Finding the Benefit in Net Tangible Benefit

For a number of years the broker was top of the mortgage world totem pole. This penultimate position allowed some brokers the ability to inform the appraiser how much the subject property was worth and to tell the borrower(s) how much money they earned each year. Small fibs grew to stretching the truth, which morphed into white lies, that finally parlayed themselves into outright fraud.

While the majority of brokers out there stayed away from this daisy-chain to disaster, the allure of 3+ points on the back of an option-ARM was too much for many to pass up. Lender's underwriting guidelines had lapsed into quick once-overs of the file and the, as already written, insatiable Wall Street demand kept the spigots open and fundings flowing. As the spreads, and therefore profits, on loans became larger and larger, it became easier and easier to turn a blind eye to what was happening.

Value became detached from reality and merely a number that was dictated by which program paid the most YSP to the broker. The appraisal process turned into an equation of: VALUE = (CashOut + Closing Costs + Payoffs) / Max Program LTV.

The income side of the equation wasn't too far off from the above. Taking program's a max DTI allowed, subtracting a few points for a margin of error and then backing into what the borrower needed to be making to qualify. These SISA loans didn't become known as 'Liar Loans' for unmerited reasons.

As was bound to happen, these bad apple loans have begun to rot in the securities into which they were bundled. Many of these notes have begun to go bad and the borrowers are being sent default notices rates far surpassing historical averages. Remembering that home-ownership is the 'American Dream' and that foreclosing on that dream is never a pretty picture, things have started to get ugly. Homeowners have begun to fight tooth and nail to keep the roof over their heads, lawmakers have started to devise bass-ackwards plans to save these over-indebted individuals and families, and most importantly, the vulturous lawyers have begun to circle overhead.

The unpleasant odor of impropriety and fraud has created a breeding ground for lawsuits and a much ballyhooed rallying cry of 'save the American Dream'. Much has been written about the misdoings and legal rumblings that have already started. Read the Counting the Subprime Lender Lawsuits blog here, or any other of the myriad of articles that a Google search will produce.

The question now becomes, what to do about all of this. Aside from the points described in the previous post, we here at GMC, for some time now, have been using a Net Tangible Benefits Form. This form is devised for the sole purpose of flushing out the true purpose of the loan to each of our borrowers. It's used to paint us a picture and common sense outline of why the deal makes sense, and why, at the end of the day the borrower is better off for having us originate the loan. We want to ensure that their truly is a benefit, save for lining the broker's and our own pocket books. Reducing a borrower's current rate, saving a home from foreclosure, using equity to buyout an existing bankruptcy, taking cashout to reduce overall monthly debt obligations - these are just some of the benefits we're able to offer to our borrowers and some of the benefits we double check to make sure exist on every deal.

This NTB form goes hand-in-hand with our employment verification, as one is near meaningless without the other. It's great to save a home from going into foreclosure, but not great if that borrower is then unable to afford their new payment.

We want to make sure the borrower is better off after signing on the dotted line. We want to ensure that we protect all parties in the transaction. We want to make sure that we're here going forward and that we're putting our customers, brokers and the end borrowers alike into a better situation then before they came to us. After all, who wants to be sued anyhow?

Press Release

GMC Hard Money Announces it will portfolio all hard money assets

GMC Hard Money is satisfied to announce that it has completed negotiations with two large investment portfolios to accept 100% of the hard money origination of GMC. GMC began discussions to portfolio its hard money loan business back in January of this year in light of forecasting the eminent turbulence that would occur within the secondary and securitization markets due to the sub-prime debacle.

This move secures GMC Hard Money with ample capital and autonomy to gain market share in the hard money space while the majority of its competitors rely on the secondary market, which has proven to be unreliable at best in the past several months.

With the lack of liquidity on Wall Street for newly originated mortgage product, GMC Hard Money feels that this move was essential and necessary in order to preserve its broker relationships and maintain its service levels and loan pricing.

Many hard money lenders have been forced out of business or had to drastically reduce staff and infrastructure, thereby decreasing service levels. Having the ability to keep these loans on the books means that GMC Hard Money remains one of few hard money lenders that can actually close and fund loans with no reliance on the movements of the rest of the mortgage marketplace.

GMC Hard Money has added many additional sales staff, some of which has come over from former competitors in the hard money space, to provide our broker clients the service and execution they deserve.

GMC Hard Money lends in approximately two dozen key states with LTV’s up to 70% in certain areas of the country. To discuss a loan scenario or to just find out more about GMC Hard Money, please visit our website at http://www.gmchardmoney.com/ or just give us a call at (954) 332-3567.

Historical Times

Unless you're an ostrich with your head in the sand, you realize the historical times that are currently upon us. The mortgage market as a whole has been turned on its head by a tidal wave of surplus Wall Street liquidity that has near instantaneously evaporated. MortgageImplode.com is fast approaching a dozen dozen lenders who have vanished. More will continue to follow suit and the ones left standing will reap the benefits.

GMC Hard Money looks to be one of those lenders who realized the race was always a marathon and not a sprint. We have avoided drinking the greed laced Kool-Aid that so many other lenders have in search of the quick buck and fast cash.

The 'common sense' philophies of originating loans has started to pay its dues and looks only to continue to do so. Our ability to leverage our portfolio investors' appetite for these deals, along with our ability to find the deals and package them correctly is going to go a long way. Firms selling to institutional, Wall Street firms that have the end goal of securitization are feeling the tightening noose currently, if they already haven't had the stool pulled from under them.

Let the others ride the short-term, sugar induced temporary highs - we'll continue to stick with our 'common sense' and 'Underwriting 101' guidelines that have kept us in business to date.