2015 update to The Credit Road Map

I am finishing up a major revision to The Credit Road Map for 2015 and sending it to the printer in June so the revised book can be delivered by the end of June to everyone who buys it as a presale. If you have any suggestions on what you would like to see in the book I would love to hear your input. You can learn more about the updated book project here and check out the presale rewards: http://creditliteracyproject.com/the-credit-road-map-2015/

Here is what I have changed in the book so far:

- The original book has 231 pages, right now 120 pages have updates and the new release will be between 275 – 300 pages.

- In-depth examples of credit reports and the correlating credit score to give a more hands on approach to how the contents of a credit report produce a particular score. I have a generic credit report format I will be plugging examples into. We will cover FICO scores from 500 up to 800. Visually demonstrating how the information in the book ties into actual reports and FICO scores will be a huge addition.

- Deeper look at 800 FICO score credit reports and breaking down how the FICO score was achieved.

- Step-by-step actions and timeframe of a FICO score improvement from high 500 range to high 600 / low 700 based on real examples.

- Recovery from foreclosure, bankruptcy and short sale.

- More credit scenarios, the composite stories of the issues people come to me with and what I see on credit reports daily.

- How to make the mortgage process easier by learning from the mistakes of others and what not to do leading up to and during the process.

- More legal references to court cases impacting consumer credit rights under the Fair Credit Reporting Act and references to court decisions since the last release in 2007.

- And much more!!

If you make a presale purchase before April 30th your name will be listed on the supporters page in the book with a big thank you from me. Here is a link to the presale page, click any reward to be taken to the online shopping cart: http://creditliteracyproject.com/the-credit-road-map-2015/

Here is a link to the shopping cart: http://creditliteracyproject.com/purchase-book/

If you have any questions feel free to contact me anytime via email or on my cell phone.

Agency CE at Lake Havasu Association of REALTORS April 21st, 2015

GRI Finance at Lake Havasu Association of REALTORS on April 20th, 2015

Thoughts on Dodd-Frank Seller Financing

A question that comes up often in my Dodd-Frank classes is: Can a seller carry financing on a house without getting in trouble?

There are a few components to consider in that question:

• Is a license needed?
• Does ATR apply?
• Is the financing transparent to the buyer/borrower?

This is not meant to be legal advice, just educational observation of points one should probably consider. Always begin any discussion regarding this topic that sellers doing financing should have a conversation with the attorney who would represent them in the worst case scenario of being pursued under the Dodd-Frank Act, because from a legal analysis standpoint we are missing a major leg to the stool, which is legislative intent as decided by a court. We can only go with the words the law states, and interpretation by the Consumer Financial Protection Bureau (CFPB), along with how the CFPB chooses to enforce.

However, that doesn't mean the CFPB will always be correct in interpreting the application of Dodd-Frank, think back to your high school government class: checks and balances in federal government.

The executive and the legislative branches have been heard, but the judicial may have a say at some point. We are missing the case law needed for a complete legal analysis, the law is too new, but case law will slowly come.

 

For example, the Federal Trade Commission (FTC) has been on the wrong side of the court opinion in interpreting the Fair Credit Reporting Act. Just because the federal agency tasked with enforcement says "this is the way it is," sometimes a court says, "sorry federal agency, but you are mistaken." The FTC has been in that position occasionally, but not often. Recently the Equal Opportunity Employment Commission (EOEC) was shot down by a district court in a case against Kaplan Higher Learning, alleging the use of credit reports in employment background checks was a form of discrimination (Case: 1:10-cv-02882-PAG). The court sided with Kaplan over the EOEC. Case law will unfold on Dodd-Frank as it pertains to licensing and ATR, it will work its way through and up jurisdictions, and maybe one day we will see it as a case before the Supreme Court. Or maybe we won't and we are overthinking the seller carry issue, but it is always safer to analyze the worst case scenario when possible.

The CFPB may find itself experiencing the same judicial findings at some point. What we know is that courts have not weighed in yet on interpretation to the extent we are bound to see in the future.

 

That being said, the first question is whether the seller is even considered an originator:   12 CFR §§ 1026.36(a)(4) and (a)(5) suggests limited extension of financing probably excludes a seller if they doing less than 3, or only 1 loan a year.

