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Lokvani Talks To Jyoti Bhattacharya

Nirmala Garimella

Jyoti Bhattacharya of Mortage Partners Inc., expertise is in the areas of business including accounting, finance and taxation. He worked for a good number of years in these areas  and also taught those subjects at colleges in the states of Massachusetts and New Hampshire. According to him, Mortgage business is a significant part of the financial world.  "My background, I believe, has helped me quite a bit to become a good team-player in this industry.  I enjoy helping people and there is an ample opportunity to continue that way in this business by structuring and originating appropriate mortgage products that fit the unique needs of the individual borrowers"

In an interview with Lokvani, Jyoti Bhattacharya talked about various aspects of Mortgage.

Q. What are the professional services you offer for your clients?
A.  For most of us, mortgage (owner-occupied primary home) is the biggest investment. Although some emotional issues could be involved, I sincerely believe, a thorough financial analysis should be done for each borrower/borrowers, the related mortgage, its financial impact and that should be clearly discussed with the borrowers in the light of their individual needs.  This approach would help them considerably in choosing a mortgage that is just right for them.  As mentioned above, we try to consider all the variables that are applicable to a particular situation and then come up with a product/program that will best serve the purpose of the borrowers.

Q. What are the rules of PMI?
A.  PMI stands for Private Mortgage Insurance. To put it simply, the lender requires the borrowers who obtain loans of more than 80% of the appraised value or sales price (whichever is lower) to purchase additional insurance.  This additional insurance, known as PMI, protects the lender in case the borrower defaults on the mortgage payments.  This approach enables the borrower to buy home with as little as 3 or 5 % down payment and only one mortgage loan.  Unfortunately, PMI payments are not tax-deductible and thus, the borrowers cannot get any tax-shelter on these expenses.  However, depending on the situation, the borrowers can generally avoid the PMI in one of the following ways:

1.    Some lenders will eliminate PMI in exchange of a higher interest rate on the loan.  Sometime it may work out in borrowers’ favor as total payment could be less and also, there would be additional savings since mortgage interest is tax deductible.
2.    Borrowers can opt for a piggyback loan. For example, they go for 80% first mortgage and 10% second mortgage, instead of going for one loan of 90% when the down payment is 10% of the home’s value.

The specific situation could be more complex than it is portrayed here.  The loan originator should discuss with the borrowers the particulars of the situation and recommend the best approach for a particular loan.

Q. Should people go for 30 year fixed or ARM (Adjustable Rate Mortgage)? What is  your advice?
A. Depending on the situation, both of these programs could be right for the borrowers. Varieties of ARMs (1yr, 3/1, 5/1, 7/1, 10/1, etc.) are available in the market.  These loans are less expensive in their fixed term portion. When the fixed term is over, these loans become variable and adjust periodically (mostly, annually) to higher or lower rates on the basis of the index (Treasury, LIBOR, etc.) and the margin assigned to the loan.  These loans also have caps (2/2/5, 5/2/5, etc.) which limit the subsequent rate increases (first year, annual, lifetime).  If the borrower is going to occupy the property for a relatively short-term period, ARM products may not be a bad idea.  Sometimes, first time home buyers have to go for ARMs in order to qualify for a loan.  However, in a market of rising interest rates where the rates are  still historically low, I would strongly recommend a fixed rate (30 or 15 year) where the borrowers are going to hold on to the property for a long period of time.

Q.  Do you have any innovative products for loans? Home equity line of credit (HELOC)?
A.  We do have a lot of products, both regular and new innovative ones.  We are a brokerage as well as a lending company.  Besides regular loans, we have different programs for the first time home buyers, reverse mortgages for the elderly people with no income, construction loans, bridge loans, interest only loans, 100% no PMI loan, 40 year and 50 year programs.
We also can generate different types of equity loans (variable or fixed).  These loans can be used as standalone or second mortgages. These are more expensive than the first mortgages.  However, these can be used as piggyback loans to avoid PMI.

Q.  For a first time buyer do you have any special products for recent immigrants and H1 visas?
A.  We do have a considerable number of mortgage products for the above groups.  As long as these borrowers have some work and credit history and a job to make the mortgage payments, they can qualify for almost all programs used by the US citizens.  Requirements for H1 visa holders are little stricter for the non-permanent nature of their US residency status.

Q.  Are there early prepayment penalties?
A. There may or may not be prepayment penalty for the borrowers.  Usually, prepayment penalties are determined as percentages of the loan balance at the time of prepayment, or are calculated according to some other terms of the mortgage.  The amount of prepayment penalties usually go down over time and eventually is eliminated after a predetermined period (1 year, 2 year, etc.).  However, if chosen rightly, a prepayment penalty clause can work in borrower’s favor, since it can lower the interest rate and save the borrower a sizable amount of money over the period of the mortgage.  Some sub-prime loans require prepayment penalties, although most of these penalties can be eliminated paying higher interest rates.  The most important point here is that the broker should thoroughly analyze the specific situation based on the information available from the borrowers and come up with the right mortgage product to fit the borrowers’ needs.

Q. What are the foreclosure procedures?
A.  Foreclosure procedures do not exactly belong to the mortgage broker’s territory.  However, in a nutshell, when the borrowers miss their mortgage payments for 3 months or longer, the lender/mortgage servicer starts the foreclosure process.  Depending on the state where the property is located, the foreclosure process could vary to a certain extent.  The bottom line is that a foreclosure notice is recorded with the court, debt and property details are published in the local newspaper and eventually the foreclosed property is sold at an auction.  Sometimes, there are ways to avoid a foreclosure procedure through lender approved revised payment plans, modified loan programs, new refinanced loans, bankruptcies, etc.  These procedures require serious legal involvement and the borrowers should immediately seek appropriate legal help.

Q. What kind of mortgage loan companies should a person avoid or be careful about?
A.  As a borrower, I would choose a well established and reputed mortgage company.  A referral from friends and relatives may also be helpful.  The individual broker’s role is very important in the loan origination process.  The broker must be well-versed with all aspects of the loan, communicate thoroughly and openly and be able to structure the right program/product for the borrowers.  If the broker’s promises are too good to be true, then most probably those are not realistic and the borrowers should be careful if they choose to deal with this broker.  In this computer age, borrowers can also do some research on the internet and educate themselves on the various aspects of their mortgage before they make their final decisions.

Q. What different loan products are there for investment properties/second homes, etc.?
A.  We have a host of mortgage products for both second homes and investment properties.  We can arrange interest only loans, fixed and variable mortgage programs.  We also have zero down payment programs for both of these areas.

Q.  What are your other hobbies and interests?
A.   I try to spend my spare time reading books and listening to music.  I also like to travel when I get an opportunity.

I thank you and Lokvani for your time and interest.  If I can be of any further help, please contact me at 978-758-1682.  I can also be reached at jbhattacharya@msn.com

Jyoti Bhattacharya
Mortgage Partners, Inc
482 Aiken Avenue
Dracut, MA 01826.

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