Major Bank No Longer Accepting Third Party Underwriting (aka pmi)

toastEarlier this month, I learned that a big bank is no longer accepting “third party underwriting”.  Third party or contract underwriting is “private mortgage insurance”.  Private mortgage insurance is often used when a borrower has less than 20% equity (or down payment) in a property.  When a private mortgage insurance company is issuing mortgage insurance to the the lender, they are underwriting the transaction.  Sometimes mortgage companies may use private mortgage insurance companies to underwrite files even when no private mortgage insurance is required.

From the memo:

“The clerical and support duty exemption to licensing under the SAFE Act (and other proposed regulations) for loan processors or underwriters who are employees taking direction and subject to supervision and instruction of licensed persons, does not apply to contract underwriters.

For all underwriters who do not qualify for exemption to licensing, including contract underwriters, compliance requires that anyone who is performing credit underwriting in connection with a residential mortgage be licensed as a mortgage loan originator….to perform credit underwriting tasks, each individual independent underwriter must have the applicable state license.”

It will be interesting to see if private mortgage insurance companies move forward with having their underwriters become licensed mortgage originators.  If other banks follow and pmi companies do not license their underwriters, it would appear they’re toast.   This bank is no longer accepting loans underwritten by pmi companies effective July 5, 2011.

Borrowers would need 20% down payment to obtain conventional financing, if pmi ceases to exist or consider FHA, USDA, VA financing or a combo mortgage (yes, second mortgages are starting to come back).

Update:  Some lenders may still underwrite the loans with higher loan to values – some banks are are firing warning shots that they will not accept loans only underwritten by a private mortgage insurance company if their underwriters are not MLO licensed.  It’s going to be interesting to watch this evolve.

Photo credit: John McClumpha via Flickr

A First of It’s Kind: Mortgage Tech Summit

mts555I am very excited to be participating and attending the Mortgage Tech Summit in Denver this week.  If there is an event like this, it’s news to me.  🙂

The Mortgage Tech Summit is geared towards presenting technology for “street level mortgage originators” and several of the speakers are actual active mortgage originators.  In my session, I’m going to be sharing my “talking good faith estimate” which has been an essential tool in how I communicate with my clients.

The pricing for this event is “progressive”.  The tickets started at $1 and with each ticket bought, the price increases by $1.  As I write this post, the current ticket price is $52.00.

I’m looking forward to learning and sharing with fellow mortgage professionals from across the country this Thursday, June 9, 2011 in Denver.  I hope to see you there!  For more info or to RSVP, visit and be sure to follow on Twitter @mortgagetechsummit #MTS11

JUST RELEASED: Two Proposed Good Faith Estimates

2011-05-18_0936Consumers and industry professionals can vote on two options for the new Good Faith Estimate that was just released by the Consumer Finance Protection Bureau via their Know Before You Owe campaign.

The CFPB is segregating the “vote” (perhaps “survey” is a better term) between consumers and professionals opinions on the two versions of the proposed mortgage disclosure.

I recommend printing the examples to really get a good look at them.   They both appear to contain the same information, disclosed in different manners.  For example, one features terms at the top of the page and the other has projected payments over 30 years at the top.


I’m noticing three improvements right off the bat over our current Good Faith Estimate (HUD’s attempt) which has been in effect since 2010:

  • total mortgage payment:  PITI vs PIMI.  The new GFE will actually include proposed taxes and home owners insurance.  HUDs 2010 GFE only discloses principle, interest and mortgage insurance (if any)
  • funds for closing.  Yes, it’s true…the proposed forms actually help borrowers know what funds they should be bringing in at closing.  And it even factors…
  • credits from lender or seller!   The new form may want to just have this be “credits” since sometimes real estate agents contribute towards closing costs as well.

All three of these items have been sorely missed from HUD’s creation that we’ve been mandated to use since 2010.

Mind you, I’ve only had these forms in my hot little hands for about a half hour…it looks like they’re missing any place for rebate pricing (aka ysp as disclosed as a credit in Box 1, Line 2 of HUD’s GFE).  This is a huge oversight in light of the Fed’s Rule on Loan Originator Compensation.   I would also like to see a signature line added (this would eliminate documents that borrowers currently have to sign to state they have received the GFE).