 

See all of page 144 - 145, but CFPB response is ATR applies to creditors originating more than 5 loans in a year

 

http://files.consumerfinance.gov/f/201301_cfpb_final-rule_ability-to-repay-preamble.pdf:

 

From CFPB: The Bureau received numerous letters from individuals concerned that the rule would cover individual home sellers who finance the buyer’s purchase, either through a loan or an installment sale. However, because the definition of “creditor” for mortgages generally covers only persons who extend credit secured by a dwelling more than five times in a calendar year, the overwhelming majority of individual seller-financed transactions will not be covered by the rule. Those creditors who self-finance six or more transactions in a calendar year, whether through loans or installment sales, will need to comply with the ability-to-repay provisions of § 1026.43, just as they must comply with other relevant provisions of Regulation Z.

 

The points above give the appearance that this stuff may not apply to the individual seller acting within the published limits, but there is one more angle, and that is of the Small Creditor provision for a lender doing 500 or less loans a year, they can do balloons until 2016, at which time only rural small creditors will be able to do balloons, but in order to do balloons under this provision all other QM requirements have to be met, and the balloon could not be less than 5 years it appears, here is the chart:

 

http://files.consumerfinance.gov/f/201308_cfpb_atr-and-qm-comparison-chart_V2_final.pdf

 

On June 12, 2013, the Bureau published a final rule amending the Ability-to-Repay Rule (78 FR 35430). Among other things, the final rule adopted §1026.43(e)(6), which provides a two-year transition period during which small creditors as defined by § 1026.43(e)(5) can originate balloon-payment qualified mortgages even if they do not operate predominantly in rural or underserved areas.

 

 

I hope this helps, not completely clear, but the statement made by the CFPB in the ATR Preamble seems to support that there is no intent to go after sellers who do not meet the standard of a bonafide lender.

 

Personally if I were giving a loan as a seller, I would follow the ability to repay guidelines simply because they are basic ways to make sure this person can actually pay back the loan, but also it may prevent someone from trying to work an angle of predatory lending, which ultimately is what the Dodd-Frank Act is designed to prevent.

 

There are 8 underwriting factors to make a reasonable & good faith determination of the ability to repay:

1. Borrower’s current or reasonable expected income or assets, except for value of dwelling that secures the loan.
2. Borrower’s current employment status (assuming creditor relies on employment income in determining repayment ability).
3. Borrower’s monthly payment on the covered transaction, calculated in accordance with Appendix Q in final rule, which closely follows the FHA 4155 guidelines.
4. Borrower’s monthly payment on any simultaneous loan the creditor knows or has reason to know will be made, calculated in accordance with the Rule.
5. Borrower’s monthly payment for mortgage-related obligations.
6. Borrower’s current debt obligations, including alimony, child support or other liabilities due monthly or will have payments within 12 months from the closing date.
7. Borrower’s monthly debt-to-income ratio (DTI), calculated according to the rule. Residual Income also taken into consideration on HPML loans.
8. Borrower’s Credit History.

 

What transactions does this apply to?

1. Primary residence
2. Second/Vacation Home
3. Only applies to investment properties is the borrower will live in the property for more than 14 days a year, otherwise investment properties are excluded

 

Exempt loan scenarios:

1. HELOCs
2. Reverse Mortgages
3. Bridge Loans and Construction loans with a term of 12 months or less
4. Timeshares
5. Investment properties for business purposes (e.g. borrower doesn’t occupy the property more than 14 days out of the year)
6. Loans made pursuant to Housing Finance Agency Programs (HARP/HAMP, etc.)
7. Community Housing Authority issuing Down Payment Assistant Loans,
8. FHA Streamline Refinance if meets HUD guidelines

 

QM and Temporary QM cannot have the following toxic features (there are exceptions for small creditors):

1. Payments with deferred principal
2. Negative Amortization
3. Interest Only Payments
4. Balloon payment
5. Terms in excess of 30 years
6. Irregular payments (except ARMs)

I hope this gives you some points to consider, go to www.CreditLiteracyProject.com to learn more about credit and mortgage financing, there are some cool webinars available on demand at no cost.

Patrick Ritchie

Patrick.Ritchie@outlook.com

Credit Score Factors: How the Score is Determined

This is where you start when it comes to improving credit, focus on what impacts the credit score, check out this webinar on the FICO credit score factors that determine your score:

All the Best!!

