3 Ways Mortgage Loan Officers Can Grow Leads Without Spending Money on Ads

By Luke Shankula

The coronavirus pandemic has affected virtually every aspect of our daily lives, from schooling to socializing to business. Since lockdowns commenced nearly a year ago, I’ve had mortgage loan officers, long accustomed to building relationships and generating leads through in-person networking, asking me how they can generate new business.

Sure, spending money on advertising is one strategy. But in a brave new world where people are spending huge amounts of time online, my advice to loan officers is this: go social like you mean it. These are my top three ways that loan officers can grow leads organically—that is, without spending a dime.

  • Be strategic with social media engagement.
  • Create quality content that people want to consume.
  • Present yourself in a genuine manner—i.e., be the “real you.”

Choose your platforms strategically


Image by nominalize from Pixabay

Unless you’ve got a monstrous amount of time to devote to social media or the budget to pay someone else to do it for you, it’s difficult to have a huge presence across several different platforms. Instead, I tell my clients to choose one, two, maybe three social media platforms, and get really good at using those. This comes down to researching which audiences you’ll reach on different platforms and honing in on those that can be the most fruitful. Here are just two examples of how I tell clients to use the many platforms out there:

  • LinkedIn: While LinkedIn isn’t exclusively a B2B platform, it is the place where you’re more likely to network with referral partners, such as real estate agents and other loan officers. It’s a great place for work-related content, but posting links to shared content will actually reduce your engagement here, since LinkedIn (and Facebook) wants to keep people in the site. Instead, create short, original posts that talk about your business. This doesn’t have to be “hard sell” stuff. Try posting video or screenshot testimonials from happy clients, or you celebrating closing a loan in record time. This is called “social proof”—it’s what establishes you as a leader in your field and attracts potential colleagues and referral partners. Also, be sure to congratulate colleagues who post about promotions or job change. But go beyond a simple “Well done!” with substantive, sincere praise. “Congratulations Jan! I’ve been following your career since we worked together at ___, and it’s no surprise you’ve been so successful.”
  • Facebook: If LinkedIn is your office, Facebook is your living room. Use your personal Facebook page—yep, that’s right; your personal page, as it’s amazingly difficult to generate organic traffic on a business page—to share your original content on mortgage news, career wins and challenges. Intersperse these with normal Facebook stuff, whether it’s family photos or funny animal videos. When you sprinkle in the work-related posts, always think about engagement: “The Fed is threatening to raise interest rates again: do you think it’s too soon for another rate hike?” Make your non-personal posts public so that they can be shared with anyone. Accept friend requests that don’t seem sketchy or stalkerish. And engage, engage, engage.

Create quality content


Image by Gerd Altmann from Pixabay

I say it all the time and I’ll never stop saying it. When it comes to growing organic leads, it’s about quality, not quantity. Posting 60 pieces of shared content a day, regardless of the platform, is going to turn people off and make them reach for the dreaded “mute” button—and it might also get you flagged as a spammer. Instead, post original, quality, shareable content that people can use. Here are just a few ideas:

  • A short video (60-120 seconds is ideal) of you explaining how the mortgage pre-approval process works, or telling folks how they can improve their credit score
  • An attractive infographic showing the steps from loan application to closing

Remember, most first-time buyers—and a lot of second- or third-time buyers—have no clue how this stuff works. By creating content that explains the process, you establish yourself as an expert. Just don’t forget to add links to your email address and business website!

Just do you


Image by mohamed Hassan from Pixabay

They say that all business is personal, and that’s truer now than ever before. There might have been a time when prospective loan applicants could choose from just a handful of loan officers. Now, there are more than 300,000 loan officers in the US, most of them reachable with the click of a mouse. So how do you stand out in a crowded field? Just by being you—and social media is the place to do it.

  • Be genuine. Share your kid’s stellar report card and your spouse’s new promotion just as readily as you do mortgage industry news. You’re a lot more than just your job, and your clients want to know that.
  • Engage actively, but naturally. Make a concerted effort to share and comment more on social, but don’t fake it. If you’re interested in a topic, try to generate lively discussion around it. If you’re happy for a friend or colleague’s positive news—express it!
  • I tell my colleagues to be themselves online and in-person, with one caveat: stay as apolitical as possible. Mortgage loans aren’t red or blue!

Building a social media presence that generates organic leads won’t happen overnight. It takes months, if not years, to create and curate quality content, build your followings and raise your profile. But when it all starts to click, it’s some of the most rewarding business you can land—and not just because it’s free. For loan officers, marketing and lead generation through social media enables you to really create a trusted brand. And the satisfaction of knowing you did it yourself, using your own initiative, creativity, and industry knowledge? That’s priceless.


Trust Deeds vs Mortgages: What’s the Big Difference?

Image by Arek Socha from Pixabay

If you are planning to invest in turnkey real estate development collateralized by real property, one of the top items on your due diligence check list should be to determine which mortgage theory the state follows per the location of the subject property. This understanding can be detrimental to your recovery strategy if your borrower is unable to uphold their end of the deal and defaults on the loan. Each state adheres to either title theory or lien theory, though there are a few states that follow both. In title theory states, Deeds of Trust are the binding agreements utilized between lenders and borrowers, and Mortgages are the agreements utilized in lien theory states. Both documents serve the same purpose in a real estate deal between a lender and borrower, but how they affect the relationship between the parties involved and the subject property is what makes the big difference.

What are some similarities between Trust Deeds and Mortgages?

