Interesting Article: Tightened Lending - Posted by Stacy (AZ)

Posted by Fred on February 10, 2001 at 14:53:48:

I was not aware that there are so many rules that the credit bureaus have to follow. Does the program clean the reports from all 3 credit reporting companies (Equifax, Experian, Trans Union)? I am interested in learning more. I look forward to more of your posts explaining this. Does ICR have a web site? You can also send e-mail if you like. Thanks for the good info. This could be what I’ve been searching for but you can be sure that if its too successful then the lending industry will lobby Congress to change the regulations.

Interesting Article: Tightened Lending - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 08, 2001 at 14:09:19:

Here’s a small excerpt from an article on MSNBC. Regardless of declining interest rates, the doom and gloom of a slowing economy is having an impact on lenders that will have an affect on most of us.

First, selling your properties to new-loan buyers is getting tougher. Better look at your holding-cost estimates and time-frames to be sure you’re considering the longer time it may take to find a qualified buyer.

Second, selling your properties with owner financing should be a terrific strategy, as fewer buyers are able to qualify via conventional lenders.

While Greenspan has urged bankers to keep the money spigots open for credit-worthy customers, the definition of who bank regulators think is credit-worthy is getting more stringent, bankers said.
Last week, bank regulators (the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Board of Governors of the Federal Reserve System) issued ?expanded guidance for subprime lending programs.?

?Subprime? refers to individual borrowers with credit histories that include payment delinquencies (two or more 30-day delinquencies in the last 12 months), and possibly more severe problems such as charge-offs or bankruptcies.
?What the regulators wanted was a safer, sounder standard, but the consequence of this guideline will be greater credit tightening,? said Diane Casey, president and chief executive officer of America?s Community Bankers, a trade group.
At Charter One, the regulators? guidelines exactly reflect analysis it has already undertaken, said Koch.
But the overall impact of the new ?regulatory guidance? is to send ?a chill through any lender who lends to people who have slightly imperfect credit,? Koch said.
That?s because the ?very stringent? definitions in that regulatory guidance ?apply a label of subprime to a significant percentage of the American population,? he said.
?The guidance will clearly reduce availability of loans to people with imperfect credit,? Koch said.

For the entire article:


Bright future!!! - Posted by George

Posted by George on February 09, 2001 at 10:42:06:

I see more owner financing and L/O properties in the future…GREAT!!!

Re: Interesting Article: Tightened Lending - Posted by Fred

Posted by Fred on February 08, 2001 at 15:10:57:

Gee, thanks for making my day. I find it tough enough to find qualified buyers for my rehabs and now it’s going to get tougher? In my market, borrowers have very little money as a downpayment. That means I’m forced to use FHA, Nehemiah, etc. type loans. So if I were to owner finance I would want to sell the paper so I can cash out. That means taking substantial discounts for high LTV, unseasoned paper - something I am not willing to do (there goes my profit). I am also an appraiser and over the past 5 years I have appraised many homes where the owners have refinanced to pull out as much cash from their equity as possible. Many times they borrowed more than the house was worth. Should we have a real recession with high unemployment, the foreclosures will be everywhere. Something to think about while I take my next call from an unqualified buyer.

A different strategy! - Posted by Mark-NC

Posted by Mark-NC on February 09, 2001 at 09:15:46:

I have run into the same situation you have. Infact, it seems since the begining of the year, lending has already tightend up. Plus having to deal with seasoning issues evens makes it worse.

The note route is an option, but like you say the discounts can really hurt at times or even blow the deal. Many times I myself do not have enough room in the deal to take an 80% LTV and a second that I may never see. It just not profitable to do too many deals like that and throw all that money away. Besides if the lending institution tigtens up the note industry will too especially if you are selling to institutional note buyers.

I recently came up with a plan that I have implemented to get more Qualified buyers. What I do is create them. What I mean by this is I found a company called ICR that does unbelievable credit repair. The way the lending is going I really belive that if an investor is buying and selling properties they need to have this in their arsenol to help sell properties faster.