Patrick Ritchie

Do Not Do List for a Mortgage Transaction

This is the most important information any one getting a mortgage could receive, the Do NOT Do List:

All the Best!!

Patrick Ritchie

Case Study: The $10,688 Library Book

I have been putting together and editing some new on demand webinars, here is the first sample I am releasing, super excited about this project!! I have 70 webinars written out to film and edit, you are going to love it, check out the sample below about how a library book turned into a cost of $10,688:

If there is a credit, mortgage, legal, or real estate topic you would like to see a webinar about just leave a comment and I will add it to my production list.

All the best,

Patrick Ritchie

CFPB Looks at Medical Collections

A May 2014 released study by the Consumer Financial Protection Bureau indicates medical collections are having a negative impact on credit scores without merit. I couldn’t agree more, medical collections in general seem to be more about poor billing than consumers unwilling to pay. The idea of removing them from the credit scoring models has been tossed around over the years. Perhaps this initiative by the CFPB will get the ball rolling on that.

 

In my book The Credit Road Map, I have an entire section dedicated to medical collections. Most importantly, steps on how to avoid the issue in the first place. Despite the “thorn in the side” problem medical collections cause credit scores, there is a deeper purpose for the reporting.

Let me explain.

 

A debt becomes delinquent, any debt (justifiably or not). The debt is sent to collection.

 

A collection agency reports the collection account to one, two, or all three credit bureaus (not always all three, it varies, but generally all three).

 

The collection account decreases the credit score because there is risk, something is past due, recent negativity is bad.

 

A collection account could eventually turn into a judgment, although I do not see a lot of medical judgments, I see way more credit card judgments.

 

A judgment can turn into garnishment of earnings (wages) or non-earnings (bank account).

 

This potentially creates instability for the consumer financially, which could result in the inability to pay bills as normal, hence higher risk.

 

So the initially collection is sort of a call-out of, “hey, we have a problem.”

 

Although the problem may not really be a problem if we are talking about a small amount, if forced to pay, it may not disrupt the consumer’s typical monthly financial ability to pay obligations.

 

In essence a collection tells anyone looking at the credit report there is potential for legal liability that may or may not materialize, because when it comes to bad debts, a collection is the first step before pursuing a judgment. Not always, but generally.

 

In all likelihood the consumer will discover they have a medical collection when they go to finance a house or car. They will be appalled a bill was never sent to them, a phone call was never made, and no opportunity was given to pay the bill in the first place. The debt will be paid quickly, the consumer will move on.

 

Most of the medical collections I see are for less than $100, and the next level up is less than $300. I do see massive medical collections at times on the $10,000+ range. Sadly there is no distinction based on dollar amount in terms of scoring impact.

 

I am happy to see the CFPB looking at this issue because it does impact consumers. One of my students in a presentation I gave at the Ohio State University was denied an internship because he couldn’t pass a background check due to his credit. The negative item was a medical debt. You can’t change the damage once it is done in some cases. I could write numerous case studies on medical collections alone, it is that out of control. In fact, I am writing a case study book about various credit scenarios beyond what is in The Credit Road Map. If you would like to be added to the waiting list to be notified of the release this summer send me an email at Patrick@PatrickRitchie.com.

 

 

Patrick Ritchie

Mortgage Finance Instructor

Ritchie School of Real Estate Finance

480-203-4641 Cell

Patrick@PatrickRitchie.com

NMLS# 276438 AZ#0913109

Click Here to go to Patrick's Mortgage Website

© Copyright 2014 Patrick Ritchie All Rights Reserved

Stories from the Vault for a Smoother Transaction Part II

Now we continue with Part II of my “moving” checklist for credit protection, if you have a client who will be doing a temporary move prior to buying a home, this information may save your transaction from calamity:

 

Make sure all utilities are paid in full and I would even go as far as to request something showing your account is closed out with a $0 balance

   

Same thing with any medical or dental providers, they often times won’t send out a bill for an amount not covered by insurance until 6 months or longer after the visit. This is a huge source of unexpected collections and credit score danger. Not a bad idea to request a print-out of your account to show it is zero just to make sure you can document in case there is ever an issue. Mistakes do happen at times resulting in things being sent to collection incorrectly. This will also let you know if there are any outstanding insurance claims that may become harder to address if you are no longer employed by the company providing the insurance coverage, this is an absolutely huge issue for people, I could write a book only about medical collections with the frequency and volume I see them, and many times there is a dispute about what insurance was supposed to cover, or maybe the bill was paid but not updated in the system, too many variables exist to trust that it will be ok, always assume it won’t and be sure by documenting.