Mortgages and Trust Deeds both secure repayment of the loan by placing a lien on the property, and are considered, by law, evidence of the debt as they are generally recorded in the county where the property is located. If the borrower defaults on the loan and the lien is in first position, the lien gives the lender the right to take the property back through foreclosure and sell it. In other words, both Mortgage and Trust Deed documents are used as leverage to ensure the borrower pays back the loan in full. The ability to sell the property gives real estate investors and lenders the potential to recoup the original principle lent on the loan. Depending on the value of the property, there is the potential for the recovery of back due interest, late fees, and even capital gain.


Image by Tumisu from Pixabay

What are the main differences between Trust Deeds and Mortgages?

Number of Parties

A Mortgage involves two parties: a borrower (the Mortgagor) and a lender or investor (the Mortgagee). A Trust Deed involves three parties: a borrower (the Trustor), a lender or investor (the Beneficiary), and the title company or escrow company (the Trustee). The Trustees main functions are to hold the title to the lien for the benefit of the Beneficiary and to initiate and complete the foreclosure process for the Beneficiary in the case of default by the Trustor.

Property Title & Foreclosure Processes

The main difference between Trust Deed and Mortgages is who holds the title to the property encumbered by the loan for the duration of the loan term. In a Mortgage State, the borrower holds the title of the property. Therefore, if the borrower defaults on the loan, the lender must go through the courts to take back the property through foreclosure. This is known as judicial foreclosure and this process involves the lender filing a lawsuit against the borrower. This can be a costly and time-consuming process for both parties involved.

In a Trust Deed State, court can be bypassed because the Trustee holds the title to the property. You would follow the non-judicial foreclosure process, which almost always results in faster execution and resolution for all parties involved, especially for the lender. The speed of foreclosure can be detrimental to minimizing carrying costs and getting the property on the market quickly to sell in what may be a more promising market than one met at a later date.

What are First Trust Deeds?


Image by an_photos from Pixabay

A First Trust Deed is as it implies, is recorded first before any other financial liens on the subject property, whether they be secondary mortgages, trust deeds or even mechanics liens placed by subcontractors. This means the First Trust Deed holds a priority or “senior” position, making all other liens encumbered by the loan subordinate or “junior” to the senior loan. Obtaining first position is important because in a foreclosure scenario, all outstanding subordinate liens are eliminated. This makes it so the lender does not have to worry about reconciling those other debts on top of their own.

Why invest in First Trust Deeds?

Hard money lenders like Ignite Funding, tend to operate more in Trust Deed states. First Trust Deed investments offer an attractive yield with relatively low risk to Ignite Funding investors due to their senior lien position on the property and the foreclosure process that is more conducive to the investors who are the Beneficiaries on the loan. This allows investors to earn double digit annualized returns paid as a monthly fixed income with REAL property as their collateral.

If you are interested in becoming a Trust Deed investor or want to learn more, you can schedule a FREE consultation with an Investment Representative, please click here.

Ignite Funding, LLC | 2140 E. Pebble Road, Suite 160, Las Vegas, NV 89123 | P 702.739.9053 | T 877.739.9094 | F 702.922.6700 | NVMBL #311 | AZ CMB-0932150 | Money invested through a mortgage broker is not guaranteed to earn any interest and is not insured. Prior to investing, investors must be provided applicable disclosure documents.

covid 19 business

The Effects from Covid on Reverse Mortgages

By Edward Brown and Mary Jo LaFaye

With the Covid crisis still looming, much attention has been focused on conventional loans where monthly mortgage payments are required. Recently, laws have been passed on both local and national levels to ensure homeowners are not evicted for non-payment on FHA loans.

Relatively little attention has been geared toward reverse mortgages during the Covid virus. Why is that? At first glance, the simple answer is that no monthly payments are required for reverse mortgages; thus, there is no risk for a foreclosure for non-payment of a mortgage. However, one needs to go deeper to understand that there could be a potential risk to the homeowner of losing their house in certain circumstances but for the foreclosure moratorium.


Image by fernando zhiminaicela from Pixabay

Under normal circumstances, the borrower on a reverse mortgage does not have to worry about foreclosure by the lender because no monthly payments are required; the loan balance just keeps increasing as interest accrues over time and is only required to be paid back upon the death of the last remaining borrower, move out by the borrower, or death of the non-borrowing spouse if the borrowing spouse predeceased them. The borrower’s only requirement for yearly payments are real estate taxes and insurance, HOA dues if applicable, plus maintenance and utilities. If the borrower fails to pay these, technically, they are in default and the loan may be called. This could lead to a foreclosure. In addition, the house may not be left vacant or abandoned.

For those borrowers who take a lump sum reverse mortgage and whose income is estimated to be too low to maintain the real estate taxes and insurance, they may be required to have a Life Expectancy Set Aside [LESA]. LESA is similar to an escrow account that is set aside for future real estate taxes and insurance and is based on the life expectancy of the borrower. These future expenses are deducted from the lump sum provided by the reverse mortgage company and held by them. The funds in the LESA become part of the loan balance once the lender disburses them to pay the property charges on behalf of the borrower. Thus, those borrowers who have LESA, for all intents and purposes, would not typically face foreclosure during their expected lifetime.


Image by Olga Lionart from Pixabay

Many conventional borrowers have requested deferments from their lending institution as they fell on hard times with the loss of income during Covid. The need for deferment requests are all but eliminated for reverse mortgages.

There has been a tremendous push toward applying for reverse mortgages by homeowners. There are many reasons for this; historically low interest rates mean that a borrower can obtain a much larger reverse mortgage, as the interest that gets added to the mortgage every year is less than in a high interest rate environment. Thus, the lower the interest rate, the better it is for the homeowner and, consequently, the less risk for the mortgage company.

