If you are shopping for a mortgage in today's market you should be careful. Now more than ever loan officers are hungry for money and might be sneakier than ever to capture your business. A good mortgage can be a great financial decision for years to come, but a bad mortgage from a greedy loan officer could mean financial disaster in the future. Here are some tips that your loan officer doesn't want you to know when shopping for a mortgage.
1. You are due to get a good faith estimate when you give the loan officer enough information that they can pull your credit and they have a property address that you are looking to finance. On a refinance you must get a good faith estimate of your closing costs within three business days from when your loan officer has enough information to make a credit decision - i.e. when you give them your home address, date of birth, name, social security number. If you are purchasing a home, technically you are due a good faith estimate when you pick a home to purchase and give that address to your loan officer. You will have already given them your name, home address (which in this case doesn't matter), birthdate and ssn by this time.
2. Regarding your good faith estimate - everything on it is negotiable! Look closely at the items listed as loan discount fee, loan origination fee, mortgage broker fee, processing fee, and underwriting fee. You also want to scan down the page to see if you can find something that says "Yield Spread Premium" or "YSP" or "Lender Paid Broker Fee". If you are using a mortgage broker the YSP must be disclosed. The shame of our mortgage lending laws is that mortgage bankers, savings banks, regional banks, federal banks don't have to show you this fee like mortgage brokers do. The other shame of all of this is that many of the bad mortgage loans that are now turning into foreclosures were written by loan officers written at these very institutions who don't have to disclose to you these fees.
Every mortgage loan officer in the United States gets paid by the interest rate they sell you. You can think of it this way, the higher the interest rate the more money the loan officer is making. The higher the "margin" if you are getting an adjustible rate mortgage the more likely your loan officer is making more money. Also, if you are being charged a pre payment penalty, you can probably bet that your loan officer is making money on it. If the loan officer is charging you an origination fee, a loan discount fee you should question the loan officer what your interest rate would be if they didn't charge that fee. If they give you a higher interest rate, go shop and find out what someone else is going to give you. The lower of the two might be your choice.
3. The title insurance company who settles your loan is actually your choice, but very rarely is it presented to you this way. Especially with purchase transactions, realtors are pitched all the time by title companies for business and you better believe the realtor is getting something out of referring your sales transaction to that title company. It might not be obvious because it is actually illegal for the realtor to accept anything from the title company. Ask your realtor to use your own title company and see if you can detect any hesitation. If so, you might be getting in the way of some extras the realtor might not get if you use your own title company.
If you pick your own title company, you might be able to negotiate a lower fee on your own. Title companies have some leeway in their fees and if its you doing the asking directly, then you might get a better deal. It is worth checking around.
4. Looking at your annual percentage rate, APR. This is a very tough discussion topic because very few loan officers know how to give you an accurate APR for the deal that they quote you. The US government developed the APR in order to give you a way to compare loan programs. Essentially, the APR measures certain costs associated with your loan that the Feds technically say that you can't finance. However, you are financing them. Some of these things include the loan discount fee, mortgage broker fee, application fee, title fees, insurance etc. You can think of it this way, if the APR is calculated correctly, then if you were getting the exact same deal from two different mortgage companies then the APR should be exactly the same, but 9 out of 10 times it is not. Look at your good faith estimate and then your Truth In Lending (TIL) forms. If you are trying to compare two different deals and the APR of one is less than the other, but the fees with the lower APR are higher, then it is likely that the APR wasn't calculated correctly. So pay attention and look that these figures from several different companies. If you have questions ask your loan officer. They might or might not be able to answer the questions on your APR. If you are not satisfied with their answer look for another loan officer. Use your gut.
5. Don't pay up front fees with the exception of two things: a credit report fee, and an appraisal fee paid directly to the appraiser. If you write a check to your mortgage company in the form of an application fee you could be kissing your money goodbye. Mortgage companies who charge this fee are very stingy in giving it back if you decide not to use them for your mortgage. If they won't work on your loan until you pay them, then go get another mortgage company. There are plenty of companies out there who do a great job and don't charge this fee. Some of the biggest lenders in the country charge this application fee. It doesn't make them good. I know that I have caused a few folks to walk away from the bigger lender even after they have paid this money because I almost always can beat the bigger lender's deal.
