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A few weeks ago, one of the Realtors I work with, Suzy Seller, contacted me to see if I could help her client with an out-of-state mortgage. Ima Rusty (names are changed to protect the innocent), was moving to Arizona to retire and perhaps see the sun. Ima had gone to her “local bank mortgage company
Tell Ima Rusty to “threaten” with a complaint to the AZ DFI http://www.azbanking.com
Why deal with that originator? There are so many other options to them in AZ.
Brian, this is buyer I tried to refer to you. She has since decided to stay in WA for now. She contacted me to refi her home since she hates Big Bank Mortgage…her current rate is fine and her ARM isn’t set to adjust for a few more years…I suspect she’ll move to AZ by next winter and hopefully, YOU will have a new client. 😉
I just sent her an email asking for an update. I’ll refer her to AZ DFI when I hear back from her.
Consumers need to have access to an estimated final HUD 1, in order to compare it against the Good Faith Estimate before they step into the closing room to sign. How could consumers possibly be able to find out if they’ve been taken advantage of if they do not have adequate time to compare and then to take their paperwork to an attorney for review, if they so choose?
Rhonda,
I really like the idea of a consumer receiving more than one Good Faith Estimate when applying for a mortgage loan. This is what the forms were designed for in the first place: To give the consumer an opportunity to compare costs and shop before making a decision on a lender.
Consumers, if a mortgage lender encourages you NOT to shop around, this is a big red flag for you to get another Good Faith Estimate from a different lender.
Rhonda, what do you think about my suggestion? I value your insight on this.
I review HUDs for my clients prior to signing. I want to make sure that if they bring my GFE with them, it matches the HUD. Consumers can ask the Escrow Officer to send them a copy. Tim will probably confirm that often times, escrow is getting docs so close to the signing time, they may not be able to always do that. And, a HUD looks so different than the GFE. With time being an issue, you’re getting into longer lock periods or possible extensions, both which cost money, if the borrower wants more time to review the HUD. I send a pre-closing letter out to clients to let them know if they want a copy of their loan docs in advance, to please let us know. My clients also know that I’m reviewing the HUD for them.
In fact, although GFEs have the same info on them, they can really vary in appearance from lender to lender.
Jillayne, you and I start sounding like broken records with the shopping lenders issue. Here’s a link to how I think borrowers should shop for a lender: http://www.mortgageporter.com/reportingfromseattle/2007/01/how_to_pick_a_l.html
And…be sure to block out enough time to do it in one sitting if you’re obtaining GFE’s since rates change and…remember boys and girls, if it’s not locked, it’s not your rate.
Rhonda,
Great article. I think the most important thing that I emphasize to my customers is that the GFE and the TIL are two of the most easily manipulated documents in the mortgage industry. The GFE can give such a false sense of security because it looks official but is usually woefully incomplete.
I always recommend that borrowers go beyond the GFE and TIL and request a rate lock confirmation and a copy of their full approval. Getting a copy of the rate lock is such an important step in the process, and you’re right, if an originator doesn’t want to share a copy of the lock that should be warning number one.
What I try to explain to borrowers is that there are certain fees that accompany every loan because every loan needs these items: appraisal, title, escrow, recording, etc. If they look at a GFE and those items are missing they have an incomplete GFE and that should be another red flag that the relationship they have with that originator is not off to an honest start.
Thanks for the honest commentary.
Thanks, UK and Morgan! I’m sneaking out side now since we have a “spot” of sun and we’re suppose to have ran and chilly weather for the next few days.
The nice weather is a blessing. I’m finishing some transplants this afternoon and during my break took another look at RCG.com. The Good Faith estimate bothers me because it is an estimate. The conversation I had yesterday was about another one of those promises made by a loan originator. I don’t know when, where, or how the loan originator designation started, but many of these people are under trained.
My client was promised 5.75% interest on a 100% loan. The originator promised the rate and filled out a good faith estimate. My client has two BMW payments. His credit score has gone from 680 up to 720 by doing some credit repairs we have been working on. He and his girlfriend are refinancing a purchase made eight months ago and in the process will be removing a third borrower from the original loan.
The two of them were asking my opinion and I don’t think the Good Faith Estimate, even though it is in writing, will reflect the final loan documents. In my opinion the Loan Originator is sucking my clients into a process that will be woefully manipulated.
With my transactions I insert into my Purchase and Sale Agreements that “the closing date will be on or before such and such a date.” By doing this the loan processor can be moved along to provide loan documents in advance of closing if the buyer and seller should so choose. If during the loan process something seems suspect I advise the processor or Loan Officer that my client wants to see loan documents or a confirmation of terms in the event they should want to move the loan.
The vast majority of loans just go along without a hitch. What I’m responding to are the number of loan originators who I believe are simply lead generators. The lender has no exposure in most cases. Once the originator is caught in a series of misrepresentation the lender apologies profusely and tells me the originator has quit or been fired. I’ve never really followed up, but suspect that fired originator is back at work in a different zip code the same day.
David, 5.75% sounds AMAZING. If you check my Friday rates, that would be what I quoted for a 30 year fixed, 80% ltv at 1% discount. That rate is “barely” available (by Monday, we may be at 5.875%). I’m not sure what the new LTV would be if they just bought it 8 months ago.