In addition, many older homeowners have lost their job during the virus, and their largest retirement asset, by far, is their home equity from which they can draw upon. These same homeowners not only may not qualify for a HELOC [Home Equity Line of Credit], they may not want them after considering the benefits of a reverse mortgage (HECM) vs. a HELOC. For one, HELOCs require monthly mortgage payments. In addition, unlike a reverse mortgage (HECM), the bank can freeze [or reduce] the HELOC line and not allow access to it. This puts the homeowner in a precarious position of having debt against their property [as the HELOC is recorded against the property for the maximum potential draw of the line] without any benefit. Such was the case during The Great Recession in the mid-late 2000s when $6 billion of HELOC credit was frozen in June of 2008, and the freezing continued for some time. Why? The answer lies in the fact that the fastest way for a bank to shore up its balance sheet is to freeze HELOCs, so they do not have to set aside reserves. During The Great Recession, banks were facing write downs and write offs of loans as the loans that they had previously written took a downturn when borrowers, during the credit crisis, were unable to pay their mortgage. When a bank makes loans, they use depositors’ funds. The government requires reserves [loan loss reserves] be set aside to ensure the return of those depositors’ funds. If a bank has existing loans outstanding, they cannot just call in those loans [unless borrowers default]; however, a HELOC is a “potential loan” as the loan technically only exists as the borrower draws upon it. In this situation, if they freeze [or reduce] the line, the bank has not lent the money yet and can stop it before the borrower accesses the money that was available to them.


Image by Queven from Pixabay

Most major banks have seriously curtailed the issuance of HELOCs during the current Covid crisis, and those that continue to offer HELOC’s have imposed stringent qualifications to borrowers.

Many borrowers are realizing reverse mortgages offer advantages over HELOCs in this regard. There are limited income and credit qualifications to obtain a reverse mortgage. Reverse mortgage (HECM) lines of credit cannot be frozen or reduced, and, since there are no monthly mortgage payments, the risk of foreclosure [even after the moratorium] is slim.

A new situation has arisen due to Covid and that has to do with nursing homes. Once considered an alternative to in-home care [which is usually two to three times the cost of a nursing home], many stories have been published about the increase in deaths surrounding Covid and older Americans in care facilities. Most people would like to be in their own home instead of a care facility given the choice, but, unfortunately, many people cannot afford the [around the clock] care required to stay home and be cared for. Loved ones, especially during the virus, are looking for a way to keep their elders in the safety of their own home and receiving the quality and quantity of care they needed. Many are looking toward a reverse mortgage to fill this need. Many people have enough equity in their homes, especially as real estate has tremendously rebounded since The Great Recession, to allow them a large enough reverse mortgage to afford the costs associated with in-home care.


Image by Tumisu from Pixabay

The National Reverse Mortgage Lenders Association [NRMLA] reports that there have been significant increases in draws [on the HECM reverse mortgage line of credit]. Those retirees who lost their part time jobs and need to make ends meet, helping family affected by Covid, and those who are just generally concerned about their future finances. NRMLA states there has been a 55% increase in the number of draws and 14% in the size of the draws. In fact, they notice that some borrowers who had never previously drawn on their line of credit are fully drawing the line now.

As Covid gets more impactful on the economy and on peoples’ lives in general, we should expect reverse mortgages to grow, and now seems to be the most opportune time to obtain one – before interest rates increase.


Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

financial-5050415_1280 attribute

UBTI and Mortgage Debt Funds

By Edward Brown

According to Investopedia, Unrelated Business Taxable Income [UBTI] is income regularly generated by a tax-exempt entity by means of taxable activities. This income is not related to the main function of the entity and prevents or limits tax-exempt entities from engaging in businesses that are unrelated to their primary purposes.

UBTI greater than $1,000 is subject to taxation. For 2019, the highest tax rate was 37%.


Image by Gerd Altmann from Pixabay

Most forms of passive income, such as dividends, interest income, and capital gains from the sale of capital assets, are not treated as UBTI.

Many investors use their IRAs to invest in Mortgage Debt Funds [MDF]. MDF lend money similar to a bank where they take a deed of trust as collateral for the loans they make to borrowers. Typically, income derived from MDF are not subject to UBTI even though the income derived at the MDF level is not passive in and by itself. The IRA investor, however, is a passive investor; consequently, it is not usually subject to UBTI. There are times, however, when this is not so.

Ways that UBTI can be triggered for the investor in a MDF can involve a few different scenarios; if the IRA borrows on margin to purchase the MDF; if the MDF borrows within itself to generate income [called a leveraged MDF], or if the MDF ends up foreclosing on too many assets and the IRS treats the MDF as a dealer in real estate. [This last risk is relatively small, as most MDFs would not be treated as being in the business of buying and selling real estate by the IRS under normal circumstances]. The first risk [the IRA borrows to invest in the MDF] is also not a normal risk, and the investor has control over this by not borrowing to invest in the MDF]. It is the second risk that is the main one, as the MDF controls how much [if at all] it borrows.


Image by Thanks for your Like • donations welcome from Pixabay

Most MDFs that use leverage usually center around attempting to enhance its yield to investors. If the MDF can borrow from a bank at 5% and lend it out at 8%, there is a 3% arbitrage in favor of the MDF; however, this may possibly put undue risk in its portfolio – depending on how much leverage is used and the bank covenants required to obtain this leverage. In addition, for those investors in the MDF who use their IRAs [or 401(k)s, pension, or profit-sharing plans], this leverage may subject the income derived to create UBTI.

