Will Real Estate Agents Embrace a Loan Originator with Fiduciary Duties?

I’m beginning to wonder. I’ve always put the clients best interest first…it’s just something I naturally have to do in order to bevalentinescandy able to sleep at night. There has been a time or two when a real estate agent has told me that my job is solely to provide mortgages and not worry if the mortgage made sense or if someone is capable of making the payment in my opinion. This is one reason why I’m glad that I (and others designated as mortgage brokers) will have official fiduciary duties to their clients. Here’s a scenario for you to chew on that has me wondering if Real Estate Agents will be as accepting of this new responsibility…

Susie and Sammy want to buy a home. They know their credit is lousy and Susie actually giggles about it. However, their friends were able to buy homes over the last few years and so they should be able to as well. Susie and Sammy were referred to me from an agent I’ve worked with for many years. And if it weren’t for bad credit, they’d have none at all. Susie has no credit scores and more collections than you can shake a stick at. Sammy is a fluke of the credit scoring system and has managed a mid-score of 621 although the last time he used credit was three years ago…no one will issue him any new credit due to his proven track record of not paying for any account he opens. Sammy, if the scoring system were perfect and 100% accurate, would be credit scoreless as well. To top it off, they have no savings and would like a zero down loan.

As a “Mortgage Professional”, I review this information with them and I let Sammy & Susie know that they do not currently qualify for a mortgage (because they don’t). If they want to work on their credit and develop a plan, such as practicing making a mortgage payment by paying the difference between the mortgage and their rent into a savings account, perhaps we can develop a long term strategy. In no way is this couple ready for a mortgage. I’m not sure that I could (or would) have provided them a subprime mortgage had they met with me this time last year. As someone who is looking out for their clients best interest, I believe I did the right thing. In fact, even with “subprime” clients of yesteryear, I would let them know of their options: you currently qualify for a subprime mortgage with a rate of X; or you can wait a few months and work on your [what ever is causing you to be subprime] situation and then qualify for a better rate with FHA/VA or conventional. Why encourage people buy “right now” if their finances are a wreck? The choice on what borrowers do with their finances is really their own. Really, it’s not for me as a Loan Originator to determine whether or not they are worthy: we have underwriting and guideline criteria for that. With Sammy and Susie, they really have no options but to work on re-establishing credit and change their spending habits…and they seemed eager to do so. I set them up with a company to help them work on repairing their credit (because it was beyond what I could do) and they were happy (they never followed through with the credit repair).

A few weeks later, I get a voice mail from the agent. He’s upset and wants me to know that Susie and Sammy have found another lender who has referred them to another agent and they’re buying a home. I’ve been checking the county records and Susie and Sammy’s real names are not showing up–I’ll really be surprised if they qualified for anything except the hardest money loan available with a double digit interest rate or seller financing. Regardless, the agent is obviously not very happy with me since I did not “approve” them for a loan and someone else says they did (at who knows what terms). My subprime shoe-horn is gone and I would not have used it here anyhow…this couple is not ready for a mortgage.

Fiduciary duties for Washington State loan originators who don’t work for a bank-mortgage company will be here this summer (effective June 12, 2008). Are you ready? How will you feel if a loan originator with fiduciary duties believes that a home buyer should take six months to a year to improve their credit and have at least 3-6 months of reserves? When this legislation first came out and Jillayne wrote about it. I thought it was an advantage for brokers. Yes, once again it’s more legislation on brokers (excluding mortgage bankers) for the sins of ALL loan originators regardless of institution. Wouldn’t everyone want to work with a loan originator who has a legal responsibility to look out for their best interest (mortgage broker) verses one who has no legal responsibility (mortgage bank)? Perhaps some agents would rather their clients not work with someone who has fiduciary responsibilities. Consumers…you may want to ask your loan originator whether or not they owe you any fiduciary duties.

