Questions from a client…”great” offers in the mail and home equity loans.

June 3, 2007 by Leave a Comment

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I just received two excellent questions from one of my clients who I helped with their financing when they bought their first home and their move up home which they currently live in.   

"We keep getting info in the mail from some odd place that says that we have a mortgage through Mortgage Masters and that they can reduce our house payment to $900.00 per month. We shred them every time we get them but now I am curious if it is true? It does not have the Mortgage Masters logo on it, it just says that they know we have a mortgage balance of $266,000.

Also, we keep getting info regarding a home equity loan. We want to know what a home equity loan is and if that is something for us? I know this will probably be too much to respond to in an email but maybe you have something to send us about what all of this is and what (if anything) you think we could do to lower our house payment? Probably not since we have such a low rate but we thought we would ask!"

Both of these questions are excellent and deserving of their own post.   Please keep your questions coming.   The home equity post will follow soon…I recently posted an article at Rain City Guide regarding offers from too good to be true mortgage offers.

Filed Under: Mortgage

How am I paid?

May 20, 2007 by Leave a Comment

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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. 

Filed Under: Mortgage

Question of the day: Just what DO you do?

May 17, 2007 by Leave a Comment

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.

Filed Under: Financial Planning, Mortgage

Debt and Your Mortgage

May 9, 2007 by Leave a Comment

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

Filed Under: Credit Scores and Reporting, Debt Restructuring, Financial Planning, Mortgage, Refinance, Subprime Lending

Mortgage Interest Rate Locks 101

May 8, 2007 by 22 Comments

EDITORS NOTE: With changes to the 2010 Good Faith Estimate, a lot of the information below is no longer relevant (relating to the GFE). However, the pricing is still a good example of how locks work.

I love it when I’m asked an excellent question from a potential client. This person Mpj040062600001_2 is still shopping for his next home and who the lender will be to provide financing.   At this point, I have provided several good faith estimates and a total costs analysis to compare possible scenarios side by side along with how the mortgages may be working for him in 5 and 10 years. 

Here are a few of his questions:

What level of guarantee can you offer me with these rates you have provided on the Good Faith Estimates?

Until your loan is “locked” the interest rates on the Good Faith Estimate (GFE) is simply a reflection of what the rate is at the moment the Loan Originator prepared the GFE.   In fact it’s possible that the rate may have changed just moments after the GFE was provided to the client.   Mortgage interest rates can change throughout the day.   The GFE is not a guarantee of the mortgage interest rate, costs or that one is qualified or approved for a loan program.  (I have addressed guarantees towards the of this post).

Can I lock in my rates and closing costs before I find my new home?

Typically, the buyer has a signed around (agreed to) purchase and sale agreement.   Most locks require a property address along with the borrowers full legal name, social security number, program type, purchase price/loan amount and credit scores along with the length of time required to close the transaction.   

Some lenders, like Mortgage Master, have a “lock and look” feature which does allow buyers to lock their interest rate before finding their next home.   Unless the market is experience ramped rate increases, I recommend not doing this.   The locks are for longer terms (so they are more expensive) and should rates improve, odds are the buyer is not going to want the long term rate they’ve committed to with the lock.

How long is the lock period?

Locks have various time periods that are available to accommodate a borrowers needs.   The most common for a purchase is a 30 or 45 day lock.   Again, loans are locked in based on how many days are needed to accommodate the transaction closing date.   The longer the lock period, the higher the costs is for a specific rate.

For example, here is what the difference in fee may look like based on various lock times assuming the 30 day lock is par or neutral (comparing the other locks to 30 days):

  • 15 day lock = 0.125 better over the 30 day price
  • 30 day lock = 0
  • 45 day lock = 0.05 cost over the 30 day price
  • 60 day lock = 0.150 cost over the 30 day price
  • 70 day lock = 0.270 cost over the 30 day price
  • 90 day lock = 0.400 cost over the 30 day price (may have to pay additional upfront lock fee for this long of term)

So if you have a loan amount of $400,000 and a closing date that was just shy of two months away, and you want to have the 30 day rate, the cost may be $600 (400k x 0.15).    If you have a longer closing, a Mortgage Professional should advise you of your options of locking now or waiting until  your close date is more near and what the risk are (rates changing).    At 70 and 90 days, instead of paying an increased cost for the 30 day rate, you could also opt for a slightly higher rate (0.125%) and still have the 30 day pricing (it would be factored into the rate).   Again, the above numbers are just an example of possible pricing.   Rates and pricing do change constantly.

