Author Archive
IT’S THE LOAN PROGRAM, STUPID……
March 8th, 2011
Written by Greg Frost
As I listen to the talking heads and government policy experts in Washington discuss mandating 20% down payments for future mortgage programs I get sick to my stomach. Aren’t any of these people doing their research before suggesting such a draconian response? Are they not aware that FHA, VA, and USDA have been insuring high ratio (96.5%, 100%, and103%) loans for over 70 years? Are they not aware that, barring a short period of time in 2007-2008, when sub prime lenders successfully crammed some of their loan products into the FHA programs, that these government insured loan programs performed admirably?
Please note, on the attached graph, the default rates, during the 10 years preceding 2007, before the wheels came off the economy. Note how well the Prime Fixed Rate and Prime Arm Mortgages (Fully Documented) performed during that entire decade compared to all other mortgage instruments.
So why doesn’t Washington recognize that it was very specific and easily identifiable loan types that were toxic; eliminate them; and stop trying to make us and our industry out to be outlaws? Their own Federal Reserve Bank of Kansas City shows, in the attached report, that it is the loan program that was the culprit.
I can’t find any of my counterparts who designed those toxic loan programs. We just originated them. So who are the culpable “outlaws”?
The government’s attack on our industry is unprecedented. Why isn’t the government going after the car salesmen who sold all those Toyota’s that wouldn’t stop? Why aren’t they attacking Standard & Poor’s, Moody’s and Fitch who rated the securities filled with those toxic loans AAA? Why didn’t they attack the contractors who installed all the asbestos, or the painters who once used lead based paint? Again, what they are doing to us is patently unfair and unprecedented in scope.
We sell mortgages, we don’t design them. We sold what the mortgage industry, with congressional oversight, provided us to sell. Remember Barney Frank stumping for relaxed guidelines?
Admittedly, during that period of time, most mortgage brokers did not have access to FHA and VA loan products so they sold what they had, which in many cases was not the best product for their customers. Therein lies the biggest problem. The toxic loan programs were so “fast and easy” that mortgage brokers and mortgage bankers alike, shied away from traditional full documentation products in order to facilitate faster approvals, minimize documentation requirements and increase throughput.
When the smart guys who were designing loan programs for, and within our industry, allowed a W-2 employee to use a ”stated income” loan program, they established a scenario for lying or fraud. Remember, how we referred to those mortgage products as “liar loans”?
Why on earth were these loans designed and thrust upon our industry?
To facilitate the Executive Branch of our government’s goal of increasing home ownership, that’s why. The Executive Branch, during the Clinton administration pressured HUD, FNMAE and Freddie Mac to come up with loan programs that would utilize the stated income feature of the Acorn loan, that was being originated by Commercial Bankers, to meet their CRA lending requirements. That Acorn loan program was the magic product that brought sub prime lending into the mortgage mainstream.
The attached Federal Reserve Bank of Kansas City chart is so important because it shows how things were, prior to the economic melt down. It categorically shows that the full doc, 30 year mortgage (Prime ARM & Prime FRM) were loan programs that lenders, bankers, investors, along with domestic and international investors could count on to perform.
We were enticed, by our industry leaders and regulators, and enabled by the securitization efforts of Wall Street, to substitute the loan programs that we prime lenders had originated for our entire careers, with the “fast and easy” loan programs that were now considered to be “main stream”, and thus replace the exceptionally well performing industry standard loan programs that clients demanded and we originated in order to remain competitive in our markets.
We all participated. We all were drawn into the mess in order to be competitive. And now we’re all suffering, as our industry is targeted by our government and made the scapegoat for most all that went wrong with the national financial system and our economy.
If I, with my insignificant B.S. in Business from a mid major university can see what happened, why can’t those learned leaders of ours? There is an old saying….”don’t throw the baby out with the bath water”. I find, as I grow older, that those old sayings are around for a reason….they are forever relevant.
This baby is tired of the bath, the bath water and the mis-guided and unfair efforts of my government officials, many of whom I helped elect, all of whom I support with my tax dollars, who are trying to make me and my industry the fall guy for a political agenda that was ill conceived, short sighted and mismanaged.
