From the Mortgage Junk Mail Bag

JunkIt’s been a while since I’ve shared a POS (piece of solicitation) from the junk mail bag. I don’t have an issue with lenders trying to obtain business from home owners by mailing marketing pieces…although I do wonder why they must resort to marketing to strangers instead of working with past clients.  

This letter was sent last month. It was packaged in a folding security envelope to look as if it may have contained important information, such as the code to an ATM card. It was only a trick to get one to open it. 

They start with quoting an APR of 3.125% for a 30 year fixed rate in the upper right corner with a very low payment of $651 on a $250,000 loan amount. That’s a great rate and an amazingly low payment!  However if you read the very tiny print on the bottom of the page, you’ll see that what the rate offered is actually based on a 5 year interest only adjustable rate mortgage (ARM).  Why not have that information in the upper right corner with the teaser rate and payment? 

The lender who sent this is from a company in California. I really recommend working with lenders in your own state where processing and underwriting are done locally as well. Why would they have to mail to Washington state home owners to try to get refinance business?

I also recommend that you use the NMLS Consumer Access site to research any Mortgage Loan Originators you’re considering allowing to assist you with your refinance. The NMLS Consumer Access site will disclose their employment history and whether or not they’re licensed to originate mortgages in Washington.  I think it’s also a good idea to “google” their name and the company’s name to learn more about them. 

Instead of calling a stranger from out of state for your mortgage needs, do your own research. 

If your home is located anywhere in Washington state, I’m happy to help you with your refinance or financing your home purchase. And by the way, I have never bought “a lead” or sent out a piece of junk mail to try to solicit a mortgage prospect.

Hammered with HARP 2.0 Offers from Lenders You Don’t Know?

I received this email from one of my readers:

"My mailbox is being bombarded with out of state Harp 2 "pre-approved" loan offers and I did call one of them and they talked me into running a credit report and when I found out their fees for the loan I didn't call them back and told them I had to think about it. I'm a not sure if this is a scam or not so I thought I would check locally…"

The Home Affordable Refinance Program (HARP aka HARP 2.0) has created a refi boom for mortgage originators. Many large banks are now telling their clients it may take up to three months to process their refinances due to the heavy volumes that are being experienced. Some banks have so much business that they're turning away clients just because they have private mortgage insurance or LPMI with their existing mortgage. NOTE: Our company is closing HARP loans and accepting HARP refinance applications with existing pmi and lpmi for properties located in Washington state.

HARP 2.0 has created a great opportunity for mortgage originators and companies to buy leads. I've always scratched my head at why a mortgage originator or mortgage company would have to buy leads. You have to wonder how their service is if they do not have enough business by clients who return to them for their HARP refinance. Especially if the company is out of state – is their business so bad they have to go out of state to find consumers who have never heard of them?

I would never work with a non-Washington based mortgage originator or company who has to buy leads in order to get a loan. However, should you decide to, please check the NMLS to make sure the company and mortgage originator are licensed to do business in Washington State.  The solicitations you're receiving from these out-of-state lenders must disclose the license numbers for the company. 

Google the company and the mortgage originator to learn more about them. Should you decide to proceed with someone you're about to spend several weeks with while your refinance is in process, you might want to check their credentials first.

If you are considering buying or refinancing a home located anywhere in the state of Washington, I'm happy to help you. I've been originating mortgages at Mortgage Master Service Corporation since April 2000 and I've never paid for a "lead". My business is completely referral, returning clients and those who find me from reading my blog. Our local mortgage company located in King County has been family owned and operated since 1976. 

Why May 31, 2009 is the cut-off date for Home Affordable Refi Program (HARP 2)s

I'm on a confererence call with Fannie Mae regarding the updates made to HARP 2. Someone has asked about how the date was selected for the cut-off of when when a mortgage is eligible for HARP 2.  The answer from a gentleman representing Fannie Mae said (paraphrased – this is a conference call):

Because anyone who bought a home or obtained a mortgage June 1, 2009 or later, knew the they type of housing marketing were getting into.  