When I use to do signings (back when I was in title/escrow), I remember an LO who attended thte signing and when the client questioned the GFE, he circled the word ESTIMATE. I wonder why he didn’t circle GOOD FAITH?
The Good Faith Estimate is only as good as the LO who is providing it. Like Morgan mentioned above, it is an easily manipulated document and if your clients are working with a schmuck…then the GFE is worthless (no different than a worthless preapproval letter).
I would ask you clients if they have a lock confirmation and a copy of their loan approval. And, they should mention to the LO that they plan on taking the GFE with them to closing and see if the LO will guarantee his closing costs. If not, your clients should bail out and do so soon.
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Rhonda, perhaps I’m too subtle but, what I find is that some buyers shop for a Good Faith Estimate until they find some one who tells them what they want to hear. The couple I’m referring to did not like what my recommended lender had to tell them so they “shopped.” The young man felt he could do better because of what he reads on the internet. He’s quoting to me statistical data based on some articles he’s read.
Bottom line is that the numbers are the numbers are the numbers. His situation isn’t going to change no matter how many people he talks to. The fees are also set in stone. The Loan Originators have no problem removing the fees only to have them show up on the HUD. The internet, in my opinion, is making things ten times worse. I can go to any trusted site today and find a lender ad. There’s flashing lights and promises. Long articles get published about what might happen if the statistics follow a trend.
I’m responding because my wife and I are selling a house. It’s supposed to close tomorrow, but it’s not. I knew when we signed the Purchase and Sale the loan they were promised wouldn’t go smoothly. I warned the Loan Originator, who is a very nice young man working for a reputable company, that the loan needed to close on time. I monitored the process over the weeks and was given promises. The bottom line, to me, is that I know the lender is asking the buyers for more money to close. No one wants to say that, but it’s standard operating procedure today. Many loans go along without a hitch, but there is that percentage you can smell are going to go sideways.
I blame the Real Estate agent. She works for a big company who is doing business with a big company lender who are throwing deals together with a hope and a prayer. Promises are being made that may be true for some people, but not for others. Sure, I can walk into a lender today and get a loan to buy a house. I have no credit, income, or money, but I can buy a house. That doesn’t happen for everybody, but it can happen.
I’m just saying that “shopping” for a loan doesn’t mean better.
Hi David, I hope your purchase closes soon. I’ve written post in the past on RCG about shopping lenders. I’ll always go back to using someone who has been referred to you and not blindly shopping. There are too many smooth talkers out there, as you know. I know I’ve lost buyers, like yours, where I was truthful and upfront with them…so they went elsewhere. Shopping rates is deciding who is going to handle one of your largest financial investments yet you don’t get that rate UNLESS your locking it when you’re shopping. It’s a fools game.
Loaning should be done with all considerations. As much as possible, discover every truth about your transactions and the strings that are attached. It will be difficult to stand your ground if you’re not careful.
True Gina. I’m often surprised how many borrowers are not provided a GFE from a lender who has quoted a mortgage interest rate.
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Hi,
I would like to buy a condo and put 10% down. How do you access a 30 yrs fixed my community loan, currently 5.75% rate, vs regular 30 yrs fixed rate of around 6.25% (for example bank of usa has no closing cost and PMI now). Or is it better to get two mortgages to avoid PMI. My community has PMI, yet it is deductible at least for 2007.
Thanks
Min,
Is there any possibility that you will be able to pay off 12% to get to 20% down and get rid of the pmi in the next few years? If you have no PMI you can’t get the rate back down that 1/2 of a % without a total refi, which is costly. If you are planning to carry the 90% LTV for many years,then only getting a guarantee of deductibility for 2007 doesn’t do a lot for you.
The last client I had did the two loans because they fully intended to, and had the ability to, pay off the send loan within a year to 18 months.
Hi Min, I actually did a post recently here at RCG regarding LPMI, PMI and piggy back mortgages. There are examples of how the rates compare: http://www.raincityguide.com/2007/05/11/lpmi-pmi-and-8020-mortgages%e2%80%a6oh-my/
Your rate is going to be determined a great deal by your credit score with the my community and lpmi products. There is also Fannie Mae Flex which could also be one loan with or without buyer paid mi.
There’s buyer paid (lower rate w/mi) and lender paid mortgage insurance (rate should only be approx. 0.25 – 0.375% higher with 10% down). And there are pros and cons with each scenario.
As far as which route you should take with your financing depends on several factors. Ardell’s touched on one of them.
1. How long do you plan on staying in this home?
2. How long do you plan on retaining this mortgage?
3. Do you forsee coming into cash to paydown the second (if that’s what you want to do with your cash).
4. Do you have other long term financial goals with your funds?
5. Your income will also determine which programs you qualify for. My Community has income limits; Flex does not.
Definately get a second opinion to compare BOAs product (or any lenders) apples to apples. Often times, “no cost” means “higher rate”. Here’s another post I did for RCG regarding GFE’s: http://www.raincityguide.com/2007/03/25/second-opinions-on-good-faith-estimates/
Min, I had an answer go into RCG’s stealth spam trap…I’m hoping someone will fish out my response to your question soon. 🙂
Thanks, Ardell! Min, I just checked rates and 5.75% will cost you in points. If you haven’t locked that rate in yet, talk to your Loan Originator to see if the rates have changed.
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