So there you have it. Things you should know if you are looking for a new mortgage and your loan officer isn't telling you. For more information on the mortgage process, buying a home and other credit information go to www.getprequalified.com.
Friday, October 26, 2007
Monday, August 27, 2007
Credit Report Shame
When dealing with your credit report and fico score, there is one important thing to keep in mind. The system is broken and there is no plan to fix it. Why wont they fix it? The credit report companies are tied into the financial institutions. The financial institution make more money off of lower fico score borrowers than higher. This doesn't mean that you have to sit back and take it. You can go to www.getprequalified.com for more information on how to fix your credit report. Over 90% of credit reports have at least one error on them.
It is also smart to take a look at your credit report a couple of times a year. When dealing with your credit card company or financial institution, get everything in writing. If you have errors on your credit report in the future, it will be much harder to remove them from your report versus have documentation from them for what they promised to do. They don't keep track of what they promise you. You must be vigilant for your own credit affairs. To get a free credit report go to www.getprequalified.com.
It is also smart to take a look at your credit report a couple of times a year. When dealing with your credit card company or financial institution, get everything in writing. If you have errors on your credit report in the future, it will be much harder to remove them from your report versus have documentation from them for what they promised to do. They don't keep track of what they promise you. You must be vigilant for your own credit affairs. To get a free credit report go to www.getprequalified.com.
Sunday, August 26, 2007
Throw out the 4 year Bankruptcy time period
You can now get a home through Fannie Mae with a Bankruptcy under four year. Fannie Mae allows you to buy with a Bk as long as you are two years from the filing date. It must be discharged however. For more information go to www.getprequalified.com.
LendingTree
LendingTree, When Lenders Compete You Win!!
When you fill out an internet form for LendingTree.com, you will have lenders competing but it may drive you crazy in the process. What you don’t hear about in the advertising is that you will be bombarded by aggressive sales people all trying to earn your business. Unless you like to talk to sales people in your spare time, the process will drive you nuts. In theory it makes great sense. Competition is great; you just want it to be the right kind of competition. In reality playing the multiple lender game can become a sales pitch nightmare.
What LendingTree doesn’t want you to know is that you can accomplish the same thing by dealing with just one reputable mortgage broker. A mortgage broker has dozens of mortgage wholesalers to get mortgage quotes from. An individual mortgage broker can get mortgage quotes from a variety of sources such as Bank of America, First Horizon, Ohio Savings, Washington Mutual, Wells Fargo, Countrywide, Citibank, Flagstar, World Savings, Chase and National City to name a few. A single mortgage broker can deliver you dozens of mortgage quotes from multiple lenders that they deal with. As long as you are comfortable and confident with the person that you are dealing with, they can save you hours of aggravation and pesky sales calls. The mortgage brokers for www.GetPrequalified.com can accomplish getting multiple lending quotes for you.
A bank on the other hand can only give you a rate quote on only the loan products that they have to offer. This can be limiting. This is probably why banks have been trying to get mortgage brokers wiped off of the lending landscape. A mortgage broker is not locked into any particular lender or money source. Interest rates change daily. A good mortgage broker can change with the fluctuations to deliver you the best interest rates offered by the different lending institutions. They will get you to the lowest interest rates because they get paid the same regardless of what lender they use. Get the picture?
The other piece of the lending puzzle most people don’t think about is using a local lender in the home buying process. When you use an internet lender, you may be speaking with someone thousands of miles away. If you have a problem with your loan, I’m sure you would want the option of getting in the car and going to visit with your mortgage broker in person so you can speak with them face to face. Problems do occour in a real estate transaction. Wouldn’t you feel more comfortable with someone you can sit across the table from? I am consistently shocked at how many potential borrowers know nothing about the person that is originating their mortgage. A mortgage may be one of the most important financial instruments that you will sign in your lifetime. You probably wouldn’t pick a stock broker in this manner, why would you pick your loan officer like this? Using an internet lender that you have never seen or met is gambling. There is no reason to do this. Work with someone that you know and trust.
