By Moe Bedard
The mortgage and real estate industry has resembled a battlefield marred with carnage and destruction with what appears to have no end in sight. 210 imploded lenders and thousands of mortgage, real estate professionals and anything related to these professions in one way, shape or form, litter the path of no jobs and no hope.
The bad apples spoiled it for the good apples. Loose lending standards and easy money for everyone (loan officers, real estate agents, appraisers, homeowners, investors, lenders and anyone associated with real estate) may have killed this business for good.
A black cloud is following many of the good people in the mortgage industry as they try and find employment to no avail.
Many have said they can’t find a job outside the industry because there is now a stigma associated with all mortgage professionals. Lack of regulation on the loose cannons and bad seeds, resulted in unscrupulous mortgage broker, chop shops sprouting up in almost every neighborhood in the country. Churning out cheesy, unlicensed loan officers, fresh out of high school, that sold one toxic and fraudulent mortgage after the other.
Unfortunately, it may be difficult to decipher the good broker from the bad broker because many borrowers were victims of the old wolf and sheep’s clothing. So, human tendency is to just place blame on the whole lot of them.
Trust is not going to come easy and brokers may never get a chance to earn that trust back.
Hell, I remember real estate and mortgage fat cats that were selling and lending on homes here in Corona, Ca. by the bunch. $50,000-$70,000 gross commission months were common. Brand new Cadillac Escalades, 750 BMW’s and daily sushi and Martini lunches were the norm.
They themselves jumped in on the investment bandwagon and gobbled up multiple properties all over he inland empire.
Now, well, let’s just say that they are way in over their heads. Those $50k months and sushi lunches are ancient history. Most are lucky to get a deal a month and are working just as hard, if not harder, for a much smaller piece of the pie. Many have given up and decided to throw in the towel because they feel there is no hope or dignity left in the business. Some have taken low paying jobs wherever they are lucky enough to get hired.
A lot of these professionals are 10-20-30 year respectable industry veterans with educations and impressive backgrounds.
Just take a look at the local MLS, Riverside County Notice of Defaults or Trustee Sales and you will find several prolific agents, mortgage brokers, contractors etc. that are listed for the foreclosure auction block. I will give them the respect and not mention their names here, but it is quite a list.
Many lenders are slowly but surely cutting off access to mortgage brokers by closing down their wholesale channels. The day I saw that Bank of America announced it was closing down it’s wholesale business back in October, I thought to myself that this was the beginning of the end of the mortgage brokerage business. B of A is one of the more conservative players and survivors in the lending game. Many suspect that the other major players will soon do the same.
If more lenders follow suit and shut down their broker business, this will mean that there is no way a broker can survive. Couple this with an already severe mortgage and credit crunch and you have a lethal cocktail for the mortgage broker professional.
There are just not that many loans to be had out there and there isn’t much money being made. These people need food and shelter and selling mortgages or real estate doesn’t seem to be cutting it these days.
Yes, there are mortgages being made and deals being done. But it looks like most of the business is being completed on the retail side of the lending industry and many seasoned mortgage brokerage vets have already jumped ship to go work for the man 9-5.
I’m sure I am going to get the comment from the guy who is still killing it on the brokerage side and even doing better now then back then. But either A, You are a BSer or B, you are of the extreme mortgage and real estate professional minority.
There have been many rumors circulating of other lenders are going to shut down their wholesale channels in early 2008. With lending guidelines so tough and such a small mortgage market, isn’t that the common sense business move for lenders to make?
Isn’t this a perfect time for lenders to just dominate, consolidate and own what is left when this market finally turns around? Is this the perfect time for Countrywide and other servicers or lenders to expand their services into real estate service companies? Think about the massive residential REO portfolios that they need to manage and sell?
This isn’t about saving an industry, it’s about business survival. Make no bones about it. When people and massive companies are in survival mode, they make common sense and wise cut throat business moves to increase their bottom line.
Wouldn’t one of those moves for the lenders that are left to cut out the middlemen and the commissions? Do lenders really need brokers anymore, now that subprime is a thing of the past? Will non-profits now be the conduit for borrowers and lenders to keep the greed out of the equation. (one of my theories)
There are long time veterans like Joe who believe and hope that they will survive;
I have been in the mortgage business as a broker since 1990. The situation we are experiencing now is not all that much unalike the S&L crisis of the early 90’s. Simply put there were a few “bad guys” that caused a lot of grief for a lot of people. And, in time, we survived.
Most mortgage people do a good job. Unfortunately now those of us who are left will have more legislation and regulation. In stead of more legislation and regulation, government should simply enforce the existing ones. Layering legislation will not eliminate the “bad guys”. As always they will simply figure out a way to get around it all. Pulling their licenses and assessing penalties swiftly will go a long way.
Anyway, to sum up, the mortgage banking/broker community is a tremendous marketing system. We need it and all of the good mortgage professionals to help many, many people in the next few years. So hats off to the “good guys”. Don’t quit
Is Joe fighting a losing battle or will mortgage brokers survive in 08?
One things for sure, the smart people that are left in the turbulent mortgage industry waters are devising an emergency back up plan and exit strategy because from the looks of things, the horizon isn’t looking to sunny.
Honestly, this is very extreme . Where do you get your data from. This is a very biased article with very little factual data to support your opinion.
Good and fair dealing mortgage brokers are here to stay. We positively impact the lives of so many people. To think that all the positive that has been done for years, will all of a sudden disapear. Not going to happen. Our volume is up over last year and next year even better.
Kate – it’s an editorial opinion. very little factual data? are you living in a bubble where you do not get out much?
Joe – I knew I would get some brokers saying biz is up, but I already commented on that in this post. FYI – Just have a back up plan sir. Never hurts, even when you are overly optimistic.
Good mortgage brokers?? Very rare indeed. This country is built on greed. Nobody cares about there clients anymore. We are living in a very sick country. Wall St. cant be trusted, the gov’t certainly cant be trusted, and the mortgage industry has joined the pack of wolves. Now the next scams i see happening is credit repair, life settlements, and debt settlement. I am so thankful I am debt free and rent.
Nice insight. Thanks for a great article!
Good Editorial – I hope it is wrong. I have been in this industry for 31 years and have seen the ups and the downs. Opened the first wholesale office for Far West Savings and Loan in Northern California outside the Bay Area in the mid 80′s. Back then it was us and Sunrise Mortgage doing wholesale. It has been a long and fun ride. The banks fought us in the beginning and it has always been a love hate relationship. We will survive, but in case we don’t, would you like fries with that order?
Now you’ve got to be kidding me. Let me guess you work retail? The reason brokers will be around is because we’re smarter than you. We realize that the costs you’ll endure will always make us more profitable obviously depending on scale. I can work from my home with a $800 laptop, $350 all in one, and a couple of online accounts (credit,point,leads). Make $6000/mo selling 2 loans to some small start up regional bank only charging my borrower 1.5% ysp beat your rate by .5 and your costs by .5% or more(average LA 250K). You and all the other retail/bank people just don’t understand that we were 75% of the business coming in up until recently, you can’t believe how many of us kept in touch with our old clients. Is it going to be tougher to find 2 clients a month YES will I still play 4-5 rounds of golf a week YES…Good luck with your PREDICTIONS career, your going to need it.
I think that your article hits it right on the head! It comes down to survival and the banks want to survive. Unlike the references that are being made to the S & L crisis, this time it is a global issue. Foreign and American investors will NOT touch our securities, in fear that they will lose milllions. Why? Too many hand in the pot and no guarantee that what they will buy is not just smoke and mirrors. The solution..simple..eliminate the possibility of tampering with the loan…this means no MORTGAGE BROKERS or APPRAISERS that can monkey around with the loan package. So banks are now forced to keep it within the retail, under their control, to assure that they will be able in the near future to start the investment engine again..
Brokers don’t want to hear or acknowlege this fact… it isn’t about your little 5-10 loans a months..the banks need the investors and they are going to do whatever it takes to keep the billions of dollars flowing..
Brokers don’t like it then complain to your precious NAMB..who did what for you except, collect your membership dues? And what are they doing now to protect your industry??? NOTHING!! WHY? Because they don’t control the money of wall street….the banks do..and there is NOTHING they can do about it! They know it and won’t admit it to any of you…
Mortgage brokers are taking the biggest beating in the shakeout, but will re-emerge. The model just makes better sense for the CONSUMER to go to a broker, rather than to trudge from bank to bank shopping for the right product. And yes, from the CMO managers to banks, the brokers, and the borrowers all are guilty of greedy exhuberance.
When anyone loses a profession its a saddening and hurtful experience. I have had bad experiences with real estate and mortgage brokers but I did not blame the whole industry. That is too easy and convienent. I have learned to sell my own properties and use cash to buy property as well. I really believe people can sell their own homes without a realtor and of course I will get the RE professional telling me to take a hike. I understand as well its a business and that perspective is appreciated. From where I sit I have taught my whole family how to buy and sell property without a RE agent. Call it a saver of about 6%. Who knows their own property better than the person that is selling it? I believe the RE profession will be a thing of the past as well as the mortgage broker. They crowed way too loud when the going was good and people will not forget that. I also know the Mortgage Brokers Association and Real Estate Agents Association kept up the cheerleading even when the situation was dire. The truth would have been easier and much more appreciated that cheerleading because your industry was in free fall. In a act of genorosity I wish all of you the best in searching for a noble profession. Its about time.
OK in that scenario I guess the banks don’t want to make money off of us little guys anymore huh? Filling the chest with loans for the servicing portfolio’s. Getting their small margin on all of the loans they touch before they sell them off. To WHO? I suppose your going to ask. Don’t know maybe the same people the banks sell too. Investors aren’t stupid they want and need us because they surely don’t want all the power to be in the banks..BECAUSE THEY LIKE MONEY TOO YOU MORON.
Ann
Lets play nice in the sandbox with the kids who arrived on the little bus!:)
Sorry Ann I meant Aaron. My bag.
wow, you really don’t like brokers or must have been burned. when i look at the drug industry, the investment industry and about 12 other diffrent industries. i can only say where is there an honest i care about my customers needs before mine industry. let’s not be so fast to kill the mortgage guy there is a couple of others that have gotten away with a hell of allot more. how many investment advisors gave a thumbs up to the market before the crash. fundamentals didn’t matter…
It’s a shame Aaron has no conception how secondary works. And Comicpro’s assertion that “Who knows their own property better than the person that is selling it?” makes me laugh.
However, I’m writing to ask you to tell me more about your theory that non-profits now be the conduit for borrowers and lenders to keep the greed out of the equation.
Thanks for a grimly accurate article.
Aaron- Investors have no say so on what lenders do and brokers have no power when it comes to what Countrywide, CITI or any lender decides to do in regards to its business.
Do you know that lenders have to buy there loans back if there is fraud in the origination process? That’s alot of buy backs they are going to incur over the next few years and these losses will continue.
you said, “You and all the other retail/bank people just don’t understand that we were 75% of the business coming in up until recently”
well duh! until the subprime mortgage market imploded….
YES…Good luck with your loan officer career, you’re going to need it. I am not wishing anyones financial demise and I am not predicting that this industry is dead. But I think that it would be safe to say that the horizon doesn’t look to good for the mortgage broker and it might be wise to explore other opportunities while your cashing those checks.
Robert Brett Curtiss,
I am only assuming you are somehow involved in the industry. I give people the benefit of the doubt when it comes to the ability to learn things on your own. I have a great persistence in seeing things for what they are and not what people make them out to be hence I learned to sell my own properties. So I am going to go on a limb and say a vast majority can sell their own property given correct advice and a good RE attorney. By the way I am a professional comic so your laughing is expected.
Robert – Millions are being funneled to non-rprofits to clean up this mess. There is talk about having home preservation centers in all major cities that will be ran by non-profits.
Take a look at NACA.com and you will see the future of this business. This model might be the mortgage model of the future.
Hey Moe,
I’m curious about your theory that the conduit between borrower and lender might be the non-profit organization in the future.
Who would be the players and how would it work?
thanks
Comicpro – I agree with you. The market, price, location and sign in the yard sell homes, not real estate agents. Help-U-Sell dominated in Corona, Ca. during the boom because people were sick and tired of hiring an agent for $30,000 and the home selling as soon as it hit the MLS. It wasn’t the agent that earned the money at all.
The only extreme advantage that Realtors have is the MLS and vast network of professionals that access this data and disseminate it to their clients. This alone can be very valuable when a quick sell is needed.
If you have time, by all means, you can sell a home yourself with a trusted advisor or attorney.
Its obvious you were not one of the people in the business who made money in the past. Take your own advise and get out of the business, do yourself another big favor and don’t become a columnist. There’s enough negativity in our industry now without help from “poor me” attitude, bs article.
Take a look at all the major non-profits boca. http://www.NACA.com, http://www.nw.org and http://www.995hope.org, these are the major players of the future and look who is on most of the non-profit board of directors, oh, lending executives, what a surprise.
Most of the Liar loans might have been done by Brokers but the next batch of loans that will be hitting the fan- the Pay Option ARMS- that are destined to take down the OC, LA, SD and Northern California were done by the kids in retail. Kids who had to slap those pre-payment penalties and push the 1% rates to make enough for their 30% split. That is where the Banks will need the Brokers with the experience to get those loans refinanced or finance those FHA transactions that will be sold in what used to be High cost areas.
Thanks Moe. I just get tired of the “you can’t do it because you don’t know sign” they hang around their scrawny necks. Oh sorry real estate folks!
Moe is dead on with his “opinion”. Don’t beleive it? Just wait 120 days!
If any of you have been paying attention, this has been a clear signal being sent over the past 4 months.
I’m sorry to say, but by the end of 2008 the mortgage brokerage segment of the industry will most likely be a memory.
Good luck to all….
Yes Aaron you are correct…THE BANKS DO NOT WANT TO MAKE MONEY OFF OF YOU! Why? Because today, Goldman announced that Citi may have an additional 18 BILLION in write offs..Do you call that making money off of you? No..you and your industry are now a huge LIABILITY to the Banks..wake up and smell the extinction…
Marvin..it is obvious that you don’t want to face the reality of life after a six figure salary..People in the industry that are leaving are facing the reality of 40-60K or the expense of learning a new trade..hard to accept that you may have to sell your McMansion or turn in the leased BMW..
Those that will survive in your industry are the ones who did not adjust their lifestyles to a wannabe Donald Trump..because survival will mean accepting a job with one of the banks that make it through…
Aaron, what you fail to understand is that you are not going to be able to sell those loans at 1.5% YSP and beat the banks retail pricing because you’re not going to have a place to sell that loan at all. Everone is looking for a scapegoat in all of this and guess who that scapegoat is going to be? You got it, it’s YOU. This has nothing to do with reason or logic, right or wrong, it’s just simply how this country works. Something goes wrong and someone gets blamed and the easiest and really the best target because of a definite history of abuse of the system is brokers. It’s time to face facts, who else is there that’s going to take the blame? Do you think the government is going to take the blame? Everyone knows the government was lax and not paying enough attention to what was going on, and they definitely are a good place to lay blame, but we all know that isn’t going to happen. Do you think the monoline lenders are going to take the blame? They’ve already shut their doors. Do you think the banks are going to take the blame? They have more lobbying power than the pharms industry. Do you think the secondary market is going to take the blame? It barely exists anymore, and the secondary market is mostly seen as the victims of this debaucle despite the fact that without their willingness to buy risky loans the subprime market would never have existed. So, I’m sorry to say, that leaves you. Believe me, I feel for you, I have a lot of friends who are brokers and I was a broker for years until early this year I saw which way the stink was blowing and got a bank job because I wanted to stay in the industry. In closing, good luck with your anger problem and your golf game, I hope you socked away some rainy day money because you’re going to need it.
Marcia – I am aware of this and of course retail had a huge part in the crisis. But they have deep pockets backing them up private meetings with our Sectretary Treasurer.
I have a good friend that owns an ethical, major bokerage here in Corona and he is fighting and not giving up. He also thinks that brokers will survive. Sometimes he says I am negative, while I can be, but I am more of a realist.
I am not one to eat a crap sandwhich and say, “this is the best sandwhich in the world!”, No, it’s a crap sandwhich and it definitley taste like crap. However, I will hopefully be eating a turkey on wheat tomorrow. That is being a realist and telling things like they are.
I look at the industry and things do not look good for him and I just hope everyone realizes that there is a lot of crap sandwhiches going around and a lot of people are claiming they are eating turkey sandwhiches when we all know, that isn’t the truth.
Comicpro – hahaha
Too many brokers where made bankers overnight with easy to attain lines of credit, now those bankers will be brokers again or move on to other careers it is just a way of the market correcting itself it will pick up again cause banks can’t handle the volume and most of them will need to consolidate or close in 2008/2009 due to lack of profitability it is sad if mortgage related experienced people can not find jobs due to the housing stigma they are very talented individuals this will be mistake and shameful for Hiring Managers, and remember what goes around comes around, every industry suffers at some point in time.
I have been in the industry since 1975, before Brokers. When brokers first came into the picture they served a specialty niche (subprime) aimed at people with poor credit and provided a great service alternative to the retail banks. That niche is all but gone today. The lending world did quite well before brokers and will do just fine without that segment of the industry.
Moe, this is an excellent article, and not being a mortgage professional I still can see the writing on the wall — or maybe it’s because I am not a mortgage professional and I’m not blinded by my own desperate hope.
However, I do work in the legal industry and believe me, Nick is right on when he says that if there’s going to be a fall guy, and there will be — it won’t be the government or the banks.
Comicpro, I used to have real estate agents come by to show my apartments. They do absolutely nothing. They’d sometimes have the person come by without them and give them the address and then still collect their one months rent, some even asked for 12% of the yearly rental. When it comes to selling houses, it’s even worst.
I think that is why the industry attracted so many dishonest, shady people. Easy sells, easy money as long as a person has the gift of gab, that will always attract the scavengers.
Disclaimer: I am not talking about ALL mortgage brokers, loan officers and real estate agents, just the ones that were guilty as sin. You know who you are
Pointing to other industrys that are dishonest is a poor excuse.
The bottom line is when it comes to the huge loss of money for the rich, somebody is going down. In this case, I think Moe is right, it just might be a whole industry.
Funny, I was watching A Christmas Carol over the holidays and spent some time thinking about the character Mr. Scrooge. Soooo many centuries have gone by, and the money lenders are still considered and regarded as the bad guys.
As a matter of fact, even in biblical times they had bad reps.
I guess it is true, the LOVE of money IS the root of ALL evil!
Moe — you are correct — the majority of mortgage brokers will not survive 2008 because of “no consumer confidence” in the concept that the mortgage broker is acting for the consumers’ behalf. And those mortgage brokers that manage to stay in business will have to execute new contracts with the remaining wholesale lenders that will include “buybacks” & “personal guarantees” as well as “commission recovery” for loans that have a delinquent payment … say in the first 18 months … as long as a material misrepresentation of fact is found on the 1003 … such as stating incorrect income or assets to make the deal work … or credit “repair” in order to manipulate FICO scores to meet guidelines.
What happened aftert the S&L Crisis of the early 90′s…than the fallout of the 125′s in the late 90′s and now the subprime Crisis of the mid 2000′s. It is all part of the cycle going up and coming down hard. After the smoke clears and the industry as a whole, banks/lenders/brokers have a chance to put thier thinking caps on, if they have not already started, they will come up with new programs to do one thing. Fund loans. yeah it will be tougher and many of those landscapers may not qualify for loans, but the business is going nowhere brokers included. There are plenty of honest brokers still helping people in this mess of a time in the industry.
One question for all the people who think the banks are perfect. Who came up with those creative programs and paid Commission to thier AE’s to push them to all the brokers and funded those loans. yeah plenty of brokers cheated everyone by misstating income or doing flat our fraud, but if the lenders did not come up with SISA, NINA, NO DOC and all those programs they would not have been there for the brokers to sell. Think about the Professionls selling Neg Ams… Downey Savings, WAMU, World Savings, they crafted those loans and built in the PPP and everything else. Brokers may end up taking the blame but the problem was industrywide. Greenspan made a statement that he could never have really forseen the true impact of the subprime market…BS in CAPS that old man is very smart and the Bush Administration needed some part of the ecomomy to flourish to help fund thier OIL war. Things are much bigger than brokers doing LIAR loans.
Banks will accept loans from brokers (and correspondent lenders) as long as they can make money doing so. Some, being ignorant, are afraid to stay in wholesale. Others, being more sophisticated, will remain and thrive – if prudent. The key to avoiding credit losses is relatively conservative underwriting. They key to avoiding runoff losses is to never pay more than about 100.875, all-in. No Cost loans are great for LO’s & lousy for servicers. Wholesale account reps and loan officers will always belly-ache about limited product & pricing options. The ruination of a bank’s mortgage division is trying to be all things to all people. Smart banks will say “Here’s what we have, take it or leave it.” Good loan officers can sell borrower into the pricing & product options that will remain.
Definitely an interesting article. I’ve been in the industry since the early 90′s and have worked as a loan officer, middle manager, and executive over the years from small companies to big banks, from retail and currently in wholesale and as much as I hate to say it, or even admit, but things will get worse before they get better. Am I concerned for the future, very much so. Am I thankful that I can still work in an industry that I love and still pay the bills, definitely yes, but I know so many more that are unemployed and suffering because of unethical practices and no morals. Could I have made more money doing fraud, like so many others did, yes, but at the cost of my conscious, no. I’m glad to see all the fraud cases being pursued and I hope all of those who hurt so many, including all of us who did it the “right” way, go to jail or at the very least, get what’s coming to them. Life has a way of balancing everything out. So I hope you enjoyed it while it lasted.
For those of you that made money and started living the “champagne” lifestyle, lesson learned: save money! As for me, I paid off most of my bills. Yes I have a BMW, and yes I have a nice house in the hills, but that’s because anyone who knows how this industry works and understands it, planned for this “correction.” None of us expected it to be this bad, but you’d have to be foolish to think it was going to last forever. So for all you people that got rich quick with no clue as to how you did it, and now don’t know what to do, sorry, maybe you should’ve learned the business before you started destroying peoples lives for the sake of a commission check. I don’t feel sorry for you. I spent years, 7 to be exact, as a loan officer learning my trade, before I got into management, and to this day, I deal with brokers who have no clue as to what they’re doing. Those brokers will be extinct and soon. Brokers who know what they’re doing and can change with the market, and have ethics, will survive.
For all the good guys out there, I wish you luck and hope you find something soon, or I hope you survive this mess to come out stronger in the end, and when this market does turn, only “true” professionals will be around to reap the rewards, whether they are brokers, bankers, or corporate big boys. Those who know how to survive, will! Those who were here for easy money, see ya, good bye! Go back to selling cars or whatever it is you did before you spoiled an industry that so many depend on.
Happy New Year to everyone. I hope the new year brings you all peace, prosperity and happiness, god knows, we could all use it!
BROKERS are the most uneducated and arrogrant morons I have ever dealt with.
I have worked as an AE for several years. Since I do have skills and know the business..I am now working the retail side as that is where it is all heading as we have discussed in meetings.
1 yr BEFORE the mortgage crisis started..the lender I worked for would inform us in our monthly meetings telling us that this crisis was inevitable as changes were going to happen. We were told that subprime market was going to take a big hit. The times of overwhelming business were going to come to a halt. We were told that record guideline changes were going to take place in the lending business. 100% stated was going to go away by 2008. We were told that there were going to be record foreclosures and that lenders and banks were going to be haunted by all these bad loans that were closed in the past couple years.
I sat there and talked to all my brokers and their owners about these issues..all these arrogant individuals would say
“oh they will never take 100% stated away, of that will never happen…how will they make money.” I would point out “what is the point of continuing this type of business all these types of bad loans if they are all just boloney bad deals that are going to cost everyone money and losses?” “obviously it is going to happen if all these deals come back as losses”
still these brokers said it would never happen and that lenders need them to survive.
In my honest opinion..only the ones that know how to read rates sheets, and can read a program and actually want to learn… will survive.but the majority of the brokers I worked with..had no idea..how to structure a deal, read a rate sheet properly or calculate borrowers incomes…
all they knew was how to take a person for all their money.
also.a private study has learnd that borrowers who paid closing costs upfront and had a ysp included in their transaction paid more in closing costs that a borrower who paid nothing upfront, and had a retail bank pay their closing costs. This argument was discovered after brokers were claiming that the ysp help cut down on the borrowers costs.
Do you people know what a ysp is? Do you know what a rebate means
? definition is ” a return of a part of a payment ”
this means that money belongs to the borrower for accepting a higher rate.
if you shop at a store such as Home Depot and you get a rebate..as a customer..who gets the rebate? the customer or the saleperson?
put it together..figure it out.
Brokers are crooks and thieves..period.
I am for more regulation.
Hilarious… Yes, there have been loans that brokers have done that have gone bad. There are also just as many that were done in the retail arms of Countrywide, Wamu, Chase, Bankofamerica, and my super favorite Ameriquest. While pointing your finger of fraud at brokers, please feel free to point them at these retail outlets as well. Ask any of the loan officers at these “shops” how to get a loan by an underwriter and you will get a huge amount of fraud ideas you never even thought existed. And it still is going on at some of these places. In 2005 the State of Illinois required all of its loan officers to pass a competency test and get licensed. We lost about a third of the loan officers in the state. Funny thing though. The loan officers who didnt pass a basic skills test went to work for the above companies that did not need to be licensed.
So the banks pretty much picked up all the sh*t loan officers and paid them a salary to write fraud loans with no knowledge of what the hell they were doing.
Yes, the banks were there before, but they still dont know sh*t about originating loans. That’s a broker skill.
THERE is fraud in every single industry on the planet. We just built too many houses for the buyers we have. When the supply is gone lending will be back but since the government is getting ready to bail everyone out to the tune of 10 trillion THEY WILL TAKE OVER THE MORTGAGE BUSINESS. US Taxpayer is the new subprime lender. This is the Enron stock scandal and the 92 housing meltdown TOGETHER, getting uglier by the day……………big players are going to disappear in banking, wall street and building and all the industries tied to that group. The S and L’s took the loans from the banks in the 80′s, the brokers took them in the 90′s and now the government will own it all and pick 5 banks to be the conduit.
Wholesale represents over 60% of total production. Subprime represented less than 20% of total production during the past few years. There are plenty of direct lenders with zero or a very limited retail footprint. Are you suggesting that all these lenders will go out of business in 08? TBW, Flagstar, Provident, …?
I and my former manager made this call 6 months ago. I left the industry after 18 years and my former manager went to work for “The Man” at Wells Fargo, where he tells me he still has all the products available he had before. I saw the writing on the wall when banks like Indy Mac started gobbling up all the retail branches they could buy. They’ll keep the stated income, etc in house and sell it thru their “new” retail outlets and of course thru the internet. Brokers are going away because the big banks don’t need them anymore. The pie has shrunk significantly and although I believe a few will survive because their will continue to be certain lenders willing to sell thru brokers, their products will be limited to Agency and Gov’t; a far cry from 100%, stated income, non-owner occupied, with a 620 FICO – Now those were the days!!!
Vegas..
It was good that you back peddled a bit in the middle of your statement there. Broad generalizations are never a good stance to take. I do agree that there are idiot brokers out there, but uneducated… To be a broker you have to pass the test, granted it is not much more that study by memorization but the idiot brokers you are talking about probably worked for the Broker and did not actually have a license. And if all the brokers you worked with thought that 100% stated was never going away then you chose the wrong brokers to work with, or you were just trying to make money like they were from the begginning.
YSP should be there to help get the borrower a lower rate but it really was for brokers to make more on the back. But banks do price in a spread when they list thier rates, do you think they are giving brokers the rate they are getting from secondary, no they are making thier money too. The Good brokers out there never tried to hit home runs on thier borrowers if they were make a ysp and charging a point at the same time. They tried to make 1-1.5% total on the front and back get a good rate for thier client, call them back and keep in touch with them after the loan funded. Saying that all brokers are crooks and thieves is a harsh statement. There are plenty of AE’s who killed it because they had puffy lips fake tits and short dresses and told you to call thier Account manager when the question got to technical. If a Licensed broker did not know how to read a rate sheet, price a deal, structure a loan that was funded before it got submitted to the lender than they are in idiot. But genarlizing is just being ignorant. And coming from and AE who was not required to pass any tests to do his job is unfair.
Great article, thanks!
A broker is just a middleman, and adds cost without adding value.
Capitol is simply the surplus value of real productive labor. Without labor, no Capitol.
Therefore, a broker is just a parasite. Money taken for nothing tangible gained. The Commission based business model should be outlawed.
If you think it’s morally correct to charge $20,000 for a few hours of your time, then have the integrity to charge your time by the hour for the fee.
Of course, only a fool would use a broker for $5,000 an hour.
And people say that Lawyers are crooks
Don must be a lawyer…I mean crook.
If brokers didn’t add value no one would use them. This is still a free market. Borrowers shop around before deciding to use a broker. Don’t they?
The banks were going in this direction for many years. The only reason that the brokers have even survived this long is that we have the local connections to people (realtors, accountants, planners etc.) We are the people that drag in customers off the street to do business. Banks wait for customers to walk into their doors brokers go to the customers.
In the last few years the banks have become more equipped to take back the relationship development aspect by creating a accessible conduit through the internet to expand the banks footprint. This was very apparent a couple of years ago. Even as production was falling the rush to get internet appearance doubled. Account execs were even eliminated at some companies, MILA for example, as useless tools (and they were). I told my account execs that this would be the future for originating loans. Why do you think there has been such a push for a paperless process? It’s not about the trees…
In general the last 15 years i have had as a broker have been awesome. even today I still have the network to get a nice volume of loans closed. I always have job offers available to me. I do not have any idea why someone would not hire a loan officer for a different position in another industry.
I have worked as an LO for both retail and broker outfits. I know this may not be a popular statement but I have seen more shady practices at retail (banks) than at brokers. Retail Loan officers are under much higher production goals which cause them to do things which may not be legal. Retail LO’s are usually of a lower caliber as a license is not required and banks have a hire en mass and “see who sticks” mentality. Retail loan officers are also paid a much smaller % of each loan which will cause them to charge the borrower more than they should. Overall I have found retail LO’s to be under educated , careless, boring, wolves in sheeps clothing. I spent time originating for Wells Fargo and would NEVER go back. As for the “no more brokers” argument…. I hope it does not happen, but the thing I have learned in this industry is you never know. I also think the industry clean out is a good thing and I have all ready noticed an increase in the caliber of people working in the industry.
The posters original article smacks of jealousy and I woudl imagine it is with great envy he or she writes about the 50K to 70K commision months. I see nothing wrong with someone making money. We live in the United States of America whose economic system as well as cultural and political cornerstones are based on capatlism and the free market. It sounds as if they are almost wishing the broker out of business or just jumping on the bad news band wagon to hear their own horn blowing.
Nick… Retail loans are par priced at 101 so their is allready a 1% origination built into the rate. Lets get something straight..banks do NOT do free loans. It costs a retail outfit MUCH more to process a loan than a broker and they are NOT going to absorb that but rather pass it along to a consumer. If you do not believe me just call any major bank and then call any local REPUTABLE broker…ask a realtor.
Moe… Your statement about the investors having no control over lenders is absolutely wrong! Investors are the ones who purchase the pools of loans or CDO’s by the lenders. Each investor has their own set of criteria and guidelines the lenders must adhere to when originating or underwriting the loan otherwise the investor will not buy it. Thereofore lenders are actually directly controlled by the guidelines of the investors. The only time a lender would not be subject to these guidelines is when they portfolio (keep themselves) the loan. They then can underwrite the loan to thier own criteria.
As for 2008 and the housing market….. I see nothing but FTHB opportunity. With no existing home to sell, interest rates still at historic lows (google the charts), and home prices coming into more affordable territority it is begining to look like a buyers market. Remeber buy low sell high…..not the other way around
yes they sure do Dean…And they still get better deals than from certain banks…and sometimes they dont…but not by much…unless the broker is an idiot looking to hit a homerun than he is also out of the business now.
All the chest-pounding is amusing, this bubble in no way parallels the S & L crisis. Truth hurts for the middlemen….
This article is dead on and there are actually 218 companies out of business as 12/17/08. It will get worse until they loosen up the cash flow. Wall Street and the Govt to blame. They knew what was going to happen and let it happen. So the banks won this round by trying to rid all the of mortgage companies to the wayside. I have been in busy for awhile and it will come back slow. The regulation will make worse for the homebuyer. But the idiot politicians can’t see 2 feet in front of them. The Fed are a bunch of losers since they helped create mess and ruined the dollar. The writer is dead on. That is why I started another company so I don’t get to screwed.
While it is very easy to get caught up in the moment and express feelings like you are having Moe, it is also helpful to look back at fairly recent history. Your thoughts are not very novel. In fact, I’ve heard them numerous times in past down cycles, and each time the broker comes back originating a bigger percentage of volume. That being said, I wouldn’t be at all surprised to see many other companies exit the wholesale business. I mean really, when you can’t sell what you have, why bring more of it on? But that will only be temporary – maybe up to another couple of years – unless you think people are going to stop buying homes altogether, or begin paying cash for them; not very likely.
What you need to remember is that while many banks have retail channels, and they can get away from wholesale, what do you do about the non-bank financials, ie, CSFB, Bear, Lehman, Morgan Stanley, Merryl Lynch, who have no retail ability, nor the desire to build it? Unless you think they are going to exit the mortgage business altogether, which won’t happen because it is such a huge source of income (until lately).
However, the main reason why you will be proven wrong, like those before you, Moe, is due to the greed factor. When things turn around, and they will, the quickest way to grab volume is through the wholesale channel. No bricks and mortar, nor leases, no huge overhead, less hiring, less HR hassles, EEOC bullshit, etc, etc.
While the resurrection will take a different form, frankly for the best if they raise the barriers to entry, the business will once again prove to be very viable for the true professionals.
Banks make me sick! They act like they are so white and pure like the driven snow. Well I have a news flash for you out there in ferryland! In the last two weeks I have come across two hud-1 from previous loans closed by good old Countrywide retail and when I looked at the origination charged to the client they were both almost 4%! And while I’m on the subject of purity have you seen latley what banks charge the working class smucks for credit card intrest? They are as crooked as they come but they do it with a smile and a suit! They pay there help next to nothing! What everyone at the banks retail level doesn’t pay attention to is the amount of money they sell the loan on the secondary market, because they are not privey to that!It’s about relationships period! Banks do not care about clients and they sure don’t care about employees! Have you seen what some of the exiting CEO’s have taken with them as they left the big banks? This all cost the consumer right?
The nail is in Jim
What exactly was the broker supposed to do? Wall street says “i want to buy loans with a 620 score 100%ltv Stated Income Investment properties” The lenders say “cool, I can commit to 1 billion a month of this product. The account executive tells his 50 broker accounts ” hey, we have a new silly ass program to sell your clients” The real estate agents ask ” Hey broker, do you have a loan with a 620 score Stated Income Investment properties with no money down?” (they don’t know what ltv means). The brokers put the deals together, the bank underwrites the deal, everyone gets paid, and then someone figures out that the housing prices had a ceiling. The buyers, most of them on their first investment property, had no idea how to get a renter in the property. Now the property is vacant and the price is going down. This whole process could have been avoided if the top of the food chain never offered this to the bottom of the food chain. You give a broker something to catch fish with, and we go fishing.
I was a loan officer/mortgage broker from 1994-2007. To my knowledge during that timeframe I had 2 borrowers foreclosed on. I am proud of that record.
Early on, I was taught the simple fundamentals of subprime lending. First was the “3 Cs”; Character, Capacity & Collateral. Second was to never make a loan that did not have a definable FINANCIAL advantage to the borrower. These rules defined subprime. If a borrower was damaged in one of the 3 Cs, there was a loan there, damage in 2 made an unlikely deal, damage in all 3 was a show stopper, and a borrower who had nothing to gain also had nothing to lose and was not a good risk. During the last 2 years I was in the business I noticed some very disturbing trends. They were the reason I got out.
The first problem was a complete disregard for the actual value of “Collateral”. In “old school” subprime, a house was not worth what some idiot was willing to pay for it; it was worth what we could get for it if we had to foreclose. We would never allow a valuation gain of more than 10% in a year without significant physical improvement to the property (not new paint and carpet), and the standing rule was 75cents value gain for every dollar of cosmetic improvement (including kitchen and bath upgrades). When we began to ignore realistic collateral valuation, we started the water filling behind the dam.
The second problem was degradation of “Character” qualifications. I came into this business before credit scoring. We made judgments on the likelihood of mortgage repayment on patterns of behavior. Borrowers needed confirmable 2 year mortgage or rental histories, and these counted for the majority of the decision making process. If a borrower was responsible on the payments for shelter, there was a loan there. The worse the pattern of lates, the less the LTV available. Credit scores are not reliable. I have seen spreads of 100 points between scores on the same borrower with the same information. I have seen 700+ credit scores on borrowers 1 year out of bankruptcy. When a credit score that often included nothing more than credit cards and car payments (sometimes not even the borrower’s) became the decision factor, the water started to top over the dam.
The third problem was was letting go of “Capacity”. 100% Stated Income/Stated Asset loans are suicidal. Especially to a subprime borrower. If you put someone into a loan that there is no rational expectation that they can pay, they won’t. Period. That started the erosion of the dam itself.
Finally, ignoring FINANCIAL BENEFIT TO THE BORROWER so that commissions could be made and loans could be packaged and resold was stupid beyond belief. Moving someone into a new home with twice the mortgage payment because it is “nicer” or giving a huge amount of cash to a known irresponsible borrower for frivolous spending, while ignoring the “3 Cs” was dropping a dynamite charge behind a flooded, eroding dam.
Subprime borrowers are not the problem. They were always stupid with their financial decisions. The qualification/processing/underwriting process was meant to protect the system and the banks from excess risk. We ignored lending fundamentals. We now have a wall of floodwater rushing down the valley. We created it, we deserve it, and we can’t stop it. All we can do is survive it and clean the shit out of our basements after it is over.
Bank of America has left the wholesale channel before and re entered when they felt the climate was better. Just because they or any other bank ceases wholesale does not mean it is forever.
I say, dont worry so much about material things, enjoy life you only get one, smile every day, treat others well and before you know it this will all be over.
At some time in the future, probably around 2012 when the recession will be over and prices retreat to the old tried and true formula 100x the average rents in the area, I will probably consider buying again, having sold my house in 2003. One thing I can promise and there will be many like me – the last person I would go to for mortgage advice or to arrange my mortgage, will be a broker. Frankly, if I was a mortgage broker at this time, I would be looking to change jobs. I was going to write profession but after the things we have seen in the happening in the mortgage industry over the last 5 years where brokers are concerned, even the word “job” sounds too clean.