It does take some planing but once you get it started and keep it going you will always have new qualified buyers for your future deals. The process usually takes 2 to 6 months but when it is done, you will more than likley have a qualified borower and you may not have to deal with subprime lending.

I was so impressed with the company and what they could do I became a rep for them. So now I can sell the credit repairs myself. The cost of the repair is 399 and as a rep I get 150 of this. So now when ever I am selling a home and only 2 out of 10 callers can qualify I can at least offer a credit repair to the ones that don’t qualify and maybe help them in the future. That way I am not totally waisting my time on all the dead lead calls and I usually end up selling a few repairs a week from unqualified borrowers and puting extra money in my pocket for just filling out a form and sending it to the company.

I have also just implemented A new plan that has gotten a big response with the credit repair. When someone comes to me with credit problems and really wants a home I tell them that if they sign up for my credit repair program for 399 I will include the cost towards the down payment of one of my homes. Then during the process of the repair we can start looking at what I may have or may be rehabbing.

Another thing you can do with this is sell with owner financing include the credit repair with the deal and once their credit is cleaned up refi it in there name and cash the deal out. This will also work with lease options.

This is a little more work but considering the potential of being able to put most of your money in your pocket and what you could do with it, it really makes sense.


Re: Interesting Article: Tightened Lending - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 08, 2001 at 15:57:21:

Fred, I’m sorry this added to your stress today. But the reason I posted it is to give investors like you and me some forewarning. It’s time to look at current strategies and adjust where necessary. We can chose to keep doing the same things, and get burned, or get smart and change to what works. It’s too late to change methods when we realize our business’ cash-flow has dwindled to nothing. That’s the definition of a failed business.

So, if you start to find your holding costs are getting way out of hand selling your rehabs to new-loan buyers (because of their scarcity), you have some adjustments to make. Better now than too late.

Structure your deals from the start to take into account owner financing and selling a note, keeping a second.

Or, do 80% cash-out refi’s and sell to buyers using wraps. Start to calculate your profits in potential deals based on this cash-out, and the monthly cash-flow between your 1st mortgage outgo and your wrap inflow. And realize your “full profit” will come later when the buyer refinances and pays you off.

Yes, it may make it harder to justify doing full rehabs. Or, it may make it harder to find good buys on junkers, taking into account this strategy. But, then again, maybe it’s time to learn to deal with “pretty” houses.

Interesting food for thought. A growth opportunity in disguise?


Re: Interesting Article: Tightened Lending - Posted by Nate

Posted by Nate on February 08, 2001 at 15:30:09:

Don’t give up hope yet. How would you structure your owner-financed deals? With 80% LTV on the first, a 15% second which is held by you, and a 5% downpayment, you can probably cash out the first at around 93% of face value with no seasoning at all. Considering the profit margin on flips I do that is more than enough to make me a $10,000+ profit even if the second ends up being worth no more than the paper it’s printed on.

If you can’t find buyers with 5% down - well, I hardly think you’re the only one with that problem. It’s always easy to find people with no money and no credit who want to buy a house! :wink:

Best of luck,

Re: A different strategy! - Posted by Robin (IL)

Posted by Robin (IL) on February 09, 2001 at 22:54:56:

Good to here about another ICR rep out there. I just became a member. My thoughts were also along the same lines as yours. To generate my own credit worthy buyer.

Re: A different strategy! - Posted by Fred

Posted by Fred on February 09, 2001 at 22:28:24:

I am a little skeptical of these credit repair services. First of all, if the derogatory information on the credit report is true (such as judgements, collections, reposessions, late pays)it will be impossible to remove them, even if the buyer disputes them. I know that under the Fair Credit Reporting Act you can file a dispute and the creditor has 30 days to respond. If they don’t respond then the credit bureau by law has to remove the item. I have been told by several lenders that the problem with this strategy is that you have to prove that the creditor did not respond within the 30 day time period. Good luck with doing that. Also I heard on a radio financial talk show today that these credit repair services are really scams. They tell you that they will repair your credit by getting you a new social security number. That my friend is fraud. If you have had any success with this service tell us about it. How did they repair your buyer’s credit. I am always open minded but cautious.