 

Gym memberships and any monthly payment agreement you have that will not continue once you move, most agreements require at least a 30 day notice, so make sure that is covered to avoid the dreaded gym collection (all collections have the same impact regardless of dollar amount or reason/type)

 

Library materials, make sure everything has been returned and confirm your account has no fines that can be sent to collection, I have witnessed library collections many times. While laughable to think of, nobody laughs when it happens in their transaction.

 

Make sure all bills are being sent to the correct address. This is especially important for store credit cards only used sparingly. I have had people move, the mail forwarding expires, they haven’t used their XYZ Super Fashion store card in a year or more, and today is the day they will use it. It isn’t something they have burned into their mind to pay each month, so when the bill never arrives at their new address they don’t miss it. At least not until they get a phone call that their account is 30 to 60 past due, and now it has decreased their credit scores.

 

When it comes to credit the little things matter.

 

Clients can apply for a mortgage online at http://patrickritchie.onqtempe.com/ or call me any time.

 

 

Patrick Ritchie

Mortgage Finance Instructor

Ritchie School of Real Estate Finance

480-203-4641 Cell

Patrick@PatrickRitchie.com

NMLS# 276438 AZ#0913109

Click Here to go to Patrick's Mortgage Website

© Copyright 2014 Patrick Ritchie All Rights Reserved

Stories from the Vault for a Smoother Transaction Part I

I am always looking to improve the mortgage process, my file checklist grows a little each month, but it is the best way I have found to increase efficiency. In my CE classes I spend most of the class time pointing out ways to avoid problems in a real estate transaction. If you would like a copy of the most recent checklist email me at Patrick.Ritchie@OnQFinancial.com.

I view it as a flight checklist; I don’t want a pilot taking me 30,000 feet in the air without going over every point on their checklist, no matter how many decades of flying experience they may have. In the same regard, I don’t want to take anyone into the mortgage process without the same thorough review. After 15 years of mortgage experience, one thing that has been a constant: surprises come from out of the blue many times

My focus is to eliminate and eradicate surprises, hence my checklist. However, the best laid out plans do not always guarantee perfection, so we always need to be looking out for issues.

Here is a recent scenario you should be aware of because we all hate the pain of mortgage delays or denials. Our business is a zero sum game, the transaction closes or it doesn’t, there is no second place on a transaction. This is my “moving” checklist for credit protection, if you have a client who will doing a temporary move prior to buying a home, this information may save your transaction from calamity:

• Turn in cable equipment if you are switching service providers or just closing out service, even if temporarily until the permanent move, making sure everything is returned to the cable company ASAP is vital. Always get a receipt for documentation, because if you say you turned everything in, and they say you didn’t, the receipt is your saving grace. Put the receipt in a place worthy of keeping $800, which is the estimated value of the three pieces of common cable equipment.

I had a client who forgot to return the telephone modem she received from Cox, which she was not using, but had as part of her plan. I have the phone service as part of my plan, it was free, the monthly cost would be the same whether I accepted the phone line or not. After three days I unplugged the phone because of the amount of telemarketing calls (despite the do not call list), and I imagine this was the experience my client encountered.

She turned in the cable box and internet modem, in fact she took it to a Cox Store personally, but the Cox employee never asked, “where is the third piece of equipment you still have out (telephone modem)?”

She had packed the telephone modem in a box in her closet when she first moved in and did not use the internet phone line, forgot about it, and was not reminded when she turned in the other equipment. 30 days later Cox sent the account to collection for $200 and it knocked her credit score down 80 points. Cable equipment includes:

1. Cable box/DVR
2. Internet Modem
3. Telephone modem/box

The total value of the equipment? Roughly $800, according to the documentation she had returned $600 worth of equipment, but was delinquent $200.

If you read the fine print in the Cox agreement it says: Telephone modem required and will be provided for the duration of phone service subscription. Upon disconnection of phone service, modem must be returned within 30 days or a monthly rental fee or lost equipment charge will apply.