As for the poster who has seen this before? Think again. This is a sea change as far as mortgages are concerned and the word “mortgage broker” will be enough to scare most people away and head to their bank.
MAKAI…you are right on with everything you’ve stated. Everything.
It’s obvious that the Lenders on here are gonna protect the Lenders, the Brokers are gonna protect the Brokers, and the Lawyers are gonna protect the Lawyers. Everybody wants to bad-mouth eachother and make themselves look good, but, like Makai mentioned, there are very good respectable PROFESSIONAL (in every sense of the word) Brokers and loan officers out there.
The ULTIMATE perpretrator in all of this mortgage meltdown is (drumroll please…)….the people/investors who allowed these programs to exist (SISA, NINA, Option Arms, PPP, 100%, etc.). BOTTOM LINE.
If these programs had never existed none of us would be talking about this and no one would be having to turn in their BMW’s back to the dealer.
Now regarding the people who went to work at Countrywide, or any other retailer during 2002-2006, YOU MISSED OUT ON THE GOLD RUSH! Us brokers made double what you made doing the same amount of work or less. Don’t blame brokers for this. Blame yourselves.
But again, whoever invented these programs and allowed them to exist are the cause of this Mortgage Meltdown. Period.
Stop all the words…Don’t wait for your own blood to show up on your own walls before you realize you are not earning what you used to… and stop blaming everyone…life is way to short you have options for another career.
Jim H, you’re right on with what you said, at least from my perspective. The mortgage company I’m with now is funding more each month, although be it mostly Conforming, but nevertheless, we’re still funding loans, profitably. The Real Estate Industry isn’t going anywhere and those of us who know how to ride these waves will survive.
In regards to John town, just because you have a Triple Decker Chocolate Fudge Cake doesn’t mean you eat the whole cake. Loan products are designed for certain types of borrowers and just because you have a product you can slam a borrower into, it doesn’t mean it’s the right product for your borrower. It’s called ethics. It’s called educating your borrower, and making sure they know what they’re getting into. It’s called “customer service.” A novel idea I know for many who came into the mortgage industry in the last 5-7 years. I’ve been doing counseling for a non-profit company instructing borrowers, who were never told what kind of loan they got into by their loan officer or broker, what their options are and educating them on the industry and it’s the loan officers job to make sure the product they sell is what the borrower can afford and understands. Option Arms were around long before the refi boom, but we sold them to borrowers who knew how to manage them, not to make 3 points on the back and give any jo schmo keys to a house he couldn’t afford.
In regards to the fraud issue, banks, brokers, mortgage bankers, guilty, guilty, guilty!
I believe in capitalism and all of us having the ability to make as much money as we can, as long as it’s done honestly, ethically, and doesn’t hurt anyone. It’s called responsible lending. This mortgage mess is no one’s fault and everyone’s fault. It’s years of bad practices, greed, and no regulation and monitoring that’s caused this mess. It is what it is………….
Thanks Kev. Bashing any one part is ingnorance. There are too many factors involved. there are always going to be good and bad and the brokers will be made out to be the bad guys this time while banks look like the poor guys having all these write downs. they are just as responsible as are the secondary and firstly the fed for making money so cheap and allowing this to start. John Town said it right it started at the top and brokers just took the bait to catch the fish. Fish may be smaller now but they will get bigger again.
I am a mortgage banker in NJ. My office is 2 floors above B of A. Almost everyday I would check the posted rates at B of A. I would say that 99% of the time I could find a better deal for my client and still make 1.5YSP. As a matter of fact I could close the loan at B of A wholesale and beat B of A retail by a quarter point. Here is an idea, have every loan officer post a bond and if they commit fraud/lie they should lose their bond, pay a big fine and never be able to write a loan again!!!!!! Countrywide was and still is the biggest fraud in our industry. I have made a great living refinancing their pay-option arm to clients who should have never been placed in that type of loan!!!! instead of a 30 yr fixed motgages, only to be sold a piece of crap loan and Countrywide reps getting paid a ton. I am here to stay!!!! I have not been in a realtors office in over 8 years, all of my clients come from CPA’S, Financial planners , attorneys who trust that I will take great care of there clients!!!!!!! My clients are my best advertisment!!!!!! Repeat business!!!!!!! Sure I could have made more money, but I can go to sleep ay night knowing I did the right thing and that I will have clients knocking at my door for years to come because I am honest!!!!! Honesty has paid off for me and I am glad that most of the crap brokers will be gone!!! I will survive and make more money in the long run!!!
Mike,
Maybe if you had consulted a broker you would not have sold your overperforming assett at the WORST time possible. Having sold your home in 2003 you missed out on 2.5 more years off spectacular appreciation rates. Just to think….you could have waited, timed the market, taken the extra gains and retired early…….I guess the under educated lackey loan officer you talked to at the bank did not actually ADVISE you, they just took your order and let you commit financial hari kari.
Can you give me the specific day and time in 2012 I would like to put it in my outlook. Mike…we need to enter a recesion before it can be over.
This article is so dead on. Former co-workers and I have been saying this for a long time and I am glad someone finally wrote the article. Writing “mortgage” on your resume is like writing curse words and that’s for job-seekers with college degrees! A recruiter told one of my ex-coworkers to take her mortgage job off of her resume! Take years of hard work off of her resume like it had never happened. She’d be better off saying she was a stay-at-home mom for the last 5 yrs.
I’ve worked with hundreds of brokers in Los Angeles and most of them were not crooks. People wanted these loans regardless of benefit. They didn’t care if the loan made absolutely no sense at all. They didn’t care if they had to go to the slimiest broker in the community–as long as their loan closed. And if one broker/lender refused to fund the deal, another one would have it doc’d and funded by the end of the week.
The reason we are in this mess is because the competition always found a way to show “willful blindness” to unethical (sometimes fraudulent) practices. The reason all of these homebuyers are upset is because they thought they would have more equity by now and they would do another refi. Unfortunately, many brokers and homebuyers didn’t know that lenders would change their guidelines and they would no longer qualify for their own homes anymore. No one thought it would
get this bad. If you say you did, you are either lying or psychic.
“The reason all of these homebuyers are upset is because they thought they would have more equity by now and they would do another refi.”
The reason homeowners thought this is because that is what many brokers TOLD THEM so that they could close the deal. Most homeowners don’t spend time going over cost structures and rates and predicting what the market will look like in the next three to five years.
gee moe if your such a guru why cant you afford to move out of corona.
or is it you like the smell of horse manure when it rains?
Paul,
How right you are. I am in RI and there is a Bof A branch, where I do my personal banking, and a Citizens branch where I do my business banking. I am always checking their rates; every time I see their rates, I smile to myself.
In fact, go on BofA’s website and see if you can’t beat their “NO FEE mortgage plus rates” They are just as bad as any scumbag broker. Yeah, no fee – except for the points! What’s with that? Points aren’t fees? What liars at BofA. I know one other thing – try closing a loan at a BofA branch in 2-3 weeks – not a prayer. As long as they remain my competition, I am going to be around for a long, long time.
Everybody should chill out, step back, enjoy the time you have, regroup and come up with a plan to go forward. If your overhead – personal or business – is too high to withstand this downturn, you probably should get out and go work for somebody. If you can’t beat the likes of BofA on price, service, and intellect (have you ever talked with the morons they hire), again, probably a good idea to get out now!
For those who can hang in through these difficult times, like all the past downturns, we will all reap the rewards of less competition via more regulatory hurdles in the future.
Someone call me when everyone stops pretending that they were too stupid to think for themselves. I can’t even tell you how many times homebuyers have committed the fraud themselves. I worked for a Lender and I know the Brokers aren’t to blame here. And since, I didn’t write the guidelines, I am not either. We all played by the rules. All of us. I refuse to believe ALL of the homebuyers just aimlessly went by what BROKERS had to say. Come ON!
In October 2006 there were over 500,000 people employed in the loan origination business (includes retail, wholesale, correspondent). As of October 2007 that number is 400,000. So 100,000 jobs gone. See http://www.ml-implode.com for a list of lenders that are imploding. Predictions are for another 100,000 jobs to be gone during 2008. HOWEVER, that will still leave 300,000 in the business, including many independent brokers. I suspect those in the business with good contacts and clients who were solid risks will find themselves staying in the business. Those that took anything with a heartbeat and put them in a loan that defaulted won’t have too much repeat business and won’t have too many referrals.
Also, lenders will figure out who dumped bad loans on them. So, even if lenders don’t shut down the wholesale channel, they may be more selective. I would not write off the entire mortgage broker industry too soon. Also, by 2009 I would expect some lenders to open wholesale channels back up if they can’t make their numbers on their retail channel alone. Lending is a volume game and with the profit per loan decreasing, lenders need volume.
When others feel the end is near, the few take advantage of the moment. I am proud to be a mortgage banker!!!!! I can walk on any street in my town and hold my head up high. You know why???? I am honest, I always try and do what is best for my clients and I feel I am rewarded with refferals. A funny thing happens when you do the right thing, you get more business from happy clients.So to all who think the end is near for brokers , I say good bye!!!!!! I am proud of the fact that I do not have any loans that have defaulted…..because when I receive a loan that I know damm well is bullshit or the client cannot afford, I tell them to go away!!!!!! You will thank me in the future. Some took my advice and some wish they had!!!
Make LO pass a real test, get a bond, 24 hours of CE credits every 2 years and be held accountable for there actions!!!!! Retail included!!!!! The bullshit would stop!!!! If we are to be respected, we have to raise the standard/stakes of the people who orginate the loans.
I have worked in secondary marketing and securitization for 14 years. I have worked in collections, all the way to trading mortgaes on Wall Street. Subprime is only the “newer” FHA loan. People will always buy what they cannot afford, and our industry enabled them to do it, through whatever channel, broker, retail, or direct lender.
I am accustomed to the days, where when you closed a loan, if the borrower ended up not paying-you were fired. There were standards. You hired people who had 4 year degrees as a minimum, and understood economics, and the secondary market. When Greenspan cut the rates continually post 9/11 to get consumer confidence up, and to get people spending again, everyone and their mother became a broker, or a realtor and tried to cash in. Now they have to learn how to reputably do their job, per the standards that always existed-that they chose to ignore.
I agree with a previous comment, we have another S&L crisis on our hands. But, those who are educated, have been around for a while and understand the secondary market, monetary supply and macro and micro economics will be ok.
I am not worried, with an MBA in Finance, and a CPA, there is always some place to work. If worst comes to worse, I will work for HUD, FNMA or FHLMC.
I want B of A, Wamu, Countrywide and other lenders around!!!! They make me look good!!!!! I have better rates, service and put my clients in the proper loan program. I will be in the business for next 10-20 years, where as the Loan officer at the retail shops will be lucky to last a year!!!
Paul I love how you talk in the past tense..”You would check B of A…”
So does that still hold true today?…
Paul if the reputation of your industry is SO GREAT..why are most of you being Blacklisted when it come to finding new employment?
Most people surveyed today would NOT go to a mortgage broker because of the bad press…
So, really, how many loans are you actually closing today vs. 1 year ago?(Please do us a favor and not bs us on here instead look in the mirror when you ask the question? You need the answer more than we do.) And how many do you expect to close in 08? Not dead files that can’t go anywhere because the product isn’t available, the client has a bad score or they are underwater…business isn’t business unless it is a closed file.
Well paul they certainly will still be around and if you are smart you will go work for them because all those mom and pop shop brokerages wont exist anymore. Its like when the stock market crashed and all those boiler rooms went under. Same thing. The banks always win. You might as well go join them before its too late.
Great financial people are invaluable at any price. What this article fails to note is that the liquidity crunch is being caused precisely because there is literally no mechanical difference in the way banks and brokers originate. Banks no longer fund there own paper: period. With negative savings rates where do you think the money would come from? Not from depositors: that is obvious. We are all beholden to the FCBs and giant retirement funds. A broker, at least, is not captive to a static funding model and can migrate rapidly. This reason alone, AGILITY, makes the survival of the broker much more likely than the survival of behemoth banks who have decked the halls with hanging corpses. The independent brokers are an army for hire and as logn as one bank hires them and treats them fairly they will slay the opposition. What I am seeing is that the indescriminate approval of brokers has been tightened quite a bit by the banks who will emerge as the next giants.
I am somewhat unique in that I am a mortgage originator who caters almost entirely to bank employees: loan officers, commercial bankers, actuaries and bank executives. Why do they use me if they can deliver a superior product to themselves? Do you think actuaries would settle for a subpar or inferior deal? If you think so then you don’t know what an actuary is. They use me because I offer superior pricing, service and product: period.
This misaimed article would make you assume its vast wisdom by pointing to the way in which securities brokers have been consumed and rendered moot by the large investment houses. Of course, that never happened either.
For all those that want to ridicule Paul, all I can say is you must really stink at what you do. If you are so pathetic that you can’t grind out a living – even today – you must be part of the problem you are defining.
For you, Matty, the Mom and Pop brokers will ALWAYS survive, because they don’t get caught up in the questionable dealings that it sounds like you are used to. Sounds to me like you are on your way out, and you’re trying rationalize your own shortcomings. Just leave – we’ll be fine. Really!
And Ann, sounds like you have your own problems. I can say I won’t close as many loans this year as last, but guess what – I am still making a lgood living. One thing about this business is that there are big cycles – big ups and big downs. If you gear your overhead to your highest level of earnings, well, you get what you deserve and you are probably already out of business. I am just doing fine and it sounds like Paul is too. Sorry I can’t provide your misery with any company.
Matt and ANN yes it does hold true, look it up on their web site!!!
You prove you know nothing!!! Bank of America …30 year fixed 450k purchase 20% down,full doc,680 credit. 6.250% 30yr fixed 1,127 points! Everbank wholesale same deal 6.250% ..0 points 1.555ysp to broker!!! 30 day lock and yes I can close that loan in 10 days!!!Look it up!!! Which is better for your client???????? To pay 1.127% points or 0 point deal!
Our rep. sucks that is my point!!!!! Most of the brokers deserver to be blasted. I am no where near being a boiler room operation!!! Like I said…put up a bond, pass areal test, CE credits every 2 years and 1 strike and your gone!!!!!
Thats right most people would not go to broker because of bad press. Only people who took the time to educated themselves for the biggest purchase in thier life would seek out a broker who had their best interest in mind and not their wallets!!!! Smart people would ask there CPA, Attorney or CFP for a refferal!!!!!! Not some lame ass who would give them a option arm with a prepayment !!
I think you are correct in your estimation that FDIC “banks” will leave the wholesale scene. I do not however think that that alone will be enough to shut down Mortgage Brokers. Lenders like B of A and Wells Fargo even Chase can leave the wholesale “biz” behind, but others- WAMU and Flagstar for example have huge wholesale divisions with virtually no retail presence with which they can compete on a national level. In fact the volume of wholesale lenders who have ZERO retail capability far outweighs the volume of the “big banks”.
The thing that will kill Mortgage Brokers (and Mortgage Bankers for that matter) is if the “Banks” shut down the warehouse lines that “lenders” use to fund loans. You see it’s the FDIC insured “Depositories” that control the money and as a result hold in their hands the power to kill Mortgage Brokers.
But even then, you still have the banks like Flagstar, ING and others who have no retail presence to speak of (if at all) and the competition for the Brokers loans will be as fierce as ever. In other words ALL sources of warehouse lines would have to dry up and it seems to me, that would take some sort of coordinated effort between all depositories and investment banks alike.
As far as banks getting into the real estate “biz” I think you will find that
1. Banks REALLY don’t want a fiduciary responsibility as the cost of litigation would far outweigh a 6% commission
2. Buyers will not want to enter into a contract to buy without representation from their own Realtor, so the bank saves only three and not six percent.
3. NAR would not like the idea and it wouldn’t be hard to come up with real estate rules and code that would “poison the well” for banks so to speak ( back to fiduciary responsibility and the ensuing litigation)
4. See point #1 and especially #2
All in all, the idea of the Mortgage Broker fading into extinction seems to be very, very unlikely. On the other hand, two years ago I would have also told you that the elimination of Sub-Prime 100% ltv loans would have been unthinkable, as the aftermath of financial destruction that would ensue would shake the very foundations of the American economy. Irony is funny that way.
CTAN
Ann
I do not have many if at all dead files!!! I know right off the bat if I can close the loan or if I should close this loan!!!!! If a client comes in with a 600 Fico or lower, I ask my self if this person SHOULD be buying a home or enter into this transaction.I do not take pride in banging the crap of some financial challenged clients… 3-4 points. If you like to do shit loans you will only receive shit loans!!! If you surround yourself with quality people…..honest CPA’S CFP’S and attorney’s you will do very well even in tough times!!
Mortgage Brokers: Ancient History in 2008 ?…
The mortgage and real estate industry has resembled a battlefield marred with carnage and destruction with what appears to have no end in sight. 210 imploded lenders and thousands of mortgage, real estate professionals and anything related to these pro…
I like how all of you seem to have either the answer or a blame . if you are in the industry then why listen to all the bad news. I actually get a kick out of skimming thru this jargon. few of you if any are probably not even doing any business or quit already. the rest of you should follow quickly, so we real die hards can return the market back to normalcy. options arms with low margins fully indexed right now are still good loans for people who have the ability to manage the risk. maybe we were greedy in maxing out the premiums, maybe there should of been a cap on the ysp. but there wasnt and we maxed them out as often as possible. so do car dealers and boat brokers and everyother business we shop at. maximize profits. free enterprise. maybe we should listen to some of you and change to a socialist gov’t and sell everything one price like saturn. distribute a chicken, one bag of rice and a bag of beans once a month for a family of four like they do in cuba. personally you are mostly full of you know what. cry babys as well. lets clean up this mess one mortgage at a time and let the free enterprise market correct itself. and when the banks still standing get to big let the feds break them back up. sound familiar. dont want to be rude but if you are not part of the solution, do yourself and us diehards a favor and go to work for walmart i heard they are hiring loan officers to sell tires at a fixed salary no matter how many you sell.
LJ
I did consult a broker and a realtor. The realtor said, “Now is a good time to sell.” lol. The broker gave me his card and said if I found a property I liked – give him a call. I think the year before he gave up his job as a car salesman to becme a mortgage broker. In fact, I heard the mortgage broker bought several properties between 2004 and 2006, planned on flipping them but is now heading into bankruptcy! As for advice about selling too soon? I bought that property in 1975 for $100,000 and sold it for $400,000 so I have no complaints. Unlike most mortgage brokers, I’m not greedy. Want to know when prices will bottom? Easy. When 100x the average monthly rents in the area are reached. I have been renting since I sold. My rent is $1,800. Rents have risen slightly and are around $2,000 but going no higher. Why. One word. Affordability. People making $25,000 a year cannot afford expensive rents. A fact the mortgage brokers seemed to have left out when talking to the people they sucker punched. However, at the peak, the values for this sfh reached $725,000. They are now at $575,000 and sitting on the market. 100x the average rent means the true (and eventual) value of this house will settle somewhere around $250,000. Maybe $300,000. It’s going to happen and when it does I will go and see my bank manager. NOT a mortgage broker. My 2012 prediction is based on that as more and more people abandon property, inflation bites, stagnation take hold, wages are stuck and unemployment increases. It’s 100% baked into the cake. Want another indicator? Watch the charts of BZH and RYL and DH Horton on a monthly chart. When they start to move on the monthly, wait 3 months and if they are actually moving up as opposed to being in a dead cat bounce, it’s time to look. BUT, this is such a gigantic mess, property prices will take years to increase substantially once the bottom is reached.
And for the record I agree with paul on the idea that the rate that a Broker can get a borrower compared to what a “bank” has to offer is…well….there really isnt a comparison. People pay a premium when they do business at their local bank in exchange for a “good felling” that they are not getting screwed.
Lets not forget that the WORST examples of preditory lending have been perpetrated by “Banks” not Brokers. Its companies like Houshold, Ameriquest, Centex, New Century’s retail division, UC Lending, Greentree, Transamerica,Associates, American General, Benificial and others who were “banks” and did not have to disclose YSP getting up to 20 points in some cases (front and back), thats 30K in revenue on a 150K loan boys and girls, I’m sorry Brokers have never done that and its only the “cattle” who would believe otherwise. I’m sorry I really dont understand the logic behind hopeing for the demise of the broker when all it will result in is a serious lack of competition in the market place.
CTAN
Competition is a good thing!! Just think what rates and fee’s would be if there were only a hand full banks offering mortgages. Most certianly they would go up!!!!
Im not saying your a bad or dishonest broker paul. Im saying that is the way things are turning out. Its not your fault. There are the good and the bad in every industry. It was driven by the greed of young hot shot idiots that have now wiped out another great industry for a period of time that is uncertain. Im hope that you do make it through this. You are an important part of a very important industry. And no Jim, i am actually a CPA. Not only do i like making a lot of money, but more importantly i want stability in my life. I know what im making every month, and every year it grows considerably more.
Verdy, verdy interesting!!! Remember Schultz!!
I closed a loan for a bank person. This person has been at a local bank for 5 years now, 4 years when I helped her with her FHA loan. The mortgage person at that same local bank told her she could not get an FHA loan because SHE MADE TOO MUCH MONEY!!!!!!!!! Hmmmmmm1!!
I am the person quoted in the article above the 71 responses.
1) If the “big guys” were so smart about investing – Wall Street – then why are they writing down billions and billions of dollars? Hmmmmmm!!
2) I got out of the stock market and into cash on July 5, 07. and I am still in cash. I was an investment broker in the 80′s, have an MBA with honors and have been investing in the equities markets since I was 16. (My father started it all!)
3) Investors know there is a lot of money to be made in this industry. They will be back and the investors that are still here will stay here for the same reason. Get serious. People will continue to purchase real estate. People will need mortgages to purchase the real estate. A very god marketing system is in place to facilitate the process. The “money guys” know this. The mortgage banking and the mortgage broker industries will not be dismantled. Get on the other side of the table. If you were/are the “money guy”, what would you do?
4) Mortgage brokers will always out do the banks. As was mentioned earlier, they got the guts to go get the business. They don’t just sit there and wait for it. Oh, gee, give me a nice office and a, duh, salary, and pretend I know it all. Not!!!!
5) A past customer (really) came in my office late last week. He needs to refi his investment property, cash out, no escrows, pretty good credit. He decided to have me do his loan. He got a quote from COUNTRYWIDE, duh, at 6.5%. Oh, let’s see $7,000 in closing costs. For those bankers who don’t know the difference, this doesn’t include ESCROWS. I am charging him 1 point plus normal (real!!!) closing costs. Total cost to him – way less than 1/2 of COUNTRYWIDE’S quote. Oh, he knows I TELL THE TRUTH AND SHOWED HIM THE GFE! For those bankers who don’t know what that is, it is a Good Faith Estimate. Hmmm!!
6) Doing good, honest business pays. And, according to the numbers mentioned above, 60% of the mortgage community will still be here.
7) My office had a great November and December. Best in the past five years! (Gee, I keep records!) We anticipate January to be really good. Oh, I am FHA approved and have been for many years. Guess what we have coming. If ya think you’re gonna get approved FHA and close a lot of FHA loans, WRONG!! I promise I won’t tell those who don’t know the secret. (Do ya know what FHA loan doesn’t have mip?)
Point made. They really don’t know what they’re doin!!! How in H… can a mortgage person tell a same bank employee she can not get an FHA loan because she makes too much money??????????????????? And this is my competition???????????!!!!!!!!!!!!!!!
9) Last week 8 people were sentenced after a 4 year FBI investigation. This is in a nearby relatively large town. Believe me, they’re goin after the “bad guys” and they’re getin ‘em.
(Enjoy the early English!)
10) As John Wayne would say “Well, Pilgrim”!!
11) There is a big market developing out there. All ya good guys, hang in there. This country needs you. The bad guys are gettin out ’cause there ain’t big bucks in it any more. That’s ok. There is a good, honest living in it and that’s why I’m a stayin’. If it ends, so be it.
12) I told my kids as they were growin’ up, “ya gotta stick together-help each other”. It’s like the pioneers headin’ West. When the Injuns were comin’ over the ridge, “Farm a circle the wagons”. So what is different today? Nothing! So all you positive, creative, energetic, hard workin’ loan officers, stick together. The fight has just begun. Our ancestors got through the Great Depression and we will get thru this. Remember the best way out of trouble is through it. Hmmmmm!!! (A former President of the United States went to England, smoked pot and got out of the draft!!!) Hmmmmmmmm!!!! Guess who’s runnin’ for President now!!!!!!!! By the way, I served in the UNITED STATES AIR FORCE for 4 years! And I was stationed in Pakistan!!!!! Hmmmmmmmm!!!
13) Summary – I hope this gets the blood runnin’. I hope this gives hope to a bunch of the “good guys”. I hope this pisses off a bunch of the “other guys”.
Matty
Thank you, I will make it!! You said you are a CPA and I am sure you would not put your license on the line for a client just to make a few extra bucks. I want all broker, bankers and LO to be held to a high standard, testing, education and subject to stiff fines! I receive many loans from CPA’S because I do what is right!!! Not only do I have my reputation on the line but also the CPA. yOU DO NOT BITE THE HAND THAT FEEDS YOU!
Broker or Banker, which is worse? Neither. Fraud can take place any where, at any time, by Broker or Banker. In Washington, I was a Broker for 9 years, but switched to a Bank job to weather the storm. As a WA Broker, you have to get a Loan Originator license. Working for a Bank, no license required. I think to make it fair, all Loan Officers need to be Federally Licensed and Bonded. Finger printed, thorough back ground check, the whole nine yards. Also, 20-30 hours/year of Continuing Ed should be required to originate any type of mortgage. Rebate/Overage should be limited to .25 – .50% to the L.O., the rest to the borrower.
To make additional income for an L.O., you get a “Residual Income” for a perfectly performing mortgage. This forces Loan Officers to orignate good, fair loans. When the loan pays well, the LO gets a bonus each year. Plus this would keep LO’s in touch with their clients to make sure the are paying on time, or if another sales opportunity is there due to changes for the borrower. This could be a win/win.
exactly what I was talking about. great answer mark. for you walmart has an executive position in the the shoe dept.
You brokers kill me. You make it sound like you are truly helping people. What a crock of crap. Would you help a dope addict obtain his dope at any cost? FBs and speculators all overstretched their true buying capacity. When you have people making 25k to 50k buying 500k and 600k homes you are not helping them. There is no subprime loan on earth that these people should qualify for. Just because it exists doesnt mean you throw your client to the sharks. Not just a few places were doing this almost every brokerage whore house was is on this.
No, I dont have sympathy for any brokers. Sure there were hard working honest people but if they were out buying themselves 600k houses and mercedes and not saving then they deserve what they are getting now. This isnt going to get any better for them in the next year, year after or the year after that. Look at telecom, many of the people making huge amounts of money no longer exist. There are some but the industry as a whole has changed nearly 8 years later and the people that are left are making less.
oh i forgot your bag of rice and beans
Mark:
You quit. You left the mortgage brokerage business!! And now you give instruction as to regulation!! What’s wrong with you? Mortgage brokers work on commission. And from your non-broker positon you hand down income/revenue restrictios!! Oh well!! Russia, here we come!!!!!
The wholesale lenders created the products.
The brokers sold them.
The customers bought them.
The lenders packaged the loans.
They sold them to investors.
Too many homes were built.
The cost of housing got too high.
Housing crashed.
Lenders crashed.
Brokers crashed.
People are crashing.
The economy is crashing.
The world is crashing.
The party is over.
Time to get real.
Time to adjust.
Time to pray.
Time to spend more time with family and friends.
Time for new hope.
Time to be happy we are still alive.
Time to love.
Time to forgive.
Time to move on.
Time to survive! And we will.
Carpenter:
So brokers make 10% commission? In talking with wholesale reps I hear 2-3% is max. Where in the h… are you gettin’ your info?
Well said, Jariah
Joe, Really!!! Broker’s work on commission? How do you think LO’s at banks get paid? Maybe…..commission!!! In some other countries, LO’s get paid for the life of the loan. Not here. We want it all up front. Which is fine, when no one is complaining. No they are. So let’s get paid some other way. Like earning it.
Carpenter:
You have more than bathroom time to respond. Apparently you “Got no facts”!!!
mark you are an easy target. you are a broker working for a bank to wait out the storm. why not put your balls on the line like us diehards instead of hiding behind a bank?
Earn it?
LO’s at banks get a salary, not a commission. And we are talking about this country, not other countries.
I earn it. That may disappoint you. There is a lot of work to this business when ya don’t just sit behind a desk in a fancy office (which ya don’t pay for!!)
Clearly, you have no idea of the word risk!!!!
Earn it?
LO’s at banks get a salary, not a commission. And we are talking about this country, not other countries.
I earn it. That may disappoint you. There is a lot of work to this business when ya don’t just sit behind a desk in a fancy office (which ya don’t pay for!!)
Clearly, you have no idea of the word risk!
Aaron,
Well put. You’re just the type of over-charging greedhead broker the article is about. Just because the GFE dollar cost to the borrower from you is less than from a banker doesn’t mean a thing, especially when you’re getting them a higher interest rate to make your YSP. It’s noob hacks like you that have ruined this industry. Since I started in this business in 1984, I’ve held management positions in retail, wholesale and correspondent for many of the major lenders such as Norwest, Countrywide and Weyerhauser, and I’ll let you in on a little secret: up until 1998, the brokers were , in large part, considered a valued and trusted business partner and a peer. Then the Alt-A and subprime loans really started hitting their stride. After that time, you’ve been nothing more than a necessary evil and a liability. Countrywide uses their brokers and correspondents to get huge monthly volumes without staffing and brick and mortar costs. The worst of it is that brokers like you have no fiduciary responsibility back to the wholesalers. When your loans go belly-up, there are no buy-back provisions as there are with licensed bankers that broker out. Mortgage brokering has turned into a money making proposition for uneducated cheats and slackers who are out to make a fast buck by doing refi churns and packing loans with high rates and YSP’s. You fit that role to a tee…you mention your fabulous monthly income for so little work, you clearly state how you jack up the YSP for your exclusive benefit, and your grammar is abhorrent. Brokers were always viewed by the wholesalers as a means to an end. Your end is near.
Gill, I’m not stupid. Stupid is is trying to avoid the inevitable by staying on a sinking ship. Things are changing, so deal with it.
Joe, Know the difference between risk and risk management.
My question to all the brokers and bankers is how are you going to compete and originate loans when new regulations are squeezing your ability to compete and you can’t even fart without the feds hooking up a pollution control emissions to test the gas for your a$$. I say that in fun, but it’s true.
Joe, you are a class act as well as some of the other commentators such as Amy, Ann, Paul, Mark, CTAN, JacMac, Makai, Jim, Vegas, John and anyone I forgot. Thanks for comments from all sides of the fence.
There are many good people that are affected by this. Homeowners and industry professionals. A lot of people should be pushed and and never should have touched a deal in their lives.
I wish all the sharks and scammers a cold cell in a dark federal prison and I wish the good guys the best and hope you all do make it in 08 and years to come.
I feel if you do what is right by the client, you will make it.
Maybe this is just what the industry needed to weed out the sharks and firmly plant guys like Joe and the other good brokers and bankers to get back some much needed respect and dignity. It will take a lot of time and work and it can be done.
But, I feel you all have your work cut out for you and a lot of uncertain times ahead in 08 and 09. 08 will be the year of reckogning for this wounded industry.
Will it survive? Time will tell and if it does, it will never, ever be the same.
Mark:
I do know. I understand risk. I understand risk management. I’m still here – profitable, bills paid to date, business plan written for next year for all three companies, etc. Remember, I got out of the stock market in July. I predicted the market would go to 12000. It his 12,500 2 weeks after I got out. I am still out. Risk management??? Preservation of capital??? He who loses the least in this game and this market and markets like this, wins!!!! Risk management!!
What happens if there is no wholesale channels? Rumors keep circulating that what lenders are left will shut down wholesale in early 2008.
What makes everyone think that more lenders will not follow suit? I think the writing is on the wall.
Hey, ya all! (not bad for a non-Southerner!!) I gotta a radio show tomorrow mornin’. Gott a script to write and sleep to get.
Have a good one! Remember the pioneers! I can’t imagine three months from St. Louie to California in a little covered wagon. And we think we got it rough!! How did they do it?
Joe, do you have a back up plan to your mortgage biz in 2008? or is it all about FHA?
I disagree that retail LO are force to do more legal things that brokers, becuase if the LO does something and the loan doesn’t perform and fruad was the cause he will be fired or possible jail time. If the broker commits fraud he/she show be responsible to buy back the loan. Now in 08 the banks will get stricter and go after the brokers. The bottom line is theat people go to brokers, because he don’t qualify for the loan at the bank. The broker will alter documents to make the deal work, not to help the customer, but to make a big comission. I have been in this business for over 25 years and this time it will take 2 years to recover from this mess. I see everyone working for the banks retail in the future with no middleman. If the investor are not buying the loans, why would the big banks are going to take any risk in third party originators. The party is over for all the broker who let the money go to thier head. Buying million dollar homes, driving Bentley’s,Ferrari’s & $200 lunch is sad.
Ok. I a few more minutes. Yes, I have a back up plan. It’s not just FHA. We have been doing FHA, VA and Conventional loans all along. We will continue to do these loans. We have a large data base of customers who continually call us for mortgages and refer people to us for mortgages. So I see this continuing.
2) We are getting some very good leads from a very good lead source. Many of these people need a mortgage and the banks will not give them a mortgage. There is a very big arena of people here who need the mortgage banking and mortgage brokerage communities to help them.
3) I own a RE/MAX real estate franchise. We are in a very good vortex of growth and a stable market. Values here are holding relatively well. We are not experiencing price decline such as in Florida, the Southwest and California. Yes, volume has slowed down, but we are getting the business. We will benefit with more traffic due to a new large grocery store and large chain drug store currently under construction and opening for business in April, 08.
4) We have been given the opportunity to have our own radio show which in our current format has been responsive and profitable due to tracking.
5) We have augmented the mortgage and real estate business with another business we believe is a very large market and will help people.
6) If all else fails I am planting seeds to branch my company with a large bank or banker. I am the only mortgage broker in the entire county and have a 14 year credible history and a large clientele
7) I am exploring other avenues that relate to this business because I am a firm believer that people will be purchasing real estaste, refinancing real estate and will need mortgages to do so. I believe that people really want to be face to face with their mortgage professional. I have always done this and will continue to do this. I think there will be a pause in internet lending. With the eventual loss of 40% of the mortgage broker business I will become less commoditized, get more business and become more profitable. I will not run away. If it ends, it ends. I’ve been there before. So it is no threat to me.
Great conversing with everyone tonight. Gotta go. As Winni-the-poo says, TTFN
Here’s a word from a sucker who paid a broker a couple of years ago to refi in a interest-only loan fixed for 5 yrs. I paid more in closing costs than my parents paid for their whole house (it was 1959 but you get my point). I think broker fees, real estate commissions and all the rest of it are just another way of ripping off people who actually work for a living. I read some brokers were pulling in $2m a year. For what? Doing some paperwork? Of course, you folks probably aren’t as bad as the big time crooks running the banks and hedge funds on Wall Street. And oh by the way, I fully expect to end up in foreclosure like all the rest of the suckers. Thanks for nothing. Hope you all starve.
I agree JARIAH.I’ve been in survival mode the last 90 days and going forward I will be in life support.(In god’s hand) People enjoy your family and plan for the future.
CA Sucker I am sorry for you but why did you sign the loan with so many fees. I suspect it was pressure from your RE Agent and the seller who was going to let the purchase agreement expire if you didnt sign. Am I right? I’m sure title was so damn busy that they didnt really ever explain any of the papers to you but its up to you to understand and what about your Agent didnt they look out for your best interest? That was a part of their duty after all. Your RE Agent made a 3% commission and in CA what was that? 15k? More?? It sounds like a dog with a note in its mouth could have done your Realtor’s job and yet you place the blame with us? I am truly sorry but I’m sure in retrospect you wish that you had walked away and let the PA expire. Best of luck to you…truely.
Top Producer- I dont know what to tell you, alot of us are in your same boat. Just focus on helping people and stop focusing on the money you need, help enough families and God will handle the details.
” Things may come to those who wait, but only the things left by those who hustle”
Abraham Lincoln
CA Sucker- Oh sorry you said you did a refi…well…I really dont know why you paid all those fees. Good luck all the same.
I worked at Ameriquest Mortgage, I know I am the devil, but i thought it was intersting when I met with the Execs after the 360 mil settlement they were saying while sitting down with the AG of each state they made every effort to make brokers look bad. YSP was the devil and they claimed in 2 years brokers would be out of business. I am not predicting anything this is what was said to me over 2 years ago.
My, my, this thread caught a fire. For all LOs: middleman DO NOT ADD 2 CENTs of value. Middleman’s function is to facilitate transaction and be paid from that transaction. Middleman are FRICTIONAL COSTS to overall economy, the lower those costs are there better overall economy is. Go read Warren Buffet’s annual report from few years ago where he observes that frictional costs (cost to facilitate transaction) are raising because those middleman are paid when transaction occurs, it doesn’t matter whether transaction makes sense or not middleman WILL FACILITATE transaction by lying, cheating, misrepresenting so he can get paid. Middleman has close to zero interest in making sure that transaction itself makes sense, he simply DOES NOT CARE. That’s the freaking reason middleman people need to be controlled. Otherwise they will transact us all away into 7th circle of hell.
As far as brokers going away: automation and technology WILL make story of disintermediation happen sooner than later. Sorry guys but you are going the way of horse carriages and travel agents. Given the level of intelligence required to price agency loan out (let me say threshold is very low) I’m pretty sure computer can do it much better and CHEAPER. Brokers will be left with 2% of mortgage originations: subprime and hard money share before this bubble.
Alan! I was looking for you! Same spiel, different forum! There you go, lumping an entire industry into one sweeping generalization. And you are still thowing out statistics based on what? Alan: you are speaking about predatory lending practices perpetrated by some, not all, a majority of which occurred in the sub-prime arena. The cause of this crisis is due to many factors and I believe that anyone with a brain will agree regulation reform is in order. Whether or not the mortgage broker will survive is still up in the air. I hope they do because the career oriented, professional, educated, moral, ethical mortgage brokers provide an inavaluable service to the consumer. They provide competition with the banks so the consumer does not have to run from bank to bank to bank to shop for a home loan.
Great Article!