The toxic loan programs are gone. The investors got rid of them, not the government. The investors realized, after poor performance, that they were not good investments. We don’t need the politicians to show us the folly of deviating from the previous industry accepted risk assessment standards. We all did what we were encouraged to do, and we all have suffered, as a result.
I implore my government to get back to what we elected you to do. Stop the wars and balance the budget. And for God’s sake, stop trying to tell me how I can or can’t pay one of my employees for the services he or she renders my company. My company is not trillions of dollars in debt. I know what I’m doing.
Discussion: 2 Comments »
FHA Credit Overlays May Be A Form Of Redlining
January 20th, 2011
Written by Greg Frost
HUD has commissioned the National Community Reinvestment Coalition to conduct research on the practice by large bank consolidators of imposing FICO score overlays that require minimum scores above the new HUD minimum of 580. HUD previously had no FICO score minimums.
The NCRC alleges that the practice by large banks such as Wells Fargo, Bank of America, and J. P. Morgan Chase of imposing FICO overlays up to 640 on borrowers obtaining credit through their Correspondent and Wholesale lending sources is a form of “Red Lining” and effectively discriminates against those entry level borrowers who don’t have the means to pay larger down payments.
David Berenbaum, NCRC Chairman, notes that this potential “Red Lining” is being arbitrarily imposed only on loans originated by Mortgage Brokers and Mortgage Bankers, as all of the banks mentioned will accept lower FICO scores from borrowers who apply directly through the bank’s real estate lending offices.
Lawyers for several the largest Banks are on record saying that they have been expecting law suits on this matter and that it will be hard to defend these Bank practices because FHA loans are 100% insured.
FHA Commissioner Dave Stevens has gone on record stating that HUD’s move to a 580 FICO score minimum would effectively “open up” the credit box that has been constricted due to mortgage industry consolidation. In fact that has not been the case, as large numbers of potential customers have been denied credit due to these Bank FICO overlays.
Greg Frost, Sr., President of Frost Mortgage Banking Group, Albuquerque, New Mexico, the mortgage industry’s 1st billion dollar Originator, says “ FHA has been in existence for over 70 years. For 60 of those years there were no FICO scores or Automated Underwriting Systems. The FHA insurance fund was not in jeopardy, nor did it need refinancing until after the industry started relying on this new technology driven method of assessing risk. I long for a return to the days of manually underwritten credit evaluations, done by FHA certified Underwriters, who utilize the FHA underwriting guidelines to assess risk, approve loans, and allow credit to be extended to a larger community of qualified borrowers.”
HUD has commissioned the National Community Reinvestment Coalition to conduct research on the practice by large bank consolidators of imposing FICO score overlays that require minimum scores above the new HUD minimum of 580. HUD previously had no FICO score minimums.
The NCRC alleges that the practice by large banks such as Wells Fargo, Bank of America, and J. P. Morgan Chase of imposing FICO overlays up to 640 on borrowers obtaining credit through their Correspondent and Wholesale lending sources is a form of “Red Lining” and effectively discriminates against those entry level borrowers who don’t have the means to pay larger down payments.
David Berenbaum, NCRC Chairman, notes that this potential “Red Lining” is being arbitrarily imposed only on loans originated by Mortgage Brokers and Mortgage Bankers, as all of the banks mentioned will accept lower FICO scores from borrowers who apply directly through the bank’s real estate lending offices.
Lawyers for several the largest Banks are on record saying that they have been expecting law suits on this matter and that it will be hard to defend these Bank practices because FHA loans are 100% insured.
FHA Commissioner Dave Stevens has gone on record stating that HUD’s move to a 580 FICO score minimum would effectively “open up” the credit box that has been constricted due to mortgage industry consolidation. In fact that has not been the case, as large numbers of potential customers have been denied credit due to these Bank FICO overlays.
Greg Frost, Sr., President of Frost Mortgage Banking Group, Albuquerque, New Mexico, the mortgage industry’s 1st billion dollar Originator, says “ FHA has been in existence for over 70 years. For 60 of those years there were no FICO scores or Automated Underwriting Systems. The FHA insurance fund was not in jeopardy, nor did it need refinancing until after the industry started relying on this new technology driven method of assessing risk. I long for a return to the days of manually underwritten credit evaluations, done by FHA certified Underwriters, who utilize the FHA underwriting guidelines to assess risk, approve loans, and allow credit to be extended to a larger community of qualified borrowers”.