How Quickly Guidelines Change

When WaMU decided that most of Washington State zip codes are soft, they let Loan Originators know via email giving us just hours to submit loans under the old guidelines (pre-soft haircut of 5% or what ever the value is). I have another example of how little time we are given as LO’s to deal with changing guidelines in our industry. Keep in mind when you read this, this is from one lender: these programs/products are still available with other lenders.

At 6:42 a.m. this morning, I received an email from MortgageIt, a subsidiary of Deutsche Bank, announcing the following:

Dated 2/29/2008

Effective Friday, February 29, 2008 [last Friday]…

Discontinuation of the following products in their entirety:

FHMLC Home Possible

FNMA MyCommunity Mortgage

FNMA FLEX [All Fannie Mae Flex programs]

Loans APPROVED at this time of this notification that are negatively affected by the modifications (i.e. approved under the old guidelines) may still lock through the end of business Monday, March 3, 2008 for a maximum of 15 days at current rate/pricing.

Locked loans that re not approved at this time of this notification will have the price honored and may be underwritten to the old guidelines up to the original lock expiration date ONLY IF the loan package is submitted to the branch NO LATER than end of business Monday, March 3, 2008.

All loans must be closed and funded within the original lock expirations; RELOCKS AND EXTENSIONS WILL NOT BE GRANTED….

Again…this is just an example from one lender. What does this mean to me and other lenders? Obviously we won’t be using MortgageIt for these programs…we couldn’t if we wanted to. Other lenders are still offering (as of today) these programs. Much like WaMU declaring most of Washington soft…other lenders are not yet. Mortgage Professionals will opt for lenders who will provide the most options for our clients. Why work with a bank/lender who’s going to discount home values 5% when others are not?

This particular memo was backdated to Friday…or the email I received was distributed late. (I no longer have a MortgageIt Rep since they laid off their staff and shut down their local office in Bellevue). However, if I had transactions locked or approved with this company, you could see how I would have very little time to react for those transactions.

Just a sign of the current mortgage landscape.

If March begins roaring as a lion (as it seems so far), I do hope we go out as a lamb as far as our industry is concerned and that this is another “knee jerk” reaction and not a trend we see with other banks. Fannie Flex, MyCommunity and HomePossible have been great programs for many home owners.

The Legislature Volleys Back….

Recently, I wrote about new case law in Washington that was making it more difficult for buyers of real property to make post-closing claims against the seller for property condition related matters. The Washington legislature has just amended the state’s residential property condition disclosure law to put additional burdens on sellers and will soon require a disclosure form when “unimproved

Licensed to Loan

This New Year brought significant changes to the mortgage industry. Loan Originators who provide residential loans in Washington State are now required to be licensed. This legislature applies primarily to Mortgage Brokers and not LOs who are employed by banks or credit unions. As I am employed by a Mortgage Broker (technically, we are a Correspondent Lender…I’ll save that for a later article), I thought I would share some tidbits of what I’ve found so far during the first two weeks into the licensing period.

I completed my online application with DFI, submitted my MU4 forms and 2 sets of fingerprints all prior to the due dates so that my background check to determine that I am not a felon and do not have any gross-misdemeanors can be performed. DFI is inundated with applications and they are posting the list of licensed loan originators on line. I’ve been checking the list daily for my name and license number. As of Tuesday, DFI is showing 9,913 licensees from 123 Cash to Zippy Cash. Loan Originators must display their license number on their business cards, loan applications, marketing and websites. This seems kind of odd to me. Realtors and Escrow Officer’s (L.P.O.) do not have to attach their number to their name for the public to see…don’t they trust us?

Currently, Loan Originators who have completed the required steps of the online application, MU4 and fingerprints are operating under an “interim license

Blogging at Ed.Con 2006

Yesterday, Russ Cofano and I gave another blogging seminar, this time in Seattle as part of Ed.con 2006 put on by the Washington Realtor Association.

[photopress:elvis_and_liberace.jpg,full,alignright]I thought the day went over really well and considering it was the first seminar we’d given to the “home town

Improving Online Home Valuations?