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Alan- Good post very intelligent. However, to what degree do you remove the “middle-men”? If you take the Mortgage Brokers out of the picture then the lender becomes the “middle-man” if you take the lender out then the Investor becomes the “middle-man” and the investor does not have the time or the desire to facilitate (even if they chose to the cost would be much the same as it is now) If you could somehow remove all the “frictional costs” you would simply end up with virtually no competition and no delivery method
As far as automation…yes agreed it is changing the industry but it is still the “middle-men” who are automating and not the “Investor”
Alan I am sorry but presently this whole country is nothing but a whole network of “middle-men” working in concert to redistribute the wealth of this country to what was once the third world. We really don’t produce anything anymore…we just buy.
CTAN. . .
Sorry about the “hope you all starve” thing. I hope you people appreciate the anger out there. I paid about $19k in closing costs for a refi of 4.75% fixed for 5. I thought I’d done a reasonable amount of shopping around and understood the break-even point and all that. Because of a health problem I needed low payments until about 2010 or so when we had planned to retire and downsize. Now the house in CA is down about $150k with more to come. If it goes down more than 40% we’re upside down. I think one of the problems is the loans and the various costs are so complicated most people don’t understand what’s really going on. That was okay until the crash. Now, from what I’m hearing, the public perception of the real estate and mortgage industries is very negative for a lot of people. What’s really incomprehensible are the riches handed out on Wall Street and the compensation to the big boys in big business. But that’s another story. Bottom line: for years now a lot of wealth has been shifted from the bottom and middle up to the top and eventually that’s going to tear this country apart. Maybe it’s already started. Thanks for the sympathy.
Virginia,
I’m putting down number of 90% based on appraiser survey where 90% of appraisers mentioned that WERE PUSHED by LOs to inflate the value threatened with suspension of future business if number is not hit. From there I extrapolate that 90% of transactions involved dishonest cheaters if not outright criminal LOs as originators. Need I go further ?
http://latimesblogs.latimes.com/laland/2007/04/mortgage_fraud_.html
As far as banks: if they sell loans to FNMA/FHLC/secondary market I see that type of activity no different from LOs. It’s same thing and it will be extinct. I wouldn’t be surprised if DU is opened up to consumer one day, especially for loans without risk layering, you know those 58% of originations that are 20%+ down, 720+ FICO, fixed rates ones. I can’t find a value for brokering of that loan even with microscope.
Banks will be doing portfolio loans or some niche secondary market programs.
Also, most ethical mortgage brokers kept their compensation to 1 to 1.25% (maybe more for low loan amounts). YSP was truly used to offset costs, fees to the benefit of the consumer. We share the commission with the broker of record: typically 50% to 70% splits. Less for more inexperienced loan officers. Out of that share we have to pay our own costs such as: education, marketing, life-health-E&O-workman’s comp etc. So, while we may have made good money with volume, we weren’t “gouging” people to increase our earnings. Prepayment penalties were not in play unless a borrower had bad credit or they took an Option ARM. Most ethical loan officers did not slap a pre-payment penalty on a loan to bump their commission.
Now Alan, can you please rail against Wall Street Investors, banks and lenders as well? Jariah you ROCK! Well said!
BTW, make no mistake, Wall St peddlers are no less (much more I would say) middlemanish with all the dark sides of human nature that it brings to light. Stock brokering no longer cash cow it was so Wall St invents new types of transactions to facilitate and to be paid on doing so. The problem though they must constantly come up with new ways to fleece the sheep because sheep are not that stupid. IPOs transactions are dead after dot com bubble, at least in US (btw IPOs were hyped and facilitated by the same middleman). Sensitization is going to be dead after global ABCP, MBS, ABS market seizures. Would be interesting to see what would be next great thing for Wall St peddlers. For those LOs watch and if you want to make the same careless living do what they do.
Alan: thank you for the reference. I was able to read the small comments re: Kenneth Harney’s article but was unable to link up to the original article. Surveys can be fraught with inequities: Who performed the survey; were the appraiser’s chosed “at random” from all areas of the county or were they chosen from declining markets and sub-prime transactions? Were all of the appraisals ordered by mortgage brokers or were there orders from both banks and brokers. I think I will perform my own survey of 15 appraiser’s from across the country chosen at random to see what kind of statistics I can come up with. I’ll keep you posted.
Also, I agree with you. Some companies have already opened up DU directly to the consumer. Cookie cutter loans are easy to do. But when you talk about taking away stated products so you have to go full doc and you have a multi-million dollar client who owns a huge conglomerate, fifty seven properties and has three feet worth of tax returns to review and analyze that takes a professional with years of experience.
Brokers really do provide competition to the banks. I cannot tell you how many loans I closed where the banks could not even come close to the rates and fees I provided to my clients. I do work in an A paper, jumbo area where most my clients were very sophisticated and internet savy. I lost very few loans to the banks and usually only to Wells Fargo. I have to tell you, I worked very hard for most of my income.
CTAN,
Middleman are like oil, you do need certain quantity in the economic engine. Put too little or too much and engine will be dead. The problem in US as you properly noted we are no longer incentivized to produce, create and do other productive things. Instead a lot, and I mean a lot of smart folks who otherwise might be doing great things go into facilitator roles. Engine’s displacement is getting smaller and amount of oil is getting larger. It’s not healthy, engine will sputter. It will hit us hard and we will go back to be creative nation that we were until then broker away.
Your post re: Wall Street was very interesting. Yes, we will all have to wait and see what is left after the bleeding stops. I see a value in what I do as you can tell. I will survive, one way or another.
Virginia,
It was National Appraisal Survey 2007, unfortunately they are asking money for the copy. http://www.octoberresearch.com/studies/nas2007/
You appear to be positioned in that non-commodity niche just like travel agent who arranges Serengeti safari tours (you can’t book it on expedia you know). As long as your service is not commodity you should be fine however given that competition is going to increase (there will be more hungry brokers) your margins may sag a little but again if you are the best to book Serengeti safari with you should survive long term.
You guys kill me! Norwest mortgage bought Wells Fargo bank remember? Hmmm? They were a subprime lender who bought Wells Fargo bank! A wolf in sheep clothing! As far as calling your self a top producer working for a bank well ok…what ever. Let me ask all of you the so called “bankers” a question ok? Where do all the bank CEO’s live and what kind of cars do they drive hmmm? What about bonuses they recieve every year do the kick down to you for taking so good care of your customers? There was a master plan here by the banks and you guys cannot see it let me explain! When home values dropped and short term rates climbed 13 straight times because the Fed turned up the hot water too much there was too much inventory out there as Alan Greenspan stated in his article The Roots of the Mortgage Crisis dec 12, 2007. He sates in his writtings that it started back in the aftermath of the Cold War,when the economic ruin of the Soviet Bloc was exsposed with the fall of the Berlin Wall. As soon as inventory clears out and it already has started. Very large loses will, no doubt, be taken as a consequence of the crisis. But after a period of protraccted adjustments, the U.S. economy, and the world economy more generally, will be able to get back to business. So back to the banks master plan! Hey lets hang this on Brokers and deflect the politicians away from us ok? How do we do this? We stop doing business with brokers and it will look like we did not do anything wrong! Hey that’s a great idea! To finish our plan let’s throw lobby money at Washington and tell them how bad brokers are. They’ll go for it because they can take some blame away from them also! We are Geniusses are we not! Cool let’s do this and hey let’s get the media to bite too! Every one has a grandpa that has a saying I’m sure you remember your whole life long right? My grandpa came through the great deprestion, fought in World war one. He used to say for every guy jumping out of a building when times are bad there’s two on a trampoline coming up…! Makes sense to me.
CA Sucker: When did you do this refinance? A 5-year fixed-rate @ 4.75% is a pretty darn good rate. I haven’t seen that rate in quite a while. $19,000 is extremely excessive in closing costs UNLESS you bought down the rate. I closed a 5-1 ARM (fully amortizing) in July 07 for 5.375% and the discount points were 3%. What was your loan amount? Are you paying interest-only or fully amortized? Did you take cash out in the transaction? What were your total origination and discount fees-points paid to buy-down the interest rate (separate from the third party fees)? Any loan officer can tell you quickly whether or not you got a good deal re: closing costs with the information requested above. Depending on the loan amount, the broker/bank making a net 1-1.25% points is reasonable (this does not include discount points but does include origination fee and yield spread premiums).
No one can predict the future but hopefully the CA real estate market will rebound and you can still sell and retire in 2010. I don’t know what area of CA you live in but major metropolitan areas and suburbs are usually more insolated against major downturns in value. Marketing times have increased substantially. What used to take 3 days to sell is now taking 6-9 months. Our real estate markets have always bounced back…..Please don’t lump all industry professionals into one category. Most of the people remaining are doing a good job and are watching out for the client.
Amen Doug
Virginia. . .
The loan amount was $417k for the refi with a little cash out (less than $20k). I don’t have access to the paperwork right now, but I do recall there was a buydown to the 4.75% interest-only rate for the 5 yrs. If the buydown was 2 or 3% that could have amounted to most of the $19k, making the cost reasonable. I don’t know. I guess I’m just venting since after 25 years of owning a home in California, I think we’ll be renters again within a couple of years, probably permanently. Of course we won’[t be alone. I work with a woman with four kids who’s upside down and making the lowest payment on her option
ARM. She’s toast and she’s got nowhere to go. It’s obvious there is a lot of soul-searching going on in your industry in the wake of what is truly a disaster for a lot of people, including those who maybe shouldn’t have agreed to subprime loans they didn’t understand. One thing is certain: a lot of money was made all the way all the way from the top (with the derivatives being sliced up and sold over and over again) down to the level of the brokers and realtors. It’s especially galling when we read that some hedge fund managers, for example, had personal compensation last year in excess of a billion dollars. It’s crazy. But again that’s another story. Good luck to the mortgage people who actually provide a decent service at a fair cost to the client(whatever that might be).
CA Sucker:
2010 is two years away. A lot can happen in that amount of time. Keep your chin up and hope for the best. There are a lot of people out there trying to help others that are in trouble due to the resets on sub-prime loans, exotic loan programs and decline in value. At the very least, they can go to their existing lender for loan modification. The lender would rather renegotiate the loan than go through the time, money and hassle of foreclosure proceedings. When the time comes and you need a good mortgage professional, ask questions, get referrals and check licensing/reputation. Make sure you get at least three quotes from three different reliable sources to be sure you are getting the best deal. You should be okay.
Virginia. . .
Okay, thanks. I’ll leave you folks alone now.
Great post and an interesting conversation between predators and real mortgage lenders. Thank heavens HUD stood its ground on the minimum bar for their mini-eagle.
This whole post is just hillarious. In 2000-2001 the Nasdaq fell apart and I heard people speak of “the end of the tech stocks”. Funny how just a few years later the stock that started it all Amazon.com is making new highs. Yes things will probably not get this crazy again for 20 or 30 years, but the broker industry will muddle throught this as will the retail. Ultimately the fat cats who should really be worried are middle management in the retail channel as they are “not necessary” and will be eliminated. Also to be extremely worried are overpaid underwriters, processers, marketing coordinators and anyone else who is not actaully bringing in revenue to the table. I 100% agree there are some bad actors who are brokers, however after looking at several outrageous “stated” loans which were approved by a local bank YES RETAIL all they way. Subsequently the local paper spoke of their 25 million in buybacks locally.(this is a publicly traded company as well, so this proves that brokers don’t share all the blame. Ultimately the problems created are associated with Greed and the market as a whole which include realtors who pressured their RETAIL loan officers, appraiser who did not have the guts to simply not massage the appraisal, loan officers both retail and broker who refused to just say no and deny loans that did not make sense, and lenders who underwriting in my opinion turned a blind eye to obvious embellishment of income, and last but not least borrowers who had no intention of every repaying any of these loans as they were just an ATM. Face it, Capital chases return and quick buck artists come and go with every bull market in any industry. There is enough business for anyone who wants to work hard and do their job. Question is who will stick it out and prospect enough to make a living. Working in the broker world I can definately say that margins will compress as the public has more price discovery, but this will not be isolated to brokers alone. Retail will feel the pinch as well. Personally I can’t think of a better time to be a broker. Retail will try desperately to sell loans priced way too high claiming all brokers are dishonest and they could not possibly do the loan at a rate this low. The good credit consumers who can still get approved will go to brokers. Like it or not people will always deal with brokers who are sophisticated and have lower cost. The one thing no one wants to admit is that price is still the number one factor once a person finds loan officers they can trust. Service should be expected and low cost providers will always have a space. Good luck to all that read this post and please focus more on the opportunity to gain new clients and less on bashing other professionals.
BrokersAlly
I think in your predictions, you left a couple of things out. The most important one being the banks. They are even more avaricious than mortgage brokers and they spread their money around in political circles and, frankly, mortgage brokers are no match against banks wherte political influence is concerned. With this meltdown, banks will/have sensed a big opportunity to corner the mortgage industry for themselves. EVERYONE (except mortgage brokers) will be looking for heads to roll as this mess grows worse, and it will, and the prime suspects are going to be mortgage brokers. Also, to a lesser extent, realtors.
Watch out for the deluge of new regulations will will be introduced to beat mortgage brokers into the ground or even drive them out of business. Posting VERY big dollar bonds will be one. Background checks. Annual examinations, etc. In fact, mortgage brokers will try and buy off the politicians but because of the magnitude of this mess, even the most corrupt politician (and there are plenty of them these days) will not get involved on their behalf. Seeing as we are going to have the democrats running things for the next 4 years after 2008, with a majority in both houses, life will get very uncomfortable for mortgage brokers.
In the next 5 years, for good or bad and I have no interest in the banks or the brokers either way, the landscape for mortgage brokers will look very different from today.
Aaron, get your head out of the sand. Hopefully your approach to the 18th green is more precise then your approach to fully understanding how the lending world works.
It is amazing how many people just read the paper and believe everything printed. The mortgage companies and brokers are the evil of the Earth and they have collasped the American dream. But, maybe if you took a more educated looked at what has truly happened over the last couple of years you may soon understand that it may not be the mortgage companies to blame. The past 3 yrs have seen record foreclosures, and everyone points to ARMS (adjustable rate mortgages) and large commissions. Well over the last 10 years the percentages of ARMS sold was the same as the last 3 yr and the 3 building up to it. Why then has the market not fallen 10 yrs ago? The answer is simple, but rarly said. Higher energy cost and the taking advantage of the consumer by energy companies. Fact, most people who bought a $150,000 mortgages in the US on an ARM, the payment has gone up once the loan adjusted by $200 in payment. But the average energy cost for a home owner has gone up $425 between electricity and gas for the house and the car, not to mention goods sold that require freight. Goverment or congress never points that our, instead they drop it on the door step of the mortgage companies, it is an easy out. Lets not forget to also place blame on the many home buyers who decide they need more than they can afford. Year after year people want more and more to keep up with the Jones. My thought is that there should be tighter regulations on the amount of payment you should qualify for, and if that means buying a smaller house then that it was you have to do. There was and always will be some people doing fraud in the mortgage industry, just like there always has been, but that is no different then say bad writers who write ridicules articles based on no merit or facts, but as just a way to put there name out there for the sake of vanity.
I haven’t read each comment but i will throw in my two sense. There are alot of large banking institutions looking at the B of A model. Remove themselves from the wholesale market, origninate, process and underwriter all there own paper. We all agree that their are a large number of highly qualified respectable mortgage originators out there looking for jobs. If B of A is successful, and i think they will be, i would venture to say that the other big boys would follow. This would run the brokers out. The ones who have positioned themselves as mortgage bankers with good LO’s, processors, underwriters and closers would scoop up the good brokers and then inturn sell directly to Fannie or Freddie. Like it or not there are going to be some extreme changes in our field over the next 2 yrs.
Hey Aaron, if I’m wrong the next round is on me….
There has been quite a turndown. The largest in history. The mortgage broker has been the fastest channel to the market for over 20 years. Things will tighten and eventually ease but not like it had been. This will be trying times for all. Not just the strong will survive only the strongest will survive.
All pretty obvious points made by all, but you missed one huge point! G.S.E.’s (Government Sponsored Enterprise). Only Brokers will be able to feed theses beastly companies in the future. Fannie, Freddie and Sallie need brokers more than banks. And for most of you who don’t now theses government sponsored loans are much better loans and can help a wide range of borrowers. After any crisis in this country we all look to Uncle Sam. Fannie and friends will help American home owners and good American Mortgage Brokers.
Major generalities made here. But, truth be told, the 24 year old high school dropout with gift of gab and no scruples will thankfully be yanked from the business. Gone will be the 30 Mercedes and BMW and Porsches in the parking lot. I never understood how they got people to refinance their homes anyway. But, thats the subprime fiasco: It let otherwise incapable people make huge money for too long.
This happened in the stock broker business and, as mentioned, in the S & L thing before. Culling of the herd.
Its good.
cream alway’s rise’s to the top. i’ve been a owner operator of a small mortgage company for 11 yrs. yes it has been an eye opener this year but i see oportunity. short term hard money is alive and well and will pick up allot of steam in 08. over the years i have learned that winners are simply willing to do what loosers won’t.
Who here really, I mean, really thinks the brokers are at fault for the Trillions, yes Trillions of dollars that are being lost and the global economic crash this is going to cause when all is said and done? I for one would like to think that my little shop here in Michigan was powerful enough to create such a catastrophic mess. The fraud that everybody is talking about was being done by everybody in the industry. So if everybody is creating fraud, and fraud is the norm, then there can be no creation of fraud.
Someone mentioned that lenders have to repurchase a loan if there was fraud in the origination of the loan? Where is the lenders due diligence when it comes to approving the loan? Okay, they overlook some things to approve the loan, so they can get paid upon sale to secondary market. At that point, bundles of loans get securitized, and oops, we’ll just not disclose that there were 20% second tds attached to the same properties that all these investment grade 80% first td’s that all of these investors, foreign and domestic, will be investing in.
I could go on and on, but will just say that the greed is widespread, and nothing will change (even by eliminating brokers) unless the risk associated with mbs, cdo, and other security instruments has been properly and honestly assessed and rated, period, end of story.
Great article for doing exactly what it had intended, creating a lot of banter.
Broker: “You want answers?”
Borrower: “I think we are entitled to them!”
Broker: “You want answers?!”
Borrower: “I want the truth!”
Broker: “You can’t handle the truth!!!” (continuing): “Son, we live in a world that requires revenue. And that revenue must be brought in by people with elite skills. Who’s going to find it? You? You, Mr. Finance? We have a greater responsibility than you can possibly fathom. You scoff at sales divisions and you curse our lucrative incentives. You have that luxury. You have the luxury of not knowing what we know: that while the cost of business results are excessive, it brings in revenue. And my very existence, while grotesque and incomprehensible to you, drives REVENUE! You don’t want to know the truth because deep down in places you don’t talk about at staff meetings … you want me on that call. You NEED me on that call!
We use words like Volume Rebates, Co-op , discounts, buy backs, cost adjustments, purchase agreements. We use these words as the backbone of a life spent negotiating something. You use them as a punch line! I have neither the time nor inclination to explain myself to people who rise and sleep under the very blanket of revenue I provide and then question the manner in which I provide it. I would rather you just said “thank you” and went on your way. Otherwise I suggest you pick up a phone and make some sales calls. Either way, I don’t give a damn what you think you’re entitled to!”
Mlmortgageguy, I had to address your flawed reasoning, which IMO is a recipe for evil.
You started out really well. Who is responsible for the fraud. EVeryone! You’re right. Everyone involved who fudged numbers, looked the other way, out and out lied and misrepresented — they know who they are, and SOME Mortgage Brokers played their part.
But then you go on to say this:
“The fraud that everybody is talking about was being done by everybody in the industry. So if everybody is creating fraud, and fraud is the norm, then there can be no creation of fraud.”
WHAT!!!!! All that is necessary for evil to triumph is for good men to do nothing ~ have you ever heard that little tid bit of knowledge?
When we start believing that evil is normal, and that to lie and cheat should be an accepted way of the world then WE ARE REALLY IN TROUBLE.
Yes, fraud exists in every corner, ever nuance of the capitalistic society of America but that doesn’t mean that it shouldn’t be rooted out and EVERYONE who partcipates can revert their behavior and instead become part of the solution.
I have to say here, as a homeowner and victim of fraud, it is EXACTLY THIS TYPE OF TALK (and also the ha, ha, ha, I made so much more money than all you other suckers) from Mortgage Brokers and industry professionals which has created the bad rep. that they have now, along side of the actions of some unscrupulous members of your ilk.
The, “oh this is the way of the world” and “it wasn’t me — it was the (fill in the blank — the bank, the homeowners, the builders et cet.) ” — it gives me, personally, an impression of a profession attracts those looking for ALL THE MONEY THEY CAN MAKE — and here is where it goes wrong — WITHOUT THE MORAL, LEGAL OR MENTAL ACCOUNTABILITY — and that’s something that WE ALL no matter our profession SHOULD HAVE.
There is nothing wrong with making money. Let’s all make as much as we can. But there is something wrong with hurting people and ruining the lives of families and children. There is something very wrong with fraud.
Joe said: There was and always will be some people doing fraud in the mortgage industry, just like there always has been, but that is no different then say bad writers who write ridicules articles based on no merit or facts, but as just a way to put there name out there for the sake of vanity.
There has always been:
Child molestors.
Drug trafficing.
Child sex trafficing – - so what???? Do nothing about it?????
When I have a cut, if I don’t attend to it, it becomes infected and festers and soon, I might be at risk of losing a limb.
The mortgage industry has become infected with the greed of fraud and it’s gotten this bad so that we can DO SOMETHING ABOUT IT. To point to the infected Energy industry might be a valid point but it doesn’t take away from the NEED to do something about THIS INDUSTRY right now!
My name is Frank and I am in idiot broker who is now burning seniors by selling reverse mortgages, now that pay options have dried up.
Please visit my website at http://www.msogallc.com or email me at frankthrift@msogallc.com. I only charge 4.5 points and an additional $5k paid outside of escrow. Now accepting applications.
I have been a broker for over ten years, last December(2006) I took a job with the then fourth larger mortgage lender in U.S. and I was there 60 days, I HAD to leave once I saw how crooked they were running the game, NO GFEs issued, insisting you lie to customers about rates until close but MOST of all—–their insistence that we put AT LEAST 4 POINTS UPFRONT ON ALL LOANS to balance out on some “chart” they had, ANTHING less than 4 points upfront had to be approved by HQ?!? THIS WAS THE RETAIL SIDE and I never want to be associated with it again, Brokers will survive and prosper if this is our competition.
the reason we are having this credit crunch is pure greed from wall street. they were the drug makers and brokers were the pharmasict. the only diffrence is that wall street will get away with it and brokers will take the heat.
Joe (the RE/MAX owner and old school mortgage broker) – it looks like you have good plan and should do just fine. good luck!
jacmac,
it wasn’t my intention to suggest that no fraud was created. everybody knows it was, and on all levels. my point is, that it is ridiculous to suggest that brokers are the only culprits. many players of the game turned a blind eye, in particular, those that were most responsible for the securitization and sale of the securities. A lot of people made a lot of money in the business. But there are some that made a ton more than the brokers…those on wall street to be exact. follow the money and you’ll see where the greed really came into play…
without knowing your situation and how you were a victim of fraud, there is still some responsibility of the client to do your diligence and have everything reviewed before your loan funds. if there are any questions you don’t get answered, well then….gotta look in the mirror…
MLmortgageguy. I didn’t read you as suggesting that no fraud was created. I read you, I think correctly, stating that because there was massive fraud everywhere and always has been it makes no sense to concentrate on the fraud of the Mortgage Brokers.
As I said, pointing the finger mentality, MLmortgageguy. Yes, the Wall Street investors made a killing, yes the banks made a killing, yes the client has responsibility but this article in particular is about the responsibility of the Mortgage Broker and how the fraud and the behavior of a lot of Mortgage Broker’s and the ensuing crisis will affect THEIR industry in the near future.
You say: “Gotta look in the mirror.” I love it. When oh when will Mortgage Brokers like you start doing that?
You know, reading responses from people like MikeJacob is refreshing.
I very rarly read a former or present Mortgage Broker say, Yes, I committed fraud and worst or I witnessed fraud and worst. I feel like crap about it and I’m ready to admit that many of my other colleagues did the same. This industry needs to be regulated and monitored.
Because after all, isn’t that the plain truth?
After 12 years as a mortgage broker, I got really worried last fall. Started thinking about my options and went to work as a loan originator for a big, well-thought of bank that has a nice corporate culture and a big share of the mortgage market. Definitely a high-end player with lots of volume.
As a mortgage broker, I charged a point on my loans. I usually advised the borrower to pay a point rather than go for the higher interest rate they’d pay if I took a YSP. Yeah, I know, a lot of brokers took the point AND the YSP. But I just took my point, did the loan, and called it a day. I often advised clients to take a one year pre-pay unless they had a good reason to think they might need to sell or refi in the next 12 months, because then either ther rate or the margin would be lower.
The borrower and I worked out what program would work best for his situation, I shopped around for the best deal on that program, and made my one point. Do you get what I’m saying? Didn’t gouge, didn’t churn, didn’t put people into 3 year pre-pays on a 2 year fixed, always tried to give clients my best advice.
In November I started at Big Bank. First thing I got was as a sheet explaining the commission structure. They do things a little differently. You can sell whatever you want, but you get paid the most on the deals that net the bank the most profit. In November, as the market was MELTING DOWN, they were still paying the highest commissions on option ARMS and HELOCS.
So let’s say that whatever the program, the borrower pays a point. But if you put him in a 5 year fixed, you get .375%. If you put him in an option ARM, you get .625%. IF you call everybody you know and get them to open a nice line of credit, you get .75%.
I’m still able to look at wholesale ratesheets, and you can almost ALWAYS find a better rate for the client wholesale. The bank has a $350 non-refundable origination fee. And when they say non-refundable, they mean it. You don’t get your money back if they decline the loan, discontinue the program, the property doesn’t appraise, whatever. I assume if the borrower signs docs and then rescinds, he could sue to get it back, but you get the picture.
So you tell me — are the banks the good guys? In case you’re wondering, yes I’m going back to being a broker. These are tough times, but I think I’ll survive.
I didn’t catch this earlier;
Joe
December 27th, 2007 at 7:59 pm
65
gee moe if your such a guru why cant you afford to move out of corona.
or is it you like the smell of horse manure when it rains?
===============================
Your guess is right. I like the smell of horse manure even if it doesn’t rain. I own a 150 acre ranch with 25 pure bred Arabian Horses in the Norco Hidden Valley.
Blogging sure does pay well…………………………………..
Do all of you really think that fraud was done just by brokers????
I worked in a CHL branch, an Option one branch and a BOA branch all as retail and there was more fraud in those places then in any brokerage I have ever seen. Just becuase they work for the servicer dosen’t mean they were not greedy too.
and BTW all of those companies priced the loans at 7% profit before they paid out anything on the mark up to the LO.
From Art Of War…” HE WHO CONTROLS THE GOLD..CONTROLS THE LAND” big banks and wall street controls the gold right and probably forever so they can do what ever it is for them to survive and be in control. I dont really care if broker survive or retail is going to do better, this article is just saying be careful and have a backup plan. As human beings we dont like or want to see othe human beings lose their house or have a bad time financially. Just be safe and becareful because things doenst look like it will get better anytime soon.
It saddens me that now a mortgage professional (Broker or Banker) has about the same credibility as a used car salesman. I guess as an industry we’ve earned that reputation. We sold too many of the wrong types of loans to the wrong types of people. There were too many crooks out looking out for their own paychecks, and not their customers best interests. Its really a shame because mortgage transactions are usually the biggest financial transaction the average American makes. Mistakes in this industry can really damage peoples lives. I guess the broker charging 4+ points and YSPs didn’t care about anything but their own paycheck. Didn’t the phrase caveat emptor originate with real estate transactions? I guess not much has really changed in the past 2000 years…
I really hope that the non-profits do take over the sub-prime business. It removes the greed component of the equation, and it creates a permanent housing solution for the low/moderate income borrower. I’ve seen impressive things done here in Southern CA, with the state bond program, layered with affordable seconds.
As far as brokers disappearing. I doubt it. I also doubt that retail is going anywhere. I work at a large bank (in the top 10 by size in the nation). We never really did take off during the boom times, but now things are really picking up. Admittedly we are mostly doing conforming loans, and the purchases seem to all be bank owned (not ours..thankfully). Business is doing great! Oh and by the way.. our bank Loan officers are paid a base salary + commission. Most American banks usually have a commission only or salary + commission compensation for their loan officers. (Most banks will also not let the Loan officer charge 4 points plus premium pricing).
After years of wondering why our bank was passing up so much business, I finally realize why we weren’t pushing the riskier loans, even though we had them available. We’ve got an really low default rate (Less than the 3% standard I’ve heard somewhere.). Now I know how the tortoise felt when he was racing the hare.
Maybe we should start coming up with ideas to fix and prevent the mess rather than fight about who started it.
1) Higher barriers to entry into the field.
2) Bonds and backgrounds on ALL (bank and broker, CFL, net branch etc etc etc) employees.
3) More in Depth mandatory C/E requirements
any more suggestions???
I have worked at a couple of broker shops…. the training stinks and the attitudes are less than honerable in my experience.
Yes, there are good ones…. but I think there are far more bad ones than the author suggests.
End of the broker? I don’t think so….
Tough going in 2008, certainly.
Dear Moe, how long have you been in the mortgage business??
“Houshold, Ameriquest, Centex, New Century’s retail division, UC Lending, Greentree, Transamerica,Associates, American General, Benificial”
These are not “banks”, these are monoline lenders, most of whom derive 100% of their revenue from mortgage origination. Most banks derive less than 25% of their income from mortgage origination and actually offer bank accounts and other services primarily and mortgages are secondary.
jdub – if you read my post you’d see that I’ve been both a broker and worked for a bank, so I understand how these things work, but you missed my point completely, which was that there may not be a wholesale market when the smoke clears, or if there is the barriers for entry will be a lot bigger.
Level the playing field. All LO’s need a standardized license to originate mortgages. Hold the bad Bankers, Brokers, LO’s accountable by enforcing (or at least theatening) mortgage buy backs for verifiable loan fraud. Give the Broker, Banker, LO a annual bonus for the loans they originate and perform well.
The gred was two part. The hedge funds and the rating companies. Take a look at there earnings. Just look at the top five. Let me ask you guys and girls a question. Was that not a form of brokering?You think with all of the brilliant minds in Washington they could see the trees through the forest? Senator Schumer sent Countrywide a letter asking for hud-1 closings to see what they were charging on the retail side of there lending model. I bet their scrambling to cherry pick the ones they want him to look at. I’m sure he is on to there games don’t you think?
Their retail side Full Specrum subprime side of there bank had one of our friends working for them. First of all she could not even get a surity bond due to her drug convitions in her early years, and that also meant no Califoria state license to do loans. But could hire on with them with flying colors. She said if you did not close at least three loans a month and if you goosed egged two in a row you were gone! Here is the kicker they use clues and it priced the loan for the agent with a min of three points. They had to go to higher management for the exeptions.
She closed about five loans a month cold calling there client data base and she made about 5000 a month. I wonder how much the bank made? They came in one day and said if you want to drive 50 miles each way you can move with us if you would like? She is a single mother with one child 5 years old. Banks do not care about anything but bottom lines!
Jacmac,
fraud is everywhere in the industry…i’ve witnessed it first hand, in the first mtg. shop i worked in, and I saw the celebration that followed when the lo felt he got one over, and needless to say, that shop is out of business…but i digress, fraud is on ALL levels in the industry…is my industry in trouble, hell yeah it is…what next year holds nobody knows…does the industry need to be regulated? hell yes it does, but those in charge need to do a better job of regulating the laws that are already in place…adding more is like trying to put more band aids on an amputated limb…just aint gonna help.
enforce what’s in place, make loan officers have to get licensed, i’ve got no problem with that. bottom line is, brokers have not completely, single handedly, create the TRILLION DOLLAR global economic meltdown, and to suggest so is ridiculous!!!
Mark- the purpose of listing these lenders “Household, Ameriquest, Centex, New Century’s retail division, UC Lending, Greentree, Transamerica, Associates, American General, Beneficial” as banks is purely for the purpose of illustrating that it is not Mortgage Brokers who the average consumer should concern themselves with. Would you prefer I listed “Norwest/Wells Fargo Financial” and “Citi Financial” in with the mix.
When you say banks you seem to mean the FDIC insured depositories. Do you really think that means anything? Countrywide Bank, World Savings, Downey, these are FDIC insured banks and they make heinous amounts of revenue from selling some the most venomous loans have ever been devised. In the late 90’s I worked for a Mortgage Broker/Banker that was setting up their depository to become a bank. It means nothing.
When I said Banks in my earlier post I wasn’t really referring to “BofA, Wells Fargo, Chase and the rest of their ilk but for every bank you can name that is above reproach, I can give you fifty that are rotten to the core. Everybody keeps blaming the brokers….We’re just selling the banks stupid loan product (FIGURE IT OUT!!!) if you go directly to the source (the bank) to get your loan, you still get the same product, you just pay more for it. Of course if your dumb enough to pay 5 points to a broker then maybe you should just rent, However, I think most posts are actually referring to those who are intelligent enough to do the math.
And Mark..paying an LO anything that is not set out before hand in the HUD will never happen…sorry there is this nasty little thing called RESPA that gets in the way.
ML Mortgagebroker, I vehemently agree: “Brokers have not completely, single handedly, create the TRILLION DOLLAR global economic meltdown, and to suggest so is ridiculous!!!”
But it’s besides the point, because the dirty ones played their part, didn’t they?
Just look at CTAN’s comment above: “Everybody keeps blaming the brokers….We’re just selling the banks stupid loan product (FIGURE IT OUT!!!) ”
Like I said: No accountability. The Devil made me do it mentality. BS.
CTAN goes on to say: “Of course if your dumb enough to pay 5 points to a broker then maybe you should just rent, However, I think most posts are actually referring to those who are intelligent enough to do the math.”
Aaron said: “The reason brokers will be around is because we’re smarter than you.”
Joe Cahill: “when i look at the drug industry, the investment industry and about 12 other diffrent industries. i can only say where is there an honest i care about my customers needs before mine industry. let’s not be so fast to kill the mortgage guy there is a couple of others that have gotten away with a hell of allot more. how many investment advisors gave a thumbs up to the market before the crash. fundamentals didn’t matter…”
Marvin: “There’s enough negativity in our industry now without help from “poor me” attitude, bs article.”
jdub: “The posters original article smacks of jealousy and I woudl imagine it is with great envy he or she writes about the 50K to 70K commision months. I see nothing wrong with someone making money. . . . . It sounds as if they are almost wishing the broker out of business or just jumping on the bad news band wagon to hear their own horn blowing.”
Kev: “Now regarding the people who went to work at Countrywide, or any other retailer during 2002-2006, YOU MISSED OUT ON THE GOLD RUSH! Us brokers made double what you made doing the same amount of work or less. Don’t blame brokers for this. Blame yourselves. But again, whoever invented these programs and allowed them to exist are the cause of this Mortgage Meltdown. Period.”
LJ: “Someone call me when everyone stops pretending that they were too stupid to think for themselves. I can’t even tell you how many times homebuyers have committed the fraud themselves. I worked for a Lender and I know the Brokers aren’t to blame here. And since, I didn’t write the guidelines, I am not either. We all played by the rules. All of us. I refuse to believe ALL of the homebuyers just aimlessly went by what BROKERS had to say. Come ON!”
Arrogant, egotistical, condescending, callous, irresponsible — is this a representative of the industry?
The worst of it, I say, the ones who:
1) Need to be regulated.
2) Need to be licensed.
3) Need to be held accountable and penalized for all loan fraud they
participate in OR (I say) fail to report.
That was suggested by Mark.
Here are the other suggestions:
1) Higher barriers to entry into the field.
2) Bonds and backgrounds on ALL (bank and broker, CFL, net branch etc etc etc) employees.
3) More in Depth mandatory C/E requirements
That was suggested by JDUB
Raise the barriers to entry, Jim Hackman says.
Any other suggestions for SOLUTIONS?????
Paul: “Make LO pass a real test, get a bond, 24 hours of CE credits every 2 years and be held accountable for there actions!!!!! Retail included!!!!!”
Other Mortgage Brokers who are not interested in pointing fingers but can offer solutions, what do you say?
JacMac, another comment hits the front page. Thanks, you rule.
JacMac- You seem to be under the impression that nothing has been or is being done to regulate the industry. I really don’t think it is the argument of anyone here that Mortgage Brokers are pure as the driven snow.
It seems to me that all you have done in this post is rip poster’s comments (probably mostly out of context) and then make remarks to the effect of “but something still needs to be done” “the industry is sick” “the industry needs to be regulated” OK I GET IT your not a happy camper.
You seem intelligent enough here is a good quote from you-
“There is nothing wrong with making money. Let’s all make as much as we can. But there is something wrong with hurting people and ruining the lives of families and children. There is something very wrong with fraud.”
Are you really under the impression that in order for a home loan to be done it requires that fraud be committed? Do you really think that all Loan Officers are criminals who are out to do what ever it takes to make a quick buck? I have to wonder where your getting that from, I figure that either
1. You have personal knowledge of LO’s committing fraud.
2. You don’t actually have any personal experience on the subject and are actually just repeating what other people say. (And you should just go away)
You see JacMac if you ask a thief if everyone steals he will tell you that yes everyone is a crook, if you ask a liar if everyone lies he will tell you that truly nobody can be trusted. If you ask a Sub-Prime underwriter they will tell you that all loan is fraud and that LO’s are morons. If you ask a sub-prime AE he will tell you that LO’s are Liar’s and that the investor knows what he is buying. But JacMac if you step outside that little sub-circle of business and get away from the lunatic fringe, you will find that there really are allot of very good, morally straight Loan Officers working for banks or if they are really good at what they do they work for Brokers. In fact the vast majority of loans that are done in this country are done without fraud and done by LO’s that are not thieves.
Now earlier you ripped a quote from me when I stated
“Everybody keeps blaming the brokers….We’re just selling the banks stupid loan product (FIGURE IT OUT!!!) ”
What do you suppose I meant by that? I’ll bet you didn’t even try to read it in context in fact you where probably just skimming the article looking for quotes with which to prove your point.
Well I apologize if I was not clear the sentence immediately preceding the one you used was this
“When I said Banks in my earlier post I wasn’t really referring to “BofA, Wells Fargo, Chase and the rest of their ilk but for every bank you can name that is above reproach, I can give you fifty that are rotten to the core”
What I am trying to convey here is that the real problem that we are having in the industry is not the brokers but rather the loan product itself. If a borrower goes out and gets into an Option ARM, it is a mistake and it does not matter where they get the loan its just a bad deal. A Sub-Prime 2/28 or 3/27 is just not a very good loan product it is designed to force the borrower to refinance after the fixed portion of the term (the bank simply does not want the borrower on their books for more than two of three years)
Now that being said, a first time home buyer with a 600 score that can’t prove income, assets or that they have even made rent payment in the past should have never been given a mortgage. So is it the broker’s fault for offering it or the banks fault for creating the product?
