Archives for November 2010

My Interview on NPR: Credit and Refinancing

If you listen to the soothing voices of NPR in the mornings, you may have heard NPR's Wendy Kaufman's interview discussing the challenges of refinancing with lower credit scores.  I actually meet with Wendy about a week ago in Bellevue so she could interview me for this piece which I'm told will be airing again around 8:50 this morning PST on KPLU (88.5 a.m.).

You can also read the text version which includes a link to the broadcast:  Home Loan Blues: Refinancing Isn't So Easy

Here are some points I'd like to add to the interview:

It is more challenging to refinance (or purchase) in today's market.  Especially if you compare it to the wild subprime era of a few years ago…however the pendulum is still swinging tighter.  Mortgage guidelines absolutely needed to swing back from subprime, however some people may surprised to experience a mortgage transaction today.   The broadcast included a borrower who had to take clear copies of his documents–that would have happened before too assuming his supporting documentation (bank statements) were even required.   Today's underwriter is asking a lot more "why" instead of simply checking off a box that was generated by a streamlined automated underwriting system.  Qualifying for a mortgage is not impossible but you do need to be cooperative and provide what your mortgage professional asks of you…including that last page of your bank statement, even if it's blank.

With regards to credit scoring, we continue to see the minimum allowed credit score being raised.  It used to be that a 700 credit score or higher was considered great.  Now there are three different credit score "brackets" with conforming mortgages if your score is in the 700 range.   With higher loan to value loans, like FHA, many lenders are requiring a mid-score of 640 or higher (some lenders may go lower but I expect their credit score standards to increase too at a higher rate).

There are programs available for refinancing your home if you have lost equity and/or have a lower credit score.  If home owners currently have an FHA mortgage or conforming mortgage that qualifies for a Home Affordable Refi, they may still be able to take advantage of today's low rates.  If your home is located in Washington state, I'm happy to review your scenario at no obligation to see if refinancing makes sense for you. 

Listen to the NPR interview where I discuss credit scores.


The Mortgage Process: Contemplating Buying a Home to Getting Preapproved

For a while now, I’ve had this idea floating around in my head that with four years of articles at Mortgage Porter, I really should organize the post by the actual mortgage process.  Right now, my blog is traditionally organized chronologically and by categories.  I’m not changing that at all…what I am planning on doing is reposting the articles I most commonly refer to for my clients in an order that follows the mortgage process.  This will be a post I will continue to update with new content via links to the article…it’s a work in progress!  

In my opinion, someone considering buying a home should start researching the process months before actually entering into a purchase and sales agreement.  So that’s where we’ll start:

Considering Buying a Home?

Getting on Track to Buy Your Home

Basic Tips for Homebuyers

How Much Home Can I Afford?

That new car with cost you!

Tips for Improving Your Credit Score

Game Plan for if your credit score is low.

Getting Preapproved

Are You Really Preapproved or just Prequalified?

Debt to Income Ratios (aka DTI)

Do I Really Have to Provide All Pages of My Bank Statements?

What is required to document income?

Documentation for Self Employed or Commissioned Paid Borrowers

Why it pays to get preapproved early:  You may think you know your credit score

Preapproval Letters Defined

What should a preapproval letter contain?

Relocating to Washington State and getting preapproved for a mortgage

Is my Preapproval Letter Still Valid wth all the Rate Changes?

Planning Your Funds for Closing

Funds for closing when you’re buying a home

How much do I need for a down payment?

Gifts from Parents:  FHA and Conventional

We’ve just started the process with this post addressing considering buying a home to getting preapproved!  Watch for future post where I’ll organize articles I’ve written on being in a transaction.

Live from WAMP’s Annual Award Luncheon: VIBE

I'm going to do my best to blog "live" from WAMP's Annual Award's Luncheon at SeaTac.  I all ready lost my first post…so this may be a little etchy.  I will be updating this post throughout the day.   The room consists of half brokers and half correspondents (based on a show of hands).  It's truly great to see this gathering of mortgage professionals who care about their profession.

