Archives for May 2007

How am I paid?


This is a follow up to a question that I was asked the other day from a reader who asked:

"First of all, are you like a real estate broker, in addition to your specialist title?  Are you a consultant /broker or just an educational resource? What is your fee for consultation?"

I answered the first part to her question on an earlier post.   Leaving me the question of how I am paid.   

To begin with, I’m not paid hourly nor do I charge a fee for my consulting advice…some days I wish I were paid that way!   Mortgage Professionals/Loan Originators are paid when a transaction (purchase, refinance, second mortgage) closes and the loan funds.   So it’s very possible for a Mortgage Professional to spend hours, sometimes months, with a client advising them on their credit and/or creating a mortgage strategy and not get paid one penny!   I can accept not getting paid if a client is waiting to buy a home until the time is right for them…it does sting to have a client obtain financing elsewhere after investing a lot of time and effort into them.   This happens to the best of Mortgage Professionals.   I do my best to make sure that I’m working with clients who appreciate my time and advice and are as committed to me as I am to them. 

Back to the big question of my compensation.  Loan Originators are paid a couple different ways.   They may be paid by the consumer in the form of points, or by the lender as a rebate.   How the mortgage is priced, with points or without, will impact how the LO is paid.   It is the consumer’s choice on how they want their mortgage priced, with or without points.   A Loan Originator is going to be paid for their services either way.

I am paid a percentage of the loan amount.   Depending on the loan size and the difficulty or ease of the transaction, my income can range anywhere from a couple hundred dollars to around 1% of the loan amount divided by half and less the fees I pay towards our processing.   For example, if the loan amount is $200,000, the fee would be $2000 divide it in half (half to me and half to my employer, Mortgage Master), my portion would be less than $1000.  Again, each loan is unique and may be priced accordingly and each Loan Originator is extremely different with how they may price their mortgages…the sky just might be the limit for some

Over the top technology

A hat tip to Tony at The Mortgage Cicerone for passing along this amazing, and a bit scary, information.   The GPS in your cell phone allows you to be tracked and with today’s satelite technology, you can be located and viewed at any time!    I love technology as much as the next person…but is this too much?

Click here to visit the site…checking cell phone number locations is free!


Question of the day: Just what DO you do?

I received this question in an email yesterday…it’s priceless.Mpj043316500001

"First of all, are you like a real estate broker, in addition to your specialist title?  Are you a consultant /broker or just an educational resource? What is your fee for consultation?"

First of all, I am not a real estate broker.   I am a Correspondent Lender and I am a Certified Mortgage Planning Specialist (CMPS).

As Correspondent Lender, we fund a majority of our loans in our credit line.  We process, underwrite, prepare loan documents and fund a majority of our loans at our office located in King County, Washington.   Since we’re taking the upfront risk, we receive better pricing than a typical broker.  The loans are sold to lenders after closing.   We also have the ability to broker mortgages when necessary.  Typically a brokered loan is going to be a mortgage that is too unique to be in our credit line (such as subprime or alternative mortgages).   A brokered loan may have more fees than one closed as a Correspondent.  There are more "Mortgage Brokers" than "Correspondent Lenders" out there…it’s expensive to be Correspondent (but worth it)!

My DFI License "title" of 510-LO-32047 is also something that will be earned (officially ofter the exams take place starting next month).   Mortgage Brokers in the state of Washington are required to become licensed (as Correspondents, we’re not quite banks and not quite mortgage brokers, so we fall into this new state law).   What this means to the consumer, if the work with a Licensed Loan Originator is that they have:

  1. Passed an extensive exam.*
  2. Cleared a background check from the FBI and DFI.
  3. Must continue their education by means of clock hour course requirements.

If someone is working with a Loan Originator who does not have a license, such as a banker or credit union LO, they have not met (nor are they required to meet) the above requirements.   (*Again, the exam will not be available until next month).

To be a CMPS, you must pass an exam consisting of 100 questions (different from DFI’s test) and are held to additional ethics beyond what other loan originators strive for.  A Certified Mortgage Planning Specialist has gone through extensive training on mortgage planning and is doing so voluntarily in order to distinguish themselves over the rest of pack of Loan Originators knocking at your front door for a chance to sell you a mortgage you can’t resist.   The CMPS designation is beyond what is required to be a Mortgage Professional.

