Reverse Mortgage Scams

(Alternate title: Dealing with My Stupid Criminal Loan Officer Peers)

I wish I could say that this was a "stupid criminal" situation like Jay Leno loves to see.  It is not. If you would like to get really ticked off, read on.  I received a call two days ago from a reverse mortgage client of mine. They closed about a year ago. Mr. Jones (as we will call him) called me to ask me this question:

"I recieved a call today from a loan officer. He said that the mortgage company that we closed our loan with went out of business, and that we need to sign new paperwork. He said he was going to send us a new mortgage package. He told us to just sign everything and send it back. Is this right and should we sign?"

Does it make you start to wonder how many seniors are scammed this way? 

Just in case you are wondering, once a loan is closed, you can have 1,000 banks go out of business. YOU DON'T NEED to resign anything.  This scenario above is a complete scam. And I hope it makes you as irrate as it makes me!

One would hope that after all the industry changes in the past year that the scum in this business would be gone. Nope. They just have invented new ways to crush someone to make a fast buck.

The great news is that Mr. Jones still had my number handy and called me first. That move just saved him $1,000's plus massive heartache.  (the LAST thing a senior in his late 70's needs!!) I plan to have Mr. Jones tell the loan officer to send that new loan package out, so that I can then go personally pick it up, and forward the same scenario to any and every banking official I can get a hold of.

Steve Kappre is a mortgage loan officer in New Jersey. For more info or questions feel free to contact Steve.

• NJ First Time Home Buyer
• Purchase, refinance, rehab loans
• Conventional, FHA, USDA, VA, HMFA, First Time Home Buyer, Police and Fire, Live Where You Work, and more

Call direct @ 856-419-3561 | Subscribe to Steve's blog via e-mail | NJ Loan Officer .com | NMLS ID: 218007

Will I Get a Better Interest Rate with a Higher Credit Score?

by Steve Kappre, NJ Loan Officer

The simple answer: Maybe, but there are many variables.

As a rule of thumb, the higher the credit score the better the rate you will receive (or the less fees you will pay). This is most relevant when talking about conventional loan programs. For the best rates and options you want a credit score of 740 of more.

What can make my rate higher?

• Credit scores below 740
• A property's status: Second home or investment property loans
• Type of property: Condo vs. single family vs. mobile home vs. multi-unit
• Loan amount: Conforming loan vs. jumbo vs. super jumbo

And the list can go on and on. Each variable can add to the interest rate and/or the cost of the loan. Some combinations can get very expensive as well as very limiting on your financing options.

FHA and VA loans are different than conventional. Many lenders will be able to offer the same rate for an FHA or VA loan if you have a 620 or better credit score. Some lenders will require a 660 or better credit score to get a better rate (or less fees).

What you may find from lender to lender is that the rates offered or the options allowed may fluctuate for the exact same program and financing scenario. On top of the guidelines that Fannie Mae, Freddie Mac, FHA, or VA set, lenders may place their own restrictions, commonly known as lender overlays. Lenders can go as far as to not allow certain loan options even though FHA, Fannie Mae, or Freddie Mac may allow the option themselves.

Keep doing you research. If you find yourself getting different answers to the same questions, you are probably talking to either loan officers that do not know what they are talking about, or one or more lenders you are talking to are telling you their guidelines based off of their particular lender overlays.

So the final answer is ...

Higher credit always helps - but isn't always required to get the best rates. Many lenders can offer the same rates for certain loans whether your credit score is 620, 720, or 820.

Steve Kappre is a mortgage loan officer in New Jersey. For more info or questions feel free to contact Steve.

• NJ First Time Home Buyer
• Purchase, refinance, rehab loans
• Conventional, FHA, USDA, VA, HMFA, First Time Home Buyer, Police and Fire, Live Where You Work, and more

Call direct @ 856-419-3561 | Subscribe to Steve's blog via e-mail | NJ Loan Officer .com

My Credit Scores Need Anger Management Class!!

