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Going to take my money and run!

Well, I'm not running in the literal, virtual sense in that I'm leaving one actual place and going to another . . . but as far as finance is concerned, I'm running away as fast as I can go. I made a lot of money in mortgage banking (hella money, my kids say), but I hated it every minute I was doing it, and the better the money got, the worse the job got.

From where I sit now the people still in the mortgage business must be saints to live with it (And they are probably making HELLA money) But it's not for me. Not anymore.

I've decided to concentrate on writing - I have a book coming out in May, "The Secret Art of Rockstar Buzz" which I'm pretty pumped about. The official site is "http://artofrockstarbuzz.com.

And, in leaving the mortgage business, I have absolutely no use for my website, Georgia Mortgage Money.Com, so I've decided to sell it. Stats, rankings, etc., will be available to anyone with a real interest in the purchase.

I'm considering financing it, should a "lone" officer want to buy it, rather than a company, but no promises . . . I want to get completely out of the biz, but that site has been up for 11 years, and in the good years, I made an average of $200K a year with it . . . Mostly loans, but some ads . . . not many, I assure you. I didn't have time to bother with them.

If you're interested in the website, email me: traci@tracigregory.com, and, if I can talk you into reading my blog, great! or following me on Twitter -


I'll be proud to have you.

Rock on,

Trace

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Feds move up from originators, go for IndyMac, Countrywide and New Century Mortgage

I've just heard today that those three, IndyMac, C'Wide and New Century have been issued subpoenas as the subject of a federal grand jury investigation. The Justice Department was focusing primarily on smaller operators thought to be defrauding homeowners and mortgage lenders . . . as if there could have been a coordinated effort across the country large enough to create the mess we're in. . . Now they've decided that it was fraud on the part of large sub prime lenders. According to Los Angeles Times, they have asked for e-mails, phone bills, financial records and other information. The Times said this is part of an investigation into whether fraud and other crimes contributed to the mortgage crisis.

I find this stuff small time compared to the creation of the programs that required a heartbeat and a signature to get a loan, but I'm just a loan officer . . . They didn't need fraud to lose money on those programs! There were such minimal requirements for loans an enterprising 12 year old could have made them work.

You already know about Countrywide and Angelo Mozilo, with the "friends of Angelo" mortgage program . . . interesting that the only "friends of Angelo" that we know about are politicians . . . who probably can't repay the favor for him now . . . too much daylight shining on their relationships . . . and you probably know by now that Countrywide is being sued in Illinois, Florida and California. I'm sure Cuomo will jump in there soon. After his win with Fannie Mae, he couldprobably take on any lender and win.

Countrywide and all its memories will fade though, except maybe for Angelo and anyone else who actually attends a trial. BOA bought it, and they'll swallow it whole. . . they're already changing the names of the divisions to "Anything But Countrywide".

I was surprised to hear that a court-appointed examiner has determined that New Century was involved in inappropriate accounting practices that inflated its profit and gave top executives the ability to acquire millions of dollars in undeserved or inflated bonuses. I guess I was surprised that I had not heard it sooner . . . I'm certainly not surprised at the charges.

They were not a lender that I sold loans to . . . they were quick to change program details, interest rates, etc, at the closing table and they only had to embarrass me once for me to take them completely off my list of possibilities. They filed Chapter 11 in April of 07 . . . and I felt almost the same way when I heard that news as I did when I heard Greenpoint had "bitten the dust." (What goes around comes around doesn't it? Couldn't have happened to anyone who deserved it more.)

The FBI is up to 21 cases against corporate and other large companies relative to subprime market defaults. They've inferred they want brokers, lenders, and now securities firms, hedge fund operators and credit rating agencies. The Securities and Exchange Commission (SEC) is reportedly working closely with the fibbies to find and charge anyone who may have contributed to the credit crises . . .but because of deregulation they're struggling with making criminal cases about the subprime debacle.

I've recently thought of two youtube videos I think I'd like to make . . . Bear Stearns indictees, set to the tune of Dirty Laundry, by Don Henley

You may listen to the song here (but it isn't my Youtube version . . . yet)

Rock Stars, Professional Athletes, Business Moguls

So what do Rock Stars, Professional Athletes and business moguls have in common and why are they on my mortgage blog?

Well, some of them have me in common, and those who do, live in houses with loans that are termed Mega Jumbo.

A super jumbo loan is anything over $650,000. A Mega Jumbo is over a million dollars . . . and up to 10 or 12 million dollars.

And, while one would think if you lived in a mega-million dollar house you wouldn't be concerned with financing products, or monthly payments, the reality is that some of you are.

The new philosophy on owning a home is to regard it as an asset, or a vehicle to accrue assets, rather than merely creating a liability on your balance sheet.

To accomplish this, you get as much house as you can for as small a monthly payment as you can, and invest the rest in something that is making money faster than your mortgage is deferring interest.

The most popular super jumbo mortgage program is the "interest only loan", which allows you to pay interest only for a defined period of time which can mean substantially lower payments for larger loan amounts.

Are interest rates higher? Mostly yes. Super Jumbo loans tend to carry a higher rate than conforming loans but rate also depends on your overall risk profile. Loans are priced based on risk, and layers of risk mean high interest rates. Mega Jumbos are also priced specific to the borrower, the property and the risk. These loans aren't priced on a rate sheet, and as such are more difficult to quote to borrowers.

General rules are

• full doc loans are less risky that stated loans;
• Verified assets are less risky that stated assets;
• Higher credit scores are less risky than lower credit scores;
• Owner occupied properties are less risky than second homes or investor loans.

So, when you layer a stated income loan, with stated assets, on an investor property, the layers of risk have multiplied, and the interest rate is higher. Add that to the risk of a million dollar property (or more). Before a lender writes the check, they asses the risk they are taking, and your interest rate is the result.

Stated Pay Option Arm to $6 million? Perhaps, it depends on the layers of risk in your property. (Note) I have Stated Pay Option arms to 100% LTV only on properties that cost $1,000,000 or less.

I also have asset based loans to 100% ltv, up to 12 or 14 million. This means they are cross-collateralized with other assets, properties, CDs, brokerage accounts, etc. These are more complicated to price and complete, but well worth the effort when you consider that the more expensive the property, the lower ltv a lender wants to give up.

You should have in reserves, after either purchase, stated or full doc, about 25% of the value of the house. If you are a strong borrower (huge credit scores, low loan to value) you'll get by with less. I've done a loan for 4.5 million, at 78% LTV with about 750K in reserves . . . that's half what you'd expect, and it worked.

As of 10/2006 a standard interest only loan for $6 million is going to run in the $35,000 per month range, so your income should be $90 to $100 K per month, or your trust account should pay that much. The pay option arm could drop the payment to about $10,000 a month . . . but you have to qualify at the full payment.

You can see how that $25,000 per month in your investment program could make a big difference over five years . . . as long as you're making money. Because unless you sell the house before your option payment period is over, you're deferring interest at the rate of $25,000 per month, too.

Send me an email if you've questions on any of these programs; in most cases we have solutions for the most complicated deals.

And, I wish you the best! I think we should all live in six million dollar houses.