given the unprecedented nature of credit problems.

The Fed lowered its federal funds rate, the benchmark overnight lending rate at which banks lend to one another, by a half-percentage point to 1.5% in an emergency announcement Oct. 8.

Many investors believe the central bank will cut rates by at least another half-percentage point following the end of a two-day meeting on Oct. 29.

In fact, the fed funds futures on the Chicago Board of Trade are now pricing in a 26% chance that the Fed will cut rates by three-quarters of a percentage point to 0.75% by that meeting.

Fed Chairman Ben Bernanke has said in recent weeks that economic weakness is likely to continue into next year, despite rate cuts and other recent moves taken by the Fed and Treasury Department to try and fix the credit crisis.

On Monday, Bernanke pushed Congress to consider a new stimulus plan to spur the economy.

“Everyone at the Fed has pretty much told you they’re going to cut,” said Rich Yamarone, director of economic research at Argus Research. “They’re in a kitchen sink mode right now. Rate cuts, fiscal stimulus, bailouts – they’re throwing everything they can at this right now.”

Still, would the Fed really consider lowering interest rates below 1%? The last time rates were at 1% was between June 2003 and June 2004.

Rate cuts have been a key tool the central bank has used in the past to boost a weak economy. A variety of lending rates, including credit cards and home equity lines, as well as the prime rate used to set many business loan rates, are pegged to the fed funds rate.

So lower rates usually lead to cheaper credit, thus spurring businesses and consumers to spend money more freely.

But in the current credit crisis, with banks afraid to make loans due to worries about their firms’ own need for cash in the near term, already relatively low short-term rates have done little to get credit flowing. (The Fed cut rates seven times between September 2007 and April before holding them at 2% for several months.)

Some economists argue that another rate cut may be the least important step the Fed can take in its effort to solve the crisis.

“It’s window dressing, only a psychological weapon,” said Sung Won Sohn, economics professor at Cal State University Channel Islands. “Right now, the problem isn’t the cost of the Fed’s money, it’s that the existing money supply is not circulating. The pipelines are clogged.”

Even Fed Vice Chairman Donald Kohn seemed to acknowledge that rate cuts aren’t as important as they once were. In an Oct. 15 speech, Kohn said the coordinated global cut the previous week had already been “overwhelmed …by the further erosion in confidence.”

Still, many economists say that fear and uncertainty in the markets is so great right now that the Fed can’t risk leaving rates unchanged. And they say anything that can be done to spur lending is a positive.

“It’s not irrelevant, even if it’s not as important as usual,” said David Wyss, chief economist with Standard & Poor’s.

Wyss said that if the U.S. credit and financial markets remain in crisis, a cut below 1% could come later this year or early next year.

To be sure, some have pointed to rates being at 1% for as long as they were as a factor in the housing bubble earlier this decade. It was the plunge from those inflated home values that sparked the credit crisis now dogging markets.

Low rates can also feed inflation. But that might be a sacrifice the Fed has to make.

“Inflating our way out of this mess is the Fed’s only option at this point,” said Peter Boockvar, market analyst of Miller Tabak, in a note Friday morning.

With the global economy slowing down, there are few economists talking about the threat of inflation. And the continued decline in home prices has negated most fears of low rates leading to another housing bubble.

So even a cut to nearly 0%, a rate where the Bank of Japan left rates for much of the 1990’s, is not out of the question, given the unprecedented nature of credit problems.

“There’s a hesitation to do it because it looks like desperation. But they’re getting desperate,” said Wyss.

 

Fed cuts key interest rate half-point to 1 percent

AP                                                                                      Fed cuts key interest rate half-point to 1 percent Wednesday October 29, 3:45 pm ET By Martin Crutsinger, AP Economics Writer Fed slashes key interest rate by half-point to 1 percent in effort to combat financial crisis WASHINGTON (AP) — The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades. The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958, when Dwight Eisenhower was president. The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8. In a brief statement explaining Wednesday’s action, the Fed said that the “intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and business to obtain credit.” The central bank said that “downside risks to growth remain” holding out the promise of further rate cuts if needed. The rate-cut decision was unanimous. Federal Reserve Chairman Ben Bernanke and his colleagues pledged that they would “monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.” Wall Street had staged its second biggest point surge ever on Tuesday with the Dow Jones industrial average climbing by 889 points in anticipation of the Fed’s action. Trading was more subdued on Wednesday with the Dow actually slipping into negative territory immediately after the announcement, but surged up by about 200 points in late-afternoon trading. Many analysts said they believe the Fed will not stop at 1 percent if officials see the need to cut rates further. Some are forecasting another half-point move at the Fed’s last meeting of the year on Dec. 16. But other economists said with rates already so low, the Fed may decide to hold at 1 percent, leaving some room for a further reduction if needed next year should the country’s economic troubles intensify. David Jones, chief economist at DMJ Advisors, said the Fed’s rate cut will be followed over the next week by similar action in other major countries as they grow more concerned that the recession that began in the United States is spreading to their regions. But he said a section of the Fed’s statement where it listed all the efforts taken so far to battle the slowdown was a signal the central bank believes it has done enough for now. Other economists disagreed, saying the Fed clearly lowered its worries about inflation while raising concerns about economic growth. Sung Won Sohn, an economist at the Smith School of Business at California State University, said he believed the Fed will make the “momentous decision” to move the funds rate to zero if events in coming months show such an action is needed to battle the global credit crisis. In its statement, the Fed indicated it had room to lower rates because the spreading economic weakness was lowering the risks that inflation would get out of control. Indeed, the weakness has caused dramatic declines in the price of oil and other commodities. While many economists believe the country has already fallen into a recession, they think the aggressive efforts by the Fed to cut rates and take other actions to unfreeze credit markets will keep the country from plunging into a prolonged and deep downturn. The Fed’s action was expected to be quickly followed by a reduction by commercial banks in their prime lending rate, the benchmark for millions of consumer and business loans, by a similar half-point. The central bank also announced that it was lowering its discount rate, the interest it charges to make direct loans to banks, by a half-point to 1.25 percent. This rate has become increasingly important as the central bank has dramatically increased direct loans to banks in an effort to break the grip of the credit crisis. Bernanke pledged in a speech earlier this month that the Fed “will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity.” In addition to the rate cuts, the Fed has been moving to pump billions of dollars into the banking system to help unfreeze markets that seized up in dramatic fashion last month. The ensuing meltdown of financial markets caused the Bush administration to successfully lobby Congress to pass on Oct. 3 a $700 billion rescue package to make direct purchases of bank stock and buy up bad assets as a way of getting financial institutions to start lending again. That money started flowing earlier this week with $125 billion going to nine of the nation’s biggest banks. Other industries, including automakers and insurance companies, are in talks with the administration to get a share of the bailout funds. And there is pressure from lawmakers to deploy some of the bailout resources to provide mortgage guarantees to encourage more banks to rework home loans to stem a record tide of foreclosures.

 

Quint Cobb & Associates Get The Most Out of Your Homebuying Tax Credit

Quint Cobb & Associates  Get The Most Out of Your Homebuying Tax Credit

 

Programs, states offer ways to get $8,000 break to first-time buyers faster

 

source AP 

 

When it comes to the $8,000 tax credit for first-time homebuyers, it seems there’s a new program every week to help tap that money today.

 

The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees, and at least 10 states offer ways to use the tax credit faster.

 

“There are some real neat tax planning strategies you can apply now,” said Bob Meighan, vice president of TurboTax.

To be eligible, a buyer cannot have owned a home in the past three years. So if you’re ready to buy, here are some tips:

 

INCOME CONSIDERATIONS: The tax credit, for home purchases made through end of November, comes with income thresholds, $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year’s, it makes sense to file for the credit this year using a 2008 amended return.

 

However, if you think your income will decrease, due to job loss, wage cuts or hour reductions, it makes more sense to file for the tax credit on your 2009 tax returns to get the most out of the credit, Meighan said.

 

TAX WITHHOLDING: Another benefit to waiting until 2009: You can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis, Meighan said.

 

You’ll be giving up a “fatter” tax refund next year, but each month you’ll have more change in your pocket.

 

Also, don’t forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.

 

BRIDGE LOANS: Ten states (and the list keeps growing) are offering so-called “bridge loans” for the federal tax credit, so homebuyers can take advantage of the $8,000 before the 2010 filing season. Qualified homebuyers in Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania and Tennessee can receive a loan with little to no interest and repay it with the tax credit refund next year.

 

“I see it as an upside,” Meighan said. “It gives homebuyers more flexibility,” with the money.

 

Each state program varies and some require a minimum down payment contribution from the buyer.

 

Some nonprofit organizations like NeighborWorks America are also offering bridge loans for the tax credits.

 

California also enacted its own one-time home buying credit for newly built homes purchased between Feb. 28 and March 1, 2010. The nonrefundable credit, which is for all buyers, not just first timers, is equal to 5 percent of the purchase price up to $10,000. It can be claimed over a three-year period. The property must be a single-family residence, the principal residence and eligible for the property tax homeowners exception.

 

A California resident can take both the federal and state tax, according to Kathleen Thies, a state tax analyst at CCH Inc. However, only $100 million has been put aside for the state credit and that money is expected to run out this month or next. And there are no plans to add more funding to the program.

 

“It’s on a first-come, first-serve basis,” Thies says.

 

ADVANCE CREDIT: Last month, the FHA said its borrowers can receive advances on the $8,000 first-time homebuyer tax credit from lenders, so they don’t have to wait to get the money next year from the Internal Revenue Service.

 

Borrowers will still have to come up with the FHA’s required 3.5 percent down payment, but the advance from the tax credit can be applied toward closing costs, fees or to increase the down payment.

 

John W. Roth, a senior tax analyst at CCH, believes some lenders won’t participate. The process involves more work for lenders, but lenders can only charge an additional 2.5 percent fee for that.

Streamline-Refi Deadline

 

November 17th

Last day to assign a case number for FHA Streamline refinances under current FHA guidelines.  Mortgagee Letter 09-32

 

  IMPORTANT CHANGES

•             Defined net tangible benefit for the borrower

•             Maximum Combined LTV

•             New Maximum Mortgage Amount for Streamline Refinances WITHOUT an Appraisal

•             Verification of any assets needed to close

•             Certification that borrower is employed and has income

•             Must have made at least 6 payments

•             With Payment history no lates in the last 12 payments 

 

About Quint Cobb & Associates

•             Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.

•             Our team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.

•             We are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.

•             Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.

•             Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).

•             We pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.

•             Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.

•             Quint Cobb & Associates pride themselves in providing cutting-edge market information and analysis.

•             Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.

Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

•             Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

 Quint Cobb & Associates FHA Prequal Form

Quint Cobb & Associates Loan Modification Eval Form

Quint Cobb & Associates Purchase Prequal Form

Quint Cobb & Associates Refinance Prequal Form

A Great Article by Warren E. Buffet

Warren E. Buffett has two cardinal rules of investing. Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.

Well, a lot of old rules got trashed when the financial crisis struck — even for the Oracle of Omaha.

At 79, Mr. Buffett is coming off the worst year of his long, storied career. On paper, he personally lost an estimated $25 billion in the financial panic of 2008, enough to cost him his title as the world’s richest man. (His friend and sometime bridge partner, Bill Gates, now holds that honor, according to Forbes.)

And yet few people on or off Wall Street have capitalized on this crisis as deftly as Mr. Buffett. After counseling Washington to rescue the nation’s financial industry and publicly urging Americans to buy stocks as the markets reeled, in he swooped. Mr. Buffett positioned himself to profit from the market mayhem — as well as all those taxpayer-financed bailouts — and thus secure his legacy as one of the greatest investors of all time.

When so many others were running scared last autumn, Mr. Buffett invested billions in Goldman Sachs — and got a far better deal than Washington. He then staked billions more on General Electric. While taxpayers never bailed out Mr. Buffett, they did bail out some of his stock picks. Goldman, American Express, Bank of America, Wells Fargo, U.S. Bancorp — all of them got public bailouts that ultimately benefited private shareholders like Mr. Buffett.

If Mr. Buffett picked well — and, so far, it looks as if he did — his payoff could be enormous. But now, only a year after the crisis struck, he seems to be worrying that the broader stock market might falter again. After boldly buying when so many were selling assets, his conglomerate, Berkshire Hathaway, is pulling back, buying fewer stocks while investing in corporate and government debt. And Mr. Buffett is warning that the economy, though on the mend, remains deeply troubled.

“We are not out of problems yet,” Mr. Buffett said last week in an interview, in which he reflected on the lessons of the last 12 months. “We have got to get the sputtering economy back so it is functioning as it should be.”

Still, Mr. Buffett hardly sounded shellshocked in the wake of what he once called the financial equivalent of Pearl Harbor. (An estimated net worth of $37 billion would be a balm to anyone’s psyche.)

