Comments on: This Just In: Zero Interest Loans, at a Cost of Zero, with a Monthly Payment of Zero (APR 0%)* http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/ Seattle's Leading Resource for Real Estate Information Sun, 21 Mar 2010 05:48:34 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: The Financial Crisis Inquiry Commission is Interviewing the Wrong People : National Association of Mortgage Fiduciaries http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-344662 The Financial Crisis Inquiry Commission is Interviewing the Wrong People : National Association of Mortgage Fiduciaries Sat, 16 Jan 2010 01:05:14 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-344662 [...] win if they can pretend like this whole mess is nobody’s fault.  This case is not unlike the Space Shuttle Challenger Disaster.  There was one person, an engineer, Roger Boisjoly, who warned that the O-ring seals would fail [...] [...] win if they can pretend like this whole mess is nobody’s fault.  This case is not unlike the Space Shuttle Challenger Disaster.  There was one person, an engineer, Roger Boisjoly, who warned that the O-ring seals would fail [...]

]]> By: Chris Hyde http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-308653 Chris Hyde Wed, 16 Apr 2008 18:27:02 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-308653 Thank you for this post. It was very helpful in seeing the holes and flaws in the whole system. As far as the L.O. side of things, I stand by my previous comments about changing our thinking from being a retail industry to being a service industry. If we have a service mindset, doing things like taking the time to explain disclosures well would be seen as a value that we bring to our business. I know the problem gets down to the fact of personal integrity. No matter how the system is tweaked and improved and regulated, there are still going to be those who lack integrity and who look after their own earning of the Almighty Dollar. There are those who lack integrity in every industry. Maybe ethics training can speak to the issue of personal integrity!?!? Thank you for this post. It was very helpful in seeing the holes and flaws in the whole system.

As far as the L.O. side of things, I stand by my previous comments about changing our thinking from being a retail industry to being a service industry. If we have a service mindset, doing things like taking the time to explain disclosures well would be seen as a value that we bring to our business.

I know the problem gets down to the fact of personal integrity. No matter how the system is tweaked and improved and regulated, there are still going to be those who lack integrity and who look after their own earning of the Almighty Dollar. There are those who lack integrity in every industry. Maybe ethics training can speak to the issue of personal integrity!?!?

]]> By: Jessica Kristine http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-307546 Jessica Kristine Mon, 14 Apr 2008 23:17:48 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-307546 While analogies generally aren't perfect, I like them as a way of giving perspective. The ones put forth in this article, as well as the airline analogy in comment #68, are great. One good thing about the Challenger and Alaksa Air analogies is that people saw the problems and tried to do something about them, displaying competence as well as heroism. Unethical loan originators, as the consumer's first point of contact with a bewildering world, need an application of the stick. Is there some kind of carrot for those who see problems and try to do something about them? One thing that came up earlier in this series just came to mind: the whole American ideal of home ownership. Are people with homes happier than those who rent? Renting can mean a lot more freedom. If more people were prepared to throw up their hands with the whole home-buying affair, that might encourage the industry to come up with better ways to behave. While analogies generally aren’t perfect, I like them as a way of giving perspective. The ones put forth in this article, as well as the airline analogy in comment #68, are great. One good thing about the Challenger and Alaksa Air analogies is that people saw the problems and tried to do something about them, displaying competence as well as heroism. Unethical loan originators, as the consumer’s first point of contact with a bewildering world, need an application of the stick. Is there some kind of carrot for those who see problems and try to do something about them?

One thing that came up earlier in this series just came to mind: the whole American ideal of home ownership. Are people with homes happier than those who rent? Renting can mean a lot more freedom. If more people were prepared to throw up their hands with the whole home-buying affair, that might encourage the industry to come up with better ways to behave.