You can lock 90 days and beyond.   However, the cost increased (as you can see from my figures above) and there is often an additional upfront lock fee that is non-refundable.   

Click here for your rate quote for homes located in Washington.

It’s important that the loan is locked in for the right amount of time.   If a loan doesMag7winner_4  not close before the lock expiration date, the lender is put in a position to where they may need to extend the lock. The price of a lock extension varies from lender to lender and, if the market has improved from when the loan was originally locked, there may not be a cost for a shorter extension.    Some lenders charge 0.015 per day of the extension; so if 10 more days were required to close and fund the loan, the cost could be 0.15% (0.015 x 10 days) of the loan amount.   On a $400,000 loan amount, this is an additional cost of $600.   You can see why it’s important to lock your loan correctly in the first place.

I recommend that when you lock in  your loan, you ask your Mortgage Professional to guarantee the closing costs associated with the loan.   Third party costs, such as the appraisal title and escrow fees, the Mortgage Professional has no control over.   I would not work with any Loan Originator who is not willing to stand by their closing costs.   As a borrower, you should be able to bring your Good Faith Estimate with you to closing (your signing appointment) and have the lender’s fees be reasonable close.   

Once you have locked in your loan, you should receive:

  1. Written lock confirmation stating what the rate and points are associated with that rate.
  2. Request an updated Good Faith Estimate (and ask the lender if they are going to guarantee their loan costs) to correspond with the lock.  [2010 UPDATE:  You may find that mortgage originators will provide a written rate quote prior to providing a Good Faith Estimate with an actual Good Faith Estimate to follow.]

What ever you do, please do not select the person who will be assisting you with your largest investment (your mortgage) by interest rate alone.

If you would like a mortgage interest rate quote for your home located anywhere in Washington, click here.

 

Filed Under: Interest Rates, Mortgage, Refinance, Residential Purchase Tagged With: ,

And the Survey Says

April 25, 2007 by 1 Comment

Famfeud After every closed transaction, I mail my clients a survey to get a read on how they feel their service was from our team.  99% of the time, the responses are very positive. 

In today’s mail, I received two surveys that I thought I would share portions of them with you.

"This was a difficult refinance which seemed hopeless at times but Rhonda never gave up.   She was always upfront and honest.   Excellent communication and service…I received almost immediate response any time I had a question.    Thank you!"   

The refinance was challenging however, this mortgage just really made sense to me.  I’ll have to follow up with more information in a separate post.   Here are some bits from the other survey I received today.    This transaction was a purchase that recently closed early.

What did you like best about Mortgage Master: 

"Rhonda’s speed & professionalism & dedication"

How could we have improved our service to you: 

"Impossible"

Comments: 

"Rhonda, you are absolutely the best!  Thank you!"

So what about the few who are not satisfied?  I’ve had two who did mail in surveys in my seven years who were not singing praises.   One was unhappy with the escrow company and I tried to get more details from my client…I do want to know whenever there is room for improvement with the mortgage and home buying process.   I did pass that survey on to the escrow company.   

The other transaction was with a past client who decided to go elsewhere for his home financing instead of returning to me. Just barely over one week before closing, he changed his mind, pulled his loan from the other lender and threw the transaction in my lap.   He withheld an addendum to the purchase and sale agreement with various work orders filling the entire page…you don’t think he was purposely trying to keep that from the lender, do you?

Needless to to say, this delayed the transaction from closing in the one week I was allotted and for that, he was unhappy with me!  Had the addendum been provided, we might have closed on time assuming he would have provided the documentation to show the work was complete.    

I am glad whenever I receive a survey back from clients.  The feedback is priceless and it is my goal to have families as happy with me at the end of the transaction as they were in the beginning. 

Filed Under: Mortgage

When are you obligated to a Loan Originator?

April 19, 2007 by 4 Comments

Commitment…ah hah!  I bet I just lost have of my readers out of fear from that oneMpj038482500001  word!  We’ve had a series of post recently at Rain City Guide that has developed some very interesting comments and dialog.    Here’s are excerpts from a recent post of Ardell’s:

Me:  “…if a buyer comes to you with a lender and has gone through the preapproval process, you might steer them to another one?”

Ardell:  “Absolutely YES….Are you suggesting that the “pre-approval” comes with some kind of “obligation” to use that lender? “   

A response from a real estate agent like this should not surprise me…but it did.  This probably served as a much needed personal wake up call.   I know when consumers are shopping me…and I have worked with a few real estate agents who have counseled their buyers to shop.   They call me with the same script almost word for word, “All I want is a Good Faith Estimate…”   I believe this agent (it’s not Ardell) is using my GFE to keep her preferred lender “honest” with his rates and costs.   

