Rain City Guide

Predatory Short Sale Negotiators

Hi Wendy,

Your previous comment can be found over here:
http://ceforward.com/

Here is the link to the Department of Licensing. Scroll down to the bottom of this page and look for the PDF form called: Real Estate Programs Complaint

http://www.dol.wa.gov/business/realestate/contact.html

I recommend contacting the Trustee tomorrow and finding out if another auction is scheduled. Your buyer might decide to bid on the home at the auction or buy the home as an REO if the short sale doesn’t work out.

FTC Considers Total Ban on Upfront Loan Modification Fees

Wow, $950 per hour. That’s more than some of the top trial litigators charge, steve ruza. Thanks for stopping by but your website showing that high hourly rate doesn’t do much to persuade me of your motivations. Seriously. No one is THAT good at loan mods. But maybe you finish up each file in an hour….

Charging for loan mods at the completion of the mod is a good idea. Why? Well, it will motivate folks like yourself as well as the predatory mod companies to qualify a consumer up front.

If chances are high that the mod will be accepted, then you’ll take the client.

If chances are low that the mod will be accepted, then you’ll not take the client’s money.

Today, loan originators earn their fee at the close of escrow. This simple shift to apply the same standards to modification people is not only necessary, but useful.

The predatory mod companies will go do something else, like predatory short sales, (leaving regulators to deal with that mess) and the mod companies who are in it for more than instant money will continue to survive.

The Federal Reserve's proposed changes to Regulation Z (Truth in Lending)

Sorry, their name is still coded into my long term memory as being pronounced with an ie at the end so that’s the way it comes out when I type.

You’re deflecting the topic at hand over to shine a light onto bank LOs.

At the height of the bubble, WAMB and NAMB were very proud to boast that over 51 percent of all mortgages were originated by a broker.

I am definitely not shy about pointing out that the two biggest predatory lending settlements in the US were at Consumer Loan Companies: Ameriquest and Household Finance.

Fifty one percent. That’s pretty high, Rhonda.

This new federal law will also affect bank LOs too, correct? ( I did not hear the conference call)

Then I think it’s highly likely the law will pass. Banks will jump at the chance to limit LO compensation. This will give them an excuse to hire only green, new LOs who would be happy to accept limited compensation in exchange for a job with benefits. This will greatly help the banks control one of their costs and make it more fixed than variable. They’ll get behind it.

The Financing Contingency: Does it disfavor mortgage brokers?

Hi Rhonda,

CLA is not a designation. I know you know that.

Just wanted the readers to understand that at this moment in time, loan originators in WA who work for a firm that is licensed under the Consumer Loan Act (CLA) do not have to be licensed….today. But they all will be by June 30, 2010.

Even though an LO is working for a consumer loan lender, they still must also know the Mortgage Broker PRactices Act because when an LO does broker that one loan every now and again, the LO will need to follow the MBPA.

“I don’t work for a broker” doesn’t mean an LO gets excused from following the MBPA.

Again, I know Rhonda knows this. Other LOs and consumers might not.

It’s a detailed but important point regarding Craig’s topic at hand!

The Financing Contingency: Does it disfavor mortgage brokers?

Hi Craig,

There was a case out of Kittitas County, WA where a seller sued a buyer and won. Buyer was to have made application to a LENDER within X number of days.

Buyer made application with a broker and the broker did not forward on the application to a lender within the required time frame. Seller won the case.

When i first started using this case in the classroom, the majority of mortgage broker loan originators were outraged and horrified, however, that was back in 06/07.

Today we have a small but core group of weather beaten broker/LOs who are aware of HUD’s and this state’s definition of a lender: The entity with the money to fund the loan.

Many of the 06/07 LOs only did refinances, never met a Realtor they liked, nor did they have any intention of ever dealing with realtors (said with a small “r” and a measure of disgust in their voice)

Realtors are demanding, you see. So many LOs prefered easy squeezy stated income refis for the quick bucks. The majority of those cowboys are gone.

I am confident that the majority of LOs (who work at a broker) today know this. Well, LOL, at least my students know of this case study. I had several thousand LOs go through that course.

Now. Where might the problems lie?

What about LOs who are licensed under a consumer loan company? These folks are just now, in 2010, going through their mandatory education and taking the new national exam.

LOs who work at a CL company can also decide to broker a loan. When brokering, the loan originator is subject to the entire Mortgage Broker Practices Act for that loan and if these folks don’t submit the loan to the lender within the required time frame, their buyer is out of compliance with their purchase and sales agreement.

Loan Originators: Stop Your Crying...Let's Love the Good Faith Estimate

Looks like Roger is still in the anger phase.

Rhonda what event finally helped you turn the corner on this issue?

Predatory Upfront Loan Modification Fees

New FTC Rule would ban all up front loan mod fees!

I predicted this would happen back in 2008 when all the predatory subprime LOs started opening up loan mod firms. #totalfail.

Reboot the system and start over: Fee only payable after the homeowner has accepted the lender’s modification offer.

They’ll cry like babies: “Waaa, we do all that work up front.”

To that I counter: LOs, you do all kinds of work up front on a traditional loan and only get paid when it closes.

Major Bank No Longer Allowing Mortgages with Zero Points/Zero Costs

Hey Rhonda, “Mortgage Brokers did not cause our current crisis. They’re a weak lobbying group formed of small businesses that are in jeopardy as well. Mortgage banks sold the products to the brokers, created the guidelines, underwrote the transactions and then bought them from broker. The Broker was only a sales person.”