“It has been an incredibly interesting period in the last year and a half. Just the drama,” Mr. Buffett said. “Watching the movie has been fun, and occasionally participating has been fun too, though not in what it has done to people’s lives.”

Investors big and small hang on Mr. Buffett’s pronouncements, and with good reason: if you had invested $1,000 in the stock of Berkshire in 1965, you would have amassed millions of dollars by 2007.

Despite that formidable record, the financial crisis dealt him a stinging blow. While he has not changed his value-oriented approach to investing — he says he likes to buy quality merchandise, whether socks or stocks, at bargain prices — Buffettologists wonder what will define the final chapters of his celebrated career.

In doubt, too, is the future of a post-Buffett Berkshire. The sprawling company, whose primary business is insurance, lost about a fifth of its market value during the last year, roughly as much as the broader stock market. While Berkshire remains a corporate bastion, it lost $1.53 billion during the first quarter, then its top-flight credit rating. It returned to profit during the second quarter.

Time is short. While he has no immediate plans to retire, Mr. Buffett is believed to be grooming several possible successors, notably David L. Sokol, chairman of MidAmerican Energy Holdings at Berkshire and also chairman of NetJets, the private jet company owned by Berkshire.

After searching in vain for good investments during the bull market years, Mr. Buffett used last year’s rout to make investments that could sow the seeds of future profits.

Justin Fuller, author of the blog Buffettologist and a partner at Midway Capital Research and Management, said the events of the last year, while painful for many, provided Mr. Buffett with the opportunity he had been waiting for.

“He put a ton of capital to work,” Mr. Fuller said. “The crisis gave him the ability to put one last and lasting impression on Berkshire Hathaway.”

For the moment, however, Mr. Buffett seems to be retrenching a bit. Like so many people, he was blindsided by the blowup in the housing market and the recession that followed, which hammered his holdings of financial and consumer-related companies. He readily concedes he made his share of mistakes. Among his blunders: investing in an energy company around the time oil prices peaked, and in two Irish banks even as that country’s financial system trembled.

Mr. Buffett declined to predict the short-run course of the stock market. But corporate data from Berkshire shows his company was selling more stocks than it was buying by the end of the second quarter, according to Bloomberg News. Its spending on stocks fell to the lowest level in more than five years, although the company is still deftly picking up shares in some companies and buying corporate and government debt.

Among the stocks Mr. Buffett has been selling lately is Moody’s, the granddaddy of the much-maligned credit ratings industry. Berkshire, Moody’s largest shareholder, said last week that it had reduced its stake by 2 percent.

The shift in Berkshire’s investments suggests Mr. Buffett is starting to worry, said Alice Schroeder, the author of “The Snowball,” a biography of Mr. Buffett.

But Ms. Schroeder said Mr. Buffett was also growing anxious about how he would be remembered. He wants to remain relevant in the twilight of his career, she said, and is taking a more prominent role on the public stage. That shift means ordinary investors are getting a chance to hear more of his sage advice, but it also carries some risk.

“Before, he always made sure to dole out the wisdom with an eyedropper,” Ms. Schroeder said. In the past, Mr. Buffett “said it was a mistake to believe that if you are an expert in one area that people will listen to you in others,” she said.

Whatever his recent missteps, many people, from President Obama down, listen to what Mr. Buffett has to say. He is important in his own right as a billionaire businessman but also because millions of ordinary investors follow his homespun aphorisms, copy his investing strategies and await his pronouncements on the markets.

Mr. Buffett refused to be drawn out on where stocks are headed, but he warned about the dangers of investing with borrowed money, or leverage, which proved disastrous when the crisis hit.

As for regrets, he has a few. His timing was bad, he concedes. He should have sold stocks sooner, before the markets tumbled. Then he served up a Buffettism that any investor might heed:

Asked if anything was keeping him awake at night, he said there was not. “If it’s going to keep me awake at night,” Mr. Buffett said, “I am not going to go there”.

 Quint Cobb & Associates FHA Prequal Form

Quint Cobb & Associates Loan Modification Eval Form

Quint Cobb & Associates Purchase Prequal Form

Quint Cobb & Associates Refinance Prequal Form

Get The Most Out of Your Homebuying Tax Credit

Get The Most Out of Your Homebuying Tax Credit

 

Programs, states offer ways to get $8,000 break to first-time buyers faster

 

source AP 

When it comes to the $8,000 tax credit for first-time homebuyers, it seems there’s a new program every week to help tap that money today.

 

The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees, and at least 10 states offer ways to use the tax credit faster.

 

“There are some real neat tax planning strategies you can apply now,” said Bob Meighan, vice president of TurboTax.

To be eligible, a buyer cannot have owned a home in the past three years. So if you’re ready to buy, here are some tips:

 

INCOME CONSIDERATIONS: The tax credit, for home purchases made through end of November, comes with income thresholds, $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year’s, it makes sense to file for the credit this year using a 2008 amended return.

 

However, if you think your income will decrease, due to job loss, wage cuts or hour reductions, it makes more sense to file for the tax credit on your 2009 tax returns to get the most out of the credit, Meighan said.

 

TAX WITHHOLDING: Another benefit to waiting until 2009: You can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis, Meighan said.

 

You’ll be giving up a “fatter” tax refund next year, but each month you’ll have more change in your pocket.

 

Also, don’t forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.

 

BRIDGE LOANS: Ten states (and the list keeps growing) are offering so-called “bridge loans” for the federal tax credit, so homebuyers can take advantage of the $8,000 before the 2010 filing season. Qualified homebuyers in Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania and Tennessee can receive a loan with little to no interest and repay it with the tax credit refund next year.

 

“I see it as an upside,” Meighan said. “It gives homebuyers more flexibility,” with the money.

 

Each state program varies and some require a minimum down payment contribution from the buyer.

 

Some nonprofit organizations like NeighborWorks America are also offering bridge loans for the tax credits.

 

California also enacted its own one-time home buying credit for newly built homes purchased between Feb. 28 and March 1, 2010. The nonrefundable credit, which is for all buyers, not just first timers, is equal to 5 percent of the purchase price up to $10,000. It can be claimed over a three-year period. The property must be a single-family residence, the principal residence and eligible for the property tax homeowners exception.

 

A California resident can take both the federal and state tax, according to Kathleen Thies, a state tax analyst at CCH Inc. However, only $100 million has been put aside for the state credit and that money is expected to run out this month or next. And there are no plans to add more funding to the program.

 

“It’s on a first-come, first-serve basis,” Thies says.

 

ADVANCE CREDIT: Last month, the FHA said its borrowers can receive advances on the $8,000 first-time homebuyer tax credit from lenders, so they don’t have to wait to get the money next year from the Internal Revenue Service.

 

Borrowers will still have to come up with the FHA’s required 3.5 percent down payment, but the advance from the tax credit can be applied toward closing costs, fees or to increase the down payment.

 

John W. Roth, a senior tax analyst at CCH, believes some lenders won’t participate. The process involves more work for lenders, but lenders can only charge an additional 2.5 percent fee for that.

 

About Quint Cobb & Associates

 

Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.

 

Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.

 

Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.

 

Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.

 

Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).

 

Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.

 

Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.

 

Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.

 

Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.

Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

 

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

 

The next step for any homeowner interested to see if they qualify for one of these programs is to simply fill out the Free Loan Evaluation Form (by clicking on the link below) and faxing it back to us for our network of attorneys to review.

 

Quint Cobb Free Loan Eval Form Quint Cobb & Associates

 

This Free Loan Evaluation Form will allow us to determine if your financial profile fits within the eligibility requirements for a successful Loan Modification or Short Refinance and if you qualify under the Presidents new Homeowner Affordability Plan.

 

You will receive an approval within 24 – 48 hours after completing this Free Loan Evaluation Form.

A Good Read about Appraisals (Quint Cobb & Associates)

In 2004, years before plummeting real estate values turned Fort Myers, Florida, into a top five foreclosure capital, appraiser Mike Tipton faced a dilemma.

Tipton’s employer, eAppraiseIT, sent him to value a two-bedroom home in a new subdivision built by the developer D.R. Horton. Paperwork given by the appraisal management company to Tipton included a $245,000 estimated value.

But after inspecting the home and comparing it to five similar houses that had recently sold, Tipton set the value at $237,000, $8,000 less than the estimate. He knew the difference might disappoint DHI Mortgage, the prospective buyer’s lender, which is a subsidiary of developer D.R. Horton. And indeed it did.

The lender, in a process appraisers say was common in the boom days before the housing bubble burst, asked Tipton to redo the appraisal. It sent paperwork through eAppraiseIT asking him to reconsider the value. It gave him different homes to use for comparisons.

“If you read between the lines, they wanted a larger value,” Tipton said. “I told them no, I wasn’t changing my report.”

Tipton, who like many other appraisers is paid by the job, says he was never given another appraisal for a D.R. Horton home. “All I can say is D.R. Horton has remained an active developer in Lee County,” Tipton said. “I didn’t see any further appraisals for DHI Mortgage. So you tell me.”

Carrie Gaska, a spokeswoman for First American eAppraiseIT, declined to comment on why Tipton received no further orders from the company for DHI Mortgage properties.

Tipton is among dozens of appraisers who have told the Center for Public Integrity that for years lenders across the United States have pushed them into inflating the value of homes to justify higher mortgages. Appraisers and lenders alike are demanding better oversight of the industry. In addition, the Center has obtained copies of lenders’ “blacklists” containing the names of thousands of appraisers; some appraisers say lenders used those lists to exclude those who refused to inflate home values.

The Center also found many appraisers who say they bowed to lender pressure to “hit the numbers” in order to remain in business. These appraisers, along with the lenders who pressured them, helped pump air into the housing bubble that led to widespread economic devastation, according to dozens of appraisers, lenders, and others with intimate knowledge of home loan practices.

And there’s evidence that Fannie Mae and Freddie Mac, the two largest purchasers of home loans, bought mortgages without ensuring they were made with accurate appraisals, according to an investigation by New York Attorney General Andrew Cuomo.

No one knows exactly how much of a role inflated appraisals played in the mortgage meltdown. But as an increasing number of homeowners face foreclosure, many remain unaware that the appraisal they paid for during the purchase process may not have reflected the true value of their investment, and may have allowed them to borrow more money than their home was worth.

Depending on the state where the homeowners purchased, the scheme may or may not have been against the law. Pressuring an appraiser to inflate the value of a property is a crime in at least 20 states and the District of Columbia, though it is often a misdemeanor punishable by a fine, a slap on the wrist that appraisers say does little to prevent the exertion of undue pressure.

“There is rampant corruption throughout the industry,” said George Dodd, a veteran appraiser in Virginia who has been advocating for more regulation. “The way it stands now, the public doesn’t stand a chance.”

Dodd said, that in addition to the appraisal ordered by the lender, consumers can protect themselves by ordering a second independent appraisal before a purchase. They will, however, still have to pay for the lender’s appraisal.

 

About Quint Cobb & Associates

• Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.
• Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.
• Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.
• Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.
• Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).
• Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.
• Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.
• Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.
• Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
  Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

Fudging the Numbers

Richard Frank, an appraiser in Vero Beach, Florida, started appraising homes in 1998, when values were climbing. From the beginning, Frank said he stepped into a business arrangement in which lenders forced appraisers to abandon their standards if they wanted work.

Frank said lenders commonly gave appraisers an estimated value for a home on each appraisal order. Appraisers, who usually determine values by comparing homes to recent sales of comparable properties, often worked backwards from that estimated price to find recent real estate sales that would “make the value,” he said. Working backwards from the estimate was faster. Everyone made money. And since appraising homes is subjective — both an art and a science — it was easy to fudge numbers.

“The [supposedly comparable] houses might be bigger and better, but who’s going to know?” Franks said. “In an increasing market, your sins are buried.”

If an appraisal came in lower than the purchase price, the loan likely would be denied. Since loan origination staff is typically paid by commission, a failed deal meant no paycheck for them. If that happened too many times, Frank says, lenders stopped sending the appraiser work. “Put out, and you will get more dates. It’s just that simple,” he said.

Richard Bitner, a former subprime lender in Texas who has written an insider account of the mortgage industry collapse, backs up Frank’s story. Bitner says the pressure came more from the cozy relationship between lenders and appraisers than threats.

“The pressure applied didn’t really need to be overt,” Bitner said. “If suddenly [an appraiser] can’t make the values, at the end of the day, it’s pretty easy to go to someone else. You are here to make money.”

Appraisers say lenders did just that, sometimes asking appraisers to promise a value before they officially ordered the report.