Do LO’s need to be licensed? Yes I have always felt we should be required to be licensed, CE classes, E & O, the whole bit, but should we have a fiduciary responsibility to our borrower? Why do you suppose that in HR 3915 it expressly states that the new licensing requirement of LO’s is not to extend to that of a fiduciary responsibility. I’ll tell you why-
1. Banks don’t want a client/agent relationship (that shows you what the bank really thinks of its customers)
2. Closing costs would go through the roof. If you expect Brokers/Bankers to originate loans for which they are legally liable, you had better be prepared to pay more than 2 points.
As far as loan fraud in the current market? It is virtually non-existant. Sub-prime loans are gone and will never return (HR 3915 make this a certainty). Most all loans are Full Doc, not stated. The only thing that really mystifies me is that damned Option ARM, I think its still out there (I really don’t know, I’ve never used it).
So as far as your opinion that the industry is sick and that nothing is being done to disinfect this festering wound called the mortgage industry, I have great news for you….. You’re Wrong.
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hey that guy did my home loan
P
I’m glad that this post was highlighted, because I read often the sale of a home by a dishonest Mortgage Broker being compared to the sale of a lemon by a used car salesman and I believe there is a great big difference.
A car is expendable. If the car breaks down and you’ve been had, at the most you’ll lose what, 5, 10 maybe even 20K as any everyday American. The kids have to go back to taking the bus and walking or riding their bike. No biggie. Everyone will lose a little weight in the process. They’ll end up healthier.
But a home is a huge purchase and investment. There are lots of other costs that come along with buying home, like heat, insurance, water/sewer charges, et cetera. If you lose a home you CAN end up homeless. Children have to be uprooted — it’s a lifechanging experience.
For someone, a professional with a fiduciary responsibility to toy with the lives of a family, children is reprehensible. Cashing out on money that’s been saved in some cases for years to obtain the goal of a lifetime for some, and to have all of that go to pay for some Mortgage Brokers life in the fast lane, it makes me so angry.
CTAN, I started to read your response but then I stopped. You see, we don’t see things as they are, we see things as we are. A little similiar to your a thief always thinks someone is lying statement, huh?
I’ve used that one before myself, so I get where you were coming from with that statement.
But YOU haven’t gotten where I’m coming from at all. I asked for solutions, for those in the industry to suggest them. I highlighted some of the ones I thought meritted repeated.
You seemed to have taken offense at my quoting you and calling your statement amongst other things, callous.
As a testament to your ego, you go on and on and on, but never offer any solutions yourself.
If the industry has rules and is already regulated, as many have suggested, the rules are not be ENFORCED and therefore there either needs to be new rules or never enforcers but definitely a call for change.
Just look at this place. Moe is on his toes and is hands on. If something goes wrong here or in the Homeowners forum, he is on it like white on rice. Flaming and baiting is NOT tolerated. There is no room for “fraud” while Moe is on watch.
We can have intelligent discussion as to who is to blame but in the end what is all of that worth if we don’t come up with solutions? The emphasis is on WE.
To me there is plenty of blame to go around…LO, banks, shitty loan programs,Wall Stret,rating agencies…….and so on!!!!
It is up to the true mortgage professionals to change/demand the way we do business. We must demnd higher indusrty standards to orignate loans….testing, education,bonding, E&O, enforce laws already one the books, and now the BIG ONE…. EVERY NEW LOAN OFFICER MUST COMPLETE A 2 year training/apprentice/internship under a senior loan officer before your can obtain your license!!!! If you want to get into this business you must pay your dues and show that you really give a shit and this will be your profession!!!(not quick money) RETAIL INCLUDED!!!!
Raise the bar and kick the scum to the curb!!!!!! I love what I do and demand a higher standard!!!!!
$10 Billion? That’s not very much money in the grand scheme of things. Who pays the bills at these “non-profits”? They have overhead just like any other organization don’t they?
Ahh, the question of the day for many, will Mortgage Brokers survive ? The answer isn’t so complicated, just as Mortgage Brokers had very little to do with their previous success, they will have very little to do with weather they survive or not. Those who offer wholesale lending channels will access the situation, and decide weather to turn it off, or continue. One thing is clear, the writing has been on the wall for many years, this “mortgage meltdow” has only created a reason to excellerate the decision that some Big Bankers have alreday begun to excersise, and that is to turn off the wholesale lending machine, as in most business climates, it’s only a matter of time. Mortgage Brokers, it’s time to seriously look at the reality of all this.
You are asking who pays the bills of these non-profits? You, taxes and governement funding.
$10 Billion is not a lot? You are joking right? This is one non-profit Larry and just the beginning of many more billions to come.
Just wait, Bruce Marks and NACA will be in a town near you, soon. Like I said, good for consumers, BAAAAAAAAAAD for brokers.
JacMac, yes a HUGE difference. Spot on, again
Paul,
i couldn’t agree more. this whole meltdown is going to kick the scum to the curb. but it goes much deeper than instituting requirements for lo’s. again, it seems to keep going back to brokers and lo’s. the laws that need to be enforced are the ones that regulate the bond rating agencies, and those that enforce underwriting standards. better enforcement of respa, tila, hoepa, section 32, by sticking to the strictest interpretations and enfoorcments of those rules, and this mess surely would not be as catastrophic!!! the loose interpretations and turning blind eyes in the name of greed is the main culprit.
this mess will ultimately get cleaned up…it has to as there’s too much $$$ involved…but unless things change, we’re doomed to repeat…which is, by definition, insanity…doing the same thing over and over, trying to yield a different result every time.
Yes, some banks have cut brokers but wholesale lending will still be around in some form. I have a office in NJ and I have big banks who have cut off wholesale only to be contacted by the same banks “Private Banking Group” looking for loans. What they want are loans over 500k to 3 million good credit (680) good assets, can be stated( but job,assets, are realistic) strong LTV.
I do believe if you have quality full doc A paper loans that there will be a market for it. Banks cannot handle the business now, 2-4 months to close! Go ahead and call Citibank retail, they answer in India!!!!No competitation will only make the problem worse!!!! Some of the lenders who have stopped there wholesale channel were/are the biggest fraud players…that is just the facts!!!!! Selling option arms, fast and easy program to the guy who pumps gas. Everyone is to blame including the big banks!!!!
There will always be a market for high quality loans, no good business would turn them away!!! It will be a tough couple of years but the strong will survive.
jacmac
one question for you…how is forcing lo’s to get licensed, and whatever else you want them to do, how is that going to change the way mortgages are underwritten, approved, securitized and sold to investors?
i’m an lo and i do believe in setting standards for us. no qualms whatsoever. i just dont see how that is going to solve the true nature of the problem. maybe you can offer some clarity? thanks
At least if LO Were held higher standard the investors, bond rating groups, underwritters could not point the finger at brokers. BROKERS DID NOT PACKAGE A PAPER LOANS WITH CRAP LOANS AND SELL THEM OFF TO INVESTORS FOR HIGHER RETURNS!!!!!!!! BOND AGENICES RATED,THEM INVESTORS BOUGHT THEM, HOW IS THIS BROKERS FAULT!! Shit flows down hill and brokers are at the bottom of that hill!!!
CTAN — i concur with most of your opinion in your post #171 … however … there is one point i would like to address … as you stated … it was the lenders that provided the programs … it was the broker that offered the programs to the borrower /// my points … it was the broker that misrepresented the information on the 1003 to meet the lender’s underwriting guidelines … it was the lender’s AE that advised the broker … it was the lender’s underwriter who signed off on the 1003 … it was the lender that funded the loan … all are equally responsible.
naw
loans cant be closed properly by min wagers.
they will figure that out soon
and when they realize they need mortgage professionals, and have to pay more… they will.
do pendulums swing one direction, then return and stop in the middle? i forget.
Whipping boys? You brokers are a bunch of goddamn babies. Fuck your crying. I’ve spent the last 8 months trying to stop the fraudulent loans sent my way, but as long as sales commanded the ship the Titanic sailed on. Now I see this and it makes me want to puke. I don’t blame lenders or borrowers….I blame you! Be a man and quit acting like you were a part of the cure for cancer…you were the cancer.
loans cannot be properly closed by minimum wage earners? LOL….. That’s why most loan officer’s have college degrees, wrong. A lot of people that work for non-profits are educated consumer activists and not greedy capitalists (some may beg to differ).
This is the future Chuck.
Borrower walks into local non-profit mortgage co.
1. App taken & Credit is ran.
2. 689 mid fico and that borrwer is sent to window 3
3. Window 3 has 5 or so motgagte options with fully disclosed terms and fees.
4. Borrower picks loan and signs disclosures
5. Sent to processing and then underwriting.
6. 30 days later loan closes
Doesn’t seem like rocket science to me.
But, hey, I know some LO’s that make a stated/stated SISA, 600 FICO wage earner 100% refi’s seem like they are puting together a skeleton fossil from an ancient dinosaur in the Egyptian Desert.
OK, you heard it from a pissed off underwriter. The person that sees the files that brokers submit and apparantly these files have fraud all over them.
While I agree to some of this, underwriter, to not place blame on lenders as well, hypocritical. Oh wait, you work for a lender who pays your salary. My bad.
Lenders knew full well, that there was masssive fraud going on in mortgage originations. All they had to do was sell that damn loan on the seconday market (like they all did) and it was out of their hands. Done.
Fraud or no fraud, they were now off the hook and whoever bought the loan that has now transfered 3 or 4 times has the liability.
It’s like you stealing a car and then selling it and then that same car (loan) is arbitraged and sold time and time again, where the cops can never track the owner and everyone (servicers and investors) who got the car turned a profit.
Well until, the car broke down and the guy driving it (lender) was stuck in rush hour (subprime imlposion) traffic in front of the LAPD. No one (secondary market) is going to buy that stolen car now and now the owner just wants the REPO yard to come take it and hopefully the cops (AG’s) don’t figure out it’s stolen before it gets sold at auction (foreclosure sale).
the end………………………………………….
Just a point about NACA…You must have rate over 10%, 24 months in your property,owner occ., live in certain area codes…
If you have 689 credit you would not have rate over 10% and if you did either your Lo drilled you or just plain out of touch!!
NACA does good work but it will not replace mortgage business!
The job of the underwritter and LO AS A MATTER A FACT is to verify information!!!! Job does not make sense…call employer….asset out of line….see more statements……income out of line……..see more pay-stubs/ tax returns…how about pulling a 4506. How about using coman sense…… If underwritter checks all information and is verified, than at a latter date turns out to be fraud the borrower should go to jail and anyone who helped him falsify documents!!!!!
Its unfortunate that the industry is viewed as similar to a used car salesmen. There are still good and honest people in this business. And in time, the bad stigma will fall off. However, mortgage brokers aren’t going to go completely away. Like anything new to society, a product must be infused into our society and then recalled for an overhaul and to remove malfunctions. That’s where we are right now. In the recall era. Complaints, laws, regulations, blame, money lost and money gained is what happens with any product is introduced, then the new improved model emerges. It will operate smoothely and then it will break again. So as long as there are consumers, brokers will still be in business.
WallStreet doesn’t want to deal directly with consumers. Never had, never will. But they want that money. They put buffers in front of them to get that money and not have to interact with consumers directly. In any industry thats how it’s set up. In the real estate industry the current mortgage buffer has been exhausted. The result is foreclosure, companies shutting down. Is this the end. Everyone please. Do you not think all of this is planned? Money is being made because of this mess. WallStreet is going to play some hocus pocus with the media. Blow blue dust at the already confused consumer and confuse them even further, get the politicians to change the rules they themselves created for brokers and blame the brokers for the change, then get some lobbists to attack every aspect of real estate; Title Co, Realtors, Appraisers, etc, just to buy time to cement the new money plan.
Just look at what’s happening in MA and NV. That not going to last long. GA tried this years ago and lenders came back when the rules adjusted more realistically and people complained that they couldn’t buy a home. Wallstreet is the only entity that knows when the reset will take place. As some sort of joke, they are allowing us to guess at before they do something. Will this end in 08′,09′, never? Now we are all panicking and shortly will be willing to accept any new solution to the current problem, wether its to our benefit or not. When it reaches its zenith and everything is appearing to completely not work, is when you will see the roll out of the new mortgage industry. Most of the same players we are complaining about if not all, will still be there giving us a new improved product. The funny part is we are going to forgive them and fall in love with them again.
To the customer, which I’m apart of: We are just as guilty as the industry is for this mess. Enough of us wanted houses we couldn’t afford. We knew we couldn’t afford it. We didn’t need someone else to advise us on that one. We wanted to live like our rich neighbor or our t.v. hero. We convinced ourselves that we are “owed” having a piece of the american dream of being a homeowners, even if we didn’t work at it or properly prepare for it. Why buy a 1500 sqft house when a 3000 sqft is right up the street? I have good credit but no money. I have a little money but bad credit. I have money, good credit but I can’t afford it. Something can be down for me if I keeping bitching because I(consumer) want what I want. So complain and complained we did and banks, lenders, realtors, appraisers, insurance agents obliged us.
Now we are losing our ass off. The same “i deserve to have this” attitude now has us blaming everyone for us not paying our bill. And yes, some consumers were deceived but not to the tune of all the millions of homeowners losing their homes as you are seeing now. Some of these mortgages are going bad not because they are adjusting, but because they weren’t being paid for. Some of these mortgages are fixed rate mortgages. So as these nonprofit companies make this “run,” remember this. Doing the loan for free won’t stop foreclosure. There will be lots of those clients still who won’t pay their note on time or at all. My question then will be, who’s fault will it be then? And allowing nonprofits to take over mortgages completely. Nahh. Its only going to be a new facet of generating money for WallStreet. Check the criteria of getting one of these non-profit loans. If it was that easy, then brokers would have been eliminated years ago. Bank lending too. Everyone needs to relax, get their credit back in line and be prepared to spend a little money next time they want to buy a house. Just this time, make sure its something you can afford.
Really great article. Thanks for the post. I am new to your blog and I look forward to your future work.
If you need a loan go to your local Bank or Credit Union, while they are still around, be aware to read your Settlement Statement or HUD 1, there should be no garbage fees other than points if any, appraisal, and/or rebates-YPS, remember if larger than .375% this is really costly to your rate, and how these brokers make their money and can be extremely costly in the long haul, pay no garabe fees such as Admin, Processing, Discount fees, Underwriting, Credit Report, ETC…NO POINT, NO FEE LOANS are becoming very popular, it is usually the unfortunate ones without good credit and desperate borrowers (Subprime) that are targets of brokers and because these products are not offered by banks or credit unions that is unfortunate, that we prey on the less fortunate, it’s awful, but it is no different than a Consumer Lender, Title Pawn business etc… Your not going to wash out all the brokers overnight these parana’s are going to be around for a long time just with less popularity due to a weak maket.
At least if LO Were held higher standard the investors, bond rating groups, underwritters could not point the finger at brokers. — Exactly Paul, I agree.
Mortgage professionals wouldn’t have to point fingers if they were doing what they were supposed to do — then they’d have standing to be outraged and unwilling to take blame for this fiasco.
MLMortgageguy you asked: “one question for you…how is forcing lo’s to get licensed, and whatever else you want them to do, how is that going to change the way mortgages are underwritten, approved, securitized and sold to investors?”
MLMortgageguy — you’re the seasoned industry professional and you ask me, a layman such a question?
It seems like you’re just trying to show me up as being ignorant to the way this industry works — admitted, I’m ignorant to the way this industry works.
But licensing, as one of the suggestions, sounded good to me. I think it can make a difference. A person who has to be licensed to practice their profession and is held to certain standards for fear of losing such license, who faces the risk of losing substantial income, because of being barred from practice their profession without such license, will then in turn behave in such a way as to preserve such lisence and will uphold their fiduciary duty to the client so as not to be held up to censure or be submitted to a hearing for license revocation.
Now that won’t deter all fraud but it will help.
What does a license do???????? Do you go to doctor without a license/?attorney?Pharmacist?engineer?CPA?CFP? YOU BET YOUR ASS YOU DON’T? A license shows you have meet standards and been educated in your choosen field!!! If they screw up it can cost them there license/job for life!!!!!!! Even jail!!!
Why bother get a MBA or PHD its just a piece of paper…….because it shows you have spent time mastering your craft!!!!!!!!!!!
A home purchase is one of the most important events in a persons life…..you should be licensed and educated to help people with there needs. Yes there are bad CPA-doctors and for that matter cops, but it is a standard!!!
Buy the way did you know you need a license/educational traing and standards to groom dogs, cut hair, run a daycare……..but not to finance the most important purchase of your life…????????
Loan Officers who work in a broker environment are already required to be licensed and pass the required classes and test and then continuing education each year. It is the banks that are allowed to hire unlicensed, unseasoned, uneducated people off the street to sell their loans.
I agree with an earlier post re: a minimum internship (he proposed 2 years, I say 3 years) and more indepth training and education for ANY person selling a real estate loan, whether a loan broker or a bank.
It is finally going back to the good ole days.. once the market levels out, there will be plenty of work for HONEST mortgage professionals, and to be honest, you will need more than 10 years in this business to get a job. They want the ones that knew it like it used to be.
Finally some justice. I spent more time justifying my declines than my approvals. And naturally massive time to fight the commissioned A holes… on their nasty slimey submissions.
Thank goodness things are changing….
Moe,
Looking at your NACA list, I’m not covinced that there won’t be massive problems. When the assembly line starts who answers the assortment of questions that will be asked from the consumer? If this is how its going to go, whats happening to the rest of the industry’s vendors? Appraisers, Insurance Agents, Title Company’s Inspectors, etc? When moving to window 3 what happens if the client picks the wrong option and loses their home. Who’s to blame then? Who will do the loan for the 615 fico client? As easy as your list is, it’s not practical. Lenders, brokers and bankers are a necessary.
Underwriter is definitely pissed. I don’t know why. If he/she keeps that attitude up he will be unemployed underwriter. Underwriters have guidelines to follow, not personal opinions to interject. If the guidelines match up, then you must go with it. You are a facilitator. Ironically, you don’t blame the lender who made the crazy products you sign off on and you don’t blame the borrower who wants the deal they know they shouldn’t be getting, but you blame the broker who is delivering the same instrument you need to keep your job. Doesn’t make sense, however, if it bothers you that much, then quit.
Virginia,
Be careful, in NJ,NY,CT,CO,WY states in which I am a license mortgage banker, LO DO NOT HAVE TO PASS A TEST OR CE CREDITS!!!!!!!!! All lo work under the office license….sad but true! The only state that I am licensed in that does require LO To pass a test and CE is Florida.. The test and 24 hour class is pretty easy but it is educational.
That is why I only have 2 people work with me…I trust them and they do the right thing…no boiler room here!!!! My license is on the line, not them. I must say my home state does not enforce many of the present laws,, it is very sad!!! They just make new ones to make themselves look good!
Also NACA charges 50-$100 fee per month depending on loan size. Also what happens if a NACA client gets a loan and sells his house in 2 years for a profit of 30k… do the homeowners get to keep the money????? Most NACA areas are , well not the nicest areas. With that said they do help people with there heart in the right place…and make people lives better, which is fine by me!! We can both survive…NACA -Brokers!
Banks and mortgage bankers are not required to license their loan officers. My post read: loan officers who work in a broker enveironment” Mortgage brokers are required to be licensed in most states. I am not a compliance expert but my many years of experience tells me that as a general rule, mortgage brokers do have to be licensed.
Paul,
So someone is making some money off of these loans. What is the $50-$100 monthly fee called? And how long do the client pay that fee?
I am (soon not to be at the end of this month) a Realtor and an appraiser in the Northern VA area. I got into the appraisal side in 2001 and agency side in 2003. I love appraising and hate agency. When I first started as a Realtor, I was so excited….we had to take so many ethics classes and than had give a pledge which included the Golden Rule. I was in the middle of a very nasty divorce with lots of lies and I was feeling so blessed to be going into a business that I could be honest, know others were honest and still make money! This was just the answer I was looking for…right? Well, 2 years later I left my broker and came close to sending back my license because the rose colored glasses had been yanked off me too many times. I interviewed with a broker that was different and went with them instead. I also started my own appraisal company in 2005 so that I would have no pressure from a boss to “bend” the rules. Since appraising is what I like and excell at, my bread and butter is there. Agency was done just to help friends not get taken advantage of. Everytime I get into conversations with folks over the past few years, I would very hestitantly tell them I was also a Realtor. I specifically said that I have found most Real Estate agents to be lower then used car salesmen…and I still take that view. I believe that if you made your living in Real Estate over the past 7 years and did well, you are in that catagory guaranteed. Even the NAR condones the actions by themselves giving a rosey picture when they know the reality of the downhill slide we are in. So YEAH!!! As of January 1 I will no longer be in the catagory of “worse than a used car salesman.” 2008…what a year! PS- I will mention that I turned in appraisers and Realtors to the boards during my “reality check” time to no avail…all the actions were condoned. The practice in this industry is corrupt from the top down.
Virginia,
The Mortgage broker or mortgage correspondent has to been license but not the LO under him in NJ,NY.CT,WY,CO…LO ONLY PAY $100 for a LO license every 2 years…no test/no CE!!! I want the LO to have there own license that he/she is responsible for there actions!!
In NJ:
Mortgage Banker 250k liq. net worth…can warehouse loans.
Mortgage broker $100 net worth…can not warehouse
Mortgage correspondent $50k net worth…can not warehouse
So if you have 50k liq. net worth, pass state test you were able to open shop with as many LO as you wanted!
Jacmac & Paul — you are correct in your opinions in favor of licensing … however … it may be too little too late for the industry now … i just read a post stating that the state of Massacusetts has in effect banned YSP as a way for brokers to be compensated effective January 2nd … in response to this Wells Fargo is designing a flat fee compensation program for brokers … while IndyMac has pulled out of the state … in effect … the end of the mortgage broker business segment in that state as all lenders either go to the Wells form of compensation which will not adequately provide the necessary compensation for a broker to operate a business or the wholesale lenders will simply exit the state … it is reasonable to believe that many of the other state attorney generals will follow Massachusets lead on this matter … and as one by one the states eliminate YSP then so will the viability of operating a profitable mortgage brokerage be eliminated.
JacMac- You are correct and I apologize. I made comments that where callous (at least) and truthfully I don’t really even feel that way. I wrote some posts last night when it was late and I tried to defend them this morning with the sleep still in my eyes.
My frustration is that brokers are made out to be the cause of this mess and the blame simply cannot rest solely on their heads. I feel that the disclosure that is afforded to the borrower from a broker is far beyond what a bank is held to.
It is my firm belief that the government caused the bubble and knowingly allowed it to continue because of the state the economy was in after 9/11. It is said that the true value of a property is the value that a reasonable buyer would pay under reasonable circumstance and during the last few years of the “bubble” there was neither reasonable buyers nor reasonable circumstance. As a result property values continued to skyrocket and buyers where frantic to purchase a home before the cost of homes were even further out of reach. Nobody wants to claim any responsibility for their part and the whole mess is being laid at the feet of the Mortgage Broker.
Not wanting to go “on and on” I will sum this up with what I think should be done moving forward-
1. Loan Originators need to be licensed. They always should have had to be licensed as its only after an LO really has something to lose will the BS stop.
2. National registry, while I don’t like the idea of a bigger government it is important to track what is going on with the players in this industry.
3. Continuing education I think is important. The one complaints of those who I would consider to be professional Loan Officers and Realtors is the lack of knowledge of a certain element in the lending community.
4. I think first time buyers and those doing a cash-out refinance should have to attend an online class and proof of this should be required in the original submission to the Lender. A big problem with what is going on with homeowners not understanding what they are getting into could be avoided with this simple measure.
5. Loan officers should be financially responsible for fees at the closing table that where not disclosed to the borrower at least three days prior to signing.
6. Homeowners that engaged in deception during the loan process should be held accountable in the event that the loan forecloses. Presently (at least in Arizona) Lenders are prohibited from entering a deficiency judgment against a foreclosed borrower.
7. Yield spread should not be paid Negative Amortization loans (or reverse mortgages for that matter)
I do not however agree with the thought that all stated loans are bad or that “high cost” loans would not be eligible for YSP. I think that an educated borrower should be able to enter into any agreement that would be beneficial to them. What or who determines benefit is not so cut and dry however.
Most of these things are already being addressed in HR 3915 and nearly all “poisonous” loans have been eliminated from the available loan products so most of this is presently a mute point in my personal (yet highly accurate) opinion
P .
CTAN
Chris,
I am not a expert on NACA but the fee last 5-10 years and depends on loan size. 0-99k $50 100k-199k $50 and over 200k $100…but they do not pay MI…They pay this fee .
I think in the long run if Wells and other banks stop paying YSP it will be bad for consumers. They will be the only game it town and that is not good. When Wells closes a loan they DO NOT have to disclose how much money they are getting paid for delivering the loan.THEY ARE NOT DOING IT FOR FREE!!!! I think this is a bad idea. Every bank, broker or whoever should have to disclose what they are getting paid…fair to all!! EQUAL PLAYING FIELD FOR ALL!!! I feel there is money to be made in wholesaling loans and some new players will emerge and some old will be around.
Like I said in a early post…I have been closed off to some lenders via wholesale…only to be contacted by the same banks “Private Banking” looking for high quality loans!!
bigcityloans- As always lenders will just find a way around the problem one way would be a flat fee a better way would be to simply use the yield (“backside”) on loans to pay for the points (“front side”) at least then all fees will be disclosed to the borrower right on the top of the GFE and HUD.
Here is the thing that gets me-
If you go to Wells Fargo retail and get a quote on a say.. 200k loan, full doc, great income, 80% ltv (really “vanilla”) you will get a rate that is a full half a percent more than the rate that would be given to a broker by Wells Fargo wholesale. So why is Mass. passing legislation saying that a business owner doesn’t have the right to “mark up” their loan products?
An “A Paper loan” pays YSP at about 4 to 1, so a loan offered to a broker at 5.75% and sold to the borrower at 6.25% pays the broker 2 points YSP. Is that really so awful? Wells Fargo retail just keeps the 2 points YSP for themselves but doesn’t have to disclose it to the borrower because they (unlike the Broker) are funding the loan with their own money. I really think the repercussions of flippantly forcing an industry to suddenly change the way is run will have dramatic unintended side effects.
I am Republican, a proud member of the vast right wing conspiracy and I believe in corporations I believe they should make money and as much as they can.
I am starting to doubt my beliefs.
I have been in the mortgage business for 20 years. I have seen just about everything. Here are my thoughts on lending
*Government talks about economy and growth. People have very little ‘extra’ money to take care of things so they ‘borrow’ The consumer(so) own about 1.9 trillion in credit. The economy grows doesn’t show how much ‘borrowing’ attributes to that. Is it real growth or is it growth based on ‘borrowing’?
*Lender-lending has become abusive from payday lending, auto loans, finance companies, credit cars(late fee’s and over limit fee’s, high interest rates, NSF fee’s to the tune of 18 billion per year, atm fee’s, check by phone fee’s, late fee’s
Corporation have been abusive to the consumers. They have gouged and raped them with anything slight deviation from the contract. They pounce on you to extract more money.
Lending has become a multi trillion dollar business and every lending institution has devised every single possibility to set up triggers to get more money. And often times the consumer doesn’t even know it. A bank will sometimes create a way to post your checks to trigger you to become over draft and generate NSF fee’s
Predatory lending is throughout the lending and banking institutions and I find it horrible that the consumers are straddled with so much debt that the consumers and totally stressed out with how much they owe and how much it cost to survive.
So many lenders grant loans without any real consideration to ability to repay. I bought a car and they never asked me for paystubs. They relied entirely on my credit score. I could certainly afford the loan but how many people go through the assembly line and if the customer has a 650 score they can buy just about any car and the lender doesn’t even do a real budget analyses. Wow…
I called in my mortgage payment they want to charge $20 convenience fee. So I went online to pay and they want to charge $20 convenience fee.
Lending today has gotten out of control because the lenders don’t care if you can pay. They just look at the bottomed line and will continue doing this until they start taking real hits.
I will certainly will never be no Democrat — but the Republicans are not the answer to this countries problems either.
Also as to Wells…. I have closed loans at lender A at 6.25% 30 yr fixed and been paid 1.5ysp… a few months later that loan is sold off to Wells…no big deal…..but when I was placing the loan Wells was at 6.5 for the same loan, not only wholesale but on the retail side. So how much is Wells making and is this really better for the consumer????? I doubt it!!!!!
I invited any Congressman or law maker to my office and I will show them facts….Wells is making more than the broker and costing the consumer in rate….the facts will speak for themselves!!!!! Free enterprise is the only way!!!!!
Competiton is good thing, if brokers go away so does pricing to the consumer!!!!!!!
People are not losing their homes because of YSP’s. They are losing their home because of the products and the inability to continue paying for a loan they wanted in the begining but now can’t afford. Having the L.O. lose the ability to have a YSP will now without a doubt affect the the borrower’s closing cost. Remember, these are clients that can’t get bank financing. However, banks who get a YSP every loan they originate have the luxury of not calling it anything. Wells Fargo is making this big YSP statement in MA but does that same statment to their retail or bank which also does loans? Probably not.
Paul — it is not the remaining “wholesale” divisions of banks that will arbitrarily eliminate YSP … YSPs will be eliminated by new laws passed by your elected officials … similar to the Massachusets governance … because it is politically correct … or … in the case of the attorney general of the state of Massachusets … she feels that it is the right thing to do.
CTAN
YOU BEAT ME TO THE PUNCH!!!! Can you here me Barry Franks and every other law maker….EQUAL DISCLOSER FOR ALL!!!!!!!! ALL YSP, FEE’S….WHATEVER! NO HIDING BEHIND THE FACT OF BEING A FEDERALLY CHATERED BANK!!!! IF that was the case Wells, Countrywide, would and is out off the market!!!
ALSO, NO CONGRESSMAN OR LAW MAKER IS ALLOWED TO EXCEPT A DONATION FROM ANY BANK, LENDER, FOR THERE ELECTION CAMPAIGN!!!
sorry, jacmac
i’m not trying to show anybody up. just trying to share the knowledge that brokers have not created this mess…have we contributed, absolutely. but the meltdown does not rest solely on us…paul, yes the shit does flow down hill, especially with this fiasco…it being an election year, the politicians have to make somebody the sacrificial lamb…to try to win votes…in the mean time…
jacmac, i wish i had the answer, then i wouldn’t be working harder than ever for very little…i’d sell my solution to those on wall street!!!!!!!!
Paul,
I believe in everything you have said. If someone lost their house because you gave them a 6.25% as opposed to a 5.75% then there is something wrong with the buyer, not the product. I have a question for you and everyone else on this post.
When the YSP is eliminated, then what? And when L.O. is licensed, which is a good thing, who is it on when the house goes into foreclosure?
If Congress, attorney general wants to elimate YSP, then Wells and others big banks have to give loans to consumers at cost!! Wells should not be able to make a fee for delivering a loan… in effect it is there YSP,WHICH IS A MUCH MORE YSP THAN I RECEIVE!!!….OH I FORGOT THAT IS PROFIT FOR DOING THE LOAN…and I thought they did it for free!!!!!
IF YSP is elimated why have any business. Can we just buy our perscriptions from our doctor, good bye pharamcist. How about buying a car direct from Honda, who needs a dealer! How about getting a loan from Fannie Mae and skip right over Wells??????
The fact is I can deliver a better loan to a consumer at a cheaper price than Wells and other banks. They know it , we know it!!! Shit flows downhill and we are the easy target right now!
NACA forgot to show the APR after the note rate in their ad according to federal truth-in-lending advertising rules.
LOL.
ctan — the attorney general in Massachusets has deemed that it is illegal for the lender to pay YSP to a third party originator … not that it is illegal for a business owner mark up their loan products … a mortgage broker can still charge an application fee, processing fee and origination points … they will not be able to be compensated by YSP. So, the new deal will be how many points/fees will a borrower pay for a par rate.
And one more thing!!!! I know I am out of controll!!!!
What does YSP have to do with mortgage fraud????? We are in this mess because underwritting standards were to easy,stupid loans 100 ltv stated-580 credit NIV?? bond ratings were inflated, and so on.
WE ARE NOT IN THIS MESS BECAUSE SOME BROKER MADE 3 YSP INSTEAD OF 1.5YSP. The fact is it was a bad loan to start with and the blame lies on the bank who created the product, and the bank who bought them!!!
Food for thought…..If banks limited the YSP TO 1.5 4 YEARS AGO AND HAD ALL OF THE SAME LAON PROGRAMS, WOULD WE BE IN THIS MESS??? YOU BET YOUR ASS BECAUSE THE PROGRAMS , UNDERWRITTEN AND PURCHASE OF THESE LOANS BUY WALL STREET IS THE REAL PROBLEM!!
Bigcityloans- Well I would say that preventing a lender from paying YSP to a broker is the same as not allowing the broker to mark up the loan.
However, I’m certain that the YSP can still be used to pay loan costs so it should be ok to pay origination points charged by the broker. All the broker needs to do is charge the points and have the lender pay for them with the rebate that is still in place to pay other loan fees. yes?
Paul- the 10% you are speaking of is a special deal they have with Countrywide for loan modifications of loans that have a reset or starting rate of 10% or higher. I reported on that deal last month.
Of course the homeowner gets to keep any profits on the sale of their home.
They are a mortgage broker and these lenders have committed $10 billion to fund these mortgages on NACA’s terms and NACA’a way. Below market rates.
Chris- They will still have title rep and appraisers, but it is the mortgage broker/LO who needs to worry about this new breed of mortagage company. The non-profits have arrived and they are now backed BIG TIME by our government.
Like I said, good for consumers, BAAAAAAD for brokers.
Here is their mortgage program;
PURPOSE: Purchase
Purchase & Rehab
PROPERTY TYPES: One to Four Family, condos, and co-ops.
Existing, New Construction, and Renovations
DOWN PAYMENT: None
CLOSING COSTS: None (paid by lender)
INTEREST RATE: One percent below the prime market rate
Current Interest rate: 5.375% 30 year fixed (as of 12/28/2007)
BUY-DOWN: Additional funds can reduce the interest rate
Paying one percent of the mortgage amount up front reduces the interest rate by one quarter of a percent (.25%)– a tremendous added benefit.
APPLICATION FEE: None (paid by lender)
POINTS & FEES: None (paid by lender)
CREDIT HISTORY: Perfect credit not required
P.M.I.:
(Private Mortgage Insurance) None
NSF/Membership:
(Neighborhood Stabilization Fund) $50 per month for five to ten years
This payment occurs once you purchase through NACA and is part of your mortgage payment. This is a required payment as a NACA Homeowner Member, and as a Member you can receive assistance to NACA\’e2\’80\’99s membership assistance program if you are ever at risk of losing your home. You would also receive the other benefits of NACA Membership.
OTHER TERMS: No yield spread premium; No pre-payment penalty; No balloon payment; No required credit life, or other unnecessary or overpriced insurance.
Let me ask you this. Can you beat this rate and terms? 5.375% on a 30 year fixed with no fees.
I would like the AG of Mass. explain to me how a 6.25% o point loan with a YSP 0F 1.5% Is a bad deal compared to Wells at 6.5% retail????????????????????
Now I have to charge points to my client for the rate of 6.25% or he can go to Wells and pay 6.5% no points??? Oh buy the way Wells is getting 4 points on the inside for that loan!!!!!!!!!!!!! AND IT IS NOT DISCLOSED!!!!!
I hope the lawmakers take ther time and think this out, sometimes no action is this best action until you have had ample time to digest the facts!!!!!!
Paul- the reason that YSP is being looked at so closely is because of that damn Option ARM. Brokers/Banks have been steering borrowers into those loans because of the massive YSP paid on that product. The real irony is that with all the problems we are having with forclosures the Option ARM is still in the product mix and has gotten ZERO attention from the media. In fact if you listen to the news the Option ARM is lumped in with “Sub-Prime” which of course you and I know to be an absolute lie. Option ARMs where A paper and then Alt A but never (asside from a brief stint with GMAC) where they ever Sub-Prime paper.
CTAN
You are correct!!! The fee’s have just been moved!!!!!
The answer is so simple!!!!!! ALL LENDERS DISCLOSE EVERY LAST DIME!!
NO HIDING DELIVERY FEE’S!!!!!!
Then brokers and bank would have to survive on honesty and customer service, what a novel idea!!!!!
Paul- agreed on the Banks non-disclosure. I suppose the argument is that at the time of funding the bank hasnt really made anything on the loan and so its no business of the borrower what they will make later.
Of course this goes for mortgage bankers as well, I guess Allied and Wilshire will be growing like there’s no tomorrow. They would be exempt from the YSP problem on the “banked” side
The best Republican mortgage broker line of the year.
Mike Durocher – “I am Republican, a proud member of the vast right wing conspiracy and I believe in corporations I believe they should make money and as much as they can. I am starting to doubt my beliefs. ”
I just about choked on my turkey sandwhich when I saw that.
Then Mike says, “I will certainly will never be no Democrat — but the Republicans are not the answer to this countries problems either.”
Ron Paul is the answer Mike!
CTAN
Right again!!!! Option Arm is not subprime, Brokers sold the shit out of this loan for the big payday. Most lenders turned a blind eye to these loans, They new damm well that most of there clients should not be in this loan, but it made the most money so on it went!!! Where was the state banking depts. allowing these loans???? Getting paid contributions by the big lenders?
Paul,
That is the point the supporters of eliminating brokers don’t get. The consumer will pay someone and something. 60 months/120 months at $3000 or 6000 and $6000 or $12000 respectively. Some of these figures are the amounts paid at closing. Some are higher and keep in mind, closing costs will still be there when they sign their final closing docs in addition to the fee that is not call MI. Don’t get it twisted. Non-profit organizations don’t mean what they offer is free. And as crazy as that sounds, free does come with stipulations. Clients don’t pay mi but they pay. You can call fees whatever you want.
