As Texas moves towards full compliance with new national licensing laws,  Douglas Foster
Commissioner of the Texas Department of Savings and Mortgage Lending announces:

In a memo dated April 9,2010 that was sent to all participating lenders the agency said:

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.”  This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita.  Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.  Should you have any questions, you may contact the Single Family Housing Guaranteed Loan Division at (202)720-1452.

The agency ran out of funds in March last year (the funding year for Government programs ends in September) but the gap in funding was filled by the stimulus program.

Many end investors are already cutting off new applications. If you are a loan officer you need to check with your company’s secondary department or the investor that you have a broker relationship with to see if they are going to continue to accept applications.

It could be the end of the USDA Rural housing program for the rest of the year.

Net Branch – USDA Rural Housing

I always welcome comments, questions, and subscribers!

If you would  like to know more about our net branch partner program visit our Frequently Asked Questions page.

I have noticed that there are several “side businesses” trying to recruit loan officers.

By “side businesses” I mean companies that offer services like credit repair or loan modification.

My in-box is full of offers and I see recruiting ads everywhere.

These companies are trying leverage the loan officers ability to connect with a group of clients that could also be prospects for their business. This is common business practice and you can find this in many industries.

It does raises a few real important questions.

1. What is the best use of your time.

Should loan officers invest their time building their own origination business or become a referral source to help someone else build their business?

Should you spend your time finding credit repair leads or another type of mortgage or real estate related service for someone else instead of investing your time in developing a referral network that delivers you an ongoing stream of business?

Credit repair and loan modification are not bad things (although everyone has heard the stories of companies that charged for services and did not deliver much in the way of results) and these services could help some people in the long run.

But I think that the question is really about time, focus, and reward.

How much time do you have to spend, is the activity diluting your focus, and how much of a reward will you receive.

Based on time and reward I think anyone would be better off focusing on their core services. You will profit more by focusing on the activities that help your core business instead of diluting your focus by spending time and effort on an activity that does not generate revenue for your core business.

Ask your self the question. Am I a loan officer or a loan modification representative? If you have to decide – which one are you?

What ever your answer is that is what you should focus on. Any one who tries to be all things to all people will fail at all of them.

2. Is this legal?
If you originate FHA loans – in today’s environment almost everyone does – you could be in violation of HUD employment rules.

HUD says it is OK for a mortgage company’s employees to have other employment but it cannot be with another mortgage company, a real estate company or any other finance related company. Here is the exact wording from the HUD handbook “They may have other employment including self employment. However, such outside employment may not be in mortgage lending, real estate, or a related field.” You can find this in Chapter 2, Item 2-9, G (Full Time, Part Time and Outside Employment).

I think credit repair and loan modification would fit HUD’s definition of “a related field”.

Credit repair has been around for a log time but for most of the time that the industry has existed FHA played a minor role and most mortgage companies did not consider HUD rules for many of their practices and policies. That has changed. FHA now is the primary product at most mortgage companies.

Loan modification is a relatively new part of our industry. I do not think many companies have gotten that far yet to ask the question of their compliance department – “Does this violate the HUD employment rule?”

The HUD rules on employment are simple. It is only a few sentences and leave little room for misinterpretation. As an employee of a HUD approved mortgage company you cannot work for another mortgage company, real estate company, or any company in a related field.

If you are employed as a  loan officer and you  are also acting as a credit repair, and/or  loan modification agent to earn additional income you should question your compliance department to make sure you have their OK.

Get it in writing.

Lee Walsh

Instead of joining a net branch company to originate FHA loan wouldn’t it be better to get your own company approved by HUD to originate FHA loans?

In most cases the answer is no.

Let’s look at some of the costs associated with any mortgage company getting a HUD approval.

Broker – If your company is a mortgage broker and you want to originate FHA loans you need to be approved as a non-supervised loan correspondent (I know the way different groups in our industry use the same term to mean completely different things is confusing and frustrating).

The minimum net worth is $63,000 plus $25,000 for each branch office (up to $250,000). At least 20% must be in liquid assets at all times.

This requirement is not a deal killer for many companies. But to prove your company’s net worth you must provide audited financials. This can run from $2,000 to $5,000 and take months to complete.

Then there is the HUD process. Once you have obtained the required financials it can take 6 months or longer for the application to be processed. I have talked to companies that have had their application in for over 8 months without any action.

