In marketing, advertising and testimony before Congress, Countrywide Home Loans has said repeatedly that it is working hard to modify the mortgages of financially strapped borrowers caught up in the subprime meltdown. But in a New Hampshire court, attorneys for the lending giant are singing a different tune, describing such assurances as “mere commercial puffery.”

Saying the modification offers are “only Countrywide’s vague advertisements,” attorneys for the lender are asking the court to throw out a lawsuit alleging breach of good faith, fraud, negligence and misrepresentation, which was filed on behalf of a family that was refused a loan modification by the California-based company.

Candor is much need these days.

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Mike is THE MAN Shailesh and I have gone to for mortgage advice, input, information, help and coaching in the last 4 years. He is amazing. Not only does have a TON of experience and knowledge (over 20 years in the industry), but he is actually a great guy. Someone you’d want to hang out with after work and have a beer with.

So, without further ado… I interviewed my new partner, Mike Moshofsky for this blog to better introduce him to the online community.

Question: What makes you different from other lenders?

Answer: I am different from other lenders because of my knowledge, experience, integrity and work ethic. I personally have over 25 years of mortgage experience and a thorough knowledge of mortgage lending including FHA, VA, USDA Rural housing and conventional financing.  This experience and knowledge helps me identify potential problems early in the process and avoid these problems or solve them so we don’t have last minute surprises.  I believe in sprinting to the finish line and waiting for everyone else. Stress is eliminated when my documents are delivered to title well in advance of the close of escrow.  This makes happy buyers, and brings repeat clients and multiple referrals.

What characterizes you?

Integrity and honesty are my strongest characteristics.  The agents I have worked with for years know  they can count on me every time.  When I say something will happen they can rest assured it will.  My goal is to provide my agents and clients a quick approval that they can count on.  However, I believe a fast “no” is better than a slow “no”.  If a transaction has no chance, everyone would prefer  to know on day one, and not on day 31.

What about your work ethic and loyalty?

I work long hours Monday through Friday and am typically in my office working for my agents and clients from morning till night.  I am not the loan guy that spends all his time getting new agents and clients only to mess up the transaction so they have to go find other referral sources.  I want to take care of the referral sources I have.    That is my idea of a marketing plan.

What are some of your motto’s in this business?

A fast No is better than a slow No.

Under promise and over deliver.

If you think it is expensive to work with a professional, wait until you find the cost of working with someone that is not.

You have to know what you don’t know.  If you are not positive on an answer, get clarification.  Guessing is very expensive.

Never, Never, Never miss a close of escrow.

What advice would you give potential home-buyers and their agents when they are hunting for a mortgage professional?

There are many excellent loan officers out there.  The problem is there are also many unqualified loan officers and it is often hard to tell the difference.  Many sound great, but do not deliver.  My advice is to ask your Realtor for a referral of someone they have had positive results from in the past.  The Real Estate Agent wants you to work with a professional that consistently delivers quality service at a competitive price.

What do you love about this business?

I love figuring out ways to close mortgages that other said were impossible.  I love dealing with first time homebuyers and their energy and excitement when they get the keys to their first home.

What do you hate about this business?

I hate the fact that there are so many non-professionals in the industry.  I believe we need to have licensing, required training and be held to a higher standard.

—

I look forward to working with Mike during this time of change for me and my family. I plan on working until the day I give birth and then afterward will take some time off. I will be accessible through eMail a few weeks following the birth, but will not be back in full time action until 2 months. I really appreciate Mike stepping in and helping out during this time.

To contact Mike, please use the following methods!

E-mail: mmoshofsky@primelending.com

Direct: 480-346-8383

Cell: 480-332-8545

Fax: 866-908-6596

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This is quite a turn of events for everyone. I know several colleagues in the mortgage and title business who have left, not to mention the real estate agents who are no longer “practicing”. So, this mornings experience was an isolated event. Over the past two months I have been contacted by many real estate agents across the country seeking a quality lender for their borrowers. After being hounded by loan officers and title reps for the greater part of their careers it must be unnerving for a real estate agent to not have several reliable loan officers and title reps as business partners.

So, if you are one of those agents then I want you to know that Aimee and I are still here, while almost 50% of loan originators have left the industry. We’re still closing loans and we’re still helping borrowers make the biggest financial decision of their lives. Just to introduce ourselves to you, here are a few links that might you learn more about us:

• About Aimee and Shailesh (pronounced “sai-lesh”)
• Testimony from past clients
• Our 2007 Customer Satisfaction Rating

We are FHA and VA approved lenders and as a national mortgage broker/banker we have access to all loan programs in the industry. Most importantly we’re here and we’re here to stay!

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The guidance doesn’t compel lenders and the investors who buy loans to restructure the loans — but it puts an added burden on them to try to do so, while clarifying that they shouldn’t face negative tax or accounting implications from such restructuring. The statement was issued by the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration and the Conference of State Banking Supervisors.

The WSJ story also said it’s unclear how many would benefit from restructuring loans. Given the sheer number of ARM’s (in excess of 1 million) which will reset in the next year or so this should have a significant impact.

It is a make sense idea in my opinion. From the lenders perspective taking a smaller loss as opposed to  having to write off the entire loan may make sense. Same goes for investors. However, these companies appear to be concerned about the tax consequences. That should be no problem to  Uncle Sam though, all they have to do is add one more page to the 60,000 + pages in the current tax code.