Deb Bortner of DFI just finished addressing the Mortgage Call Report which will be required of all licensees.  She added that DFI is obtaining software that will allow them to have access to every loan originated if the mortgage company uses a compatible LOS.  Currently Encompass is ready and Calyx and Byte should be ready by spring.   They will use this data to determine who they feel requires a more indepth review.

Regarding credit reports being pulled on licensed mortgage originators.  Deb Bortner says they're "looking for deadbeats".   Transunion is the credit vendor being used and will not allow DFI to share a copy of the report with the LO.  If the LO's credit score is higher (specific score not mentioned), they will not review the entire report.  Otherwise, credit reports are being reviewed for "general financial fitness and honesty".   If a LO has $100,000 in liens or judgements, they will not be allowed to have a license.  DFI is essentially making underwriting decisions reviewing Licensed Washington State Loan Originators as to who is qualified or no longer qualified to originate mortgages based on their credit report.

Deb Bortner strongly recommends that LO's who are required to be licensed (LO's who work for banks or credit unions are not licensed) – DON'T DELAY!  Your renewal and/or license may not be processed in time if you wait too long.

Loan Originator Compensation with Patrick Palmer with Pinnacle Capital and Gary Szymanski with Flagstar Bank.  "What we think we know…."

After April 1, 2011, mortgage originators can only be paid by the borrower or the lender — no blending of the two.  This means that mortgages can only be priced with points or without points: if a borrower wanted a loan priced with a half point, they will not be able to.  

For example, based on the scenario below, the borrower would not be allowed to have the rate of 4.125% since compensation would be coming from the them and the lender.   It doesn't matter that the loan originator would be compensated the same with every scenario.

  • 4.00% priced with 1 point paid by the borrower with zero rebate from the lender.
  • 4.125% priced 0.5% point paid by the borrower with 0.5 pts paid by the lender.
  • 4.25% priced with 0 points paid by the borrower with 0 points paid by lender

The presenters are showing that there is confusion and different opinions on how compensation for LO's will be next spring.  

Brian Chappelle with Potomac Partners in Washington D.C. has examples of compensation.


The Good Faith Estimate – Present and Future with Andrew Fay, HUD Supervisory Investigative Coordinator and David Friend, HUD Compliance Coordinator via Skype.  (Laura Gipe was not able to participate).  

What HUD's looking for:

Required uses of affiliates – should not be in block 3.  Looking for affiliated business disclosure form.

A credit union rep refused to give Andrew Fay of HUD a GFE unless he paid $100 for underwriting and credit report!  (Obviously not knowing who they were dealing with!) Only a credit report can be charged for GFE.   You must give a GFE on a refi if requested (and 6 points of info provided) - you cannot use "not knowing the address" as a reason to now issue.

When re-issuing a Good Faith Estimate you must make sure you have the "changed circumstance" well documented–especially if it's borrower requested.

Q: Why must we include excise tax and owners title insurance on the GFE?

A: The GFE is a form that is intended to be uniform across the country.  Some states have different laws, regulations regarding excise/transfer tax.  If exclusively assessed to the seller, then some states exempt.   There is no exemption allowed for non-disclosure of the owners policy even if there's a contractual agreement that the seller pays.

Q:  Why have a disclosure document not have a signature line on the GFE?

A:  Because it binding of the LO, not the borrower.   Andrew suggests that borrowers can sign the GFE but you cannot add additional lines–they can sign the top above their names on page 1.   David says additional disclosure form signed by borrower to prove receipt is acceptable.

More answers…and tidbits.

The GFE must detail all fees that are charged to the borrower, even if the lender is paying them.   

The HUD-1 is no longer a disbursement document.  HUD says it's intended to be a disclosure document. 