Both appraisers and lenders say the two professions have not always been at odds. Appraisers traditionally served as the front-line defense for loan underwriting departments, ensuring that the value of a home was worth the loan amount in case the lender needed to foreclose. In the past, many banks had in-house appraisal departments. And, unlike today, lenders historically kept and serviced the loan for the life of the mortgage. But when lenders began bundling loans and selling them to Wall Street and other investors, lenders carried less risk and industry analysts say they became less concerned about home values. With no “skin in the game,” lenders focused on closing deals. In this climate, many in the industry say the appraisal became a barrier to jump over.

Appraisers say making money was easy, as long as they did not cross lenders. But if they did, appraisers say lenders lashed out, adding their names to the blacklists that lenders originally kept to identify incompetent appraisers. Lenders kept their own lists, but appraisers sometimes found their names on those lists even if they never worked for that lender.

Amerisave, one of the largest online mortgage lenders, has close to 12,000 appraisers on its “ineligible appraiser list,” which was removed from the Atlanta-based company’s website after the Center made inquiries about it. In December, appraiser Tom Woolford found his name on Amerisave’s list when the list also appeared on a popular online appraisal industry forum. Woolford said he has never done an appraisal for Amerisave, and the address they used for him was at least 10 years old. He doesn’t know how he ended up on the list, but he says it could be a matter of reputation: He says he never gives in to lender pressure.

“I think you will find a lot of the people on these lists do not hit numbers,” Woolford said. “I won’t lie, and I won’t push a number for nobody.”

After conferring with top management officials, Martin Wilhelm, an Amerisave vice president, declined to answer questions about how it compiles its blacklist.

About Quint Cobb & Associates

• Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.
• Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.
• Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.
• Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.
• Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).
• Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.
• Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.
• Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.
• Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
  Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

Unheard Warning Bells

 

Before real estate prices began to plummet in 2006, some sounded the alarm on fraudulent appraisals and lender pressure, but few listened to the warnings, least of all Congress, industry regulators, and the Justice Department.

David Callahan, a founder of the public policy think tank Demos, was one of the first people to study inflated appraisals and lender pressure. In 2005, Callahan wrote a paper describing the financial incentives for lenders and appraisers to pursue inflated appraisals. The goal of lenders, brokers, real estate agents and developers was to ensure that a home loan closed without a problem, Callahan said. All those people exert pressure on appraisers to inflate values.

In a 2007 study by October Research, a real estate news provider, 90 percent of more than 1,200 appraisers polled reported feeling pressure to change property values, usually from lenders, mortgage brokers or real estate agents.

“Congress didn’t really care about it,” Callahan said, noting the lack of reaction his report generated in Washington. “There was remarkably little legislative activity looking at the corruption in the real estate market.”

In fact, Congress had struggled with the issue of lender pressure on appraisers since the savings and loan crisis of the 1980s. In recent years, Congressman Paul Kanjorski, a Pennsylvania Democrat, has been the most vocal proponent for stronger regulation, proposing legislation in 2007 that would have set stiffer appraisal independence standards. The legislation, which would have prohibited lender coercion of appraisers and established penalties for it, was folded into the 2007 Mortgage Reform and Anti-Predatory Lending Act. The legislation faced stiff opposition and lobbying by the banking and mortgage industry, which argued it would adversely impact credit availability, a nd the bill was not taken up in the Senate after passing the House. In March, the legislation was reintroduced in the House as part of the Mortgage Reform and Anti-Predatory Lending Act.

Appraisal industry insiders say part of the difficulty in policing the process stems from regulatory fragmentation. Appraisers fall under the jurisdiction of state regulators, which enforce standards set up by the Appraisal Foundation, a nonprofit industry group authorized by Congress. State licensing is overseen by the Appraisal Subcommittee, an agency created by Congress in 1989.

Hyped appraisals did not escape the attention of federal banking and savings and loan regulators, but reports published since the mortgage industry collapse show that those officials did little to stop the practice. A February audit by the Treasury Inspector General on the implosion of IndyMac, a savings and loan, noted that the Office of Thrift Supervision, IndyMac’s primary regulator, identified problems with appraisals on the company’s loans in 2001, but took no formal action.

In one example from the audit report, an IndyMac file for a $1.5 million loan contained appraisals ranging from $639,000 to $1.5 million. “There was no support to show why the higher value appraisal was the appropriate one to use for approving the loan,” the report says.

In 2006, Ameriquest, then the largest subprime lender in the country, paid $325 million and agreed to reform its business practices to settle a 49-state investigation into its predatory lending practices. Among the allegations, the lawsuit claimed Ameriquest engaged in deceptive or misleading practices to obtain inflated appraisals substantially beyond the market values of homes. The company, which closed in 2007, denied the allegations.

Problems like these only seem to come to light during declining markets and concerns are put on a shelf when buyers return, says Dave Biggers, founder and CEO of the real estate technology company a la mode, inc. In an appreciating market, appraisals five to 10 percent beyond value are not an issue, he said, and home values climb beyond appraisal values soon after the sale.

But when the market peaked in 2005 and then began its sharp decline, inflated appraisals exacerbated the trouble faced by “underwater” homeowners. “We as the taxpayers are getting stuck with the bill,” Biggers said. “What has not been investigated is the systemic issues that take place on the basis of policy by many of these companies.”

 

About Quint Cobb & Associates

• Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.
• Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.
• Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.
• Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.
• Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).
• Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.
• Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.
• Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.
• Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
  Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

 

“Who Has Juice with Whom”

Since the bubble burst, the FBI has focused most of its real estate efforts on appraisers and other fraudsters who developed intricate schemes to defraud banks. The Justice Department is not going through the wreckage looking at the institutionalized lender pressure on the appraisal process. An FBI official, asking not to be identified because the agency has no official position on the matter, said they view the matter as a regulatory issue to be addressed by Congress not a matter of law enforcement.

FBI Deputy Director John S. Pistole testified in March before the House Committee on Financial Services about the agency’s efforts to combat mortgage fraud, saying the bureau is focusing its limited white collar crime-fighting resources on real estate industry insiders engaged in fraud for profit. Those cases target real estate speculators and mortgage brokers who work with appraisers to sell a house for far more than its true value. So far, however, there have been no prosecutions of lenders who pressured appraisers to inflate values.

Instead, the highest-profile investigation of the appraisal industry has come from New York Attorney General Andrew Cuomo. In 2007, Cuomo filed a lawsuit against First American Corp. and its subsidiary First American eAppraiseIT, charging that eAppraiseIT allowed loan production staff at Washington Mutual to pressure appraisers to inflate home values. The suit is pending.

The suit claims the appraisal management company allowed Washington Mutual’s “loan production staff to hand-pick appraisers who bring in appraisal values high enough to permit WaMu’s loans to close, and improperly permits WaMu to pressure eAppraiseIT appraisers to change values that are too low to permit loans to close.”

In addition, the complaint alleges that executives at eAppraiseIt knew its appraisal arrangement with Washington Mutual broke the law. “I think WaMu’s new initiative is way over the line,” it quotes eAppraiseIT’s executive vice president as writing in spring of 2007 to the company’s president. “It is even possible that the current arrangement crosses the line.”

“Bingo!” replied the company president, according to the complaint. “It boils down to who has juice with whom at the regulatory level.”

In a 2007 press release, First American said the New York lawsuit “has no foundation in fact or law. The Attorney General’s allegations, largely based on a handful of e-mails that have been taken out of context, or mischaracterized, and an incomplete review of the facts, belie our record of compliance with applicable law.”

Cuomo also subpoenaed Fannie Mae and Freddie Mac. The investigation into whether the two largest loan purchasers bought loans that included inflated appraisals was dropped in March 2008 after Fannie and Freddie agreed to strict new rules — penned in part by Cuomo’s office — governing the appraisal practices for the loans they buy. They also agreed to pay $24 million to fund the Independent Valuation Protection Institute, a new organization to help implement and monitor the code.

What led Fannie and Freddie to the agreement was not made public, and Cuomo’s investigators aren’t talking, but his office did point the Center for Public Integrity to letters Cuomo sent in 2007 to the CEOs of both Fannie Mae and Freddie Mac, expanding his investigation to include a subpoena of their records.

In the letters, Cuomo wrote that his office had “uncovered a pattern of collusion between lenders and appraisers that has resulted in widespread inflation of the valuations of homes.” Further, Cuomo wrote that evidence shows mortgages Fannie and Freddie purchased from Washington Mutual “may be premised on fraudulently inflated appraisals” that do not meet regulatory standards. “We are, therefore, expanding our investigation to determine the extent of [Fannie Mae and Freddie Mac’s] knowledge of, and actions regarding, these problems as they relate to past mortgage purchases and securitizations.”

Cuomo’s office declined the Center’s request for details of its investigation’s findings.

The Home Valuation Code of Conduct, an industry standard which came about as a result of Cuomo’s investigation, is slated to go into effect on May 1, makes deep changes to the appraisal industry.

The code, which affects all loans eligible for purchase by Fannie and Freddie, bans lenders and brokers from pressuring appraisers to hype appraisals by threatening to withhold future business as punishment. Lenders must inform appraisers when they are removed from qualified use lists and allow them to appeal. It also bans loan origination staff from ordering appraisals directly — instead, the lender must use other in-house staff or go through a middleman appraisal management company. Even so, the incentive to pressure appraisers still exists, even for supposedly independent appraisal management companies.

 

About Quint Cobb & Associates

• Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.
• Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.
• Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.
• Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.
• Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).
• Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.
• Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.
• Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.
• Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
  Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

 

Fox and the Hen House

Despite the changes, the new code has been panned by both the appraisal industry and some lenders. The National Association of Mortgage Brokers filed a lawsuit to try to block the rules, arguing that the code puts smaller mortgage brokerages at a disadvantage because they will be forced to rely on lenders to obtain appraisals for their customers, thereby limiting their ability to shop for loans. The association dropped the action earlier this month.

Appraisers who work for themselves or small businesses say the code will end their careers since mortgage brokers and other loan generation staff can no longer contact them directly. Instead, they say the code in effect directs all business to appraisal management companies, the unregulated middlemen that are often subsidiaries of lenders.

Appraisers say the management companies passed on pressure from lenders in the past, including in Cuomo’s case against eAppraiseIt, and see nothing in the new code to stop it from happening.

“It’s a bit of irony that the solution is the same thing that got us here,” said Bill Garber, director of government and external relations at the Appraisal Institute, a trade association representing appraisers.

The Home Valuation Code of Conduct, Garber added, is lip service to cleaning up the industry. Appraisal management companies “are just as capable of pressuring appraisers as anyone else.”

Appraisers also dislike the plan because some appraisal management companies take a hefty administrative fee and pay low rates to appraisers, which experienced appraisers say will force them out of the business and turn the industry over to less experienced appraisers who are more likely to make mistakes.

Pressure will still come from the management companies, said Dodd, the Virginia appraiser. “They could give a damn about the consumer. They don’t care if the consumer pays ten, twenty, or thirty thousand more than it’s worth.”

Cuomo hasn’t answered critics of the new code, and his office did not return calls from the Center for Public Integrity.

 

About Quint Cobb & Associates

• Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.
• Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.
• Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.
• Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.
• Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).
• Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.
• Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.
• Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.
• Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
  Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

 

Lawyers, Banks, and Money

Since the real estate crash, the appraisal and lending industries have come under closer watch by regulators and Congress. But so far, no one has addressed the effect inflated appraisals have had on struggling homeowners. Buyers who moved in at the height of the boom are particularly vulnerable, and attorneys say their struggle provides fertile ground for civil litigation.

“I definitely believe that lenders have engaged in widespread illegal activities, and they will come under increased scrutiny in the next year or so as people who have been damaged by this realize there are some bad actors out there,” said Steve Berman, an attorney in Seattle.

In October, Berman’s firm, Hagens Berman Sobol Shapiro, filed a class action on behalf of blacklisted appraisers against Countrywide Financial and its subsidiary Landsafe, an appraisal management company. Like Cuomo’s suit, Berman’s case argues that Countrywide forced appraisers to hit the numbers and added them to a blacklist if they refused.

“Countrywide… has engaged in a practice of pressuring and intimidating appraisers into using appraisal techniques that meet Countrywide’s business objectives even if the use of such appraisal techniques is improper and in violation of industry standards,” the complaint alleges.

If the appraisers refused, the complaint says they were placed on a “field review list,” which disqualified them for further work for loans for Countrywide. Because mortgage brokers shop for lenders, if an appraiser was blacklisted by Countrywide, the largest independent mortgage lender, they were in effect blacklisted by much of the industry, Berman’s complaint claims.

According to the complaint, Countrywide’s blacklist contains more than 2,000 appraisers. Berman said his firm is looking at other lenders and their blacklists as it considers further litigation.

The new appraisal code and increased scrutiny of the industry seems to have had some effect. Lender pressure is not as strong, appraisers say, but it still exists. Ray Miller, an appraiser outside Madison, Wisconsin, says the pressure is moving to FHA loans and refinancing as credit for other loans remains dried up.

