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andrewh1
56 Posts |
 Posted - 11/03/2009 : 2:04:30 PM
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Is the mortgage world gone completely crazy or is just me? I had a loan CTC on Friday, the title expired today so I sent in a revised title, only to get the loan denied. They are saying he taxes increase by $39 monthly as shown on the revised title, which increased his DTI by 0.4, so the underwriter re ran DU, and get a ineligible.. Now here is the best part. The rate I ran it at was the same rate I was closing it at and I could have gone up by 1% on the rate which would have increased his PITI by $200.
So I ask again, is the mortgage world gone completely mad or is it just me? |
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OHlo61
147 Posts |
Posted - 11/03/2009 : 2:07:31 PM
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Most of my lenders no longer allow us to raise the rate by the 1% that DU allows. That aside, what is the borrowers DTI with the increase of $39?
I always request the lender release the DU Findings back to me so that I can run DU. At least that way I can tweak it multiple times to see if I can get it to work. You know damn well the UW is running it once and calling it a day, even if there is a way to get it to work. |
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andrewh1
56 Posts |
Posted - 11/03/2009 : 2:09:36 PM
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| His DTI went from 49.5 to 49.9. |
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1stintegritymort
1781 Posts |
Posted - 11/03/2009 : 2:11:12 PM
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| Why don't you try lowering the rate to compensate for the higher DTI? |
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Edumakated
238 Posts |
Posted - 11/03/2009 : 2:25:09 PM
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no common sense... but this is what happens when you rely too much on computers to do the thinking. It took me awhile to understand, but the reality is that banks don't make loans that make sense. They make loans that make money. Many times, the loans that make money don't make sense as well. That .5% increase in DTI, no matter how irrelevant is the difference between a salable loan and a nonsalable loan.
I had a similar deal where the DTI was on the cusp and the loan would only work if he paid the loan down by $20k. DU seemed to be ignoring the fact that while the borrower's DTI was high (semi retired in private equity, so last year income looked low since he didn't work much) he also was worth about $4 million (2.5 mil in cash) and the loan was a $300k loan on a $800k 2nd home.
It is what it is... |
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just in kase
1512 Posts |
Posted - 11/03/2009 : 4:08:54 PM
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| push the dedectable up on the hazard policy, thus lowering the monthly policy. |
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The Truth
178 Posts |
Posted - 11/03/2009 : 4:31:55 PM
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| yep...that's how the business is these day and it *****. this is why (by choice) I don't do any local business or business for people I know...it's damn near impossible... |
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hmorales007
491 Posts |
Posted - 11/03/2009 : 9:24:34 PM
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a 50% DTI is too high. The max DTI on all loans should be 36% period. After you factor in taxes and expenses not factored in mortgage underwriting (taxes, gas, food, utilities, haircuts, car repairs and maintenance, auto insurance, auto registration, etc. etc.), a borrower with a "50% DTI" is typically in dire financial straights. The mortgage industry needs to calculate debt-to-income ratios like Federal Bankruptcy Guidelines. It is eye opening how many idiots "qualify" for an FHA home loan and bankruptcy at the same time. The real "DTI" is usually greater than 100% - hence the depression.
quote:
Originally posted by andrewh1
His DTI went from 49.5 to 49.9.
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peter
6464 Posts |
Posted - 11/03/2009 : 10:04:09 PM
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I had a similar experience with Wells and the funding was
aborted due to just a minor increase in homeowner's
insurance new policy at the PTF review. We had to
ask the borrower to pay off 1 small credit card, re-drew
loan docs, and finally lost the rate lock entirely.
We had to wait for 30 days, until Wells allowed us to re-lock
at a new rate -- and we were lucky that the rate went down
and we could re-lock at the same rate.
Just a "fly in the ointment" that delayed our loan closing
by more than 1 month, just because of a few hundred dollars
of the new insurance made the DTI a little more than 50%.
These days, if you want to fund loan, always think and
imagine the worst from any lender. "What if?" must be
constantly on your mind and be meticulous in your loan
processing and checking guidelines with lenders.
