| Subprime Market Transforms Divorce Lawyer into | | | | — especially with a good credit history and credit |
| Loan Officer | | | | score of more than 660 — sometimes less for |
| Breaking up is not as hard to do for spouses who | | | | different lenders." |
| have former Maryland divorce lawyer Ronald Kronthal | | | | Limited-documentation and no-documentation |
| in their corner.Visit here | | | | mortgages once were used primarily by self-employed |
| That's because Kronthal, a mortgage loan officer for | | | | professionals, small business owners and individuals |
| the Delaware-based Residential Home Loan Centers, | | | | heavily dependent upon periodic bonuses or |
| resolves the marital foes' money woes with affordable | | | | commissions, according to columnist Kenneth R. |
| arrangements for living apart. | | | | Harney. |
| His goal is to solve the puzzle of who should stay in | | | | In no-doc programs, applicants typically state their |
| the marital home and assume the mortgage — and | | | | income and assets to the loan officer but are not |
| who should go — not an easy task for splitting | | | | required to show detailed proof of that information for |
| couples facing a debt and possibly two mortgages. | | | | the lender's files. |
| Matchmaker, make me a match | | | | Twenty-two percent of brokers in a recent study by |
| Working from his home office along the scenic | | | | Inside Mortgage Finance, reported low-doc clients had |
| Delaware shore, Kronthal is a kind of broker | | | | "divorce or other legal circumstances that complicated |
| middleman, searching to match his clients with lenders | | | | their financial profiles." |
| around the country and negotiating the best price. | | | | Trading post |
| Financial real estate transactions that arise out of | | | | The trade-off for lenders is to be able to charge higher |
| divorces are tricky because in virtually all divorce | | | | rates and compensation for the loan originator. |
| cases, one of the parties will buy out the other, and the | | | | Kronthal made the move from divorce lawyer to loan |
| party bought out will usually be buying a home within a | | | | officer three years ago when housing sales began to |
| year, he said. | | | | slump. |
| However, with the March 13 collapse of about a dozen | | | | "I got into this business because I had handled so many |
| subprime lending institutions, Kronthal no longer has the | | | | divorce cases, and these kinds of actions were not |
| same options or tools at his disposal. | | | | uncommon," he said. "And I didn't think loan officers |
| "There is still a subprime market out there, but | | | | were giving my clients good financial advice." |
| allowable credit scores have risen, state income | | | | Kronthal and his family left Maryland and bought a |
| programs have been greatly curtailed and a number of | | | | home on the Delaware shore where he also set up |
| lenders have gone out of business," Kronthal told | | | | shop. |
| Broker Newswire. "I know of at least four lenders in | | | | Despite the housing slump and subprime collapse, |
| the region that have closed their doors." | | | | Kronthal is cautiously optimistic about the future. |
| New conservatives | | | | "For a number of years mortgage professionals were |
| The housing slump and subprime implosion "make it | | | | not properly trained and lent borrowers mortgages |
| more difficult because there are not as many products | | | | they could not afford," Kronthal said. "F rankly, I was |
| out there," he said. "Lenders are more conservative | | | | aghast to see who was authorized to sell mortgages |
| and everybody in the industry is hungry for business | | | | to people. |
| — at least those still in business." | | | | "Lenders were allowed to make loans to people who |
| Every scenario with a divorcing couple is different. | | | | could not afford it," he said. "That proved to be |
| Sometimes Kronthal counsels with one or both of the | | | | shortsighted and led to the continued appreciation in |
| marital partners; sometimes with their lawyers — and | | | | the real estate market. |
| sometimes mediators are also invited to the table. | | | | "But after a 22-year run up in appreciation, property |
| The most crucial decision to make is whether the wife | | | | values were starting to revert," Kronthal said. "And |
| remains in the house with the children or whether the | | | | there is not as much room, now, to protect the lenders |
| husband assumes the role. | | | | when there is a default." |
| "Judges in the state of Maryland now have the | | | | Nix on ARMs |
| authority to award the house — the former marital | | | | Even before the subprime problem, Kronthal raised the |
| home — to one of the parties with the provision that | | | | red flag over a 10-year trend in adjustable-rate |
| if there is an existing joint mortgage, the name of the | | | | mortgages (ARMs). |
| party not awarded the home, is taken off of the | | | | More than 8 million adjustable-rate loans originated |
| mortgage," Kronthal said. | | | | during the past three years, the National Association of |
| Creative financing | | | | Realtors (NAR) reported. Of those, 1.1 million loans |
| That's where the creativity comes in. | | | | totaling about $326 billion — are likely to end in |
| "It's typical for the wife to have been out of the labor | | | | foreclosure. |
| force for a couple of years and become a | | | | Kronthal agrees. While the initial terms of an ARMs |
| stay-at-home mom raising children, while the husband | | | | mortgages look good on paper, all too soon the |
| was the primary wage earner," Kronthal said. "When | | | | mortgage payments start to climb and soon |
| the parties get divorced, the wife has to return to | | | | homeowners are faced with the dreaded "f" word |
| work and doesn't have an employment history. So I go | | | | — foreclosure. |
| out and find products to accommodate her. | | | | Despite the current crisis, Kronthal does not favor |
| "That is where the no-doc loans come in," he said. | | | | government regulation, believing instead, that "the only |
| "The loan-to-value ratios are comfortable enough for | | | | thing the industry can do is regulate itself. |
| lenders to lend to people re-entering the workforce | | | | |