An in-house appraisal goes in Block 1 and an outside appraisal is to be disclosed in Block 3 of the Good Faith Estimate…"sometimes a LO may wind up having to eat an appraisal fee" ($500 approx)… "they may want to disclose the appraisal fee in both blocks 1 and 3 but then risk looking not so competitive with their GFE".

Dodd Frank Act passed in July transfers the RESPA function over to the new bureau next July.  The statute specially requires the GFE, RESPA and TILA forms must be combined into one document (how many pages??) by July 2012.

Property taxes are not shown on the GFE because HUD feels that the new GFE was intended to only show fees charged by the lender in association with the loan (that conflicts with excise tax and the owners policy IMO)…HUD states that the property taxes are the buyers responsibility with or without the mortgage loan.

If a HUD examiner finds that a "changed circumstance" is not valid or lacks documentation, the GFE that was issued with invalid changed circumstances will be "tossed out".   Documentation is key.

Under the RESPA regulation, the LO is also bound by the TERMS of the loan–not just the terms! (Section 5 of RESPA).   A mortgage originator issued a GFE based on a 30 year fixed rate when it should have been prepared for a 5/1 ARM.  The mortgage company is now holding that mortgage a 30 year fixed with a rate for a 5/1 ARM due to the mis-disclosure.   HUD says the LO checked "no" on all boxes stating as the the loan being fixed and at settlement/closing, received an ARM Note. 

If you issue a GFE with a TBD address, receipt of an address (or once a property is identified) does not constitute a "changed circumstance" where fees may be adjusted for the actual property.  (This is why LO's WILL NOT issue a GFE on a "preapproval" until there is a property identified.

If a LO has to use a different lender after a GFE is issued, they're still bound by the GFE–it's not a "changed circumstance".

Deb Bortner of DFI asks HUD regarding getting the SAFE rules out.   Will HUD issue them or will it be sent to CFFB?  Reply is "We can't answer…that's another department in HUD".

GFE's must be re-issed at the time of lock–this is a qualified "changed circumstance".

Andrew Fay says that there is nothing wrong with issuing multiple GFEs showing different scenarios…the borrower can chose which GFE they prefer.

HUD encourages you to sign up for their RESPA Roundup Newsletter by emailing

Note:  I had to leave after HUD's presentation so this wraps up my "live" post.  Thanks for reading!

Get Out and VOTE

Vote Today's Election Day…and there is a lot of very important issues on the ballot as well as the race for Senator between Murray and Rossi.   My personal belief is that folks who don't exercise their American right and vote shouldn't complain about conditions later. 

Please read up on the issues, do your home work and do not rely on the nasty informericals and robo-calls.   What ever you do, please vote!

Ballots need to be postmarked by November 2, 2010.  If you prefer to not pay $0.44 for postage and you're in King County, you can drop your ballot off at these locations

Does Your Mortgage Originators Credit Score Matter to You?

Would you work with a mortgage originator who has a 620 credit score?   Would you prefer to work with a mortgage originator who has a 720 or higher credit score?   Does how someone manages their credit history important to you if they are providing you advice about credit scoring and/or helping you with one of the largest debts you may have in your lifetime?

Starting November 1, 2010, the NMLS and Washington State DFI will begin pulling credit reports on LICENSED mortgage originators.  This is one of the final "background" checks being performed as required by the SAFE Act.  If a mortgage originator works for a depository bank (like Chase, Wells Fargo, Bank of America, Washington Federal, etc.) or any credit union, they will not have their credit pulled and reported to DFI.

I'm not aware of what the "magic number" is that DFI will use for weeding out mortgage originators with lower scores.  I believe they're looking more at credit history than the actual score…but I don't know for sure.  

What I do know is that mortgage originators who are licensed are held to higher standards per the SAFE Act than mortgage originators who are merely registered.   If you're curious about whether or not your mortgage professional is registered (bank/union union LO's) or licensed, you can visit