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Ken R Fisher & Associates, Inc.

KenFisherRealtors.com

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The Mortgage Meltdown ... Click here for the who, what, when, where and why.

Mortgage Providers

How many mortgage providers are there in your marketplace compared to how many there were last year?  How many are owned by real estate companies?  How many are owned by builders?  How many are owned by Banks and Credit Unions?  How many are really independent?  How many have you checked through the Better Business Bureau?  How many have you talked with to determine the differences in interest rate, closing costs and fees to the Buyer and also those to the Seller.  Some providers make presentations that look like apples to oranges or walnuts making it quite difficult to come up with true comparisons.  How many mortgage programs can your selected provider present to you?  What are the differences in interest rate, closing costs and fees to the Seller?  Did you get a Truth in Lending statement outlining everything when you made mortgage application?  Are you Pre-Qualified, Pre-Approved, or Approved Subject to Appraisal … the first two are pretty much a waste of your time and really benefit no one other than the mortgage provider who is thinking that you won’t switch mortgage companies once you have received an unbinding letter indicating basically nothing.  Will the mortgage provider perform to meet the purchase agreement that you have negotiated with the Seller to acceptance?  What happens if the Seller refuses to pay the undisclosed fees imposed by your mortgage provider on them … no closing or a delayed closing while a new purchase price is negotiated … you may even lose the house over the problem.  What happens if the fees quoted by your mortgage provider were way too low?  Now what?  Will they loan you more money to cover the fraudulent fees so you can close the transaction and take possession of your new house?  Perhaps!

Was your mortgage provider one of the over 90,000 who have lost their jobs in 2007/2008 due to their participation in or because of the sub-prime mortgage scandal?

Securing a Mortgage Company can save you money, cost you money or even cost you the potential purchase of the property that you wish to own.  There are many mortgage companies to pick from.  Some are excellent, some are good, some are fair and some are quite poor in what they do … but most all make a rather hefty profit (from you).  Keep in mind that you must consider more than just interest rate when considering which loan package to accept.  Some companies offer rates that are too good to be true … and they are.  They will put so many charges on your closing statement at the last minute at the closing that you will wish you had never heard of that company.  And watch out, too, for companies that offer to finance all of your costs (both in new purchase loans and re-finance loans).  You may not notice the excessive amounts of those costs until it’s too late because they were built into your new loan amount. 

You should consider interviewing at least three companies and literally demand a Good Faith Estimate (list) of the fees that they will charge you as well as a time table for processing your mortgage through until the actual closing.  Compare the fees between the mortgage companies … question the differences. 

Also, keep in mind that mortgage companies are not, by law, allowed to collect illegal kickbacks and unearned fees.  HUD has stated that builders, lenders, mortgage companies and title companies CANNOT mark up third-party charges such as appraisals, settlement fees, credit reports, flood certifications, pest inspections, postage and courier costs, surveys, title work and title insurance.  Does this really mean anything?  Take A Guess!

The Real Estate Settlement Procedures Act (RESPA) prohibits payment of any fee, kickback or thing of value for the referral of Real Estate business. 

One Stop Shopping as proposed by the U S Department of Housing and Urban Development in 2002 proposed a rule that would change RESPA to permit the sale of guaranteed-price bundled packages of mortgages and mortgage related services.  This proposal may require mortgage brokers to credit the yield spread premium to the borrower and then increase their fees to receive the same compensation as a mortgage banker.  This bundling of services may further allow large lenders to create a subsidiary company to offer the settlement or closing services.  They could then receive discounts on those bundled services including appraisals and not pass the savings to consumers.  These services would be passed along at the retail value creating a net increase in the fees to the borrower.  Most bundling would not provide a detailed list of those services included in the package, thus creating a problem when the consumer attempts to shop around for 'the best deal'.  The proposal was withdrawn, under pressure by the National Association of Realtors in March, 2004, for further study.  It was then redeveloped ... Effective January 1, 2010, RESPA is being revised in an effort to help the consumer truly determine who provides the BEST mortgage.  Why the delay, ask your Realtor, your Builder, Your Mortgage Company ... their actions delayed the process for over 3 years ...

To make One Stop Shopping in the mortgage business more acceptable, the following conditions should be met:

(1) All of the savings in the negotiated prices by the actual provider should be passed along to the consumer with no management, administration or other costs added.

(2) The consumer should be free to opt out of any component of the bundle, with no penalty or loss of benefits suffered.

(3) The bundle should be transportable from one investor to another.  This would include the credit report, appraisal, survey, pest inspection, etc.  It would then not be necessary for the consumer to start all over again if the consumer decided to move on to another provider.

(4) The RESPA 'kick-back' provision including the referral fee prohibition must apply to bundled services.  Kickbacks and referral fee payments should remain illegal between the participants in the bundling of services.

(5) The Good Faith Estimate must compare exactly with the HUD-1 Closing Statement to allow the consumer to compare exactly with the Good Faith Estimate provided by their choices of mortgage providers.

You should also get a list of the fees that the mortgage company plans to charge to the seller … the seller may refuse to close if those fees are exorbitant.  Check those fees for reasonability.  We advise that you require the mortgage company provide a list of those fees to the Seller by certified mail at the time you make mortgage application.

Watch out for JUNK FEES!  They can be added on by the mortgage lender at the last minute to the Buyer, the Seller or both.  Some of these fees are unearned in some respect, or duplicative of other fees (with just another name), or simply not justified by the service provided.  These fees are subject to the Federal Real Estate Settlement Procedures Act (RESPA).  

Other RESPA violations include failure of the mortgage person to give you a Good Faith Estimate and the RESPA Information Booklet “Buying A Home” either at the time you make mortgage application or within 3 days thereafter.

Real Estate companies, Builders, Mortgage companies, Title companies, Appraisal companies, all must disclose any ownership between them in writing in advance or they are violating RESPA.  You do not have to deal with their various divisions.  We recommend getting price quotes from various providers.

You should talk with a real estate consultant for advice and recommendations about how to secure a reputable mortgage company.  You may order a Mortgage Guide from the Consumer Information Center at 1-888-878-3256.  You may also order a Homebuyer’s Mortgage Kit from www.hsh.com.