Certain key factors for the investor’s IRA are; how much the IRA has invested in the MDF [because the first $1,000 of UBTI is not taxable to the IRA, the income derived by the MDF, and how much leverage was used to produce that income. In addition, it is important the length of time that leverage was used, as the UBTI will be calculated using a formula.

For example, Chart 1 shows an IRA investor having $100,000 in a MDF generating a rate of return of 6.5% [without leverage] will not have its $6,500 income subject to UBTI as no leverage was used. If the MDF chooses to leverage the Fund 50% [50% investor funds and 50% bank funds] for the entire year and can borrow at 5% and invest that portion at 8%, the net income to the IRA [after subtracting the bank interest expense and UBTI tax ] would be $8,760.

chart 1

Many IRA investors may not feel that the extra $2,760 earned in this example is worth the risk. When a real estate syndication goes bad, it is usually only for one reason – leverage. If no leverage is used, then, usually, the only way for a real estate investor to lose substantially most or all of his/her investment in these types of investments [be they REITS, Limited Partnerships, Limited Liability Companies, etc.] is if the real estate taxes associated with the underlying real estate are not paid. When leverage is used, the banks have first priority over the assets. Simply, the more leverage that is used, the riskier the investment.

It is important for those investors using their retirement savings to invest in assets that can produce UBTI to ask the manager how much debt/leverage is used in the investment. A small amount of leverage is not usually taking on undue risk, especially if that leverage is used sparingly. Mark Hanf, president of Pacific Private Money, says that he likes to use a small amount of leverage, and on a very short term basis for his MDF for specific reasons; mostly, to help fund short term loans in his Fund when he is expecting payoffs on other loans or anticipated investor money flowing in. As soon as payoffs or investor money comes in, he immediately pays down line of credit [leverage]. This creates the benefit of having the ability to close deals that he might not otherwise have been able. The short-term nature of this leverage does not usually create enough UBTI income to concern the retirement investor. In addition, the short duration of the leverage puts his Fund at minimal risk; however, since the rate of interest to obtain the leverage is less than the income derived from it, his Fund still benefits from a small amount of positive arbitrage.

The retirement investor would be wise to look for Funds that conservatively use leverage in their MDF to avoid UBTI as well as undue risk. In addition, the investor should calculate the anticipated UBTI ahead of time to determine how much should be invested, as only the first $1,000 of UBTI income is tax free; The investor can then decide the risk reward of investing in a MDF that uses leverage.


Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

Photo by Black ice from Pexels

Don’t Miss The Deadline To Balance Your Real Estate Portfolio

By Bill Mencarow

Savvy real estate investors balance their portfolio with real estate notes (trust deeds or mortgages); real estate for appreciation, real estate notes for income.

My name is Bill Mencarow.  While my wife Alison and I were on the staff of the US Congress in Washington, we started to invest in real estate and later discovered notes (trust deeds and mortgages).  We still love real estate, and since then we’ve bought and sold lots of it, and lots of notes.


We then started The Paper Source, an educational resource for note investors and those who want to be.  For many years we have hosted the annual Paper Source Note Symposium which attracts several hundred investors.

Because of virus restrictions we can’t hold it live this year.  Instead, it will be at your house!  (That is, it will be online.)


Photo by Andrea Piacquadio from Pexels

* Our speakers are people who DO what they teach. Over three days you will learn from some of the most experienced people on the planet (full-time note investors, tax and asset protection attorney, self-directed IRA experts, to name just a few) – and absolutely NO sales pitches.

*  There will be presentations for beginners on up.

*  You will get NON-EXPIRING access to all the speakers’ videos and MP3 audios.

Tom Henderson, whom many call “The Note Professor” (and you will too, once you hear him) recently told me, “Bill, this is the deal of the century!  Can you believe all these speakers for only $97.00? And be able to watch at anytime on any device?!”


Image by Gerd Altmann from Pixabay

This is my invitation to join us for the online Note Symposium Oct. 1-3.  Please CLICK HERE to see all that it offers.  The $97.00 registration includes admission to the event and lifetime access to the videos and MP3s.

And that’s not all.  If you register by this Friday, Aug. 21, you will receive a one year subscription (or renewal) to THE PAPER SOURCE JOURNAL, the only publication for real estate note investors, which sells for $79.00.

Every month you’ll get news affecting your investments, including court decisions, scam warnings, tips and techniques on everything from finding notes, negotiation, recasting them to double and triple your yields, and much more.

W. J. Mencarow, President, The Paper Source, Inc.

Remember to register by this Friday to receive the $79 bonus. Your registration includes access to all the speakers’ videos and MP3 audios which will NEVER expire – you will be able to watch and/or listen anytime now or in the future.  CLICK HERE for more information and to register.  And please don’t miss the Friday deadline!

Feel free to contact me with any questions.  My personal email and my cell is 830-285-5926.


How FHA Benefits Buyers, Sellers, and Brokers

By Rick Tobin

Since 1934, FHA has insured over 34 million home mortgages nationwide. For buyers, sellers, and advising real estate brokers or other licensees, they should all learn more details about how the use of FHA mortgage loans can help each of them to buy and sell properties at potentially a faster and more profitable pace today.