Look for a lender that has been in the mortgage business for a minimum of 5 years. Ask them if they could have the phone numbers of the people that have closed loans with them in the last 30 days. There are a lot of people that drift into the industry looking to make a quick buck. The reality is that completing a mortgage takes expertise. You want someone that has spent the time to educate themselves in learning what it takes to fulfill the duties of completing the task. Someone who is professional has a great interest in making sure that you have a positive experience. They want referrals and their reputation is important to them. It should be easy to spot a slick salesperson from someone who is a consultant.
The internet is a powerful tool in the financial markets. Do your research. When it comes to business, personal relationships still rule. Talk to your friends that own property. Ask them if they would recommend the person that did their mortgage to you.
Dave Mason
Mortgage Broker
When you fill out an internet form for LendingTree.com, you will have lenders competing but it may drive you crazy in the process. What you don’t hear about in the advertising is that you will be bombarded by aggressive sales people all trying to earn your business. Unless you like to talk to sales people in your spare time, the process will drive you nuts. In theory it makes great sense. Competition is great; you just want it to be the right kind of competition. In reality playing the multiple lender game can become a sales pitch nightmare.
What LendingTree doesn’t want you to know is that you can accomplish the same thing by dealing with just one reputable mortgage broker. A mortgage broker has dozens of mortgage wholesalers to get mortgage quotes from. An individual mortgage broker can get mortgage quotes from a variety of sources such as Bank of America, First Horizon, Ohio Savings, Washington Mutual, Wells Fargo, Countrywide, Citibank, Flagstar, World Savings, Chase and National City to name a few. A single mortgage broker can deliver you dozens of mortgage quotes from multiple lenders that they deal with. As long as you are comfortable and confident with the person that you are dealing with, they can save you hours of aggravation and pesky sales calls. The mortgage brokers for www.GetPrequalified.com can accomplish getting multiple lending quotes for you.
A bank on the other hand can only give you a rate quote on only the loan products that they have to offer. This can be limiting. This is probably why banks have been trying to get mortgage brokers wiped off of the lending landscape. A mortgage broker is not locked into any particular lender or money source. Interest rates change daily. A good mortgage broker can change with the fluctuations to deliver you the best interest rates offered by the different lending institutions. They will get you to the lowest interest rates because they get paid the same regardless of what lender they use. Get the picture?
The other piece of the lending puzzle most people don’t think about is using a local lender in the home buying process. When you use an internet lender, you may be speaking with someone thousands of miles away. If you have a problem with your loan, I’m sure you would want the option of getting in the car and going to visit with your mortgage broker in person so you can speak with them face to face. Problems do occour in a real estate transaction. Wouldn’t you feel more comfortable with someone you can sit across the table from? I am consistently shocked at how many potential borrowers know nothing about the person that is originating their mortgage. A mortgage may be one of the most important financial instruments that you will sign in your lifetime. You probably wouldn’t pick a stock broker in this manner, why would you pick your loan officer like this? Using an internet lender that you have never seen or met is gambling. There is no reason to do this. Work with someone that you know and trust.
Look for a lender that has been in the mortgage business for a minimum of 5 years. Ask them if they could have the phone numbers of the people that have closed loans with them in the last 30 days. There are a lot of people that drift into the industry looking to make a quick buck. The reality is that completing a mortgage takes expertise. You want someone that has spent the time to educate themselves in learning what it takes to fulfill the duties of completing the task. Someone who is professional has a great interest in making sure that you have a positive experience. They want referrals and their reputation is important to them. It should be easy to spot a slick salesperson from someone who is a consultant.