In January, Miller said he did an appraisal for a lake home where the owner was looking to refinance. The original appraisal, done when the owner bought the home a few years back, listed the value at $554,000, but the comparables used to hit that number were from homes on a more upscale lake, Miller concluded.

Miller’s reappraisal came in at $400,000. “I’m just waiting for the phone call,” he said.

In February, Miller received a call from a different lender. This one wanted him to remove pictures of a cracked sidewalk he included in his appraisal. This would be prohibited under the Home Valuation Code of Conduct. But Miller expects lenders will figure out a way around the rules.

“They don’t want good appraisers,” he said. “They don’t want good numbers, even now.”

 

 

About Quint Cobb & Associates

• Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.
• Quint Cobb & Associates team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.
• Quint Cobb & Associates are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.
• Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.
• Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).
• Quint Cobb & Associates pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.
• Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.
• Quint Cobb & Associates team pride themselves in providing cutting-edge market information and analysis.
• Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
  Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.
• Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

Quint Cobb Free Loan Eval Form Quint Cobb & Associates

Quint Cobb & Associates

Quint Cobb and Associates are seasoned veterans in the real estate industry with combined experience of over over 17 years.  Quint Cobb and Associates hold active licenses in real estate, mortgage finance, and property & casualty insurance. Quint Cobb and Associates offer a one-stop shop for his residential and commercial clients, Quint Cobb & Associates strive to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, Quint Cobb and Associates are uniquely qualified and have a passion for helping people achieve their goals in real estate.

 

Quint Cobb & Associates specialize in Residential and Commercial Financing, Investment Planning and Mortgage Relief Assistance in all 50 States.

Our team of mortgage analysts, attorneys, negotiators, processors and underwriters are chosen from the top 1% of their industries.

We are dedicated to providing our clients with the absolute best financing options by delivering individualized service, unmatched loan approval percentages and unparalleled lending flexibility and speed.

Quint Cobb & Associates have access to the power and speed of a direct banking line that has not been paralyzed by the losses and toxic loans that crippled the rest of the industry.

Quint Cobb & Associates also have the flexibility to broker to all remaining lenders (with tier one pricing and FHA backing in all 50 states).

We pride ourselves in our Underwriters (and the relationships and direct communication we maintain with them) to assure the highest loan approval percentages, loan processing speed and overall loan pull-through ratios possible.

Quint Cobb & Associates specialize in FHA loans, Short Refinances, Conventional, Jumbo and Commercial Loans, Residential and Commercial Loan-Modification Assistance, Short Sale Guidance and Investment Planning.

Quint Cobb & Associates pride themselves in providing cutting-edge market information and analysis.

Quint Cobb & Associates have the unique ability to provide analysis across markets and property types. In addition to their reports and publications, information can be packaged to meet specific needs of investors by property type and submarket.
Clients are informed of the latest market trends and real-time data on buyer demand, pricing and local markets. We assist our clients in measuring the performance of their properties and look for new opportunities to maximize returns.

Quint Cobb & Associates professional experience and knowledge will enable you to clearly and quickly identify a course of action that delivers maximum value to your company or to your individual portfolio (whether you are a Homeowner or a Realtor or Mortgage Professional looking for a home for your financing needs in all 50 states).

 

 

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Loan Modification Update

As you have probably seen on the news, lenders loan modification guidelines are changing daily.

I wanted to take a moment and give you a detailed update on the most recent information regarding: 

 

Loan Modification, Forensic Loan-Reviews, Loan Balance Reduction, as well as a detailed breakdown of the things we can do to improve our chances and the speed of a beneficial loan modification negotiation with the lender.

 

Please take your time reviewing this information and please call or email me if you have any questions at all. 

 

LOAN MODIFICATION UPDATE

 

In this email I have included information on the following:

 

1) New Finding May Ease Concerns That Borrowers Would Fall Behind on Loans after a Modification

 

2) HALF of all loan workouts still result in the same or HIGHER payments!

 

3) Myth: Lenders and servicers are doing everything they can to assist struggling homeowners.

 

4) Homeowners may need legal help and a “true” advocate that will look at these loans and tell the truth.

 

5) Latest Options Available to Homeowners

 

a) Loan Modification

b) Forensic Loan Review

c) Short-Pay Refinance

d) Who Qualifies

 

 

1) New Finding May Ease Concerns That Borrowers Would Fall Behind on Loans

A new study shows that by CUTTING financially troubled borrowers’ monthly mortgage payments by MORE THAN 10% reduces the chances that they will fall behind on their mortgage payments after their loan is MODIFIED..

 

 

The report, released Friday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision, comes as mortgage companies are preparing to modify loans under the Obama administration’s foreclosure-prevention plan, which provides financial incentives to encourage mortgage companies and investors to reduce borrowers’ mortgage-related payments to 31% of income.

 

 

 

“The administration plan is premised on the notion that if you lower the payment enough you can produce sustainable modifications,” said Comptroller of the Currency John C. Dugan. The report, he added, “provides evidence in support of that thought.”

 

It could help allay concerns that scores of borrowers whose loans are reworked will fall behind again on their mortgages, leading to higher losses for lenders and investors who hold these loans.

 

However it needs to be noted that while modifications that result in LOWER payments are increasing nearly half of all loan modifications result in the same or higher payments!

 

2) HALF of all loan workouts still result in the same or HIGHER payments!

 

Nearly HALF of all loan workouts still result in the same or HIGHER payments, for homeowners that contact their lender directly, the study found.

The re-default rate was less than 26% after nine months when monthly mortgage payments were cut by more than 10% after the modification. 

 

In comparison, more than 50% of homeowners re-default when the mortgage payment increased or remained the same after the modification!

 

Loan modifications that leave the payment unchanged or higher “in better times were more sustainable,” Mr. Dugan said. “In this climate, leaving mortgage payments unchanged or increasing them is resulting in too high of a risk of re-default.”

 

Modifications can result in higher monthly payments because, by the time loans are worked out, borrowers often are behind on their payments. Lenders frequently have been adding these past-due amounts, which can include principal, interest, taxes and insurance, driving monthly payments higher.

 

The government is pressuring lenders to step up their efforts to modify loans and reduce borrowers’ payments in response to pressure to reduce foreclosures.

 

Still, roughly one in four borrowers saw their payments increase after their loan was modified.

 

 

3) Myth: Lenders and servicers are doing everything they can to assist struggling homeowners.

 

 

According to President Obama, “Right now, when families seek to modify a loan, they often find themselves navigating a maze of rules and regulations but rarely finding answers. Some lenders are willing to renegotiate; many aren’t. Your ability to restructure your loan depends on where you live, the company that owns or manages your loan, or even the agent who happens to answer the phone on the day you call.

 

Lenders do not have enough man power to help all the wounded homeowners suffering in their mortgage contracts. Tens of thousands of employees have been laid off and the lenders simply do not have the man power to assist all the homeowners that are contacting the lenders on their own competing for the lenders assistance.

 

 

The reality is that many of these homeowners that are facing foreclosure or that are no longer able to refinance may be victims of predatory lending and or mortgage fraud due to the banks loose lending guidelines over the past 5 years. Many homeowners that received a loan easily during the last 5 years are finding it nearly impossible to refinance today.

 

 

4) Homeowners may need legal help and a “true” advocate that will look at these loans and tell the truth.

 

Homeowner’s may want to have their loans examined by “independent” third parties. This independent organization should act as a non-biased “buffer” between the lender and the homeowner. This organization’s purpose should be to identify unlawful and predatory mortgages. They then should properly advise the borrower on what they can do to remedy their situation.

 

By working with an experienced team of attorneys, negotiators and loss mitigation experts homeowners can exponentially increase their chances for a successful loan modification and more importantly a payment and or principle balance reduction.

 

By going to the lender without assistance or representation it is like going to the IRS and allowing them to do your taxes for you!!!

If you and your family have considered a loan modification read the options available below:

 

 

5) Latest Options Available to Homeowners

 

a)    Loan Modification

b)    Forensic Loan Review

c)    FHA Short-Pay Refinance

d)    Who Qualifies

 

a) Loan Modification

 

Who qualifies:
Any homeowner can qualify for loss mitigation and loan modification as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course.

Misconception:

Loss mitigation and mortgage relief is reserved for people that cannot afford their home or their mortgage payment. This is untrue. Anyone can qualify for loss mitigation and mortgage relief. The factors that create a solid case for loan modification vary from lender to lender and are changing daily. So whether you have a fixed rate or an adjustable, whether you have a large amount of equity or you are upside down, whether you just received a raise or you lost your job, whether you have never missed a payment or you are considering foreclosure, whether you have large reserves or you are living off of credit, whether you are trying to modify your primary residence or your investment property, whether you own 1 home or 18, if it is determined that your specific situation and lender guidelines qualify you for loan modification then modifying your loan is not only possible it is guaranteed.

 

 

 

b) What is a Forensic Loan Review?

 

A Forensic Loan Review is an important tool when forcing lenders to negotiate with us for a loan modification, an FHA Short-Pay Refinance or a Short Sale (especially if we have not been late on our mortgage).

 

Many lenders are trying to avoid negotiating with homeowners that are either current on their mortgages or that are only slightly delinquent. Lenders are first working with people that are just about to foreclose (and will cause the greatest and most immediate cost to the lender).

 

It is becoming apparent that a Forensic Loan Review is a necessary tool in getting the lender to negotiate with us for a Loan Modification, an FHA Short Refinance or a Short Sale (all of which require calculated negotiations with the lender) whether a client is late on their mortgage or not.

 

Even a minor $30 miscalculation on the lender’s part could be an actionable offense, and the threat of a lawsuit is often enough to persuade the lender to deal with you in trying to find a way to help you work through your financial difficulties.

 

In a forensic loan review, a legal pathologist scours your loan documents looking for errors in, among other things, the truth in-lending (TIL) statement the lender provided shortly after you applied for your mortgage and the lender’s annual-percentage-rate (APR) calculation so you could compare loan costs.

If the TIL statement doesn’t match up with the HUD-1 closing-cost sheet you received at closing, if the APR is off by just a hair, you might have cause for legal action against the lender.

 

Typically, forensic loan audits are ordered by mortgage investors to determine what kind of legal liability confronts them in the pools of loans they already own or are considering buying. As a so-called “business-to-business service,” they are not generally available to individual borrowers.

 

That is until recently.

 

American Mortgage Relief Services is now offering comprehensive loan document reviews to homeowners as part of its service to help homeowners get the attention of their lenders and ultimately achieve powerful loan modification results.

 

If an error is found, it can force the lender to move you up to the front of the long, long line of borrowers who are looking for loan modification.

In some cases, if people were simply overcharged by $30 on the final HUD-1, or if the APR was higher by just .125 percent than was originally disclosed, this may give the lawyers leverage when negotiating with the lender to grant a beneficial loan modification.

 

This is an excellent option for homeowners that have Negative Amortization or Pick a Pay loans.

The TIL (truth in lending) statement for Neg Am loans are notorious for having mistakes.

Because Neg Am loans have 2 interest rates (the minimum payment rate and the fully amortized rate) the APR is very difficult to calculate and there is bound to be mistakes on the paperwork.
Intentional or not these mistakes give negotiators the leverage to force lenders to modify the loan.

 

 

 

c) What is a Short-Pay Refinance? (Principle Reduction)

 

Another powerful option for homeowners that have not been late on their mortgage but are interested in a loan modification or principle reduction is the new Short-Pay Refinance.

 

Many homeowners still have good income, and have not been late on their mortgage or credit cards but cannot refinance because the value of their home has dropped in recent months.

For these individuals there is a powerful option that went into effect in October called the Short-Pay Refinance.

 

Where as a “Short Sale” has become a well known solution for borrowers to avoid foreclosure by selling their home for less than what is owed, the “Short Payoff Refinance” (Short-Pay Refi) is becoming a popular tool for borrowers to retain their home.

 

This process is similar to a short sale but, instead of the property being sold, it is refinanced with a new FHA backed lender.  A Short-Pay Refi is unique in that it allows the borrowers to keep their home, lower their payments and eliminate the upside down equity in their homes while reducing their principal.

 

The transaction itself is a basically a three part process.

 

1.     First we need to establish the actual current conservative value of the home with an appraiser.

 

2.     Next, we document and underwrite the homeowner’s income for the new appraised value and issue an approval.

 

3.     Now, armed with that approval, we can enter into equity re-negotiations with the bank/loan servicer of the homeowner’s loan to negotiate a principle reduction on the current mortgage.

 

Once the bank/loan servicer accepts the offer presented, we can complete the new loan transaction and principle reduction.

 

In areas where values have dropped 20% or more, this could mean a substantial reduction in principle and loss to the lender.