Easier Mortgage Underwriting Guidelines for FHA Loans

pexels-lukas-684385 digital

Because FHA mortgages are insured by the federal government in case of future default or foreclosure risks, mortgage lenders are more likely to offer much easier loan approval requirements for their interested borrowers. Let’s take a look below at some of the best FHA mortgage loan benefits that include:

  • Loan-to-value loan amounts up to 96.5% LTV for owner-occupied properties.
  • FICO credit score allowances as low as 580 for some lenders up to 96.5% LTV loans.
  • Sellers, family members, and other interested parties may be able to contribute up to 6% of the sales price towards closing costs, prepaid expenses, discount points, and other financing costs or concessions to greatly reduce total out-of-pocket cash contributions for the buyer.
  • Borrowers who invest at least 10% towards a down payment may qualify with a FICO credit score as low as 500 in some cases.
  • Debt-to-income (DTI) ratio limit allowances that may exceed 50% for borrower applicants.
  • Interest rates for FHA loans are usually priced at or better than the most attractive interest rates for loans that aren’t government-insured, which allows borrowers to qualify for much larger loan amounts.
  • Maximum loan amount limits for one unit ($765,600), two unit ($980,325), three unit ($1,184,925), and four unit ($1,472,550) properties are much higher now in 2020 than most people realize.

FHA Loan Amount Limits for 2020

Each year, the Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), and the Department of Veteran Affairs (VA) revise their maximum loan limits for one-to-four unit residential properties by county regions across the nation.

limits digital

The FHFA establishes the baseline conforming loan limit that meets or “conforms” to certain qualifying underwriting guidelines that are established by the two largest secondary market investors or Government-Sponsored Entities (GSE’s) named Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

After a mortgage company, wholesale lender, or bank funds a loan, they usually need to sell it off into the secondary market to Fannie Mae, Freddie Mac, or to another secondary market investor so that the financial institution doesn’t run out of money. As a result, the lender will underwrite and approve borrower’s loan applications that both meet their own guidelines as well as the secondary market investor’s requirements. If not, the financial institution might be stuck with the funded loan, and will not be able to transfer it to another secondary market investor.

A conforming loan that is saleable or transferable to Fannie Mae or Freddie Mac and FHA loans are typically based upon median home prices in each county region. California, and other expensive states to live in that are typically near ocean locations or prime metropolitan regions, have “high-cost” county loan limits that can reach as high as 150% of the baseline mortgage limit that is derived from local median home prices in that same county region.

FHA has a minimum loan amount or floor limits that go as low as $331,760 for a one-unit property (single-family home, condominium, townhome, etc.) as of January 2020. FHA has maximum loan amount limits that rise to as high as $765,600 in pricier county regions in California that include:

* Alameda
* Contra Costa
* Los Angeles
* Marin
* San Benito
* San Francisco
* San Mateo
* Santa Clara

Maximum Residential (One-to-Four Unit) Loan Limits in 2020


For so long as the owner lives in one of the units for a duplex, triplex, or fourplex property, the same owner may qualify for the maximum residential LTV ranges just like he or she would for a single-family home. Many times, the adjacent tenant or tenants will pay enough in monthly rent to cover the owner’s monthly mortgage payment.

Single (single-family home, condo, townhome) – $765,600

Duplex (two units) – $980,325

Triplex (three units) – $1,184,925

Fourplex (four units) – $1,472,550

Mortgage Insurance Premium (MIP) Fees

Because FHA mortgage loans tend to be at higher loan-to-value levels up to 96.5% LTV, these government-insured loans will include a mortgage insurance premium fee when the LTV exceeds 80% of the purchase price or appraised value for a refinance. The pooled insurance fee payments will act as future protection against any default risks.

Generally, the MIP funding fee equals 1.75% of the loan amount that’s due at the time of closing. The official title for this MIP funding fee is the Upfront Mortgage Insurance Premium (UFMIP). Many times, the borrower can add this MIP finance charge to the loan amount if all underwriting guidelines are met and approved by the lender.

pexels-karolina-grabowska-4386393 digi

Additionally, there will be an annual mortgage insurance premium (MIP) fee that varies depending upon factors such as the loan-to-value and loan amount size. Loans with a higher LTV range at 96.5% are generally considered much riskier than loans with lower 90% LTV ranges. As a result, the annual MIP fee percentage amounts will differ and range from a low of 80 basis points or .80% (at or below 90% LTV for loan amounts below $625,500) to as high as 105 basis points or 1.05% (at or above 95% LTV for loans greater than $625,500).

Please note that 15-year FHA mortgages generally have lower interest rates and much lower annual MIP fees to as low as 45 basis points or .45%.

FHA Monthly MIP Payment Example

Let’s quickly review a fictional $600,000 home purchase deal for a borrower who wants an FHA mortgage that’s fixed for 30 years with the lowest down payment possible:

  • Purchase price: $600,000
  • Maximum 96.5% LTV with just 3.5% down: $579,000
  • Upfront Mortgage Insurance Premium (UFMIP): $10,132.50 (1.75% of $579,000)
  • Annual MIP fee: $4,921.50 (.85% of $579,000)
  • Monthly MIP fee paid: $410.12 ($4,921.50 / 12 months)

The monthly MIP fee is paid in addition to the homeowner’s principal, interest, property taxes, and homeowners insurance. The faster that the homeowner can eliminate this monthly MIP fee requirement, the more affordable the future monthly payments will become for the borrower.

FHA Streamline Refinances


Two or three years after buying a property with a 96.5% LTV FHA loan, a borrower may be able to qualify for the FHA Streamline refinance program if the new loan amount will be at 80% or below of the most recent estimated market value. Over the past several years, many homes have appreciated at 7% to 10% per year. If so, it may only take a few years for a property owner to reduce their LTV range from 96.5% with monthly MIP requirements to 80% LTV or below with no monthly MIP payments.