An education resource is what every Mortgage Professional (regardless of what we call ourselves) should be!  This is my favorite part of the question I was emailed.  And I’m very flattered that this is how she interpreted me.   In my opinion, a Mortgage Professionals first responsibility should be to make sure the consumer fully understands the mortgage process and what their options are so the borrower/buyer can make an educated choice as to what their mortgage will be.   Sometimes, that choice might be to wait a few months once some credit issues are cleared up or more funds are in hand.    There may be no mortgage involved at all.   

How am I paid?  That will have to be a new post!  Stay tuned.

Local Mortgage Fraud Exposed

Mpj031428300001 Last night I watched an investigative report on the local evening news about a loan originator who put the hard sell on two brothers to purchase 3 investment homes and now the brothers are having to sell their primary residence in order to try to make ends meet.   There was so much wrong to this story that it made my gut turn.

I’m glad that predatory loan originators are being exposed.   It’s truly unfortunate that for every one of these LOs, there’s an anxious, gullible borrower on the other end.   Here are just a few of the highlights from last nights story :

The LO grossly overstated the buyers income.   And according to the buyers, the signature on the loan application was not theirs.   Absolute fraud.

  1. The LO was the selling agent, loan originator and the seller (he transferred the property to a family member)…I’m assuming he was the listing agent, too? 
  2. The properties were horrible overpriced.   According to the report, the brothers bought a property for $605,000 and it’s only worth $400,000. 

The brothers state they were shocked at their new mortgage payments when they arrived.   Since the loan applications were forged, I’m assuming they had no idea what their payments would be.   

Simply googling the loan originators name shows that he has been banned recently from his former career as a stockbroker for "defrauding customers" and trying to "harass and intimidate" a securities investigator.

"He’s a great salesman, I’ll tell you that…and stupid me, and stupid us…for trusting someone with a silver tongue."

It is so important to carefully select the Mortgage Professional you will be working with.   This may not be an easy task, you’ll need to do some research.   The brothers in this story say that this loan originator is one of their friends!   

  1. Google the Loan Originators name.   What pops up from the search?
  2. Read the LOs blog.  You’d be surprised how you can get a "read" on a LO’s personality and lending style.
  3. Get referrals from your other people you respect.
  4. Get second opinions from other lenders or professionals (such as your CPA, CFP, etc.)

I also have an issue when selling agents are also the loan originator.   In my opinion, it’s too self serving and a green light for abuse.  The loan originator/real estate agent should only wear one hat during a transaction…not two.  This subject deserves a post on it’s own.   I wonder if this LO disclosed on the purchase and sale agreement the relationship to the seller?

If it seems too good to be true, it probably is.   Owning investment properties can be great.  I recommend dipping your toe into that pool slowly.   Jumping in with 3 homes (the brothers bought 2 condos and a house for investment) is a certain recipe for disaster when you do not have experience as a landlord.   Even if the LO was a decent lender, these were highly risky purchases. 

It will be interesting to see how this story unfolds.   My first post was about a local mortgage fraud case as well and I’m still waiting to see if this predatory loan originator was able to slither away.

DFI currently shows this LOs license as pending…which probably doesn’t indicate anything at this time since Loan Originators will not be able to take the test until June 1, 2007.   DFI is, however, in the process of background checks…so it will be interesting to follow this LOs career and to see if he will be able to continue working as Mortgage Broker or if he can find employment elsewhere in the lending industry that is not licensed by the State of Washington.

Loan Originator Leftovers


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:

  1. Get a copy of the buyers Good Faith Estimate (GFE) before the seller agrees to pay closing costs when an offer is being considered.
  2. 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.
  3. 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.
  4. Review the estimated HUD-1 Settlement Statement prior to closing.
  5. 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.
  6. 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!

Happy Mother’s Day


My Mom is the blond lady sitting on the left.   The photo was taken at Seward Park just a couple years ago.   The red car is an Austin Healy, I’m guessing a 1961 3000 (one of my favorite cars).    My Aunt Teen is the other lady with my Mom.    Who are the boys…Who knows? 

