Fast forward 18 months. The market had changed and her house dropped $125,000 in value. She called to say she was no longer able to keep up with the payments and the lender was foreclosing. Unfortunately we were unable to do anything else to help due to the loan-to-value. 

Fast forward 6 more months. I just got a call from her last week letting me know that her first and second lenders had BOTH agreed to a workout. The first lender rewrote her loan, deleting $100,000 from the balance, and the second lender rewrote their loan deleting $90,000 from the balance.

She said dealing with the lenders was a long and painful process, but with a happy ending because she is now able to stay in her home and make the payments.

I don’t know how many lenders would be willing to do a mortgage work out like this one, but it would make sense for all of them to do it. The alternative is to take posession of the property through foreclosure, spend the money getting it ready to market, pay the sales commission, and still not get the amount of money she has agreed to pay.

Her story is a reminder that no matter how hard it is to do, communication with the lender is important. How else will they know what’s going on with you?

There was a period of time about two years ago that three business associates and I briefly worked in the pre-foreclosure market. We would actually go to the property, introduce ourselves and offer our solution, which was to work with the lender loss mitigation departments. I was amazed to find most of the people facing foreclosure had already given up and just moved out. One couple we talked with on the phone said they knew what was coming and had already bought a cheaper house in another state before the foreclosure started and simply packed up and left.

And so this wild ride called "being in the mortgage business" continues.

Lenders are laughing at 100% home loan financing requests now.

That’s OK.  Lenders don’t have much to laugh about right now. The business is in a state of clinical depression. New home loan applications have fallen dramatically. Home sales are down. In Las Vegas there are even companies taking busloads of investors around town to view bank owned and foreclosed properties!

I don’t have to tell you any of this. It’s all over the news every day.

However, tucked away behind all this negative press, there are still some pretty amazing mortgage financing packages available.  Let me tell you about one.

Believe it or not, even though 100% financing is gone (except for special programs I’ll talk about below), you can still get 95% financing up to loan amounts of $667,000. Let’s see, that would be a purchase price of $702,000. And that’s not all.

You can get this 95% home loan financing even in declining markets such as California.

I know, I didn’t believe it at first either, but it is true.

It’s not for everybody. The minimum credit score is over 700. Everything, and I do mean everything, must be fully documented. And you must have sufficient reserves after closing, but you can do it.

The investors offering this program are using the old-fashioned "piggy back" loan to make it happen. A "Piggy back" loan is simply a combination 1st and 2nd mortgage. You end up with 2 payments instead of one. The 2nd mortgage is typically an equity credit line so as you pay it down you have the advantage of being able to use it again later without points or fees.

Now, about the 100% mortgage financing I mentioned above, you can still get a program called the "125", although for all practical purposes we probably should call it the "110". On paper at least, you can get a comination loan up to 125% of the value of the property you are buying. The qualifying guidelines are tough, but again, the program is available.

To sum up this post, 100% is not a myth, but it is rare to be able to meet all the current guidelines.

As always, we would be happy to review your situation and give our professional assessment.

There are so many changes taking place and on the drawing boards for the Mortgage Industry it’s like living in a whirlwind, or maybe a hurricane, we’ll see.

It appears that regulators, law makers, reporters, and even some bloggers are trying to paint mortgage brokers as the bad guys when in reality:

Brokers did not design and create the flexible programs that let so many risky loans get funded.

Brokers did not underwrite the loan approvals that let so many risky loans get approved.

Brokers did not fund and package those risky loans into mortgage backed securities, CDO’s, and derivatives.

Brokers did not buy those packages on Wall Street and resell them in countless bundles around the world to investors who thought they would get above market returns.

All the mortgage brokers I know have always been in business to make a living by helping clients achieve their goals and dreams.

My personal take on it right now is that the more things change the more they stay the same. Well, let’s re-state that. The more things change, the more this business is getting back to being a responsible profession again.

When I first started in this business 22 years ago you had to prove to an underwriter that your client could make the payments and had a continuing likelihood of being able to make the payments. There were even courses offered by the investors on how to underwrite from tax returns. I took several. They were very tedious.

I still remember how shocked we were when World Savings first offered the "25% down no questions asked program". 

"How can they do that?" was the question on the street.

It wasn’t too long before other lenders started experimenting with "stated income", then "stated assets", then "no income, no assets" loans. The horse was out of the barn and it took a meltdown of proportions never seen in this country to jolt everyone back to common sense.

Now, we once again have to prove to an underwriter that our client is a good risk.

What a concept.