It is still a win win for the homeowner and the lender (who gets to remove the bad loan from their books and move forward making new loans.

 

Who should get a Short-Pay Refi?

 

For those borrowers that still have decent credit, ficos, income and no mortgage lates but through either upcoming changes to their interest rate (making it no longer affordable) or to a decline in the value of their home (owing more than it’s worth), a Short-Pay Refi is the perfect solution.

Through the Short Refi, the borrower will qualify to refinance into a low fixed rate loan at the highest LTV’s (loan to value ratio) possible.

This allows the borrowers to put the brakes on before everything gets away from them and spins out of control.

 

Why would the bank/loan servicer agree to a Short-Pay Refi and not just foreclose on the property?

 

Simply put, foreclosing on a property requires large amounts of legal fees and then the home is typically sold at a substantial discount off of the fair market value.  The Short-Pay Refi allows the loan servicer to avoid the majority of the legal fees and let’s the new lender make its largest loan based on the fair market value.  When a Loan Modification can’t solve the problem as many loan servicers are not lenders, a Short-Pay Refi becomes a very powerful alternative.

 

To sum it up.

 

In essence, with a Short Payoff Refinance, the bank/loan servicers are happy because the loan is off their books and the homeowners are happy because they get a fresh start while still staying in their home with a lower mortgage payment and a lower mortgage balance.

 

Loan modifications, short refinances and short sales all require that we negotiate with the lender.

 

The lender will not grant a Short Refinance a Short Sale or a Loan Modification unless you negotiate and present your case without a shadow of a doubt. As with any negotiations the final outcome and results are determined by knowledge and experience of the negotiator. One important factor stands alone in determining the best results and that is Professional Negotiation Assistance.

 

Even for people that believe they may qualify for the Presidents new Homeowner Affordability Plan, having professional assistance may be more important than ever.

With the Presidents new Homeowner Affordability Plan homeowners may only get one shot at getting a loan modification. Once you submit your financials you may not get another chance, making it more important than ever to have a professional on your side (just as you would with a divorce, bankruptcy, arrest or injury).

 

 

There is a complex set of procedures, negotiations, and documentation that needs to be completed. In most states this process needs to be performed by an attorney or properly licensed counselor.

The key to borrower success is navigating the red tape and unfamiliar internal processes at banks and lenders and knowing when to be aggressive and when to take the offer and this is why working with professional loan modification experts is extremely important.

Even more frustrating and challenging is the fact that the lender that services our loans may not be the ultimate investor that owns the note. The loan modification guidelines for the company that services your loan may be dramatically different from the company that owns the note. In addition to this the loan modification guidelines are changing monthly and vary from bank to bank. Countrywide has changed their guidelines on late mortgage payments 3 times in as many months. Countrywide even told one of my clients that what may work with Countrywide last month won’t always work this month. This is exactly why homeowners need professional assistance to obtain the best results possible.

The window for homeowners to qualify is very small and it is getting smaller due to stricter guidelines and audits as a result of the President’s Plan. Many lenders require homeowners to have monthly positive income to qualify while others require negative cash flow and it is different depending on the lender.

 

So if a homeowner doesn’t know this information (because lenders do not put out guidelines for public use) it can be difficult for homeowners to know how to approach the lender with the proper numbers.

 

Homeowners could disqualify themselves immediately by saying the wrong thing and they may only get one shot.

 

The next step for anyone considering loan modification is first finding out if they qualify and second seeking advice and assistance in obtaining the best results for a successful loan modification.

 

 

d) Who Qualifies?

 

The next step for any homeowner interested to see if they qualify for one of these programs is to simply fill out the Free Loan Evaluation Form (attached in this email) and send it back to me for our network of attorneys to review.

 

This Free Loan Evaluation Form will allow us to determine if your financial profile fits within the eligibility requirements for a successful loan modification or Short Refinance and if you qualify under the Presidents new Homeowner Affordability Plan.

 

You will receive an approval within 24 – 48 hours after completing this Free Loan Evaluation Form.

 

  

If you have any questions at all about your current mortgage, loan modification, short refinances, short sales, credit scores or new home purchases, please give me a call or email me anytime.

 

 

I hope that this information was helpful and I am looking forward to speaking with you soon and helping you in any way I can.

Homeowner Affordability and Stability Plan

Obama signs The Affordability and Stability Plan

 

The Affordability and Stability Plan has 2 Parts:

1.    Part 1 is the Refinance Option

2.    Part 2 is the Loan Modification Option

 

1) The Refinance Part of the plan:

To be eligible for the refinance option of this plan, the borrower must:

·         Be on time with their mortgage payments

·         The LTV (loan to value ratio) of the property can can not exceed 105%

·         At the moment only loans “held or securitized by Fannie Mae and Freddie Mac” qualify for the refinance option.

 If these qualifications are not met, the homeowner can only qualify for the loan modification option.

2) The Loan Modification Option:

To participate in the loan modification plan, borrowers must:

·     Have obtained their mortgage before Jan. 1, 2009;

·     Have a primary mortgage of less than $729,500;

·     Must live in the property;

·     Must be able to fully document their income by providing tax returns and pay stubs;

·     Must sign a statement of financial hardship; and

·     Go for counseling if their total household debt – including auto loans, credit cards and alimony – totals more than 55% of their income.

The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers’ total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% – but the interest rate can’t go below 2%.

The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower.

If rate reductions aren’t enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan’s balance.

The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so monthly housing payments are no more than 31% of monthly gross income.

Separately, homeowners who haven’t missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.

The $75 billion loan modification plan will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.

“This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans,” said Housing Secretary Shaun Donovan.

Borrowers can now begin to see if they are eligible for assistance. Federal officials will promote the program at homeownership events nationwide.

The administration Wednesday released additional eligibility criteria and program guidelines.

The loan modification plan focuses on people who are behind in their payments or are at risk of default.

Federal officials clarified the definition of “at risk” as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.

The “Homeowner Affordability and Stability Plan” will exclude a number of American Homeowners.  

·         No non-owner occupied properties

·         No jumbo loans

·         If you don’t have a job, you don’t qualify

·         Homeowners whose loan to value is at 150% or higher

·         Homeowners who qualified with stated income on their original loan application

·         Homeowners whose loan to value is greater than 105% but their mortgage payments are below the 31% income threshold.

Here is the Problem:

Banks are not going to reach out to and let them know if they qualify!

It is up to us to find out if we qualify.

The most commonly asked questions we have been asked are below: ·            

·         Is my loan securitized by Fannie Mae or Freddie Mac?

·         Did the loan company qualify me with Stated Income? (95% of all loans over the last 5 years were stated income loans, even if you supplied all of your income, it’s likely the lender qualified you via stated income to make the process easier. Thus ruining your chance of qualifying for the new refinance plan).

·         If my property is above 105%, what are my options?

If you would like the answers to these questions, please click on the link to our Free Loan Evaluation Form below and fax it back for us to review. We will let you know if you qualify within 24 – 48 hours of receiving your completed form.  

Printable Qualification Form   

 

 

Clearing up the Misconceptions about the Presidents Homeowner Affordability Plan

We have received hundreds of emails and calls from homeowners that are worried that they don’t fit the guidelines for the Presidents new Homeowner Affordability Plan wanting to know if that means that they don’t qualify for any type of loan restructuring, refinance or modification.

 

It is important to take a quick moment to clarify that there are 4 powerful options for every single homeowner in the United States to help them get their loans under control.

The Presidents new Homeowner Affordability Plan is just the newest option available to homeowners but it is far from the only option.

To be clear, every single homeowner in the United States will have the opportunity to restructure, refinance or modify their existing loans as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course.

 

As of today there are 4 extremely powerful options available to people that do not qualify for a traditional refinance.

 

In this email I have included the most recent information on the four options.

Please take your time reviewing this information and please call or email me to go over everything in detail.

 

 

4 Options Available to Homeowners

 

Below you will find detailed information on the following options:

1.      The Presidents Homeowner Affordability Plan

2.      Loan Modification

3.      Forensic Loan Review

4.     New Short-Pay Refinance

5.      Who Qualifies

 

      1) What really is the Homeowner Affordability Plan and who will it help?

 

1)     It appears that this will only help people with Primary Residences (meaning the home they live in).

2)     Homeowners that have multiple properties may have to liquidate them in order to qualify.

3)     The Plan will only help people with Conforming Loans secured by Fannie Mae or Freddie Mac.

4)     It also appears that it will only help people that owe no more than 105% of the current value of their home. Anyone that owes more than 105% of the current appraised value of their home will be out of luck.

5)     Also homeowners with second mortgages or Home Equity Line may be excluded. This is very problematic in states like Arizona, Nevada, Florida and California where home values sky rocketed and many homeowners needed two loans to buy a home or were given easy access to second mortgages when values increased. These people may not qualify.

6)     Finally with the Presidents new Homeowner Affordability Plan you may only get one shot at getting your loan restructured or modified. The President is enacting major oversight and checks and balances to make sure that the bailout money is being spent wisely. As a result of this each modification and applicants financials will be reviewed rigorously. Homeowners may need professional negotiation assistance even more now than before as they might only get one shot at after the Plan goes into effect, rather than the way it is now where we are able to change things if necessary as we go, even if the homeowner already submitted information to the lender prior to working with a professional negotiator. Each homeowner application is now going to be audited even more tightly and documented to the government to paper trail where the bailout is going to be going and helping for homeowners. There truly may only be one shot at a successful loan mod after the plan goes into effect.   

7)     If you are denied the first time (because you don’t know how to structure your financials) you may never get another chance.

 

Conclusion:

The Homeowner Affordability Plan is a fantastic step in the right direction. It is a way to help force the banks to start helping homeowners and start using the money the government has given them. But as the first step it is really only designed to help people with relatively low loan amounts on loan amounts that do not exceed 105% of the current value of their homes, it is only for primary residences and for people that do not have other properties or second loans on their home. This plan is a great step in the right direction. At this point trying to work with your lender without professional negotiation assistance is very difficult. Trying to navigate the maze of rules and regulations is meant to be intimidating by the banks. The President’s Plan will help force the banks to start working with homeowners that fit these relatively conservative guidelines but it is a start. For everyone else (those with larger loan amounts, second homes, investment properties, self employed, those that have second or third mortgages and home equity lines, and for those that owe much more than 105% of the value of their home) luckily there are other very powerful options aside from the President’s new plan.

 

 

2) Loan Modification 

Who qualifies:
Any homeowner can qualify for loss mitigation and loan modification as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course.Misconception:

 

Loss mitigation and mortgage relief is reserved for people that cannot afford their home or their mortgage payment. This is untrue. Anyone can qualify for loss mitigation and mortgage relief. The factors that create a solid case for loan modification vary from lender to lender and are changing daily. So whether you have a fixed rate or an adjustable, whether you have a large amount of equity or you are upside down, whether you just received a raise or you lost your job, whether you have never missed a payment or you are considering foreclosure, whether you have large reserves or you are living off of credit, whether you are trying to modify your primary residence or your investment property, whether you own 1 home or 18, if it is determined that your specific situation and lender guidelines qualify you for loan modification then modifying your loan is not only possible it is guaranteed.

 

 

3) What is a Forensic Loan Review?

 

A Forensic Loan Review is an important tool when forcing lenders to negotiate with us for a loan modification, an Short-Pay Refinance or a Short Sale (especially if we have not been late on our mortgage).

 

Many lenders are trying to avoid negotiating with homeowners that are either current on their mortgages or that are only slightly delinquent. Lenders are first working with people that are just about to foreclose (and will cause the greatest and most immediate cost to the lender).

 

It is becoming apparent that a Forensic Loan Review is a necessary tool in getting the lender to negotiate with us for a Loan Modification, an Short Refinance or a Short Sale (all of which require calculated negotiations with the lender) whether a client is late on their mortgage or not.

 

Even a minor $30 miscalculation on the lender’s part could be an actionable offense, and the threat of a lawsuit is often enough to persuade the lender to deal with you in trying to find a way to help you work through your financial difficulties.

 

In a forensic loan review, a legal pathologist scours your loan documents looking for errors in, among other things, the truth in-lending (TIL) statement the lender provided shortly after you applied for your mortgage and the lender’s annual-percentage-rate (APR) calculation so you could compare loan costs.

If the TIL statement doesn’t match up with the HUD-1 closing-cost sheet you received at closing, if the APR is off by just a hair, you might have cause for legal action against the lender.

 

Typically, forensic loan audits are ordered by mortgage investors to determine what kind of legal liability confronts them in the pools of loans they already own or are considering buying. As a so-called “business-to-business service,” they are not generally available to individual borrowers.

 

That is until recently.

