Working Together Real Estate Agent & Mortgage Originator, Creating a Successful Real Estate Transaction Presented By Mike Elwell All American Title Company.

Working Together

Real Estate Agent & Mortgage Originator,

Creating a Successful Real Estate Transaction

Presented By Mike Elwell

All American Title Company

Working Together The Role of the Mortgage Originator and

Realtor®

The Past

Low Credit Scores / O % Down payment

Stated / No Doc

Appraisal Standards

Traditional owner / seller

Routine / Cookie Cutter PA

Working Together The Role of the Mortgage Originator and

Realtor®

The Present

Changes, Changes, Changes.

But…

By working together, the Real Estate process today can be manageable.

The Origination Landscape has Changed!

August 1st 2007 New Laws went into effect for Mortgage Originators in Minnesota Reasonable Ability to Pay Agency Tangible Net Benefit

Churning

Escrow Disclosure 27 Standards of Conduct

The Origination Landscape has Changed! Appraisal Requirements

Underwriting Guidelines Change on a weekly or daily basis! Have questions? Check with your mortgage

professional.

Private Mortgage Insurance Changes the type of transactions we can do

Products & Programs – Back to the Basics

HVCC - Home Value Code of Conduct Effective May 1st 2009 (Excludes FHA)

Appraiser independence, valuation protections, and enhance the overall integrity of the valuation process.

The lender shall ensure that the borrower is provided, free of charge, a copy of any appraisal report concerning the borrower’s subject property immediately upon completion, and in any event no less than three days prior to the closing of the loan. The borrower may waive this three-day requirement. The lender may require the borrower to reimburse the lender for the cost of the appraisal.

Realtor can have contact and communicate with the appraiser Rescission period does not count as 3 business days.

The Origination Landscape has Changed!

HOEPA- Home Ownership and Equity Protection Act HERA- Housing and Economic Recovery Act

MDIA- Mortgage Disclosure Improvement Act (Effective July 30th ) No more quick closings! 7 business days for disclosures. Collection of fees up front.

Regulation Z: changes to Truth in Lending .125% Change to initial APR, must re-disclose

Homebuyer must receive Truth in Lending disclosure 3 business days before closing.

The Origination Landscape has Changed!

4 Steps to Creating A Successful Real Estate Transaction

Pre-qualification

Full Application

Processing and Underwriting

Closing the Transaction

Pre-qualifying Home Buyers - Step #1 Communication

Realtor ® and Loan Originator working for the common goal!

Building a Plan and a Strategy that best fit the needs for the client. Over Communicate and Allow sufficient time!

Working together. Efficiency.

Gathering all the information!!!! When in doubt, check it out!

Pre-qualifying home buyers - Step #1 The Four C’s: The Foundation of Prequalifying

First C: CHARACTER – Defined through the credit history, business status, employment history, and reputation of the applicant‘s

The credit history helps assess the applicant's financial obligation, current and past as well as the applicant's willingness to pay.

Pre-qualifying Home Buyers - Step #1

Credit Scores and how they effect the mortgage transaction today. Credit scores range from 300 – 850 Ideal score today is 740 + for conventional mortgage

transactions. FHA / Lenders now have a minimum credit score. Not like the old days of lending. Watch out for the pit falls of credit.

BK, Judgments, Liens, Collections, Etc……

Pre-qualifying home buyers - Step #1 The Four C’s

Second C: CAPACITY – The ability to earn a living. This is based on the applicant's education received, field of study, reputation and professional training & skills.

Can the applicant's generate enough income to be able to support the debt over a period of time? Will the applicant's professional training & skills provide a job that will allow them to support the debt over a period of time?

Pre-qualifying home buyers - Step #1 The Four C’s

Third C: CAPITAL - The financial scenario at this time and financial history for the past 2 years of the applicant's.

Cash on hand, what is available for down payments, closing cost and the ability to make payments to be incurred?