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The premise of the post is that many of the Truth in Lending Disclosure for 2/28 ARM Loans (sub-prime) did not adequately document the actual interest rate, payment and cost of the mortgage over the loan term. This is a direct violation of many state and federal lending laws. In the authors own words:

Let me put on my lawyer hat for a moment: The Truth-in-Lending Act requires “clear and conspicuous” disclosure to borrowers of the key provisions of their mortgages. This includes such details as the eventually reset interest rate, specific loan terms, and the total dollar amount the mortgage will cost over time:

And lawyers for borrowers losing their homes are very aware of this noncompliance of existing laws:

This seems to be where many of the subprime 2/28 ARMs ran afoul: They failed to meet the disclosure laws regarding actual interest amounts and payments.

Who has gotten tagged with these cases so far? Subprime lender NovaStar Financial Inc. (NFI) in Kansas City settled a class action suit for $5.1 million. And, consumers in Wisconsin recently won a class-action TILA suit (its under appeal).

Go over to the article and read the whole thing. It makes you wonder what everyone was thinking, especially those buying and selling mortgages. Aren’t they supposed to be reading this stuff?

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What is a consumer to do? If you have any loans in process right now it’s a good time to check with your lender to make sure everything is on track. As long as the loan is locked it should be okay. However, moving forward that may not always hold. In fact Brian Brady, a veteran mortgage professional in California is advising mortgage brokers to lock with two lenders - just in case. As a broker we can do this even though it may not be fair to the good lenders, as Brian points out.

Countrywide is the nations number one home mortgage lender. So, anything bad on that ship sends waves that could even rock Fannie and Freddie. The market knows that both Fannie and Freddie will not crash because they have the full faith and commitment of the Federal government behind them.  However, this is not to say that loan guidelines can not change over night and become more restrictive. From what I know they are not thinking of any changes but the way the market changes you never know.

Below are some notable market news from MarketWatch and LA Times:

• Fed cuts discount rate to 5.75%
• Moody’s downgrades 691 mortgage-backed securities
• NovaStar Financial to cut 37% of workforce
• A rush to pull out cash (LA Times)

Stay tuned. I’ll have some more information and analysis on the mortgage market as it becomes available.

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Last week, Sen. Hillary Clinton came out with a plan to address lending abuses. One of its main policy planks was to “crack down on unscrupulous brokers.”

As head of the Senate Banking Committee, Dodd has been more out front of the issue than other candidates, leading several hearings to investigate the subprime mortgage crisis.

Sen. Barack Obama has introduced legislation targeting fraud and predatory lending.

The best response to the attacks is from Brad Inman:

Brad Inman, publisher of Inman News, an on-line chronicler of the real estate industry, said, “I find it odd that mortgage brokers would carry the weight of blame for this entire web of sins.”

According to Inman, the loans originated by brokers wouldn’t have been offered to consumers if Wall Street wasn’t ready to buy them to sell on the secondary markets.

Who are we kidding here? The greed cycle started on Wall Street and it should end there. I may be doing home loans but I’m not the one setting the rates and making credit easy. The Fed made that choice after 9/11. Back then Alan Greenspan himself conceded that he didn’t know what the consequence of easy credit would be.  Well the wreckage is all around isn’t it Mr. Genius?

From a mortgage brokers perspective it was dizzying how many wholesale reps used to come by our offices offering stated income 100% with 560 FICO scores.  I mean girls in tight skirts and lots of makeup with multiple lunch offers. All they wanted was a name, address and social security number. The rest didn’t matter. I’m serious. (Some didn’t even require a social security number.)

Now, who benefited from all this? The mortgage broker had a heck of a few years but that is peanuts compared to the money passed around on Wall Street. I’m sure lots of bonuses were paid and many in management bought boats and luxury apartments. Where are these people? Who are these people? If this is such an injustice then why are they still walking free? What did they know and when did they know it?

Don’t get me wrong, the industry is not innocent, but the people most responsible for the mess are wearing suits in New York and Washington. We the little guy just got caught up in the euphoria.

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House Bill 2040 would make deliberate misrepresentations to lenders — such as inflated appraisals or falsified borrower incomes used to obtain loans that exceed a home’s true worth — class four felonies, punishable by up to three years in prison.

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Why the panic here in the US? Well, the Japanese are the most enthusiastic buyers of US Mortgage Bonds. There has been a phenomenon lately called the “Yen carry-trade” where investors borrow money in Japan at very low interest rates and buy US Mortgage bonds paying much higher returns. In recent years these investors have made a comfortable return on their money with very little risk.

The first shock in the carry-trade came earlier this year with the continuing weakness of the dollar. A weak dollar ate directly into the spread. If the Japanese central bank raises rates in August, it will further eat into the spread and slow Japanese purchase of bonds. This weakening in demand will translate into higher interest rates.

Not everything happens so neatly, but there is a clear possibility and my hunch is rates will rise a bit more yet before peaking. Here is some more detailed analysis.

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There are many reasons why the market is beating down on bonds and in a global economy, foreign markets are driving much of the action. As CNNMoney is reporting, the US bond market is feeling the jitters because the major economies are all raising interest rates:

From Canada to England to Japan, central banks around the world have been raising rates amid growing concerns about inflation.

How does this affect US bonds? Well, for one thing now global investors can park their money elsewhere and get a decent return, the US is not the only place. We have already been seeing a drop off in demand for US bonds and it’s not getting any better. Less demand for US bonds translates into higher bond yields (interest rates).

I expect the 30 Year fixed rate to take a great leap forward towards 7.00%. What does this mean for consumers? On a $200,000 loan a 0.5% increase in rate results in a
$66 increase in payment. Looking at it another way if a borrower felt comfortable with a $1,200 monthly payment they would have qualified for a $200,000 home. With a 0.5% increase in rate they now can only qualify for a $190,000 home. It can be a pretty big difference in a market like Phoenix. Of course the higher the purchase price the larger the changes to purchase price and monthly payment.

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