As the Year Closes, Fraud is Still a Trending Topic

I have been hoping all year that I would have a better closing article for 2010. But, unfortunately, fraud is still high on the list of topics in the mortgage industry.

CoreLogic estimates the 2010 fraud loss will be $11 billion! What seems like good news, is it is down from the 2009 number of $14 billion. Unfortunately, just looking at the numbers can be deceiving. CoreLogic said that the probable fraud rate increased by 20% due to volume increases.

What I find as a sad statement is that some are saying fraud is a crime of necessity where it used to be a crime of opportunity. Necessity? Fraud? The tough business environment is blamed for this; I, personally, don't see any excuse or good argument for anyone to commit fraud - in the mortgage industry or any other industry for that matter.

One huge area that is suspect is the information being entered into the automated underwriting system doesn't match the data in the loan file. It is yet to be determined if the discrepancies are carelessness or delibarate omissions of specific data. Two additional suspects are percentage rate calculation and proper appraisals.

The good news is that problems will be detected earlier - before the loan is issued - rather than after the fact. Quality control is becoming more stringent as processes are put in place. And there are plans for the mortgage industry to share information, which will enable the fraudsters to be caught much earlier.


As always, it is best to work with someone you know, trust and feel comfortable with - a leader in the mortgage industry. When you choose a professional mortgage broker, you can be assured that you won't be taken advantage of. Grandview Lending is here to work WITH you for all of your mortgage needs.

Happy New Year; we wish a successful, abundant 2011 for all!

Writing With a Specific Purpose

It has been just a little more than a year ago when I started this blog. When I decided to jump into blogging, I knew I had to have a focus and purpose. What I chose was to use this medium as a way to reach out and create communication to provide some insight into the sometimes confusing and often seemingly complex mortgage industry. This past year I shared the ups and downs (unfortunately more downs than ups), in an attempt to keep you up to date on what's happening with interest rates, the housing market and some general information I thought would be of interest. I also covered some of the key mortgage terms and discussed - very recently -  some unique, creative types of loans available.

But the purpose of this specific post is to wish each of you a very Merry Christmas. As we all spend time with family and friends - exchanging gifts, sharing meals and enjoying each others' company, let's all take a moment to appreciate what we have. No matter our situation, we don't have to look far to find someone who is less fortunate and possibly even suffering, cold or hungry.  I hope you'll join me in being ever so thankful for all with which we are blessed.

Merry Christmas!

Mike Farrell

Rent to Own Could Be the Answer for Buyers and Sellers

Reports are out that the economy is improving, and some have even stated that the recession is officially over. Most also agree that it's going to be a long recovery in the real estate market. Therefore, I have shared with you alternatives to traditional mortgages. During the past few weeks you've learned about Seller Carry Back, Land Contracts and Short Sales.

Another option that might help you purchase or sell a home during the economic recovery is Rent to Own (or Lease to Own). If you've purchased your new house, but can't sell the "old" one, you might want to consider this alternative. Paying two mortgage payments can be difficult at best. Another scenario that could encourage a Rent to Own transaction is when you have a serious prospect who just can't come up with the required down payment.

Quite simply, the renter pays an established amount each month to live in the house (just like renting). The difference is, a portion of each monthly payment is applied toward a down payment and the rest is income for the seller. At the end of a pre-determined period, the renter has the option to purchase the house. The money paid as part of the rent is applied to the down payment.

This benefits the buyer/renter by being able to purchase the home they want, while being given the time to accumulate the down payment. The term of the agreement also gives a trial period in the house before buying. This allows for the opportunity to "try it out" to see if there are any major expenses that will be required.

Conversely, during this agreement period, the buyer is responsible for all repairs and maintenance as though they had already purchased the house. On the financial side, a normal contract requires the buyer to pay an option fee at the beginning of the agreement, plus a penalty fee if late on the rent payment(s).

This Rent to Own option can lessen the risk to the owner, a great benefit. When compared to "just renting it," the buyer normally takes much better care of the house because it is, in essence, his. If the renter does break the contract, the seller retains the option fee and the rent he has received as income.

Two major chances the seller takes are 1) if the buyer backs out, the selling or renting process begins all over again and 2) a buyer with the ability to purchase cannot buy the house because of the current agreement with the renter/buyer.

Though all transactions have an element of risk, these options can be the answer for a number of buyers and sellers. As I always suggest, discuss all options with a professional mortgage broker before making a decision. You might just find you have more than one alternative.

Seller Carry Back Is Financing Provided By Owner

The two previous posts discussed what some might call "creative financing". In these tough economic times, people are finding unique (or little known) ways to enable the sale or purchase of a home. These non-traditional transactions help 1) buyers who might not normally qualify, 2) sellers who are having difficulty selling and 3) stimulate the local real estate market. No matter what your financial situation is, a licensed, professional mortgage broker is a valuable resource who can help you determine the best type of loan for your situation.

Basically, and simply put, seller carry back financing is owner-provided financing. This can be a win/win for both the buyer and the seller. The increasing interest of this type of financing is due to the difficulty some are having when applying for a traditional loan.

The seller offers to “carry back” the loan to enable the buyer to purchase the house directly from the seller. Both sign a promissory note that states the buyer will pay a designated amount, plus interest, on a scheduled monthly basis. The only difference between this and a traditional loan is that the seller receives the payments instead of a bank.

Just like a traditional loan, title is transferred and the buyer takes possession of the property. If the buyer does not continue making payments, the seller can legally foreclose and take back the property. At that point, he or she can sell it, this time with a traditional mortgage, or seller carry back again.

Some seller-financed transactions might be disallowed due to the SAFE Act, which was passed in 2008. This applies even when originating all loans - even seller carry-backs on your own home. An exception is when the homeowner sells to immediate family members. Sellers may also carry back, only every three years, on their own house to a non family member.

I participated in the small think tank group that helped develop and write the state test that was implemented two years ago to meet the requirements of the SAFE Act. Briefly, it serves as protection for the buyers, requiring that anyone originating a loan be licensed by the state. Who better to assist you, than a mortgage broker who knows this law from the ground up?