The Fannie Mae rep insinuates that those who financed prior to June 1, 2009 may have not been aware of the dramatically changing climate in the housing industry.  

By the way, the date of May 31, 2009 is not the closing date – it is the date Fannie Mae securitized the loan which may be weeks after the closing date. I have had clients who have missed qualifying for a HARP refi because Fannie Mae securitzed their loan ON June 1, 2009, disqualifying them by one day!

I was surprised by the Fannie Mae rep's response. I assumed there was a more scientific reason for the date of loans securitized prior to June 1, 2009 instead of "these borrowers knew better".

In my opinion, the date should be removed. Why punish borrowers who happened to refinance or buy after that time period. If Fannie Mae's argument is that these borrowers knew better, how could they continue to have mortgage programs available during that time? I feel that if borrowers are qualifed and can benefit from a HARP refi, they should be allowed to have access to this program to help their personal finances and therefore, the economy to improve.

Other factors Fannie Mae is stressing is that loans are still underwritten based on risk – especially borrowers in a negative equity position.  It's not guaranteed that HARP refi's will receive an appraisal waiver and not all scenarios will receive an approval for a HARP refinance.  I've been contacted by Washington area home owners who lack steady income or have blemished credit assuming they will qualify – they may not. We won't know until we submit your loan scenario to Fannie Mae's automated underwriting system DU Plus and have a response before we can determine IF someone qualifies for HARP and what documentation will be required.

If you are interested in a Home Affordable Refi (HARP 2) for your home located anywhere in Washington, please click here.

It’s time for HUD to revamp the FHA Streamlined Refi

HUDHUD's Shaun Donovan was recently promoting Obama's jobs bill and the recently revised the Home Affordable Refinance (aka HARP 2.0).  Fannie and Freddie have revamped the Home Affordable Program to reduce the closing cost and eliminate the need for an appraisal on many qualified homes.

From Donovan last week on HARP for conventional refinances:

"…There are still millions of Americans who have worked hard and acted responsibly, paying their mortgage payments on time. But because their homes are worth less than they owe on their mortgage, they can’t refinance….

Just yesterday, the FHFA announced changes that will help more responsible borrowers take advantage of today’s low mortgage rates. These changes will knock down barriers such as closing costs and fees that can sometimes cancel out the benefit of refinancing altogether.

And by creating more competition so that consumers can shop around for the best rates, these changes will save homeowners on average $2,500 per year — that’s the equivalent of a pretty good-sized tax cut…"

With HUD promoting HARP 2.0, I'm hoping that they're taking a strong look at their own FHA Streamlined refinance.  FHA streamlined refi's already do not require an appraisal as long as the loan amount is not being raised over the balance of the existing FHA loan.  

The problem with the FHA streamlined refinance is that with the last adjustment to FHA's annual mortgage insurance and funding fee, it's more difficult to have these refi's pencil out. The annual premiums are so much higher than past insurance premiums that despite today's much lower rates, the higher insurance fees often cancel out the reduced rate benefit. Seattle area and other home owners who are not underwater with their home values may be able to switch to a conventional mortgage (with or without private mortgage insurance depending on the loan to value) and an appraisal will be required to prove the current value of the property.

In my opinion, with FHA streamlined refi's, HUD should either allow a reduced mortgage insurance rate for streamlined refi's and perhaps not offer a credit of the remaining upfront mortgage insurance premium. VA's IRRL loans offer a reduced funding fee of 0.5% for refi's.

Another option would be for HUD to allow the FHA borrower to refinance their FHA mortgage with the same FHA mortgage insurance premiums of their current FHA loan.  

HUD should also make it easier for borrowers with FHA ARM's to be able to do a streamlined refi into a fixed rate program.  Current guidelines require a reduction in payment of 5% and a caps the interest rate at no more than 2% higher than the ARM. If the borrower qualifies for the higher payment and they are opting for a fixed rate program, they should be allowed to do so.  Currently this eliminates borrowers from being able to streamline refi from an adjustable rate to a 15 year fixed.