The internet is a powerful tool in the financial markets. Do your research. When it comes to business, personal relationships still rule. Talk to your friends that own property. Ask them if they would recommend the person that did their mortgage to you.
Dave Mason
Mortgage Broker
www.optoutprescreen.com
You can improve your credit score by as much as 20 points just by opting out of receiving credit card offers. Visit www.optoutprescreen.com.
Donna Gamaly
Mortgage Broker
Donna Gamaly
Mortgage Broker
Interest Rates and the Current Housing Market
Over the last few weeks the Subprime mortgage market has been devastated if not killed off. We have seen multiple companies go out of business. Large players such as Novastar, New Century and even First Magnus have gone into bankruptcy. Even Countrywide the nation’s largest mortgage lender is teetering on financial disaster. We are now seeing the impact of these high risk loans play out in the real estate market as well as on Wall Street. The panic over the liquidity in the mortgage markets has definitely spilled over into the real estate market in a big way. If you look at the run the real estate market had in 2004 & 2005, the market force in the market was the availability of multiple loan programs and low interest rates. Low interest rates made it cheaper to buy a home than to rent. In this time many people were buying homes on first lien home equity lines. If you look at the prevailing rates for these home equity lines, they were around 4.25%. If you compare the same rate for that mortgage today you would be at 8.25%. Not only was money cheap but you could even buy a home with no money down and no proof of income, employment or assets. No documentation loans made it easy for anyone with high credit scores to obtain a mortgage. Many of these buyers had no business buying a home. They could buy because they could. The rules for lending have changed. That type of borrower will no longer be able to obtain this type of financing. You must now demonstrate your ability to repay your mortgage.
What does all of this mean to the current real estate market? Since the Subprime meltdown, mortgage companies have pulled back on the types and loan to values of mortgages they are offering. It is no longer enough just to show up at the closing table with your good credit score. You must demonstrate your ability to repay the loan. The no documentation or liars loans, as they are often referred to have disappeared. The 100% financing loans have also begun their recession. Borrowers will now have to have some skin in the game. Many of these high risk loans had borrowers bring no money down to the transaction. If things get bad, there is nothing to loose. Walking away from the situation is easy. It is true that you will end up with a foerclosure on your credit report, but the impact is still less than a bankruptcy. If you have put a down payment down on a property, a borrower would be more inclined to try to work it out and try to keep the property rather than to just walk away.
If I am selling my home what does this mean to me? What it means is that the pool of buyers has shrunk considerably. The tighter the lending guidelines get, the fewer buyers there will be to potentially buy your home. You might expect to see the value of your home drop as well. It is just simple economics. As demand goes down and the supply goes up, your home becomes worth less. If you don’t need to move don’t. If you do, you may want to consider renting. Real Estate cycles don’t last forever and it is likely market conditions will change in a few years.
If I am a buyer what does this mean to me? If you are in a position to buy, you may not have a better time to purchase a new home. With low interest rates, lower property values and anxious sellers abound, you may not find a better time to buy for years to come. There are still many programs that will allow you to buy with no money down. You may want to talk to your real estate agent about negotiating a seller to pay for your closing costs. Many Fannie Mae loan programs will allow a seller to pay for up to 6% of your closing costs. This would be enough to pay all of your costs and even buy your interest rate down to a more attractive rate. Sometimes the best time to buy is when nobody else is. The deals of a lifetime could possibly be right under your nose. At some point you need to give up the fact that this in not 10 years ago, it is now and these are the market conditions. You may kick yourself in another 10 years and say why didn’t I act then. Following the flock may not get you want and it may not be prudent. Trust you gut and make your move. Life is risky, but owning property over the long term is usually a winning proposition.
For more information on Fannie Mae 100% financing please visit www.getprequalified.com. While you are there you can check your credit and find other valuable financial services to assist you in the home buying process.