HUD has commissioned the National Community Reinvestment Coalition to conduct research on the practice by large bank consolidators of imposing FICO score overlays that require minimum scores above the new HUD minimum of 580. HUD previously had no FICO score minimums.
The NCRC alleges that the practice by large banks such as Wells Fargo, Bank of America, and J. P. Morgan Chase of imposing FICO overlays up to 640 on borrowers obtaining credit through their Correspondent and Wholesale lending sources is a form of “Red Lining” and effectively discriminates against those entry level borrowers who don’t have the means to pay larger down payments.
David Berenbaum, NCRC Chairman, notes that this potential “Red Lining” is being arbitrarily imposed only on loans originated by Mortgage Brokers and Mortgage Bankers, as all of the banks mentioned will accept lower FICO scores from borrowers who apply directly through the bank’s real estate lending offices.
Lawyers for several the largest Banks are on record saying that they have been expecting law suits on this matter and that it will be hard to defend these Bank practices because FHA loans are 100% insured.
FHA Commissioner Dave Stevens has gone on record stating that HUD’s move to a 580 FICO score minimum would effectively “open up” the credit box that has been constricted due to mortgage industry consolidation. In fact that has not been the case, as large numbers of potential customers have been denied credit due to these Bank FICO overlays.
Greg Frost, Sr., President of Frost Mortgage Banking Group, Albuquerque, New Mexico, the mortgage industry’s 1st billion dollar Originator, says “ FHA has been in existence for over 70 years. For 60 of those years there were no FICO scores or Automated Underwriting Systems. The FHA insurance fund was not in jeopardy, nor did it need refinancing until after the industry started relying on this new technology driven method of assessing risk. I long for a return to the days of manually underwritten credit evaluations, done by FHA certified Underwriters, who utilize the FHA underwriting guidelines to assess risk, approve loans, and allow credit to be extended to a larger community of qualified borrowers”.
Discussion: 1 Comment »
Foreclosure Relief For Seniors
January 11th, 2011
Written by Greg Frost
If you are over 62 and are facing foreclosure on your home, Frost Mortgage may have a way for you to save your home and eliminate your mortgage payments for the rest of your life.
The Frost Mortgage Senior Saver loan program uses the FHA Reverse Mortgage, which does not require a credit score. If you and your co borrower are over 62 and you have at least 50% equity in your home, Frost Mortgage can help you save your home and eliminate mortgage payments for the rest of your lives, right up until the day before your current lender completes the foreclosure process.
“The government finally got something right when they designed this mortgage program. It truly solves one of the ugly crises of our times….our senior population losing their homes in the wake of the economic crises” says Greg Frost, Sr., President of Frost Mortgage Banking Group. “Seniors who stayed the course, didn’t speculate with their equity, and didn’t use their home as an ATM are being rewarded by this excellent government insured mortgage.”
(Greg Frost wrote an article on the advantages of reverse mortgages for New Mexico Business Weekly in 2007; you can click here to read it.)
If you or someone you know could be helped by the reverse mortgage program, please contact us today. We’ll be back in touch with you quickly.
Discussion: 2 Comments »
Greg Frost’s thoughts on the future of Mortgage Banking
December 30th, 2010
Written by Greg Frost
You know I just heard a quote from a long time mortgage man that we Mortgage Bankers were toast and that after April, 2011 we would all be out of business. That perspective was credited to my long time, friendly competitor, Jason Pike. Jason has been a top mortgage originator for many years. He currently works at Bank of America. Jason didn’t choose to go to work for Bank of America, as a matter of fact, once upon a time, Jason shared his very dim view of that particular bank’s ability to compete in the mortgage space. He chose to work for Countrywide Home Loans, and we all know what happened there and we all know that the bank bought Countrywide and, I guess, Jason along with it.