Well, what about the hundreds of mortgage fraud cases posted on the FBI website involving mortgage broker LOs. What about the countless stories of broker LOs bragging about how they are making thousands off of consumers, driving Hummers, talking about how they knew nothing about lending and then were making six figures. Yes, I’m sure its’ the bank’s fault that those LOs committed fraud and screwed consumers. 100% the bank’s fault. Uh huh. Right.

This meltdown exposed a wide, systemic problem. The brokers are in no way innocent.

At the height of the bubble, NAMB (Nat’l Assoc of Mtg Brokers) was proudly bragging that over 51% of loans originated were done by a broker.

Broker LOs like to say “well what about the consumer and their responsibility for understanding what they’re signing.”

So the argument is that broker’s aren’t accountable for what happened because the banks created the product and as salespeople, they had no accountability to their customers.

If that’s the argument, you’re arguing that brokers are worthless salespeople, used by the banks (victims!) with no duty to the consumer.

I do not take that position AT ALL.

I believe many brokers took advantage of consumers and were encouraged to do so by the corporate culture they found themselves recruited into at their broker shop.

I have met MANY brokers who couldn’t live with themselves inside corporate cultures described above and left that company, and sought out a different work environment that cares for the client, even it it means making less money than the Hummer driving LOs.

Further, MANY MANY LOs who took advantage of consumers WORKED FOR CONSUMER LOAN COMPANIES who like to call themselves “mortgage bankers” or “correspondent lenders.”

It’s not just the mortgage brokers who had a problem with corporate culture and rewarding LOs that piled on the fees and YSPs.

This mess is a systemic wide problem.

Brokers as well as consumer loan company LOs PLAYED A BIG PART.

Let’s not pretend they’re innocent and point the finger at ONLY the banks.

I definitely believe YSP and any LO compensation based on a higher rate will eventually go away. Why? Because it was misused for too many years not to “give the consumer a choice” but to line the pockets of LOs and their bosses. Not by all LOs but by the majority of LOs.

You all who use YSP to “offer the consumer a choice” and who honestly explain what YSP is and what your compensation is are IN THE MINORITY of LOs.

The wide majority of LOs did not do this.

Over the past 5 years I have met thousand and thousands of LOs (broker and consumer loan LOs)
I can attest right now that the vast majority of LOs used YSP as an additional form of compensation and rarely honestly explained what it was to the consumer.

YSP is going away. Compensation will revert back to what it was in the 1980s. 2% LO fee and 3% if it’s a broker.

Broker is going to have to justify his/her value to the consumer. If there is no value, broker numbers will shrink even more.

It's Official: FHA Upfront Mortgage Insurance to Increase in April

Hi All,

In regards to Ardell’s question about the financing contingency:

1.b.

“For purpose of this addendum, “lender” means the party funding the loan.”

The author of this form is taking the definition of the word “lender” directly from HUD as well as from WA State DFI and the laws/rules governing mortgage lending in WA State.

Lender is defined as the entity with the ability to fund the loan.

A broker is a middleman; the person who finds the mortgage money, for a fee. By definition, a broker is not a lender.

So for the purpose of the financing contingency, the buyer must make application with an entity with the ability to fund the loan; a lender.

Homebuyers who choose to work with a loan originator who is licensed under a mortgage broker: Your broker/LO must take your application and turn it in to a lender within the number of days stated in the financing addendum in order for the buyer to be in compliance with their purchase and sales agreement.

One of the important cases we can reference in the classroom is David and Amy Johnson v. Hal and Barbara Maloney Kittitas County, WA 99-2-06954968

From my own experience, the majority of mortgage broker/LOs in this state that I have met are NOT aware of this distinction.

Perhaps that’s because many LOs have been solely or almost entirely focused on the refi market over the last 7 to 10 years.

Please note: I am not an attorney and the above cannot be construed as legal advice. For legal advice, please consult with your favorite attorney.

New vs Old Good Faith Estimate

Regarding the fear about third party fees, why not have a written agreement with your third party that if their fees go up after a GFE is presented, then the third party will eat the fee.

Any company is welcome to approach a third party with this idea. Bank, broker, Consumer loan company, credit union.

Third party companies have also seen their profits go down in 08 and 09. I bet they would love to have a chance at getting your business.

Call your third party provider before issuing the GFE and get a written quote from them and make it binding on them.

New vs Old Good Faith Estimate

My apologies: I have to do in-line comments. I have a very hard time going up and down trying to follow a conversation.

Rhonda,

“Jillayne, are you saying that just because an originator works for a bank that they are deemed innocent and above taking advantage of a consumer”

No, I am not saying that. I thought we were talking about mortgage brokers being squeezed out of the business and my comment was about mortgage brokers, not bank loan officers.

I frequently mention the two biggest predatory lender cases (settled out of court) were with companies licensed as a consumer loan company: Household Finance and Ameriquest. Wells Fargo has also had to face predatory lending charges and the stories we hear about Countrywide’s Full Spectrum Lending are horrifying.

All LOs no matter where they work must use the new GFE.

The form was designed with input from consumer groups, regulators, politicians, retail bankers, mortgage bankers, as well as brokers.

New vs Old Good Faith Estimate

Interesting that Michael Brown says Originators won’t be completing this form. Wow. Talk about writing yourself out of a job. Why on earth would a consumer pay an originator a commission for not taking accountability for fees and for completing the GFE? That originator’s worth just went down several notches in my mind.