If you want to be approved as a lender (non-supervised mortgagee in HUD speak) the net worth requirement jumps to $250,000 with a 20% liquid net worth. Renewal can bump the net worth requirement to $1,000,000 depending on the company’s production volume.

** update 11/01/2009 – there has been a major change in the HUD rules sinc ethis article was published. The broker approval process will be discontinued and the net worth requirements for a lender  is being increased to $1,000,000.

This will make it more difficult to become a HUD lender and the approval process to do 3rd party origination will become tougher.

For a small independent mortgage company these requirements can be a burden to maintain.

After you clear the net worth hurdle you have the HUD compliance requirements to meet. This is a lot more than reviewing closed files to make sure that the signatures, dates, and terms are correct.

Although some companies use a third party compliance review company for this process and they only do the minimum required by HUD for the process they are setting themselves up for some real financial pain down the road. HUD usually requires 10% – 20% review. That means that companies that only review the minimum  are leaving 80% to 90% of their files in the unknown category when they ask the question how compliant is our company.

When you become a branch of a national company they take care of these issues. The parent company is responsible for the net worth requirements and they are responsible for the compliance requirements.

For most  branch managers their income relies on their personal loan production. If they have to spend the majority of their time on the non-production activities that small independent owners must focus on they are losing revenue. When you are not originating you are not making money.

Nothing is free. A branch has to bear some of the cost for these services but instead of one or two offices bearing all of the costs they are spread out through out the entire branch network.  Each branch has far less cost for these services than they would if they were operating as a small independent company.

With a net branch mortgage company the branch managers can spend their time on the activities that generate income.

I hope you found this information helpful.

I always welcome comments and subscribers!

In the past the ability to be both a broker and a lender was a valid option. Today although most companies still promote the available option to be broker or lender – in today’s reality that is not an option that is really available to you.

Why?

Because of a little rule that HUD has in place for FHA loans.

The HUD rule says your company has to either broker 100% or lend 100% on FHA loans. You company cannot “cherry pick” by allowing you to close some FHA loans as a lender and allow you to broker the loans they do not like.

Since the majority of loans closing are now FHA – the HUD rule is pretty much the rule of the day.

So with this in mind – which is better for a net branch opportunity -  Broker or lender?

Here are the pluses and minuses.

Lender: Pluses

• Close in your company name
• No disclosure of YSP
• Status of telling client you area lender
• Ability to work with in-house underwriters

Lender: Minuses

• Greater risk to company
• Must usually go through company underwriter not end investors
• Experienced FHA underwriters are very hard to find and keep
• Company warehouse limits can restrict or stop funding at end of month
• Limited investor options

Broker: Pluses

• Can use many different investors
• Work directly with investor
• direct wholesale pricing

Broker: Minuses

• Must disclose YSP
• Some states restrict mortgage broker fees
• Junk fees from investors can be a little  higher
• Wholesale investors are exiting the business

As you can see there is not a clear cut winner in this comparison.

You have to do your homework. You have to ask a lot of questions before you make a decision.

As a mortgage net branch manager your decision should be a careful one.

If you are talking to a company that does not want to take the time to discuss this important issue it should be an indicator that you have not found the right company to work with.

I try to present information about net branch opportunities in an impartial way. The main objective of this section of the site is to give facts about the net branch industry in general.

If you would like to know about the opportunity I can provide please contact me by clicking here.

Net Branch -  Mortgage Broker  -Mortgage Lender – FHA Net Branch

It appears that Ameritime Mortgage, based in Houston, TX and Residential Loan Centers of America, Des Plaines, IL have ceased lending. Their websites are down.

Ameritime Mortgage funded loans in over 40 states and offered branch opportunities in around 20 states. RLCA operated in 18 states.

Although it appears that the companies shut down for different reasons it still boils down to either their revenue model was flawed or their compliance practices were lacking in the majority of recent closings.

Branch managers were surprised by an email yesterday announcement to it’s large branch network that they are closing effective Tomorrow.

Although the branches will have about 30 days to clear out their pipelines this leave many in the lurch.

Acquired in 2002 by Empire Equity Group 1st Metropolitan was one of the largest branch operators in  the country. With well over 100 offices (In June of 2007 they had over 250 offices).

How can this happen to a company that less than a year ago was named one of the top net branch companies in the country?

