The Mortgage Porter

The Mortgage Porter: Comment Policy

March 19, 2011 by Rhonda Porter Leave a Comment

Every so often, I start writing a formal comment policy and it seems to wind up on the back burner. A few years ago, I decided to have comments approved before being published on Mortgage Porter due to some very spammy, self-promotional comments that mortgage lenders were leaving. I welcome comments on my blog…but I will not tolerate spam, self-promotional comments or anything vulgar.

I reserve the right to edit comments if needed…typically this would be removing self-promotional. You do not need to add your url or titles–please use the links provided in your signature line of the comment for that. I may be adding advertising to this blog in the future and if you're interested in paying me to promote yourself, let me know.

I reserve the right to delete comments that are pure spam and that add no value to the conversation or that are vulgar.

In addition, as everything on this blog is my content, I will not tolerate plagiarism. If you wish to refer to my content or use an excerpt from one of my post, I'm flattered, just do so with a link back and proper credit to me. This blog and all content (text, photos, videos, etc.) is protected by US Copyright.

I've been writing Mortgage Porter since late 2006 and it's become a wonderful way for me to connect with readers and to work with new clients who are seeking a mortgage for a home in Washington State.

Bottom line, I would love for this blog to be a place for discussion and conversation. If you have questions, please contact me.

Be nice and we'll all get along.

Filed Under: Misc., Weblogs

When Can a Good Faith Estimate be Changed?

March 18, 2011 by Rhonda Porter 5 Comments

Someone recently landed on my blog by searching: "can a bank alter a good faith estimate?".

The answer is yes IF there is a qualifed changed circumstance or IF the good faith estimate has expired. If the mortgage originator made a mistake with a good faith estimate (regardless of how human the mistake may have been) they still cannot reissue the good faith until it has expired. This is why many mortgage originators or loan officers are still hesitant to provide the good faith estimate that HUD created last year.

Even though HUD created their GFE as a tool for lenders to shop, they have decided that the addition of a property address is not a valid changed circumstance — meaning that mortgage originators cannot reissue the good faith estimate because someone has gone from being "preapproved" to in a bona fide contract. From HUD's FAQs dated April 2, 2010:

"…if a GFE is issued wihtout a property address, the future receipt of the property address is not a changed circumstance that would allow the loan originator to issue a revised GFE."

So if an LO issues a GFE without an address, they are bound by those cost (subject to certain tolerances) if the buyer accepts the GFE prior to expiring. This is why MLOs (mortgage loan originators) have been issuing rate worksheets prior to having a transaction. However, if the MLO has received the criteria HUD had determined is an application a Good Faith Estimate must be issued within three days or the loan must be denied…this tends to happen more often with a refinance than a purchase scenario due to the valid address component.

When does a Good Faith Estimate expire?

From HUD's RESPA FAQs:

If a borrower does not express an intent to continue with an application within ten business days after the GFE is provided…the loan originator is no longer bound by the GFE.

It's a minimum of ten business days (two weeks) after the Good Faith Estimate is issued to the borrower that the mortgage originator is liable for the good faith estimate. If the MLO forgot to include the owners title policy fee (which the buyer doesn't pay for) they (or their employer) may out hundreds of dollars. On a $400,000 sales price, an owners policy runs about $1000. That's a hefty penalty to a mortgage originator for something the buyer doesn't even pay for in Washington state or that has nothing to do with the mortgage. Another expensive mistake is if the MLO forgets an upfront funding fee that FHA, VA or USDA loans have…HUD does not allow any wiggle room for human errors once that GFE is issued.

With all that said, President Obama's new Consumer Financial Protection Bureau is working on drafting a new Good Faith Estimate that is suppose to be friendlier (to conumers) which will also combine the Truth in Lending. Watch for this new document to be created by June 2012…with new guidelines on when a good fiath estimate may be changed or reissued.

Filed Under: Good Faith Estimate

Spring Forward Seattle

March 13, 2011 by Rhonda Porter Leave a Comment

It can be tough picturing spring with all the rain we seem to be enjoying in Seattle lately. In spite of the grey days, I do love spotting the signs of spring. Here are a few photos I captured in my neighborhood.

Camelia

Drops of rain on a cork screw willow.

Jonquils or Daffodils…I'm not sure?

By now I'm sure you've set your clocks forward one hour…this is also a good time to change the batteries in smoke detectors and to check your emergency safety kits at home (or create one).

Have a great day!

Filed Under: Current Affairs, Misc.