Dave Mason
Mortgage Broker
What does all of this mean to the current real estate market? Since the Subprime meltdown, mortgage companies have pulled back on the types and loan to values of mortgages they are offering. It is no longer enough just to show up at the closing table with your good credit score. You must demonstrate your ability to repay the loan. The no documentation or liars loans, as they are often referred to have disappeared. The 100% financing loans have also begun their recession. Borrowers will now have to have some skin in the game. Many of these high risk loans had borrowers bring no money down to the transaction. If things get bad, there is nothing to loose. Walking away from the situation is easy. It is true that you will end up with a foerclosure on your credit report, but the impact is still less than a bankruptcy. If you have put a down payment down on a property, a borrower would be more inclined to try to work it out and try to keep the property rather than to just walk away.
If I am selling my home what does this mean to me? What it means is that the pool of buyers has shrunk considerably. The tighter the lending guidelines get, the fewer buyers there will be to potentially buy your home. You might expect to see the value of your home drop as well. It is just simple economics. As demand goes down and the supply goes up, your home becomes worth less. If you don’t need to move don’t. If you do, you may want to consider renting. Real Estate cycles don’t last forever and it is likely market conditions will change in a few years.
If I am a buyer what does this mean to me? If you are in a position to buy, you may not have a better time to purchase a new home. With low interest rates, lower property values and anxious sellers abound, you may not find a better time to buy for years to come. There are still many programs that will allow you to buy with no money down. You may want to talk to your real estate agent about negotiating a seller to pay for your closing costs. Many Fannie Mae loan programs will allow a seller to pay for up to 6% of your closing costs. This would be enough to pay all of your costs and even buy your interest rate down to a more attractive rate. Sometimes the best time to buy is when nobody else is. The deals of a lifetime could possibly be right under your nose. At some point you need to give up the fact that this in not 10 years ago, it is now and these are the market conditions. You may kick yourself in another 10 years and say why didn’t I act then. Following the flock may not get you want and it may not be prudent. Trust you gut and make your move. Life is risky, but owning property over the long term is usually a winning proposition.
For more information on Fannie Mae 100% financing please visit www.getprequalified.com. While you are there you can check your credit and find other valuable financial services to assist you in the home buying process.
Dave Mason
Mortgage Broker
Friday, August 24, 2007
Don't Pull My Credit
I have been in the mortgage business for nearly 7 years. One of the biggest misconceptions that I run into is that pulling your credit report numerous times will hurt a credit score. I find that sometimes new borrowers are reluctant to have their scores pulled because of this belief. They believe that their scores will drop considerably if everyone is pulling it. The reality is that you can pull your mortgage credit report unlimited times in a 14 day period from the first pull and it will count as one pull.
It is a known fact that borrowers will talk to a couple of different lenders prior to selecting a company to go with. It is just part of the research and fact finding process. It is a ploy by some lenders to tell their clients not to have other brokers pull their report. To a broker that has already pulled credit, this improves their chance of securing the loan instead of another broker. They scare the potential borrower into believing that their credit will be ruined if they have other people obtain reports, thus potentially risking the homebuyer’s ability to obtain a loan that serves the consumer versus one that serves the mortgage originator.
The problem with this is that a borrower may miss out on better loan terms and lower closing costs. If a lender tells you not to have anyone else pull your credit for these reasons, you may want to talk to someone else. They are not being honest with you. The end result is that it could cost you thousands of dollars over the term of your loan. An honest lender will give you this information. They are confident in their services and don’t have to rely of sleezy scare tactics to earn your business.
If you want to know what your score is, you can pull it yourself. If you pull it on your own it does not count as a pull. Be sure that you pull a mortgage credit report. This will be more accurate for assessing your ability to get a loan and the types of rates that you will be able to get. Most of the free credit reports online are consumer credit reports. They are similar but are not accepted as a valid report in the mortgage industry. You can go to www.getprequalified.com to order a free credit report. You will also find other useful services to get started on the home buying process.
