Choosing A Preferred Or Approved Lender When Buying New Construction

We all see the enticing advertisements hoping to sway us in choosing a lender. What’s the difference between a “Preferred” lender and an “Approved” lender and which one gets our loan accepted quicker?

A Preferred Lender is a loan originator who has a relationship with the builder and who has processed many of their loan packages. They know the builder’s processes and will keep the builder informed of any problems.

Approved Lenders are loan originators who no doubt will have strong credentials, but they usually don’t have an extensive history with the builder. Approved lenders have been qualified to work with specific loan packages. They follow stricter criteria, while not appeasing the builder. It’s not that you’ll get incompetent or inferior service by choosing an approved lender but you’ll probably miss out on some of the incentives that are only offered to those using a preferred lender.

1. Preferred lenders help expedite the loan approval and closing process.

2. Approved lenders have been certified and accepted to approve loans for specific loan packages.

So what should you do? Go with the “Preferred” or the “Approved”? Look for a lender that has a range of loan programs with a commitment to service. And while you’re at it, look for the benefits in the deal;

• Is the lender attentive? Send a few inquisitive emails to see how long it takes for a response.

• Ask them for quick summary of the top 3 programs you may qualify for? While many lenders may quickly tell you to complete an application to see which programs you’re eligible for, the real gems will mention their “star” programs that stand out and have general criteria. For example, I’d rather a lender mention a neighborhood revitalization program that provides down payment assistance for low, mid and higher incomes than receiving the standard answer of “complete a quick application so I can evaluate your options”.

• How long will a mortgage decision take after an application is submitted?

• What is the minimum down payment requirement for each type of loan?

• How long will a mortgage commitment remain effective?

• Does the interest rate remain constant on the loan commitment?

Even when you decide upon choosing a preferred or approved lender, you should still do your homework; Study the types of lenders and their advantages and disadvantages for your situation.

Beyond the interest rates, there are closing fees and points, and occasionally commissions that you don't see. You will want to compare these for all the lenders on your list.

Compare a minimum of three or more lenders before making a decision. You'll want to compare rates, fees, and points, but you will also want to know a slew of other things. Don't be afraid to ask: Lenders know you have options, so being forthright should not be a problem.

HOA Q&A: Can a real estate agent serve on the board?

Q. I am a licensed real estate agent that lives in a community association. I have represented people who have purchased homes within the community and people who have sold their homes. I have been informed by the President of the board that I may not serve on the board because my work as an agent conflicts or may conflict with my responsibilities as a board member. The President has requested that I sign a statement acknowledging his conclusion.

What are your thoughts?

A. I have the following comments:

1. The fact that you have a real estate license and represent buyers and sellers within the community does not by itself create a conflict of interest between you and the association, buyer or seller.

2. While it is possible that a conflict could develop between you and the association, or a prospective buyer or seller of a home in your community, this is also possible with unlicensed board members.

3. Should a conflict of interest develop between any board member and the association, or a potential buyer or seller, any such conflict would not disqualify the person from serving on the board. It would simply mean that the particular board member could not vote on a matter involving the subject of the conflict.

4. The fact that a licensed board member knows that a seller is in foreclosure does not create a conflict. The fact that a seller is in foreclosure must be disclosed by an agent to a prospective buyer whether the agent is on the board or not.

5. Business that is conducted outside of executive sessions must be reflected in the association's minutes which is information routinely provided to prospective buyers. Consequently, this information is not confidential and providing it to potential buyers would not by itself create a conflict.

6. Should a seller be delinquent in paying his or her assessments, that information would be confidential and should not be disclosed to a prospective purchaser by any board member. The fact that a licensed board member has such information does not create a problem any more than an agent knowing that a seller will accept a certain price, or a buyer will pay a certain price, creates a problem. The agent is simply under a duty not to disclose such information to the other party. This is routine in the real estate business.