Sunday Drive to Mount Baker

March 6, 2011 by Rhonda Porter Leave a Comment

We decided to spend the long Presidents Day weekend at Mt. Baker with our kids for a short family vacation. We rented a condo at Snowater, in Glacier, just minutes from snowboarding, skiing or inner-tubing in the beautiful scenary of Mt. Baker. The condo at Snowater is located just off the north fork of the Nooksack River and did not have internet access or cable tv…yep, we were unplugged for the weekend and it was wonderful! Snowater does have other ammenities (indoor pool, ping pong, etc.) which our kids really enjoyed. A majority of our time was spent on Baker. It takes about 2-3 hours to reach Mt. Baker from Seattle. Do check driving conditions (chains may be required) for Baker.

Check out the more of my photos of our Mt. Baker vacation by clicking here. By the way, I used my new Sony Bloggie (pocket camera) to capture these photos.

Filed Under: Sunday Drive - Neighborhood Tours

Which Fees Can Change on a Rate Quote Worksheet

March 4, 2011 by Rhonda Porter Leave a Comment

When a home buyer is shopping for their next home, they often request written rate quotes from mortgage originators to see a detailed list of closing costs and an estimated total monthly mortgage payment. Before HUD mandated their Good Faith Estimate in 2010, they could rely on a Good Faith Estimate. Due to the liability a mortgage originator may incur on issuing a GFE before the buyer has a purchase and sales agreement (in contract to buy a home), a buyer would be hard pressed to find a mortgage originator is allowed to issue a GFE pre-contract. In addition, HUD's GFE does not include the total mortgage payment nor funds required to close the transaction, so it's not best tool for a buyer.

In lieu of issuing the Good Faith Estimate, mortgage originators can issue a written "rate quote worksheet" which may have different names by different lenders. Just like the old GFE, the rate quote worksheets also vary in appearance from lender to lender as they had to be created by lenders as a result of the limitations of the HUD's GFE…they are not a standardized document. The written rate quote worksheet should contain all the same information as the good faith estimate did prior to HUD's 2010 GFE as well as the APR.

The rate quote worksheet is simply a tool to provide an estimate of closing costs as well as what current rates are available if the home buyer were locking at that moment.

Some fees on the quote can change, including:

Title Insurance and Escrow. There are several title insurance companies located within each county. Home buyers DO have the ability to select their title and escrow providerand some offer discounts when you use title and escrow from the same company. They may discover that their real estate agents try to control who provides this service. Often times, listings have a title committment prepared by the listing agents preferred title vendor (sometimes called a "TBD"). Until the mortgage originator knows who the title and escrow company are, this fee is an estimate and the fees do vary.

Property taxes. Property taxes are in the mortgage payment as well as the prepaids/reserves section of the mortgage quote. The number of months required to collect for reserves may varies based on when the first month's payment is due…so until there is an established closing date, it's a "best estimate". NOTE: I use 1.25% of the sales price divided by 12 months, unless I am provided a different figure to use for taxes. Property taxes are specific to the property that is purchased…and property taxes may change over the years (impacting your mortgage payment).

Home owners insurance. Home owners insurance is in the payment as well as the prepaids/reserves. This fee can vary based on who the provider is (selected by the home buyer) and the amount/type of coverage they request.

Prepaid interest. This will be based on the very date of closing, paying interest through the end of the month (because you now own the home and have a mortgage). Until we have that contract, most lenders will use 15 days of interest for purposes of a rate quote. Closing earlier in the month increases the days of interest and later in the month reduces the days of interest.

Of course, how the loan is priced once the rate is locked (with or without discount points) may also change as the home buyer may not decide this until they know the what pricing (what rate at what cost) is actually available until the moment they are able to "lock".

This post was written based on a question from a home buyer I'm working with in the Seattle area. If you have a question regarding mortgages that I can answer on Mortgage Porter, contact me! You just might read your answer on my blog.

Filed Under: Good Faith Estimate, Residential Purchase

Mortgage Loan Originator Compensation Changing on April Fools

February 25, 2011 by Rhonda Porter 2 Comments

I’m going to start this post by saying I can bet certain people are going to chime in that this needed to happen and LO’s will still thrive and do fine…and I can also bet that those who will sing that song have not recently been a mortgage originator. They may be exposed to mortgage originators from being employed in the real estate industry, but in my opinion, they are “arm-chair quarterbacks” at best. Enough said…on to my post.

Effective April 1, 2011 rules regarding how mortgage originators (anyone who takes a residential loan application) may be compensated will be implemented. Currently most mortgage loan originators (MLO) are paid by the consumer (points), by the wholesale lender (rebate pricing) or a combination of both. MLOs may also be paid a salary and receive additional compensation based on volume (many banks pay this way). These rules are created by the Fed through modifications to Reg Z. Even though the rule goes into effect on April 1, 2011; lenders will probably enact deadlines in advance (sometime in March).