Basically, the more restrictive guidelines and the unwillingness
of banks and lenders to be flexible and apply the common sense
business principle that have killed many otherwise good loans.
It will get worse as foreclosures rise.
Peter |
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Ebby
36 Posts |
Posted - 11/04/2009 : 06:13:28 AM
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The problem is lenders have totally lost sight of the fact that there are human beings, with families, whose lives are being brutally disrupted by flip, inaccurate, and downright incompetent handling of their files. They look at your conditions, misread one, throw you back in the conditions line for another three days - they don't care that that small mistake on their part can play havoc on expiration dates of contracts, rate locks, etc.
When you throw in the fact that most foreclosure sales are handled idiots who don't know what they are doing either, it's a feat when anything closes.
I realize that lenders consider brokers slightly lower than whale ****, but they are ignoring the fact that we represent real people.
It's a very sad situation, one that will only rectify itself when more lenders are in the market, which will force them all to return to some semblance of customer service. Until then...we all just wait.
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johnnyboy38109
4357 Posts |
Posted - 11/04/2009 : 06:13:37 AM
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quote:
Originally posted by hmorales007
a 50% DTI is too high. The max DTI on all loans should be 36% period. After you factor in taxes and expenses not factored in mortgage underwriting (taxes, gas, food, utilities, haircuts, car repairs and maintenance, auto insurance, auto registration, etc. etc.), a borrower with a "50% DTI" is typically in dire financial straights. The mortgage industry needs to calculate debt-to-income ratios like Federal Bankruptcy Guidelines. It is eye opening how many idiots "qualify" for an FHA home loan and bankruptcy at the same time. The real "DTI" is usually greater than 100% - hence the depression.
quote:
Originally posted by andrewh1
His DTI went from 49.5 to 49.9.
We're not in a depression,not even close.
Look the definition, then get some stats.
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djorge44
3699 Posts |
Posted - 11/04/2009 : 06:38:08 AM
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| 50% is WAY TOO high in my opinion |
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Edumakated
238 Posts |
Posted - 11/04/2009 : 07:02:13 AM
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50% is way too high, but you also have to look at the context of the file as well. I have had a few files where the DTI was 50% due to technicalities, not necessarily because the borrower was living on the edge. Like in my example above, the guy didn't even need the mortgage ($300k mortgage, but $2.5 million in CASH), just carried it for the deduction.
Or you have cases where the co-borrower changed to 1099 or self employed and we can't use their income. Or even like now where you can use rental income on old property when buying a new home unless you have 30% equity.
The issue is that there is no UNDERWRITING, it is coloring between the lines and banks have removed the ability for people to make common sense decisions. |
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LO1003
446 Posts |
Posted - 11/04/2009 : 07:14:58 AM
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quote:
Originally posted by hmorales007
a 50% DTI is too high. The max DTI on all loans should be 36% period.
quote:
Originally posted by andrewh1
His DTI went from 49.5 to 49.9.
Are you kidding me? I bet you make all your borrowers put down 20% too. Your agents must love you and probably refer to you as "deal killer morales". |
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1003s.com
4157 Posts |
Posted - 11/04/2009 : 07:27:57 AM
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Gone Mad? I think __not.
Aside from the governments ill concieved
socialist plans to regulate the mortgage
industry. Making banks too big to fail,
even bigger, ETC, ETC,.
The mortgage industry is __more sane now,
than has been in the last decade.
A loan at 49% DTI made no sense to begin with.
So denying the loan later, actually made more
sense, than approving the loan, in the first place.
Replacing real underwriters with scoring models,
opened the door to a good deal of loan fraud
going undetected. I get the OP's point though,
the scoring model in the case of his
borrowers loan, seemed a bit arbitrary. |
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schapin12
79 Posts |
Posted - 11/04/2009 : 12:06:15 PM
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| She probably ran it as a cashout instead of limited cashout it happens all the time and you get approve/ineligible? Reserves right? it should go to 50dti no problem. Double check your facts see if there are any other payments that are out there and get your hoi reduced and redo or lower your rate a little |
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Jonas
1217 Posts |
Posted - 11/04/2009 : 1:53:08 PM
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| DTI's don't tell the whole story. The amount of discretionary income is the key. |
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1003s.com
4157 Posts |
Posted - 11/04/2009 : 2:07:16 PM
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quote:
Originally posted by Jonas
DTI's don't tell the whole story. The amount of discretionary income is the key.