It will be  a while before the full story of their demise in known but one of the major problems has to be their size. The biggest is not always the best. The bigger a company is the harder it is to keep a firm grasp on the practices of the offices in the network. It’s harder for home office operations to know what their operators are doing and it’s even harder to remember who is who.

For the managers and their staffs this will be a tough period. Many originators are starting to see some light at the end of the tunnel. Business is showing some signs of returning. They will have to find new homes quickly.

We are already in the process of  converting several of their successful offices and hope to bring a few more into our group.

If you are a branch manager with 1st Metropolitan feel free to call me direct to discuss converting your office over to our network.

To learn more about our branch opportunity please visit out website www.NetOriginator.com

You can also read the articles in this blog for information.

You can also call me direct at 407-459-4119.  If I cannot help you because we are not in your area I will be glad to help connect you with a reputable company that can help.

Lee Walsh
Branch Development
407-459-4119

*** 01-02-08 update.. I have heard several stories.. 1. that they are converting to a bank and are eliminating all smaller branch offices, 2. they have had audit problems with some states and investors and are downsizing  to regroup. 3.The other is that they are planning on merging with another company that requires each branch to close a high number of loans a month for acceptance.

No matter what the real story is – the branch managers that have to move quickly to find a home for new loans have some tough decisions to make in the next few weeks.  Fell free to contact me for any assistance that I can provide.

Loan limits on Fannie Mae, Freddie Mac, and FHA mortgages will be cut if we do not act now.

This news is important to all net branch companies. Congress passed two temporary laws (The Economic Stimulus Act ) earlier this year that raised the maximum loan amount eligible to be purchased by Fannie Mae and Freddie Mac or insured by FHA. When this limit expires on December 31, 2008, the loan limit in high-cost markets will be reduced by over $100,000. If the loan limits are decreased as scheduled this could have a profound negative effect on our nation’s housing market and would limit the availability of affordable mortgage financing at a time when it is needed more than ever.

The Economic Stimulus Act temporarily raised the high-cost loan limit to a maximum of 175 percent ($729,750) of the conforming loan limit of $417,000.  When this limit expires on December 31, 2008, the loan limit in high-cost markets will be reduced by over $100,000 to the Housing and Economic Recovery Act’s maximum of 150 percent ($625,500) of the conforming loan limit.

Unless Congress acts next week, the GSE and FHA loan limits in many markets will decline on January 1, 2009. If you believe that reducing the loan limits should not happen and you are in favor of keeping the new limits you should write your legislators (Congressman and two Senators).

To make it easier to contact your legislators the Mortgage Action Alliance has put a letter together for you to use, which you are free to edit.

The Mortgage Action Alliance Link

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
(To subscribe use the subscription button in the upper right of this page.)

Mortgage Net Branch -  Net Branch – Net Branch Opportunity

You need to be aligned with a company that is is in a good position to originate FHA loans and Reverse mortgages in your market and you can for the most part eliminate refinance out of your business model.

Refinance will not disappear completely but I believe you will see the numbers continue to drop.

With home values dropping home equity is going with it. Even the best markets have lost 20% – 25% equity. This greatly reduces the refinance market. With the problems Fannie and Freddie are facing FHA is going to be the primary source of mortgage funds in the short term.

If you are not with a company that is in good standing with FHA you should consider making a move.

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
(To subscribe use the subscription button in the upper right of this page.)

Up until 18 months ago most people would have said – not so much!

Today it’s another story. With the Fed take over of Fannie and Freddie comes a very strict requirement for the two agencies to cut their portfolios by over 60%. This will mean less lending and more restrictive criteria for both agencies.

That puts the focus on FHA to pick up the slack.

In the last 18 months many companies have seen their FHA originations increase 2 -3 times.

With the current and future increases in FHA production I don’t see any other path for FHA to follow other than to make it tougher for companies to get approved to do FHA business.

If you are considering a net branch opportunity you should spend a little extra time reviewing each company’s FHA history using Neighborhood Watch
and you should ask questons to determine how FHA loans are originated at those companies.

There are two basic models. Local in branch origination and processing or coporate processing of FHA loans.

Local means that your branch gets it’s own FHA connection number and you keep full control of the file from initial contact with the borrower all the way to funding.

Corporate means that after you take the initial application the file goes to a processing center to complete the loan process.

Before you join a company make sure their policy on the issue is in line with the way you want to do business.

As a net branch manager you should plan on FHA being an important of your business day for quite some time. Make sure you pick a compamy that meets those needs.