Lucille gave us a list of fees not to accept and some are really BS fees, but some are real costs that must be paid by someone. Just like passing the savings on to the borrower when applicable, there are some debits the consumer is going to pay. Lenders are a for-profit organization. If the consumer is thinking that in the end of this mess, getting a loan will be free of charge then they are in for a helluva suprise. I agree NACA is a good program but it comes with guidelines a borrower must adhere to or they don’t get the loan or suffer a “penalty.” You are correct Paul on the locations. The loans are attached to less desirable areas to sitmulate neighborhood revitalization and that is a good thing for a community. But is the consumer really concerned about the community? Remember, it’s a loan and when the consumer is ready to updgrade to a popular community then what? There are their penalties for moving on. Penalties=fees. It may not be attached to the interest rate but its still called a penalty and the consumer will pay them.
paul — you are missing some basic business concepts … when a customer retains your services to provide them with “money” they are not buying a manufactured product such as a drug or a car … they are retaining your services for your knowledge, advice and expertise as a professional … what the Massachusets attorney general has determined is that as a professional you are not entitled to receive illegal kickbacks from lenders in the form of YSP for the funding of the loan … however … you are entitled as a professional to charge fees for your services to the client who retained you (the borrower) such as an attorney, an accountant, a doctor, or a financial planner would.
No I can beat the rate but they only serve 5 towns in NJ.
Vote for Paul and CTAN for NAMB pres and VP’s in 08! and all the other fine commenters like bigcity, mlmmortgageguy etc.
Some of the few mortgage brokers and LO’s with class, dignity and a firm grasp of this industry and I appreciate the information and debate.
There are a lot of influential people who read this blog, non-profits and also a lot of homeowners. So, this gives you all a chance to shine and educate the non-industry mortgage professional. It also gives some of the idiots a chance to look like, well, idiots. But you all have out weighed any idiotic comments by taking the time to explain yourselves in detail.
Thanks for the insight, ideas and future posts that I get as a result of the ideas I pick up from all your comments.
Loan Officer Licensing States
The following states require additional licensing for Loan Officers. The definition of a loan officer is different in every state, but the usually meaning is anyone that is compensated for taking an application and reviewing the rate and fees with the borrower. Unless otherwise noted, these states require loan officer licensing for all license types.
Loan Officer licensing varies from state to state. It can be as easy as just notifying the state, or it can be as difficult as a full application, fingerprint background check, bonding, initial and continuing education, and an exam. Contact Us today if you need assistance with licensing your Loan Officers.
Alaska – July 1, 2008
Arkansas
California – DRE Only (Education required under CFL and RML Licenses)
Colorado
Connecticut
Florida
Hawaii
Idaho
Illinois
Indiana – Loan Broker Licensees Only
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Mississippi
Montana – Mortgage Broker Licensees Only
Nevada – Mortgage Broker Licensees Only
New Hampshire
New Jersey
New York – January 1, 2008
North Carolina
Ohio
Oklahoma – Mortgage Broker Licensees Only
Oregon
South Carolina – Mortgage Broker Licensees Only
Tennessee
Texas – Mortgage Broker Licensees Only
Utah
Washington – Mortgage Broker Licensees Only
West Virginia
Wisconsin
Bigcityloans- to a broker loan programs are as much of a product as a mutual fund is a product to a financial planner. Now I know FP’s get “kick backs” so what about them. How about car loans? they are financed with the equivalent of YSP, what about them? I’m certain I could find other examples if I where so inclined.
NACA does scare me. Lets see no money down, less than perfect credit. other income source( this means cash on the side) I know they help many people but isn’t this program wide open for fraud???
No money down means homeowner can walk away at anytime!!
they serve many more town then that Paul.
Their main office is in MA. and they have over 30 offices in 16 states.
Moe,
Sorry I STAND CORRECTED!!!
aNY INCOME LIMITS?
I think they do it the right way and commit homeowners to ownership not just of their home, but of their communities. Like it should be. I would say that it’s a safe bet that many of these people do not walk away. Especially when NACA teaches consumer activism and community involvement.
https://www.naca.com/members/eligibilityIntro.jsp
General Requirements
The following are the general eligibility requirements to participate in the NACA Program. There are no income limits, but there are maximum purchase price limits and you must purchase within a NACA service area.
Be a Member in good standing
NACA provides the NACA Workshop to everyone without becoming a NACA Member. After attending the workshop, should you decide to begin the NACA Program and the initial counseling, you need to be a NACA Member in good standing. This requires that the Membership Agreement and Authorization be signed by all household members. At your first individual meeting with a Mortgage Consultant, you will need to pay the Membership Fee, (for 2007 is $20 for the year). Once you purchase your home, you will need to pay the Membership Fee, which includes the Neighborhood Stabilization Fund Fee,of $50 a month for a period of between five and ten years, depending on the amount of the mortgage. The Membership fee entitles you to not only NACA\’e2\’80\’99s comprehensive counseling to assist you throughout the home buying and mortgage process, but also to NACA\’e2\’80\’99s membership assistance for NACA homeowners that provides comprehensive foreclosure prevention assistance.
No member of the household can have an ownership interest in any other property
NACA focuses on people who have not been able to purchase a home. The program, however, is not limited to first-time homebuyers; you may participate as long as you do not own another home at the time of purchase. Current NACA homeowners must have lived in their home for at least three years and have been active participants in the NACA program to be eligible to purchase through the program again.
Occupy the home for as long as you have the mortgage through NACA
NACA believes that owner-occupants stabilize neighborhoods. Therefore, NACA requires that you live in your home for as long as you have a mortgage through NACA. Being an owner-occupant involves you in all aspects of the community because you own a piece of the community, not just real estate. NACA is very serious about Members adhering to the occupancy requirement. Therefore, NACA takes out a lien on the property\’e2\’80\rdblquote in addition to other enforcement mechanisms\’e2\’80\rdblquote to ensure that homeowners live in the home.
This does not prevent you from selling your house for a profit, refinancing your house, or purchasing other property while continuing to live in the house purchased through NACA. These serious actions and remedies are in place to prevent the abuse of the NACA Program. Lenders participating in the NACA Program also require owner-occupancy and may have their own enforcement mechanisms beyond NACA\’e2\’80\’99s. Obtaining a second mortgage requires that NACA subordinate its lien to the second mortgage, which NACA may or may not, in its sole discretion, agree to provide; therefore, your ability to obtain a second mortgage may be limited.
Participate in at least five actions and activities a year in support of NACA\’e2\’80\’99s mission
Every Member is encouraged to contribute their unique skills to NACA and its mission. Many people say the NACA program sounds too good to be true. It is real because of the active participation of NACA\’e2\’80\’99s huge Membership. Participation and direct action have made NACA successful and will continue to strengthen our neighborhoods and organization. There are numerous ways for you to participate:
Join advocacy campaigns that may include protests, demonstrations, actions and/or engaging in litigation against persons or companies that discriminate against or victimize others;
volunteer in the NACA office;
participate on the peer lending committee; and
assist other Members with the home buying process.
great thanks Virginia!
Virginia,
Yes you fill-out a application in NJ for LO license no test, fingerprint card. $100 CHECK ON YOU ARE ON YOUR WAY!
Good bye for now, It has been fun and I hope we all learned something!
um….5.375????? How? From Where? How does one keep the door open? expenses to do loan? All for low cost loans, but lets be real here. Someone seems too low…. not feasable for the long term! Same level of costs that banks face. Dollars and cents… Do the MATH!!! Short Termer…
Moe,
I hear you but let me ask you this. With all of the vendors minus the broker still in play, who is watching the employees who are getting paid to push these deals through. Some deals will be unscrupolously put together and suffer the same fate as what we are witnessing now. What regulation is in place for that? Are the employees licensed or fall under the umbrella of the organization?
Is NACA for investors or people with multiple properties?
100%financing: great but that’s one of the current industry problems. No personal investment from the consumer when contemplation comes up on rather to pay for the home or walk away. No loss. As the buyer I can negoiate the property below value and buy with no money or cost to me and turn around and sell it for a profit? Really. There is a no recapture clause on these free deal?
Interest rate: Wonderful. That just proves to everyone that brokers are not the only one getting YSP. The money is loaned to these institution at discounted rates anyway and they inturn loan it out to the consumer slightly higher. Prime + 1. Just eliminate the 1 and there it still is. YSP.
Discount the rate. That’s nothing new
Application fee: Looks like it has a new name. Membership fee
Perfect credit: Are they doing sub 500′s or mid 500′s What is their cut off? Are BK’s allowed. How about previous foreclosure and other loan defaults? FHA does shaking credit situation already
PMI: Is the NSF($50-$100 monthly fee) a bailout mechanism if the loan goes into default or do they send literature and give some verbal support to what is about to happen next when they have to get out of the property? Do they hold these loans or sell them?
No, no one can beat this seemingly perfect situation. Not even the banks, so they need to be scared too. I can match most of these terms and get very close to the rate. But what are the cons to this program. You gave me all the good stuff, what are the negatives because NACA has been in my state for years and its not that popular. It’s a one stop shop where I’m at and that’s never been a good thing. Monoply.
CTAN
Financial planners do get 12b-1 on assets under management. .250-1.00 basis points. This fee is to pay the planner for his time. In that I mean does your planner look out for you? Does he have a semi-yearly meeting with you to discuss your concerns or needs. That is what the fee is for. If you mdo not hear from him/her it is time to find a new planner.
I am sorry, Paul but I keep reading that there is a test for becoming a licensed LO in New Jersey. It looks like an LO does not have “education” requirements but it does require the LO to pass a test:
New Jersey requires that anybody dealing with the money part of Real Estate transactions must have a license. Real Estate licenses are divided into three parts: Sales Assistant, Agent (Realtor), and Broker. The difference lies in the number of courses one has to pass. The Sales Assistant designation usually requires the passing of one course, often called the Real Estate Principles course. The agent designation requires one or two additional courses, typically Legal Aspects and Real Estate Practices. In New Jersey the profession of loan officer (loan solicitor) is regulated by the department of banking and insurance. The state does not require that a specific course be completed. However, they still want you to pass a test. You may purchase from them a booklet that covers the required details. But note: It is not a textbook and it does not train you for the mathematics portion.
We can go on and on, back and forth. I agree that all LO’s should be licensed, have a three year internship and pass rigid education requirements……
What does the pay structure look like for a Non-profit LO? Sounds interesting to be in a non-greed driven market, but I still need to make a living. I would love to continue helping people in to homes with good mortgage, but I also have big bills to pay. So how much does the average Non-profit Loan Officer make per year?
Virginia,
I am not trying to give you a hard time here. I am a license Mortgage Banker in NJ. There is only a test for banker, broker, correspondent lender, secondary lender. No test for LO JUST SIGN ND DRIVE!
Virginia,
Also A LO must work for a licensed banker, broker, correspondent. It is my ass on the line not the LO.
chuck3d b33f..I love how you say loans cannot be closed by min wage earners..HELLO..every bartender and McDonalds person has a mortgage broker license..what do you think was in your industry…rocket scientist??
Also, for all those who think that the mortgage broker industry is going to rocking and rolling in the near future..open up your email…chances are there is some change from at least 1 lender regarding thier loan requirements…
Wall Street has to make the foreign investor happy..they are not happy with our so called rating system that gave junk the A status..so bye bye broker with your six figure salary and welcome to the real world where you will have to work harder, with less products and less of a YSP.. just to earn 50K..you wont be phased out totally, but like a bad dog you will be re-trained to think totallly differently about your clients and your job…
Oh by the way..where is your precious NAMB?? They were too busy enjoying the boost in membership fees to care about its members..to busy enjoying the bigger budget for their expense accounts than caring about the destruction of their industry…funny how so many of your higher ups have already jumped ship!
Give them a call and ask them what are they doing about your future??
Virginia,
This was and still is a big problem in NJ, bankers/brokers were licensing everyone that had a pulse. They would bring in every piece of crap loan and then try to find a home for it. They make as much money as possible and now we are in this mess. Not all brokers did this, there many honest broker here but a few bad apples spoils the crop!
Paul,
In your opinion, do you think requiring everyone to be licensed at this stage of the game, even though it needs to happen quickly, will really prevent fraudulant activity?
Ann,
You hit the nail on the head…every bartender and fastfood worker was license because there were no standards!!! They bring the loans in and there boss would find a home for them, no regard to the well being of the client! But lets not forget, the lenders knew it, Wall Street knew as lond as they made a profit and now we all pay!
Mortgage brokers have never had a good reputation. I don’t know what planet you are living on. They have never been respectable and have always been thought of as used car salesman. Wake Up!!!
Moe,
What is the income expectation for a Non-Profit Loan Officer? Just curious.
Chris
Every LO is licensed in NJ but there are no requirements, testing, fingerprinting, bond. If every new LO had to complete 40-60 hours classroom time, pass a test and buy there own bond it would help! The average Joe would not put in his time.
Hey folks, using words like “always” and “never” do not support your “facts.” Those words just show how pissed off everyone is.
10 trillion dollars will be the payout of the US taxpayer for this mess. We are the new subprime company………non profit is tax money………once the government cleans up the mess they will make sure that they CONTROL all the future mortgage origination. They will have to save a few banks in this mess, with CITI and MERRILL having 13 billion plus losses quarter after quarter, well say goodbye.
Banks like Washington Mutual, CW and Suntrust and Wachoivia have huge problems and may not make it.
The builders start going bust next month. This will not be gone until the over supply is sold off, we are at about 3 year supply right now.
“A” paper mortgage holders are starting to give their homes back, no shylock there but they will find another excuse for the problem, no one seems to see the supply and demand side of it, they all want to blame someone, what a shame. But guys this just started in November with CITI’s losses and the adjustments to the loans really don’t start until February. Oh yeah that is the month that the first of the baby boomers start getting their checks…………oooops………….
Paul,
I’m a broker in LA and the requirements for the L.O. is everything you listed short of the L.O. getting their own bond. Even with that, foolishiness still prevails. Just two year ago the governing body decided to reactivate the testing requirement for anyone who wanted to be an L.O. Three years before that all you had to do was sign up and wait for your license to show up. The same government that now is saying brokers are “bad.” For three year the state let everyone run willy nilly and now they are running around trying to shut every brokerage down behind bad behavior they help create. The general public doesn’t know that though.
Someone has to direct some of this problem on the borrower. Consumers ultimately drive the market. Every professional is at fault but it starts with them.
Good nite all!! Off to watch the Pats complete the perfect season!
If all of some of these banks fold, us brokers might be the only ones left???
Paul,
I hope not. We need banks, just as much as they need us
I also am in Los Angeles. I am very bitter at the foolishness of our industry in allowing anyone who can pass the state exam and take the required courses to sell loans to obtain a license. The state exam and education requirements are geared mainly toward realtors with some minor areas of mortgage disclosures, etc. This in no way provides any real experience or knowledge in mortgage lending. They do not require ANY real time experience. Looks like licensing was pretty loosey, goosey all over. I like the idea of a long-term internship, along with an exam and courses that are geared toward mortgage lending.
Chris,
Yeah, I know we need them. Just being silly.
As somebody said many years ago “This too shall pass”
Mark- my knowledge is that non-profit employess recieve prevailing industry standard. If you are the marketing director, then that salary should be in line with a for profit and within reason. With that said, I am not sure what they would use as the standard for an LO. I am guessing, not much but decent.
My guess is they are going to need a few good men and woman to assist them.
Ann – I am definitely a fan
Mortgageman – I am assuming you have suit like the used car guy pictured and wear a pinky ring?
, kidding
Catherine – apparantly your head is not stuck in the sand and you have a grasp of reality.
Paul and Chris – Non profits are the new mortgage players in 08-09, maybe you all should look into it. Just a tip from your friendly and always real blogger, Moe.
What about computer chips embeded in the loan officers skin and anytime they charge more than a point, it is then registered into a central database that is manned at Central Mortgage Control. CMC?
Much like a sex offender, but a loan offender and they will have to register has a loan offender is they ever move and if they don’t register, it’s like a lo jack system and the DRE or whomever can send in their goons and I dunno, shock him with taser guns or something like that to teach em a lesson.
Moe
Non profits may be a new player but with loan limits in Burlington County at 270k is very limited. Bergen county loan limits of 370k does not buy you a garage. A 370k loan limit is lets say in not a good area!
I am not trying to blow smoke up anybodies ass, but most of my loans are 500k- 2 million. The average price for a starter home in North Jersey,Bergen, Morris and Monmouth County is 600k range, even after a price corrections. Remember this part of Jersey is were all the Wall Street players and CEO LIVE.
I do not see any nonprofits here…just Newark!
Why does Countrywide get to refi people at NACA???? Didn’t Countrywide approve these people the first time???? Or did approve bullshit option arms or fast and easy???? How is there rate now over 10%???? Must have put them in a great loan to begin with!
Ouch. But since we’re being funny, send some of those hot chips to the borrowers who after good advice say F**ck it, I want the big house anyway. That needs to be made public record and list in bold print in the Sunday edition.
Then takes some of the left over chips, if you have any left and inject them into the appraisers who inflate the property value. Shoot them when they get out of pocket with ya. Appraisers don’t take kindly to being told anything.
Inject truth serium into the real estate agent so they can stop lying to the borrowers and trying to do everyone’s job.
Poision the builders who are making the 20%, not 1.5% markup on house sales
And last but not least, embed a digital timer into the Title agents ass and when he skips over the important jargon and say sign here and we are finish, zap his ass with about 50 volts of that good stuff for about 12 to 15 seconds, for each offense, because he’s probably a lawyer and knows the law.
P.S. Inform Anderson Cooper 360 when a lender is rolling out a new product and let him interview the inventor and take phone and internet questions before the product goes live.
The End
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The below criteria is for a NACA Refinance. Even if you do not meet the below qualifications it is likely that we can assist you with your mortgage as long as you live on the property and do not own other properties.
You cannot own other property, and the property to be refinanced must be owner-occupied.
You must have a predatory interest rate or unaffordable loan terms. The interest rate for the current mortgage(s) must be 10% or greater or considered to be predatory, or the home must be in need of substantial repairs. NACA considers loans predatory that have a teaser rate, but become high rate once they reset.
The property to be refinanced must be within a NACA region where the NACA Program is available.
The property to be refinanced and all requested money for improvements cannot exceed NACA\’e2\’80\’99s maximum purchase price limits set for that region.
You cannot have multiple refinances where you are continually taking money out to pay for your living expenses. This does not include refinances to obtain lower rates or to pay for one-time expenses such as home repairs, medical expenses, or education.
You must have had your current mortgage for at least 24 months.
All properties to be refinanced must have thorough home inspections\’e2\’80\rdblquote a complete house inspection and termite inspection. If applicable, a septic inspection will also be required.
If your situation does not meet all of these criteria, we will not be able to refinance you. However, we may be able to assist you in other ways. You need to complete the Mortgage Questionaire, attend a NACA Workshop and meet with a NACA Mortgage Consultant. If you believe the lender or broker engaged in illegal or unethical activities, you should contact the Federal Trade Commission and state and federal banking regulators.
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criteria is for a NACA Refinance. Even if you do not meet the below qualifications it is likely that we can assist you with your mortgage as long as you live on the property and do not own other properties.
You cannot own other property, and the property to be refinanced must be owner-occupied.
You must have a predatory interest rate or unaffordable loan terms. The interest rate for the current mortgage(s) must be 10% or greater or considered to be predatory, or the home must be in need of substantial repairs. NACA considers loans predatory that have a teaser rate, but become high rate once they reset.
The property to be refinanced must be within a NACA region where the NACA Program is available.
The property to be refinanced and all requested money for improvements cannot exceed NACA\’e2\’80\’99s maximum purchase price limits set for that region.
You cannot have multiple refinances where you are continually taking money out to pay for your living expenses. This does not include refinances to obtain lower rates or to pay for one-time expenses such as home repairs, medical expenses, or education.
You must have had your current mortgage for at least 24 months.
All properties to be refinanced must have thorough home inspections\’e2\’80\rdblquote a complete house inspection and termite inspection. If applicable, a septic inspection will also be required.
How about we videotape every transaction!! We can see the borrower tell us he makes 100k or has money in the back, or a job. It will show if the LO is telling the truth…quoted no points or this is the best loan for you!
When there is a problem, lets go to videotape…case closed!
Moe,
It’s always a pleasure to visit your site and share comments with you. NACA has its place and it works for a facet of situations. It’s been here for years; long before this meltdown happen. It won’t replace brokers, bankers or lenders. It will however, create another avenue for clients to obtain a piece of the American Dream. If you take aother look at its structure, that’s all its designed to do. The people that should be afraid aren’t on this site. It’s the ones who are doing idiots deals and jamming people into impossible situations. But let us not forget we are here because we actual care about our industry.
Paul
Pats 3/ Gaints 7
Chris
Well said!
Moss just got lit up by Giants safety!
Paul,
Did you just see that?
Great play, The Giants are making a game of it!!!
Buy the way NYC, Bronx, Queens NACA loan limits 36S,750!! GOOD LUCK!! Parking spots sell for 60-125k in NYC!!
NACA does great work, I am not here to beat them up. There program is almost like WAMU Affordable gold program. WAMU gives the broker a much better rate .5 below normal and pays the broker a much bigger YSP. the underwritting guidelines are very felxible!!! Boarder income, second job that pays cash…lets say you are a teacher you could say you tutored on the side and use that income to quailfy!!! You must be in the medium income level for the county you live in, just like NACA. DO you know why they do this???? because the goverment requires them to!!! because they are federal chartered bank!! They have no choice and if the money is not loaned out they (WAMU) must find ways to approve borrowers!!! No wonder we have problems!!!
So my point is NACA is nothing new but is does have its place!
Citi and other lenders have the same programs or CRA YSP bonus in certain zip codes!!!
Moe – I am a mortgage broker and I would be happy to work for $50 per month for 5 – 10 years. As for the rate, don’t blame me, I am only taking the rate the lenders give me, JUST like NACA. So, give me 5.375% and I will do the loan and all the parework for $50 per month for the next 5 years. What you are REALLY bragging about is NACA’s ability to blackmail a bunch of lenders into providing below market financing so they will not level charges of discrimination (and the discrimination was often performed by the large lenders, not brokers). When that money dries up, I will put my measly 1.5 pts of YSP up against your $50-100 per month anytime. I am gald to see some of the crooks and bad apples get out of my business, but I guarantee there are a bunch of bad apples in the non-profit sector. Your reasoning sounds just a tad off – NACA is squeezing the lenders for discrimination, which they will blame on the brokers as you put them out of business, thereby guaranteeing the survivability of the big lenders and increasing their margins. I see where this is going.
Moe – I have been a mortgage professional since 1994. I am currently in mourning, realizing that my career is pretty much over. The impending boundaries that will be put in place, as a result of the scum that has operated and prospered for the past 5 years has ruined this industry. I will emphasize here that “I” have never, EVER put my interests before my clients interests in structuring or pricing a loan transaction. I played the game by the “golden rule” and it pisses me off that I am now trying to figure out “what next?”. Because I know that I will never work for a bank.
I hope that what you believe to be true about the “non-profits” comes to fruition in some shape or form. This is the ONLY way to finally get the preditors out of our industry, except for the BIG banks cause they are preditors too. It really is time for some radical reform. The entire industry is corrupt and the compensation structure is corrupt – whether you work at a bank, correspondent, or a broker – it is ALL CORRUPT.
Yes. Every state has some entity that caters directly to reinvigorating forgotten areas. But look at the financial contributors. Instead of loaning the money directly, they use NACA to loan their money out. Sounds like brokering to me. And these instituition don’t want to be directly attached to helping sub par credit clients but they understand there is profit in doing so. So when and if the program is a bust, the real lenders name aren’t on anything. Hmm. Forget about the loan limits. Its about getting that available money out into the world. Lender don’t make money if they hold on to it. If the borrower is not going to be responsible, you can give the loan away at cost and you will still get a disaster
Paul Pats 16/Giant 20 Pats need to tighten up
While we are it how about we make every industry disclose there profit margin. When I buy a car I want to know how much the dealer made! When I drive the car off the lot it is worth 25% less, we all know it but we still buy one!!! Lets see a 30k car minus 25% after the first mile is….7500…now thats profit baby!!!When I pick up blood pressure( just an example) meds I want to know how much Merck is grossing!! 200%????
All I ask is that I can make 1.5-1.75%… Pretty fair if you ask me!!! What business works on a 1.5% margin??? Fraud is the problem, bullshit programs and people who really beleive there rate is 1.95%!!!
that’s to much like right.
How many people really understand this!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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1 Up to four payment options are available during the first 10 years of your loan, depending on the option you select at origination. At various times during the life of your loan, some payment options do not provide for the full payment of principal, interest, or both, which could result in an increase in your loan balance (negative amortization). This can occur if the initial payment amount that you select is less than the full amount of interest due. This can also result from increases in the Adjustable interest rate prior to the Payment Change Date, or from a monthly payment that did not increase sufficiently to pay the full amount of interest due because of the Payment Cap. The minimum payment can change every 12 months, beginning with the 13th payment. Each date on which the payment may change is a “Payment Change Date.” The monthly payment cannot increase (“Payment Cap”) more than 7.50% each year, with some exceptions. Please contact us for details.
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How many people understand this!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Home | Customer Service | Contact Us | Locations
HOME LOANS CAN BE FIXED AND FLEXIBLE.
——————————————————————————–
If you’re looking for a mortgage that offers the stability of a fixed rate and the flexibility of payment options, look at the Pick-a-PaymentSM Mortgage.1
With Pick-a-Payment, you can:
Choose a lower monthly payment2 and temporarily free up cash for:
paying down high-interest debts
funding college tuition
retirement savings
Make higher payments and pay off your home sooner
Pick your rate from adjustable or fixed
With the Fixed Rate Pick-a-PaymentSM Mortgage , we’ll lock your rate, but not your payment because you still get to choose from up to four payment options. Plus you get the added stability of a fixed interest rate.
With the Pick-a-PaymentSM Adjustable Rate Mortgage , your initial payments are based on a lower interest rate and you can still get the house of your dreams and have cash at hand when you need it.
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Call (866) 489-7491 to speak with a Mortgage Specialist. Or we can call you. Just give us the best time to call by following the button below.
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Your inquiry may be handled by Wachovia Mortgage Corporation, or World Savings Bank, a Wachovia Company. The Pick-a-Payment product is originated by World Savings Bank and is subject to credit approval, verification and collateral evaluation. Products not available in all states and are subject to change without notice. Certain restrictions apply.
1 Up to four payment options are available during the first 10 years of your loan, depending on the option you select at origination. At various times during the life of your loan, some payment options do not provide for the full payment of principal, interest, or both, which could result in an increase in your loan balance (negative amortization). This can occur if the initial payment amount that you select is less than the full amount of interest due. This can also result from increases in the Adjustable interest rate prior to the Payment Change Date, or from a monthly payment that did not increase sufficiently to pay the full amount of interest due because of the Payment Cap. The minimum payment can change every 12 months, beginning with the 13th payment. Each date on which the payment may change is a “Payment Change Date.” The monthly payment cannot increase (“Payment Cap”) more than 7.50% each year, with some exceptions. Please contact us for details.
2 When you choose the minimum payment option, it may generate deferred interest and increase your loan balance (up to a maximum limit of 125% of its original amount), reducing the equity you have in your home. The initial minimum payment is fixed for one year. When your loan reaches its tenth year, or if the balance reaches its maximum limit before that year, your minimum payment will increase significantly to the amount needed to pay off your loan within the remaining term. A prepayment fee may apply. Ask for details.
Pick-a-Payment is a federally protected service mark of Golden West Financial Corporation.
Contact Us
(866) 489-7491
8:00am – 10:00pm ET
Monday – Thursday
8:00am – 6:00pm ET
Friday
9:00am – 6:00pm ET
Saturday
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This is a broad statement but “you pay for what you want.” If you don’t have the 500k for the house you want, you then you have to borrower the money to get it. Borrowering money cost. The product is the money, not the house. The house is what is lost when you don’t pay back the product(money). Don’t pay for your car and see what happens. Don’t pay that credit card and see what happens. Don’t pay your rent and see what happens. When you don’t have the 500k for the house you can’t phase out the process. The process cost.
The NACA process cost. To eliminate and have someone totally take responsiblity for initiating your finance, you have to perform acts and pay “membership” fees for a long time. You have to take classes and attest to others that the program is ok. You have no choice in the matter. You are going to have liens on your house if you try to be slick. The rules can be compared to lender guidelines. And that’s ok.
Question. When the borrower has completed the program, do they get the $50×5 years or 100×10 years back? What’s the twenty dollars at the initial application for?
When you have 750 credit and 20% and verifiable income, you’ve already paid for a the option to get the best loan and that cost. When you haven’t done any of that and the sh**ty loan is the only thing availlabe, whose fault is that? And that cost. This crisis isn’t about people who had what they needed before they went house buying. Its about the ones who said “i deserve this just because.”
By the way, car dealerships are given the cars on consignment and split the profit after the sale. When you trade in your car, you are sure getting in the ass and the down payment they get out you goes to the car gods. Yeah Paul, everyone bitches but they buy the car anyway and if you have the balls to tell the sales man any of that, you might get a worse deal. No disclosures and you know you are getting the business. But there are no laws on this and in two years your car is garbage and you are usually forced to buy a new one. Almost like the 2/28.
Pats 16/ Giants 28 Don Shula is losing his mind right now
What a great game…..Don Shula and the 72 fins are on CPR watch!
As the borrower I bet all they saw was you can get the house of your dreams, then everything went black
Beeeeeeep………Beeeeeep Don’t be suprise if Don or his boys come out on the field and shoot Brady in the head
Don’t forget about the rust proofing the car salesman is trying to sell you… do you mean my new car is going to rust????? sign me up!! How about the Golden Gate bridge with that????
People take responsibility for your actions!!!!!!!!
Yes. Plastic does rust. But if you take the 5year or 50k mile warranty for $2000, it won’t rust……Really it won’t rust. Or the priceless, limited and ancient floor mats for an extra $800 and the $750 destination fee for getting the car from the back of the lot. Though its free is you take the upgraded LX model for an extra $1550.
Doctor we have a pulse…. Mr. Shula can you here me????????
sorry……… hear me????
boy I really need to get a life.
Is that you Larry Csonca? Where Bob G at.
Starting CPR again… I don’t know how much he can take!!!
WOW What a play!!!!
Pull out the defibulator. Put it on extra high
Extra high
Underwriter wrote-Whipping boys? You brokers are a bunch of goddamn babies. Fuck your crying. I\’e2\’80\’99ve spent the last 8 months trying to stop the fraudulent loans sent my way, but as long as sales commanded the ship the Titanic sailed on. Now I see this and it makes me want to puke. I don\’e2\’80\’99t blame lenders or borrowers\’e2\’80\’a6.I blame you! Be a man and quit acting like you were a part of the cure for cancer\’e2\’80\’a6you were the cancer.
I am a mortgage loan officer in a broker environment. I began my career in mortgage banking in 1983 as a junior underwriter. I have worked my way up through every facet of mortgage operations to SVP Operations Manager. I received my real estate license in 1999 and went into sales. As an underwriter, NO ONE ON EARTH COULD MAKE ME SIGN OFF ON A LOAN I DIDN’T BELIEVE IN OR THOUGHT DIDN’T QUALIFY! If a superior asked me to sign off, I said “no”. If they told me to sign off, I said no. If they insisted I sign off, I quit. And let me tell you, I did have to quit a few times. As an underwriting manager, operations manager, I NEVER FORCED AN UNDERWRITER TO SIGN OFF ON A LOAN. If they didn’t feel comfortable, they brought it to me. If I didn’t feel comfortable IT WAS DECLINED. How long have you been an underwriter? I would guess not before 2002. I resent yours and everyone’s generalizations THAT ALL MORTGAGE BROKERS ARE LIARS, CHEATS AND THE CANCER. I am not afraid of full doc because I was trained extensively in analyzing all types of borrowers and their financial statements. I have analyzed self-employed borrowers with huge conglomerates, 52 properties with three feet of tax returns. It took me two weeks to complete but my analyzation went to the lender, not the underwriter’s. Hindsight is 20/20 isn’t it underwriter? If you let the loans go through that you knew were fraudulent…..SHAME ON YOU! You are the one that was part of the cancer. Your reputation is all you have in this business…..you should guard it with your life.
Mr. Shula do not go into the light!!!!!!!!!!!!!!
Ladys and Gentlemen we have lost him. T.O.D. 4:30 Dr Paul we done all we can do.
Virginia
Good for you for standing up for yourself!!!!!!!! Your repuatation is everything, your soul is not for sale at any cost!!!
Virginia,
He has 8 months of experience. If he gets back on here and says he has more, then my question is why wasn’t he declining them “fradulant” loans then. 8 months is nothing. He just got out of the 90 day probation period. It takes time to build reputation. You have to know the good and the bad. He’s foolish
Who is underwritter???
Boy I must be tired I cannot even spell anymore……
Its been a rough 4 quarters. Its o.k.
His post is at the top of this forum #6
Underwritter you sold yourself to the devil…do not sign off on shit loans. Document your employers thearts to push loans to close, call a good wrongful termination attorney!
WOW Pats 16-0 what a great achivement!! We can all learn something from the Pats work hard, never settle on past performance, and never give up!!!!! To all honest brokers and all related mortgage personal NEVER GIVE UP!!!!!!!!!!!
Moe~
I wouldn’t give any credence to any underwriter that signed off on any loan that he/she knew was fraudulent. All mortgage bankers have a system: If an underwriter suspected fraud, it went to quality control for a complete audit . If the underwriter was still uncomfortable, they could take it to their UW or Ops Mgr. NO UNDERWRITER IS REQUIRED TO SIGN OFF ON A LOAN THEY DON’T BELIEVE IN. There are rules and regulations regarding that position. Any underwriter that knowingly pushed fraudenlent loans through the system is part of the problem and should be prosecuted. If he/she was coerced, I agree with Paul….get a good wrongful termination attorney!
OK
So we are now all considered scum sucking car salesmen.
The same type of person that slams you into the overpriced over retail car because it is “in demand and a new hot model”, they give you 1/3 the value on your car for trade in, sell you a warranty, credit life, accidental death, Scotchgard treatment, clear coat, under coat, and over coat. They make an overage on the interest rate that they place for you. This process has gone on for decades and continues today and will tomorrow. The public is outraged that they get the shaft whenever they shop for cars.
How many non-profit car lots are out there?
Lucille,
Do you know anything about the mortgage business?? All loans, every single loan originated in America costs money to originate. The advertisements themselves offering a “no cost” loan are nothing but smoke and mirrors and border on fraud. Every loan requires a credit report, some sort of valuation determination, title work and insurance, etc. These loans are only called no-cost due to the fact that the interest rates charged are higher than the current market rate thus enabling the lender to receive a premium on the secondary market (which banks do not have to disclose) that covers the costs associated with the origination of said loan. Get a grip, there is no free lunch…
MLMortgageguy, CTAN, you guys are class acts. Dialogue and communication is key whenever you’re dealing with a problem.
I think what CTAN has proposed is priceless. I’d like to see those provisions put in place. When I spoke to the Senior Bank Officer at the New York State Banking Department in regards to my complaint against the brokers who worked on my loan, we spent about an hour on the phone and basically he kept telling me if I had a problem with the rules or the enforcement powers of their agency I should speak to my legislatures.
He was aware of what was going on, but very non-chalant about his inability to really do anything about it. He said, WE don’t act as litigators.
Paul said: Tape the closing. I LOVE THIS IDEA.
In that closing, their should be FULL DISCLOSURE, and that would seperate the lying homeowners from the lying Mortgage Brokers.
I really liked all of your suggestions, CTAN but especially suggestions NOs 2, 4, and 6 and 7
“1. Loan Originators need to be licensed. They always should have had to be licensed as its only after an LO really has something to lose will the BS stop.
2. National registry, while I don’t like the idea of a bigger government it is important to track what is going on with the players in this industry.
3. Continuing education I think is important. The one complaints of those who I would consider to be professional Loan Officers and Realtors is the lack of knowledge of a certain element in the lending community.
4. I think first time buyers and those doing a cash-out refinance should have to attend an online class and proof of this should be required in the original submission to the Lender. A big problem with what is going on with homeowners not understanding what they are getting into could be avoided with this simple measure.
5. Loan officers should be financially responsible for fees at the closing table that where not disclosed to the borrower at least three days prior to signing.
6. Homeowners that engaged in deception during the loan process should be held accountable in the event that the loan forecloses. Presently (at least in Arizona) Lenders are prohibited from entering a deficiency judgment against a foreclosed borrower.
7. Yield spread should not be paid Negative Amortization loans (or reverse mortgages for that matter)”
THe biggest problem I have with the Mortgage Brokers I worked with is I ASKED THEM, I said, what are you making off of this deal. I am in favor of everyone making as much money as they can, but they lied to me, over and over. The LO said the Loan Origination Fee was ALL they were making.
I have to say, I still don’t get the YSP thing. What is this with I sell you a loan at a certain rate, and then bump the rate up AND charge you a fee?
I can’t wrap my mind around the sense of it. What is the basis of this fee?
