Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
As the title indicates, I do have a point to make. Although in the mortgage business when a banker says they want to “make a point,” it’s usually not something a client wants to hear. Typically, “a point” is a fee charged to the borrower which represents 1% of the loan amount. In private mortgage lending, for example, rates and fees are significantly higher – and loans can be made for upwards of 12-14% interest rate plus charges of 2-4% in “points” for challenging circumstances.
With all that said, that is not “the point” I am referring to. About two weeks ago, I received an email from an attorney who told me that he gave my contact info to one of his clients. I immediately replied to him that I very much appreciated the opportunity, and will await their call. Within seconds of me clicking “send,” my phone was ringing – and it was the Attorney. He wanted to give me a heads-up about these clients. Without going into details to protect their anonymity, even though they are not within the community, he explained that this was a second marriage for both, after a few very difficult years.
As for the scenario, these applicants inherited a home, which is great, but it is proving to be more heartache than they could have ever imagined. While the home they inherited was unencumbered (free-and-clear) of any mortgages, there were a few old liens on title, and delinquent real estate taxes covering several years. The estimated cost to pay those off was close to $60,000 before calculating interest and penalties. In addition, they have to do approximately $120,000-$150,000 in repairs to get the house to where it needs to be. Mind you, they already put in about $40,000 in repairs thus far – money which they didn’t have, and had to take out some kind of home-improvement loan which they have been paying since November. The monthly charge on that loan was stomach-turning. Not to mention the “points” they had to pay that loan-shark company to get that loan for them in the first place.
Both applicants work full days, and they were insistent on meeting me in person as late as possible in the evening, which was easy enough to accommodate. Within two minutes of our meeting the woman broke down. She said they have been going in circles for the past two months and have not been able to get approved for any kind of financing. She brought with her a proposal from another home improvement company for the exterior work to be done in the amount of $80,000. I calculated the payment that this company was proposing to charge them, and it seemed like the interest rate on this loan would be over 17% annually. Granted, that might be cheaper than some credit cards out there, but it was still incomprehensible. I ran their credit and saw what I was up against. The husband had excellent credit, but not enough income to qualify for all the funds they needed. The wife’s credit wasn’t the best, to say the least.
We discussed a few of the loans that I saw on their report that I didn’t understand. Several of them were for financing previous home repairs, while others were incurred trying to consolidate debts. They were working with a mortgage broker who “tried as hard as he could” but after several months, and several attempts, was not able to get them a mortgage. Unfortunately, they made financial plans and contingencies based on getting the mortgage, and they were up against the clock with bills and work that needed to be handled. Contractors were chasing them, the home was becoming uninhabitable, and time was running out. I left them in the conference room for a few minutes while I went to crunch some numbers, and think things through.
I came back in the room with a pre-approval for more money than they were anticipating. They didn’t understand. How could I approve them for more of a loan, when two previous companies weren’t able to do anything? I expounded on my strategy. I explained, that part of the reason I wanted to give them more money was because I was going to consolidate two of their improvement loans, and one of their high-balance high-rate credit cards which would save them an additional $800 a month. They were ecstatic. I broke up the celebration with “the catch.” The great offer that I was proposing had one contingency. They needed to get “a point.” “Huh?!” Again, not “the point” you think. I noted that their credit-score was one point shy of being eligible for my specialty-loan program. I highlighted one small account that they recently opened which was “maxed out” at the $1,500 credit limit, and told them to pay that down as much as they can, as soon as they can. I gave them two other ideas, which I am happy to “point out” to anyone interested by calling me directly. Long story short, we expect this approval in the next few days, and in the end, I expect the terms to be even better than I promised. I hope my point is clear. A little time, a little patience and a little creativity is sometimes all that is needed.
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