And, if the CFPB is reading this post, I’d be a happy camper if they discontinued having the owners title policy (typically paid for by the seller in Washington state) being quoted on the GFE only to be credited back on the HUD.   This has been confusing for our local consumers and mortgage originators should NOT be held liable for a cost that is not associated with their borrower.  The owners title policy should be treated more like the excise tax: disclosed in areas when it is common practice the buyer pays that cost.

So what are you waiting for? Go check ’em out and let your opinion be known.

High Balance Conforming and FHA Loan Limits to be Reduced after Summer

As of October 1, 2011, high balance loan limits in greater Seattle are set to be reduced from $567,500 to $506,000 for a single family dwelling for both conventional and FHA mortgages.   That’s a loss of $61,500.   This roll back is taking place across the country and will impact all counties in Washington.

Currently, someone buying a home priced at $700,000 in King County could put 20% down and not have a jumbo/non-conforming mortgage.  After September 30, 2011, the same home buyer will need to have 28% down payment (an additional $61,500) for the same scenario.   A home buyer not wanting to put more than 20% down and have a loan amount of the new limit of $506,000 will be able to purchase a home priced around $632,000.

With FHA financing, a home buyer in the tri-county area can buy a home priced at $585,000 with 3.5% down payment with the present loan limits.  After September 30, 2011, the same FHA home buyer who wants to use the allowed minimum down payment of 3.5% will be reduced to a sales price of $524,000.

This could have a dramatic effect on homes priced between $524,000 and $700,000 in our area as potential buyers will be forced to either come up with more down payment and/or use jumbo financing (which has tighter underwriting guidelines and higher rates than conforming or FHA).

If you’re a current home owner who has been considering refinancing and your mortgage balance is $500,000 to $567,500, I recommend taking action now.  Not only will your borrowing power be reduced but local home values may take a hit with the reduced financing options should Congress not extend the limits…I wouldn’t count on Congress (ever).

I wouldn’t wait until September 30, 2011 either.  The last time we phased into new loan limits, lenders were very unorganized…it really was a mess.   Some may adopt the new loan limits much earlier in order to avoid being stuck with a loan that exceeds the new limit (having a jumbo loan at a conforming rate) on their books.

I feel like Debbie Downer! 🙁

Loan Originators Who Argue That Predatory Lending was Bad Should Welcome the New FRB Rule on LO Compensation Prohibitions

funny pictures-Bad Idea: Agreeing to play a game of Monopoly with Basement Cat for your eternal soul.Under the final Federal Reserve Board’s loan originator (LO) compensation rule, effective April 1, 2011, an LO may not receive compensation based on the interest rate or loan terms. This will prevent LOs from increasing their own compensation by raising the consumers’ rate. LOs can continue to receive compensation based on a percentage of the loan amount and consumers can continue to select a loan where loan costs are paid for via a higher rate. The final rule prohibits an LO who receives compensation directly from the consumer from also receiving compensation from the lender or another party.

The final rule also prohibits LOs from steering a consumer to accept a mortgage loan that is not in the consumer’s interest in order to increase the LO’s compensation.

Though a lawsuit has been filed to stop the changes from going into effect, there has been legal research conducted by the FRB over the course of many years.

The FRB’s research found that consumers do not understand the various ways LOs can be compensated such as yield spread premiums (YSPs), overages, and so forth, so they cannot effectively negotiate their fees. Yes, some LOs spend many hours educating their borrowers but this is not true for all LOs.

YSPs and overages create a conflict of interest between the loan originator and consumer. For consumers to be able to make an educated choice, they would have to know the lowest rate the creditor would have accepted, and determine that the offered rate is higher than the lowest rate available. The consumer also would need to understand the dollar amount of the YSP to figure out what portion will be applied as a credit against their loan fees and what portion is being kept by the LO as additional compensation. Currently, mortgage broker LOs must do this, but LOs who work for non-depository lenders or depository banks are not required to disclose their overage.

LOs argue that consumers ought to read their loan docs and take personal responsibility for negotiating a good deal on their mortgage yet facts related to LO compensation are hidden from consumers when working with depository banks and non-depository lenders.

The FRB’s experience with consumer testing showed that mortgage disclosures are inadequate for the average random consumer to be able to understand the complex mechanisms of YSPs when working with mortgage broker LOs. Consumers in these tests did not understand YSPs and how they create an incentive for loan originators to increase their compensation.

