The following is an excerpt from a conversation between Tony Cordi of Beachtime Realty and Doug Smith of Stratis Financial on 11/16/09:

Tony:  How long have you lived in the South Bay?

Doug:  I am a graduate of Mira Costa, class of 1980 and my wife is Costa 1979, and she coach of the girls cross country team at Mira Costa.  Go Mustangs!  We live in Hermosa and love our neighborhood.  Our community roots are very strong.  It is the best place in the world to live, and we are excited to raise our son here.

Tony:  How long have you been in the home lending industry?
 
Doug:  I have been a loan officer since 1993 and started Stratis Financial with my 5 partners in January 2000.  The recent market has really validated our business model.  We did not enter into the subprime market at all, and as a result our record of very few defaults has enabled us to have more funding sources for our clients today than we did 3 years ago!

Tony:  The business media have offered a lot of explanations for why we experienced this recent financial crash.  At a high level, what changes have you seen directly in the lending world based on all that has happened these past two or so years? 

Doug:  There are big changes on two levels.  First, the credit standards have swung way back from the easy money of a few years ago.  This part is actually not as bad as the mass media would have you think.  For the most part, if people can afford a home, they can qualify for a loan.  A few years ago, there was NO consideration given to the buyers expected ability to repay, and that ability is now back in the forefront.  The second change is all of the new regulatory requirements.  A lot of time is spent ensuring that these requirements are satisfied.  This makes the process a little more time consuming, but has no real effect on the consumer other than more paperwork.
 
Tony:  Have we seen the last of stated income programs? 

Doug:  For now, yes.  The buyer who has gotten "left out in the cold" in today's mortgage market is the self-employed borrower with good savings and good credit.  Historically, the stated income loan was designed for this person.  The down payment requirement was higher than for a traditional wage earner, and the rate was a little higher, but there was still a loan available for a self employed buyer whose income is difficult to document.  From a make-sense standpoint, it is perfectly reasonable to just make this person put a little more down, have more in reserve after close, and prove that they do in fact own their own business but still give them a loan.  Their excellent credit, proven ability to save, and cash left over at close make them a great risk.  It is my opinion that if a few lenders with solid financials were willing to enter this market in a well reasoned way, they could get a TON of good, performing business.

Tony:  What’s going on with conventional financing?  What does it take to secure a loan these days?  

Doug:  The conventional mortgage market is in a state of flux right now.  The jumbo loan market (loans above $729 K) is particularly fragmented.  Those lenders are not willing to buy each other's loans at this time, so each lender is making their own isolated decisions about what they will lend, how much money is required for the down payment and what kind of rate they want.  Based on this, the rate and program varies dramatically from source to source.  It has been a much more "self policing" market in the past, but the difference from one source to another is very big right now.

Tony:  If I have 20 percent for a down payment or I need to borrow more money, do I have other options? 

Doug:  On a home with a price of up to about $800 K, there are other options, both within conventional and FHA home loans.  It is important to just understand the difference in the cost of your loan to make sure that you are making a clear decision about how to structure the financing.  Many people who have enough saved to put 20 percent down are opting for a lower down payment because it makes sense to have some money left over after close of escrow.

Tony:  What’s happening with investment property financing or construction bridge financing? 

Doug:  I can speak to the market for properties with up to four units.  Above four units is considered commercial, and I am not an expert in that field.  Loans are still available for non-owner occupied properties, the standards are just more strict than in recent times.  Loans are available with 20 percent down, but the rate is considerably higher than with 25 percent down.  Also, there are additional rate surcharges for two to four unit properties.  However, with the recent correction in home prices, there are some GREAT opportunities in the investment property market.  Buyers with a little cash and a cool head are making some GREAT purchases right now.

Tony:  Thank you for taking the time to discuss this with me.

Doug:  My pleasure and thank you.

              

Doug Smith - Stratis Financial

Your Conventional, Jumbo, and FHA/VA expert since 1993

3625 Del Amo Blvd #220, Torrance CA 90503

Direct 310 697-7033  Cell 310 508-5832  Fax 310 371-7469

DRE License #01158488

www.stratisfinancial.com