Confessions of a Mortgage Industry Professional…
It saddens me that now a mortgage professional (Broker or Banker) has about the same credibility as a used car salesman
I guess as an industry we\’e2\’80\’99ve earned that reputation. We sold too many of the wrong types of loans to the wrong types of people. T…
All I have to say is that a great majority of this is bullshit. I’m so sick and tired of hearing the same old rhetoric regarding all these poor victims who were duped into a loan that they could not afford. Take a hard look at the statistics and you will see that the numbers tell a different tale. An astounding percentage of these homeowners falling behind on their mortgages have done so PRIOR to an adjustable rate reset. Whose fault is this? Does personal responsibility not play a factor in all of this? The masses all thought they were Donald Trump’s in the making and rushed out to get their tickets to ride on the real estate train and the consequences be damned. Every 2/28 I sold (as a mortgage professional with over 15 years in the business) to a borrower was due to one simple fact – they could not qualify for anything else – plain and simple. I clearly spelled out the terms of their loans on numerous occasions throughout the process. Those with less then perfect credit all knew that they had less than perfect credit and were perfectly fine with a 2/28. They simply didn’t care as they all had dreams of selling for a huge profit before the rate re-set. Something that is not being discussed is the role of the Realtors in all of this. I can’t count the times when a borrower came to me with a house already picked out (and emotionally committed) prior to the application process. You would then run their application and discuss their financing options with them. Countless times I urged clients to reconsider their purchase as too expensive for them only to be countered with such responses as how can you get my payment lower? What about an ARM, what about an interest only payment, what about a 40 or even 50 year amortization? How much can the seller contribute to my closing costs as I have no money to put down? I would ask where they learned of these various options and the response was almost always the same – from our realtor. You had a situation where realtors were showing borrowers houses that they could never afford while at the same time feeding them inaccurate information regarding the mortgage process. In North Carolina, if you work for a mortgage broker as a loan officer, you must be licensed by the state which involves a strenuous examination and background check conducted by the SBI. Sadly, this only applies to brokers and not bank loan officers or realtors. Realtors were specifically exempted from this legislation (due to their powerful lobby) and are therefore free to discuss mortgage financing with their customers. What’s the problem with this you ask? They don’t know what the hell they are talking about! They poison the minds of their customers with loan scenarios and payment options that are not realistic. This takes place before the customer has come to see me. Now imagine this scenario: The borrower has been shown a variety of houses without regard to their ability to qualify by their “trusted” Realtor. Now they sit down with me after they are emotionally attached to a particular property and wonder why they don’t qualify for what the realtor had presented to them. They beg and plead for any option available that will get them into this house. So who’s fault is this now? As their mortgage consultant I am required to present them with all of their available options regardless of suitability. Ultimately, it is the client who must decide what is best for them…
Case and point: A few years ago we were solicited by a previous client’s sister to perform a refinance. She had a really good fixed rate first mortgage in combination with a “silent” second held by the city. She was not required to make any payments on the second mortgage. She was adamant in her request to receive a lower mortgage payment while also getting cask back if possible. Unfortunately, her credit situation only afforded her the option of a 2/28 interest only ARM in order to meet her desires. She closed on the mortgage as requested and we hadn’t heard from her for a couple of years until we were served with a lawsuit accusing us of predatory lending practices. She claimed that we should have never “put” her into her current loan and that she couldn’t afford to make her payments. As it turns out she was about a week away from foreclosure and the judge granted a stay of the proceedings until the suit was worked out. She not only sued us but the original lender, the attorney, the trustee for the lender, a previous owner of the mortgage and the current owner, Wells Fargo. Long story short, her claims were bogus. Wells Fargo produced documented evidence that she fell behind on her payments a year before the rate reset. They had recorded transcripts of all of her hardship stories regarding her financial position at the time period of her late payments. None of which had to due with her interest rate adjustment. She has successfully stayed off foreclosure and cost all of us involved thousands of dollars in legal fees for no reason at all. I know for a fact that this is happening all over the country each and every day. Consumer advocate attorney’s smell blood and are suing everyone in sight. Unfortunately, unlike a criminal case, the state does not provide free legal assistance for a civil defense. How is this fair???
All this being said, I must agree with the original thread’s premise. With all of this legal wrangling going on and everyone pointing the finger at mortgage brokers, while the Realtors and the borrowers fail to accept personal responsibility for their own actions, we may very well be doomed…It says a lot about where we are as a society. We seem to have adopted a secular view where every wrong is always someone else’s fault. I am deeply troubled about my child’s future as our society is certainly sending the wrong message
Simply put, there is no question when looking at historical data that people who pay their bills, debts, etc. have good credit. These people therefore qualify for a loan with the best rate at the time. People who do not pay their bills, debts, etc. do not have good credit. Therefore these people do not qualify for the best rate at the time.
Why is it so hard to understand this concept?
Someone mentioned earlier borrowers and Realtors pushed the mortgage community to get the financing for the house the buyers wanted. I own a real estate company as well. Our Realtors know borrowers/buyers have to be prequalified before looking for a home. It’s kinda like a house – basement, walls, roof. It doesn’t get done the other way around. So why is prequalification and getting the correct information from a mortgage professional so hard to accept? Prequalification today only takes 15 minutes or so. Not much time spent to know where we’re going. Fill in the blanks with accurate information and the answer will be there – qualify or no qualify. When the borrowers/buyers come in I have all of the documentation, disclosures signed, I have signed, credit has been reviewed and so on. My files go to underwriting that day or the next morning. Amazing how this happens when all has been upfront, all has been disclosed and all is complete.
There are mortgage professionals and there are some “bad apples”. This is true today, has been true, will always be true and applies to most every profession. It’s unfortunate, but this is reality.
It really gets down to responsibility, accountability, facing reality and work ethic.
Example of helping people who have marginal credit. Got the loan done. Proved the income. Proved the assets. Got a valid appraisal. Closed the loan on a new construction. These borrowers did not qualify for a conventional, fha or va loan. They qualified for a 2/28. I told them to pay everything, not just the mortgage, on time and with your income you will be able to refi into an fha loan within a year or so. Just before the loan was to reset, I get a phone call from them. “We need to refinance right away becuase the payment will be adjusting upwards”. I got permission to run the credit. Guess what? It was worse than when we did the loan. I mean really bad. What they did was run up the credit cards to fill up this new house with new furniture, etc and purchase a new car. They just had to have it all right now. Well guess what? I can not help them. They did exactly what I told them not to do. They did not do what I told them to do.
There is only so much mortgage professionals can do. Momma bird pushes the baby birds out of the nest. They better fly or else – not good. The baby birds take responsibility and learn how to fly. This is the way it is, this is reality and there are consequences.
The second biggest issue I see is we have legislation all over the place. We do not have enforcement of the legislation. So who’s fault is that? Why is it the small business person is the scapegoat? Government representatives are insulated from the realities of business.
A professor of econonics from the Milton Friedman School of Business, Chicago, stated this week the following:
People have tapped their home equity. Now prices have leveled and there is little or no equity. So this is done. Next people have used their credit cards. They’re now tapped. So this is done. Next people’s wages/incomes really haven’t kept pace with inflation. And particularly with energy costs and real estate taxes. Case in point: Energy costs and real estate taxes vs. adjustable mortgages – up $425 vs. $200 respectively for a $150,000 home. Hmmmmmmmmmm. So now people have little or no equity, tapped our credit cards, income not keeping pace, energy and real estate costs up and adjustable mortgages up.
Sorry, folks, but all of this is not the fault of the professional mortgage banker or broker.
Did you know that real estate taxes have gone up 50% since 2002? Check it out.
Realtors and mortgage people seem to have been at odds with each other forever. For years I have contributed above and beyond to the real estate board in our area. I have made mortgage presentations in their offices with lunch provided. I have brought, spread sheets, etc to their open houses. And guess, what? No loans or maybe 4 over the past 14 years.
Sad to say all they wanted was the food. I was told one by a Realtor, “The best way to get a Realtor’s business is through the stomach”. I can tell you that for the most part this doesn’t work. And I can tell you that for the most part many real estate transactions have fallen apart because the Realtor that wanted my support and food gave the business to the local brick and mortar bank. So that’s why I opened up my own real estaste company. And we’re doing just fine. Thank you!
Joe~ post #83 is spot on.
By the way, I had a real estate license in California and Michigan. I do not practice real estate now. However, when I was a Realtor, I didn’t play mortgage professional. I sold real estate. I am in the mortgage business now because of two things: 1) I am more of a numbers person; and 2) I know Realtors really do need good mortgage professionals to help. Note that my comments about Realtors is no all inclusive. There are good Realtors out there. And, unforntunately, the real estate world has similar issues. People get into that business because it looks easy, etc. They sell one home a year. When it is all added up these parttimers simply take away income from the serious, hard working Realtor. So goes it.
Virginia:
Sorry, what is “spot on”?
Joe~your post #83 below:
There are mortgage professionals and there are some \’e2\’80\’9cbad apples\’e2\’80\’9d. This is true today, has been true, will always be true and applies to most every profession. It\’e2\’80\’99s unfortunate, but this is reality.
It really gets down to responsibility, accountability, facing reality and work ethic.
Example of helping people who have marginal credit. Got the loan done. Proved the income. Proved the assets. Got a valid appraisal. Closed the loan on a new construction. These borrowers did not qualify for a conventional, fha or va loan. They qualified for a 2/28. I told them to pay everything, not just the mortgage, on time and with your income you will be able to refi into an fha loan within a year or so. Just before the loan was to reset, I get a phone call from them. \’e2\’80\’9cWe need to refinance right away becuase the payment will be adjusting upwards\’e2\’80\’9d. I got permission to run the credit. Guess what? It was worse than when we did the loan. I mean really bad. What they did was run up the credit cards to fill up this new house with new furniture, etc and purchase a new car. They just had to have it all right now. Well guess what? I can not help them. They did exactly what I told them not to do. They did not do what I told them to do.
There is only so much mortgage professionals can do. Momma bird pushes the baby birds out of the nest. They better fly or else – not good. The baby birds take responsibility and learn how to fly. This is the way it is, this is reality and there are consequences.
[...] ———— Hat Tip to BrokerWatchdog Are Mortgage Brokers Ancient History in 08? – Loan Modification & Loan Workout News [...]
Paul and Chris – I do see NACA expanding big time as the awareness and also massive funding of these non-profits is coming to fuitation as we comment back and forth.
I see other “smart” brokers that have a sense of reality and a pulse on the street that will apply for their 501 (c) 3′s and change their tunes and start being community leaders where they can exist, thrive and keep their doors open.
You see, that’s where I see the business going.
Anyone can open a non-profit mortgage brokerage and offer every product available in wholesale. All they would have to do is charge low fees that cover costs and expenses. Just because they are non-profit does not mean they do not charge fees and they can be more than NACA. So, when a non-profit mortagge brokerage opens down the street in your community, good luck marketing against that.
Andrew – I am glad you see the light.
Cynthia – My heart goes out to all the ethical and honest mortagge professionasl that are suffering and being black balled as a result of all the scum and scammers that entered and most likely exited the business. It’s is a travesty that everyone has to suffer for and be black balled.
Virginia – underwriters have a holier than thou approach as if they were some kind of guardian angel to the gold with no faults. you and I both know that they were the last line of defense for fraud and guess what, the angels were a sleep at the job the last 5 years, based on a money and greed induced coma.
rcf – Great view form the table with clients and Realtors. I know real estate agents have a huge part in this, but they have NAR and years and years of community involvement. If anything NAMB needs to get off their a$$e$ and so do brokers and get involved in their communities instead of counting how many loans they are closing.
Joe – there is only so much you can do when advising a client on what they should do to protect themselves. I know that a lot of professionals fully explained the terms of a mortagage how it works. But at the same time, there were just as many loan officers that did not do that and placed borrowers in predatory mortgages with predatory fees where that LO and broker made the most cash. Same can be said for Realtors.
All I know, that way of business is gone and no one will make the money they were making.
Oh and one more thing, watch out for the non-profits because they will be opening these types of shops everywhere and most likely in your town too.
Moe
Maybe I am thick headed but most of my clients would never go to NACA. First off there loans sizes are to large, second they make plenty of money, and third there time is so valuable that they would never meet the 5 requirements year after year!!!
Moe answer this…why do private banking groups from big banks call me every week for loans. These are the same banks with wholesale channels that no longer exsist???? I will tell you why!!!!!!!!! Big ticket loans!!!! Good credit, great assets and they hope to move that client to there bank, although it is not a requirmrnt of the loan!!! High quality loans with little risk!!!!!
Here you go: 2.7 million purchase, 20% down, 690 credit, stated ( Vice president of big company) 4.2 million in assets!!!!!!!! 2.5 million in stock options!!! The private banking group terms ……10/20 IO 7.125% NO PREPAY 1 YSP and I charged him .625.
That commimsion will pay my mortgage for all of 2008!!!!!!!
This is a loan for any smart common sense bank to approve!!! But the BEST part is clients like this have friends that need help too!!!!! and guess who gets the refferal……me!!! I service the hell out of them and charge and deliver a great product. I do not see them going to NACA!!!!!
Maybe I going to make less in 2008 buy proable not!! I am a mortgage banker because I love my job, not for the money….the money is nice but there is a difference!!!
Moe
You have to admit NACA IS WIDE OPEN for FRAUD!!!! 100 LTV, LESS THAN GREAT CREDIT!!! Is this why we are in this mess!!!!!
I still the think the 20% down, 680 credit, full doc conforming loans are not going to NACA. I can get to 5.625% and make 1.25-1.5 ysp. You seem to missing the fact that peoples time is worth a quater point in rate….no 5 requirements for the next 10 years!!!!!!! Two income households with 2.4 kids running around like crazy do noy have the time over the next 10 years just to save a quater point!! Just my opinion!!!
Moe:
If you charge costs and cover fess etc, how does the non-profit pay the employees? How does anyone there make any money at $50 per month or whatever?
I went to the website last night. I don’t totally understand this non-profit mortgage lending. I do understand there are parameters. I get the impression this is for certain zip codes or type of borrowers.
By the way if this is true then how can I get a 5.375% mortgage fixed for 30 years with no costs, etc? I have a mid 700 score, equity, assets and can prove income.
Point:
First off I know according to what I read and what you are saying I will not qualify for this type of loan. So isn’t this discriminating?
Moe:
Why would I get the 501(c)3 if I all I can do is cover costs and not make any money?
Again, I probably shouldn’t be asking this since I don’t know enough about it. But if it is a way to expand my existing business, I will have to look into it.
JacMac
Thats right tape the transaction!!!! I am also a financial planner and when I make a trade or buy a mutual fund my conversation is recorded!!!!!!!!! It protects everyone. If you are a honest broker you will not care if you are taped..It would cost the the price of 3 tapes 1 FOR me,1 for the client and 1 for the bAnking dept and a $50 fee for the person taping it!!!Oh I forgot…if we taped everything there would be no one left to blame….we would not need a bond or insurance because tapes don not lie!!! We can now get rid of 2 more businesses bonding and E & O!
Thats right Joe, you do not quailfy…you make to much, do not live the proper zip code unless I am missing something!!! Sounds like reverse discrimination!!
NACA does help many people , there is room for both broker and NACA.
By the way there(NACA) loan officers get 45k-65k benifits, bonus and 401k, good for them any hard working person earns it!
Paul – You are not being thick headed, just failing to see that NACA can do what you can do. Not now, but soon. You see these companies will soon have the pick of the litter on who they can hire. I am sure we will see people such as yourself, with experience and integrity working for these non-profits.
You can still operate a non-profit mortgage company and a for profit side by side. Th enon-profit would be for low income borrowers who qualify and the for profit would be for people who can afford to pay for mortgage service fees.
If brokers survive, then yes, the upper class and jumbo loans may very well go to you and you can pay your mortgage for a year.
BUT – if a non-profit opens down the street and they offer jumbo loans etc and charge minimum fees to do the same thing you did, well, bud, you soon will be out of business because those referalls will be going to them.
Paul:
I agree. I said it in the beginning of #83 above. It really gets right down to responsibility, accountability, commitment and work ethic.
It was too easy over the past few years to get a mortgage for the home that people wanted!! Note wanted!! Here in lies some of the problem. Again, they found what they wanted. Then they looked for a mortgage.
When the borrowers signed the papers at application and when they received the papers in the mail from the lender and they signed the papers at closing, how did they not know or think about actually making the mortgage payment (PiTI)? And really how on earth did underwriters approve these loans?
Even when doing a stated income loan salary.com gives guidelines for jobs, positions, etc. I understand that many of these stated income loans were given to people who’s income was stated double of the real income. How in the world could this get through the system?
Oh, and then there is fraud – bogus W2′s, pay stubs, bank statements and retirement accounts. I am not an underwriter. But I can tell after many years in the mortgage business whether these documents are real or not.
In our area recently 8 people were sentenced after a 4 year investigation to prison, revoked licenses, etc. It was because of fraud. Period. I remember asking someoe several years ago how is so and so closing so many loans and making 30m per month. Well, here we are. And there they are.
Moe
You didnot answer my question about private banking groups, also jumbo mortgage clientS ARE NOT GOING TO MEET THE 5 REQUIREMENTS FOR THE NEXT 10 YEARS…..THERE TIME IS MONEY
Joe -charge costs and cover fess etc, how does the non-profit pay the employees? How does anyone there make any money at $50 per month or whatever?
Moe – they get additiinal funding from the government and lenders in the millions that pay for all of this. All employees and the CEO must be paid within reason for the industry. What’s a broker CEO make on average. You could pay yourself a salary of what a comprable for profit would make within reason for your area. I am in So Cal and a broker here (not during the subprime market) income on avearge would be $80k-$120k. Processor $12-15 an hour, LO $35-$50k a year with beni’s.
Joe – I went to the website last night. I don\’e2\’80\’99t totally understand this non-profit mortgage lending. I do understand there are parameters. I get the impression this is for certain zip codes or type of borrowers.
Moe – NACA has their own deal with lenders and their own mortgage model. It’s for low income borrowers and you can still have your for profit.
Joe -By the way if this is true then how can I get a 5.375% mortgage fixed for 30 years with no costs, etc? I have a mid 700 score, equity, assets and can prove income.
Moe – Yes, it is true and you can even get a mortgage with them.
Joe -First off I know according to what I read and what you are saying I will not qualify for this type of loan. So isn\’e2\’80\’99t this discriminating?
Moe – No, it’s underwriting
Joe – But if it is a way to expand my existing business, I will have to look into it.
Moe – probally the smartest thing you can do in 08. By the way what state are you in? Is this the Joe I know from San Diego?
JacMac,
What is your professional trade? Is it real estate related?
As it pertains to your list of industry corrections:
1. Most states require licensed L.O.s already. The few that are left are following suite
2. As of this Friday, only 16 heads of financial instituition nationwide have sign on. Its an indivisual state decision. Unfortunately constitutents don’t have any direct say so on this.
3. Continuing Ed. is already happening. It needs to be for real. Its a legislative call
4. Is a waste of time. Think about violation of rights. You can’t isolate one aspect and make it mandatory and not regulate the whole subject.
5. Won’t happen either. Good Faith Estimate There are fees that change at the last minute that has nothing to do with the loan officer. Making them responsible for that is crazy. Documents are dated and interest accrues daily. If you are told your fees total $3500 and it ends up 2500, can the L.O. get that $1000. That won’t happen either. Just due your due diligence and try and find a L.O. that can get close to what is accurate in pertaining to your fees and go with it.
6. Most borrowers have some deception involved in their deals. Be real. No one wants to disclose all of their personal business. They lie. This won’t happen either because they are the consumer. Consumers make everything function. The consumer in this case is the main problem but everyone is pointing the finger at everything but that.
7. Not going to happen. Discrimination. Either No YSP or YSP. You can’t pick and choose.
When the L.O. is paid a YSP the rate is increased. This can be used if the borrower is short on money and yes it can also be used to pay the L.O. Keep in mind, the lender is never going to take a short. You don’t have enough money and the YSP can offset that, you will still pay for coming up short. Your rate will increase.
The lender is getting a very large compensation for the borrower paying on that rate every month for the period of time they keep the loan in their portfolio. This can amount to tens of thousand of dollars. That’s the lender part of their investment in you who, the consumer who wants something but doesn’t have the funds to get it. If you consider what the lender is making, paying the L.O. 1% or 2% is nothing to bitch about.
JacMac you have to come to realty on this point.
Nothing and I mean nothing you purchase, will you get 100% disclosure on the money being made. To some degree its none of your business, considering how any business is conducted that involves money. Consider this also JacMac when you go obtain a loan, first you must do your homework as consumer. A consumer must always beware. Period. I’ve told you this before. And after you have done your homework and you know what is going to happen and you have settled on what you will and won’t accept then you have no other choice but to go with it. You are not going to get the ultimate deal. As the consumer, never. The business world doesn’t function that way.
The problem I have with some of your position is once you have accepted the terms and discovered the industry has made more than YOU expected them to make, you are pissed off. Until you are on the side of the business model where you totally control the product you will continue to be pissed off. The only thing you can conplain about is if the product doesn’t do what you paid for it to do. Then you can get a refund or seek damages.
The meltdown is not about the YSP. So stop it. It’s about lack of knowledge and information on the L.O. and the Consumer. You posted last month a topic that involve you getting screwed over on your deal. You had a horrible L.O. and title company, but as an adult some responsible was yours to bare. You were or are in a Opt Arm and you lost control of it. You tried to get out of it and went back to the same L.O. I hope it went in your favor but the YSP had nothing to do with your issue.
Paul – I understand that these private bankers and jumbo mortgage clients come to you now and you do them a great service and you may get to keep doing this and my predictions will be rubbish. But, if these non-profits open in your same town and they are charging considerably less to do the same thing you do because they will have professionals such as yourself on staff, then I am almost certain that these same banker will be calling them. I know I would.
I just see more regs coming down and a lot more controversy that will be hitting you ALL in the next 2 years. It has just begun and if Clinton gets the oval office, brokers are done.
http://www.guidestar.org/FinDocuments/2005/043/244/2005-043244616-02bcb251-9O.pdf
Moe:
Thank you for your response. I am in Illinois west of Chicago near Rockford, Illinois.
Can I have this type of operation and have my existing mortgage broker (business) at the same time at the same location?
Above is al link to NACA IRS form 990 Looks like NACA runs a tight ship, CEO salary is very resonable.
Just 1 item of note, in there mission statement they lend to low to moderate income in certain economic areas/ zip codes. Unless they raise the income level or open up zip codes I feel there is a place for both of us..
I am not affraid of NACA , they seem to help many people which is always a good thing. Competition is a good thing and it should always remain in a business model.
Where does the money come from for the mortgages?
Moe
I am not sure if more regulation is the answer, no one observes the regs now!! Lenders approving 100LTV stated 550 credit, NIV, NINA, NO JOB LOANS, was the problem but most of greed fromthe broker making to much all the way to the borrower who PUT HIMSELF IN A BAD POSITION TRYING TO GET RICH QUICK OR A HOME THAT WAS TO EXPENSIVE!
You did not answer if you think the high end buyer, 680 credit, 2 headed household with 2.4 kids would meet the 5 requirements to save a quarter point in rate????? May answer is no!!!
If buyers were dumb enough to try 100% financing, took neg am loans, prepayments, crazy credit card debt, high home equity loans why would they care if they paid quater point higher in rate if they did not have meet the 5 requirements!
Moe:
The funds. So a non-profit organization is formed. I can see that from the website when googled. Now where does the money come from to give to the borrowers? Do we, then, solicit donations from the public to fund the non-profit organization and the donors, then, get the tax benefit?
I would like to find out how this works after the non-profit organization has been formed.
Any suggestions?
Chris
The rate is not Always increased to pay a YSP!! I can get better deals from certain lenders that will pay me a ysp and have a better rate than retail. I can close a 30yr fx full doc, 10% conforming at 5.875% and get paid 1.25 ysp. Wells, B of A are all higher in rate!
Moe,
Again, NACA is a facet of this industry. Its designed to do a specific thing in a certain area with certain binding criterias, for a certain period of time, geared towards certain clients. NACA has been in my state and is in my town for years and its not that popular. I have financed several people over the past three years who left NACA because of their unusual conditions. A 5.375% is not that great when you have to commit a part of your daily routine for 5 years, having liens and “membership” fees as opposed to a 5.75% and you can do what you want when you want and your house is not tied up.
In regards to jumbo financing, that is a different breed. Paul is right. Time is money to these type of clients. They want it done quickly, discretely and with a sense of sophistication. And they have no problem paying for that. Going through an assembly line and having that kind of exposure isn’t going to work for them. It may sound crazy buy my jumbo and luxury clients would never touch a NACA loan. They’d invest in it, but never use it for themselves. That’s the realty of this world. Its backwards. And as long as its backwards, by design, NACA can take all 50 states by land air and sea and it will still be only a facet to the industry. But a facet only to a borrower in a certain area, with certain unsual requirements. But continue to do what you do Moe. You are giving NACA good press. The CEO would be proud of you. Some indivisual will never own a house without this type of assitance. Its a needed vehicle. Its a good thing.
You never told me if they entertain BK/FC clients? And what are their minimum fico scores?
Paul,
After further review you are right. I too have had YSP paid and the rate doesn’t move. I too have always been able to beat retail, not only in rate but with effieciency and speed. In my dealings, Wells has always had higher retail rates. I think we both can agree that YSP are not the issue.
P.S. Don Shula called me. He’s ok and still talking sh**t
Wall Street is here to make money, they are not going to let NACA take there business!!! Wall Street will find a way to put money out on the street!! END OF STORY!!!!!!!
All records are meant to fall…..now can the Pats seal the deal 19-0????
It will not be easy!!!!!
It depends. They have a good shot after last night. However the Giant brought it to them. They can be beat but the right combination has to implemented from the toss of the coin to the very end. Getting ahead in score doesn’t phase these guys.
The mortgage mess will straighten itself out sooner or later. When the next national problem hits the mortgage mess will be moved to the back burner just like every other problem the gov. has to deal with……Enron, yes you can still put all your 401K savings in company stock even after thousands of people lost everything being in Enron stock…remember the law makers were going to correct this problem….I am still waiting!!!!! People still have all of there 401K…some will never learn!!!! 9/11 security meassures……still a mess even after billions of dollars thrown at it!!!!!!!!!!!!!!National health care …………….still waiting!!!!! Social Security reform………..still waiting!!!!! Tighten boards…..still waiting………passport for everyone………still waiting, keeps getting pushed back!!!
Giants took there foot off of the pedal in the 3 quarter, try to protect being up 2 scores. You have to go for kill, no fear!
I understand that NACA has been around since 1988 per a quote from someone earlier. If this is true and if it is true that the mortgage business will disappear because of a 501(c)3, then so be it. But it hasn’t happened in 19 years. So why would it happen now.
It’s similar to where I am doing loans now. The loan amounts are larger than west of here yet smaller than Chicago. It is not a low income area. Yet the housing is very reasonable. Our everyday living costs are reasonable. And we are in a vortex of a growth area. Note: just reported yesterday that the real estate values in the Chicago and immedate continguous communities went up 4% in 2007. So we can continue to live well with reasonable costs and income that leaves us with more disposable/discretionary income than in the megapolis’ such as Chicago.
I do believe that the real estate market will settle over the next few months. I believe real estate market activity will pick up in the late Spring for two reasons: 1) It’s Spring as usual; and 2) People will finally realize “Chicken Little” is not here. So they will say “What are we waiting for”?
Again, the marketing/distribution system of the mortgage banking and mortgage broker industries will be a big help to borrowers. Again, there are many mortgages such as fha and va the big banks can do but prefer not to. And that’s ok. I will do them. We have been doing them. We get them closed with real proven income, real assets, real down payment albeit smaller than conventional and pretty good credit.
Yes sir
Joe,
Exactly
Paul:
You are right. Unfortunately it is what it is. And those of us in the mortgage business who have and are surviving the turmoil and aftermath of 2007 will still be here. The best part is that 35% of the mortgage people are gone. It will tougher for people to enter or get back into this business. Therefore competition is reduced. The “bad guys”, not all of them, are gone because of the obvious – can’t steal large amounts of money from people. Fha will have higher loan limits. Fha will have smaller down payment requirements. And if they don’t change the rules, it’s ok with me. I live in an area where the limits and down payment are just fine. And, again, we already meet the new proposed Federal predatory mortgage legislation. So let’s go.
Joe
I too have no problem with the new predatory lending legislation, but someone has to address the BIG ELEPHANT IN THE ROOM!!!!!!!!!!!!!
When we have all of these new regulations………………..
WHO IS GOING TO ENFORCE THE REGULATIONS??????????? No one does it now and state gov. has so many problems they cannot commit the resources to the problem!!!!!
Ron Paul is a joke. — When the liberals and Democrats support Ron Paul then I know something is very wrong.
Two major items need to be changed in an lending.
Stop Adjustables
Approve loans on NET INCOME. You make 2000 per month. 50% debt ratio is $1000. 50%……….what is the borrowers acual take home pay? $2,000? no! $1,700 So his debt ratio is 58%!!!!!!!!!
Can anyone tell me why this is never a solution to affordability? Not 50% of gross but of net.
The lending industry – not just the mortgage lending — Banks also have raped this nation and bleed it through interest rates and outrageous fee’s.
This is a dumb question — no it’s not — can someone tell em why if someoen buys a house for $200,000 — the bank earns some $279,000 in PROFIT??
And your total amount of payments is 479,000 that you paid for this house. Like I said above. I am a proud member of the vast right wing conspiracy and I support corporatiosn right to make profit but something is terribly wrong. Premium Yiled Spread. 1.5 % and the bank makes $279,000??????
279,000 IS A BIG PROFIT, but you do have the right to send in more principal and reduce your costs. One extra payment per year will take off almost 7 years of payments, it is your choice!!! Remember the bank is lending you money for 30 years, it is going to cost you!!!!
I am not trying to defend banks , just a point.
Joe,
WallStreet is figuring out how to make some long term money and who the players are going to be. There will be some minor legislative changes. H.R.3915 will pass but not as we see it now. Some licensure requirements will be insitituted and the state will make some more money off of that. The effect of these modifications will weed out the newbees. The market has rid us of most of the bad apples already. The rest will be on there P’s and Q’s for awhile until they discover the ever present loophold.
Defunct lenders will be replaced by new ones who promise good ethical behavior.
Appraisers will be scared to go over value even by one dollar.
L.O.s will act like they truely care because for some strange reason, we won’t them too.
Realtors will be artificially realtors and then it begins.
The borrower who is not held liable for any of this will want something they can’t have and the industry will give it to them. They are the ones who have truely not learned anything from this mess. Why? Because we haven’t made them.
Watch the down payments requirements go from 20% to 0%. LTVs 80% to 90% to 100%. Fico requirements 750 to 650 to 600 and you know. Gradual and new guideline changes from those ethical lenders who promised. Them damn lenders. Always wanting m$ney.
Watch the crazy real estate contracts start popping up. Watch the Appraiser start stretching. Watch the Title Attorneries begin to forget their legal obligation.
Watch how the L.O. will advise against certain deals in the begining, but will give in when, the word gets out that everyone is doing it. Property values will rise again and before we know it, its five years from now and ten years from that it blows again.
Mike,
The main reason net income isn’t used is because a person may have multiple deductions, i.e 401k, various direct deposits, not just your traditional tax deduction. A person can net 5000 after tax and have money disperse everywhere before they get a dime. Their net end the end is $1000. That doesn’t work
Crime/fraud has paid a great deal of money to some brokers. Until crime does not get paid and people go to jail, surrender there license , pay big fines, and be exposed to the public…like there name being printed in there hometown newspaper and local cable channel this will continue!!!!
No three strikes and your out, your are gone on your first case of convicted fraud…minor or major!!!!
Chris:
You are right. I don’t know. I think Paul is right also. And so goes it. It the meantime I do believe the mortgage banking and mortgage brokerage business will survive just as it has in the past after similar problems/issues.
Also this gives us who are staying the course, if you will, an opportunity to build strong business relationships with builders, Realtors, other affinity groups such as attorneys and investment advisors. And with borrowers purchasing and refinancing homes.
Those who left for the commercial world will discover the same issues evenetually. And they will have a very difficult time getting back into our business for quite some time.
The honest bankers, brokers, title agent, laywer must take the lead…..report fraud, refuse to do the deal, refuse to close a bad loan, bring a fraud case straight to your banking dept/congreessman office, bring proof to your local newspaper or TV station AND DEMAND ACTION!!! If we will not protect our industry,,,,who will!
Mike,
The reason the bank made 79k on the 200k is because the “borrower” used someone else’s money. Its called a loan. you don’t have 200k to buy your house but you want it now. You can a. save up for thirty years and buy that baby cash or b. do like most of us and go to the bank and borrower the money.
We want it yesterday but don’t have everything we need to get it. Well, the lender will gladly oblige you will the means. They will give it to you and wait thirty years to get their money back, but the incentive of waiting that long is going to cost you 79k because you want it now. If you have 200k cash, none of this applies. but even the person with 200k is going to get a loan and hold on to their money. Wake up.
right again
I know I am rambling…but I give a shit!!!!!!!
I hope I can get through this for all of my staff and loan officers and myself. It is a shame we have do a lot of extra work to find lenders and programs and marketing for borrowers. But we have to go the extra mile to survive.
I compare this with when I was a loan officer for other companies. Unfortunately I had to move again and again because the owners took my commission or went out of business. I make less now but I know I will get my pay check and I know that my staff and loan officers will get their pay checks.
I am skeptical now about hiring experienced loan officers. Even with a lot of background investigation I can not be sure there are no issues. I can not afford to hire someone and get blindsided by a news article that so and so from my company has been indicted by the FBI. So I will stay small for a while.
Here is a idea…….Take advantage of a opportunity. Call the NACA, go visit one of there offices……see if you can help them help people who they cannot get loan for……income to high, zip code issue, loan size. Work for a lower payout!!! I am sure if I can help people with there mortgage problem and it makes sense for all concerned…It could be a great income source.. How would you like to get refferals from the NACA because you do the right thing! All you have to do is ask!!!
rambling is ok – at least you give a damn. Most don’t and won’t take the time to discuss issues, present views and opinions. They’re probably out looking for some other way to take advantage of people. Ya know.
Well, I am back to underwriting again – and I have to say – WTF, you have not stopped with the Mis-Rep and Crap that you are submitting. Damn, you are more creative than ever folks. Here’s the deal, I get real cranky having to decline over 60% of what I am looking at, real cranky. I am at a point where my patience is really, really worn thin and about to let some of you know personally when I call out the decline what I really, really think in no uncertain terms.
Would you all stop co-opting the Appraisers, hell, when I call them and dig for information, they admit it, I with great glee and gusto put them on a list of “naughty boys/girls” for future reference. The Broker that submits the file is informed that I am calling for a Field Review, and yes, upon receipt of the Field Review, I was right, the damn property is 20,000.00 to 30,000.00 under the original appraisal valuation. Just how stupid do you really think I am.
I am so tired of having my intelligence insulted by all of this funky documentation. Now that you have to do full documentation the rash of “creative paycheck stubs”, “innovative tax returns”, etc…. is exceptionally annoying. Yes, I can figure out what is real and what is not real. Yes I call the employer, yes I pull a 4506T. Again just how stupid do you really think I am.
Oh, for your information, that explanation letter that went on for 4 pages of hand written legal paper regarding the borrower’s woes over the last 10 years of absolutely hideous credit reflected on their credit report, actually sank the deal. After 10 relatives died, 100 trips to the hospital, and 14 jobs lost……I see a pattern, and it ain’t going to stop. The 5 “R’s” were not met, go look that up with an old timer. They still have 8 pages of unpaid collections, charge offs, judgments and nothing re-established that is actively being reported for the last 12 months as paid as agreed. Oh that 4 month car payment history (did not redeem them) shot them in the foot. Now they have some serious payment shock with the proposed house payment in conjunction with that new car payment – never mind their rent was 350.00 per month – the new house payment is 1560.00 per month. They never paid anything else on time, what makes you think I am so gullible to think that they will pay this house payment, if frankly ever.
Now for what really pisses me off, I look at the GFE and Details of Transaction and see what you are charging to close this loan. Damn, are you trying to live off this pathetic thing for the next 6 months….. Are you that hard up? Then get the F*&% out of the business and leave it to competent professionals, we do not want you.
I could go on and on, but why bother – I see no end in sight to this, after the last 5 years of my 30+ years career in mortgage banking, of fighting the “New Age” lending, quiting and losing so many jobs I am on the fast track to the State Ho-Ho House thanks to you my fans.
I declined this crap 5 years ago, no matter what it was labeled, fought with management, and am still doing so. I am mad, you have screwed with my dinner table and the food on it for far too many years. You know who you are, yes I am sure of that, GO BACK TO THE USED CAR LOT, MCDONALDS, WHERE EVER and do not muck with those of us who take this seriously with an honest, prudent and fiduciary attitude.
To the honest and prudent Brokers out there, yes, there are some really good ones out there, I talk with you daily. Please get the scum out of the business, all of our livelihoods depend on rehabilitation of the industry through the industry. We are still a community service, the best service we could give our community is shut these SOB’s down.Well, I am back to underwriting again – and I have to say – WTF, you have not stopped with the Mis-Rep and Crap that you are submitting. Damn, you are more creative than ever folks. Here’s the deal, I get real cranky having to decline over 60% of what I am looking at, real cranky. I am at a point where my patience is really, really worn thin and about to let some of you know personally when I call out the decline what I really, really think in no uncertain terms.
Would you all stop co-opting the Appraisers, hell, when I call them and dig for information, they admit it, I with great glee and gusto put them on a list of “naughty boys/girls” for future reference. The Broker that submits the file is informed that I am calling for a Field Review, and yes, upon receipt of the Field Review, I was right, the damn property is 20,000.00 to 30,000.00 under the original appraisal valuation. Just how stupid do you really think I am.
I am so tired of having my intelligence insulted by all of this funky documentation. Now that you have to do full documentation the rash of “creative paycheck stubs”, “innovative tax returns”, etc…. is exceptionally annoying. Yes, I can figure out what is real and what is not real. Yes I call the employer, yes I pull a 4506T. Again just how stupid do you really think I am.
Oh, for your information, that explanation letter that went on for 4 pages of hand written legal paper regarding the borrower’s woes over the last 10 years of absolutely hideous credit reflected on their credit report, actually sank the deal. After 10 relatives died, 100 trips to the hospital, and 14 jobs lost……I see a pattern, and it ain’t going to stop. The 5 “R’s” were not met, go look that up with an old timer. They still have 8 pages of unpaid collections, charge offs, judgments and nothing re-established that is actively being reported for the last 12 months as paid as agreed. Oh that 4 month car payment history (did not redeem them) shot them in the foot. Now they have some serious payment shock with the proposed house payment in conjunction with that new car payment – never mind their rent was 350.00 per month – the new house payment is 1560.00 per month. They never paid anything else on time, what makes you think I am so gullible to think that they will pay this house payment, if frankly ever.
Now for what really pisses me off, I look at the GFE and Details of Transaction and see what you are charging to close this loan. Damn, are you trying to live off this pathetic thing for the next 6 months….. Are you that hard up? Then get the F*&% out of the business and leave it to competent professionals, we do not want you.
I could go on and on, but why bother – I see no end in sight to this, after the last 5 years of my 30+ years career in mortgage banking, of fighting the “New Age” lending, quiting and losing so many jobs I am on the fast track to the State Ho-Ho House thanks to you my fans.
I declined this crap 5 years ago, no matter what it was labeled, fought with management, and am still doing so. I am mad, you have screwed with my dinner table and the food on it for far too many years. You know who you are, yes I am sure of that, GO BACK TO THE USED CAR LOT, MCDONALDS, WHERE EVER and do not muck with those of us who take this seriously with an honest, prudent and fiduciary attitude.
To the honest and prudent Brokers out there, yes, there are some really good ones out there a lot of you, I talk with you daily. Please get the scum out of the business, all of our livelihoods depend on rehabilitation of the industry by the industry. We are after all a Community Service Industry, let us all Serve our Community as an Industry by shutting these SOB’s down.
It’s not $70 — it’s $279 thousand. I understand all your reasoning — I understand the economics. And if you knew what you were talking about your have figured out that it’s NOT $79 k ….. I’m just trying to make a point that making more money on the interest for the investor then you paid for your house is is is is well …….in my opinion wrong.