Ironically, these “fast track” refinance programs may allow the borrower to not provide any formal documentation for their current income, credit scores, or even need a formal updated appraisal. If the monthly MIP payment can be eliminated with the new FHA Streamline loan, the borrower may also get a partial refund of their upfront MIP payment that was due at closing when the home was purchased.

A new FHA Streamline loan could save a borrower $500 to $1,000 per month, depending upon how much their interest rate is reduced, their loan amount, and whether or not their monthly insurance premium was eliminated.

Whether you are a buyer, seller, or a real estate broker, the FHA loan option might be the best financing option of them all for the parties involved. This is especially true as both the 30-year and 15-year fixed mortgage rates hover at or near all-time record lows!


Rick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at for more details.


How Deferment of Mortgage Payments May Affect Borrowers in the Long Run

By Edward Brown

When Congress passed Section 4021 of the CARES Act in response to the effects of COVID-19, their intent was to help borrowers who were having problems making their mortgage payments. Little did Congress realize that they were potentially setting up borrowers for trouble in the future when it comes to credit worthiness as assessed by the lending community.


According to Mark Hanf, president of Pacific Private Money, “Section 4021 of the CARES Act contained a regulation that loan servicers “shall report the credit obligation or account for those participating in forbearance as current”. In other words, those participating in a forbearance program should not see their credit scores drop. However, there is a loophole that allows lenders to discover whether or not a borrower is actually making payments. It is the “comments” section of a credit report. The CARES Act does not mention the comments section of credit reports, and that’s where forbearance notations are going.” What borrowers are not being told is that any reference in a credit report to forbearance can be a Scarlet Letter for an applicant seeking a new mortgage, according to Kathleen Howley in an article she wrote in early May 2020.

According to Hanf, within a week of Howley’s article, his company received a loan request from a home buyer who was denied credit from a major bank for just this very situation. Although the bank sees the existing mortgage as “current” the forbearance has let the world know via the comment section that this borrower has requested a deferment. The major bank involved would most likely not deny the loan on its face due to the deferment, as this would violate the law; however, banks are notorious for coming up with a myriad of reasons for denying a loan and still stay within the guidelines set out for them.

crop-businesswoman-counting-money-while-sitting-at-desk-4475525 small

Conventional lenders desire to have plain vanilla borrowers who pay back loans in a timely manner. When a borrower changes terms of the loan by requesting principal forgiveness or other aspects of the loan, the lenders generally do not usually extend credit again to these borrowers and can negatively affect the borrower’s ability to borrow again from unrelated lenders. Such is the case back during the Great Recession wherein some borrowers took advantage of the economic climate by asking their lender to reduce the principal of their loan [total forgiveness rather than just a deferment]. The borrowers may have gotten a reprieve, but the long-term effects may have been more drastic. Similarly, to when a borrower files bankruptcy. The borrower may get out of paying creditors, but their ability to borrow in the future is usually severely hampered.

In one case, back in 2009, during the heart of the Great Recession, one banker tells a story of how a wealthy borrower first asked for a principal loan reduction of $500,000 because his collateralized real estate had decreased and his request was granted. But, when this borrower was faced with the prospects of having this reduction reported on his credit report or the fact that he would have to inform any new lender that he requested a principal reduction [as this question is usually on bank applications], he voluntarily requested that the $500,000 abatement be reinstated. He decided his ability to borrow in the future was worth more than the $500,000 principal reduction.

Borrowers will have to decide if requesting deferments is worth the risk of potential future lending restrictions based upon the lender desire to lend to borrowers who choose to defer mortgage payments when the opportunity arises. Whoever said, “there’s no free lunch” must have been talking about these very situations.


Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.


Mortgage Defaults

By Stephanie Mojica

With an unprecedented national and global economic crisis, real estate industry experts have varying opinions on how the situation will affect mortgage defaults.

group-2822423_1280“The pandemic-induced closure of non-essential businesses caused the April unemployment rate to spike to its highest level in 80 years and will lead to a rise in delinquency and foreclosure,” Frank Nothaft, chief economist at CoreLogic in Orange County, Calif., said in a press release.

“By the second half of 2021, we estimate a fourfold increase in the serious delinquency rate, barring additional policy efforts to assist borrowers in financial distress.”

Paul Cooper is manager of the Kansas-based Totes of Notes. The company buys and sells distressed real estate debt throughout the United States. In a recent email interview with Realty411, Cooper said mortgage defaults have significantly increased.

“In fact, April 2020 had the highest rate of mortgage defaults for any given month on record,” Cooper said. “It took the last recession a long time to hit its peak, which was lower than this April.”

chart-5061484_1280Cooper added that many of his real estate notes have not been paying regularly for the last few months.

“It’s going to get much, much worse before it gets better,” Cooper said.

However, Jay Tenenbaum, founder and president of the Arizona-based Capital Development of Scottsdale Rei, LLC said in a recent email interview that mortgage defaults are not on the rise. His company is a private equity real estate investment firm that specializes in acquiring assets nationwide.

“Based upon information and articles I have read, mortgage defaults are not on the rise — at least not yet,” Tenenbaum said. “The multitude of mortgage forbearance relief, has, at least for now, prevented the dramatic increase in defaults that we saw in 2008.”

While Tenenbaum emphasized that he does not wish to downplay the economic and social impacts COVID-19 has had on the country, he said there are people taking advantage of government programs to the detriment of real estate investors.