A good point, however 49% DTI is too high, regardless how much
their discretionary income is. |
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johnnyboy38109
4357 Posts |
Posted - 11/04/2009 : 2:29:40 PM
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quote:
Originally posted by 1003s.com
quote:
Originally posted by Jonas
DTI's don't tell the whole story. The amount of discretionary income is the key.
A good point, however 49% DTI is too high, regardless how much
their discretionary income is.
I disagree, my learned friend.
Someone making half mill has 20k a month in discretinary with a 49% dti. |
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LO1003
446 Posts |
Posted - 11/04/2009 : 4:31:53 PM
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quote:
Originally posted by 1003s.com
quote:
Originally posted by Jonas
DTI's don't tell the whole story. The amount of discretionary income is the key.
A good point, however 49% DTI is too high, regardless how much
their discretionary income is.
Are you a LO or an owner? Why are you limiting the borrower on DTI's when the investor will go higher? I am a broker with a few investors that will still go to 50% DTI on a FHA loan. What am I missing here? Why would you deny the borrower their right to purchase higher under government guidelines? |
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Hopland
4119 Posts |
Posted - 11/04/2009 : 4:36:21 PM
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quote:
(taxes, gas, food, utilities, haircuts, car repairs and maintenance, auto insurance, auto registration, etc. etc.),
Maybe the borrower could sign an agreement stating he won't get a haircut for a couple of years. That would probably change the numbers. |
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Mandyvilla
6388 Posts |
Posted - 11/04/2009 : 5:20:49 PM
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In the past 60 days we have seen a massive constriction on credit guidelines. This is happening on our state bond programs, FHA and VA loans, and the few conventional loans, as well. What was easily making it at a 48% back ratio is now struggling at a 46%.
Even USDA investors are layering scores way tighter than what USDA will accept. I think I saw we just went to 660 minimum score on USDA across the board. If you thought the last year was tough, that was just the warm up. |
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1003s.com
4157 Posts |
Posted - 11/04/2009 : 8:10:15 PM
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quote:
Originally posted by LO1003
quote:
Originally posted by 1003s.com
quote:
Originally posted by Jonas
DTI's don't tell the whole story. The amount of discretionary income is the key.
A good point, however 49% DTI is too high, regardless how much
their discretionary income is.
Are you a LO or an owner? Why are you limiting the borrower on DTI's when the investor will go higher? I am a broker with a few investors that will still go to 50% DTI on a FHA loan. What am I missing here? Why would you deny the borrower their right to purchase higher under government guidelines?
Neither, I recruit branch managers. Borrowers can't afford payments at 50% DTI.
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KHufford
10407 Posts |
Posted - 11/04/2009 : 8:31:08 PM
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quote:
Originally posted by 1003s.com
quote:
Originally posted by LO1003
quote:
Originally posted by 1003s.com
quote:
Originally posted by Jonas
DTI's don't tell the whole story. The amount of discretionary income is the key.
A good point, however 49% DTI is too high, regardless how much
their discretionary income is.
Are you a LO or an owner? Why are you limiting the borrower on DTI's when the investor will go higher? I am a broker with a few investors that will still go to 50% DTI on a FHA loan. What am I missing here? Why would you deny the borrower their right to purchase higher under government guidelines?
Neither, I recruit branch managers. Borrowers can't afford payments at 50% DTI.
Well DU approvals are changing to 43% (I think its 43) very soon, no more 50% anyway....can you say more home values declining?
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1003s.com
4157 Posts |
Posted - 11/04/2009 : 9:22:08 PM
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quote:
Originally posted by johnnyboy38109
quote:
Originally posted by 1003s.com
quote:
Originally posted by Jonas
DTI's don't tell the whole story. The amount of discretionary income is the key.
A good point, however 49% DTI is too high, regardless how much
their discretionary income is.