Some how the system garbled that one – well read on McDuff – It repeated my computer is old and cranky too.
mike,
No its not wrong. Obviously you don’t know math. But since you are trying to make a point, what would be right mike when using someone else’s money to get all that “you” want out of the deal. Please tell me what would be right. You want to borrower someone else’s money and then tell them how and what they should be paid back. Interesting. Have you every heard of the Golden Rule theory? You want to save 70, 79k, 279k just use your own money. Problem solve.
Poppy:
Not to mention how this clogs up the pipeline and underwriting time. And particularly when you have to a lot of extra work as an underwriter to decline an government loan. Loan officers that did nonprime loans are now trying to do government loans – fha primarily. And they don’t know how to do it. It’s the same ol same ol through it against the wall and see if it sticks.
I think lenders should have a person preview the fha file before it hits underwriting. That way if it isn’t complete the lender can send it back and it won’t hit underwriting until it is correct, complete and documented.
Lenders have cut back on underwriting staff and more fha loans are being submitted. Therefore underwriting time has been extended from 48 hours to 7-10 business day. This slows down the mortgage for the good government borrower and the good government loan officer.
So now we have to set different realistic expectations for approval and closing.
I also think it would be a good idea if lenders did a thorough investigation of the brokers before approving them to submit fha or any other loan for that matter. I just went thru this with a large national lender and was approved with flying colors. It’s not that hard when it’s done correctly. And this lender will turn down brokers. The lender doesn’t want crap in the pipeline.
What do ya think????
Here you go boys….SISA Alive and well…….and if do not know Vertice is part of Wachovia….. which stop lending via wholesale. Go figure!!! HEY MOE A BIG LENDER WHO HAS A SUB COMPANY-WHOLESALE!!!
Attached you will find your complimentary rate link newsletter as well as an important announcement regarding changes to our Vertice Advantage SISA program. The proposed changes are effective on 1/2/08 and pertain to maximum dti ratios on owner occupied, second homes, and investment properties. (max 45,45, and 40% respectively regardless of du approvals). Please take whatever actions are necessary to protect your existing loans.
The good news is, at least for the present, is that there have been no changes in max dtis under either of the programs. This is great news for our brokers!
You have my best wishes for a happy, healthy, and prosp
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MOE….. I am not trying to be a jerk, just letting everyone know that there is still money at there!!!! They have good underwritting standards and use every safe guard to protect themselves…one of the good guys!!
Bullshit loans will not fly here….good comon sense underwritting!!!! The type of lender who has everyones best interest in mind!
To all posters …keep the comments coming, we can help each other by keeping everyone informed and share new ideas…Remember we are here help each other….and improve our industry!
Yep you got it right, this is FHA all the way – I proposed to our Broker division that does the approval of the Brokers that we have a test…..you know a Mortgage 101 test for the prospective Broker/Client. Nothing to difficult, mind you, just a simple test. Those that pass, well then on to the next level – an ethics test. Pass both, then you get through the gates.
I am thinking about something along the lines of: If the borrower is not in title, can he/she obtain a cash out refinance? a. Sure why not b. Not on your life c. When the moon is full twice a month. Do not laugh – I have one of those in the pipe presently, approved it contingent to some rather unique conditions, just to see how far they would go…….idiots think they have a fully approved loan (yes I am getting rather sneaky). On the ethics side hummm…: What do you call a cut and paste Credit Report? a. Creative Lending b. Art c. Fraud. Just had one of those, was so irate I declined it by pulling an new credit report through DU….guess what Refer W/CautionIV/Ineligible. Oh, the Appraisal on that one was really pathetic as well, Appraiser ought to be ashamed, so transparent.
We can not just decline a loan without an underwriter reviewing the file, I have seen some good borrowers get shortchanged by that process, they should not have to pay for an Originator whose experience or lack thereof penalizes them. I am doing a lot of “get the borrower out of the ghastly 2/28 or 3/27 product they are in”, and would like to give every borrower a fair and unbiased chance. When it makes sense, even if the credit is blemished, I am doing it, net tangible benefit has to be there, borrower capacity, collateral, willingness, etc…..all play a part. Mainly just good old common sensed lending with the guidelines, mitigating and compensating factors to support. Also am trying to rid the world of these toxic Option Arms as well, every little bit helps.
Speaking of borrowers that should be approved – this one with the borrower not in title, if they are truly making the payments, they actually should be enabled to get out of the ugly garbage they are paying on, but no cash out. This one is a twist I have not seen yet, so I am letting it play out to see where it really goes. I have not seen everything, and would love some further education in the inane and comic. If they do meet the conditions, I will counter offer and get it done. As it stands, it is not eligible for any product I have ever seen, excepting some of the old WAMU and few other propriatory guidelines that I have underwritten to.
On the purchase side, it is still the same old, same old – absolutely from the sublime to the ridiculous. I still ask myself – where did it become a rule that every citizen and non-citizen (legal or otherwise) became entitled to own a house in the US, let alone every originator makes 10,000.00 plus on each transaction whether it be 90,000.00 or 500,000.00. A little exaggerated, but not to far from the truth.
Meanwhile my patience is tried by the ones that fight my decision based on the “squeaky wheel get the grease” maxim. Wear the underwriter down, threaten the underwriter, whatever……none of it works anymore (let alone ever) with me. They have no idea where I have been over the last 5 years, and how many of the idiots that I worked for briefly, and that are now out of business for just the reasons that I quit. As a friend of mine once said – “And the Bank Closed” after the gal told her that it had been approved at MLN. That aggravated the Broker so much they reported her to her superiors……needless to say she is not there any longer, on her own terms mind you, and they are closed as well.
Yes you are right we too are at 7-10 days underwriting time, frustrating, but inevitable, so many of the wholesale houses are down for the count. The prudent ones are left to carry the burden, we will get through it, slowly and surely. By the end, my hope is that the “crap” is weeded out of the pipeline by those who have been submitting it (the crap) being OUT OF BUSINESS (maybe in jail too). Could not happen to a better bunch of folks.
Be patient with us – we are trying real hard to give every borrower an honest chance, the conditions may be lengthly, but they make the file work, especially the ugly ones that really need this loan to get out of that toxic loan they are in. Give us the chance to help the borrower and we will get there together. Put everything including the kitchen sink in the file at submission, do a cover letter to the underwriter on every file, make it a road map, it helps, we do read them. Do not think for a moment we do not care, we are tired, cranky and over whelmed, but we do care.
“JacMac,
What is your professional trade? Is it real estate related?”
It makes no difference whether I am head Manager in McDonalds or a doctor in San Juan, I already stated that I do not work in the mortgage field over and over and I said I didn’t get what the YSP was for, so it should be clear I’m not in your field.
“When the L.O. is paid a YSP the rate is increased. This can be used if the borrower is short on money and yes it can also be used to pay the L.O. Keep in mind, the lender is never going to take a short. You don’t have enough money and the YSP can offset that, you will still pay for coming up short. Your rate will increase.”
What the hell does this mean? I looked it up, and I read that the YSP was intended to offset closing costs that the borrower doesn’t have — it’s paid to the LO to offer a higher rate to the borrower, right, so that the bank makes more over the life of the loan.
See, that makes sense to me, but what you’ve written up there does not compute. Know why?
Because I’m not in your industry. Mortgage Brokers I think need to recognize their audience and when they talk to someone who is not in their field, they need to use language an every day person can understand. `You don’t have money for closing, so the bank is going to charge you a higher rate and you’ll end up paying more over the life of the loan. THey’ll give me compensation for offering you that higher rate.’ something like that everyone can understand. But that SHOULD BE DISCLOSED. It shouldn’t be kept a secret from the borrower. The borrower IS PAYING THAT YSP TO THE BROKER THROUGH THE MONEY HE/SHE ENDS UP PAYING OVER THE LIFE OF THE LOAN FOR THE INCREASED RATE.
“The lender is getting a very large compensation for the borrower paying on that rate every month for the period of time they keep the loan in their portfolio. This can amount to tens of thousand of dollars.”
Exactly, Chris, so why is the Mortgage Broker entitled to more compensation for offering a higher rate? Does he do more work? What the hell is the compensation for?
” If you consider what the lender is making, paying the L.O. 1% or 2% is nothing to bitch about. JacMac you have to come to realty on this point.”
Are you kidding me. You’re saying, Look, you’re gonna pay tens of thousands of dollars to the bank anyways, what’s a couple of thousand to the LO for NOTHING!!!!!
Why does the the Mortgage Broker deserve the YSP?
I undestand this is a controversial subject. The MB says, well the banks will make it anyway. Why does the bank charge you more money over the life of the loan, because you don’t have the money up front to pay for closing?
I guess the short answer is because they can. Maybe someone said, Hey, bank, you’re making this money, we want it, too. And the YSP then was given to the Mortgage Broker. I believe, as a layperson, it is an unfair, unecessary cost, a kickback! The MB should be paid the fees they ask for and that’s it.
“Nothing and I mean nothing you purchase, will you get 100% disclosure on the money being made. To some degree its none of your business, considering how any business is conducted that involves money.”
This, again, Chris smacks of the old, It’s Always Been This Way in All Industries, Not Just Us argument and it just doesn’t hold water with me. Wrong is wrong. Just because it is commonly done doesn’t mean that it should be. If I pay for something, I as the purchaser should know exactly what I’m paying for and how much I’m paying. My beef is not about YSP so much as it is about disclosure. There should be 100% disclosure of what I AM PAYING.
” Consider this also JacMac when you go obtain a loan, first you must do your homework as consumer. . . A consumer must always beware. Period. I’ve told you this before. . . And after you have done your homework and you know what is going to happen and you have settled on what you will and won’t accept then you have no other choice but to go with it . . . The meltdown is not about the YSP. So stop it. . . as an adult some responsible was yours to bare. You were or are in a Opt Arm and you lost control of it. You tried to get out of it and went back to the same L.O . . .”
Chris, you’ve got to be kidding, right?
When I want a lecture from my father, I’ll call him. You’re talking your fiction again. You don’t really know what happened with me because you don’t care to know. You think you know because you’ve lumped all of us “dumb option ARM” homeowners in the same category: IRRESPONSIBLE, UNINFORMED, LAZY ABOUT BEING EDUCATED. Do me favor, either get to know my situation and my history and then comment of don’t.
The recommondations I listed came from CTAN, not me. If you have an issue with them, you need to take it up with him.
I liked his suggestions because they seemed to make sense to me, but again, I don’t work in the industry.
I had hopes for this conversation, because we started talking about solutions, but now we’re back to passing the buck and laying blame.
I guess I’d have to castrate myself on this keyboard, walk on hot coals, pour tars and feather myself, whip and mutilate myself to death before any of the accusing Mortgage Brokers will be satisfied that I understand that I bare some responsibility for the position I’m in — but I’m done having that conversation.
It is getting pretty boring.
I don’t care who makes how much money, I care about being lied to when I ask questions.
When I do my job, if what I’m responsbile for doesn’t get done or is done wrong I only have myself to blame, and I do get blamed and it’s my paycheck on the line, period.
This is simple to understand.
well said jmac.
Welcome back poppy
. Nice to see you around these parts and I it’s nice to see that your the same but working and taking care of yourself.
I may have a job for you, if you’d like?(not in u/w) Would like to chat with you after the new years.
Thanks for the comments that have turned into a post. I just can’t help myself, they are too darn good.
Jackmac YSP is disclosed on the HUD-1 closing statement, that is a fact!!
Bankers and brokers must disclose this on a HUD. Banks such as Wells DO NOT DISCLOSE YSP!!!! They are not required to!!!!!!
If I close a 200K LOAN at 6.25% and receive 1.5 YSP, I receive $3000.00
but if you went to Wells retail your rate would be .250 higher and Wells would not disclose on the HUD how much they were paid . If your rate was now 6.5% your payment is higher and Wells made a hell of allot more money!!! Even if you were able to get the same rate from Wells, they are still getting a YSP FROM LETS SAY FANNIE MAE. The difference is they do not have disclose on the HUD. THEY ARE A FERDERAL CHATERED BANK AND DO NOT DISCLOSE!!!!!THAT IS WHY THEY WHAT BROKERS OUT SO THEY DO NOT HAVE TO DISCLOSE!!!!!
IT IS SIMPLE…EVERY BANK, LENDER,BROKER, WHO EVER… DISCLOSE, DISCLOSE, DISCLOSE…END OF STORY!! HOW CAN YOU AS A CONSUMER COMPARE MORTGAGES IF YOU DO NOT KNOW WHAT WELLS IN GETTING IN YSP……..YOU CAN’T AND THEY WHAT TO KEEP IT THIS WAY!!!!!! I HOPE YOU DO NOT THINK WELLS IS DOING THE LOAN FOR FREE???????
Wells has congress ear with there donations, but I do not!! THOSE ARE THE FACTS…PLAN AND SIMPLE!
JACMAC
Also when I submit a loan to ABN/AMRO, CITI, EVERBANK They send a DISCLOSER direct to my borrower showing rate,YSP AT THE RATE SUBMITTED!!!, a GOOD FAITH ESTIMATE…Which shows if I am charging pointS and a TIL. The client must sign and return to lender….So not only is myYSP on the HUD, it has been sent to the client!!! That is a fact!!!!
Does Wells, Countrywide , send you a disclore showing YSP?????? NOT!!!!!!!!!!! DEAR CONGRESSMAN ALL I ASK THAT YOU LEVEL THE PLAYING FIELD FOR ALL PARTIES, I WILL THAN TAKE MY CHANCES IN BUSINESS!!!! FULL DISCLOSERS BY ALL!!!!!!!!
Ok, Wait a minute ! I am a used car salesman – please don’t disrespect me and compare me to a morgage broker !! Our industry is cleaned up considerably !! and your is getting worse ! I’ve seen and heard more crooked stuff in the morgage business than I have ever seen on a used car lot !!
Poppy:
Thanks for your follow up. I understand and we give borrowers realistic expectations with regard to underwriting, approvals and closings.
I can’t imagine making 8-10 points on a loan. In Illinois we have had a 5% rule for all loans which includes the normal closing costs, ie appraisal, title, flood, tax service, processing and underwriting. That works out to be around 1% on a $150,000 mortgage. So then there is room for up to 4% for commissions. However, I have to say most of the time to ysp and points probably total 1.5 – 3.0%. So an average of 2% let’s say. Our average loan amount is approximately $145,000. But then again our cost of living is quite low compared to the larger cities such as Chicago. Also lender doc prep and closing check for high cost. So it is virtually impossible for someone in Illinois to close exceeding this high cost percentage.
Marc – sorry to denigrate – I am an old horse trader – no joke – sold ‘em and bred ‘em for years.
So from here on out I will use that industry as the whipping boy for the jerks submitting loans that I have to deal with day in and day out. Problem is they aren’t creative enough to make a living trading horses, utterly unable to compete with the finer art of smoke and mirrors.
As for which/whose industry is worse, who these days in the “entitled era” knows, some how or another it looks to me that everywhere you look no industry is immune to criminal behavior. Our society as a whole appears to have slide down the slippery slope and have a very muddy collective $@@.
JacMac- I started writing this this morning and at the risk of being redundant…..
Here is the deal on YSP.
Brokers get rates from wholesale lenders at a wholesale rate and the pass the rate on to the borrower as a retail rate. The idea of a broker getting both YSP and Origination is fine really because the intention is for the broker to get say .75 on the front (points) and .75 on the back (YSP) maybe more on a smaller loan.
Perhaps the borrower wants a “no cost” loan, The broker simply raises the rate high enough to get paid say 2.5-3% in YSP and then pays the borrowers costs out of that. On the other hand lowest rate available might be the important thing for the borrower so the broker simply charges everything on the front.
There are times a broker takes everything on the “back” or everything on the “front” as a necessity to make the loan work. (DTI problems or little equity/cash from the borrower) A lot of the massaging that a broker does is not fraud it is simply that the broker has access to many, many lenders who all have a little different take on one guideline or another or different pricing for different products. For example lender A might be a little restrictive on a FNMA level 2 when Lender B may actually specialize in that product.
A couple important things to understand when speaking of YSP
1. Brokers must disclose YSP, It is disclosed near the bottom of the Good Faith Estimate in the papers that are required to be sent to the borrower within three days of application. These papers (called disclosures) must be resent every 30 days during the loan process and additionally must be sent out whenever there has been a change in the loan that affects rate, fees, or term. YSP is also disclosed at the closing table in the “HUD” which is the final settlement statement.
2. Bankers DO NOT have to disclose YSP. It is very important to understand that all that is required for a broker to start banking loans is a banker’s license and a line of credit (warehouse line) with which to fund loans prior to selling them to the lender. Additional benefits of being a banker is “Correspondent pricing” which is a rate that pays (generally) a half a point in YSP (SRP) more that the “Wholesale Broker Rate” from the same Lender. None of the YSP or SRP (servicing release premium) that a Banker receives from the wholesale lender has to ever be disclosed to the borrower as long as “ABC Banker” funds in “ABC Bankers” own name (meaning that the loan Docs have “ABC Banker’s name on them as the lender). I hope that was clear enough.
3. YSP is paid at a rate of about 3 or 4 to 1, meaning that a rate increase of .25 would equate to YSP approximately .75 to 1.0 points in YSP, depending on the lender.
4. Negative amortization loans pay YSP based on the Margin and not necessarily the “minimum payment rate” so a Broker or Banker (or FDIC Bank for that matter) can on some of these loans get paid up to 4 points in YSP with out increasing the Borrower’s minimum payment. This is where the abuses have been recently, as a loan officer can get 2 point on the front and 4 points on the back. Obviously it would be easier to pull this off as a banker as the 4 points on the back are not disclosed.
I hope I was clear; in essence the YSP is a mark up for the broker on a rate that is offered only to brokers by the lender.
YSP FROM 6 YEARS AGO AND WE ARE STILL HAVE PROBLEMS!!!
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You are here : Legislation >> Big Win on YSP
Big Win on YSP
On October 15, 2001, HUD issued a new Statement of Policy 2001-1, clarifying the legality of yield spread premiums (YSPs) paid by wholesale mortgage lenders to mortgage brokers. It is a strong statement that the legality of mortgage broker compensation must be determined on a case by case basis; that the fact that a yield spread premium is based on the interest rate of the loan is not relevant in determining whether the payment is legal; and that the 11th Circuit Court of Appeals in its recent ruling for class certification in Culpepper v. Irwin Mortgage misinterpreted the earlier Statement of Policy 1999-1.
This clarification is precisely what mortgage lenders and brokers had sought since the 11th Circuit ruling in June. That ruling caused significant alarm in the industry because the court essentially discarded the two-part test of legality of YSPs established by SOP 1999-1, and also commented that a court could find YSPs illegal solely because they are calculated based on the interest rate of the loan.
HUD found that the court’s ruling was flawed and recognized that the Department has a responsibility to clarify the law when there are conflicting court opinions. It states:
It is HUD’s position that where compensable services are performed, the 1999 Statement of Policy requires application of both parts of the HUD test before a determination can be made regarding the legality of a lender payment to a mortgage broker. Under the first part of HUD’s test, the total compensation to a mortgage broker, of which a yield spread premium may be a component or the entire amount, must be for goods or facilities provided or services performed. HUD’s position is that in order to discern whether a yield spread premium was for goods, facilities or services under the first part of the HUD test, it is necessary to look at each transaction individually, including examining all of the goods or facilities provided or services performed by the broker in the transaction, whether the goods, facilities or services are paid for by the borrower, the lender, or partly by both.
The Statement further defines that YSPs cannot be judged to be illegal solely because they are calculated based on the interest rate of the loan:
It is HUD’s position that neither Section 8(a) of RESPA nor the 1999 Statement of Policy supports the conclusion that a yield spread premium can be presumed to be a referral fee based solely upon the fact that the lender pays the broker a yield spread premium that is based upon a rate sheet, or because the lender does not have specific knowledge of what services the broker has performed. HUD considers the latter situation to be rare. The common industry practice is that lenders follow underwriting standards that demand a review of originations and that therefore lenders typically know that brokers have performed the services required to meet those standards. Yield spread premiums are by definition derived from the interest rate. HUD believes that a rate sheet is merely a mechanism for displaying the yield spread premium, and does note indicate whether a particular yield spread premium is a payment for goods and facilities actually furnished or services actually performed under the HUD test. Whether or not a yield spread premium is legal or illegal cannot be determined by the use of a rate sheet, buy by how HUD’s test applies to the transaction involved.
This Statement of Policy definitively states HUD’s opinion of what RESPA requires for a finding that a yield spread premium is illegal. It clearly says that HUD believes, and has always believed, that all such determinations of legality must be conducted on a case by case basis, thereby dramatically hampering for class action lawsuits challenging the legality of YSPs.
In addition to clarifying the legality of YSPs, HUD also calls for new disclosures early in the loan process, to give borrowers more information about the originator of the loan and the fees charged by originators. HUD believes that simply disclosing a YSP or other broker compensation on the Good Faith Estimate and the HUD-1 is not sufficient for borrowers to understand what they are paying for or to negotiate the fees with the lender or mortgage broker. HUD asks for lenders to begin providing a new disclosure, and says it will require such disclosure through a new rulemaking.
Also, in a press release issued late yesterday, HUD says it will be issuing a Mortgagee Letter requiring this new disclosure in all broker-originated FHA loans. We will report on this to you as soon as it is available. HUD also announced a $1.25 million contract to an unspecified contractor for increased RESPA enforcement.
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ctan well said
Sorry, Illinois is not immune either – as it goes, there is a telephone and the internet and a whole bunch of bottom feeders trolling those venues. Some boiler room in California or Internet Lender in New Jersey gets and inquiry and off to the races they go. Yep – I send them a real clear message. ****Please note – Illinois/New Mexico property max financing fees limited to 5% please confirm prior to docs/funding. Now since when was I supposed to be a processor, underwriter, compliance officer, mortgage cop…..?????
Use to be…..now I date myself….you could not lend outside of a 50 mile radius of your institution. Not a bad idea, worked, well, kinda – we did red line in those days. However, digression aside, it did keep one more honest, if you screwed your neighbor, he could visit you some night for a real frank discussion. All joking aside, we were vested in our neighbors, our neighborhoods and our community – they were us. About time we all got back to that simple equation.
Paul, I’m with you: DISCLOSE, DISCLOSE, DISCLOSE.
I agree, but when you say that the bank’s don’t disclose in my lamenting the YSP to the broker, I say, soooooooo???
That doesn’t mean it’s okay. It’s wrong!!!!
You also said that the YSP is disclosed on the HUD1 and the GFL — here we go back again to the role of the Mortgage Broker. Ask your average American was POC or YSP is and they don’t know. They wouldn’t know. Unless they asked and if they’re the broker lies, they’re screwed.
My broker lied to me. You know how I knew he made $14,662 on my loan? Because they mistakenly gave me the Title Instructions for my closing. There WAS NO MENTION OF ANY YSP OR KICKBACK IN MY GFL.
But even when I saw it I didn’t know what it was. I had to research it. I should have had to. I asked them plain and simple: What are you making on this deal?”
CTAN, thanks for taking the time to write that out. I had to read it slowly, and I mean S L O W.
I think I understand it, but it sounds S H A D Y!!!! Shady as a spot under a big Oak Tree on a sunny day.
Why is the broker entitled to a mark up on a rate that is only offered to brokers? Because they’re special? Because the bankers like their smile better?
Is it like an employee discount? Like I buy a pair of shoes at Macy’s with my employee discount, and then I charge the person I sell my shoes to a percentage for getting the shoes cheaper from me than they would from Macy’s — while Macy’s doesn’t disclose how much they bought the shoes from the manufacturer wholesale and how much they’re charging the everyday customer for the shoes — you know, the profit they’re making? Is that was this is?
Why is the YSP listed INSIDE of the margin of the HUD1?
Why are the charges called points? Why not speak in terms of dollars?
Why can’t the broker just charge what they’re going to charge on the loan up front?
What’s with the front end and back end?
Is it so that they can maximize their income on each loan individually?
Why can’t they just disclose exactly what they’re getting paid for in simple dollars and cents so that an every day person who is applying for a loan can understand what they are paying for and then compare apples and apples with other lenders?
If the answer is it’s because the banks don’t disclose ( they don’t do it, so why should I?) , then that brings me back to my original problem: DISCLOSURE.
CTAN: “A lot of the massaging that a broker does is not fraud it is simply that the broker has access to many, many lenders who all have a little different take on one guideline or another or different pricing for different products. For example lender A might be a little restrictive on a FNMA level 2 when Lender B may actually specialize in that product.”
So here’s the problem I think. This is great, that a broker can do this for a customer and offer the use of their expertise to get a customer the best loan, but when a broker is a liar and looking to make the most off of a deal at the expense of the customer, that can be a disaster. And I think this is part of the problem we are facing now. The broker is in a unique position to either help the customer tremendously or screw them royally.
Chris- In regards to your comments to JacMac concerning the suggestions made. Those where actually my suggestions he was quoting and I’m certain I can defend every one of them. Numbers 1,2 and 3 are obvious, the idea of being licensed with continuing education and tracked with a national database is already underway and I don’t know what to tell you if you don’t like it. I would imagine that initially licenses would be yanked at the drop of a hat to make a point and then not so much. The database will be for the benefit of both the borrowers but mostly for the lenders, a “bad actor” could simply get black listed by some lenders.
Point 4 is homebuyer’s education. I don’t see how you could disagree with this point. The type of education I’m speaking of is an explanation of points, fees, YSP, terms, ARMS and so on. The idea being that if a borrower is armed with knowledge going in they will be less likely to be swindled by a would be car salesman.
Point 5 is not to say that all fees would be the responsibility of the LO, obviously things change. Of course the fees I am speaking of are the Origination, Discount and broker fees that the LO does control. I was going to make some snide remark about you intentionally trying to misunderstand but I’ll just leave it at that.
In my experience when a Borrower claims to have been pressured into a deal I have found that its because the terms changed at the table and the borrower for what ever reason has a sense of urgency that clouds their better judgment at the last minute.
I have worked as a wholesale account executive for several years now and I can’t tell you how many times I’ve seen this happen. I really don’t see what the problem is, when I was doing retail I never sent the borrower to the table with rates or fees that was not disclosed to them before hand.
Point 6 I’m speaking of the borrower buying 4 or 5 houses in 30 days all as owner occupied done quickly enough that one lender never knows what another is doing. This is the type of deception of which I am speaking……
Point 7 is no YSP on the POAs, I hate to break this to you but this is already happening the Pay Option is not a “Safe Harbor” or “Guaranteed” home loan and therefore will no longer be eligible for rebate. So no its not “discrimination” (where the hell did you get that from anyhow “ poor little loan product is being discriminated against call the ACLU”) the bad news is that this ruling will also cover any sub-prime products that either still exist or that would reemerge in the future.
Chris when you dig your heels in and simply don’t want to hear any possible solution that might help it makes you look like a predator. Additionally it doesn’t really matter if it helps we just need investors to feel all warm and fuzzy about mortgage backed securities again. I really don’t think anyone should have a problem with educated borrowers Professional Loan Officers and full disclosure…Do you?
JacMac- Agreed this is why educated borrowers and full disclosure are very important. The other thing I forgot to mention is that if “Brokers” become extinct, Borrowers will no longer be benifited by full disclosure as banks and Bankers are not required to disclose the YSP
I agree full disclosure and education are very important but borrowers must take some responsibilty entering into any transaction. How many people do you seee spend countless hours shopping for a TV, car, vacation. If this is your biggest purchase of your life do some research!!!!! But it does not give the right of any bank or banker to take advantage!!!!!
I just moved my investments over to Edward Jones. The gentleman told me when he was finished letting me know what his professional opinion was regarding where to place my portfolio’s. Then he says there is a 3% fee to do so! I said ok let’s do it! This is America and we have free trade here right? I could of went down the street and chose to shop him. Just like consumers shop me here in my area. I’ll tell you that what I don’t want is one choice! Because when you have one choice the consumer loses everytime! Look at the profits oil companies are raking in! Where are the Feds on this issue? How about what banks are making on credit card interest,where are the Feds on this? So do we just stop brokering everything? Oil, insurances, food, travel, electronics, home goods,Department stores, trucking…. ect.? This is ridiculous in it’s self! When a consumer comes to me he is probably going to run into me sometime in the future and I always keep that in mind. Whether it be Cosco or pizza I see my clients all the time out and about and I have no problem saying hi right into there eyes! If you want Russia where there are no choices…well maybe apply for a Russian citizenship? As a consumer I know every time I go out into this world I need to research my decisions right? Well so do mortgage consumers! What the Goverment has done is tightened up across the board which is a huge mistake let me explain. What about a poor guy who has 25% ltv doesn’t show income and maybe went through a heart attack. The insurance company put things on his credit report that will take some time to get removed but hey we cannot get him a loan to save his ass! How about common sense lending and we remove this credit score approch to lending? How about the three C’s? I have had banks turn down clients who missed the grade by one point on there middle credit score! You have got to be kidding me! Do you know that if you close a credit card down now your score could drop and that the other credit cards you have can have the banks double your interest? Why then wouldn’t it be ok that if you miss a 30 day on your mortgage your rate there would double also? Do you get my point…banks rip the consumer off with credit card rates and daily bullshit bank fees do they not? I as a consumer get the choice where I want to bank right? Well I chose a local credit union and there the lessor of the other evils out there in bank land! Competition is how you keep prices down and if the Federal goverment is stupid enough to let banks take over and be the new Sheriff in town and we the people set back and let them do it well we deserve everything we get! I say when no one is happy then we all win!
I know we have talking about YSP buy the reason we are in this mess is not because a broker made a couple of extra $$$. The loan programs that were in place were terrible……100ltv 550 credit…..stated. Anybody with a pulse got a loan. Wall Street bought and sold them, lenders approved them, appraisers push values, title agents closed them and most of borrowers enter into transaction they had never should have to start with. YSP is only a very small part!!!!!!
How about disclosure for the borrower…..
I have a job
I really make this income
I will live in this property
MY BROKER SAID I SHOULD WALK AWAY BUT I AM GOING TO BUY THIS ANYWAY!!
I WANT AN OPTION ARM…I UNDERSTAND THE LOAN!!!!!
Like I said before…videotape the application and closing…no were to hide for anyone!!!!
No where to hide.
Great idea. Unfortunately those who represent us won’t help us get there.
JacMac- LOL “Shady”. the reason brokers get wholesale rates is simple to understand difficult to explain but let me use an example.
“Lender A” opens shop and is going to offer loans to the public (retail) they close 50 million a year and get say a 4% revenue factor on average so their gross profit is 2 million. Lets say they have a million dollars in expenses so they net a million a year
“Lender B” opens a wholesale shop has 2 million in expenses, only averages 2% on their volume but closes a billion dollars in volume through the already established national network of mortgage brokers. So “Lender B” nets say 18 million a year.
Now in order for “lender A” to match “Lender B” in volume “Lender A” would have to open 20 retail locations all over the country at the cost of millions of dollars every year and vast amounts of risk.
The short answer to your question is that the broker has operational costs to consider and in order for a Mortgage Broker to be able to compete with “Lender A” “Lender B” Needs to give the Broker YSP. “lender B” makes less on every file but makes up for it in volume.
When I said that the YSP was paid on the Margin for Neg. Am. ARMs I didn’t mean to infer that it was disclosed in the margin but rather was calculated on the Margin of the rate rather than the index
Margin 3%
Index 3.375%
Rate 6.375%
The bank controls the margin. the index is what the banks pays for the money the Margin is the profit. (Very basically) the only loan product that the LO can be paid by increasing the Margin with out increasing the Start rate is a Negative Amortization loan like the POA ( Pay Option Arm)
Loan Officers think in terms of percentages, a “point” is short for a percentage point. I prefer to speak in terms of dollars when going over the GFE or HUD but that’s just me. “Points” just seems like a dirty word.
The Broker can’t always charge what they need to up front because the Borrower usually doesn’t have it. Also sometimes it makes more sense for a borrower to pay a little every month rather than a chunk up front (not everyone plans on keeping the loan). Besides if I offer you 5.75% with 4k in points and the bank offers 6.25% with 1k in points which would you choose?( which you would choose is beside the point why shouldn’t I be able to offer the same deal as the bank?)
The front side comes out of you pocket either literally of out of your equity in the case of a refi. The back side comes from the bank. I think the term comes from the offer coming from the bank “ I can give you 6.5% with 2 point BACK to you Mr. Broker”
Brokers do disclose in simple dollars and cents it is listed on the GFE and HUD it’s the Banks that have the ability to be secretive. In the example of your loan where title showed you something that was not for you to see….. you where dealing with a bank a broker would have disclosed it to you by law. Back to my original statement #83 its not brokers that consumers need to be weary of….it’s the Bank.
Very “shady” indeed.
Marc, that was hillarious. I think some brokers were used car dealers turned mortagage brokers.
CTAN, here’s a serious question for you. If you disclose something, but I don’t understand it, is it disclosure?
That’s why I loved your suggestion:
“Point 4 is homebuyer’s education. I don’t see how you could disagree with this point. The type of education I’m speaking of is an explanation of points, fees, YSP, terms, ARMS and so on. The idea being that if a borrower is armed with knowledge going in they will be less likely to be swindled by a would be car salesman”
I’m going to have to print what you wrote above and read it slowly to understand it. Why? Because I’m not in the industry. It seems clear and simple to you but it’s confusing to me. I have no doubt that I will understand it fully, but it takes time.
I think making money is fine but in order to shop a loan, customers need to know what they’re getting and what they’re paying for.
I can only make a choice if I’m given all of the info. If the banks hold back, it’s wrong.
If the broker discloses, but it’s greek to the customer, that’s not disclosure, it’s wrong. That’s my opinon. If a bank is dishonest, and a brokers peddles their dishonest products dishonestly, what does that make the broker?
YSP may be a very small part of the problem but I think it’s worth it to look at all of the parts of this very real problem.
I mean “undisclosed YSP” by the broker, that’s a problem for me.
JacMac,
I asked you your profession so I could better understand where you”my audience” are coming from. Getting mad will not solve your ignorance. Education will. And I mean that in a positive way. Do you remember the below post?
Worse Than a Pimp on a Corner. I Haven’t Even Pulled My Pants Up & Their Looking to F**K Me Again—back in November
If this was the truth. This story was you getting swindled by a rotten L.O. and title attorney. It wasn’t the product or the YSP or what you saw on the final documents. It was the L.O. and the title attorney not explaining the product or the docs to you so you could have made a move to help yourself. That’s all. I supported you by way of offering a solution on dealing with the L.O. and the Attorney. I felt the deception on the L.O.’s part, not the product was what got you all f**cked up. Go back and read your post and all of my responses to them. You seemed to understand my language then so don’t play dumb now.
Rather its tennis shoes, a car or a ream of paper, if you aren’t the manufactor or seller of any product you will pay the marked up price. This is a big part of what capitalism is about. No one is telling what they really paid for it. The market is set by you and me, the consumer as to the most we will pay for any item for sale. And they sell it to us at that price. It’s on sale for x amount of dollars and you have the choice of saying yea or nay if you want to buy it. If you find it for less somewhere else, then you’ve done something, but even that is not what they paid for it. No disclosure, no explanation. Don’t be a hyprocrite. YSP is in everything you buy, they just call it something else.
I have no issue with you or CTAN’s list. He makes valid points. My comment on thoses points were the likelihood of them coming to fuition and why or why not. I want things to change. Foolishness makes my job that much harder.
And you do care what the L.O. makes. You are so on their money you are missing the valid point of this mess; the lack of advisement you and everyone else have received which has put you and many like you in a screwed up situation. If the L.O. didn’t make a dime or didn’t make a YSP, your situation and many others would still be the same, if that was the only thing that changed. They didn’t tell you how the product worked and that’s the crime. The extra sauce on top of that is they got paid for it. And because they lied to you about the product you paid for they should give all of their money back and fix your problem. But we would have to use Paul’s camera and tape the whole session from begining to end to correctly find fault in these matters.
2/28′s, no doc, sisa, opt arm, i/o,30 yr fix all come with pros and cons.
The crime is when a L.O. who is suppose to be the expert doesn’t inform his client of both. Forget everything else. When I don’t tell my client this is a bad loan, when it really is. When I don’t tell them this is the only loan and this what you need to do to get out of it, or you shouldn’t do this. If I don’t reconized that my client is confused and give them time to go and think about it and come back, then I have not done my job and deserve not to earn one penny. But once I laid all the good and the ugly on the table and you have time to make an educated decision and you really agree to the terms before you, then yes, I’m going to get paid for it. Why not? If you are in full agreement with the terms set before you, why do you care if I made $1 or $10,000? What you think I should and should not make is relative to nothing. The issue is are you satisfied with the product you are about to buy? If the product doesn’t do what you paid for it to do then bring it back or in this case, report deception. You will get vindicated. And I told you on your post how to do that as well.
Lenders offer brokers YSP as a tool to get our business. Inturn we offer services and products to the consumer to get their business. There was something that the L.O. you had been dealing with before attracted you to her. Most of my posts involve responses centered around education to the consumer and on the L.O. If you are better educated then you have a better angle as to what you are up against. That’s all.
This is a flawed system by design. Alot of the things we are complaining about will not change much. Is it right or wrong? That doesn’t even matter. Education is needed, so you and millions of other don’t lose their home. Education, so you know all of your options and can react accordingly.
And as far as your job is concern, I bet whatever you do, you don’t put the whole 40 hours in, non stop, from start to finish but at the end of the week you expect that check to represent 40 hours. If you do, then I stand corrected and I apologize in advance, but if you don’t “disclose” the daydreaming moments or the cell phone calls to ya girl or your nail filing sessions, leaving five minutes early, then you should give that money back at the end of the pay period becaue you’re stealing.
And Moe you never answered some of my questions on the NACA topic you were pushing at us hard last night.
“if you screwed your neighbor, he could visit you some night for a real frank discussion.”
Ha, ha, Poppy, that’s a thought!!! Mozillo in a small room with a hundred homeowners with options ARMs. I’m thinking of a scene from Night of the Living Dead.
JacMac- To answer your question about not understanding the disclosure I would have to say that if you dont understand then its not disclosure. Here in the Southwest if I disclose in “English” to a Spanish speaking borrower then I have not disclosed.
In response to a Broker not discloseing YSP? Its impossible, it may have happened once or twice by mistake but and a hard and fast rule Brokers MUST disclose its federal law and Lenders wont fund on a loan where YSP is not disclosed. Thats how I know that you delt with a banker.
CTAN,
At what point to do you think the client should take responsiblity for their transaction and when should they stop?
Also, if you disclose and the client tells you repeatedly they understand and they don’t, but they have convince you they have, then what do you do when it blow in the end?