This past week, Top Producer quietly rolled out a home valuation tool, called HomeInsight, for a few markets in California and Washington*. I was not part of developing the tool, but I like it enough to pass along the link to Rain City Guide readers before the local media picks it up.

What differentiates this product from others is that it not only includes sold data, but also real-time listing data. The result is a page of information for each home that includes:

  • an interactive map that gives details on ten similar nearby homes (5 that are for sale and 5 that have sold) and
  • dynamic charts that give the average/high/low listing price, the average/high/low selling time and the average difference between asking and selling price for the neighborhood of interest.


However, as with all things that sound too good to be true, there is a catch. In order to pull live listing information, the servers pulling this data have to go through an agent’s connection with their local MLS. (Don’t ask me to explain why, and definitely don’t ask Robbie, but anyone reading RCG for a while knows that the MLS’ have rules!) The result is it takes 5 to 15 minutes for the request to go to the local Realtor’s Top Producer account and then for the Realtor to initiate a report that pulls the data off the MLS servers (yes, a server call to the local MLS is necessary each and every time a request for a snapshot is made). Consequently, the only way to get your snapshop is from a link sent via email about 10 minutes after you complete the form.

So, how do you get a market snapshot for your home? Simply go to HomeInsight and fill in the required fields. (Remember it is only available in a few places right now!*)

If you don’t want to fill in the form, live in another part of the country, or feel guilty about sending people like Jim Reppond a “false” lead, then you can also check out this dummy snapshot filled with made up data.

And as much as I hate disclaimers, it is important to note that these are my opinions and my currently employer is not responsible for what I write on Rain City Guide.

* This tool is currently only available in parts of California (Hemet, Huntington Beach, Laguna Niguel, Long Beach, Los Angeles, Mission Viejo and Norwalk) and Washington (Bellevue/Eastside, Bremerton, Everett, Federal Way, Greater Seattle, Puyallup and Tacoma)

Want to live in the Golden State? Bring lots of Evergreen State money.

[photopress:180px_California_state_seal.png,thumb,alignright]I recently returned from my almost annual vacation in beautiful California to visit my family and a few famous real estate bloggers (Dustin & Andy). And it was interesting to note what I learned about real estate in the Golden State during my two weeks down there…

Non surprises 

Bay Area real estate is still expensive. That wasn’t surprising at all. It’s been that way as far back I can remember. During my coffee talk w/ Andy, we discussed how the San Francisco side of bubble bay has popped, and the Oakland side is peaking. 

LA traffic is still awful.

Small Surprises

Santa Barbara is even more expensive than Silicon Valley.

Camp Pendleton is the only thing separting San Diego from Los Angeles & Orange County. I hope for San Diego’s sake, the Marines stay put.

RedFin has finally invaded the Bay Area. I wonder who’s next? 😉

Bay Area traffic is catching up to LA.

Big Surprises 

Home values in Southern Ventura county (home to Dustin’s new employer) are on the ridiculous side of expensive. In fact, it’s Silicon Valley expensive. I wasn’t expecting cheap prices (after all, I did grow up in California), but I wasn’t expecting this!?

I didn’t expect Santa Ynez to be as expensive as it is. Maybe Wacko Jacko’s Neverland ranch has done to Santa Ynez’s property values, what Bill Gate’s house has done to Medina’s? My parent’s home town (Santa Maria) is comparitively inexpensive, but it’s about as pricely as the Seattle Eastside is (median price ~$450K).

San Diego County is downright cheap in comparission to it’s neighbors to the north. In fact, prices there are less than 10% more expensive than Bellevue! Maybe being next to the Mexican border is keeping prices low, but I would’ve expected San Diego to be second only to Santa Barbara and the Bay Area. 

So what other markets in the country (or the rest of planet earth for that matter) have surprising prices (both more expensive and less expensive than you might expect)? I’ve heard from more than one local realtor, that many out of state real estate consumers have sticker shock when they first come to King County. And I’m still surprised that Portland is so cheap compared to it’s nothern & southern big city neighbors.