A few weeks ago, one of the Real Estate Agents I work with contacted me to review an estimated HUD-1 Settlement Statement. She was the listing agent and was concerned that her seller was being taken advantage of by the Loan Originator. In the purchase and sale agreement, the seller had agreed to pay "up to $10,000 towards allowable closing costs". The origination fee on the estimated HUD…2%!
It appears to me that the loan originator bumped up their origination fee at the last minute when the $10,000 credit surpassed the amount of legit closing costs. The origination was not called a "discount" so I highly doubt the Loan Originator used the excess credit to do the right thing and buy down the buyer’s rate. Especially when the listing agent requested a copy of the good faith estimate or other documentation to support the excessive closing costs. When the Loan Originator left the closing table, they attempted to take all remaining left-overs and scraps…licking their chops.
This greedy act by unscrupulous loan originators happens more often than you would like to know. It’s wrong on so many levels, I don’t know where to start! It’s taking money away from the seller, buyer and not honoring the purchase and sale agreement. What can an agent (listing or selling) do to prevent this from happening to their client?
Here’s just a few ideas:
- Get a copy of the buyers Good Faith Estimate (GFE) before the seller agrees to pay closing costs when an offer is being considered.
- If you’re the Listing Agent, have your Mortgage Professional review the buyer’s GFE to make sure the cost and rate are within reason.
- Don’t use "up to" for closing cost. Have the closing cost be a set figure for the credit. This leaves no question as to what was intended for the buyer.
- Review the estimated HUD-1 Settlement Statement prior to closing.
- Have the Buyer bring a copy of their Good Faith Estimate and Lock Agreement to their signing appointment. If the rate and closing costs are the same, yet the origination is increased…you’ve got a greedy gobbler for a Loan Originator.
- If you find that your Loan Originator (LO) is indeed taking the extra left over closing cost credit, put your foot down. Contact them ASAP or your Real Estate Agent and demand to see the GFE and to have the LO explain their increase in origination.
Everyone loses when a loan originator takes more than they should. If your LO is caught with their hand too deep in the cookie jar, slap it hard!