Another week has gone by and it is time to look at some possible FB's. It has been a busy week and I'm ready for the weekend...how about you!?!??
Let's get moving...
How about the borrower I looked at this week that had 11 mortgages on his credit report. The broker told me it really wasn't that bad because they had just sold 3 of the places, and were buying one new one, so there would only be 9 mortgages when it was all done. The borrower had credit in the mid 600's. The problem is that the remaining 8 mortgages totaled well over 4 million combined. I could tell from the credit report that 4 were neg-ams, 3 were interest only, and 1 had actually been paid down several thousand dollars. How did I know they were neg-am? Easy, on a credit report there is a column that says loan amount, and then there is a column that says loan balance. If the loan balance is higher than the loan amount, then wallah! ...you know the borrower was making the neg-am payment. The other 4 mortgages were several months old, but the loan balances were the same as the original loans. Then there was the lone loan (ha ha) that actually had the balance paid down 10's of thousands of dollars. There wasn't really any way for me to know the LTV's of all those loans, but several of the loans were in the 600k-900k range and I assume they were in the 80-90% range. Aside from the problem that this person owned too many properties, and needing to do a stated income / non-owner occupied property / with I/O, they were also losing about 10k a month on the properties they were renting. Needless to say, I didn't need to get into all of the specifics with this one, as I knew I couldn't do the deal.
This situation took place not to long ago, and it is one of those situations where I was actually able to help an FB. There was nothing out of the ordinary with the file, except that they had a 1st, a 2nd, and a 3rd lein on the property. Ok, no big deal, the 2nd and 3rd were small loan amounts, there was plenty of equity, we'll just pay them off. Things got interesting when I got a call from my account manager on the inside. They informed me that when they pulled title, there were multiple (5+) hard money leins on the property! Somehow this borrower got behind on making payments to his hard money lender, so they just kept borrowing against their property to pay their loans. Fortunately for them, they had enough equity and a solid appraisal. It took some work on my part, but the deal made sense, and it really did help the borrower get back on their feet, and have a loan with a 'legitimate' lender again.
I looked at 2 loans today where the borrowers had the same problem...having 90-day mortgage lates, and then wanting/needing to refinance and pull 100k or more out. It doesn't take a rocket scientist to see what is happening when somebody can't pay their mortgage, and they want to refi, and pull out 100k or more. No matter what they say, what do you think they need the money for?!?!?
All in all, I'd say that activity is picking up some, but whether or not that translates into business is yet to be seen. Seems that people are waking up from the holidays and looking at credit card bills and the upcoming tax season. Seems that brokers are seeing mostly A-paper deals and some ugly subprime. I have gotten more calls this week than ever before with this question: "my borrower has a loan with your company, if they refinance it with you, will you waive the pre-pay penalty??" Unfortunately, the pre-pay penalty is generally there to compensate the investor, but there are some cases where lenders will make an exception, but not usually on the subprime side. It will be interesting to see how it all pans out.
I hope everybody has a great weekend!