Question For You Mortgage Guys

[craigster59]

I have a good friend that I get together with weekly to play guitar and informed me that he is in the same bind that other people are/will be in with his mortgage.

He has an adjustable mortgage, brother co-signed and "quit claimed" the deed over to him and his girlfriend, they didn't have bad credit when they bought the house 3 years ago, just no credit.

He needs to re-fi, as his apr is going up to 9%+, a payment he soon won't be able to afford. With all the mayhem going on with the subprime lending, is there a quick path to refinancing and will his past payment history (no lates) be reflected towards him, or his brother the co-signer.

He is a professional musician so complete income verification is iffy. He would like to be able to qualify without his brothers help. Any advice I could pass along would be appreciated. Thanks, Craig

[K9Torro]

ARM = Gonna get boned

I use ARM's only on quick flip , new construction to keep my payment outlay down while the houses are on the market, once sold I simply pay off the entire ARM to convey clear title to the new owner, I would never recommend a ARM to anyone that I liked for a normal purchase,

As to your friends lack of abilty to verify income, boy that makes it tough , short of a spousal unit with good income (valid) he will be hard pressed to go it alone , hence the need for a co-signer, unless of course the loan can be secured in some other way , like another piece of property that is paid off .

Todd

[craigster59]

Thanks for the reply. Yeah, ARM's are not the way to go when you plan on staying, but I don't think he had any other choice. He kind of alluded to having been suckered into the loan.

I'm not sure what the outstanding balance is on the note, but the house is modest, so it can't be much. He's worried that the 3 years of payments aren't going to be applied to his credit history, and he'll be back at square one. I told him to try LendingTree or another online broker, but I'm not sure it's the best advice.

[Porsche-O-Phile]

He wasn't "suckered". He signed it, did he not?

Tell him to suck it up and start accepting some accountability for his actions rather than crying "victim". Show some dignity.

[craigster59]

When I say "suckered", I mean that whomever sold him the loan didn't have his best interest at heart. He's certainly responsible for signing the documents, and consequently looking for a new loan, just trying to point him in the right direction.

[the]

Originally posted by craigster59
When I say "suckered", I mean that whomever sold him the loan didn't have his best interest at heart.

now there's a shocker.

[Moneyguy1]

Mortgage counselors are like real estate agents. They do not work for the buyer. Most young buyers do not do their homework, and general knowledge about finance is sorely lacking. Highschool should include at least one course (mandatory) in money and asset management.

[craigster59]

The title of this thread is "Question For You Mortgage Guys" not "Looking for snipes from the Peanut Gallery"

We all know that "predatory lending" practices have been covered ad nauseum on television and in the newspapers. Some feel buyers get what they deserve by not being "astute" to the ways of the lending practices, but I'm not looking for legal advice to squirm out of the loan, just a way for him to refinance and move on.

(edited) Thanks for chiming in moneyguy1, I agree 100%. I research everything I buy to the nth degree whether it's a house,car or hammer.

[turbo6bar]

Tell your bud to check his credit report and score. If he hasn't built up a record of regular payments and established a credit history, he may end up having to bend over and kiss it.

Qualifying for a refi also depends on the loan to value (does he have any equity) and debt/income numbers. A lot of the BS NINJA (no job, no income, no asset) loans are like an honest politician (read: extinct).

Little brother might also want to let big brother know he's in a bind. Quitclaiming does not absolve big brother from being responsible if the loan goes delinquent.

[jriera]

Have your friend call my wife (she is a Sr. Loan Officer), very good and used to 'stated income' loans. Things are tougher than before but not impossible. Her number is 702-372-7554

[craigster59]

Thanks Jordi, I'll have him give her a call. I know things in the loan industry have tightened up lately, and I wanted to get him some info before it tightened further. Thanks for the replies guys, even from the "peanut gallery"

[Porsche-O-Phile]

Didn't mean to sound caustic, but (for one) I get awfully sick and tired of hearing these kinds of sob stories from grown adults that signed about 50 different forms and then try to claim they "didn't know what they were doing" when stuff goes south.

Yes, the RE market is full of scumbags and sharks. It's like shopping for a car. If you're dumb enough to walk in to these kinds of situations without someone on your side (i.e. a lawyer or buyer's agent), frankly you DESERVE to get shafted. Most of these people had no business buying in the first place and I can't say I've got a heck of a lot of sympathy for them now.

Don't want to belabor it - I hope it all works out for your buddy here, but I've said many times before - for one, I could only DREAM of owning my own place, but I'd never allow myself to if it meant doing the kind of crap people have been doing over the last five or six years in order to do it (I/O loans, ARMs, negative amortization, no doc loans, over-extension of credit, etc.)

This kind of nonsense has made real estate toxic and has pretty much ruined the "American dream" for people like myself that want to do it legitimately under CONVENTIONAL lending standards, not "whatever-looks-good-on-paper-that-day" standards. Unfortunately, we now have to compete against these sorts of boneheads that are willing to sign any old thing with a big heapin' helpin' of "devil-may-care attitude" to sweeten it. Then they can just cry "victim" later and at the end of the day, they get to have their own place and the financially responsible people that DO their homework and show restraint get the door slammed in their faces.

Am I bitter? Yea, a little I guess. Not wishing any harm on your friend, but people like this are the CAUSE of the problem. They deserve what they get, insensitive and non-PC thought that may sound. I have nothing against the guy personally, but it'd be nice to see some willingness to accept the consequences of one's actions as an adult in this matter for a change. . .

[craigster59]

No offense taken Jeff, I don't have much sympathy for people who jump at the deal that's "too good to be true" and b*tch when it blows up in their face. Like I said in this thread, I research, ask questions and analyze different scenarios before I make small purchases, much less a house. I know you do too, reading your comments in the RE thread.

My friend just wants to refi and move on and says he never realized that the loan was an ARM w/ prepayment penalties. I mean, he's an ol' blues musician and how many of those guys were screwed out of song royalties. The loan is just north of 100k so I don't think he's going to get hurt.

But the fact of the matter is, there are a lot of people out there that will be in much worse shape and we're all going to "feel it" whether good or bad. I'm in the same position you are, holding for the "good deal", but educating myself more and more in the process. It's going to happen and in the not too distant future.

[RANDY P]

2 questions -

does he have some proof he's been self employed for the last 2 years? - A business license? If he's been paid under the table, or simply doesn't have one then that will be an issue. Either that, or he'd better have a job that he's been on 2 years, where they pay him W2, or 1099.

2nd - did he actually sign anything at closing? if so, it will show on his bureau. If he didn't, I hope he has proof of at least a year's worth of consistent payments. - Front and backs of cancelled checks, or 12 months worth of bank statements showing every month, a large amount of money was drawn - to pay a mortgage.

If neither of those are present, then this will be a mess to do, without seeing his credit it will be a push to say if it can be done or not. A stated loan still requires reasonable proof that he has the resources to pay (a job, or some other proof showing he's paying taxes somehow)

You might be able to do NO DOC, but unless there's huge equity and he has decent credit this isn't really an option.

If he has cashflow, and proof of self employment, have him gather his last 12 mos. of complete bank statements, and go for it. 12 mos. bank statements showing a consistent monthly deposit a lot of times will get you a similar rate as someone who actually earns the money and pays taxes on it (like a W2 employee who shows ALL income).

Stated, is expensive. if he has less than say, 15% equity in the house as it sits, the new rate is probably gonna look like the old one, or damn close.

rjp