 

American Mortgage Relief Services is now offering comprehensive loan document reviews to homeowners as part of its service to help homeowners get the attention of their lenders and ultimately achieve powerful loan modification results.

 

If an error is found, it can force the lender to move you up to the front of the long, long line of borrowers who are looking for loan modification.

In some cases, if people were simply overcharged by $30 on the final HUD-1, or if the APR was higher by just .125 percent than was originally disclosed, this may give the lawyers leverage when negotiating with the lender to grant a beneficial loan modification.

 

This is an excellent option for homeowners that have Negative Amortization or Pick a Pay loans.

The TIL (truth in lending) statement for Neg Am loans are notorious for having mistakes.

Because Neg Am loans have 2 interest rates (the minimum payment rate and the fully amortized rate) the APR is very difficult to calculate and there is bound to be mistakes on the paperwork.
Intentional or not these mistakes give negotiators the leverage to force lenders to modify the loan.

 

 

4) What is a Short-Pay Refinance? (Principle Reduction)

 

Another powerful option for homeowners that have not been late on their mortgage but are interested in a loan modification or principle reduction is the new Short-Pay Refinance.

 

Many homeowners still have good income, and have not been late on their mortgage or credit cards but cannot refinance because the value of their home has dropped in recent months.

For these individuals there is a powerful option that went into effect in October called the Short-Pay Refinance.

  

Where as a “Short Sale” has become a well known solution for borrowers to avoid foreclosure by selling their home for less than what is owed, the “Short Payoff Refinance” (Short-Pay Refi) is becoming a popular tool for borrowers to retain their home.

 

This process is similar to a short sale but, instead of the property being sold, it is refinanced with a new lender.  A Short-Pay Refi is unique in that it allows the borrowers to keep their home, lower their payments and eliminate the upside down equity in their homes while reducing their principal.  

 

The transaction itself is a basically a three part process. 

 

1.     First we need to establish the actual current conservative value of the home with an appraiser.

 

2.     Next, we document and underwrite the homeowner’s income for the new appraised value and issue an approval. 

 

3.     Now, armed with that approval, we can enter into equity re-negotiations with the bank/loan servicer of the homeowner’s loan to negotiate a principle reduction on the current mortgage. 

 

Once the bank/loan servicer accepts the offer presented, we can complete the new  loan transaction and principle reduction.

 

In areas where values have dropped 20% or more, this could mean a substantial reduction in principle and loss to the lender.

It is still a win win for the homeowner and the lender (who gets to remove the bad loan from their books and move forward making new loans.

 

Who should get a Short-Pay Refi?

 

For those borrowers that still have decent credit, ficos, income and no mortgage lates but through either upcoming changes to their interest rate (making it no longer affordable) or to a decline in the value of their home (owing more than it’s worth), a Short-Pay Refi is the perfect solution.

Through the Short Refi, the borrower will qualify to refinance into a low fixed rate loan at the highest LTV’s (loan to value ratio) possible.

This allows the borrowers to put the brakes on before everything gets away from them and spins out of control.

 

Why would the bank/loan servicer agree to a Short-Pay Refi and not just foreclose on the property? 

 

Simply put, foreclosing on a property requires large amounts of legal fees and then the home is typically sold at a substantial discount off of the fair market value.  The Short-Pay Refi allows the loan servicer to avoid the majority of the legal fees and let’s the new lender make its largest loan based on the fair market value.  When a Loan Modification can’t solve the problem as many loan servicers are not lenders, a Short-Pay Refi becomes a very powerful alternative.

 

To sum it up.

 

In essence, with a Short Payoff Refinance, the bank/loan servicers are happy because the loan is off their books and the homeowners are happy because they get a fresh start while still staying in their home with a lower mortgage payment and a lower mortgage balance.

 

It needs to be noted that Short Refinances, Short Sales as well as Loan Modifications, all require that we negotiate with the lender.

 

The lender will not grant a Loan Modification, a short refinance or a Short Sale unless we negotiate and present a convincing case to the lender that this alternative will cost the lender less than a foreclosure. As with any negotiations the final outcome and optimal results are determined by the knowledge, experience and tools at the disposal of the negotiator.

 

 

Once your file has been submitted to AMRS we will receive an eligibility approval within 24 – 48 hours.

Once your file has been approved by AMRS, we can rest assured that your situation qualifies you for modification.

And once we know we have the ability to have the loan modified we can go over your 4 loan modification options in detail.

Importance of Professional Negotiation Assistance

This is one of the most incredible times in banking and lending history. Loan Modification has always existed, yet over the last 30 years it was usually not in the banks best interest to modify a loan rather than foreclose. Only recently with the advent of 100% financing and relaxed lending guidelines have banks been put in a position that many homeowners owe more than their homes are worth.

 

For the first time ever on a nationwide scale, foreclosures will cost lenders more money than simply modifying the loans and taking a loss on the amount of interest or principle balance.

 

If we had been told 2 years ago that we could get an easy low doc loan and either buy a home with zero down or refinance and cash out to 100% of the over inflated value of our homes and in 2 years qualify for a loan modification or an short refinance and have our interest rate reduced to below the going rate and even have the principle balance of our loans reduced we would not have believed it.

But that is exactly what is happening for homeowners that qualify.

 

I do not think that by asking for a loan modification or an Short Refinance we are taking advantage of the lenders. Remember these are the same lenders that would raise the interest rates on our credit cards to 22% if we miss a payment or freeze our Home Equity Lines of Credit and Small Business Lines of Credit without warning.

 

It is my firm belief that everyone that has a mortgage in the United States should see if they qualify for a loan modification or short refinance.

Loan modifications, Short Refinances and Short Sales all require that we negotiate with the lender.

The lender will not grant a Short Refinance a Short Sale or a Loan Modification unless you negotiate and present your case without a shadow of a doubt. As with any negotiations the final outcome and results are determined by knowledge and experience of the negotiator. One important factor stands alone in determining the best results and that is Professional Negotiation Assistance.

 

Even for people that believe they may qualify for the Presidents new Homeowner Affordability Plan, having professional assistance may be more important than ever.

With the Presidents new Homeowner Affordability Plan homeowners may only get one shot at getting a loan modification. Once you submit your financials you may not get another chance, making it more important than ever to have a professional on your side (just as you would with a divorce, bankruptcy, arrest or injury).

 

 

There is a complex set of procedures, negotiations, and documentation that needs to be completed. In most states this process needs to be performed by an attorney or properly licensed counselor.

The key to borrower success is navigating the red tape and unfamiliar internal processes at banks and lenders and knowing when to be aggressive and when to take the offer and this is why working with professional loan modification experts is extremely important.

Even more frustrating and challenging is the fact that the lender that services our loans may not be the ultimate investor that owns the note. The loan modification guidelines for the company that services your loan may be dramatically different from the company that owns the note. In addition to this the loan modification guidelines are changing monthly and vary from bank to bank. Countrywide has changed their guidelines on late mortgage payments 3 times in as many months. Countrywide even told one of my clients that what may work with Countrywide last month won’t always work this month. This is exactly why homeowners need professional assistance to obtain the best results possible.

 

The window for homeowners to qualify is very small and it is getting smaller due to stricter guidelines and audits as a result of the President’s Plan. Many lenders require homeowners to have monthly positive income to qualify while others require negative cash flow and it is different depending on the lender.

So if a homeowner doesn’t know this information (because lenders do not put out guidelines for public use) it can be difficult for homeowners to know how to approach the lender with the proper numbers.

Homeowners could disqualify themselves immediately by saying the wrong thing and they may only get one shot.

This is just like having an attorney do divorce or bankruptcy paperwork.

For many homeowners, this is their most important and probably largest investment into one thing.

It makes sense that they want someone that is skilled and understands how to handle the negotiations and do it for them so they don’t cause any mistakes and in order to insure the best results for them.

 

5) Who Qualifies?

 

The next step for any homeowner interested to see if they qualify for one of these programs is to simply fill out the Free Loan Evaluation Form (by clicking on the link below) and faxing it back to us for our network of attorneys to review.

 

Free Loan Evaluation Form

 

This Free Loan Evaluation Form will allow us to determine if your financial profile fits within the eligibility requirements for a successful Loan Modification or Short Refinance and if you qualify under the Presidents new Homeowner Affordability Plan.

 

You will receive an approval within 24 – 48 hours after completing this Free Loan Evaluation Form.

 

 

Homeowner Affordability and Stability Plan

Obama signs The Affordability and Stability Plan

 

The Affordability and Stability Plan has 2 Parts:

1.    Part 1 is the Refinance Option

2.    Part 2 is the Loan Modification Option

1) The Refinance Part of the plan:

To be eligible for the refinance option of this plan, the borrower must:

·         Be on time with their mortgage payments

·         The LTV (loan to value ratio) of the property can can not exceed 105%

·         At the moment only loans “held or securitized by Fannie Mae and Freddie Mac” qualify for the refinance option.

 If these qualifications are not met, the homeowner can only qualify for the loan modification option.

2) The Loan Modification Option:

To participate in the loan modification plan, borrowers must:

·     Have obtained their mortgage before Jan. 1, 2009;

·     Have a primary mortgage of less than $729,500;

·     Must live in the property;

·     Must be able to fully document their income by providing tax returns and pay stubs;

·     Must sign a statement of financial hardship; and

·     Go for counseling if their total household debt – including auto loans, credit cards and alimony – totals more than 55% of their income.

The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers’ total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% – but the interest rate can’t go below 2%.

The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower.

If rate reductions aren’t enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan’s balance.

The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so monthly housing payments are no more than 31% of monthly gross income.

Separately, homeowners who haven’t missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.

The $75 billion loan modification plan will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.

“This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans,” said Housing Secretary Shaun Donovan.

Borrowers can now begin to see if they are eligible for assistance. Federal officials will promote the program at homeownership events nationwide.

The administration Wednesday released additional eligibility criteria and program guidelines.

The loan modification plan focuses on people who are behind in their payments or are at risk of default.

Federal officials clarified the definition of “at risk” as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.

The “Homeowner Affordability and Stability Plan” will exclude a number of American Homeowners.  

·         No non-owner occupied properties

·         No jumbo loans

·         If you don’t have a job, you don’t qualify

·         Homeowners whose loan to value is at 150% or higher

·         Homeowners who qualified with stated income on their original loan application

·         Homeowners whose loan to value is greater than 105% but their mortgage payments are below the 31% income threshold.

Here is the Problem:

Banks are not going to reach out to and let them know if they qualify!

It is up to us to find out if we qualify.

The most commonly asked questions we have been asked are below: ·            

·         Is my loan securitized by Fannie Mae or Freddie Mac?

·         Did the loan company qualify me with Stated Income? (95% of all loans over the last 5 years were stated income loans, even if you supplied all of your income, it’s likely the lender qualified you via stated income to make the process easier. Thus ruining your chance of qualifying for the new refinance plan).

·         If my property is above 105%, what are my options?

If you would like the answers to these questions, please click on the link to our Free Loan Evaluation Form below and fax it back for us to review. We will let you know if you qualify within 24 – 48 hours of receiving your completed form.  

Printable Qualification Form   

 

 

Clearing up the Misconceptions about the Presidents Homeowner Affordability Plan

We have received hundreds of emails and calls from homeowners that are worried that they don’t fit the guidelines for the Presidents new Homeowner Affordability Plan wanting to know if that means that they don’t qualify for any type of loan restructuring, refinance or modification.

 

It is important to take a quick moment to clarify that there are 4 powerful options for every single homeowner in the United States to help them get their loans under control.

The Presidents new Homeowner Affordability Plan is just the newest option available to homeowners but it is far from the only option.

To be clear, every single homeowner in the United States will have the opportunity to restructure, refinance or modify their existing loans as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course.

 

As of today there are 4 extremely powerful options available to people that do not qualify for a traditional refinance.

 

In this email I have included the most recent information on the four options.

Please take your time reviewing this information and please call or email me to go over everything in detail.

 

 

4 Options Available to Homeowners

 

Below you will find detailed information on the following options:

1.      The Presidents Homeowner Affordability Plan

2.      Loan Modification

3.      Forensic Loan Review

4.     New Short-Pay Refinance

5.      Who Qualifies

 

      1) What really is the Homeowner Affordability Plan and who will it help?

 

1)     It appears that this will only help people with Primary Residences (meaning the home they live in).

2)     Homeowners that have multiple properties may have to liquidate them in order to qualify.

3)     The Plan will only help people with Conforming Loans secured by Fannie Mae or Freddie Mac.

4)     It also appears that it will only help people that owe no more than 105% of the current value of their home. Anyone that owes more than 105% of the current appraised value of their home will be out of luck.