For example, an LO may charge the consumer an LO fee but this may lead the consumer to believe that the LO will act in the best interest of the consumer. The FRB says: 

“This may lead reasonable consumers erroneously to believe that loan originators are working on their behalf, and are under a legal or ethical obligation to help them obtain the most favorable loan terms and conditions.”

Consumers may regard loan originators as ‘‘trusted advisors’’ or ‘‘hired experts,’’ and consequently rely on originator’s advice. Consumers who regard loan originators in this manner are far less likely to shop or negotiate to assure themselves that they are being offered competitive mortgage terms. Even for consumers who shop, the lack of transparency in originator compensation arrangements makes it unlikely that consumers will avoid yield spread premiums that unnecessarily increase the cost of their loan.

Consumers generally lack expertise in complex mortgage transactions because they engage in such mortgage transactions infrequently. Their reliance on loan originators is reasonable in light of originators’ greater experience and professional training in the area, the belief that originators are working on their behalf, and the apparent ineffectiveness of disclosures to dispel that belief.

The FRB believes that where loan originators have the capacity to control their own compensation based on the terms or conditions offered to consumers, the incentive to provide consumers with a higher interest rate or other less favorable terms exists. When this unfair practice occurs, it results in direct economic harm to consumers whether the loan originator is a mortgage broker or employed as a loan officer for a bank, credit union, or community bank.

Will Our State’s Regulations Kill Mortgage Blogs?

The Dodo - Didus ineptus Raphus cucullatusI recently had a local mortgage originator contact me because his company is requiring that he takes his mortgage blogs off-line.  His employer told the MLO that it was due to recent Washington State regulations.   In my opinion, his employer probably wants one less thing to worry about in this day and age of trying to operate a mortgage company so telling mortgage originators they cannot blog is much easier than making sure their blogs and outside websites are compliant.

Washington State mortgage originators, are you aware of these rules?  WAC 208-660-446 went into effect November 5, 2010.

When I advertise using the internet or any electronic form (including, but not limited to, text messages), is there specific content advertisements must contain?

Yes.  You must provide the following language, in addition to any another, on your web page or any medium where you hold yourself out as being able to provide the services…

(3) Loan originator web page.  If a loan originator maintains a separate home or main page, the URL address to the site must be a DBA of the licensee and the licensee’s name must appear on the web page.  The page must also contain the loan originators NMLS number and a link to the NMLS consumer access web page for the company….

(5) Oversight.  The company is responsible for the web site content displayed on all web pages used to solicit Washington consumers, including main, branch, and loan originator web pages.

I’m fortunate that my employer does allow me to blog.  Back in the Spring of 2010, during a scheduled audit with DFI declared my blog to be an unregistered trade name.   We did register my mortgage blog with the NMLS, which included paying additional licensing fees.

There is so much for consumers to be aware of and I find that blogging actually helps me to be a better mortgage originator.   When you write about various mortgage scenarios as a mortgage blogger, it causes you to research your underwriting guidelines and to stay current.  I’m constantly looking for “the latest” information for new content to share with my readers.  I seriously cannot imagine not being able to blog about mortgages.

I don’t blame this mortgage originators employer for not wanting to manage the content of their employee’s blogs.   However it’s a sad day when a good mortgage blog is removed from the internet.   I can’t tell you how many consumers thank me for writing and sharing reliable information about mortgages.  A quality mortgage blog provide current guidelines and trends to consumers and real estate professionals. 

If mortgage blogs in our state cease to exist, I suppose people will need to rely on what banks want them to think about mortgages, which I’ve found to be misleading on several occasions.

Perhaps You Should Lock Your Rate Today

If you are “floating” a conventional rate right now,  you might want to contact your mortgage originator to discuss whether or not you should lock today.  Typically, I don’t like to make bold predictions with mortgage rates as there are too many factors that impact their direction and traders may  not always react consistently to these factors… but today I can tell you quite confidently that Monday’s conforming rate will cost more from many wholesale lenders.