7. Sellers have an interest in making certain that all material facts are disclosed to a prospective buyer because failure to do so, could result in legal liability. An agent who is on the board of a community association is clearly in an excellent position to make a complete disclosure when representing a person who owns a home within that community.

8. Buyers have an interest in receiving and evaluating all material facts concerning a property that is under consideration for purchase. An agent who is on the board of a community association is in an excellent position to make a complete disclosure of all material facts regarding a home within that community.

9. During many years of practicing law as a homeowner association and real estate attorney, I have had the opportunity to observe and deal with many board members. While each board member is an individual with different skills, attributes, and attitudes, it is my opinion that real estate agents generally make excellent board members. Real estate agents tend to be professional in dealing with association business and the knowledge gained in preparing for the licensing exam has great value.

Article written by Michael T. Chulak, the founding partner of Michael T. Chulak & Associates, A Law Corporation. Questions can be sent by e-mail to MChulak@MTCLaw.com. Answers are general in nature. An attorney should always be consulted when legal advice is needed.

Possible Third Extension Of Tax Credit

The original homebuyer tax credit was so successful for first-time homebuyers that congress is thinking about again.

If approved, the previous credit of $8,000 for first time homebuyers and $6,500 for current home owners purchasing a new primary residence would be extended for one year. According to the IRS 479,622 homebuyers claimed the credit in 2009 and this third extension would be a big boost to the housing market.

While bills are introduced all the time and it’s no telling whether the president will sign this one, if it is approved can you imagine what it will mean to potential new homebuyers?

Right now, you can pretty much buy a home for 30 to 40 percent less than what you would have paid 5 years ago; in addition, mortgage interest rates are at their lowest making for an unbelievable combination.

Top that off with another reinstated homebuyer tax credit and you can move into the home of your dreams without much capital at all.

While many potential homebuyers are looking at a bleak picture of what the housing market looks like now, many others see the potential value of buying a new home now – instant equity.

It’s predicted that the housing market will begin to recover faster towards the fall of this year which translates into higher prices, higher mortgage interest rates and higher property values. New homebuyers are looking at instant equity, just by purchasing homes right now. The longer you wait the less equity you instantly accumulate.

With today’s depressing economy, you can pretty much get more than what you need and almost all of what you want; price reductions, improvements, and closing costs and some of the features of buying a home now. Sellers want contracts so they can move on with their lives.

It’s in every new homebuyer’s interest to start looking for a new home because if this third extension is approved it will be competition to get the best of homes with all the incentives included.

Strategic Downsizing To Cut Costs

You’ve done everything right; you’re credit is strong and stable, yet you still have problems securing a mortgage. What will it take?

Ripples from the national crisis are affecting all borrowers nationwide as they try to secure new mortgages. And while those credit-worthy borrowers would think they have nothing to worry about when it comes to securing a loan that just isn’t the fact anymore.

Would-be borrowers these days may have to set aside a little more for a down payment, have a slightly higher credit rating than the perfect rating they thought they already had, and plan on a lower debt-to-income ratio than they would have a couple of years ago.

Changes to guidelines are being imposed on lenders and their customers by mortgage insurers and the secondary mortgage market — the big banks or federal institutions that buy your mortgage from smaller banks or credit unions.

These days’ mortgage insurers have stricter guidelines than lenders.

One of the biggest losers in the banking meltdown was mortgage insurance companies; now they won't insure loans if they don't meet stricter qualifications. And without insurance, a mortgage becomes too risky and unsalable to investors, which mean lenders probably won’t be interested in making the loan in the first place.

Mortgage insurance guidelines are frequently tougher on loans that come through mortgage brokers than they are for loans that come in through direct lenders like banks yet mortgage brokers can be a great tool for finding the best deal for your loan.

Even for people considered good credit risks are having trouble securing a mortgage loan.

Sure, FHA guidelines say the qualifying credit score is 640 yet that has been really difficult to get approved. And while there may be exceptions to the rule, typically your score must be closer to 700 in order to get underwriters to give the borrower more latitude.