Joe – then we get ourselves there. We as an Industry demand that the old rules go back into place, believe me there have been so many that have shunted off. I am spending Sunday night underwriting, so do not have a lot of time to go into them, but they were on the books at one time, they need to go back on the books along with a few new ones that have arisen out of this debacle. We will rid ourselves of a lot of creeps in the lending channels, Brokers, Lenders, Investors, Scammers, Flippers, Equity Skimmers, Realtors, Appraisers, etc…… Barney and his Chums have not begun to scratch the surface, and I fear that they never will, unless we as an industry demand that they do.
JacMac – Please get me the Video on that event when it happens, it would be just deserts to see Mozilla meet his worst nightmare. However let’s not stop with him, the markets he sold to have leading men/women that also could use some sobering “visitations”, if Wall Street had not made the market, CWide, Ameriquest, Aames, WMC, RESMAE, Accredited, Impac, New Century, Fremont, ad nauseum and their toxic products would not have existed. I think a few SEC, Secret Service and Treasury Agents could cause some real consternation in the hearts and stomachs of these leading citizens.
Chris- I would say that unless the Borrower hires someone to represent their interest in the transaction then they are responsable from the point of application. The borrower is not a client they are a customer and unless ther is a fiduciary relationship they are never the “client”
As to the second part of your question, I dont think a Loan Officer should be held liable for a borrower not understanding unless that Loan Officer represented himself as an agent to the customer, creating a fiduciary relationship. other than that if you are concerned it needs to be in writing and signed. everything you discuss with the borrower needs to be put into writing and signed.
It may sound crapy but the truth is that this whole business about people thinking that the Loan Officer had there best interest in mind is completly unfounded. The LO is a salesperson and no more has the best interest of the borrower in mind than any other salesperson.
Now dont misunderstand that statement. I dont mean to say that they shouldnt have the borrowers best interest in mind, and of course you get more referal biz when your customers are happy but the truth is that there is no agency relationship and therefore nothing that says that LOs are SUPPOSED to look out for the Borrowers interest….So Buyer beware
Thank you
One problem I have with the current system is allowing real estate companies to have their own mortgage companies or have an affiliated business arrangement with a mortgage company. The real estate companies pay a referral fee or some kind of compensation when the agent “drives” the consumer to their “in house” mortgage company and or escrow. What ever happened to an ARMS LENGTH transaction? Back in the day, all entities involved in the transaction could not be affiliated in any way i.e. no in house escrows and no in house mortgage companies. If we found a relationship during a pre-closing audit, the loan was declined. If we found out about it during a post-closing audit, the people involved were prosecuted. Now we have all of the big realty firms with both. Someone in a previous post said go back 10 or 15 years and that is the structure that worked best. I say that is mostly true. Some of the loan products today are still very useful to people who are trained and educated as to how they work (i.e. Option ARM for real estate investors/interest only products for short-term occupancy). Not every type of loan is designed for every type of borrower. That is what the professional loan officer is for.
I hate to say it but the mortgage broker has always had the image of a used car salesman, its just that most mortgage brokers have finally figured it out.
As a former wholesale rep, most brokers didn’t even know what they were selling (although they thought they did) and as such, sold the product that made them the most $$ from the lender with the best rate at the desired YSP.
Selling on price, not correctly informing your customers, and maxing out YSP on most every deal does not win in the long run. Now you will be regulated to the point where it wont make sense to be in the business.
YSP was not the problem, yes it was abused!!!!!!!! When investor allows a buyer to put no money down with good or bad credit is just plan stupid. Then lenders allow the same programs stated, NIV, NINA, NO DOC. IF A BORROWER HAS NO FINANCIAL RISK TO THERE OWN MONEY IT IS VERY EASY TO WALK AWAY FROM A PROPERTY!!!!!! (LOSS OF A DOWN PAYMENT..SAY 10-20%) A buyer might think twice if it is his money at risk. Yes some LO DRILLED THERE CLIENTS AND THEY SHOULD BE PUNISHED!!!! WE HAVE TONS OF REGULATIONS NOW AND NO ONE IS WATCHING/ENFORCING IT!!! I am all for DISCLOSURE, FULL DISCLOSURE BY EVERYONE, EVEN THE BANKS HIDING BEHIND THE FEDERAL CHARTER RULES….LIKE WELLS,COUNTRYWIDE….THEY DO NOT DISCLOSE YSP AND DO NOT HAVE TO. THEY WERE AND ARE THE BIGGEST SMOKE AND MIRROR OPERATION,I SHOULD SAY CAR SALESMAN.make new regs IT APPLIES TO EVERYONE, NOW THAT WOULD BE IN EVERYBODIES BEST INTERST EXCEPT THE BANKS LIKE WELLS,CW………….
I think that your concept is correct but not accurate. Buyers will always need brokers because if the broker in knowledgeable they will get the client the best deal. Banks might eventually lower or eliminate YSP, but I don\’e2\’80\’99t know about you but if a broker was getting me a loan at a lower rate and better terms I would gladly pay them a fee.
Mortgage Bankers have been known as having the credibility of used car salesman…. since the time that the mortgage markets started expanded the credit spectrum they would do business in outside of Prime. Where ya been?
Mr underwriter, I am a loan officer for a broker, in our office we charge 1 % of the sale amount only, stop blaming Brokers..
Did you ever go to a meeting for your own AEs…..
I bet you my house you didnt.
Your own AEs were trained to “teach the LOs on How to submmit the loans so YOU can approve the loan…uhmmmm
Tell me if Am lying. I can almost see you at those luncheon meetings getting YOUR BONUS check…didnt you?
HEY MIKE, WAS YOUR JOB TO TEACH THE BROKERS AND LOs ON HOW TO STRUCTURE THE LOAN SO YOUR OWN UNDERWRINTING “LADY” DIDNT CATCH THAT MINOR DETAIL WHERE THE BORROWER FOR THAT OWNER OC WAS ACTUALLY LIVING IN DUBAI?
I was just reading about Bruce Marks and the NACA. My honest reaction? I’m pissed off. Why do these people deserve better rates and terms than me when I’ve never missed a payment in my life, have high 700 scores and put money down and paid my own closing costs? I saved money to make the down and the closing costs and these people are getting 100 percent financing, no closing costs and 1 percent less market rate on a FIXED loan. Sorry folks, that’s bullshit no matter where you live.
Most brokers I know ARE used car salemen. Maybe that’s the root of the problem?
I read the NACA website. They have job openings in my area. I was interested to see how their compensation is paid. It seems fair, but it’s still production-based. You have to hit 5-10 loans per month. However, the additional requirements seemed a little much. Then there’s the participation issue; I have one question they do not address. It says:
“When you join NACA, you agree to the Participation Pledge which requires you to participate in at least five activities a year. This applies immediately and extends for as long as you have a mortgage through NACA. Thus, you will not be able to access the NACA program if you do not participate”
What happens if I miss an activity or do not complete my 5 activities in a year? Does the rate adjust to some higher rate? Do I have to pay back the closing costs? I’d be interested to see the contractual obligations on this matter? Besides, isn’t this some sort of forced labor? Whether the customer pays through money or time isn’t it the same? (from the old addage “Time is Money”)
Additionally, the website suggests being arrested during a NACA civil disobedience action as participation. Regardless what I think or believe, I’m not sure encouraging my customers be arrested is really right or smart. (read future law suits)
I can see how this product offering could significantly hurt a portion of my brokerage/banking business. However, making low-income, questionable-credit borrowers 100%LTV loans with a second lien in place puts them in much the same prediciment the current defaultees are facing: No equity or upside down in a declining market with too many consumer unsecured debts obtained from credit-driven bankers determined to outrun their losses with cooked books and irresponsible lending practices.
Sure is a good thing Mr Community-Action Customer got a great low rate so he could fill up his new house with Rooms-that-Blow furniture and get that new car at 15%APR. Hmmmmm. I wonder what goes back first? the car ($1000 down) or house ($0 down) Hey, experienced brokers…….you know the answer to this one.
I repeat:
Mortgage brokers have never had a good reputation. I don\’e2\’80\’99t know what planet you are living on. They have never been respectable and have always been thought of as used car salesman. Wake Up!!!
Chris, I don’t generally have discussions with people who are not listening to me — you’ve shown me more than once that you are not listening. So no matter, you have your ideas about me and they’re dead wrong — but you can continue to think as you like, it seems to give you some sort of satisfaction of being “right”.
Personally, I really dislike “right” fighters — discussions like that don’t get anywhere, no understanding, healing, growth — that’s my opinion.
CTAN, I dealt with a mortgage broker. By asking you that question, I meant to point to the fact that a YSP that is not explained to a customer, even if it appears on the HUD 1 is undisclosed when the buyer doesn’t know what it is. That’s my opinion.
I didn’t know what the YSP number in the inside margin meant. I had no idea.
Mortgage Brokers, as far as I am concerned do not hold themselves out to be disinterest sales people. In my experience they hold themselves out to be someone looking to close the best deal for their “client” — they call the customer that; it’s part of their sales pitch.
I say, let’s just agree to disagree.
OH, and Chris, by the way, I’m self-employed, have been since I was about 18, so ummm, wrong again.
This is a dead on statement, Aaron: “If a broker was getting me a loan at a lower rate and better terms I would gladly pay them a fee.” — that’s why I feel so many Mortgage Brokers have shot themselves in the foot by being so dishonest and greedy.
I understand the way the business world works and that you get what you pay for, et cetera.
What I’ve been bitchin’ and moaning about since I started posting here is being lied to, decieved, having information withheld from me and being mislead.
Let me shop my loan and make the best decision for MYSELF about MY HOME with all the information that I need, not just what some slimy Broker thinks I need to know.
I never agreed to be on a need to know basis about money that’s ultimately going to be coming out of my pocket — that’s the point, but it seems to fly by the heads of most of the brokers out there, especially when their ego jumps up.
I’m in danger of getting a cornea injury with all the finger pointing that happens when Moe (or anyone else for that matter) even says a word about the fraud of the dishonest Mortgage Broker. Unbelievable.
Rudy – you have no idea – I confronted the AE’s daily, and I do not take a bonus for underwriting, never, ever will. Will not work for anyone that offers one either, how fast does that degrade the process???? Real fast. The AE’s that I work with today are professionals, their sales managers are professionals and that kind of crap does not fly in this office.
As for living off commission, well buddy – I was an originator for over 20 years, Branch Manager, Territory/Area Manger and VP on the Production side.
If I ever, and I mean ever saw anyone of my people take the fee income that I see represented on these files – they would have been fired on the spot. End of that discussion. It is immoral, unethical and down right criminal. As for my commissions, not every transaction was my last. I had an over 97% pull through rate and closed well over 200 transactions a year, I never cold called after the first 5 years, everything was referral and for that matter, the Realtors that I worked with for over 18 years, still call me for assistance. I can not render it now, conflict of interest…..yep ethics. Now for the mind blower – in the last 15 years of originating I had not one turn down from an underwriter, not ONE. I never, ever fudged on a file, it was straight up and honest, if the borrower was not viable, then we either worked to get them viable (some it took a year or more) or they rented.
I still see my old borrowers in the grocery, drug, hardware, you name it stores and other venues, they actually like me and ask me if I can help them, family members, neighbors, etc… I hear about the jerks they have dealt with since I left production and oh my, they actually remember what I told them when they bought their first house. “If it sounds to good to be true, it AIN’T true, doubt everything and when in doubt get the hell out.”
Now can you say the same….seriously doubt it. OH, damn I forgot, when I screwed up a lock – god…..I paid for it out of my own pocket, not the borrower. Yes I bellied up to the Bar and paid the price out of my own pocket, did not happen often, but when it did, it was my financial responsibility.
Now if you can run your business this way, do it, if not get the hell out of the business.
I as a former AE can say that a MAJORITY of loan officers and brokers in the business are in it for the money..not because it is their passion or because they want to help people..
they are in it for the money
how can I tell? easily!
1. they dont’t know how to price a loan off a rate sheet but can figure how to get a large rebate.
2. they don’t understand anything. they do not know how an arm adjusts..why it adjusts..can’t calculate a arm scenario adjustment..dont know simple definitions for margin, caps, floor rate, lifetime cap, etc.
3. They been in the business for years but can’t even complete a good faith correctly.
4. they take 5 days to get their borrowers a final answer (mean while..the one really doing the work they should be doing is the poor and irritated processor)
5. They tell their customers their loan has a prepay just to make another .50 on the back.
6. They provide an original good faith with closing costs and at last minute they raise the costs when they learn that the seller is actually contributing more to borrowers closing costs..so they play with the figures to soak up the sellers contribution..and the rate stays the same plus the borrower still has to bring money.
The business will change and be good for the borrower
once we get rid of all these unethical and trashy people. That would be by maxing closing costs and cutting rebates out. Then only the ones that truly enjoy this job as a passion and want to help people will be there.
and Have you seen how these loan officers talk and act?
i see females dressed like tramps..
i seen dudes walking around like they are god
bragging about how much money they made..how they took a “stupid” borrower for all they had..
they ask for pricing and used foul language around me
when they did not like the product or bank..they would shout an f word
Just plain tacky personalities. Coming to work in sandals? Come on.
I mean no professionalism what so ever.
They would ask me to commit fraud. I mean really..these people are not sales people..they are order takers. These people can not succeed in any sales job outside this industry. That is why they are all scrambling and paranoid..because they don’t really know how to sell.
These people were not really loyal either..
they would make me run up and down all day trying to get a loan approved..then they would take the loan somewhere else because the lender had shady practices that made the loan close faster or had better incentives for the broker..even though it was costing the borrower more.
Some processors too..they would show up all nappy looking and just learned how to send every borrower subprime and how to cut and paste
and are know complaining because all banks are mainly A paper..and they do not have the knowledge needed to submit a complete file.
I remember a processor frined of mine would do mostly alt a and subprime
he would send a deal to my A paper bank and complain because the file would not move…of course it would’t it was DU approved and file was missing conditions. so I told him..”im sorry if you are upset but we are A paper..that means you need to send in all conditions that are asked by your DU approval..we dont work files that are incomplete…he then stated, ‘well Aurora Lending does that..why can’t you” I said..”well we are not Aurora” we are old school underwriting…you need to learn how to truly process now. Train your loan officers and your idiot broker to get their conditions as soon as you have the DU approval. Don’t waste your time. really.
how Aurora treating you now!
yes we need to get rid of the greedy crap.
we can start by requiring COLLEGE DEGREES. That would eliminate ALOT of trash..yes trash.. you know who you are!
“It’s going to be great in 2008″
Chris,
Impossible to not have a ysp disclosed? How about when it shows up on the HUDd as “lender paid premium”, “lender premium”, “marketing incentive” or any of 50 other names I’ve seen it called other than ysp? If ysp is such a wonderful tool for the borrower, why do brokers go to such great length to hide it? Simple, because it’s not being used to reduce COSTS to the borrower, its used as a source of income.
Go look through the HUD policy statement from 1999 and 2001 and see if any ysp charged could pass their test as a legitimate fee. It has unearned fee written all over it. Only issue is the right lawyer hasn’t picked up on it yet. When I see (yes I’m a regulator) brokers charging 2 on the front and 2 on the back in addition to the other $2k in garbage fees there is nothing more fun than having them explain exactly what service was provided for each and every fee. Most can’t make it past the “application fee” or “admin fee” before they run out of ways to explain the services they provide. It’s truly pathetic.
JacMac,
Good luck with yourself. I hope it works out. You are good entertainment. Word to the wise. Watch what you say in your other post responses. Everyone is reading them. Keep your stories consistent.
Keep it moving and be sexy in the 08′.
And Ron, I believe you meant to address your comments at CTAN, not me.
P.S.
To all. It’s still and always will be, “educating” yourself more about this industry, the complex workings of the nation we live in and making sure who we deal with, really knows what they are doing. I hope that the “really” concerned people get what they are seeking out of this.
HAPPY NEW YEAR
It is so difficult trying to educate those who already have their minds made up, I’m sorry if I have confused any of you with the facts.
Chris, CTAN, Paul, JacMac, I would for you all to be regular contributers to this blog. Please email me if you’d like to get a non-paying low level job that might very well lead into a paying job someday and it will be great exposure.
This blog is unique and I appreciate you all that make it unique and real.
I feel all your comments are very valuable and needed in the mortgage blog-sphere.
“Keep it moving and be sexy in the 08′- my coffee is now all over my laptop screen and keyboard. – Chris, you owe me a new laptop, lol.
Moe,
Sorry about that. Every year I share with my staff a motivating mantra I use on myself to deal with the upcoming year. It gets me out of mental jams and keeps my energy positive.
FormerAE – Love the post. It reminds me a lot of my old office, lots of LOs there that match your description. The dress, attitude and business practices.
They could not understand why I was closing far more volume… because I wasnt trying to make 4-5% on every loan while treating the customer like garbage. I was hustling trying to advise them and find them a loan that fit their needs and budget… even if on some loans I made $500 total. You win some, you lose some… but in the end you get loyal customers and a stable business.
All they new was selling the low payment on an Option ARM, no clue how it worked and no desire to explain the risks. It made me sick to see them cursing and threatening AEs and UWs to try to push garbage through becuase it was the only loan they had going. I never once asked for pricing exceptions or to get “creative” on a loan, because we properly QUALIFIED borrowers.
The minimum standards for licensing in NC are a start, but not enough. Luckily I have plenty of education and background, but I wish it was required of everyone. Oh well, I guess time will tell who will make it through this.
As for NACA…. it has its good and bad points. As was mentioned the buyers are required to do “community service” every year. So while the interest rate (what happened to APR, they never advertise that…. FTC anyone?) may be great, it comes with strings. All good things do, so before you post how they are the second coming read into NACA further.
They have several restrictions on area they can buy, Realtors they can use (and they get a $100 bonus for referring them to in house agents… again, that looks shady to me), repairs that need to be made and how they are made, etc. For a refinance their current rate needs to be >10% which they consider predatory. I know as I sent a few clients that were screwed by their LOs to them last year… as they had 8.5-9% rates NACA said nope.
The process is budget driven, not credit or income. So if a borrower can show they are saving money over time in a bank that works (nice approach I think) They need to attend seminars, counseling sessions, etc that can take months however.
As for their loan officers, pros and cons as well. They get a draw, not salary, and if they do not keep up volume (5-10/mo) they are out. They get about $200-800/loan from what I read depending on loan amount and the borrower. The WORSE the borrower (low income or credit) the HIGHER their compensation… so they want those tough cases.
So there is motivation for them to close loans…. if they do not write loans, they lose their commission and possibly their job. They are monitored by computer and required to work long hours and attend the weekend meetings, so its a tough gig for a small commission.
I guess thats wht this beautiful non-profit window 1-5 system you describe gets though… a socialist utopia of bureaucrats. You make $8/hour while big brother watches you and tells you what community service you must do to keep your job. Those that qualify and stay in line can buy house model A or B with loan 1 or 2 and chose from a menu of demonstrations or other indentured labor to thank the non-profit for granting them a loan.
Sorry if I prefer capitalism, even with its ugly downsides. I think we need to fix the system and enforce the laws. Increase education standards for loan officers AND homebuyers (home buyer counseling requirement?) and make sure all terms are disclosed in a way that the customer understands.
Thank you for the intelligent post and information re: NACA. I knew nothing about that entity until Moe brought it to light here. It sounds like a great option for certain people who meet the requirements and are willing to contribute to their communities in order to get a better rate. Nothing wrong with giving back.
Highering education standards is great!
However..there are ALOT ALOT ALOT of brokers out there that mainitain unlicensed loan officers who sit there and do loan work or who are paid a large split under the table.
I have seen many processors who are commission based only and help steer people into high comission loans running around figuring how to rip off people and then having a licensed LO sign the initial and final 1003..and at closing recieve a check from the loan officer.
Then at the end of the year..the loan officers gives the unlicensed LO a 1099 and claims the deduction as a “marketer” or “lead generator”
which is all bull.
i think
maybe there should be a law where a broker or a loan officer who provides a 1099 at end of year to a contracted worker who must be licensed by the state. Period. That way, many of these people would be eliminated.
I think that would help.
FormerAE – Again, you hit a great point.
I know that 4-5 of my competitors are unlicensed. It is these people more than any that seem to do “Stated Income” FHA loans or other transactions that we can not compete with. They give GFE that are about $2-3000 off of reality and quote rates that can only be gotten by fraud.
They can not get licensing for various reasons, a few I know becuase of past financial “issues” in the insurance or other industries. Some I guess just can not pass the “rigorous” course and test requirements, which I think should be AT LEAST 2-3x tougher.
They just get another LO to sign the 1003, but they advertise in the paper and by direct mail, take applications, run credit and perform all the activities that the law says they can not do. I guess most get cash or 1099 as a “contractor” at the end of the year. My old branch interviewed a few and said no to them, but sure enough they found jobs at other shops that did not seem to care.
I have worked in processing, marketing, originating and as a manager now… amazes me what passes as a “qualified loan officer” in this business.
I hope everybody had a good and safe new year!!! I am holding my breath just to see what comes of 08 for the brokers (the few that are left, anyway). If wholesale lending does not “implode” then we all must re-evaluate our business plans, sales goals, and such, to be able to do better business in the craziest of guideline tightening and credit crunching times i’ve ever seen! to quote one of my favorite sales books, we must “find new cheese”. and for those that don’t survive, it will only be better for the potential customers or clients, (whichever you choose to call them) because the strongest of the strong will only be around, and we’re pretty damn good anyway!!! Good luck to all in the new year!!!
Moe,
if any of the others choose not to accept your no paying low level gig, hell, i’m not proud…i’d be happy to!!!
Ha, ha, Chris: “Watch what you say in your other post responses. Everyone is reading them. Keep your stories consistent.”
MuuuuuhahahaHAAAA!!! I guess I’ll have to watch it, huh? You’ve got a real parental thing going there. Hope that’s working out for you.
THe truth has a way of not changing, so pardon me if I’m not quaking in my boots.
Moe, a low-level, non-paying job! OOOOOoooo, goodie!!! That’s the ones you get the most satisfaction from, really (no insentive but the love of what you’re doing.) I had a high paying job for years that I absolutely hated. Wanna why? Full of people who lived for money! Questions like : Why don’t you stay late — we’ll pay whatever you like and send you home in a limo?
Answer from me: Umm, I’d kinda like to see my kids a couple of hours outta the day, otherwise they might not recognize me.
They’d always cock their head to the side and look at me really strangely. Their nannies spend more time with THEIR kids then they did, and they couldn’t understand what I was saying.
But maybe I shoulda kept that job. I’d been making so much money, I could pay my over priced option ARM for my devalueing property, and even if the kids resented me and had no real relationship with me, I’d have a big old house to love, wouldn’t I.
In ’08, I hope all of use realize money aint everything. Property is just that property, and it’s relationships (business, personal, family) and love that matters in the end, because it’s the only thing of any real value.
Email me with the details, okay!
You Can Stop Foreclosure Yourself! Learn how at: http://www.preforeclosuresolutions.info
EVERYONE SHOULD QUIT….MORE FOR ME…..GIVE IT 6-10 MONTHS AND THE BANKS WILL BE BACK FOR MORE…REMEMBER IF 10% OF ALL LOANS DEFAULT 90% ARE PAYING…SOUNDS LIKE A WINER TO ME.
BANKS NEED TO LEND MONEY AND MONEY NEVER GOES OUT OF STYLE….SEX & MONEY WILL ALWAYS SELL…
IF YOU ARE LEAVING THE BIZ…IT’S BECAUSE YOU WERE AN ORDER TAKER AND YOU COULD NOT SELL ANYWAY…
I CAN OUTSELL ANY BROKER OR BANKER SO I WILL BE HERE FOR THE LONG HAUL
THE BANKS ARE THE MOST DANGEROUS. I WORK FOR ONE OF THE TOP BANKS. I CAN TELL YOU THE SMALLER BANKER AND THE BROKER ARE MUCH MORE HONORABLE, EXPERIENCED IN NOT JUST THE SMALL GROUP OF PRODUCTS AND GUIDELINES OF ONE LENDER. THE BANKS ARE THE ONES WHO PUSHED CERTAIN PRODUCTS. THE PAY OPTION FOR ONE IS MUCH MORE DANGEROUS FOR THE AVERAGE HOME LOAN BORROWER THAN A SUB PRIME DEAL.
Hey former AE,
I read this in comment 153:
“6. They provide an original good faith with closing costs and at last minute they raise the costs when they learn that the seller is actually contributing more to borrowers closing costs..so they play with the figures to soak up the sellers contribution..and the rate stays the same plus the borrower still has to bring money.”
Yikes!
This could constitue a violation of state consumer protection laws in many states.
Honestly, where do you get your information? Obviously you are not informed and certainly not knowledgeable enough to speak about anything involving current market conditions.
Mortgage Brokers did not:
1. Write loose lending guide lines!
2. Build massive amounts of New Homes!
3. Sell New Homes in huge acquisitions to investors who would flip them!
4. Did not invent sub prime loans, alt-a loans, and negative amortization loans!
Answer the four questions I provided by starting with (who did or who does?) then you can intelligently speak about current market conditions.
Another thing, Banks are not required to disclose YSP! Mortgage Brokers are required to disclose YSP.
[...] are smarter than most people originating loans in the U.S. during the calendar year 2006 based on a random sampling of comments from Moe\’e2\’80\’99s insightful blog article to which I owe a hat tip.\’c2\~ Moe writes about the rise in power of NACA, the Neighborhood Assistance [...]
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I am a title agent, and I know how it feels to be unfairly judged. I clenched my teeth and closed my share of those sub-prime loans, wondering all the while why the people signing the documents were so excited to be jumping off a bridge into . . .a pit! They were ignoring the facts while focusing on the house they were about to move into after the closing. I agree there are some bad guys out there in the mortgage business and in the title business, but most of us are hard-working people trying to help people achieve the American Dream of home ownership–free and clear of worry and foreclosure. We cannot, however, tell other people what to do, and if someone insists on sucking their own property dry by refinancing with a sub-prime, it is NOT part of our job to try and stop them. The broker can advise them, and I can make sure they KNOW what they are sigining, but in the end–these people losing their homes SIGNED THE PAPERS THEMSELVES. I’m tired of hearing about it from the point of view where brokers-lenders-titlecompany villans are all to blame, and the poor, innocent homebuyers had no cuplability! It’s disgusting! There are tons of opportunities out there in this world, and it is MY CHOICE of whether to take advantage of them or not. I, for ONE, refuse to appologize for my profession. Hey, you brokers! Listen up! If you are one of the good guys, don’t you appologize either.
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Mortgage Brokers have now surpassed Car Salesman for the honor of “LOWEST POSSIBLE LIFE FORMS”, followed closely by REALTORS……
mortgage brokers are here to stay for a simple reason and you said it yourself….cost. As you may understand now the reason BofA closed down wholesale is because they took over Countrywide and it does not make much business sense to have 2 wholesale operations not to mention BofA was not the most effecient wholesale channel.====
If anything happens to reduce costs you will see a trend toward cutting back on brick and morter retail operations and moving toward the web to originate loans with an agent via phone. Lenders will begin a push to utilizie select/approved and lic ethical mortgage brokers to offer their products….for the simple reason you mention……cost. You must know that it is much more cost effective for lenders to have a streamlined wholesale operation vs. retail operations with salaried employees and overhead. That is the fundemental reason the real brokers will survive…we are able to perform a great benifite for far less cost to the lender than a comprable inhouse agent/LO. You do recall how CW became the largest lender in the country don’t you? cost, cost and cost. They were able to originate at a far greater margin than the “institutions” could and grew exponentially because of this fact……this was before the ridiculous UW lapses and complete mindless judgement decsions that then put them into complete orbit…..come on moe what would you do withyourself anyway if you did not have mortgage brokers to bash?
Oh John, John. Countrywide got to be the biggest lender by selling toxic crap and they did a lot of it through their pawns. Um, cough, cough, BROKERS!
Why? Because they love you brokers and have your back? HELL NO! So they can have you originate their toxic crap. So, they can say in court, the broker did it, not us!
That is the only reason, sir!
Moe,..Moe …are you ok? did you get some fumes caught in your throat?
It must feel good for you to paint a broad stroke against all brokers. Where does this dislike come from? was your hand not held enough by some broker in your past adventures?
I am not approving of what CW turned out to be in the end but simply pointing out the model as originally set up was how they became a powerhouse and why mortgage brokers exsist and will continue to do so. Better service for less cost. CW sold to investors who gave them guidelines of the products they wanted to repack and sell on the secondary. Follow the big money and you will have your culprit. CW was just good at origination. Bear Sterns, Merril Lynch, Goldman Sachs, Lehman, UBS, any other investment house…these are the people who made the big money. They came up with the derivitives and demanded more of the toxic junk.
All the investors got drunk off the $$$ flowing through the system.
Mortgage Brokers are supposed to help the consumer/client by searching out programs that meet the clients long term goals and many brokers in fact follow this model and act as the professionals that we are supposed to be. One of the “TOXIC” programs being bashed the past year (option arm) was picked up and sold by CW only when they found investors willing to take high LTV risk. The Option arm has been around for 30+ years and has a place for certain clients…similar to any tool (car, gun, insurance policies)…if put in the wrong or irresponsible hands it can be devestating. The general population did not hear of this program until they began to see the 1.25% signs on the side of the road…that should have been a blaring clue of the potential downside risk. It is like offering commodity trading on the corner. Do you happen to know the default rate on option arms? Look it up you might be little suprised.
The option arm was not intended to be a high ltv program as prpogated by CW and wall street. CW actually use to fill hotel conf rooms to push this product along with their “emerging markets” program. Client education was never their strong skill set. The option arm traditionally was for the financially savvy high end client/investor with at least 20-30% downpayment. If used correctly it is a tremendous financial tool.
Listen and believe me I am no fan of CW and very rarely sent any deals their way so I have no dog in the fight defending CW. I was giving a fundemental opinion of why ethical brokers are here to stay….you must know not all brokers charged 2% and recived the max YSP on the back end and to suggest otherwise and paint a broad stroke against all brokers is suspect and almost reckless.
It would be similar to an implication that all attorney’s who advertise on your site are just doing so to take advantage of scared and stressed homeowners and of the current chaos to make a quick buck. I do not believe that is the case on your site but I have worked with great law professionals and great many questionable sharks but i do not broadly suggest all lawyers are opportunistic sharks. I believe it is very important to know that there are many ethial mortgage brokers that are in this business as a career. They provide a valuable service to help the client navigate the various programs and options that are available. To educate and present options that fit the goals of the client. To properly structure so the process is as smooth as possible and in the end save the client money.
You think bank retail is better? I with Wells fargo and they have YSP just the same(they just don’t have to disclose) In most cases retail is required to charge more to cover the commission draws, recruiting bonuses, brick and morter ops and many other advertising expenses.
I am quite aware of the trash that inflitated this profession and has jaded the overall industry. Frankly I am actually pleased to see the shakeout of the garbage, however there are many of us brokers who are in this industry to help consumers navigate the turbulent waters of mortgage financing. From reading your posts I get the impression you may dispise brokers in general and I felt an obligation to voice the fundemental reason why brokers will remain an important and neccesary portal for the consumer.
If only the banks are left standing with just retail operations…be well prepared to retool your website to report on the consumer abuse. Consumers will get raked over the coals because there will be less competition and little motivation or incentive for the banks to keep costs low.
There were abuses from many different dynamics and there are already rules, laws and regulations to deal with those who were predatory…they just need to be enforced on those who were the actual predators and not just drop an atomic bomb on the profession.
John
well said. I have said it..others have said it…and the sweeping generalities continue…bashing everyone in our entire industry as if each and every one of us were greedy, committed fraud, coercion, etc. Those of us who are still working know how we acted, what we sold to whom and whether we priced our services fairly. Get used to being blamed because people like to place blame on the easiest target and that is us, whether we are guilty or not.
forget all the yap yap about the blame game…what needs to be done now is to pressure lenders into modifications of those mortgage on homes that are primary residences. The system is way too overwhelmed and mitigation department understaffed and if you are able to get the client through the first line of humiliating defense they usually take weeks before any material changes are even statrted. The moral hazard argument puzzels me because regardless of how we got to this point it is now time to develop solutions for those who are frightened and intimidated.
Those who have children understand that while you may not condone the actions and decsions made to get themselves over their head, you do not let your family get eaten alive to prove a point. I think we all get the point.
You learn from the mistake and make rational corrective adjustments moving forward. If we continue to let this chaos move deeper then we will all pay a much higher price regardless of the opinion. The question is- do we deal with a solution now or when the problem had plummeted to a level where we will all feel much greater pain and the cost has tripled?. It is clear that some type of bailout for the homeowner needs to happen esp when terms like “worst credit enviroment since the 1930′s”, “we are headed towards a complete collapse of the credit industry” ,” millions set to lose their homes” and many other doomsday comments. While I enjoy reading the venemous opine of who to blame…it is now time to hear the creative minds on this blog to discuss and suggest solutions.
In response to JacMac
What saddens me is the lack of personal responsibility in the whole equation. Parents that are looking to purchase a home or refinance a home should take the time to actually read the documents that they are signing. If things are different then originally disclosed by a mortgage broker or banker then they should not sign the paperwork. Losing a home to foreclosure is painful, but it can not all be blamed on a mortgage broker or banker.
Because owning a home is such an important part of american life people need to educate themselves about the mortgage process. Too many people, it seems to me, just want to call up their local bank or broker and order whatever they want. This is not ordering a pizza, this is not buying a car, this is a HOME. Take some time and READ, educate yourself about it and then make an informed decision.
Ignorance is no excuse!
The blame for this entire \’e2\’80\’9cMortgage Meltdown\’e2\’80\’9d can be laid upon the shoulders of all the greedy mortgage loan industry executives and the investment bankers who designed a scheme calculated to make themselves rich. Under the guise of \’e2\’80\’9chelping people\’e2\’80\’9d to realize the American dream of owning a home, these white collar fraudsters were really only concerned with creating feigned profits by quickly churning mortgage loans into securitized investments which they in turn sold to investors.
Based upon these feigned profits these executives and their cronies were able to extract large bonuses and convert stock options into personal profts. While the investors got stuck holding the proverbial empty bag. Many investors were large national banks. Ironically these same banks would have never loan money to the borrowers who\’e2\’80\’99s notes they were now holding indirectly through their investments in these \’e2\’80\’9cmortgage backed securities\’e2\’80\’9d. It is now estimated that the losses incurred by these banks may well surpass three hundred billion dollars.
There can be no argument these losses were the result of fraud from top to bottom of the mortgage industry. From mortgage lenders suchs as Countrywide, Washington Mutual, Fieldstone and Option One to secondary mortgage market makers, such as Fannie Mae, Freddie Mac, Bear Stearns, Citicorp, Goldman Sachs, Lehman Brothers etc.
This mortgage fraud created a false demand for housing in the U.S. This false demand caused an increase in home building. Now with the Mortgage Meltdown the U.S. has an over supply of new and existing homes. This over supply of homes has caused serious economic effects through every facet of the U.S. economy. Recovery will take years. The U.S. dollar has also suffered against other currencies. In April of 2003 a Euro could be purchased for $.85. Five years later in April of 2008 it takes $1.60 to purchase a Euro.
Rather than throwing themselves out of their executive office windows when their financial scandal was discovered and the billions in losses started to mount, these white collar crooks simply took early retirmenet or quietly resigned, taking with them the hundreds of millions they had EARNED for their part in the Largest financial scandal in U.S. history.
Americans should be outraged at how this went on unchecked by state or federal authorities.
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[...] It saddens me that now a mortgage professional (Broker or Banker) has about the same credibility as … [...]
[...] I said in my previous blog post titled, Are Mortgage Brokers Ancient History in 08?, “One things for sure, the smart people that are left in the turbulent mortgage industry waters [...]
[...] Are Mortgage Brokers Ancient History in 08? [...]
[...] It saddens me that now a mortgage professional (Broker or Banker) has about the same credibility as … [...]
[...] Are Mortgage Brokers Ancient History in 08? [...]
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Are Brokers going to become extint?
I should hope that the honest working ones, the ones that truly care about the borrower & their family will stay & help those fill their dreams of owning their own home.
For the Bank Reps, Bank A/E, Underwriters, Brokers, Realtors, Title Agencies, Appraisals etc. that were dirty/are dirty I hope you get caught and pay for destroying the lives of many people. when you have saved years to buy your first home with the hopes of raising your family and growing old with your spouse and then have all these GREEDY bastards look at you as a huge commission check to help them live their comfortable lives, I hope you lose everything ! you didn’t care about us borrowers so why now should we care about you? why should the good brokers and bankers give a s**t about you, when you have also destroyed their reputation and living?
does anyone feel Karma ???????
for those of you who did nothing when you KNEW that it was wrong, when you too needed your paycheck and looked the other way, KARMA>>>>> will be back at you.
Does anyone have a conscious anymore?
Good riddens to the bad seads, we will all have to pay for it in the years to come.. the real estate market & the economy is going to take years to repair….
COUNTRYWIDE i hope you go down & are forced to buy back allllll of your bad loans…. Mozillo you pushed your A/E, your LO’s, your underwriters etc.. to make you very very wealthy, they knew most of these loans were and are bad, now you should grow a conscious (like that is ever going to happen) & fix the problems within your bank and your borrowers…….. find solutions !!!!
You Sir are an idiot. You simply either HATE motgage broker or are very jealous of them because you don’t have what it takes to be one. As for many of the ‘consumers/borrowers ??? How about the folks who spent a ton on cigarettes, beer, pizza delivery, dinners out, and just simply wasteful spending? Then the mortgage payment comes around…….they are broke and point their fat finger at the broker because of people like you and the media hungry for a good selling story tell them we are at fault for everything. I am writing business, 3-5 loans a month, same as before. A little hard work, adapting to the new standards so what the f##k is the big deal.
You are an idiot!
Unfortunatley Mr. & Mrs. Consumer, its looks like we still have rouge loan officers out there like Dee. So BEWARE!
Denial Dee the new star of dumb and dumber part 3.
Thanks fo letting your voice be heard. Now, please dont let the browser button hit you in the butt as you get the hell off my blog.
Thanks and have a fantastic broker propoghanda filled day! while they last……………………..
Home Refinance Loan…
Because of the problems in the housing industry as well as the financial crisis (which is also tied to the housing trans atlantic mortgage boom), the stock market has taken a beaten. Whilst a word of mouth referral from a friend or neighbor is ideal, i…
fast forward 2 yrs later. mark still working for the bank. well like I said the banks got bigger and have even more control. and its agood thing for the industry that they are now requiring national licensing . less dead beats more business for us die hards. I LOVE AMERICA