Tim: The question most close to my heart is whether or not the title agent or escrow agent is due payment for services rendered in the event of a cancellation and I say YES. I don’t believe you can charge for title insurance because the policy has not been issued, however, you have provided full services of title abstract, lien letters, document preparation, etc. I would invoice the consumer. They may in turn wish to contact the mortgage broker for reimbursement if he mislead them.

As to the credit letter, as a former mortgage underwriter, I would frown on the practice of a loan officer writing the credit letter. I am aware of no prohibition on the practice but it defeats the purpose of the letter. In the case you cite, however, I think the mortgage underwriter didn’t really care about the letter anyway. Waiting to review a credit letter post closing is ridiculous. The underwriter in this case seems to have only been interested in having a letter in the file and not at all interested in the underlying credit risk.

I think you should send a copy of that YSP disclosure to HUD and the committees in the House and Senate considering predatory lending.

As for APRs, the federal guidelines for calculation do not change from institution to institution. The guidelines, when followed, produce a terrific consumer tool for shopping. The APR as it was intended to be used cuts through all the BS and gives consumers a real base line comparison. If we have lenders doing crappy calculations then it’s all part and parcel of the entire degradation into crap of the entire industry.

Ed has said Old is the “new” new. I believe that and wish we could start a new school and teach a new generation how old fogies used to do things. “Back in the day” we used to read calculation guidelines and figure them out for ourselves because we had to. We didn’t have software companies doing the thinking for us.

“Back in the day” we competed on rate and service and thereby gave the consumers the best deals possible. Predatory pricing guidelines and disclosures telling the buyer the mortgage broker is a thief weren’t necessary because competition took care of all that.

Why did competition change? How did we lose our focus? I think controlled business and affiliations started the entire industry on a steep dirty slope away from good service and healthy competition.

So there’s my two cents. Better late than never.

Great post, Tim.

1- Establish a program.
2- Get a rate with no lender costs (processing, underwriting, junk). Appraisal and credit are okay.
3- Add one point…what’s the rate? (how many mos to b/e?)
4- Add two points…what’s the rate? (how many mos to b/e?)

It really is that simple.

I agree with Rhonda that only focusing on APR will not always lead a consumer to good end results.

Let’s face it: mortgage lending is complex for those of us IN the business. Imagine what it must be like for consumers. Most consumers like to try and look for an EASY answer. This is how folks are taken advantage of because they’re only looking at one part of a moving machine with many parts. An informed consumer looks at the big picture:

rate
product type
apr
costs
originating lending institution
the institution to which your loan will be sold
escrow, title, and all ancillary services needed to obtain the loan and the costs involved with these related services
and all the people who are working these machine parts.

Ooooo…suddenly I feel like “organizational man”….a cog in a wheel. Creepy.

I have a longer reply which fully explains APR that I will post separately.

I stand by not shopping by APR because if you compared two APRs from two different LOs with the same rate and costs, you could very well wind up with two differnt figures.

And, I think just shopping rates to find out who will be helping someone select a mortgage is not the way to go. There’s more to it than rate.

Regardless. I’m with you. Getting a full list of the total costs of the loan is imperative when comparing loans, and not simply rate or APR. Problem is, brokers say “Oh, I don’t know until we place the loan”. On East Coast I always used direct lenders for this reason.

Hate to bring this up here, but really, why all the middlemen on the West Coast? I spoke with a direct lender (Wells Fargo, I think) and they said it isn’t any cheaper to go direct, as opposed to going through a broker. Can’t figure out why that is. Except for Credit Unions, which appear to have some very good direct deals from time to time, but they seem to be short term, limited funds, programs.

It is hard to believe this would be allowed. But look at the different licensing requirements for loan originators and bankers. There are different rules for different types of lenders throughout our industry.

I always thinks not a safe way to shop because you could go to three different loan originators working for the same type of lender and still receive three different APRs. That’s why I always come back to shopping by rate and closing costs.