Dave Mason
Mortgage Broker
It is a known fact that borrowers will talk to a couple of different lenders prior to selecting a company to go with. It is just part of the research and fact finding process. It is a ploy by some lenders to tell their clients not to have other brokers pull their report. To a broker that has already pulled credit, this improves their chance of securing the loan instead of another broker. They scare the potential borrower into believing that their credit will be ruined if they have other people obtain reports, thus potentially risking the homebuyer’s ability to obtain a loan that serves the consumer versus one that serves the mortgage originator.
The problem with this is that a borrower may miss out on better loan terms and lower closing costs. If a lender tells you not to have anyone else pull your credit for these reasons, you may want to talk to someone else. They are not being honest with you. The end result is that it could cost you thousands of dollars over the term of your loan. An honest lender will give you this information. They are confident in their services and don’t have to rely of sleezy scare tactics to earn your business.
If you want to know what your score is, you can pull it yourself. If you pull it on your own it does not count as a pull. Be sure that you pull a mortgage credit report. This will be more accurate for assessing your ability to get a loan and the types of rates that you will be able to get. Most of the free credit reports online are consumer credit reports. They are similar but are not accepted as a valid report in the mortgage industry. You can go to www.getprequalified.com to order a free credit report. You will also find other useful services to get started on the home buying process.
Dave Mason
Mortgage Broker
Friday, July 6, 2007
Brokers versus Mortgage Bankers
Dear Ms Reagor:
Thanks for the article on Sunday in the Arizona Republic, Feb 2007, regarding Eagle First Mortgage company’s closure. I’m glad to see bad apples weeded out. Although, I’m sure there are folks that worked there that we’re doing anything wrong who now have to look for new jobs. My company is called GetPrequalified.com LLC and I am the “Responsible Individual” for our mortgage broker license. Our company is committed to first time home buyers and helping folks prepare their financial house in advance of buying a home. I have been in the mortgage business for 11 years and have served on several local and state mortgage boards in Pennsylvania over the years prior to my moving here to AZ in early 2004. I am passionate about our industry being accountable for how consumers are treated during the home buying and refinancing processes.
In your article from this past weekend you state: “Legislation recently was introduced in Arizona to license all loan officers and originators to help crack down on bad loan and mortgage fraud.” You probably know this already, but the bill is HB2320. This bill, HB2320, doesn’t quite get the job done that it is intending to accomplish. Simply put, this bill only requires the loan officers and originators of mortgage brokers to get licensed; it does not call for the licensing of loan officers and originators of mortgage banks and other lending institutions.
Mortgage bankers are glorified mortgage brokers. Essentially the only difference between mortgage bankers and brokers is that mortgage bankers are required to have a higher financial net worth; but the educational and experience licensing requirements (3 years mortgage experience, 24 hours of class and take the AZ State test) are the same for either license type. Other than that, we operate and conduct business similarly. In fact the current President of the Arizona Association of Mortgage Brokers is the owner of a mortgage bank.
MANY of the most egregious violations that HB2320 is trying to fix are committed by employees of companies that are licensed as Mortgage Bankers or aren't licensed in Arizona at all. I have heard from talks given by Department of Financial Institutions Superintendent Felecia Rotellini that complaints to her office about Mortgage Bankers outnumber the complaints against Mortgage Brokers 2 to 1. Mortgage Brokers account for about 60% of all the loans done in this country. This statistic has been the case for as long as I have been writing mortgages.
Every study ever done shows Mortgage Brokers as the lowest cost of all mortgage originators. My company, as with other mortgage brokers in the area, often compete head to head with the big mortgage bankers and federally chartered banks and very often we beat these companies not only in rate, but in “lender” fees. This is in spite that under the current federal laws, mortgage brokers have to disclose every fee they make, which includes what is called the Yield Spread Premium which is associated with the interest rate that a borrower pays for their mortgage. Mortgage banks and other banks don’t have to disclose this ever during the mortgage loan process.