I disagree, my learned friend.
Someone making half mill has 20k a month in discretinary with a 49% dti.
John, I see your point, 20K a month discretionary income sounds
like a lot. However, the tax man takes a bigger bite on income
that large, and should the borrower lose their job, higher income
jobs, often take far longer to replace. To make matters worse,
high income borrowers, often live in custom homes, that
decline much more in value during an economic down turn.
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Coffee Is 4 Clos
1739 Posts |
Posted - 11/05/2009 : 06:15:53 AM
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| Geeze... almost half of my deals a month are over 50DTI. I just closed a FHA deal at 55DTI with US Bank the other day and conventional deals all day long at 50+ (of course 80 and under ltv). I dont have an issue with high dti deals depending on the income of the borrower.. someone at 50dti that only makes 50k per year is not going to have the same disposable income as someone who makes 100k at 50dti.... thats the difference for me and most of my customers make 100k+ in gross income |
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miramar
30 Posts |
Posted - 11/05/2009 : 09:24:51 AM
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I will say first and foremost, I am in conflict on this one. I regularly close loans above 50% dti. I will say that most of these only include one person in the households income which makes me feel better. But, if you really sit down and do the numbers on a normal person, over 40% dti is too high. Take John Doe making $60,000 a year. Federal taxes are 22%, add social security, state, and local taxes, he is probably paying around 28-33% or more in income taxes alone. His $60,000 is now $43,200 if you use the lower rate of 28%. His cell phone, cable, internet, electric, and water probably run him another $300 a month. $39,600. Now, he still has food, gas, medicine, oil changes, hair cuts to pay for. $500 a month on the low side. $33,600. Auto insurance and health insurance, $300 a month. $30,000. If you allow a 50% dti, he is now a zero sum game. If he has one unexpected expense, he is under water.
Granted, some people may have lower expenses, but most spend more. You haven't factored in clothes or any other perk like a gym membership, capuccino, manicure, dinner out. This is a scenario that is almost guaranteed to put someone in debt. When they hit their limits, what happens?
Before you get mad that you couldn't get a 50% dti loan through, think about the ramifications that loan may have. You think it ***** now, let's keep making the same mistakes and see where it gets us. Yeah, you might be working with someone that has a ton of disposable income. If they have managed their money that well, what is the harm with putting a little more down to get their payments in line? Maybe they make all that money and don't have any savings. What does that tell you? For those that have people with lower incomes and tons of money in reserves, those are one of the few deals I feel for right now. Other than that, I guess I really can't balk heading back toward the days of 20% down, good credit, and low dti. I want to see this country back on track, not just figuring out how to push the train from point A to B. |
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lemeuss
1862 Posts |
Posted - 11/05/2009 : 09:36:16 AM
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quote:
Originally posted by hmorales007
a 50% DTI is too high. The max DTI on all loans should be 36% period. After you factor in taxes and expenses not factored in mortgage underwriting (taxes, gas, food, utilities, haircuts, car repairs and maintenance, auto insurance, auto registration, etc. etc.), a borrower with a "50% DTI" is typically in dire financial straights. The mortgage industry needs to calculate debt-to-income ratios like Federal Bankruptcy Guidelines. It is eye opening how many idiots "qualify" for an FHA home loan and bankruptcy at the same time. The real "DTI" is usually greater than 100% - hence the depression.
quote:
Originally posted by andrewh1
His DTI went from 49.5 to 49.9.
My DTI figured out in mortgage terms is likely above 50% BEFORE taking into account groceries, utilities, etc. My actual DTI if you consider all of that is probably about 90%
I live comfortably, am getting my savings going, and stopped using credit cards (paying extra on all my bills). There are A LOT of borrowers who have the same situation, extra income coming in, unuseable commission, etc.