]]> By: Dale Uesonoda http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-306919 Dale Uesonoda Sun, 13 Apr 2008 23:36:28 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-306919 Definitely many elements to the real estate lending business for sure. In agreeing with everyone, that are system is imperfect in this business due to so many variables and areas for error and misguidance. One key factor that I must comment on is that as I personally take every step to make sure every one of my clients understand fully the loan they are getting and also see a benefit in the transaction, the reality is that many of them I find are so caught up in the emotional aspect of the transaction that it doesnt matter what I say or give them to read because they have been referred to me and trust me. Referals and trust are good but I stress to them to understand the loan and the transaction always. The other thing is esepcially in my cases, i have a very cultural database of clients which in many cases my referal sources are very strong but at the same time, I have come to realize this. As much as our system of lending is fixed or updated for the better, there will be many clients out there that will still never understand what they are getting, just know or feel they need to something and will find someone to trust or say yes, or a hungry lo will find them. This unfortunately will not be prevented any time soon. While I was I was in the east coast for a few yrs, I had a past client of mine who lives in washington who lost my number but was trying to get a hold of me. Unfortunately, they were in a hurry so they went to a local HFC bank to refinance their loan and get cash out. Although they did not fully understand what was going on, they just knew they would get the cash they needed. Everything was properly disclosed to my client and discussed but again, they really did not understand due to language barrier, just the bottom line of cash back. To feel better about it, they took a friend of theirs who has been through many transacations herself to make sure she was doing the right thing. The papers she ended up signing were over 9.5% and 5pts origination which the friend agreed was ok as well. Imagine what type of loans her friend has gotten in th e past. Again, the the bank disclosed everything properly and the customer signed. Done deal. She was 80% ltv 660 full doc. Unbelieveable. Definitely many elements to the real estate lending business for sure. In agreeing with everyone, that are system is imperfect in this business due to so many variables and areas for error and misguidance. One key factor that I must comment on is that as I personally take every step to make sure every one of my clients understand fully the loan they are getting and also see a benefit in the transaction, the reality is that many of them I find are so caught up in the emotional aspect of the transaction that it doesnt matter what I say or give them to read because they have been referred to me and trust me. Referals and trust are good but I stress to them to understand the loan and the transaction always. The other thing is esepcially in my cases, i have a very cultural database of clients which in many cases my referal sources are very strong but at the same time, I have come to realize this. As much as our system of lending is fixed or updated for the better, there will be many clients out there that will still never understand what they are getting, just know or feel they need to something and will find someone to trust or say yes, or a hungry lo will find them. This unfortunately will not be prevented any time soon. While I was I was in the east coast for a few yrs, I had a past client of mine who lives in washington who lost my number but was trying to get a hold of me. Unfortunately, they were in a hurry so they went to a local HFC bank to refinance their loan and get cash out. Although they did not fully understand what was going on, they just knew they would get the cash they needed. Everything was properly disclosed to my client and discussed but again, they really did not understand due to language barrier, just the bottom line of cash back. To feel better about it, they took a friend of theirs who has been through many transacations herself to make sure she was doing the right thing. The papers she ended up signing were over 9.5% and 5pts origination which the friend agreed was ok as well. Imagine what type of loans her friend has gotten in th e past. Again, the the bank disclosed everything properly and the customer signed. Done deal. She was 80% ltv 660 full doc. Unbelieveable.

]]> By: Jason ”Jack” Lowry http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-292027 Jason ”Jack” Lowry Mon, 24 Mar 2008 20:17:09 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-292027 First, in response to your multiple comments "The industry is out of balance. TOO MUCH of a burden is place on consumers who don’t know what all the language in the loan documents means. I made the following analogy: A person has to undergo surgery and the doctor hands the patient a set of medical books and tells the patient to read the books and make a decision." There is currently legislation going on about Credit Cards based on similar arguments. It appears that the whole “Credit” industry is in the US is in for a shake up. Second, I was recently discusing many of these issues with a friends wife who is the Compliance Officer at a mortgage brockerage in OR. Why is this not a more common or even required position? Some of the stories she has to tell about the things LOs tried to get away with are fantastic. One that sticks in my mind is finding an LO in the copy room whiting out sections on the loan agreements & changing figures & signatures. First, in response to your multiple comments “The industry is out of balance. TOO MUCH of a burden is place on consumers who don’t know what all the language in the loan documents means. I made the following analogy: A person has to undergo surgery and the doctor hands the patient a set of medical books and tells the patient to read the books and make a decision.”
There is currently legislation going on about Credit Cards based on similar arguments. It appears that the whole “Credit” industry is in the US is in for a shake up.

Second, I was recently discusing many of these issues with a friends wife who is the Compliance Officer at a mortgage brockerage in OR. Why is this not a more common or even required position?
Some of the stories she has to tell about the things LOs tried to get away with are fantastic. One that sticks in my mind is finding an LO in the copy room whiting out sections on the loan agreements & changing figures & signatures.