“The local, state and federal programs are/were necessary,” Tenenbaum added. “Having said that, these programs, etc. allowed many others to take advantage. We have all heard stories of furloughed employees who’d rather collect unemployment than go back to work.

“With regard to the issue of mortgage defaults, the federal/state forbearance programs were intended to minimize the risk of foreclosure, i.e. avoid a repeat of 2008, etc.

“Yet, a recent article stated that only 5% of those receiving mortgage forbearance relief did not have sufficient income to make their mortgage payments. Conversely, 95% of homeowners who were approved for forbearance relief can make their mortgage payments.”

percent-226314_1280Fuquan Bilal, CEO and founder of NNG Capital Fund of New Jersey, echoed similar sentiments.

“A lot of people, even if they didn’t suffer from COVID, still took advantage of not paying the mortgage or going into some type of deferral program,” Bilal said. “And then there were people who were genuinely affected by it. So, you have a mixture of that.

“Plus, people who are not working — even though they’re collecting unemployment, some people are still going to try to opt to see what programs the banks have and/or push the banks to see what they can get out of them.

“We saw the same thing happen with loan mods. When the market crashed, a lot of people strategically defaulted. So, you have a lot of strategic defaults that are happening.”

What does all this economic chaos, whether intentional or unintentional on the part of borrowers, mean for real estate investors?

“If you’re looking to buy distressed real estate notes, then all this is music to your ears,” Cooper said. “Because this means there will be plenty of inventory for non-performing note investors.

“You could also look at offering loans to people that are out of work. This would be riskier, but you could charge higher interest rates.”

According to Cooper, opportunities will also increase in the coming months and years for tax lien/deed/certificate investors as well as those interested in short sales and foreclosure deals.

banner-1165975_1280However, Cooper emphasized caution — especially during a global economic crisis.

“If you’re looking to invest, then I’d sit on cash until really good deals come around.

“If you don’t know what you’re doing, then I’d spend a lot of time trying to find somebody you can trust that you can invest with and learn from. More fortunes are made during bear markets than bull markets. You need to know how to protect yourself and take advantage of the situation.

“Be careful shelling out big dollars for an investing or real estate education. There are all kinds of con men coming out of the woodwork who have only done a handful of deals and only know how to sell you a course.

“Most successful investors are happy to teach you the game if you get in a deal or partner with them. It’s a good way to earn and learn. This way if you don’t understand the investment or like it, then you have a professional to handle it for you.”

Tenenbaum noted that when mortgages default, it creates a buyer’s market because of the increased supply of available inventory.

“Investors are nimbler and more equipped to obtain access to distressed homeowners and seek to acquire such properties. Also, in a distressed market, acquisition price is at a greater discount, thereby allowing investors to achieve greater profits.

“Last, banks and hedge funds are motivated to sell their assets as maintaining non-performing assets on their books puts their balance sheet and lending capabilities at increased risk.”

bad-19907_1280According to Bilal, unemployment is the number one indicator of an abundance of opportunity for note investors. However, he believes opportunities are scarcer now than they will be in the coming months.

“I believe that the banks really don’t want to take a position of foreclosing on people,” Bilal explained. “So, they are going to try to work it out; they are going to try to come up with modification programs.

“We’re seeing some of the defaults now, but I believe we’ll start to see some of the foreclosure activity maybe nine months to a year from now. They (the lenders) will probably run them (the borrowers) through a process to try to work it out, and if they’re not able to work it out they’ll start the foreclosure process.”

Cooper echoed similar sentiments about long-term plans paying off better for investors.

“The next 6 to 12 months could be rough as far as seeing good returns,” Cooper said. “However, there are good deals that are currently available that will pay off within a year or so. So, make sure to get a good price when you buy and patiently work through the investment.

“If you need money within the next 90 days, then you need a job not an investment.”


VA and FHA Mortgages & the Housing Boom (Part 2)

Military Experience Eligibility for VA Loans

How does a retired or active military personnel member qualify for a VA loan based upon their military experience?


* An earlier discharge date for a service-connected disability may still qualify you.
** Officers who separated from service after 10/16/81 may be eligible.

For more details, please visit The U.S. Department of Veteran Affairs’ website to learn about VA mortgage loan eligibility benefits:

Once an active or retired military person meets the minimum qualifying guidelines, he or she will be given a Certificate of Eligibility that’s issued by the Department of Veteran Affairs. The VA mortgage loan applicant will then send a copy of the VA Certificate of Eligibility (VA Form 26-1880) to their mortgage broker or banker. For VA loan applicants who do not have a copy, they may complete a form entitled Request for a Certificate of Eligibility (Fillable) that’s linked here:

The Evolution of VA and FHA Loans

veterans-day-4653841_1280Near the end of World War II, the VA home loan program was created in 1944 as part of the original Servicemen’s Readjustment Act that’s also referred to as the GI Bill of Rights. The VA loan benefits were signed into law by President Franklin D. Roosevelt. A portion of each funded VA mortgage loan was guaranteed by the federal government in the event that the VA borrower later defaulted on the loan and lost the home in foreclosure. This way, each bank that funded the 100% loan for qualifying VA borrowers had much less financial risk.

Specifically, there were two types of government-backed or insured mortgage loans that stimulated the housing market and helped the U.S. economy prosper and rise up out of the previous negative Great Depression (1929 – 1939) years – VA and FHA (Federal Housing Administration) loans. These more flexible residential mortgage loans were part of President Roosevelt’s New Deal plan and the National Housing Act of 1934 that were designed to create more jobs and boost home values and the economy once again.