Every mortgage loan originator no matter where they work is focused on the interest rate that they sell and/or a combination of origination fees in the form of points to make their salary and/or commission. Mortgage bankers and loan officers working at banks don’t have to disclose this fee to the buying public. Yet, mortgage brokers are disclosing all of their fees and still providing in general lower fees and the majority of the loans written for homeowners. These are good things for the home buying public. Mortgage Brokers have lead this country to its highest level of home ownership in history.
Other than making it harder and more expensive for Brokers to do business, this bill would accomplish very little. It gives those bad apples who are originating loans an opportunity to hide under the licensing of a Mortgage Banker. You speak about this directly in your article when you wrote: “Those employees are not licensed and could get jobs at other mortgage firms. So could Sanchez, as long as he does not apply to be a broker again.” This current legislation proposal will encourage the bad apples to migrate to mortgage bankers where they can hide.
A little history on this bill…the head of the House Rules Committee district includes the Countrywide (a nationwide mortgage banker) call center in Chandler that reportedly employs 4000 originators (they are looking to expand to 10000 in the near future). He is listening to their needs and desires pretty closely. They didn't like this bill when it was first introduced as it called for all originators to get licensed and their originators work in all 50 states from that location. If every state had an L.O. license they would need 200,000 licenses for that one facility! They support a national registry or licensing of originators which isn’t a bad option, but will likely take a long time to implement. The bill has been changed from its original form to exclude Mortgage Bankers. Additionally, the AMLA, the Arizona Mortgage Lenders Association didn’t like this bill when it was originally introduced because it required their constituents to be licensed as well. Mortgage brokers of all the lending institutions and have continually suffered a barrage of discriminatory attacks on their existence such as this amended bill that’s being sent through the house at this time. Yet, we provide most of the loans and get less complaints than those who attack us.
The few people who amended this bill to its current condition apparently were influenced by a similar bill in Nevada that started with Mortgage Brokers being the only folks to have individual licenses for their originators and was amended to include Mortgage Bankers two years later.
Reportedly, the NV mortgage bankers got in trouble for employment ads that basically said, "come to work for us, you won't have to put up with all that education and licensing crap." Ultimately, the ads got the bankers in trouble with their regulator and they were forced into being covered by the regulation.
But, how many Nevada brokers went out of business in the 2 years because they couldn't hire a good originator? Also, how many consumers were under served during those two years while their bill was altered to include everyone who originates residential mortgages?
Why would the AZ State Legislature wait to include everyone who originates residential loans for its constituency? Seems like politics to me versus serving the people that the Legislature represents. Let’s get everyone licensed now.
Best Regards,
Thanks for the article on Sunday in the Arizona Republic, Feb 2007, regarding Eagle First Mortgage company’s closure. I’m glad to see bad apples weeded out. Although, I’m sure there are folks that worked there that we’re doing anything wrong who now have to look for new jobs. My company is called GetPrequalified.com LLC and I am the “Responsible Individual” for our mortgage broker license. Our company is committed to first time home buyers and helping folks prepare their financial house in advance of buying a home. I have been in the mortgage business for 11 years and have served on several local and state mortgage boards in Pennsylvania over the years prior to my moving here to AZ in early 2004. I am passionate about our industry being accountable for how consumers are treated during the home buying and refinancing processes.
In your article from this past weekend you state: “Legislation recently was introduced in Arizona to license all loan officers and originators to help crack down on bad loan and mortgage fraud.” You probably know this already, but the bill is HB2320. This bill, HB2320, doesn’t quite get the job done that it is intending to accomplish. Simply put, this bill only requires the loan officers and originators of mortgage brokers to get licensed; it does not call for the licensing of loan officers and originators of mortgage banks and other lending institutions.
Mortgage bankers are glorified mortgage brokers. Essentially the only difference between mortgage bankers and brokers is that mortgage bankers are required to have a higher financial net worth; but the educational and experience licensing requirements (3 years mortgage experience, 24 hours of class and take the AZ State test) are the same for either license type. Other than that, we operate and conduct business similarly. In fact the current President of the Arizona Association of Mortgage Brokers is the owner of a mortgage bank.