Fannie Mae and Freddie Mac are revising their price adjustments (LLPA) on mortgages with a term greater than 15 years.   This will go into effect on loans they purchase April 1, 2011 or later.  However, this means that wholesale lenders need to make their adjustments well in advance so that by the time Fannie or Freddie buys the loan from them, the wholesale lender isn’t stuck with that price hit…not to mention, if they sell the loans prior to the April Fools increase, they’ve made some extra coin.  

The adjustments range from 0 – 0.5% in fee depending on credit score and loan-to-value.   For example, someone locking today with a credit score of 740 and a loan to value of 80% or higher does not have a base price adjustment.   With the new LLPA, this person has a price adjustment of 0.25% in fee.   On a $400,000 loan amount, this boils down to $1,000 in fee and may or may not make a difference in rate (typically 1% in fee = 0.25% in rate) depending on how pricing is at that moment.  

Someone with a 680-699 mid-credit score and a loan to value over 80% will see an increase of 0.5% to fee for their conforming mortgage rate.   0.5% in fee tends to pencil out to a 0.125-0.25% higher interest rate or the borrower can pay 0.5% more in fee (discount) to buy their rate down.   

Homebuyers who are putting less than 20% down payment with credit scores below 740 should make sure their mortgage professional is approved to originate FHA loans as they are well worth the consideration.   As always, I strongly recommend getting started with the preapproval process early so that you can work on improving credit, if needed, as one digit lower may ding your mortgage rate.

If you or your mortgage professional are convinced that rates will be going down, then you may not want to lock.  They will just need to go down low enough to compensate for the increase to conforming price adjustments (LLPA) which will be factored into the pricing of conforming rates.

13 Reasons Why 30% of LOs Fail the National Loan Originator Exam

The first time “pass” rate of the national loan originator exam has fallen to 69 percent.  This is an indication that the test is not too easy.  A high pass rate means an exam is too easy.  A low pass rate means an exam is too hard.  The numbers that tell a different story are the repeat test takers.  Test candidates who fail the LO exam the first time and retake the exam pass the exam only 44 percent of the time.  The SAFE Mortgage Licensing Act is working the way it was intended.

This blog post is for loan originators seeking help who are trying to pass the test the second, or third time.  Test candidates must wait 30 days between tests and if they fail after their third attempt, they have to wait 6 months before taking the test again.  I know it sounds unfair, but in all seriousness, not everyone is going to be able to pass this exam. The six month cooling off time is like a forced reflection period for a candidate to either get serious in addressing their repeated fails or get serious about studying.  The SAFE Mortgage Licensing Act of 2008 is only the beginning.  Over the next decade loan originators will slowly transform from being less like retail salespeople and more like professionals. The loan originator exam will never be as easy as it was in 2010.

I teach the SAFE Pre-Licensing course for new to newer loan originators which is a 20 hour course. I also teach an exam prep course for experienced loan originators and have had the opportunity to interact with hundreds of loan originator students. In this blog post I’d like to share some reasons why folks are not passing the exam so those who need help can identify their challenges and meet or reset their goals.  The following reasons are numbered for conversation sake and do not appear in any particular order.

1. One reason why people are not passing the loan originator exam is the same reason why people all over the world don’t pass comprehensive exams: Not enough studying. A 20 Hour pre-licensing course is definitely not enough time to teach and learn all the complex knowledge required to pass the national LO exam.  20 hours could be three, 7-hour days or two, 10-hour days.  Take a look at the test content outline.  There’s NO WAY an average human, who has never been in the mortgage lending industry, is going to be able to learn let alone understand, memorize and apply this content with only 20 hours of education.  One reason the number of classroom hours was set at 20 may have been because during 2010 there were a huge number of experienced LOs who worked at non-depository lenders who needed this course. Two days is plenty of time to spend with an experienced originator but not someone brand new.  In the future, expect the pre-licensing hours to be expanded to a full week of education. Until then, some students will have to spend way more time outside of the classroom studying on their own.

NMLS Resource Center2. “There’s no good study material available”
NMLS-approved course providers are not allowed to take the test only for the purpose of telling everyone what’s on the test.  In fact, we agree to NOT do this.  If we’re caught doing this we lose our ability to teach NMLS approved courses! If you think about it, if it were that easy to cheat on the exam then why bother with the SAFE Act? Why not just give anyone who wants a license a license and not test them.  The Nationwide Mortgage Licensing System (NMLS) does not provide a study guide book. Instead they encourage test takers to seek out study material from course providers….however, slow down a bit and you’ll see right inside the test content outline, NMLS TELLS YOU WHERE THE TEST QUESTIONS COME FROM. Look at page 3 of this pdf.  Those who are seeking good study material don’t have to pay to get it.  It’s all available for free. However, that means you’ll have to actually read it. More about reading soon.