5)     Also homeowners with second mortgages or Home Equity Line may be excluded. This is very problematic in states like Arizona, Nevada, Florida and California where home values sky rocketed and many homeowners needed two loans to buy a home or were given easy access to second mortgages when values increased. These people may not qualify.

6)     Finally with the Presidents new Homeowner Affordability Plan you may only get one shot at getting your loan restructured or modified. The President is enacting major oversight and checks and balances to make sure that the bailout money is being spent wisely. As a result of this each modification and applicants financials will be reviewed rigorously. Homeowners may need professional negotiation assistance even more now than before as they might only get one shot at after the Plan goes into effect, rather than the way it is now where we are able to change things if necessary as we go, even if the homeowner already submitted information to the lender prior to working with a professional negotiator. Each homeowner application is now going to be audited even more tightly and documented to the government to paper trail where the bailout is going to be going and helping for homeowners. There truly may only be one shot at a successful loan mod after the plan goes into effect.   

7)     If you are denied the first time (because you don’t know how to structure your financials) you may never get another chance.

 

Conclusion:

The Homeowner Affordability Plan is a fantastic step in the right direction. It is a way to help force the banks to start helping homeowners and start using the money the government has given them. But as the first step it is really only designed to help people with relatively low loan amounts on loan amounts that do not exceed 105% of the current value of their homes, it is only for primary residences and for people that do not have other properties or second loans on their home. This plan is a great step in the right direction. At this point trying to work with your lender without professional negotiation assistance is very difficult. Trying to navigate the maze of rules and regulations is meant to be intimidating by the banks. The President’s Plan will help force the banks to start working with homeowners that fit these relatively conservative guidelines but it is a start. For everyone else (those with larger loan amounts, second homes, investment properties, self employed, those that have second or third mortgages and home equity lines, and for those that owe much more than 105% of the value of their home) luckily there are other very powerful options aside from the President’s new plan.

 

 

2) Loan Modification 

Who qualifies:
Any homeowner can qualify for loss mitigation and loan modification as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course.

Misconception:

Loss mitigation and mortgage relief is reserved for people that cannot afford their home or their mortgage payment. This is untrue. Anyone can qualify for loss mitigation and mortgage relief. The factors that create a solid case for loan modification vary from lender to lender and are changing daily. So whether you have a fixed rate or an adjustable, whether you have a large amount of equity or you are upside down, whether you just received a raise or you lost your job, whether you have never missed a payment or you are considering foreclosure, whether you have large reserves or you are living off of credit, whether you are trying to modify your primary residence or your investment property, whether you own 1 home or 18, if it is determined that your specific situation and lender guidelines qualify you for loan modification then modifying your loan is not only possible it is guaranteed.

 

 

3) What is a Forensic Loan Review?

 

A Forensic Loan Review is an important tool when forcing lenders to negotiate with us for a loan modification, an Short-Pay Refinance or a Short Sale (especially if we have not been late on our mortgage).

 

Many lenders are trying to avoid negotiating with homeowners that are either current on their mortgages or that are only slightly delinquent. Lenders are first working with people that are just about to foreclose (and will cause the greatest and most immediate cost to the lender).

 

It is becoming apparent that a Forensic Loan Review is a necessary tool in getting the lender to negotiate with us for a Loan Modification, an Short Refinance or a Short Sale (all of which require calculated negotiations with the lender) whether a client is late on their mortgage or not.

 

Even a minor $30 miscalculation on the lender’s part could be an actionable offense, and the threat of a lawsuit is often enough to persuade the lender to deal with you in trying to find a way to help you work through your financial difficulties.

 

In a forensic loan review, a legal pathologist scours your loan documents looking for errors in, among other things, the truth in-lending (TIL) statement the lender provided shortly after you applied for your mortgage and the lender’s annual-percentage-rate (APR) calculation so you could compare loan costs.

If the TIL statement doesn’t match up with the HUD-1 closing-cost sheet you received at closing, if the APR is off by just a hair, you might have cause for legal action against the lender.

 

Typically, forensic loan audits are ordered by mortgage investors to determine what kind of legal liability confronts them in the pools of loans they already own or are considering buying. As a so-called “business-to-business service,” they are not generally available to individual borrowers.

 

That is until recently.

 

American Mortgage Relief Services is now offering comprehensive loan document reviews to homeowners as part of its service to help homeowners get the attention of their lenders and ultimately achieve powerful loan modification results.

 

If an error is found, it can force the lender to move you up to the front of the long, long line of borrowers who are looking for loan modification.

In some cases, if people were simply overcharged by $30 on the final HUD-1, or if the APR was higher by just .125 percent than was originally disclosed, this may give the lawyers leverage when negotiating with the lender to grant a beneficial loan modification.

 

This is an excellent option for homeowners that have Negative Amortization or Pick a Pay loans.

The TIL (truth in lending) statement for Neg Am loans are notorious for having mistakes.

Because Neg Am loans have 2 interest rates (the minimum payment rate and the fully amortized rate) the APR is very difficult to calculate and there is bound to be mistakes on the paperwork.
Intentional or not these mistakes give negotiators the leverage to force lenders to modify the loan.

 

 

4) What is a Short-Pay Refinance? (Principle Reduction)

 

Another powerful option for homeowners that have not been late on their mortgage but are interested in a loan modification or principle reduction is the new Short-Pay Refinance.

 

Many homeowners still have good income, and have not been late on their mortgage or credit cards but cannot refinance because the value of their home has dropped in recent months.

For these individuals there is a powerful option that went into effect in October called the Short-Pay Refinance.

  

Where as a “Short Sale” has become a well known solution for borrowers to avoid foreclosure by selling their home for less than what is owed, the “Short Payoff Refinance” (Short-Pay Refi) is becoming a popular tool for borrowers to retain their home.

 

This process is similar to a short sale but, instead of the property being sold, it is refinanced with a new lender.  A Short-Pay Refi is unique in that it allows the borrowers to keep their home, lower their payments and eliminate the upside down equity in their homes while reducing their principal.  

 

The transaction itself is a basically a three part process. 

 

1.     First we need to establish the actual current conservative value of the home with an appraiser.

 

2.     Next, we document and underwrite the homeowner’s income for the new appraised value and issue an approval. 

 

3.     Now, armed with that approval, we can enter into equity re-negotiations with the bank/loan servicer of the homeowner’s loan to negotiate a principle reduction on the current mortgage. 

 

Once the bank/loan servicer accepts the offer presented, we can complete the new  loan transaction and principle reduction.

 

In areas where values have dropped 20% or more, this could mean a substantial reduction in principle and loss to the lender.

It is still a win win for the homeowner and the lender (who gets to remove the bad loan from their books and move forward making new loans.

 

Who should get a Short-Pay Refi?

 

For those borrowers that still have decent credit, ficos, income and no mortgage lates but through either upcoming changes to their interest rate (making it no longer affordable) or to a decline in the value of their home (owing more than it’s worth), a Short-Pay Refi is the perfect solution.

Through the Short Refi, the borrower will qualify to refinance into a low fixed rate loan at the highest LTV’s (loan to value ratio) possible.

This allows the borrowers to put the brakes on before everything gets away from them and spins out of control.

 

Why would the bank/loan servicer agree to a Short-Pay Refi and not just foreclose on the property? 

 

Simply put, foreclosing on a property requires large amounts of legal fees and then the home is typically sold at a substantial discount off of the fair market value.  The Short-Pay Refi allows the loan servicer to avoid the majority of the legal fees and let’s the new lender make its largest loan based on the fair market value.  When a Loan Modification can’t solve the problem as many loan servicers are not lenders, a Short-Pay Refi becomes a very powerful alternative.

 

To sum it up.

 

In essence, with a Short Payoff Refinance, the bank/loan servicers are happy because the loan is off their books and the homeowners are happy because they get a fresh start while still staying in their home with a lower mortgage payment and a lower mortgage balance.

 

It needs to be noted that Short Refinances, Short Sales as well as Loan Modifications, all require that we negotiate with the lender.

 

The lender will not grant a Loan Modification, a short refinance or a Short Sale unless we negotiate and present a convincing case to the lender that this alternative will cost the lender less than a foreclosure. As with any negotiations the final outcome and optimal results are determined by the knowledge, experience and tools at the disposal of the negotiator.

 

 

Once your file has been submitted to AMRS we will receive an eligibility approval within 24 – 48 hours.

Once your file has been approved by AMRS, we can rest assured that your situation qualifies you for modification.

And once we know we have the ability to have the loan modified we can go over your 4 loan modification options in detail.

Importance of Professional Negotiation Assistance

This is one of the most incredible times in banking and lending history. Loan Modification has always existed, yet over the last 30 years it was usually not in the banks best interest to modify a loan rather than foreclose. Only recently with the advent of 100% financing and relaxed lending guidelines have banks been put in a position that many homeowners owe more than their homes are worth.

 

For the first time ever on a nationwide scale, foreclosures will cost lenders more money than simply modifying the loans and taking a loss on the amount of interest or principle balance.

 

If we had been told 2 years ago that we could get an easy low doc loan and either buy a home with zero down or refinance and cash out to 100% of the over inflated value of our homes and in 2 years qualify for a loan modification or an short refinance and have our interest rate reduced to below the going rate and even have the principle balance of our loans reduced we would not have believed it.

But that is exactly what is happening for homeowners that qualify.

 

I do not think that by asking for a loan modification or an Short Refinance we are taking advantage of the lenders. Remember these are the same lenders that would raise the interest rates on our credit cards to 22% if we miss a payment or freeze our Home Equity Lines of Credit and Small Business Lines of Credit without warning.

 

It is my firm belief that everyone that has a mortgage in the United States should see if they qualify for a loan modification or short refinance.

Loan modifications, Short Refinances and Short Sales all require that we negotiate with the lender.

The lender will not grant a Short Refinance a Short Sale or a Loan Modification unless you negotiate and present your case without a shadow of a doubt. As with any negotiations the final outcome and results are determined by knowledge and experience of the negotiator. One important factor stands alone in determining the best results and that is Professional Negotiation Assistance.

 

Even for people that believe they may qualify for the Presidents new Homeowner Affordability Plan, having professional assistance may be more important than ever.

With the Presidents new Homeowner Affordability Plan homeowners may only get one shot at getting a loan modification. Once you submit your financials you may not get another chance, making it more important than ever to have a professional on your side (just as you would with a divorce, bankruptcy, arrest or injury).

 

 

There is a complex set of procedures, negotiations, and documentation that needs to be completed. In most states this process needs to be performed by an attorney or properly licensed counselor.

The key to borrower success is navigating the red tape and unfamiliar internal processes at banks and lenders and knowing when to be aggressive and when to take the offer and this is why working with professional loan modification experts is extremely important.

Even more frustrating and challenging is the fact that the lender that services our loans may not be the ultimate investor that owns the note. The loan modification guidelines for the company that services your loan may be dramatically different from the company that owns the note. In addition to this the loan modification guidelines are changing monthly and vary from bank to bank. Countrywide has changed their guidelines on late mortgage payments 3 times in as many months. Countrywide even told one of my clients that what may work with Countrywide last month won’t always work this month. This is exactly why homeowners need professional assistance to obtain the best results possible.

 

The window for homeowners to qualify is very small and it is getting smaller due to stricter guidelines and audits as a result of the President’s Plan. Many lenders require homeowners to have monthly positive income to qualify while others require negative cash flow and it is different depending on the lender.

So if a homeowner doesn’t know this information (because lenders do not put out guidelines for public use) it can be difficult for homeowners to know how to approach the lender with the proper numbers.

Homeowners could disqualify themselves immediately by saying the wrong thing and they may only get one shot.

This is just like having an attorney do divorce or bankruptcy paperwork.

For many homeowners, this is their most important and probably largest investment into one thing.

It makes sense that they want someone that is skilled and understands how to handle the negotiations and do it for them so they don’t cause any mistakes and in order to insure the best results for them.

 

5) Who Qualifies?

 

The next step for any homeowner interested to see if they qualify for one of these programs is to simply fill out the Free Loan Evaluation Form (by clicking on the link below) and faxing it back to us for our network of attorneys to review.

 

Free Loan Evaluation Form

 

This Free Loan Evaluation Form will allow us to determine if your financial profile fits within the eligibility requirements for a successful Loan Modification or Short Refinance and if you qualify under the Presidents new Homeowner Affordability Plan.

 

You will receive an approval within 24 – 48 hours after completing this Free Loan Evaluation Form.

 

 

Mortgage News Update

Sunday night the news magazine 60 Minutes had 2 very good segments covering the Bank Rescue Plan along with the second wave of mortgage defaults that is predicted.

 

In addition to this The Federal Reserve today cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent

 

I wanted to take a moment and give the latest update on the bank rescue plan, the predicted mortgage defaults and how these will affect mortgage rates and loan modification efforts.