Have you ever done something just to spite someone? Sure, we all have. Somehow it makes people feel a little better to act like a jerk or dis somebody.  Well I'm here to tell you that getting mad at creditors and not paying your bills out of spite will hurt nobody but yourself!

There's a good chance that the mega bank with 40,000 employees won't feel that spiteful sting when you decide to hurt them by not paying your bill(s). However, your credit can take a beating, now and for years to come.

First the situation hurts your ego. So you open that can of spite and decide to not pay on an account. Next it hurts your credit scores as payments are continually missed. Sometime later it hurts your pocket as lower credit scores cause you to get less desirable loans on other accounts. And if really played out, we are talking wage garnishment. It is official: Your spite just ruined your entire life's finances.

Seem silly? Maybe. Have people done this. ABSOLUTELY!! On anything from a $10 copay to a car repossession to even a house payment.

So next time take a deep breath, forget about the idiot worker that called you with the attitude, and pay your bills. Big or small. In the end it will not only feel right, it IS right.

Credit Links

Credit Scoring - What Makes Up My Credit Score? (1 of 6)

Credit Scoring - Payment History (2 of 6)

Credit Scoring - Balances (3 of 6)

Credit Scoring - History (4 of 6)

Credit Scoring - Mix of Accounts (5 of 6)

Credit Scoring - Inquiries (6 of 6)

Steve Kappre is a mortgage loan officer in New Jersey. For more info or questions feel free to contact Steve.

• NJ First Time Home Buyer
• Purchase, refinance, rehab loans
• Conventional, FHA, USDA, VA, HMFA, First Time Home Buyer, Police and Fire, Live Where You Work, and more

Call direct @ 856-419-3561 | Subscribe to Steve's blog via e-mail

Interest Only Loans - The Devil or a Godsend?

I read this blog today that got my wheels spinning. The topic: Interest only loans. Interest only loans have a nasty reputation as foreclosure loans or "rent" loans. Heaped into the same pile are negative amortization loans, no doc loans, stated income loans, and others like it. But in my opinion, we are throwing the baby out with the bath water.

These loans are TOXIC!?!?

You don't have to convince me. And please don't try to. Lets try and create a quick parallel. We all use various tools every day; knives, can openers, lawn mowers, bleach, Jack Daniels. Where we run into the real problem is when these tools are misused OR they are given to the wrong people.

You don't give a 3 year old a steak knife. And your 5 year old shouldn't be mowing the grass. Your 16 year old shouldn't be downing Jack Daniels. They are all the wrong match for these "tools".

An interest only loan is a tool. Just like a 15 year loan is a tool. Think I am off my rocker?? I'll show you borrowers that are so aggressive in taking a 15 year loan that they put their family at far more risk than if they had an interest only loan. Point in case: If you are stretching to make 15 year loan payments, it leaves little money in the bank. When an emergency comes along, where does this person get money from? They borrower it via credit cards, bank loans, or maybe a refinance. This situation puts a homeowner in a much worse scenario and more than cancels out all of their pre-payment strategies. It may even put them into foreclosure, which would be doubly sad if they spent years aggressively paying down their home loan only to lose every cent to the bank.

The real issue is matching borrowers with the wrong loans

Did you know that negative amortization loans were around years before they were popular with Countrywide, WaMu, and World Savings? That is right. Various S&L's would carry such products. So why is it that these loans can be around for years and NOW we are getting crushed by them? Because more recently they were given to the wrong people (Wrong tool, wrong borrower, wrong age, wrong financial understanding level).

When you give a first time buyer an interest only loan at 100% financing that has a rate that adjusts after only 2 years, you are creating a serious mess. When you give a negative amortization loan to a borrower that can barely pay the 1% payment rate (but is really being charge 7% - which the loan will later adjusts to), you are creating a serious mess.

These loans got riskier and riskier. As homes appreciated, people that failed with these loans simply listed and sold their homes in a week. All is good. Until appreciation stopped and went in reverse.

Interest only loans in and of themselves are not bad loans. For a financially savvy home owner, an interest only loan that adjusts monthly can be a God send, because they understand finances. (Right tool - right user).