In 30 days Cox will send it to collection, and this will knock down a credit score in dramatic fashion, dropping from 780 to say 700 may not be that big of a deal because the score is still good, just not cream of the crop good. In my scenario we were in the 710 range, an 80 point drop to the FICO score took us down to 630. Ouch! It gets worse. Collections do not show up immediately, this hit the credit report when we were under contract and closing in 20 days.

She paid the collection immediately, but that wasn’t going improve the credit score. I knew exactly what we needed to attempt with such a short timeframe. My quickest Voodoo Credit Magic Trick on addressing the collection works 50% of the time, (disclaimer: Voodoo Credit Magic Tricks are never 100%), but we got shot down, Cox declined her request, we were stuck.

With 20 days to close there wasn’t much choice, we had to press on, she could still close on the transaction as long as she was above a 580 FICO score. If we had more time, there are other tactics she could have tried for removing the collection, but time was not on our side.

Now we had to assess the collateral damage. She was using the Maricopa County Home in 5 down payment assistance program, which was giving her $8,500 toward her down payment and closing costs. However, the minimum FICO score is 640, so now she no longer qualified for the down payment assistance because she was under 640. This really stinks, she forgets to return a telephone modem to Cox, they do not ask for it when she returns the other equipment, there is no phone call to her cell phone, and they claim they did not send a letter asking for payment because she moved and they didn’t have her new mailing address. 30 days after disconnecting service they send the account to collection. Wow. This sequence cost my client $8,500 in assistance money.

She should have requested a statement showing her account closed with a zero balance, this likely would have uncovered the issue, there were opportunities on both sides to avoid this collection.

Always get a paid in full, account closed, you owe nothing type statement or print out to be sure you owe nothing further. Otherwise this type of scenario may occur, this applies to utilities, medical visits, veterinarian, gyms, schools, martial arts lessons, leases, memberships, any type of obligation to pay, triple check it is in the clear when closing it out.

Fortunately she had access to a down payment source in the form of a gift. She closed on the house and is now a homeowner, but not without a wild ride. Not to mention the disappointment of not getting the $8,500 assistance money. The checklist asks a lot of questions, this scenario is now an aspect of it in order to get the communication flowing.

Clients can apply for a mortgage online at http://patrickritchie.onqtempe.com/ or call me any time.

Patrick Ritchie
Mortgage Finance Instructor
Ritchie School of Real Estate Finance
480-203-4641 Cell
Patrick@PatrickRitchie.com
NMLS# 276438 AZ#0913109
Click Here to go to Patrick's Mortgage Website
© Copyright 2014 Patrick Ritchie All Rights Reserved

Upcoming Classes for June and July 2014

Upcoming classes:

 

Lunch and Learn: Facebook Advertising – No CE

June 4^th @ 12:00 PM – 1:30 PM

Cost: Free and lunch provided

Location: Clear Title Agency – Chandler, 3100 W. Ray Road, Suite 111, Chandler, AZ 85226

Instructor: Casey Hardon

RSVP: Patrick.Ritchie@OnQFinancial.com

Topics Covered:

• Understanding Facebook analytics
• Targeting Buyers & Sellers with Facebook Ads
• Photo Optimization

 

Analysis of Contract Finance – 3 Hours Contract

June 6^th @ 9:00 AM – 12:00 PM

Cost: $10

Location: Equity Title Agency, 6685 W. Beardsley Rd., Ste 205, Glendale, AZ 85308

Instructor: Patrick Ritchie (CE from Ritchie School of Real Estate Finance)

RSVP: Patrick.Ritchie@OnQFinancial.com

Topics Covered:

• Case studies of Red Flags to watch for
• Prequalification Form & LSU
• Finance section of contract

 

GRI Financing: From Preparation to Close - 6 Hours General

June 10^th @ 9:00 AM – 4:00 PM

Cost: Established by AAR (CE from Association)

Location: Arizona Association of REALTORS^®, 255 E. Osborn Road, Phoenix, AZ 85012

Instructor: Patrick Ritchie

RSVP: www.regonline.com/GRIFinance

Topics Covered:

• Agent’s role in the loan approval process
• Current FHA/VA/Conventional underwriting guidelines
• FICO credit scores
• Red flags of the finance process

 

Law and Mortgage Finance - 3 Hours Real Estate Legal Issues

June 11^th @ 9:00 AM – 12:00 PM

Cost: Established by WeMAR (CE from Association)

