John DL Aren…, Real Estate Pro in Encinitas, CA

Can anyone tell me why going though a big bank/lender is any better than your ole buddy mortgage lender?

Asked by John DL Arendsen, Encinitas, CA Fri Oct 21, 2011

These big "Too Big To Fail" banks may not have failed on Wall Street or DC but they're sure failing miserably on Main Street. Can anyone tell me why I shouldn't work with my ole buddy Mortgage lender down on the corner of USA and STATE ST?

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John:

In my opinion, with the sole exception of slightly lower total escrow fees, there is not a single other advantage Retail Bank has over a Mortgage Broker/Banker for financing.

Regarding the subject of Retail Banks vs. Mortgage Banker/Brokers here's a short and quick GENERAL comparison BASED ON MY INDIVIDUAL EXPERIENCE between the two:


Retail Banks (Wells, BofA, Chase, etc.):
a) W2 employee Loan Officers NOT licensed by the State/Fed.
b) No Real Estate or Financial Training Required.
c) Access to Bank’s single set of loan products.
d) When it’s time to lock a rate you get their rate.
e) Very limited day-to-day info flow to Buyer’s Agent.

Mortgage Banker/Brokers:
a) W2 employee or Independent contractors Licensed by the State/Fed.
b) State/Federal continuing education and testing required.
c) Access to various Bank/Wholesale financing products and multiple versions of multiple loan products.
d) When it’s time to lock a rate you get the day’s BEST rate between all funding sources.
e) Maximum info flow to Buyer’s Agent based on relationships.

This last point (“e”) is always a key concern. Here’s why: There are 2 types of loan conditions that we need to stay on top of to meet contingency timelines of the purchase contract: 1) Prior-to-doc (PTD) conditions are those that must be satisfied before the lender’s underwriting department will generate and send loan docs for you to sign at escrow. 2) Prior-to-fund (PTF) conditions are those items that must be satisfied before the investor will “push the button” to send your new loan funds to escrow. To be proactive regarding #1 & #2, I ask for the lender-specific list of PTD/PTFs generated by the Underwriters and go over it to get ahead of any potential issues that may affect funding, which could place your good faith deposit at risk, and/or lead to the money spent on appraisal/credit report/property inspections to be wasted.

-Steve
3 votes Thank Flag Link Fri Oct 21, 2011
Hi Aztecluna, below is a link to a 10/13/13 LA Times article suggesting Fannie Mae and Freddie Mac are looking to collect unpaid mortgage debt from “strategic defaulters,” those underwater homeowners who skipped out on their mortgages even though they had the ability to pay. I would sit tight: 1) I not sure you could qualify for a 2nd house payment; 2) a Short Sale would prevent you from buying after selling; and 3) $2k underwater is pretty darn close to break-even which the market may take care of over the course of the next 18 months. Have you compared what a rental would cost as opposed to your mortgage payment (after the tax deduction?)

"Fannie Mae, Freddie Mac to go after more strategic defaulters": http://www.latimes.com/business/realestate/la-fi-lew-20131013,0,7334270.story#axzz2kOEUmBzI
Flag Thu Nov 21, 2013
Steve can you tell me what can happen to me if I buy a new home and foreclose on my first.Its way underwater. Its worth about 150,000 and I owe 152,000. My family deserves better we work hard and cant get out of this its not fannie or Freddie. Its Bof A.
Flag Mon Nov 11, 2013
I had to think about this one to come up with a reason.
I asked my self why would I send a client to a big bank?
I would send my clients to a big banks to get pre approvals only for the purchase of foreclosures which sellers or asset managers require that a buyer be pre approved by one of their lenders. In doing so I ask my clients to get pre approved by the big 3 banks along with a few mortgage brokers. It is always an eye opener for the client to see how much big banks charge or in my opinion overcharge people. What I find interesting is, the big banks usually end up owning or servicing the loan in 3-4 months anyhow.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomebuying.org
http://www.socalhomebuying.org
California Department of Real Estate Broker License # 01312992
2 votes Thank Flag Link Sat Oct 22, 2011
I can not think of of a single reason actually. In fact you will probably be happier you did.
1 vote Thank Flag Link Tue Oct 25, 2011
The only time I have my clients go through the big banks is on foreclosures. When it is a "big bank" foreclosure they usually offer a credit and/ or free appraisal or other incentives. Not to mention if an appraisal doesn't come in or there is any other issue it's on them - their "big bank".
Usually the "big banks" appraisals never come in and I can negociate a lower proce for my client. Other that that I never refer "big banks" to my clients.
Web Reference: http://www.laura4homes.com
1 vote Thank Flag Link Sat Oct 22, 2011
Nope.. Your local mortgage broker may still be able to offer better rates.. and better timelines. Dodd Frank act not withstanding.
1 vote Thank Flag Link Fri Oct 21, 2011
Thanks Richard, I'm starting to get warm fuzzies again about my mortgage broker. I hate big banks. Always have and always will.
0 votes Thank Flag Link Wed Oct 26, 2011
Steve,