Assets vs. Liabilities? What type of assets are they? Are they quality, stable, and liquid?

Stocks, Bonds, Checking and Savings Accounts, 401K, Life Insurance, Owe vs. Own.

Pre-qualifying Home Buyers - Step #1 The Four C’s

Fourth C: Collateral – The valuable property of the applicant's and the value of the property to be purchased.

Value of the property vs. loan amount to secure the loan. Does the property meet the lender’s standards and those of the secondary market.

Loan To Value

Pre-qualifying Home Buyers - Step #1

Floor of Prequalification

FHA 31% / 43%

Fannie & Freddie 28% / 36%

Budget

Pre-qualifying Home Buyers - Step #1 Pre qualification Results

Communicate borrower needs. Property type Minimum down payment Down payment assistance FHA Seller Paid Closing Cost

Now Let’s go Shopping!

Pre-qualifying Home Buyers - Step #1 Mortgage Programs

Fixed Rates Mortgages Adjustable Rate

Mortgages Interest Only Government Programs

FHA & VA Specialty Programs

USDA Rural Programs

MHFA CASA

Back by Popular Demand: FHA! 3.5% Down Payment 1.75% Up Front Mortgage Insurance Safe & Secure Low Monthly Mortgage Insurance Gift Money HOP Program Administered Through MHFA FHA Excluded from HVCC Conventional Appraisal Standards Seller Paid Closing Costs – 6%

Back by Popular Demand: FHA!

When in Doubt, Ask your mortgage Professional 203K Program.

Do I need a “Certificate of Occupancy?”

FHA Anti-flipping Statutes. Good Neighbor Next Door Program-GNND Collateral: Is a town home really a condo? Credit Standards for FHA: lender driven Non occupant co borrower.

Conventional Mortgage Freddie Mac or Fannie Mae

Underwriting guidelines are strict. Comply under HOPEA, HERA etc… HVCC compliance Larger Down Payment Private Mortgage Insurance Allow Enough Time

Pre-Qualification to Pre-Approval What is the difference between Pre-Qualification

and Pre-Approval??

The Subject Property

Pre-Qualification to Pre-Approval Pre-Approval Letter

Pre-Approval letter is good as the Loan Originator writing it!

Ask for Credentials.

Full Application – Step #2 Purchase Agreement : what we

need to know! Earnest Money Subject Property Purchase Price Closing Date Financing Contingency Seller Paid Closing costs Buyers Financial Disclosure

Statement Great Tip: Proof of Funds!

Full Application – Step #2Full Application: Gather all the information

Uniform Residential Loan Application

Disclosures Who we are What we do What we cannot do

Good Faith Estimate & Truth In Lending RESPA Reform!! Effective January 1st 2010!

Collect ALL documentation.

Processing / Underwriting – Step #3 How we get the Approval

Desktop Underwriter

Loan Prospector

Back to Manual Underwriting!

Processing / Underwriting – Step #3

Role of the Title Company Quarterbacking the Transaction Coordinating & Scheduling Being Proactive and Managing

the Closing Process Communication Efficiency REO & Short Sales

Managing both sides of the transaction!

Maintaining Communication

Throughout the Transaction.

Processing / Underwriting – Step #3

Appraisal Process Include the Purchase

Agreement

HVCC- Allow enough time!

Meet the appraiser at the home!

Processing / Underwriting – Step #3

Clear to close. Full Underwriting

approval!

Processing / Underwriting – Step #3

Closing the Transaction – Step #4 10 office Locations

New Hudson Office Direct Connect Full Production Center Flexibility Value Added Services Experience Leadership Active Ownership

Partnering in Your Success! Value Added Services and Seminars

“The Eight Hundred Pound Gorilla in the Room” A Workshop on Short Sales, Potential Realtor Liability, and Developing listings

“1031” Exchanges” “Commercial Real Estate 101” “RESPA Reform” And more………