Since 1934, FHA has insured over 34 million home mortgages nationwide. As per the U.S. Department of Housing and Urban Development (HUD), FHA has active insurance on over 8 million single-family mortgages. In total for both residential and commercial real estate properties, FHA’s insurance portfolio exceeds $1.3 trillion.

To learn more about the Federal Housing Administration (FHA), please visit HUD’s website:,workers%20had%20lost%20their%20jobs.

VA and FHA Loans for Buyers, Sellers, and Owners

calculator-723925_1280The main difference between FHA and VA is that the government insures a portion of the FHA loan while guaranteeing a portion of a funded VA loan. The vast majority of home loans funded nationwide over the past 10 years, directly or indirectly, were either government-backed (VA) or insured (FHA) and/or purchased in the secondary markets by other government-sponsored or federal entities named Fannie Mae, Freddie Mac, or Ginnie Mae.

FHA loans allow borrowers to qualify with 3.5% down on average (96.5% LTV) with lower FICO credit score options near 580 and easier overall underwriting allowances. FHA also allows seller credits and gifts from family members toward down payments that can effectively make a purchase loan become near 100% LTV also. However, borrowers will have to pay an additional monthly insurance premium along with their mortgage payment that can reach a few hundred dollars per month, depending upon the borrower’s FICO credit score, loan amount, debt-to-income (DTI) ratios, and LTV (loan-to-value). There are more flexible FHA Streamline refinance programs available as well that are similar to the VA Streamline.

For qualified VA borrowers, there is perhaps no better mortgage loan option available while FHA loans might be the second best option for high LTV loans. This is especially true as 30-year fixed mortgage rates continue to hover at or near all-time record lows while making many mortgage payments more affordable than rent even when the home is financed up to 100% of the purchase price.

To date, VA and FHA have guaranteed or insured over 58 million mortgages for homeowners. Home sellers should welcome any VA or FHA buyer prospect who has a pre-approval letter from a mortgage lender. This is because the lender is prepared to provide up to 96.5% LTV for FHA or up to 100% LTV for a VA loan. Amazingly, both FHA and VA loans can close in a few weeks or less due to expedited online application processing options.


Rick-Tobin-Professional-Pic-sharperRick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at for more details.


VA and FHA Mortgages & the Housing Boom (Part 1)

By Rick Tobin

The most flexible and easiest qualifying mortgage loan product in America is the VA (US Department of Veteran Affairs) mortgage loan. Between 1944 and 1966, approximately 20% of all single-family homes built or purchased were financed by the VA home loan program for active military or retired veterans of World War II (1939 – 1945) or the Korean War (1950 – 1953). From 1944 through 1993, the VA mortgage loan program guaranteed almost 14 million home loans. By 2013, the VA had guaranteed over 20 million loans. As of 2019 in the VA’s 75th anniversary year, VA had surpassed 24 million loan guarantees for borrowers.

investment-4737118_1280Did you know that there are 100% LTV (loan-to-value) mortgage loans available to qualifying active or retired military personnel up to $1.5 million dollars for owner-occupied homes as of 2020? Yes, a qualifying VA mortgage applicant has the option to purchase a home priced as high as $1.5 million with no money down. These 100% LTV loans have no additional monthly mortgage insurance payment requirements like required for most other mortgages with a loan-to-value range above 80% of the purchase price or appraised value.

VA Loan Guidelines


Mortgage loan underwriting guidelines are subject to change and may have some exception allowances for mortgage borrower applicants due to factors such as credit scores, income, job history, debt-to-income ratios, and property types. However, these are common VA loan terms or guidelines that were available as of June 2020:

  • No money down up to $1.5 million for owner-occupied borrowers (not second homes or investment properties)
  • Historically, a debt-to-income ratio of up to 41% DTI* was typical for VA borrowers. However, some VA loan programs allow up to 60% DTI or higher
  • No monthly mortgage insurance premium requirements
  • FICO credit scores as low as 620

* Debt-to-income ratio (DTI) = Borrower’s proposed mortgage payment plus monthly consumer debt obligations that are divided by monthly income. A borrower with $2,500 in monthly debt payments and $5,000 in monthly gross income (before taxes) will have a 50% debt-to-income ratio ($2,500 / $5,000 = 50%).

VA Loan Refinance

percent-226357_1280For existing VA mortgage borrowers under newer 2020 rules, VA borrowers can pull cash out of their property up to 100% of their property value. For example, a homeowner with an existing $250,000 mortgage loan secured by a property valued at $500,000 could apply for a new $500,000 cash-out loan that gets them upwards of $250,000 additional cash-out that they could use to pay off credit cards, student loans, automobile loans, business debts, or use the funds to make new property or stock investments.

A mortgage borrower in a non-VA loan can refinance from a conventional bank loan or an FHA loan with costly monthly insurance premium (MIP) payments into a new VA loan if one or more of the borrowers has VA eligibility.

Another easier qualifying VA refinance loan option is generally referred to as a “VA Streamline” (IRRRL – Interest Rate Reduction Refinance Loan). With some non-credit qualifying VA Streamline loan programs (subject to change), the borrower’s application process includes:

  • No minimum credit score
  • No appraisal required
  • Primary and non-owner occupied properties may be allowed
  • Must be current on existing mortgage loan about to be paid off
  • Manufactured homes attached to the foundation may be eligible

To learn more details about qualifying for VA refinance loans, here is a link to VA Pamphlet 26-7, Revised, Chapter 6: Refinancing Loans


Rick-Tobin-Professional-Pic-sharperRick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at for more details.