]]> By: Casey Camby http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-291390 Casey Camby Sun, 23 Mar 2008 21:37:05 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-291390 They system had been built and has the necessary checks and balances emplace. What it comes down to are the individuals in those jobs. We have a duty to our clients and referral partners to use what has been built as well as our voice. We have to either speak up or not use the Escrow, Appraisal, or Real Estate agents that don't provide the real services needed for our clients and don’t meet the standards set by licensing and regulation. Understanding our duties should be taught or hit on a little harder. In any great Business Model it comes down to the people. Our government is making changes and setting forth standards. Of course I always have wished they would employee people with a little more foresight. They system had been built and has the necessary checks and balances emplace. What it comes down to are the individuals in those jobs. We have a duty to our clients and referral partners to use what has been built as well as our voice. We have to either speak up or not use the Escrow, Appraisal, or Real Estate agents that don’t provide the real services needed for our clients and don’t meet the standards set by licensing and regulation. Understanding our duties should be taught or hit on a little harder. In any great Business Model it comes down to the people. Our government is making changes and setting forth standards. Of course I always have wished they would employee people with a little more foresight.

]]> By: Gina Kwon http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-285173 Gina Kwon Sat, 15 Mar 2008 06:56:06 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-285173 Jillayne, I believe many of us in the industry have seen the subprime crisis happening and I know our firm has been self-selective (in that we have talked countless people out of applying for loans they might not be able to afford) for years as a result. I like your analogy to the Challenger crisis and agree that what we have seen in the subprime market has been similar, and on a much larger scale at that. In the long run, we will hopefully be able to work together to avoid something like this again. I already see things changing. Jillayne, I believe many of us in the industry have seen the subprime crisis happening and I know our firm has been self-selective (in that we have talked countless people out of applying for loans they might not be able to afford) for years as a result. I like your analogy to the Challenger crisis and agree that what we have seen in the subprime market has been similar, and on a much larger scale at that. In the long run, we will hopefully be able to work together to avoid something like this again. I already see things changing.

]]> By: Neal S http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-284313 Neal S Fri, 14 Mar 2008 06:14:03 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-284313 The metaphor of the Space Shuttle was excellent, thank you Jillayne. The “voices in the wilderness” have spoken up in the past & warned the zero-down loans being created were headed for big trouble. I close friend in the world of finance, not lending, mentioned to me the other day that in order to buy $100K of stocks a person is required to put up 50%; as a result, he was not so surprised that so many home-owners are now facing foreclosure. “Homebuyers and refinancing homeowners on average know very little about mortgage lending and spend little time reading required disclosures.” This is exactly why we need mortgage professional that will place the best interest of the client above their own. The concept or example of a loan officer being in a true fiduciary capacity is a welcome change, long over due in my experience. The idea that someone, such as a loan originator, would recommend an interest-only loan to a young family is ridiculous. Clearly this is an “O” ring crisis waiting to happen. Now, we see the damage & destruction across America happening right now. The metaphor of the Space Shuttle was excellent, thank you Jillayne. The “voices in the wilderness” have spoken up in the past & warned the zero-down loans being created were headed for big trouble. I close friend in the world of finance, not lending, mentioned to me the other day that in order to buy $100K of stocks a person is required to put up 50%; as a result, he was not so surprised that so many home-owners are now facing foreclosure. “Homebuyers and refinancing homeowners on average know very little about mortgage lending and spend little time reading required disclosures.” This is exactly why we need mortgage professional that will place the best interest of the client above their own. The concept or example of a loan officer being in a true fiduciary capacity is a welcome change, long over due in my experience. The idea that someone, such as a loan originator, would recommend an interest-only loan to a young family is ridiculous. Clearly this is an “O” ring crisis waiting to happen. Now, we see the damage & destruction across America happening right now.

]]> By: Roger Ingalls http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-283314 Roger Ingalls Wed, 12 Mar 2008 15:01:41 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-283314 Taren: The RE agent/LO combo is in for a solid beating this year. FHA loans will be the way to go for MANY purchases, (if not most), and FHA strictly prohibits the practice. Taren:

The RE agent/LO combo is in for a solid beating this year.

FHA loans will be the way to go for MANY purchases, (if not most), and FHA strictly prohibits the practice.

]]> By: Q-Diddy http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-283301 Q-Diddy Wed, 12 Mar 2008 14:43:16 +0000 http://raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/#comment-283301 Taren- In a perfect world there would be perfect agents/LOs, but in reality there is a conflict of interest. If both roles are paid based on finalization (is that a word?) of a sale, then I don't see how the customers interest is taken care of. Unless there is stronger oversight, stiffer penalties, compensation restructuring,etc. I don't think agents/LOs is an acceptable combination IMHO. Taren-

In a perfect world there would be perfect agents/LOs, but in reality there is a conflict of interest. If both roles are paid based on finalization (is that a word?) of a sale, then I don’t see how the customers interest is taken care of. Unless there is stronger oversight, stiffer penalties, compensation restructuring,etc. I don’t think agents/LOs is an acceptable combination IMHO.

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