How to Shop for a Mortgage Originator When They Won’t Provide a Good Faith Estimate

June 17, 2010 by Leave a Comment

I just received this excellent question on a post I wrote at Rain City Guide about why Loan Originators are hesitant in issuing a Good Faith Estimate without all the required information:

…I am a new buyer with a question regarding the GFE. I am brand new to this world, so I apologize if this is a dumb question.

I read that I should shop around to a few banks and get a GFE to see who can give the best deal. I was pre-qualified by my personal bank but my Loan Officer denied me a GFE. She stated she cannot give me one until my offer is accepted for a home.

How am I supposed to shop around for the best deal, if they won't give me a GFE until I've found a home & been accepted? My intent of the shopping around is to be ready when the home comes along.

I've been meaning to write a post about how to select a mortgage professional since my original articles on this topic are a little out of date with the introduction of HUD's Good Faith Estimate at the start of this year.

Currently, if a mortgage originator issues a good faith estimate without the property address (when someone is shopping for a home), the addition of a property address does not create a "changed circumstance".  The only time a mortgage originator can issue a new or revised Good Faith Estimate after the initial GFE is if there is a qualified "changed circumstance".   Since the 2010 GFE has certain liabilities associated with various fees that are quoted, a mortgage originator is at risk for having to shell out hard earned cash if there are differences between the Good Faith Estimate issued and the HUD-1 Settlement Statement at closing.  I say "currently" because I do hope that HUD recognizes this significant flaw and that they correct this soon because a home buyer does not have their future home address will be hard pressed to obtain a Good Faith Estimate from any mortgage originator–which defeats the purpose of why HUD created this document!

So how can a home buyer "shop" for the person who is going to help them with one of their largest debts secured to where possibly their most significant asset?   Here's what I recommend:

  • Ask for a rate quote sheet or work sheet.  Lenders may have different names for this but HUD does allow us to provide rate quotes as long as they do not look like a good faith estimate.   If you are going to do this–it's imperative that you do in a short amount of time and provide each LO the same criteria as rates are a moving target.  Currently we're experiencing 2-3 rate changes per day. 
  • Determine if your mortgage originator is licensed or registered and if this is important to you.  Licensed Mortgage Originators are held to higher standards per the SAFE Act than Registered (bank or credit union) Mortgage Originators. If you visit www.consumeraccess.com you can verify a license and see your mortgage originators history.
  • Consider what type of mortgage company the mortgage originator works for.  What this boils down to is do they have in-house underwriting?  Where are the decisions on your loan going to be made?  Is the processing down in a far away "processing center" or does the processor work in the same office with the loan originator.   There are differences between correspondent lenders, mortgage brokers, mortgage banks and credit unions.
  • Google your possible mortgage originators.  A Google search may reveal rants or raves about the person you're considering to help you.  You may learn more about the mortgage professional.  Just enter their name into the search box–you might have to add the word "mortgage" if their name is common.
  • Is the mortgage originator or their company affiliated with a builder (the seller) or real estate agent's office?   If the mortgage originator is a builder's site agent, they may be naturally more incentized to look out more for who feeds them the most business–which isn't you.  If they are cozied up in the real estate agents office, make sure they are committed to not disclosing information that you may not want the real estate agent to have (for example, the maximum amount you may qualify for).   If you're comfortable with not having someone intendant of attachments to work with, then this point may not be a huge issue…but it is something to think about.

These are just a few suggestions to help you select your mortgage originator.  Mortgage rates and closing costs are important, but there are other considerations to factor as well. 

If I can answer your questions or help you with a mortgage for a home located in Washington state, please contact me.  I've been originating mortgages for the past ten years and I'm happy to help!

Filed Under: Good Faith Estimate, Mortgage

Refinancing Guidelines Need to Loosen Up for Housing Recovery

June 15, 2010 by 2 Comments

This subject has been gnawing at me for a while and I’m actually surprised I haven’t written about it here before.  In order for the housing market to really start recovering, I believe that the underwriting guidelines need to relax.  Whoa–you say, isn’t that what got us into this mess in the first place?  Well, I’ll argue that it was more of folks being able to buy more than they could afford (via stated income) that drove up prices and put them into homes where they could never afford the the payments over folks who used home equity by consolidating debts or doing who knows what with the cash (hopefully they banked it…in a safe place).

Helping someone keep their home by taking advantage of the lower interest rates prevents a foreclosure or short sale.  Yes, we have the Home Affordable Refinance Programs (HARP) thanks to President Obama–but many don’t qualify and many who do are not taking advantage of this temporary program.   FHA Streamline refinances now require an appraisal OR no closing costs can be financed–how is that better for American home owners during this time? 