Despite the economy and credit tightening, there are no shortages of potential homebuyers looking to get loans but there is a huge shortage of loan approvals.

Even when an insurer's guidelines theoretically allow a loan to be approved on the premise of your credit-worthiness, lenders nationwide report that getting an actual approval has been nearly impossible in troubled states that have high occurrences of economic distress.

What Should You Do?

Jump through hoops, continuously explain and submit paperwork and in the end you’ll probably work directly with the big banks since mortgage insurers are more apt to be lenient with “bigger” than “smaller”.

Strategic Downsizing To Cut Costs

Everyone feels the strain of rising costs here and there. It may be groceries or it could be gas, but many of us are looking for solutions to an on-going problem. How to cut costs?

These days it becomes more of a strategy to save money. If you move to a walkable neighborhood you can cut down on gas, kids can walk to neighborhood schools, find entertainment at nearby parks and centers and more pep in your step means a healthier you.

You’re not just downsizing your space but you’re strategizing to move to a simpler life. You look at all the ways you can save on money just by moving to the right neighborhood. Ask yourself a few questions;

1. If you drive your kids to school or if your teenagers drive to school, wouldn’t it save money to downsize to a community where they can walk or buses will pick up?

2. What communities have shopping within walking distance? If you buy local you can save.

3. Which community could you move to that has a bus stop or train station nearby?

4. Are there banks/ATM machines in the community? Do you know how many times people must run out and drive to an ATM machine just to give money to the kids? What a waste of gas!

There's more than one way to reduce housing costs. A smaller home typically means a smaller mortgage and smaller property taxes. It also means lower utility bills and reduced maintenance costs.

The biggest problem with downsizing to new homes is that people have trouble parting with the past but you always have your memories and trinkets.

The bottom line is that costs go up and down but they will never be so low that you won’t feel pocket stings, especially when you get closer to retirement age. That’s why downsizing is strategic; you must focus on cutting your expenditures so you have more going in your pockets than going out.

Asking yourself is it Worth It?

In most cases, the answer is yes. Sizing down will almost always mean saving money. Lifestyle is perhaps your wild card in this equation, and depends entirely on your personal wants, needs and any changes you hope to introduce.

If you strategize in the choices you make it can have a profound impact on your pockets and in your life.

Loan-modification complaints bring BofA, Citibank and others to the courthouse

LOS ANGELES -- It seemed Maria Campusano's financial problems were behind her when the mortgage on her Victorian home in a Massachusetts mill town was chopped by hundreds of dollars a month.

She soon learned that her troubles had just begun.

Weeks after making her first payment under the new rate, the school district staffer began receiving past-due notices, documents showing wildly inaccurate loan balances and letters threatening foreclosure. She now fears she'll lose her home.

"How can they take away what I have worked so hard for?" Campusano said.

Campusano is one of two named plaintiffs in a proposed class-action lawsuit alleging breach of contract by Bank of America and subsidiary BAC Home Loans Servicing.

The lawsuit, filed in Los Angeles federal court because BAC is located in nearby Calabasas, is among a growing number of legal complaints accusing banks of disregarding what should be binding agreements to reduce the monthly mortgage payments of troubled borrowers.

The suits involve permanent modifications through the U.S. Treasury-administered Home Affordable Modification Program, which offers incentives to loan servicers who extend modifications, as well as so-called proprietary modifications, which banks offer independently of the government guidelines.

They represent a new wave of complaints against banks that have already weathered years of criticism for their reluctance to modify loans and for foreclosing on borrowers after offering them trial modifications.

Some have faced lawsuits alleging that the foreclosures amounted to a violation of the deal they struck with the government when they accepted funds from the $700 billion Wall Street rescue. And earlier this month, U.S. Treasury officials announced it was withholding incentives from Wells Fargo, Bank of America and JPMorgan Chase for incorrectly determining that many borrowers were ineligible for HAMP modifications, a claim that the banks denied.