Our job and what I think is our ethical duty is telling someone what their payment is, exactly, and making sure they realize that their mortgage payment is a responsibility. Beyond that, leave it to the program guidelines. |
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1003s.com
4157 Posts |
Posted - 11/06/2009 : 06:53:39 AM
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quote:
Originally posted by miramar
I will say first and foremost, I am in conflict on this one. I regularly close loans above 50% dti. I will say that most of these only include one person in the households income which makes me feel better. But, if you really sit down and do the numbers on a normal person, over 40% dti is too high. Take John Doe making $60,000 a year. Federal taxes are 22%, add social security, state, and local taxes, he is probably paying around 28-33% or more in income taxes alone. His $60,000 is now $43,200 if you use the lower rate of 28%. His cell phone, cable, internet, electric, and water probably run him another $300 a month. $39,600. Now, he still has food, gas, medicine, oil changes, hair cuts to pay for. $500 a month on the low side. $33,600. Auto insurance and health insurance, $300 a month. $30,000. If you allow a 50% dti, he is now a zero sum game. If he has one unexpected expense, he is under water.
Granted, some people may have lower expenses, but most spend more. You haven't factored in clothes or any other perk like a gym membership, capuccino, manicure, dinner out. This is a scenario that is almost guaranteed to put someone in debt. When they hit their limits, what happens?
Before you get mad that you couldn't get a 50% dti loan through, think about the ramifications that loan may have. You think it ***** now, let's keep making the same mistakes and see where it gets us. Yeah, you might be working with someone that has a ton of disposable income. If they have managed their money that well, what is the harm with putting a little more down to get their payments in line? Maybe they make all that money and don't have any savings. What does that tell you? For those that have people with lower incomes and tons of money in reserves, those are one of the few deals I feel for right now. Other than that, I guess I really can't balk heading back toward the days of 20% down, good credit, and low dti. I want to see this country back on track, not just figuring out how to push the train from point A to B.
Some good points Miranda. For most folks, anything over a
30% dti is really living on the edge. |
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nw@8brook
538 Posts |
Posted - 11/06/2009 : 07:27:17 AM
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| I guess nobody looks at disposable income, payment shock anymore. Those will give you a much better picture about the borrower's ability to make the mortgage payment than anything else. e.g., if a borrower's current rent is already put him into a 50% dti ratio, got tons of reserves, you know he has other sources of income that he's not disclosing. |
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LO1003
446 Posts |
Posted - 11/06/2009 : 07:34:43 AM
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| I say we start a petition to get all the lenders to decrease the max DTI to 36% and increase the minimum down payment to 20%. WTF are you guys talking about? The subject line of this post should be changed to "Have the mortgage brokers gone mad?? |
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tropixman
362 Posts |
Posted - 11/06/2009 : 08:13:46 AM
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| Easy fix...just pay something off/or down, find cheaper home owner's insurance, or lower the rate/adjust loan amount and keep on moving to the next file. |
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Broker G
352 Posts |
Posted - 11/06/2009 : 12:42:22 PM
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quote:
Originally posted by Mandyvilla
In the past 60 days we have seen a massive constriction on credit guidelines. This is happening on our state bond programs, FHA and VA loans, and the few conventional loans, as well. What was easily making it at a 48% back ratio is now struggling at a 46%.
Even USDA investors are layering scores way tighter than what USDA will accept. I think I saw we just went to 660 minimum score on USDA across the board. If you thought the last year was tough, that was just the warm up.
All the lenders that I use for USDA loans or still @ 620 credit scores. |
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1003s.com
4157 Posts |
Posted - 11/06/2009 : 12:43:29 PM
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When I started in the mortgage business, lack of
payment shock, was something the LO used to justify
a __really high dti, like __36.
Lending at 50% dti is madness, as was the 95-100% LTV
NINA loans on NOO properties, ETC.
While the mortgage meltdown was caused in part by
high LTV lending in boom areas like CA,FL,AZ,and NV.
Plenty of 50% plus dti loans are now in default in states
where values remained more stable.
Lawmakers, efforts to limit or eliminate broker
compensation, YSP, HVCC, ETC, are all
misguided. The real cause of the mortgage meltdown,
was funding loans that made no sense. Borrowers
required to have large down payments, lower
dti's, under 25% and 6 months plus PITI reserves
generally will not cause bank losses in stable
housing markets. The financial system needs to
have integrity, if the dollar is to remain, the
currency of choice in the free world.