Location: West Maricopa Association of REALTORS^® offsite at American Sports Center, 755 N 114th Ave, Avondale, AZ 85323

Instructor: Patrick Ritchie

RSVP: www.wemar.org

Topics Covered:

• Overview of legal analysis and citation
• Overview of Dodd-Frank Act; Home Mortgage Disclosure Act
• Overview of community property, title in Arizona, statutes, and purchase contract
• Overview of federal credit, collection laws, and bankruptcy

 

Analysis of Contract Finance Requirements - 3 Hours Contract

June 11^th @ 1:00 PM – 4:00 PM

Cost: Established by WeMAR (CE from Association)

Location: West Maricopa Association of REALTORS^® offsite at American Sports Center, 755 N 114th Ave, Avondale, AZ 85323

Instructor: Patrick Ritchie

RSVP: www.wemar.org

Topics Covered:

• Overview of the Arizona Pre-Qualification Form
• Overview of the finance section of the Arizona contract
• Overview of the Arizona Loan Status Update
• The mortgage process as it pertains to the contractual obligation in Arizona

 

Dodd-Frank 2014 Compliance in Arizona - 3 Hours Legal

June 12^th @ 9:00 AM – 12:00 PM

Cost: Established by PAR (CE from Association)

Location: Phoenix Association of REALTORS^®, 5033 N. 19^th Avenue, Phoenix, AZ 85015

Instructor: Patrick Ritchie

RSVP: www.paronline.com

Topics Covered:

• Legal changes under 2014 enforcement
• Ability-to-Repay (ATR) & Qualified Mortgage (QM)
• New AAR and CFPB forms for Dodd-Frank Compliance
• Impacts in the local market

 

 

Analysis of Contract Finance Requirements - 3 Hours Contract

June 12^th @ 1:00 PM – 4:00 PM

Cost: Established by PAR (CE from Association)

Location: Phoenix Association of REALTORS^®, 5033 N. 19^th Avenue, Phoenix, AZ 85015

Instructor: Patrick Ritchie

RSVP: www.paronline.com

Topics Covered:

• Overview of the Arizona Pre-Qualification Form
• Overview of the finance section of the Arizona contract
• Overview of the Arizona Loan Status Update
• The mortgage process as it pertains to the contractual obligation in Arizona

 

 

Consumer Protection and Credit Repair: Examining the Fair Credit Reporting Act: - 3 Hours Real Estate Legal Issues

June 19^th @ 9:00 AM – 12:00 PM

Cost: Established by SAAR (CE from Association)

Location: Scottsdale Area Association of REALTORS^®, 4221 N. Scottsdale Rd, Scottsdale, AZ 85251

Instructor: Patrick Ritchie

RSVP: www.saaronline.com

Topics Covered:

• Handling credit report disputes and documentation
• Addressing zombie debt and collections
• Understanding the time limits on negative information
• The dirty games creditors play on credit reports

 

Dodd-Frank 2014 Compliance in Arizona - 3 Hours Legal

July 1^st @ 9:00 AM – 12:00 PM

Cost: Established by SEVRAR (CE from Association)

Location: Southeast Regional Association of REALTORS^® offsite at Holiday Inn - Ahwatukee

Instructor: Patrick Ritchie

RSVP: www.sevrar.com

Topics Covered:

• Legal changes under 2014 enforcement
• Ability-to-Repay (ATR) & Qualified Mortgage (QM)
• New AAR and CFPB forms for Dodd-Frank Compliance
• Impacts in the local market

 

Understanding Mortgage Disclosure Forms - 3 Hours Disclosure

July 9^th @ 9:00 AM – 12:00 PM

Cost: Established by WeMAR (CE from Association)

Location: West Maricopa Association of REALTORS^®, 9001 West Union Hills Drive, Peoria, AZ 85382

Instructor: Patrick Ritchie

RSVP: www.wemar.org

Topics Covered:

• Full explanations of each mortgage disclosure form will assist in combating mortgage fraud and reduce buyer confusion.
• The primary disclosures covered are for Conventional, FHA and VA mortgages.
• Explains the industry standards, when and why the documents must be signed.