I’m assuming my Aunt Vianne snapped the photo since that’s her Jaguar in the background.   My Mom and Aunts would cruise the Renton Loop "back in the day."  This was a few years before I came along (I’m the oldest wisest of three girls). 

Happy Mothers’ Day to all Moms.

Just in time for Mother’s Day

Do you have a present for Mom yet?  How about some Marble columns? 

Oooh Laa Laa… I’m sure these will add value to your home or at least it will look like a millionaire lives there.   Of course I can help you with a home equity loan to finance your marble columns!

Debt and Your Mortgage

Istock_000002310753medium_3This is the second part of my series on debt inspired by the blog Dollar Buy Dollar.  Before I get too deep into my posts, I want to stress that if you have a mortgage and you are sliding further into debt, please contact your Mortgage Professional as soon as possible.   Don’t wait.  It may feel better to dig your way out without help, however, credit card lates and even worse, mortgage lates, will ding your credit score down to where either:

  1. Your rate for a possible refinance or equity loan is much higher as rates are credit score based.
  2. You no longer qualify for a mortgage at the loan to value you need for debt relief.   (The amount of equity-loan to value-that is allowed to borrower is also credit score based).

I’m not a huge fan for using one’s equity as a cash card.   However if your equity can bail you out of a desperate debt situation and if you are capable of changing your spending and savings habits so you don’t wind up having to tap your equity again, then it makes sense.   

I cannot emphasize enough how important it is to take action right away.  Especially in our current mortgage "subprime" climate where it is tougher to qualify for loans with lower credit scores.  If your scores plumet too low and if you are not able to access  your equity, you may be forced to sell your home.   A mortgage late is more devistating to your scores than a credit card late and any recent lates will zap your score (mortgage lates carry more weight than a credit card late).    Credit is reflective, so the more time since a late payment, the more your score will rebound.

Recently I helped a couple where the homeowner, who was self employed successfuly for over 20 years ran into hardships with his business.   He wound up relying on credit cards to try to "bridge" his lack of income.   In a short period of time, he was not able to pay his credit cards or keep up with his mortgage.   He has a beautiful home valued around $700,000 and a mortgage balance of $250,000.   He wound up with a 120 day late (3 months of not paying a mortgage–preforeclosure).   His then Fiance helped to get him current on his mortgage, he was lucky!   However the mortgage he had was ugly.   The Fiance contacted me about refinancing their high rate subprime loan he was currently in.  She had credit scores over 700 and his were around 400.   In addition to the "preforeclosure" on his mortgage, his credit report was full of collections and late payments.  Here’s what we had to do in order to help this couple in order for them to receive the best rate and program available:

  1. Wait until the 120 day late was 1 year old.  (We were six months away and were waiting for the underlying mortgage’s prepayment penalty to expire).
  2. They married and she was added to the title.   The lender wanted to wait until she was on the title for 6 months before they would close.
  3. He remained on the title (is still a vested homeowner) and is not on the new mortgage.
  4. His judgments had to be paid at closing.  (This was a cash out refinance to pay off all remaining derogotory debts).

We did a no income verifed loan with just her on the mortgage.   The new rate was just 0.25% over the available conforming rates with no prepay penalties.   Bottom line, he was fortunate that when he disclosed his situation to his partner, she was willing to stick around and help bail him out.   He’s also lucky that he owned a home and had enough equity that he could do the cash refinance or, if he had to, sell the home and have enough proceeds to pay off debt and have a savings left over.

If he didn’t have the mortgage lates, we could have refinanced his loan much sooner.     It all worked out for the couple…now newlyweds!   Restructuring the mortgage to eliminate the debts has made a dramatic difference in their lives.   Your Mortgage Professional may or may not be able to help "bail you out".   At the very least, a qualified Mortgage Professional can help you decide which debts to pay first.   I’ll address that issue in my next post for this series.

Watch CNN’s video on Dollar Buy Dollar and couples who hide debt from each other.

Related Post: The Debt Disease…Dollar Buy Dollar; Borrower Beware