Re: A different strategy! - Posted by dewCO

Posted by dewCO on February 09, 2001 at 11:31:58:

And so wht’s the contact for ICR and how many buyers have gone through the repair for you that you were able to get loans for after when you couldn’t in the beginning. thanks, dew

Re: That’s what I’m talking about! - Posted by Stacy(AZ)

Posted by Stacy(AZ) on February 09, 2001 at 09:48:36:

Nice, Mark. Printed, filed, and tattooed on my brain. When things change…adjust!


Re: Interesting Article: Tightened Lending - Posted by Fred

Posted by Fred on February 08, 2001 at 15:37:38:

Hi Nate,
Maybe I am getting a little spoiled from past succeses. I try to get a $15-20K profit on each deal I do. Doing what you suggest would eat that up real quick. The idea of getting monthly payments on a 2nd is interesting but my dinosaur brain tells me that my 2nd would be the first debt that my buyers would “forget” to pay.

Re: A different strategy! - Posted by Mark-NC

Posted by Mark-NC on February 10, 2001 at 14:15:07:

I understand your skepticism. When I was first introduced to the company I was the same way. In fact I was introduced to them by a mortgage broker that was using it to help his clients. I watched him use their services for a few months with unbelievable success before I would even consider using them.

In the last few years I have devoted a lot of time and effort studying credit issues and repair and found out that yes, many, if not all credit repair companies were scams. The issue of a obtaining a new SS# is illegal It is called file segregation. The other way of challenging the creditors does not work either if the item is correct.

What drew me to the attention of ICR was the fact that they were using a different approach. What they did was develope a computer software program that uses the rules of the fair credit trade act to remove these items on the ENTRY PROCESS of the derogatory item. What I mean by this is that there are 320 rules written by the fair credit trade act that the credit bureaus are supposed to adhear to before they enter an item on a persons credit report. Now I don’t mean 320 rules for each item, different rules pertain to different entries.

So here is what happens and how they get the items removed. The credit buereaus recieve on an average over 260 million pieces of information a month. For the most part these rules are very labor intensive and they just don’t have the man power to be able to follow all those rules so they just don’t.

So When ICR runs a persons credit through their computer search program it picks up on the rules that pertain to the item and they force the credit buereaus to remove the item from the credit report by law. The thing is the Creditor is never even contacted through the process.

To ask if it is legal, yes it is. In fact one of the judges that helped write the fair credit trade act is on the board of this company. To make another point this software program is so powerfull the credit buereaus offer ICR 15 million to buy this program and ICR refused it.

So have I had any luck with them? If I didn’t, I wouldn’t be wasting my time with it. As an example we recently sent one in that had 21 derogatory items on his credit report and the first time through the process 17 of them were removed. If everything is not removed the first time through it is sent through again. They work with the client up to a full year.

I have many people in the process of repair at this time. The latest deal I did I had a client with a 570 score I put him in one of my houses on a contract for deed. He had put 10k down on the deal so I was willing to take a chance, After 4 months his score has gone up to 640. when we hit the 6 month mark we are going to refy the deal and cash me out. TO me this is very powerfull.

I have had many people respond to me privatley on this so as soon as I get time I will post more information on it.


Re: Interesting Article: Tightened Lending - Posted by Nate

Posted by Nate on February 08, 2001 at 15:54:51:

agree, but if the first does not go bad, you will eventually get paid something when they sell or refinance. if the first DOES go bad, make sure you have a good relationship with whoever you sold it to so YOU find out - then catch the payments up and either foreclose or get the buyer to deed the property back to you subject to the 1st…and you can try again :slight_smile: