By Adel A. Michael
Founder and CEO
Omega Financial Services Inc.
Increase your business
with the Federal Housing
Only a few years ago, loan pro- grams abounded. They filled mortgage professionals’ heads
with guidelines and different options.
That came crashing down with the
housing crisis. Mortgage brokers are
left with a drastically reduced number
of programs and guidelines. That is the
good and the bad news.
With fewer products left, it is critical that mortgage brokers and originators take advantage of every program
that is still available — like the Federal
Housing Administration (FHA) Section
No. 203(k) loan.
In the boom times, few brokers considered doing FHA loans, let alone the
203(k). These loans were too cumbersome. It was easier to pursue a sub-prime loan rather than deal with full
documentation and FHA guidelines.
Now, however, FHA products likely are
some of the most-valuable items in
your toolbox — and if you don’t know
about these programs, you should become familiar with them immediately.
With the FHA 203(k), your client can
purchase and close on a property without a certificate of occupancy, with a
leaking roof, with no furnace or with
virtually any item needing repair. This
is particularly important because of increasing numbers of short sales and
foreclosures. Those properties often
are unattended for months to years at a
time, leading to everything from general
disrepair to stolen fixtures and pipes.
These properties are ripe for a 203(k)
loan. An FHA-approved 203(k) consultant helps estimate repair costs as well
as the property’s value after repairs are
completed; the mortgage is then based
on these figures, as well as the purchase price. As an additional benefit
to mortgage brokers, six months later,
when the rehabilitation is complete,
you can refinance the same clients into
a lower rate, if available.
Many first-time homebuyers are
unaware that they can purchase a
distressed property and create their
dream home with one mortgage.
Brokers must educate clients on the
seven key benefits of the FHA 203(k)
1. low downpayment: The required
downpayment is 3. 5 percent.
2.;easy;qualification: This allows those
with less-than-perfect credit to purchase a home at competitive rates.
3. one loan: The purchase and improvements of the property are included in a single mortgage.
4.;Assumable: FHA loans may be assumable and there are no prepayment penalties. This makes the
home easier to sell later because
the benefits of the FHA government-insured mortgage can be transferred to the new owner.
5.;Peace;of;mind: Most 203(k) lenders
work only with professionals who
are familiar with the program. These
experts can take the fear out of doing a major renovation or rehab.
6. better protection: A government
agency, the FHA will make an effort to avoid foreclosure and keep a
buyer in the home should financial
can afford better locations by pur-
chasing distressed properties at
a discount and repairing them. In
addition, they get to choose reno-
vations according to their tastes
Adel A. Michael founded New Jersey-based
Omega Financial Services Inc. in 1995.
Originally a branch of Allied Mortgage
capital, it is now a mortgage bank and direct
lender. It is also the second-largest Federal
Housing Administration 203(k) lender in its
home state. With Michael’s expertise and
experience, Omega has been able to finance
numerous 203(k) and 203(b) loans totaling
millions of dollars. Reach Michael at (909)
933-0253 or email@example.com.
By David Hardin
Director of retail operations
Bay Equity Home Loans
Mortgage brokers considering the jump to banking have many advantages
To remain a broker or join a banker? Thatquestionisonthe minds of many mortgage brokers today. Mortgage originators have
been bombarded with changes not only
to loan programs and guidelines but
also to compensation.
Brokers can move to another industry or start another venture — or they
can decide to adapt their business.
A growing trend is for mortgage brokers
to join mortgage-banking operations as
employees and run their branches as
profit centers of the bank.
If you are considering such a move,
there are six primary advantages to this
mortgage;bank,;you are selling off
a rate sheet. This often allows flex-
ibility when it comes to how much
credit you give clients toward their
costs. Brokered loans have preset
margins that you must earn, and
even if you wanted to, you usually
cannot legitimately credit the client
as much as you would like. This may
render the loan unfeasible for the
client, or you may lose the client to a
competitor with a lower margin.
David Hardin, veteran mortgage broker-turned-banker, is director of retail operations for Bay Equity Home Loans, one of the
San Francisco area’s most-respected and
successful mortgage-lending institutions.
Hardin is in charge of expanding the bank’s
team of retail branches across the western
United States by encouraging mortgage brokers to transition into the mortgage-financ-ing industry. Reach him at (415) 820-4512,
(949) 701-0804 or firstname.lastname@example.org.