If it were up to me, I would make it possible for home owners who have demonstrated they pay their mortgage and debts on time and who have documented steady employment to have their appraisals waived and closing costs financed so they don’t have to dip into their hard earned savings to finance their refinance.  Now this does happen sometimes with Fannie Mae’s HARP program…but not with Freddie Mac (which requires an appraisal and limits closing costs) and not with FHA.

Why penalize home owners who’s property values have plummeted because their neighbors sold their homes via short sale, lost it due to a legitimate foreclosure or plain walked away from their obligations?  Why punish home owners who have been making their payments and who qualify on every other point EXCEPT the appraised value?  If their payment is being reduced, it helps stabilize the neighborhood and reduces the risk of default for the mortgage servicer.  Loan to values need to be eliminated on rate-term refinances where a tangible benefit for the home owner exists.

We also need to eliminate the securitization factors of when Fannie or Freddie bought the existing mortgage for it to be eligible for a HARP refi.  I recently had a client where it showed on Fannie Mae’s site that he indeed has a mortgage owned by Fannie Mae–it was not until we received an error message trying to underwrite it through DU (the automated underwriting system) that we called Fannie Mae to discover that the loan had been securitized (purchased by Fannie Mae) one day too late to qualify (March 1, 2009).  This person’s loan closed in December 2008, was sold the the bank and then took months for Fannie Mae to purchase.  This means this upside-down home owner does not qualify to reduce his payment by $250 per month.  Imagine what the $250 a month would do for him and/or the economy.  It gives him some probably needed monthly financial wiggle room and he just might spend a little more which helps our economy too.  (Loans need to be purchased/securitized by Freddie Mac no later than May 31, 2009 to qualify).

These are just a few thoughts that have been a bee in my bonnet… or worse!   Don’t get me started on home owners with existing mortgages that have private mortgage insurance hitting a brick wall when trying to do a HARP refi (most pmi companies are not cooperating) or not being able to include second mortgages (even “purchase money”) in a HARP refi.   Or how FHA insured loans will soon be more expensive for borrowers seeking to refinance or purchase with the increase of the annual mortgage insurance premium.

Please contact your elected officials in Congress if you have had issues with obtaining financing…they are making originating loans tougher and tougher as I write this post. 

I’m afraid it’s going to get worse before it will get better.  Many people who need help and who would qualify for the refinance with exception of the appraisal…are not able to get it.  Many don’t want to risk the cost of the apprasial (around $500) to attempt a refinance in these economic times.

Filed Under: Rant, Refinance Tagged With: , , ,

King County Assessor’s Office Adds Photos of Properties

June 12, 2010 by Leave a Comment

The King County Tax Assessor’s office has recently added photos to your tax records–including historic photos if they’re available.  These photos are from a home I owned in South King County on North Lake (by Weyerhauser’s corporate office) from 1999 – 2005.  It’s pretty cool to see the home when it was a classic funky lake cabin back in October of 1967.

 AuburnOldHouse
Where the camper and carport is in this photo was  my son’s bedroom and my office when I lived there years ago.  Below you can see they added a bedroom and my future office became the garage.

 AuburnOldHouse_001

Here’s the now picture they have of this view (the lake is on the other side):

 AuburnNow 

To see what photos King County has of your home (and it never hurts to review your tax records) visit this site: http://info.kingcounty.gov/Assessor/eRealProperty/default.aspx and find your property by entering your address or tax parcel number.  If you need help finding your tax parcel number for your home in King County, please contact me. 

Once you locate your property, click the “My Property Detail” tab and scroll down.  You should see more photos and floor plans, if they’re available. 

  Moreof~1
Note: the above photo is not from the county…just one from when we lived in the home.

No guarantee how the photos will be…but it’s fun checking them out and they’re free.  You may also be able to order photos from of your home from the Washington State archives if your home was built prior to 1930 which may have a better quality (not taken for tax purposes).

Hat Tip to West Seattle Blog via Twitter

Filed Under: Just for Fun Tagged With: ,

Who Does Your Loan Originator Really Work For?

June 8, 2010 by Leave a Comment

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

Filed Under: Escrow and closing, Mortgage, Opinion, Rant, Real Estate Agents

Memorial Day

May 31, 2010 by Leave a Comment

Freedom of speech and freedom of action are meaningless without freedom to think. And there is no freedom of thought without doubt. ~Bergen Evans

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Spirit, that made those heroes dare
To die, and leave their children free,
Bid Time and Nature gently spare
The shaft we raise to them and thee.
~Ralph Waldo Emerson

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Never in the field of human conflict was so much owed by so many to so few. ~Winston Churchill

~

Mortgage Master Service Corporation is closed today in observance of Memorial Day and to honor those who have made the ultimate sacriface for our country.  