MANY of the most egregious violations that HB2320 is trying to fix are committed by employees of companies that are licensed as Mortgage Bankers or aren't licensed in Arizona at all. I have heard from talks given by Department of Financial Institutions Superintendent Felecia Rotellini that complaints to her office about Mortgage Bankers outnumber the complaints against Mortgage Brokers 2 to 1. Mortgage Brokers account for about 60% of all the loans done in this country. This statistic has been the case for as long as I have been writing mortgages.
Every study ever done shows Mortgage Brokers as the lowest cost of all mortgage originators. My company, as with other mortgage brokers in the area, often compete head to head with the big mortgage bankers and federally chartered banks and very often we beat these companies not only in rate, but in “lender” fees. This is in spite that under the current federal laws, mortgage brokers have to disclose every fee they make, which includes what is called the Yield Spread Premium which is associated with the interest rate that a borrower pays for their mortgage. Mortgage banks and other banks don’t have to disclose this ever during the mortgage loan process.
Every mortgage loan originator no matter where they work is focused on the interest rate that they sell and/or a combination of origination fees in the form of points to make their salary and/or commission. Mortgage bankers and loan officers working at banks don’t have to disclose this fee to the buying public. Yet, mortgage brokers are disclosing all of their fees and still providing in general lower fees and the majority of the loans written for homeowners. These are good things for the home buying public. Mortgage Brokers have lead this country to its highest level of home ownership in history.
Other than making it harder and more expensive for Brokers to do business, this bill would accomplish very little. It gives those bad apples who are originating loans an opportunity to hide under the licensing of a Mortgage Banker. You speak about this directly in your article when you wrote: “Those employees are not licensed and could get jobs at other mortgage firms. So could Sanchez, as long as he does not apply to be a broker again.” This current legislation proposal will encourage the bad apples to migrate to mortgage bankers where they can hide.
A little history on this bill…the head of the House Rules Committee district includes the Countrywide (a nationwide mortgage banker) call center in Chandler that reportedly employs 4000 originators (they are looking to expand to 10000 in the near future). He is listening to their needs and desires pretty closely. They didn't like this bill when it was first introduced as it called for all originators to get licensed and their originators work in all 50 states from that location. If every state had an L.O. license they would need 200,000 licenses for that one facility! They support a national registry or licensing of originators which isn’t a bad option, but will likely take a long time to implement. The bill has been changed from its original form to exclude Mortgage Bankers. Additionally, the AMLA, the Arizona Mortgage Lenders Association didn’t like this bill when it was originally introduced because it required their constituents to be licensed as well. Mortgage brokers of all the lending institutions and have continually suffered a barrage of discriminatory attacks on their existence such as this amended bill that’s being sent through the house at this time. Yet, we provide most of the loans and get less complaints than those who attack us.
The few people who amended this bill to its current condition apparently were influenced by a similar bill in Nevada that started with Mortgage Brokers being the only folks to have individual licenses for their originators and was amended to include Mortgage Bankers two years later.
Reportedly, the NV mortgage bankers got in trouble for employment ads that basically said, "come to work for us, you won't have to put up with all that education and licensing crap." Ultimately, the ads got the bankers in trouble with their regulator and they were forced into being covered by the regulation.
But, how many Nevada brokers went out of business in the 2 years because they couldn't hire a good originator? Also, how many consumers were under served during those two years while their bill was altered to include everyone who originates residential mortgages?
Why would the AZ State Legislature wait to include everyone who originates residential loans for its constituency? Seems like politics to me versus serving the people that the Legislature represents. Let’s get everyone licensed now.
Best Regards,
Thursday, July 5, 2007
Unknowing Consumers
Consumers Beware: If you have collection accounts that are over a year old and you are told by a mortgage loan officer to pay them off in order to get yourself ready for a mortgage hang up on them. For more information call Dale Stouffer at 480-226-3020 to get the scoop.
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