Let me say that I don’t agree with Jason at all. I am confident that the Mortgage Banking industry, is so vital to the ethical distribution of mortgage credit to the American public, that no set of industry circumstances, natural or legislated, will depose it from its position as the nations #1 mortgage resource. We Mortgage Bankers are the entrepreneurs of the Mortgage industry. We are licensed by our states and by the National Mortgage Licensing Agency. We take mandated continuing education, which by the way, the exemption of which, Jason’s bank lobbied congress to gain. As a result our Loan Originators are eminently more educated and regulated than those working for the banks. Every day, we put our cash, credit, and net worth where our mouths are, as we fund billions of dollars of loans and then sell them to bank investors, many to the Bank of America.
It’s funny to hear Jason’s perspective, because his opinions are not shared by the officers of his own bank. Certainly not by the Bank of America officers who manage that banks correspondent lending division. The Bank of America is either the largest or second largest purchasers of Mortgage Banker originated mortgages every year. These bank officers have told me, over and over again, that the bank relies on the production capacity of the Mortgage Banking industry to help the bank replace its mortgage pay downs every month.
These Bank of America officers have repeatedly told me, at various meetings throughout the US, that we Mortgage Bankers play an integral and important role in their banks budgeted growth. A point of view that is in total contrast with Jason’s claims.
I was called by another friend and fellow mortgage banking entrepreneur today, as some of his people were being recruited by Jason. He was concerned that Jason had shared his….”you’re all going to be toast after April, 2011” perspective with his employees and successfully hired one of his team. I shared with him what I now share with you……”Capitalism and the entrepreneurial spirit that made this country great will not be stifled by a few banks, who themselves needed a government bail out, an infusion of your tax dollars, in order to survive. I think that we should just “consider the source” and focus on continuing to provide our fellow Americans with the best choices in mortgage credit, at the fairest prices, that are available in the marketplace today.”
Thank you and have a great day!
Discussion: 4 Comments »
Frost Mortgage & Prudential Sandia Real Estate Finalyze Joint Marketing Agreement
August 5th, 2010
Written by Greg Frost
I am very happy to announce that Frost Mortgage has finalized its Joint Marketing Agreement with Prudential Sandia Real Estate in New Mexico. Frost Mortgage will place a total of 3 Loan Officers in Prudential sales offices located in Albuquerque, Rio Rancho and Las Lunas, in an effort to provide “one stop shopping” services to their Clients and immediate mortgage consultative services to the Prudential Sales Agents.
Discussion: 1 Comment »
My “take away” from Zig Zigler at our meeting this week
August 4th, 2010
Written by Greg Frost
My “take away” from Zig Zigler at our meeting earlier this week was Encouragement. Encouragement is the seed of motivation. Zig shared that my timely encouragement could be just the spark that a person needs to get them to take the next step towards their success. I can contribute to the success of many by constantly being a source of encouragement.
Zig reminded me of the importance of Encouragement. I shared with him that, my wife, Devon, regularly sends me off to start each day with a “You can do it”, or “I’m so proud of you”. Zig replied, “You’ll never need one of those energy drinks if you get that kind of a send off every morning.”
Discussion: 1 Comment »
What’s the “brick” that could catapult you to success?
June 28th, 2010
Written by Greg Frost
The "brick." I bought the 2nd one sold in New Mexico, in 1985.
Technology is one of a very few places to look for a competitive edge. I embraced it early in my career and found that it helped set me apart.
A couple of Twitter connections (Jwean and Andrewtberman) reminded me the other day of my very first cell phone, a Motorola “brick”, like the one pictured here. It was only the second one in New Mexico and yes, it was expensive. All it did was make and receive calls, the battery only lasted about 40 minutes, and it weighed about two pounds.
My Realtor referral partner, Neal Goldblatt, had the first one sold in our state. He came by my office, showed it to me and told me I needed to get one. I asked why. He responded … “so I can call you any time of the day or night.” Neal ran an office with 10 agents. I was getting 12-14 referrals a month from him, so I went out and bought one. They were $3000.
This was 1985, and I went out and spent 3% of my annual income on that cell phone. I carried it to every breakfast and lunch that I shared with my Realtor prospects and referral partners to demonstrate how “in touch” and efficient I was……..worked like a charm.
The lesson here for any business professional is to consider technology early and never hesitate to invest in your success. That’s why we are now embracing social media. My mantra has always been that “Communication is the lubrication in every well-run organization.” I believe that you get ahead by recognizing how it is that your constituency is communicating and then get on board.