 

 

Mortgage News Update

 

In this email I have included information on the following:

 

1) Predicting the trouble to come

2) 60 minutes investigates next wave of mortgage defaults

3) What are Alt-A (stated income) Loans?

 

4) 2004 Alan Greenspan suggested homeowners should consider taking out Adjustable Rate Mortgages (ARMs)   

5) Fed lowers key rate another .25

6) Barney Frank disappointed with treasury secretary Paulson

7) The best way to clean up predicted wave of defaults

 

8 ) Free Loan Evaluation Form

 

 

 

1) Predicting the trouble to come

 

A little over 12 months ago I was interviewed by a very large hedge fund that was interested in buying a large bundle of “distressed debt” from Countrywide’s (as an investment).

 

Countrywide was willing to sell this bundle of mortgages for pennies on the dollar and the hedge fund managers called to interview me to hear if as a manager of a mortgage bank I thought there were any reasons why buying this “distressed debt” from Countrywide could be a bad idea.

 

I know it is hard to believe in light of what has happened in the last 12 months, but you have to remember that this was almost a year before BofA stepped in and took over Countrywide.

 

From the questions they asked it appeared that they were not interested in my predictions of future problems if guidelines continued to tighten and stated income (alt a) loans were no longer available.

I told them that if this happened the devastation and foreclosures that would follow would make the subprime problem look like a joke. 

From the questions they were asking me it appeared that they were only focused on any immediate problems that could arise with this bundle of loans from fraud or forged signatures from mortgage lenders. That is all they kept coming back to.

I told them that those types of problems would be far and very few between.

I told them that the real problem would come if Stated Income otherwise known as ALT A loans disappeared.

I told them that subprime was a very small problem compared to what would happen if the ALT – A and Stated Income loans disappeared and were no longer available. Subprime loans were loans given to the least credit worthy individuals and usually involved little to no down payments (meaning that subprime borrowers had very little invested in the homes they were purchasing or refinancing).

This was a very small portion of the public. My thoughts were that the subprime loans were made over a relatively short period of time in banking history and (even though it would be painful) the subsequent collapse and clean up would be just as quick.

What I told them to watch out for and to be very worried about before buying any distressed debt from Countrywide was what would happen if the trends that were occurring 12 months ago continued and Stated Income and ALT A loans disappeared and were no longer available.

I asked the managers of the billion dollar hedge fund to imagine what would happen if millions of middle to high income families (including doctors, lawyers and self employed individuals or investors with multiple properties) who were once able to get solid loans based on compensating factors such as Credit Score, Assets, and Equity and were able to State their income (to offset tax write offs or high debt to income ratio due to owning a business or multiple properties) were eventually told that they no longer qualified for a loan (just as the 3 – 7 year loans that most Americans chose were going to become adjustable).

This I told the hedge fund managers would be the worst case scenario and would be something to really be worried about.

Unlike subprime borrowers who would just walk away from their homes that they had very little invested in, ALT A and Stated Income Borrowers would not walk away so easily. They would have the education, resources, money, time and emotions invested in their properties to hire attorneys and cause major problems for anyone interested in buying these loan bundles (if they were told they no longer qualify for a loan just as their current loans were going adjustable). At the time (a little over 12 months ago) it was still possible to get a Stated Income Loan but the writing was on the walls that it was disappearing. Only Countrywide and Wachovia were allowing Stated Income at the time and it appeared to me that it would only be a matter of time before both of them discontinued allowing stated income as well.

The managers of the hedge fund (although polite) did not seem too impressed or interested in my prediction and were focused mainly on fraud or other immediate reasons that would cause problems by buying this bundle of “distressed debt” from Countrywide. I can only assume that the reward from buying these bundles of what would later be termed “bad mortgages” was too juicy to resist. I never heard whether they went ahead and purchased the distressed debt or not but I hope that they took my advice and did not. 

 

 

 

2) 60 minutes investigates next wave of mortgage defaults

 

On Sunday night, 60 minutes announced that a second wave of mortgage defaults is predicted that will rival the subprime defaults with another trillion dollars in defaults from (Alt A and Option Arm mortgages) that are set to recast in the next 6 – 36 months.

 

http://www.cbsnews.com/video/watch/?id=4668112n

 

According to experts, subprime was just the tip of the iceberg. Alt-A (also known as Stated Income Loans) and Option Arm Loans could have a much more dramatic effect on defaults, foreclosures and declining home values.

 

According to Whitney Tillson, an investment fund manager, we had the greatest asset bubble in history and now that bubble is bursting and we are now only about half way through the unwinding and bursting of the bubble.

 

There is still a lot of pain to come in terms of write downs and losses that have yet to be recognized.

 

Although Subprime loans are defaulting, the trouble now is with Alt-A and Option Arm mortgages. These low payment loans with 3 – 10 year fixed rates are beginning to recast, causing the payment to go up and homeowners to default.

 

Those defaults are leading to foreclosures, homes to be auctioned and home values to continue to decline.

 

There appears to be a very predictable time bomb effect going on here.

According to Tillson you can look back at the loans that were written in 2005 and 2007.

You can look back at reset dates and current default rates and it is really very clear and predictable what’s going to happen here. 

As the Alt A and Option Arm Loans begin recasting over the next 3 years we will see a second wave of mortgage defaults.

 

There is no evidence that default rates are tapering off.

The subprime mortgages are approaching 1 trillion dollars, the ALT A loans are over 1 trillion dollars and the Option Arm mortgages account for 500 – 600 billion dollars.

 

Tillson predicts well north of 50% of these loans will default. This is based on current default rates with these loans and this is before the short term fixed rates and option arm mortgages recast.

 

 

 

 

3) What are Alt-A (stated income) Loans?

 

The traditional definition of Alt-A has been loans that have less than full documentation, otherwise known as Stated Income Loans.

What 60 minutes and Whitney Tillson did not discuss were two important things when talking about Alt A (stated income loans) and Option Arm Loans is that the problem is not that homeowners cannot afford their current mortgages in most cases, the problem is that their loans are about to recast in the next 36 months and they no longer can qualify for a loan now that banks have tightened their qualification guidelines and have gotten rid of stated income all together.

 

This is at the heart of the problem and 60 minutes did not even discuss this problem nor any ideas for a solution.

 

It must be pointed out that banks made stated income loans based on compensating factors such as high credit scores, good assets and equity in the home. Stated Income loans were originally created by the banks to help self employed individuals with good net income, high credit scores and assets qualify for a loan even though (after tax write offs) their adjusted income on their tax returns (line 43) was below what was necessary to qualify. These were well qualified borrowers and the banks knew it. So they created Stated Income Loans to help these well qualified borrowers obtain loans.

It also needs to be pointed out that Stated Income loans were easier for borrowers but they were also easier for lenders (especially amongst the frenzy and competition during the housing boom).

Stated income spread from self employed individuals to include Stated W2 and Stated Retired Individuals which was more risky and eventually led to what are called Liar Loans now (Stated Income Stated Assets).

It also needs to be pointed out that the banks created Stated Income Loans and without them the housing boom would never have been possible.

 

In the end however, it is not the fact that banks allowed Stated Income that is the problem. The problem is that they are no longer offering them any longer and many homeowners choose short term fixed rate or adjustable mortgages to maximize monthly savings and now their loans are going to adjust and they can no longer refinance.

 

 

 

 

4) 2004 Alan Greenspan suggested homeowners should consider taking out Adjustable Rate Mortgages (ARMs)   

 

In a speech in February 2004, Alan Greenspan suggested that more homeowners should consider taking out Adjustable Rate Mortgages (ARMs) where the interest rate adjusts itself to the current interest in the market.

 

Alan Greenspan would never have made this recommendation had he been able to predict that many homeowners choosing short term fixed rate loans or adjustable rate mortgages would not be able to qualify to refinance in the future. Had he known this, I have no doubt he would have strongly recommended that homeowners do whatever it took, including paying points to obtain the lowest fixed rate possible (just in case) a time were to come when the banks guidelines would tighten and many homeowners would no longer qualify to refinance.

It is believed that the average American refinances their home on average every 3 – 4 years either to lower their interest rate, to pull cash out for home improvements, invest, pay for college or to consolidate debt.

 

Over the last several years took advantage of this knowledge, and choose money saving shorter term fixed rate and adjustable mortgages, just as Alan Greenspan suggested.

The problem today is that many homeowners with these types of loans are now being told that they no longer qualify to refinance and if their payments increase they may have no choice but to walk away from their homes.

 

For many homeowners with loans that are about to recast from interest only to principle and interest may see their payments jump dramatically.

And no matter how much the fed lowers interest rates; they may not be able to afford their mortgages if they cannot qualify to refinance their current loans.

 

 

 

 

5) Fed lowers key rate another .25

 

The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent.

 

The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy–which has been mired in a recession since December of last year–that the prospect of stoking inflation.

 

This is great news for anyone that is considering purchasing a new home, or for anyone that qualifies to refinance, but what about homeowners that are trying to refinance their current mortgages and no longer qualify. How will this help them?

 

The problem is that unless the banks start lending money to homeowners in need, no matter how low the rates are it may not help them.

 

 

6) Barney Frank disappointed with treasury secretary Paulson

 

Rep. Barney Frank (D.-Mass) is the Financial Services Committee Chairman and provides over the controversial government bailouts is was interviewed on 60 minutes (Sunday night) and shared that he is disappointed with Secretary of the Treasury, Henry M. Paulson.

 

http://www.cbsnews.com/video/watch/?id=4668109n

 

Barney Frank explained that Paulson is not helping homeowners, banks are not lending the money that the government gave them and that they cannot constitutionally force Paulson or the banks to do anything!

 

Barney Frank worked with Paulson to write the Rescue Plan for the banks, and pressed and prodded with Congress to get it passed.

His relationship with Paulson has soured lately because Paulson hasn’t spent any of the Rescue Money to help struggling homeowners that congress voted to help reduce foreclosures.

 

The Bill says he is supposed to, and according to Barney Frank, Paulson refuses to do so.
And there is no constitutional way that he can force Paulson to do anything.

 

Barney Frank was also asked if he thought that helping rescue homeowners that are not paying their mortgage is fair to other homeowners that are working 3 jobs to make ends meet that may not get any help.

 

He asked his interviewer if she thought that it is fair for one neighbor that has never missed a day of work in 40 years to go to work in the morning again when his neighbor receives unemployment insurance from the government when he loses his job for doing nothing.

Barney Frank answered that many things are not fair but that doesn’t mean they shouldn’t be done.

 

I want to add that any homeowner can qualify for loss mitigation and loan modification as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course. It has become apparent that homeowners that want to make sure they qualify for assistance and also to make sure they obtain the best possible loan modification or FHA short refinance results may need to obtain professional assistance and negotiation services.

 

I also firmly believe that rescuing some homeowners from foreclosure may reward “bad behavior” it is essential to slow down the drop in home values.

 

A foreclosure hurts property values for everyone in the neighborhood. By slowing down foreclosures it helps everyone.

 

And everyone should be able to qualify to have their mortgages brought under control and to have the wave of defaults, auctions and foreclosures stopped now!

 

 

 

 

7) Lower rates are good for everyone. But the best way to clean up the current wave of Stated Income and Option Arm loans is Loan Modification and or FHA Short-refinances

 

At the core of the Alt A (Stated Income Loans) and Option Arm Loans are well qualified borrowers whose only problem is the they rules of the game have changed and they find themselves unable to refinance their short term money saving loans.

 

The solution is not Lowering Interest Rates.

The solution is not “Buying Up” Bad Loans.

 

The solution is to modify all American Homeowner’s current loans to affordable long term notes, or to allow homeowners to continue to refinance under the same guidelines that allowed them to obtain their current loans in the first place.

Since the banks are not likely to loosen their qualification guidelines any time soon, it is apparent that the only real solution is through Loan Modification and FHA Short Refinances.

 

 

 

8 ) Free Loan Evaluation Form 

 

If you are interested to see if you qualify for Mortgage Relief simply click on the link below to print out  the Free Loan Evaluation Form and send it back to us to review.

http://www.quintcobb.com/Free%20Loan%20Evaluation%20Form%20QC&Assoc.pdf

PLEASE FAX COMPLETED FORM TO QUINT COBB & ASSOCIATES: (619) 512 – 4500

 

This Free Loan Evaluation Form will allow us to determine if your financial profile fits within the eligibility requirements for a successful loan modification or FHA short refinance.

You will receive an approval within 24 – 48 hours after completing this Free Loan Evaluation Form.

 

You can also go to www.quintcobb.com  for more information.

If you have any questions at all about your current mortgage, loan modification, short refinances, short sales, credit score implications or new home purchases, please call or email us anytime.

I hope that this information was helpful and we are looking forward to speaking with you soon.