Putting a knife in the hand of a 3 year old is just like lending an interest only loan to the financial noob. It may just be a miracle if things turn out right!!

Steve Kappre is a mortgage loan officer in New Jersey. For more info or questions feel free to contact Steve.

• NJ First Time Home Buyer
• Purchase, refinance, rehab loans
• Conventional, FHA, USDA, VA, HMFA, First Time Home Buyer, Police and Fire, Live Where You Work, and more

Call direct @ 856-419-3561 | Subscribe to Steve's blog via e-mail

Reverse Mortgages for Gloucester County, NJ

Here is some helpful information regarding reverse mortgages. This video answers some frequently asked questions such as;

• Is now a good time to take out a reverse mortgage?

• Is there a better/best age to utilize a reverse mortgage?

• What is the interest rate?

• How does the interest rate determine how much I can borrow?

You can both refinance and purchase a home using a reverse mortgage.

If you are considering a reverse mortgage in Gloucester County or the surrounding area, and would like to meet with a representative for a consultation, and to review your options and benefits of a reverse mortgage, contact Steve Kappre for more information: 856-419-3561 or steve@stevekappre.com.

Below is a video that you may find useful.

Refinance Your Home in South Jersey

If the public was to believe everything that the media "reported" on, they would believe that the refinance of a home mortgage would be nearly impossible. While times have certainly changed, there are certainly options to refinance your home, lower your rate, and even take cash out or consolidate your debt.

Mortgage options still exist:

• Up to 95 percent on many properties
• Up to and above 100% financing for certain situations
• Cash-out
• Debt consolidation
• Fixed rates and adjustable, including interest only
• Primary homes, second homes, and investment properties
• Reverse mortgages, which allow those 62 and older to not only consolidate, but take cash out, and have no monthly mortgage payment. If enough equity exists, a reverse mortgage even allows a home owner to receive tax free monthly installment payments*

Whether you have a conventional, FHA, VA, USDA loan, no loan at all or even a private loan, there are still many options to refinance. Call or e-mail today if you need more information. we would be happy to help!

* consult your personal tax advisor regarding tax deductability of home interest and/or tax free income scenarios regarding reverse mortgages.

The Wage Earner Home Buyer with the Side Business (Self Employed) - Beware

I often take things in this business for granted, thinking most professionals know what is going on in the mortgage market. Maybe I should have shared about this months ago. I guess better late than never.

If you have been paying attention to the documents buyers must offer up to lenders these days, you'll know that most often tax returns (1040's) are required, even for those earning income solely as a wage earner (hourly/salary type position). In the past a mortgage was approved solely on income derived from a borrower's W2's and pay stubs. Lenders did not request tax returns.

These days lenders/investors are pulling 4506's on everyone. A 4506 (4506t) is the form a borrower signs that allows the lender to pull their tax returns. In the past, a wage earner would qualify solely on their "wage earner income"; that is, their pay from their full-time job, derived from pay stubs and W2's. Self employment income was ignored!

As tax returns are pulled on all borrowers, we find that a wage earner may not qualify for a loan if he or she has write-offs from a side business or self-employed business. And we know how self-employed individuals like to write off everything from the new snow tires to the dog and cat (certainly paid employees ... no?)

So if you or someone you know has a solid job with solid pay, and is looking for a home loan, but have a side business - BEWARE. Those write-offs that saved you a buck yesterday can rear their ugly head to deny you a loan today.

(AR Members you can read this article which inspired my blog here.)

Steve Kappre is a mortgage loan officer in New Jersey with Treasury Mortgage, a subsidiary of Aurora Financial Group. For more info check out:

• NJ First Time Home Buyer Mortgages, grants, down payment assistance, and more
• NJ Reverse Mortgages
• Offering all aspects of purchase and refinance mortgages up to and over 100% of the home's value
• Home renovation loans for refinance or purchase mortgages
• Conventional, FHA, USDA, VA, HMFA, PHFA, Police and Fire, Live Where You Work, and more

Contact Steve Kappre directly: 856-419-3561 | Subscribe to Steve's blog via e-mail

Credit Scores and Reports

How Long is My Credit Report Good For?