Thank you so much for sharing that wonderful insight. That video was indeed riviting and well worth viewing. It reinforced anotner mean read I'm in the middle of studying almost verbatum: "The End of Wallstreet". It almost echos that snippit to the letter. We're going through some pretty scary times right now.

But, I'm still confused and with your obvious knowledge and expertise perhaps you can enlighten me somewhat. Why, if Obama already bailed the "Too Big To Fail" banks with almost a trillion dollars of yours, mine and our tax dollars do we owe anything on mortgages and who do we owe it to?

Am I missing something? If they got this money and paid it back then I guess we borrowers are still beholding to them. However, who's them? Some of these mortgages have been bundled up and passed along so many times how do we know that the lenders that are servicing our mortgages are applying the money to our mortgage?

Fortunately, or unfortunately as it may be I'm with Wells on both my 1st and 2nd. However, my 1st was bundled and sold off albeit Wells still sevices it and they still own my 2nd so I'm pretty confident that my loan is being handled properly. But can we say that about all the other lenders in this debacle?
0 votes Thank Flag Link Mon Oct 24, 2011
Laura, Kinda sorta like So Cal Home's answer but definitely worth a thumb. Thanks.
0 votes Thank Flag Link Sat Oct 22, 2011
So Cal Homes, wish I could double thumb bump ya. Great answer. Probably about the only logical reason to go with a big bank unless I'm really missing something.
0 votes Thank Flag Link Sat Oct 22, 2011
@John

Please review the two blog posts below and then buckle your seatbelt (and take a blood pressure pill) for the documentary link I have provided.

"Coming to a neighborhood near you: REO Shadow Inventory"
http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/…

"Why the US Loan Modification Program is Ineffectual – No, Really!"
http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/…



"Inside Job"
http://www.theotherschoolofeconomics.org/?p=2499

In my opinion, an excellent must-watch documentary that best tells the story of the "mortgage meltdown" (starts with Iceland as the opening story and then concentrates on the US experience


-Steve
0 votes Thank Flag Link Sat Oct 22, 2011
Sorry Judy, but I just can't side with that "mix of mortgage lender(s) and bank(s)" mentality anymore. I don't really think the big banks want the biz anymore. They're just under pressure from the FED (Obama QE1) to perform or at least make believe they are. They're just sitting on those billions and being paid to do so all while stiffling the US RE market.
0 votes Thank Flag Link Fri Oct 21, 2011
Steve, I'm trying to give you a triple thumbs up albeit I did award you the very best of answers. However, having said that, can anyone answer the second part of my question. Since the FED, or should I say the QE1 850b (Osama bailout) the bank was actually paid by the government to forgive our mortgage debt was it not? So who do we really owe all our mortgages to? I'm very nieve on this so please enlighten me.
0 votes Thank Flag Link Fri Oct 21, 2011
Thumb for Steve!

One more addition

Retail Banks (Wells, BofA, Chase, etc.):

f) Extremely long turn times.
0 votes Thank Flag Link Fri Oct 21, 2011
I advise my clients to contact three lenders (a mix of mortgage lender(s) and bank(s)). Get preapproved by each lender and ask them for what's call a Good Faith Estimate. The Good Faith Estimate has a breakdown of what you're being charged for and will show you how much you're paying over the duration of your 15 or 30 year mortgage. A great way to compare who is better - may take more time and a little money but in the long run may be a substantial savings.
0 votes Thank Flag Link Fri Oct 21, 2011
thank you Mark first most commonsensical and literate answer so far.
0 votes Thank Flag Link Fri Oct 21, 2011
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