HUD already has the risk with the loan, why not help Americans with FHA insured loans reduce take advantage of this current low rate environment by making FHA streamlined refinances more feasible? 

Mr. Donovan, it's time for HUD to knock down barriers such as closing costs and fees that can sometimes cancel out the benefit of refinancing altogether for FHA streamlined refinances.

EDITORS NOTE: This post was updated 11/21/2011 with the addition of the paragraph addressing changing the requirement for a steamline refinance out of an adjustable rate.

On the FHFA Suing Banks over Mortgage Backed Securities

Why is it that I keep picturing the three Stooges slapping each other silly when I think about the FHFA suing the big banks over mortgages.


Shouldn't they be including the credit rating agencies in this slap fest?

Did Congress and other politicians (like Cuomo) not press Fannie and Freddie to lower their underwriting standards to make home ownership available to more Americans? Should FHFA sue Congress?

Doesn't Fannie and Freddie have their own automated underwriting systems and standards? Wouldnt Fannie and Freddie KNOW the quality of mortgages that were being originated (with exception to fraud)?

Let the slappin' begin.

Mortgage Originators should only originate mortgages

Twophonesmortgageporterthink it's unfortunate that the SAFE Act didn't address having professionals who are helping people with the possible largest transaction in their life be limited to originating mortgages.  I feel quite strongly that it is NOT in a consumers best interest to use the same person to originate their mortgage AND sell them their home.

There is simply too much to keep up with in this climate with both mortgage originating and being a real estate agent.  New laws are constantly being created and underwriting guidelines change in a blink of an eye.  How can someone doing two important jobs do either "one" full time job well if they're split between two?   And I guess I also wonder "why" people who act as mortgage originators and real estate agents feel they must do this.  I consider myself a fairly savvy mortgage professional and I'm sure I could sell a home–but I wouldn't dream of it.  I'm dedicated fully to my profession:  mortgage.  

I cringe at the thought of a buyer disclosing all of their financial information to a real estate agent acting as a mortgage originator…especially if they don't want to buy the "maximum" they potentially qualify for.  I often times work with buyers who could qualify to buy much more than their agent knows and they ask me to not reveal this information.  If you're working with someone who is originating your mortgage and selling  you a home, they can't keep this information separate – they  know how much you can buy. 

If you're considering using a mortgage originator who's also a real estate agent for your refinance, how do you know they won't try to sway you to selling (where they'l earn significantly more income) instead of refinancing?

It's almost a form a "dual agency" where you're having to rely a great deal on trust with the individual you've hired to care for your entire transaction.  For the "professional" who is acting as both your real estate agent and loan originator, this is simply too much commission (what a buyers agent is paid and the mortgage origination compensation at stake) to truly trust they're working in YOUR best interest.

HUD is not a fan of FHA mortgage originators having other employment in real estate related fields either (from HUD Handbook 4060.1 Chapter 2: Section 2-9)

Full, Part-Time and Outside Employment.  A mortgagee may employ staff full time or part time (less than the normal 40 hour work week). They may have other employment including self employment.  However, such outside employment may not be in mortgage lending, real estate, or a related field. Direct endorsement underwriters are included in this provision.

In Washington State, Real Estate Agents acting a Loan Orinators in a transaction are required to provide this written language as a Dual Capacity Disclosure:

This is to give you notice that I or one of my associates have/has acted as a Real Estate Broker or Salesperson representing the Buyer and/or Seller in the sale of this property to you.  I am also a Loan Originator and would like to provide mortgage services to you in connection with your loan to purchase the property.

You are not required to use me as al Loan Originator in connection with this transaction.  You are free to comparison shop and to select any Mortgage Broker or Lender of you choosing.

If you're getting ready to buy a home.  Select your professionals wisely.  You deserve a to work with a team of individuals who are dedicated and focused on their sole career.   This is a case where two heads are better than one.

If you're buying a home in the greater Seattle or Bellevue area, I'm happy to recommend a dedicated real estate agent and help you with your mortgage!