 

 

Agency Tales From the Courtroom - 3 Hours Agency

July 9^th @ 1:00 PM – 4:00 PM

Cost: Established by WeMAR (CE from Association)

Location: West Maricopa Association of REALTORS^®, 9001 West Union Hills Drive, Peoria, AZ 85382

Instructor: Patrick Ritchie

RSVP: www.wemar.org

Topics Covered:

• Definition and elements of the agency relationship
• Agency all around us in the business world
• Duties of agent to principal
• Duties of principal to agent

Agency Tales from the Courtroom - 3 Hours Agency

July 16^th @ 9:00 AM – 12:00 PM

Cost: Established by SEVRAR (CE from Association)

Location: Southeast Regional Association of REALTORS^®, 1363 S. Vineyard, Mesa, AZ 85210

Instructor: Patrick Ritchie

RSVP: www.sevrar.com

Topics Covered:

• Definition and elements of the agency relationship
• Agency all around us in the business world
• Duties of agent to principal
• Duties of principal to agent
   

Are You Alive? Yet Another Reason to Check Credit Annually

In every class I teach, I am always telling people about the importance of checking their credit every year. Recently I had a mortgage client who had never checked his credit, but was confident everything was in good shape because he didn't ever really need credit so he had no debts. I pulled the credit, he was correct about no debts, but he was being reported as deceased. Yes, deceased, no credit score, no credit history, which if you are deceased you really don't need anyway, but this is a problem when you are alive and well.

 

He was surprised to find out about this, and has gone to work to rectify it with the three credit bureaus.  The problem is why he needs (or wants) credit now, he wants to buy a house. Can he buy a house right now? Not at this point, not until his credit report is corrected, and then we will have to see about establishing credit.

 

This is yet another example of why we as consumers need to check our credit with some frequency, a minimum of once a year. Credit is an ongoing thing, and when you need it you want to make sure it is there. Opportunity and survival, the two reasons we need credit, and the best time to by batteries is before the hurricane hits, the best time work on credit is when you don't need. As the saying goes, banks are always willing to lend you money when you don't need it, but unwilling when you really need it. Preparation prevents this problem, get your umbrella on a sunny day, don't wait for it to rain.

 

Imagine waking up one day and deciding to run a marathon. I don't mean waking up and deciding to train for a marathon, I mean waking up, going to a race, signing up and running in a marathon with no training or preparation. How is that going to go? Badly, because in all likelihood you wouldn't even be able to sign up for a marathon the day of the race, at least not a popular race, let alone go out untrained and complete the running course. Sounds ridiculous doesn't it? Yet every week I talk to someone who is doing the same thing, it just isn't running a marathon, it is buying a house, which is kind of like a marathon, there is preparation, and addressing credit now is the first step in that training process.

 

Patrick Ritchie
Mortgage Finance Instructor

Ritchie School of Real Estate Finance

480-203-4641 Cell
Patrick@PatrickRitchie.com

NMLS# 276438 AZ#0913109
Click Here to go to Patrick's Mortgage Website

The Needs List for a Borrower

Here is the letter I send to clients to get their file started, it tells them what we will need, covers the things to avoid doing, and is designed to eliminate issues to ensure a smooth closing:

Thank you for the opportunity to be of assistance with your financing. If at anytime I can answer any questions please let me know.

Here is a list of what we will need from you, let me know if you have any questions on anything.

Copies are sufficient, originals are not needed for your file.

Please note that it is better to send me these items as they become available rather than waiting to have everything.

- Past two pay stubs assuming bi-weekly payment, otherwise for weekly payroll four pay stubs

- Most recent quarterly retirement statement (all pages, even if page 4 of 4 is blank, we need it to complete the document)

- Past two bank statements (all pages, even if page 4 of 4 is blank, we need it to complete the document) IF YOU ARE ON AN ACCOUNT WITH ANOTHER INDIVIDUAL WHO WILL NOT BE ON THE LOAN THEY WILL NEED TO WRITE A LETTER STATING YOU HAVE FULL ACCESS TO THE MONEY IN THE ACCOUNT

- 2011 and 2012 years taxes with all schedules (if you show business deductions or loss on your taxes please let me know immediately)

- 2011 and 2012 W2's and/or 1099's

- Your work address and a phone number to the business

- Digital copy of driver's license, either a scanned copy or take a digital picture and forward, it is important that we have a clear copy

- Copy of social security card (if you do not have it I can use your W2 instead)

- Name and telephone number for verification of employment, or if your company uses the Work Number we will need a company code that you can request from your HR department

- Name and telephone number for your insurance carrier you use for homeowner's insurance, the #1 reason for delayed closings is last minute insurance quotes, get a quote during your inspection period and have your insurance agent email me at Patrick.Ritchie@FreedomMortgage.com for the mortgagee clause and loan number.