Credit reports expire 90 days from the date the credit report was pulled, this is for both purchase and refinance transactions.  For construction and construction-to-permanent financing a credit report is valid for 120 days. This is important to keep in mind as often the time-frame from the day of credit pull to the day of the transaction's closing can easily be over 90 days.

In many cases a new credit report pull will not alter a mortgage approval, but it is possible to have a credit score go from great to not-so-great, or in a worse case scenario, the credit score could drop to a point where a mortgage approval is not possible.

Additionally, if a credit score drops, than the loan can suddenly become very costly. This is not necessarily a lender charge, but a pass-through charge from Fannie Mae. 

There really is no substitute for a sound education in the credit scoring model. Those who take note ahead of their mortgage approval to restore and maintain their credit will save $1,000's, even $10,000's in interest and fees.

For additional information regarding credit scoring and credit restoration, take some time to read through the articles below. As always, if you have any questions feel free to send an e-mail or call!

Credit Links

Credit Scoring - What Makes Up My Credit Score? (1 of 6)

Credit Scoring - Payment History (2 of 6)

Credit Scoring - Balances (3 of 6)

Credit Scoring - History (4 of 6)

Credit Scoring - Mix of Accounts (5 of 6)

Credit Scoring - Inquiries (6 of 6)

Steve Kappre is a Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group. For more info check out:

• NJ First Time Home Buyer Mortgages, grants, down payment assistance, and more
• NJ Reverse Mortgages
• All aspects of purchase and refinance mortgages up to and over 100% of the home's value
• Home renovation loans for refinance or purchase
• Conventional, FHA, USDA, VA, HMFA, PHFA, Police and Fire, Live Where You Work, and more

Contact Steve Kappre directly: 856-419-3561 | Subscribe to Steve's blog via e-mail

Purchasing a Home with a Reverse Mortgage.

For the most part, the paperwork and the guidelines regarding this mortgage are the same as those regarding the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM), which is an FHA loan.  The option to purchase a home with a reverse mortgage was set to be available January 1, 2009, although as of writing this article is still undergoing final guideline and FHA regulation. The purchase reverse mortgage came out of the Housing and Economic Recovery Act of 2008. (This may be the best thing to come from this Act, because frankly many other things failed miserably.)

The main benefit of purchasing a home with a reverse mortgage is because now with this option;

1. The purchaser does not have to qualify and close on a traditional mortgage, and than
2. Refinance into a reverse mortgage

Aside from the hassle of closing two loans, the home buyer would have to pay closing costs twice.  OUCH. That's no way to treat our seniors!

Let's review some common reverse mortgage (HECM) guidelines.

1. Must be 62 years old
2. The property must be the borrower's primary residence
3. With a traditional reverse mortgage refinance, a fair amount of equity is required.  With a purchase reverse mortgage scenario, the borrower must provide the monetary investment at closing from an allowable funding source.

* Allowable Funding Sources *

When purchasing a home using a reverse mortgage, the monetary investment will be for (at least) the difference between the maximum reverse mortgage amount allowed and the purchase price. This will vary based on the sales price of a home among other factors.

Example: If the sales agreement is for $100,000, and the maximum allowable amount for the reverse mortgage is 60% of the purchase price, than the borrower will be required to come up the difference, or 40% ($40,000), plus any applicable closing costs.

A Borrower may only use their own money or money obtained from the sale of property or other assets. This includes retirement accounts, the sale of a home(s), the sale of fine art, etc.

VERY IMPORTANT POINTS TO PONDER

With a reverse mortgage purchase, these items below are NOT allowed.

1. No discount points are allowed
2. There are no rate buy-down options
3. No gifts are allowed (as in, a financial gift from a relative)
4. No closing cost assistance (seller concessions)
5. No builder incentives
6. No seller contributions
7. No seller financing

Unlike traditional FHA financing, monetary gifts from family members are not allowed. You also may not obtain personal loans, cash advances from credit cards, or EVEN equity from a property's home equity line. Lenders are required to source all funds used in the transaction.