3. Wanting the answers/not wanting to study
Loan originators ask their compliance person for the answer when they have a question about Fannie Mae, RESPA, disclosure requirements, etc.  So in attacking this exam, LOs expect to call a course provider and have that course provider hand them a set of 100 questions that will be on the exam. And by the way, anyone who claims to “have THE 100 questions you MUST know” is probably wrong. Any list of questions floating around out there will eventually make their way to NMLS and I’m sure they’ll pull those questions. Okay, so maybe you don’t expect the answers but you expect someone to sell you a book that tells you what will be on the exam.  That book doesn’t exist either.  What about a book that summarizes the test content outline?  Yes there are books available and I think those books would be very helpful for some folks but no book will tell you the exact test questions you’re going to get! Relying only on a book is a mistake.

4. “I know the material, I just can’t pass the test.”
It’s possible you don’t know the material. Re-read numbers 1-3. Or perhaps you have test anxiety.

5. Test Anxiety
I  have met several LOs who are have a high degree of test anxiety that goes way beyond normal nervousness.  Yes, passing the test is important. In their mind, people with high test anxiety go from “not passing” to “living in a van down by the river” in one heartbeat.  Test candidates get themselves all worked up so they can’t eat, sleep, think, or do anything let alone actually learn and understand the test content.  There’s lots of tips and ideas that have been written about dealing with test anxiety and even a little self-quiz you can take here.  One thing the experts agree on is that a person with high test anxiety isn’t going to be able to learn much while studying.  If you want to pass the LO exam, you must deal with your anxiety first and foremost before taking any exam prep classes.  There is no time in anyone’s classroom to give personalized psychological counseling.  Besides, most of the instructors teaching classes whether they’re live or online specialize in mortgage lending not test anxiety. Your challenge is different. Know thyself….pass the test.  Maybe your anxiety comes from not wanting to be honest with yourself about a possible learning disability.

6. Maybe you have an undiagnosed learning disability.  As I’ve mentioned in other articles, back in the 1970s there were no para-educators available to follow kids around giving rambuncious kids extra support. Instead students survived in other ways. Humans listen and talk at a much faster and higher rate than we read and write.  Some LOs are high functioning talkers but low functioning readers.  Some people are dyslexic or have other bona fide learning disabilities that they know about but don’t want to deal with the stigma associated with being labeled.  Well if you want to pass the LO test this might be that point in your life where you finally are going to have to come out of the closet and get some help.  Repeated on purpose: Most of the instructors teaching classes whether they’re live or online specialize in mortgage lending and not learning disabilities. Ask your primary care physician for a referral to a doctor or counselor who specializes in diagnosing learning disabilities in adults.  The Nationwide Mortgage Licensing System will make reasonable accomodations for people with documented learning disabilities.  See page 14 of the MLO Testing Handbook for more details.

7. Subprime LOs who fell out of the industry during 2008 and are trying to re-enter the business are having a very, very hard time passing this test.  The main reason is because they think they already know how to originate and don’t want to spend the time studying or don’t think they have to study so they repeatedly fail the test. Anyone who entered the industry around 2002, left the industry in 2007 or 2008 and only originated subprime received very little compliance training if any. 2011 is a radically different world compared with 2007. If you still think stated income loans should come back, if you still believe that a pay option ARM is “the right product for the right person” and if you think it’s unfair that people can’t use seller downpayment assistance programs please do not re-enter the industry.

8. “The test contains trick questions!”
Actually, the test doesn’t have any trick questions.  Test writers try very hard NOT to write trick questions. The reason the test question sound tricky is because LOs are not use to looking up answers and reading the statute.  Instead they ask their boss or the compliance person, their processor or the person sitting next to them for the answer and move on.  People use language differently in different parts of the U.S.  Teaching a class in Oklahoma or Idaho is vastly different compared with teaching in Seattle or Virginia.  Test writers can’t use spoken language and coloquialisms from different parts of the U.S. when writing test questions for an exam to be delivered in all 50 states. The only fair way to write test questions is to copy and paste directly from the law.  That’s why the test questions sound and look “tricky” but really the trick is on you. If LOs would simply study directly from the law, the test questions would look very, very familiar. Re-read number 2.