The following is only needed if it applies to your situation, I list this so we don't miss anything, if it doesn't apply please ignore:

- If you currently rent we need the name and telephone number for your landlord to verify rent was paid on-time

- For self-employed borrowers we need the name and telephone number for your accountant. Please note that your accountant will need to verify your business twice, once at the beginning of the transaction and once within 10 days of closing, it is a good idea to make sure your accountant will not be on a boat in Tahiti within 10 days of your closing.

- If you have ever been divorced we will need a copy of your divorce decree

- If you are ordered to pay or receive child support we will need a copy of the support order

- If you have filed for bankruptcy we will need your bankruptcy discharge and all schedules, if you do not have it I can access it through the federal court house with your bankruptcy filing number

- If you have a mortgage that has been modified please provide your modification agreement

- If you had a foreclosure we will need your 1099-C or 1099-A showing the property address and how your name appeared on the mortgage

- If you had a short sale we will need a copy of the HUD-1 Settlement statement to show the date of closing on the short sale

- If you have had a bankruptcy, foreclosure, or short sale we will need a signed explanation letter covering the extenuating circumstances surrounding the event (job loss, medical, divorce, family issues, etc.), why it happened and why it isn't likely to happen again.

- If you have sold a property in the past 12 months I will need a copy of the HUD-1 Settlement statement

- If you have rental properties we will need current signed copies of all leases, mortgage statements, and HOA payment statement/coupon

- If you have any other real estate that is not rented out we will need mortgage statements, and HOA payment statement/coupon (if you own it free and clear or do not escrow your taxes and insurance please provide a tax bill and copy of your homeowner's insurance policy)

- If you are a Veteran using VA we will need a copy of your DD-214

- Number of dependents and their ages living in your household

- Let me know if you have applied for any new credit in the past 90 days where the new account may not yet be reporting on your credit report

The 'do not do' list will make our transaction go smoother:

• Non-payroll deposits must be seasoned in your bank account for 2 months, otherwise it will have to be documented to show where it came from (check stub, etc.). Do not make any non-payroll deposits into the bank account(s) you are using for this transaction, unless it can be documented with a copy of a check, statement, gift letter, settlement statement, bill of sale, etc., please do not deposit cash. Cash is bad because it cannot be documented other than with a bill of sale, if you need to deposit cash please call me ASAP so we can figure out the best approach, this will eliminate problems later.
• Do not apply for any credit other than the mortgage application when you want to purchase a home.
• Do not co-sign with anyone on a new credit transaction.
• Do not apply for any 6 months same as cash financing for furniture or appliances until after closing.
• Do not quit your job or switch employers during the home buying process, if this is a possibility let me know ASAP (EMPLOYMENT WILL BE VERIFIED AT THE BEGINNING OF THE TRANSACTION AND AGAIN WITHIN 10 DAYS OF CLOSING).
• If you are buying a condo let me know ASAP because there are specific  requirements for condos and not all will qualifying for financing, this does not apply to townhomes or patio homes, only condos.
• If you are planning on getting married or divorced during the transaction let me know ASAP
• If you intend on asking for repairs in your contract have your agent contact me on the verbiage to avoid issues with the use of "credit or allowance" in the contract.

The appraisal need to be paid with a credit card once you have a contract to purchase a home, you will be called to get your credit card number to pay for the appraisal.

You can drop these items off at my office, or scan and email them to me. If you would like for me to copy these for you at my office let me know. I do need to get these documents as quickly as possible in order to move your file forward, please let me know if you have any questions or need assistance with these documents.

Thank you for the opportunity to be of assistance with your mortgage. Feel free to call or email me with any questions.

 

Patrick Ritchie
Mortgage Finance Instructor

Ritchie School of Real Estate Finance

480-203-4641 Cell
Patrick@PatrickRitchie.com

NMLS# 276438 AZ#0913109
Click Here to go to Patrick's Mortgage Website