As I’ve mentioned many times in this blog…odds are you cannot successfully shop interest rates–they are a moving target and change throughout the day.   Any Joe Schmo L.O. can quote an enticing rate to get you drooling and then…when it’s time to lock (assuming he’s really locked in the rate and not gambling it) you may have your real rate.   At closing, with Joe Schmo L.O. you’ll discover your real closing costs.   (Always bring your GFE to your signing appointment).

The big issue I had with the post was the practice of going through the steps of getting preapproved with a Mortgage Professional just to drop them at the curb when you have a bona fide transaction.    Ardell brought up an excellent question though, when are you committed to a Mortgage Professional?

When somebody contacts me for the first time.   I’ll ask them a few questions, including what are their expectations of me at this point in time.   Some just want rates, have questions or would like to have an idea of what they qualify for.   This takes anywhere from five minutes to a half hour.   I certainly hope that I’m beginning to develop a relationship and to show the client that I’m worthy of their business…but if they move on and elect to work elsewhere, that’s fine.   There is no commitment at this stage.   You’re just dating and getting to know each better.

Once you decide to move forward with a preapproval, if you are working with a Mpj042298200001 Mortgage Professional who has been referred to you, they are responsive to you, have earned your trust and you seem to have a decent relationship…I think you should “commit” to them.   With the preapproval phase, you’re providing a Mortgage Professional with all of your income documentation for the past two years, savings and assets and allowing them to delve into your credit history.   The preapproval process may take hours or it may take days (depending on the situation).    This is a lot of work for Mortgage Professionals…and yes, this is what we do for a living.   Keep in mind, as much as a Mortgage Professional would love you to feel like you are their only client, we are often juggling quite a few transactions along with various potential buyers who are just interested in quotes or are in the “dating phase” as I mentioned above.   

Once you are preapproved, the Mortgage Professional issues a preapproval letter in the buyers name stating they have gone through all of these steps and are committed to providing the buyer financing.  We know this is not the perfect and that commitments from unsavory lenders or individuals are worthless…however if you have a solid Mortgage Professional, you as the client should honor that commitment as well.    In addition to the time spent with the preapproval process, there are often countless emails, phone conversations, letters…you may have several weeks invested into each other.    You are “going steady”.   Please don’t date other LO’s behind your mortgage professionals back…at this stage.  If there’s something you’re not happy with, communicate with them or move on before spending more of their time and resources.

 

 

Mpj042847600001 Once you find your home and have an accepted offer (signed around purchase and sale agreement)…I hate to say the “m” word…if you’re still reading this…but you’re almost married!   After a lot of hand holding, late night chats and frequent emails together, your transaction is coming to fruition.   By now, you should really know your Mortgage Professional.   If you doubt your rate when you’re locking in, you can always ask them.   Tell them you noticed xyz rate at the bank this morning…what ever…kind of a “is that a blond hair on your collar” check. 

My point is…in this post that is all ready too long (my apologies), when  you have a signed around purchase and sale agreement on your home is NOT the time to begin shopping for lenders.   Especially if you all ready have, as Brian Brady put it, used someone else to do all of “the grunt work” to get you preapproved.   Now is when the Mortgage Professional who has worked with you to get your loan approved really has a chance to do their job and see your transaction through to closing.   

And, ideally, I hope to maintain my relationship with my clients long after closing.  I hope they will continue to rely on my expertise when they have mortgage needs in the future, whether that just be a simple question or if they need to refinance or buy their next home.   

This is a relationship business and it’s a two way street.  If you expect to have your Mortgage Professional to be devoted and available at your beckon call, shouldn’t they be able to have a little faith in the borrower?   

Filed Under: Mortgage, Real Estate, Residential Purchase

How Did You Find Mortgage Porter?

April 15, 2007 by 3 Comments

One of the features of having a Typepad blog is that I can see what the input was for Google and various other search engines.   

Here’s a recent sample from today (in chronological order):

I like to read how viewers have discovered Mortgage Porter.   The search phrases are helpful as it shows me what is currently on people’s mind.  And provides me with ideas for future posts. 

There is a definite ethics theme with both lenders and consumers and there are general searches about mortgages.   I’ve added the links to the pages the visitors were referred to (there are a couple links I had to make an educated guess on).

I wish Typepad had a way to show what the most viewed pages are in Mortgage Porter’s history…I’ll have to send them an email!   Meanwhile…I’m just scanning the information as much as possible to get a glimpse of how people are finding this site.

Filed Under: Mortgage, Weblogs
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