Filed Under: Current Affairs

The Home Affordable Refinance Program Extended to Next Summer

May 29, 2010 by Leave a Comment

NOTE:  This program has been extended thru June 30, 2012 DECEMBER 2013.

Fannie Mae and Freddie Mac's Home Affordable Refinance that allows homeowners upside down with their home equity to refinance has been extended until next summer.  From Fannie Mae:

This program is for borrowers who have demonstrated an acceptable payment history on their mortgage but, due to decline in home prices or where mortgage insurance is not available, have been unable to refinance to obtain a lower payment or move to a more stable product.

…lenders may continue to apply for the HARP flexibilities to loans originated under Refi Plus and DU Refi Plus provided the note date is on or before June 30, 2011…

This program has been very helpful for Washington homeowners who are interested in reducing their mortgage payment or refinancing out of their adjustable rate mortgage.  This is not a loan modification–this is a refinance.

NOTE: the following guidelines are for mortgages that are securized by Fannie Mae.  I'll follow up with a post on those owned by Freddie Mac — which I can help you with too.

In order to qualify, the home owner's mortgage that is being refinance must be owned by Fannie Mae.  This isn't something that most home owners know since you don't write your mortgage payment to Fannie Mae, but you can check to see if Fannie is the investor on your mortgage by clicking here.  To be eligible, the existing mortgage must have been owned or guaranteed by Fannie Mae prior to March 1, 2009.

Fannie Mae has made some recent adjustments to the HARP program including allowing the removal of borrowers as long as the remaining borrower(s) can demonstrate they have been making the mortgage payments from the own funds for the prior 12 months (except for in cases of a borrower passing away).  If a borrower is removed from the mortgage via a HARP refinance, Fannie will also require that the borrower is no longer on the title to the home.

Here are some other key points about the Home Affordable Refi (DU Refi Plus):

  • Maximum loan to value is 125%.  There is no "combined loan to value" limit.
  • Existing second mortgages must be subordinated (second mortgage lien holders review and decide IF they are going to allow the mortgage to be subordinated).  No new subordinate financing (second mortgages) are allowed.
  • Second mortgages or HELOCs are not allowed to be paid off with a HARP refinance. (I WISH they were).
  • If your original mortgage was at 80% loan to value, your HARP mortgage will not have private mortgage insurance if your current LTV is over 80%.
  • Fannie Mae High Balance/Jumbo mortgages are eligible.Loan limits in the King, Pierce and Snohomish County area are up to $567,500 for a single family dwelling (however the mortgage being paid off must be owned by Fannie Mae–see above). 
  • Available for primary, second homes and investment properties.
  • Appraisals may not be required depending on the response from the automated underwriting findings.  With that said, I recommend planning on having an appraisal…I've seen very few come through with an appraisal waiver option.
  • DU Refi Plus (HARP) has price hits (aka LLPA) based on your credit score and loan to value.
  • Borrowers are only permitted a maximum of $250 cash back on a Fannie Mae HARP refi

Borrowers must still qualify for the mortgage.  Documentation may be reduced to one paystub and a verbal verification of employment for salaried employees or one year tax returns for commissioned or self-employed borrowers.

Various lenders or banks may have their own underwriting guidelines or "overlays" with regards to credit scores or debt-to-income ratios. 

With a HARP refinance, the home owner does NOT have to go back to the mortgage servicer (the bank the borrower makes their mortgage payment to).  

If I can help you with a refinance for your home located in Washington State, please contact me.   I'm happy to review your options, including HARP or possibly FHA (which will allow including a second mortgage with a refinance) at no obligation to you. 

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

Mechanics Liens and Title Insurance Owner’s Policies

May 25, 2010 by Leave a Comment

Did you know that it’s no longer standard practice for the Additional Protection Endorsement to be included on an Owners Policy?  This endorsement protects buyers from mechanics liens.  A mechanics lien can pop up for a certain period after closing when labor has been performed or materials delivered. 

I actually received several mechanics liens on one of my new construction homes in Federal Way when the builder did not pay all of his subcontractors.  Because I had this endorsement (which at that time was, for the most part, issued automatically) the title company protected me from the liens; determining which ones were valid and paying them.  I believe they bought my shower doors! 

This video is full of important information about mechanics liens and what home buyers in Washington need to be aware of, especically if they’re buying acerage or waterfront property.  The Talon Group’s Chief Title Officer Tim Daniels, provides some excellent advice for consumers and industry professionals…it’s simply too good not to share!

Filed Under: Title Insurance Tagged With: ,

How Many DOT Employees Does It Take to Put Up a Sign?

May 23, 2010 by Leave a Comment

And on a Sunday…P5230011

Filed Under: Interest Rates
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