Lending practices are at the core of the
financial system. |
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peter
6464 Posts |
Posted - 11/06/2009 : 2:43:07 PM
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Even the borrowers who got their loans with less than 45% DTI can be
in trouble now, as unemployment rate has now gone up to 10.2%. Many
are just working part-time, due to cutbacks by employers, or had to
accept salary cuts to keep their jobs. The self-employed that used
to have qualifying income with DTI less than 40% have seen their
incomes dropped significantly, i.e. realtors, contractors, etc. and
would not even have 60% DTI today if they were to apply for refinance
loans.
In addition to the debt ratio which should be less than 45%, the liquid
savings to pay for the mortgage for at least 6 months should be built
into the DU version 8. Indeed, these days, people can be unemployed
for a longer period, i.e. more than a year, or can get re-employed at
a much reduced payscale. Indeed, a measure of liquidity should be
more stringent up to 1 full year of PITI really.
Peter
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jstar
1230 Posts |
Posted - 11/06/2009 : 3:57:28 PM
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| The short answer to this question is..... YES |
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Mandyvilla
6388 Posts |
Posted - 11/06/2009 : 4:19:48 PM
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quote:
Originally posted by Broker G
quote:
Originally posted by Mandyvilla
In the past 60 days we have seen a massive constriction on credit guidelines. This is happening on our state bond programs, FHA and VA loans, and the few conventional loans, as well. What was easily making it at a 48% back ratio is now struggling at a 46%.
Even USDA investors are layering scores way tighter than what USDA will accept. I think I saw we just went to 660 minimum score on USDA across the board. If you thought the last year was tough, that was just the warm up.
All the lenders that I use for USDA loans or still @ 620 credit scores.
Keep your eyes open. No announcement was made, it just suddenly disappeared off our daily rate sheet. Further inquiry proved, sure enough, no longer available. |
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1003s.com
4157 Posts |
Posted - 11/06/2009 : 4:25:40 PM
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quote:
Originally posted by peter
Even the borrowers who got their loans with less than 45% DTI can be
in trouble now, as unemployment rate has now gone up to 10.2%. Many
are just working part-time, due to cutbacks by employers, or had to
accept salary cuts to keep their jobs. The self-employed that used
to have qualifying income with DTI less than 40% have seen their
incomes dropped significantly, i.e. realtors, contractors, etc. and
would not even have 60% DTI today if they were to apply for refinance
loans.
In addition to the debt ratio which should be less than 45%, the liquid
savings to pay for the mortgage for at least 6 months should be built
into the DU version 8. Indeed, these days, people can be unemployed
for a longer period, i.e. more than a year, or can get re-employed at
a much reduced payscale. Indeed, a measure of liquidity should be
more stringent up to 1 full year of PITI really.
Peter
Peter, that is a good point about the self employed.
I did a loan many years ago for a couple that owned a
restaurant. In todays dollars, they pulled down
well over .500 MIL per year. They had a LTV
of less than 30%, a dti of about 5 % and
over 200K in the bank. They wanted to
go with a 30 year fixed, because they
felt the payments required for a 15 year
fixed were too high, should their business
decline in the future. They drove old
cars, and did their own yard work.
If more people managed their money
like them, this country would be better off. |
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Broker G
352 Posts |
Posted - 11/07/2009 : 07:09:10 AM
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quote:
Originally posted by Mandyvilla
In the past 60 days we have seen a massive constriction on credit guidelines. This is happening on our state bond programs, FHA and VA loans, and the few conventional loans, as well. What was easily making it at a 48% back ratio is now struggling at a 46%.
Even USDA investors are layering scores way tighter than what USDA will accept. I think I saw we just went to 660 minimum score on USDA across the board. If you thought the last year was tough, that was just the warm up.
For Ratio Waiver request by lender and the credit score is 660 or above no compensating factors are required. If credit score is below 660 compensating factors must be documented. This is where the 660 topic come from.
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benjamin
6964 Posts |
Posted - 11/07/2009 : 07:38:33 AM
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| Things are just Peachy around the Great Lakes. |
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