9. You’re ESL
English language learners are my best students. Why? Because they are typically more emotionally mature, know good and well that they have to listen, ask lots of questions, and study over and over again to pass this test.  ESL LOs…you WILL pass the test. Read more here.

10. The test has too many “situational” questions
So you know RESPA. You know TILA.  You’re scoring high on all your practice exams but the test isn’t going to be as easy as just knowing that you have to send out early disclosures within 3 days of the application.  Instead the test will contain situational questions that will require you to understand how and also why TILA and RESPA interact with each other. This requires you to look at a test question and understand what information you DON’T need and cast it aside. Only then will you be able to understand what content the test writer is testing you on.  This means memorizing test questions is a bad way to study. Instead you’re better off studying the laws and rules that govern mortgage lending.  Mortgage loan origination is all situational. These are highly appropriate questions for the exam and I hope we see more in the future.

11. Part Timers
The national LO test sets a bar and asks people who want to originate to show proof of knowledge of a body of information. Loan origination is no longer a sales job. It’s transforming into a profession. It’s really hard to be a part time doctor, lawyer, engineer, dentist, CPA unless that person is entering semi-retirement. The knowledge, skill set, and industry changes are too wide and deep and the consequences of screwing up are too high.  Welcome to mortgage lending in 2011.  You must be on your game full time or no one will want to hire you. And those companies that do hire part timers are going to have huge liability issues supervising you in 2011 and beyond.  Commit to origination as a profession. Now start over and re-read items 1-3. Part timers have a high opinion of their knowledge of mortgage lending and are sometimes too proud to want to hear that they need more basic education on the entire mortgage lending process.

12. Lack of Basic Education
The SAFE Mortgage Licensing Act does not require a high school diploma or equivalent to become a licensed loan originator. Instead, those without a diploma simply must have proof of three years of experience in the mortgage lending industry.  Subsequently, the national LO exam will be that barrier to entry for folks who may have a learning disability or folks who may not have the ability to think, reason, and understand above a 9th grade level. Some of the math questions on the exam will require a basic understanding of 9th grade algebra. Some of the questions will require the ability to understand how two federal laws relate to each other and to the consumer.  Some people only have the ability to understand one federal law at a time.  Mortgage loan origination today requires the ability to multi-think all day long.  My recommendation: Finish high school first.  The discipline required to obtain a GED will be good practice for studying for the LO exam.

13. Learning Style Not Matched with Study Choice
Visual, auditory, tactile, whole body, emotional…These are all learning styles and passing the test means knowing how you best learn. Learning requires understanding. If you can teach another person something, this is a good sign that you know that concept and will be able to select the correct answer on an exam.  Some people have to see pictures. Other students need to hear the content.  Sometimes instructors tell stories about legal cases. Stories evoke emotion which triggers long term memory.  Sometimes students learn best if they get their whole body involved in the learning process. Everyone is different. Choose a course provider that understands learning styles and find one that matches your particular style.  In my experience, most students have a mixed style so find an instructor/course provider that mixes it up for you. One student had me on the phone grilling me with questions about my course for at least 15 minutes. We figured out that we’d be a good match for each other. She attended my course and passed the test the next day.  Don’t be afraid to call course providers and ask lots of questions.

Every test candidate is different. Some people listen at a higher/faster rate than they can read and write. Some people need to simply read through 400 sample test questions and that’s all they’ll need.  Some people have undiagnosed learning disabilities.  If you’ve taken the LO exam and failed, re-evaluate your learning style, the time you’ve spent studying and any of these other ideas and try again.  If you still cannot pass the exam ask yourself how much you love the mortgage lending industry because there are other positions available in lending that do not require an LO license.  And remember, you can always go work at a depository bank.  Bank LOs do not have to pass the exam…..yet.  Someday they will.

2011 FHA and VA Loan Limits for Seattle

FHA loan limits for homes located in King, Pierce and Snohomish Counties will remain the same until September 30, 2011.