Recently, though, government officials and mortgage lenders have been touting statistics showing an increase in the number of modifications being extended.

The U.S. Treasury said in its April HAMP report, the most recent, that 70 percent of the trial modifications initiated since June 1, 2010 under the program's guidelines have been made permanent, up from 42 percent for trials started before that date.

Meanwhile, the Hope Now group -- an association of large banks, mortgage servicers and others -- reported that its members had modified 1.8 million loans in 2010, up from 1.2 million modifications in 2009.

But even as troubled borrowers increasingly manage to pry modification deals from reluctant banks, they're finding that problems persist long after the ink dries on their new loan contracts.

The Connecticut Fair Housing Center looked at 655 mortgage modifications granted in recent years to clients of partner organizations in 10 different states and found that nearly a quarter were having problems with inaccurate balance statements, erroneous default notices and other issues.

Campusano's lawsuit cites remarks from an unidentified former call center worker who said staff received bonuses for collecting more than was due under the modification deals. Attorney Shennan Kavanagh declined to make the worker available, but said the worker would testify or provide a declaration if needed during trial.

However Tracey Seslen, a real estate finance professor at the University of Southern California's Marshall School of Business, said the banks are probably just overwhelmed.

"There's not the kind of manpower for the quality control that's needed to make sure these things don't happen," he said.

Whether the problems are due to clerical errors, lack of oversight or something nefarious, the impact on homeowners is severe.

Julie Lewis, a 53-year-old mother of four, modified her contract with CitiMortgage for her Staten Island, N.Y. home after getting a divorce and suffering injuries in a car wreck that kept her from working.

In October 2010, after accepting her modified payments for more than half a year, CitiMortgage told her the modification had been denied, according to documents filed as part of a federal lawsuit in New York.

Bank agents now visit her street to take pictures of her home or hang fliers on her doorknob demanding that she call to discuss purportedly late payments.

"The banks act like bullies," said Lewis.

CitiMortgage spokesman Mark Rogers said legal restrictions kept him from discussing Lewis's situation.

Also in Staten Island, Merab Abdaladze and Tamar Bibishvili are having problems getting Chase to recognize a HAMP modification that it made permanent in September 2010.

After accepting the couple's first payment under the modified plan, the bank said the modification was invalid and stopped cashing their checks, according to a motion filed with New York state court. Chase lawyers have since assured the couple's attorney the modification was valid, but the bank still returns their checks uncashed.

Chase spokesman Gary Kishner said he could not comment on pending litigation.

And in the Seattle suburb of Issaquah, Nathaniel and Emily Perrone, both 29, saw a missed payment notice appear erroneously on their account statement soon after BAC approved their permanent modification in October 2010.

BAC customer service staffers have repeatedly assured Nathaniel Perrone that the charge was a mistake, but it remains on the account eight months later, along with late fees.

Bank of America spokeswoman Shirley Norton declined to comment on the cases involving the Perrones or Campusano, who are co-defendants in the proposed class-action lawsuit.

Campusano's problems began when she sought to modify a loan she refinanced years earlier to finish repairs to her Victorian-style home in Lawrence, Mass.

The 44-year-old single mother said she wanted to reduce her housing expenses because she was about to begin repaying a graduate school loan and had recently taken in a niece and nephew after the death of her sister.

Campusano made all of her payments under the modification she was granted in April 2010, but three months later received an account statement that misidentified her mortgage as being an interest-only loan. Over the following months, she was sent bills demanding late fees for payments she never owed.

In November, when she called the bank to ask about letters she received threatening foreclosure, she was told that she was actually ahead on her payments, according to the lawsuit. But the next month, she received four separate foreclosure notices, each giving a different figure as her monthly payment amount.

"I'm a very responsible woman and I don't think it's fair to be treated this way by the bank," she said. "If we signed an agreement, how can I be going through all this?"