A home buyer may elect to put more money down than the minimum required, so that they can leave a portion of the reverse mortgage available as a home equity line for future use.

Real Estate Agents

If you are a real estate agent looking to help clients out that are utilizing a reverse mortgage to purchase a home, keep in mind these important factors:

1. Required repairs must be completed before settling on the home,
2. These repairs must be included in the purchase agreement,
3. The buyer can NOT put any money into repairs of the property before they own the home, and
4. All offers must be contingent on a satisfactory inspection conducted by a qualified inspector.

One of the factors I found interesting is that a reverse mortgage client may choose to cancel the transaction at any time prior to closing. This is not to say that they will not lose their deposit money, but they do have this option. One other difference in a reverse mortgage purchase loan versus a traditional reverse mortgage (refinance) is that there is no 3-day rescission period. Once settled, that's it.

This wraps up our series on reverse mortgages. If you would like to visit any of the other posts on reverse mortgages, check out the links below.

As always, if you have any questions or need any assistance at all, feel free to call Steve Kappre direct at 856-419-3561.

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

There are several main questions asked regarding the end of a reverse mortgage loan. These questions are;

1. What happens if I owe more than my house is worth?

2. How long will my reverse mortgage last?

3. What will I owe when my mortgage is due?

4. What happens if I have to leave my home?

5. What happens when I pass my home to my heirs?

The answers here will be accurate but will not go into extreme detail. There are many variables and scenarios, and such situations can be evaluated on a case-by-case basis.

Q. What happens if I owe more than my house is worth?

A. If a reverse mortgage is utilized for a period of time where the homeowner owes more than the value of the home, they need not fear. The mortgage insurance that is required on a reverse mortgage (HECM) is insurance for just such a case. When the home is sold, only what the home is sold for at a fair market value will be required. In addition to that, Realtor costs and the costs of sale will also be backed out of the equation. So the short answer is, if you owe more than the value of the home, the difference is forgiven! (Further explanation below).

Q. How long will my reverse mortgage last?

A. As long as the home owner lives in the home. If the home owner passes away or if they are required to live at another place full time, than one would be required to refinance or sell the home. Reverse mortgages are only for owner-occupied homes. Likewise, if the property is passed to the heirs, than they would be require to refinance or sell the property.

Q. What will I owe when my mortgage is due?

A. This was partially answered above. First, in a normal scenario, you subtract the cost of sales and the current reverse mortgage balance to see what your net proceeds are; just like in a normal mortgage/ home sale scenario. But to reiterate when you sell the property, and more is owed than the sales price, one will only owe the;

Sales Price (-) Settlement Costs (-) amount of reverse mortgage owed only up to the remaining amount left.

For Example: If you sell your home for $200,000, but $250,000 is owed on the reverse mortgage and the cost of sale is $10,000, than the equation would look like this:

$200,000 (-) $10,000 = $190,000. YOU WOULD ONLY OWE $190,000.  You would walk away with $0, and the $60,000 would be forgiven. 

Stay tuned for more information regarding a reverse mortgage.

If you need immediate assistance regarding a reverse mortgage, feel free to contact Steve Kappre at 856-419-3561.

1. Reverse Mortgages ~ Who is Eligible? - Part 1
2. Reverse Mortgages ~ Payment Options - Part 2
3. Reverse Mortgages ~ Expected Costs, Appraisals, and Title - Part 3
4. Reverse Mortgages ~ Counseling - Part 4
5. Reverse Mortgages ~ Is Reverse Mortgage Income Taxable? - Part 5
6. Reverse Mortgages ~ What Happens When My Reverse Mortgage is Due? - Part 6
7. Reverse Mortgages ~ Purchase a Home with a Reverse Mortgage - Part 7

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving all 50 states, focusing on Gloucester, Camden, and Salem County, NJ. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com