Florida Mortgage | Loan Servicing ~ What Consumers Need to Know in this Market...

Bad economic news tops every news broadcast with big lenders like American Home Mortgage, Geneva Mortgage, Homebanc and many more completely cease all operations.  This change in the game is leaving many homeowners worried about what is going to happen to them now that their lender is KAPUT!

 Do not fret... don't worry at all... in fact, get ready to make your September payment as scheduled.  Just keep your eyes open for your letter regarding who will be servicing your loan from now on.

You see, many of the lenders that you are paying your monthly payments to are in fact only servicing your loan.  They are not holding the note, but instead they are collecting and distributing funds for the actual mortgagee - typically an institutional investor.

A lender that holds loans is called a Portfolio Lender.  Meaning that the loan is part of their investment portfolio much like we would keep stocks, bonds or a mutual fund in our retirement portfolio.  Most lenders do not portfolio loans, they sell them on the secondary market instead.

 The Secondary Market is made up of investors like Pension Funds, Insurance Companies, FNMA (Fannie Mae), and FHLMC (Freddie Mac).  These investors have contracts with lenders to service loans on their behalf.

A lender that services loans performs certain tasks for a Portfolio Lender or Institutional Investor.  These tasks are:

• Collecting Payments - the most visible function
• Collecting Escrow payments
• Maintaining appropriate Hazard Insurance - including fire, hazard, windstorm and flood
• Paying Real Estate taxes
• Collecting Private Mortgage Insurance (PMI) payments
• Paying Net Proceeds to the Investor/Lender

Other tasks that these service lenders provide that are not as evident are:

• Sending out compliance documents - like the escrow analysis forms
• Preparing Mortgage Interest Tax Deduction forms for your taxes
• Disclosing the principle and interest due and paid monthly and annually
• Dropping the Mortgage Insurance when it reaches appropriate levels
• Calculating payoff amounts upon sale

and finally... (what we're seeing so much in this market)

• Accelerating the note and foreclosing on the borrower in the event of default
• Taking title to the property and liquidating the collateral on behalf of the Investor.

So in this market when we see some big name "lenders" going under, many times they are not the ultimate mortgagee... but instead the servicing entity.  Despite the servicing entity's demise, the investor will have another lender contracted out very quickly so they do not lose the revenues.

Unfortunately, there is little or no transparency in this area of the lending industry to show you who you ultimately owe your money to...

So... as I mentioned before... be ready for your next month's payment.  It will be due to someone even if your "lender" shut its doors. 

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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Florida Mortgage Loans | Condo-Hotel/Condotel Rental Income Rules

Condo Hotels or Condotels continue to grow in popularity in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa, Bonita Springs and Miami.  Because of this, it is important to keep in mind what Lenders are requiring in their lending guidelines concerning this unique property type.

One major issue that comes up with Condo Hotels is the rental pool.  Part of the allure of the property is the ability to allow the hotel to rent the room out to guests while it is not being used by the owner.

Unfortunately, Lenders require that the rental pool be voluntary.  Involuntary rental pools are to be classified as Timeshares. 

What this means is that when the owner of the Condotel unit wants to rent out their unit, they must make sure they put the unit into the rental pool... it isn't automatically rented without their say so. 

Considering issues like seasonality, major local events, and discount room rates/sales, there is no valid way to forecast the actual income that will be shared by the hotel and the room owner. 

An owner that does not want to rent their Condo Hotel room at all has that option under a voluntary rental pool.   While this might bother some hotel operations that want the room to rent, this is the only way that financing can be obtained.

The voluntary rental pool also affects the potential net income.  A buyer cannot be promised $10,000 a year return on a property if they are only going to make it available for 6 months out of the years or only on weekdays.

Realtors (listing agents) and Developers are therefore strictly prohibited from advertising rates of return, cap rates or even offering investment advice concerning Condotels.  Any potential rate of return could only be hypothetically based on an assumed usage rate that may never be reached.

Because of this, any rental income will not be counted as part of the qualification income for the Condo Hotel Loan.  To the borrower, this means that their debt to income ratios will not benefit from any potential cash flows from the property. 

Given this information, it is prudent that Realtors and Mortgage Brokers advise their clients who are interested in purchasing Condo Hotel properties that they will need to be able to qualify for this purchase on its own with all their other current debt. 

If they are unable to meet the Lenders' Debt to Income Ratios with their current debts and current primary residence, then they will likely not qualify for a Condo Hotel Loan.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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