I’m 61 years old. I began honing my business building communication skills before there were fax machines. Back then I used a courier service to get my flyers delivered to my prospects. Now I use e-mail, Twitter, LinkedIn, Facebook, YouTube, and an interactive Website.
If this old dog can learn these new tricks, so can you. Give them a try.
Discussion: No Comments »
Greg Frost Sr.: Learn to succeed
June 28th, 2010
Written by Greg Frost
The great breakthroughs in your life will come when you realize that you can learn anything you need to learn to accomplish any goal that you set for yourself. This means that there are no limits on what you can be, on what you can have, or on what you can accomplish.
Goals are nothing more than dreams, to which you have attached a time limit. Set your goal and then seek out all information that you can to learn all that you can about your chosen endeavor. Then you will be ready to go out and achieve it.
Start by finding out all you can about what the most successful people in your arena did to become successful. Do what they did, over and over again, and you will eventually enjoy the same results. Emulate the best and you will become one of them.
I was noted as the 1st Billion Dollar mortgage originator back in 2000. I had been originating since 1985. I built my business in a full doc business environment before FICO scores, AUS systems, slim doc, no doc, fast and easy, stated income etc. My personal origination expertise was gained originating the same products that we are all originating today. I was able to distinguish myself, in my market, by putting a recognizable face on the word “service”. I did this by succinctly defining my service with daily, weekly, monthly and quarterly activities that my clients (Realtor Referral Partners) and our mutual business (Borrowers) could readily recognize and appreciate. This strategy will work for you today.
Do you feel challenged by your current environment? Are you struggling with your business model? Are you concerned that you will not be able to function in this new era of massive regulation changes and their inherent risk? Are you struggling with redirecting your sales and marketing efforts to a more productive opportunity pool?
I am President of a production Division of Primary Residential Mortgage, Inc. In addition, I am their VP of National Training. I think that I am uniquely qualified to offer you a dynamically profitable business model along with market tested production mentoring, the combination of which should give you every advantage.
Go to www.frostmortgage.com and let’s get acquainted.
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Greg Frost Sr.: Training industry leaders, planning for the future
June 21st, 2010
Written by Greg Frost
Things are always cooking here at Frost Mortgage, and last week was no exception. I wanted to share a couple of experiences in particular that I’m excited about.
Last week, I was the guest speaker at the Casa Latino National Franchisee meeting held in Orlando, Florida. We shared current mortgage industry information and conducted my Productivity Sales Training based on the 6 Scientific Principals of Ethical Influence.
This week I am in the airport and on the way to meet with the Primary Residential Mortgage, Inc. executive team for a 2-day Master Mind conference in Salt Lake City on Monday and Tuesday. Strategizing for continued industry leadership is the meeting goal, which includes design work on a new 580 FICO score FHA product that will be originated and serviced by Primary. I believe that a manually underwritten, common sense FHA product, without the severe FICO score overlays that are currently being imposed by the big Banks, is essential to simulating mortgage production and home sales. During the first 65 of the 77 years FHA has been in existence there was no FICO score a and no automated underwriting. Loans were manually underwritten to the FHA credit manual, and still should be.
Coming weeks are no less packed. What’s on your agenda?
Discussion: No Comments »
National Home Values
June 15th, 2010
Written by Greg Frost
The housing market continues to do battle with strong headwinds. Unemployment hovering at the double digit levels, disruptive appraisal requirements, more challenging loan underwriting and in many areas, foreclosure or distress sales exerting their negative influence. On the bright side, for buyers, lower prices combined with historically low interest rates have pushed true affordability to record levels. Here are a few other points to consider:
- While falling values predominate across the country, there are only six states where values fell by more than 10% over the last year.
- Unlike other investments, housing puts a roof over your head. That has always been its primary function. Yet, along with that benefit it is still an investment and in comparison to most others, it has compared favorably. Over the last 5 years, the vast majority of states still show positive appreciation with half even showing double digits. The same can not be said for the stock markets.
- Over time, home prices across all states have risen at average annual appreciation rates ranging from the high 3’s to over 7.5%.
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