It’s no surprise to me that there are two different sets of rules based on if the mortgage loan originator is employed by a bank or true corresponent lender (like Mortgage Master Service Corporation) verses a mortgage broker. MLO’s who are employed by a bank or true correspondent are not paid directly by the consumer, they are paid by their employer (also referred to as the “creditor”). Mortgage Brokers are once again kicked in the teeth with the changes to Reg Z. I do wish we all had the same set of rules (including all being licensed) as consumers should not have to determine the type of originator and varying set of the regulations that apply.

Mortgage Brokers will no longer be allowed to receive “dual compensation”. This means that MLOs employed by a mortgage broker will only be able to recieve compensation paid by the consumer OR paid by the wholesale lender. Let’s say that today, a rate priced with zero points is 5.000% (rebate pricing is 1 pt to the broker) and priced with 1 point origination fee paid by the consumer buys the rate to 4.75% (zero rebate from the lender), a mortgage broker could offer these scenarios. If the consumer decided they would like to have the rate of 4.875% and are willing to pay 0.5% in origination fee with the broker receiving 0.5% from the wholesale lender in rebate, this is not allowed per Reg Z. From my understanding, retail mortgage loan officers (employed by banks and true correspondents) will still have this option because the consumer is not directly paying the mortgage originator. I’m very thankful that I work for a correspondent lender, however it’s really not fair for the mortgage brokers.

Mortgage Loan Originators may not be paid based on the terms and conditions of the loan. The loan amount is not considered a term or condition however the interest rate is. This rule also prohibits “steering” a consumer to lender offering less favorable terms in order to increase the loan originator’s compensation”.

Owners of mortgage companies are currently scrambling trying to figure out how to compensate their mortgage originators.

In my opinion, changes to RegZ seem to favor how many big banks have been paying their mortgage originators: volume. How does a consumer benefit when the MLO who is taking care of their purchase or refinance is compensated by how many loans they can close in a specific period of time? Banks will continue to pay their MLOs less per transaction as they complete as many loan applications as possible as they sit and wait for next trusting bank customer to walk into the branch. In my opinion, banks want to pull the industry (quality of mortgage originator) down to their level so they have less competition.

I’m wondering which industry will our government get into next to control how one is paid? With what’s gone wrong in the housing industry, are the commissions paid to a real estate agent low hanging fruit?

How am I paid? (2007)

Filed Under: Mortgage, The Fed - FOMC

Presidents Day

February 21, 2011 by Rhonda Porter Leave a Comment

Mortgage Master Service Corporation is closed today in observance of Presidents Day. We will reopen for business as ususal tomorrow morning, Tuesday, February 22, 2011.

As the markets are closed, I will not be posting mortgage rates today. If you would like a personal interest rate quote based on your scenario for your home located in Washington state, send me an email or dm me on Twitter.

Happy Presidents Day!

Filed Under: Current Affairs

Your Mortgage Insurance may be a 2010 Tax Deduction

February 16, 2011 by Rhonda Porter Leave a Comment

Did you know that mortgage insurance premiums you paid during 2010 may be tax deductable? This is eligible for mortgage insurance contracts that were issued after 2006 for the use of purchasing your home (primary residence or second home) and is not limited to what you may traditionally think of as "private mortgage insurance".

Qualified mortgage insurance may include:

private mortgage insurance (may be paid monthly, lump sum at closing or both)
FHA annual mortgage insurance (paid monthly)
FHA upfront mortgage insurance premium (paid upfront at closing)
VA Funding Fee (paid upfront at closing
USDA Guarantee Fee (similar to a funding fee; paid upfront at closing)

Qualified mortgage insurance is reported in box 4 on your 1098 Mortgage Interest Statementwhich you should have received from your mortgage servicer (who you make your mortgage payments too). This deduction is treated essentially the same as deductible mortgage interest. You will need to file an itemized tax return in order to claim this deduction. If your adjusted gross income is more than 109,000 ($54,000 if married filed separately) you cannot claim this deduction. You can refer to Line 13 (of the Instructions for Schedule A of the 1040 (on page 7) and IRS Publication 936 more information.

Remember, please seek the advice of your tax professional or CPA. I am licensed to originate mortgages on homes located in Washington State.

Mortgage Insurance Tax Deduction Extended (again) through 2011

Are Mortgage Points Tax Deductible?

Filed Under: Mortgage Insurance

The Mortgage Porter