  • 1 Unit – $567,500
  • 2 Unit – $726,500
  • 3 Unit – $878,150
  • 4 Unit – $1,091,350

I have the FHA loan limits for other counties in Washington posted here.   FHA still allows 3.5% down payment, which can be gifted (or loaned) by family; 5% down will provide slightly improved mortgage insurance rates.   FHA insured loans may be assumable which may be a huge benefit for future home sellers when they are able to offer today’s rate in a higher rate environment.

VA Loan Limt effective January 1, 2011 through September 30, 2011 for King, Snohomish and Pierce Counties is $500,000.   This is a slight increase from $481,250 in 2010.  Here is a list of VA loan limits for all counties in Washington.

Qualified veterans can do 100% financing up to $500,000.   If a sales price is above $500,000, the veterans down payment is 25% of the difference between the loan amount and sales price.   

For example, if a veteran purchases home in Bellevue with a sales price of $600,000; their down payment is $25,000.   600,000 – 500,000 = 100,000.  100,000 x 25% = $25,000.   

Any seller should include buyers who are using FHA or VA for financing or they are seriously limiting their potential for selling their home.

If it stinks, blame it on the dog.

my old stinky pug, Orson

my old pug, Orson

The term “mortgage broker” has become bastardized in recent years by the media and our elected officials in Congress.   The term is often wrongly used to describe a mortgage originator who’s gone bad or done something wrong.   Mortgage brokers are blamed for what’s gone foul in the mortgage industry when the room was packed with mortgage originators who work for banks, correspondents and credit unions…it’s just so much easier to blame the dog.

Yesterday, when Jillayne wrote a post about Shawn Portmann, the Seattle PI originally has the title to their article incorrectly calling him a “Mortgage Broker”; after the Washington Association of Mortgage Professionals contacted the author, he corrected the title to read: “Feds to mortgage banker: We want your giant bag of money”.    I considered this a small victory for WAMP and applaud them for getting the Seattle PI to correct their title and for defending the mortgage industry.

I wasn’t so lucky last spring when I tried to get the Seattle Times to correct calling a mortgage orignator who worked for Chase Bank a “mortgage broker“…you might remember the story involving stated income loans for hot dog vendors and limo drivers from Russia who were trying to sue Chase for hundreds of thousands of dollars over their lost earnest money.   She refused to correct her article.   How an employee of Chase is a “mortgage broker” beats the heck out of me.

It’s very convenient for big banks to vilify “mortgage brokers” because somehow they believe it makes their mortgage originators appear to be of a higher quality.   And….once the small mortgage broker industry has reduced to almost nothing, consumers will all have to go to one of three banks or a handful of remaining correspondent lenders or credit unions for their mortgage needs. 

The big bank$ have convinced Congress that it is the “mortgage broker” who has smelled up the industry.   Somehow they forgot to mention that:

  • mortgage brokers only sell bank products and programs.   Wholesale bank reps call on mortgage brokers and correspondent lenders begging for our business.    Back in the subprime days, they’d be lined up out my door pushing Countrywide, Washington Mutual or World Savings/Wachovia option ARMs stated income or 100% financing.   These programs were created by the banks/lenders not brokers.   The broker was the street dealer (sales) and the bank was the drug-lord/meth-lab (supply).
  • mortgage banks/wholesale lenders underwrite the loans that brokers originate for the bank.   Brokers do not make underwriting decisions–mortgage banks do and correspondent lenders do can (per bank guidelines).    If a wholesale lender/bank did not want to make a loan sent to them by a mortgage broker–they could decline it!

This morning, I’m reading the White House Blog’s “Top 10 Things You May Not Know About the Wall Street Reform and Consumer Protection Act” and number 2 is:

“Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.”

First of all, I agree that NO mortgage originator, regardless of the type of institution they work for, should earn a higher commission for selling inappropriate mortgages–in fact, they should not originate that loan <period>.    This point is so poorly written — is it saying that a mortgage banker CAN make a higher commission originating bad loans?   Our own White House has joined in on bastardizing the “mortgage broker”!  

My plea is that Congress and the media use the term “mortgage originator” when in doubt of what type of institution the MLO is employed by or if they’re making a general statement about mortgage originators.   The definition of  “mortgage broker” is not an unsavory mortgage originator.   This is reckless to an industry that is fighting to stay alive.