Click here if you would like a rate quote for a home located anywhere in Washington.

Related Post:

Who Does Your Loan Originator Really Work For?

Bribery to Work with the Builder's Preferred Lender

Is Your Agent in Bed with a Title Company?

My Thoughts on the Future of Home Mortgages and Home Ownership

Yesterday, I had the Future of Housing Finance playing in the background as I was working away on rate quotes and lock commitment confirmations for a few of my clients in the Seattle area.  Oh how I wish that I, or a fellow mortgage origintor who has been originating mortgages since pre-subprime days could be on the panel.  Since I'm not, I'm going to share a few of my thoughts on this post.

People who currently have a mortgage and who are credit and income qualified (have made their payments on time) should be allowed to refinance without an appraisal.  This would not only help home owners save hundreds of dollars each month with their mortgage payment, the end benefit would be real stimulus for the economy.

I believe all mortgage originators, regardless of the type of institution they work for, should be held to the highest standards of the SAFE Act.  (Currently mortgage originators who work for banks or credit unions are not licensed).  

I also feel strongly that those who present themselves to be residential mortgage originators (licensed or registered) should not be allowed to also sell real estate.  I'm concerned this has huge potential for fraud and the home buyer is not best served when a real estate agent knows the fine details of the buyers finances.  I view this as a huge conflict of interest.   HUD all ready has this standard: real estate agents cannot originate an FHA insured loan.  I'd like to see this implemented with conventional financing.

Last but not least, not everyone in American needs to or should own a home.   Owning a home is not a right, it's a privelidge that's one's personal financial choice.  And there's nothing wrong with renting a home.  Renting a home, like obtaining a mortgage, is a personal financial choice.  

What are your thoughts? 

Who Does Your Loan Originator Really Work For?

Photo credit Sarah G... via flickr I often wonder how a consumer can truly trust a mortgage originator who sits in a housing development or a real estate office.  Yes, it's convenient when you're checking out that new home and the loan originator that works with the builder or real estate company just happens to be sitting there waiting for you or the next person who'll walk through their door.  Is that the best option for you?

HUD is questioning this with regards to builders with in-house lenders and if this arrangement is a RESPA violation.  It is harmful to consumers if the closing costs or rates are increased to compensate for what the lender may have to shell out to be that builder's preferred lender. Often times, you may find that the builder has built any cost to bribe you to work with their lender by increasing the sales price of the home.  RESPA violations aside, I've always felt that if you work with the builder's lender, you're providing your personal information to the "seller" or the more specifically, the employee of the seller.   The loan originator may be employed by a bank, but when they're constantly fed by the builder…where do their loyalties rest?

I feel the same way about loan originators who work as "joint ventures" with real estate companies.  They may be paying rent inside your real estate agent's office or just be on their preferred providers list with some sort of business arrangement.  I believe most of the big real estate brokerages in the Seattle area have an arrangement made to steer you to their lender, title or escrow company.   When a loan originator, title rep or escrow officer are constantly fed or partially owned by a real estate company–where are their loyalties?  If you only want to get approved for a $400,000 sales price, and can afford to much higher–do you think the LO who's shacked up with the real estate agent will let that agent know when they press the LO for more info on you?

Yes, you pay for their origination, title or escrow fees, but who are these people really work for.  Shouldn't you have more of a choice?   Some real estate agents will tell you that there isn't much difference in rate or fees–which they may truly believe; however, it may not be accurate

I "work for" Mortgage Master Service Corporation.  I'm paid by the consumer when we close a mortgage transaction together.  My business is dependent on my clients referring me to people they know who need a mortgage in the greater Seattle area.  I also have clients who find me from reading my blogs.   I am not part of any joint venture or arranged business agreements.  I'm not paid based on volume, quotas or selling a certain type of program.

Bottom line as a borrower in one of the largest transactions you may ever make in your lifetime, it is your responsibility to make sure you have the right team working for you.  Do as much research as possible before you've entered into a real estate contract.

Photo credit:  Sarah G… via Flickr