McLean, Va. â€“ July 14, 2008 â€“ FRB issued the release of the Final Rule Amending Home Mortgage Provisions of Regulation Z (Truth in Lending).
The rule requires accuracy and balance in advertisements as well as the establishment of escrow accounts. The advertising rules will protect consumers from deceptive or misleading advertising practices. The rule requires that the lender establish an escrow account for the payment of property taxes and homeownersâ€™ insurance for first-lien loans. The lender may offer the borrower the opportunity to cancel the escrow of funds after one year.
The final rule withdraws the FRB proposed ruleâ€™s broker-only disclosure of yield-spread premiums (YSP). The FRB removed the proposal due to â€œcompelling evidence from consumer testing.â€ The removal reaffirms the findings in two Federal Trade Commission (FTC) studies in 2004 and 2007. According to the studies, disclosure of YSP created confusion among borrowers and caused many consumers to choose more expensive loan products.
So, while HUD-1 Settlement Statements currently show the commission a broker makes and does not show what a banker makes, the new rule removes the disclosure altogether.
Brokers can choose from the same banks that a borrower can contact plus insurance companies and various other lenders, often beating the banks, but not necessarily. Total cost is in both the fees that the borrower pays upfront and the interest rate paid down the road.
A lot of people call the costs "junk fees" somehow believing that they're not real. The costs are real -- the question is whether to itemize them and have them paid for separately. A tax certificate showing that taxes are paid, or a flood determination showing whether the property is in a flood plain or not, etc must all be done -- it's whether they get broken out and disclosed and paid for as line items on the settlement statement or get buried in somebody's profit and loss statement.
Commissions seem to rankle some people. Realtors make commissions. Brokers in real estate and in mortgages make commissions. Bankers make commissions. Everybody's commission is disclosed on the settlement statement except a banker's commission. Really, there is nothing wrong with a commission based sale. Most of the business world pays its salespeople commissions or bonuses based on sales. It does prioritize activities according to the size of the house being sold, which seems reasonable.
So, why choose A over B? If there truly is no difference in the cash to close and the monthly payment, then it is your choice -- an arbitrary decision you can make based on who makes you laugh, if you like. But, there most likely are differences in cash you need to bring to closing and your monthly payments. Stop worrying about how much somebody is making off your deal (because they need to make a living too), and focus on what it costs you.
So, if two deals are about the same, you can choose, but wisdom dictates you also should check who is reliable about delivering. Referrals are a good way of finding people who have acted responsibly and reliably in the past. Negative reports are not necessarily a fair indicator of poor performance unless there are a large number of them. Try to read through the hype and select a loan officer you can work with, who hasn't had a slug of complaints or who was referred to you, but choose according to the deals offered.
When it comes to lenders (and Iâ€™m a licensed Texas mortgage broker) ask the question â€œwhat is your â€˜no pointâ€™ rate.â€ Some lenders like to offer artificial rates (fake rates) that come with points. They know you will make your loan decision based on rate so they offer themâ€”with fees.
So just ask for their â€œno pointâ€ rate. This way you are looking at the real market rate vs. some lenderâ€™s fake rate. If youâ€™d like to see our fees we have a PDF on the front of our website that outlines all our mortgage closing costs. http://www.mylendingplace.com/
We are one of the few â€œflat rateâ€”no pointâ€ lenders in Texas.
Lender is a very important part of the transaction process. If the lender is not fast and accurate, you could have problems at closing. Interest rate is important, but fees that you will pay and accuracy are important too. Mortgage company needs to open a title agreement with the title company and get ready all of the paperwork on time. Contact me if you would like to know more about it.
Coldwell Banker Residantial Brokerage
972-758-2045 Direct Line
Speaking of working with a bank.... we're working with clients right now who have to close this week in order to get the short sale deal they want. We put them in touch with our preferred lender back around Mother's Day who got them pre-approved. They then decided they could get a better deal with a bank who was going to give them a special deal, much better interest rate, no PMI, etc. So great, better deal for them - it's all good.
We repeatedly asked the bank loan officer for a GFE and pre-qual and it was never produced to us or the client. The bank LO followed up 2 weeks later and said he could go ahead and try to get them qualified now and see if they could close in July. If they close in July, the deal's off the table and they lose their home. He then runs the pre-qual and after all, the bank LO can not get our clients the better deal he had promised from the beginning.
So, now about one business week before it needs to close, our clients are back over with our preferred lender with everyone jumping through hoops working to get them closed on Friday to meet their time frame. That's just one example of "life in the trenches" and why it'd be important to choose the right lender.
Hope it helps,
Sr. Loan Officer
CMC Home Lending
972-238-7400, ext. 104
1. Rates they quote you and options in that loan package such a prepayment penalty, closing costs paid, etc. If they give you an extremely low rate compared to other people watch out. they could be doing a bait and switch and the rate you actually get locked into will be different.
2. What are the closing costs quoted by the lender. These vary all across the board. Lenders call different items different things so it is difficult to compare one good faith estimate to another. Get your agent to help you if you are having trouble comparing one lenders good faith estimate with anothers.
3. What is the lender's track record for closing on time? The biggest problem a Realtor has in the transaction is often a bad lender who cannot get the documents to the title company in a timely manner. Choose a lender that has in house underwritting. What the lender does is gather the information together and sends it to a clerk somewhere who is really the decision maker as to whether you get the loan or not. If the lender does not have a good relationship with the underwriter, there can be a lot of last minute problems and loans that do not close.
The lender does have to disclose what percentage they are charging for the loan. What a lot of people do not know is that that is not the only place a lender makes money. A lender also makes money by the resale of your loan.
Choose a good experienced Realtor who can give you a list of honest lenders who can close on time!
You'll want to consider experience, customer service and singularity of focus for a variety of reasons. I would be happy to enumerate via e-mail or phone. I wrote a bunch of them up on my computer and just lost them. Some of them know about loan programs that others do not.
Mortgage bankers have in house underwriting which is very important as well. Even though the title says "banker" it doesn't necessarily mean a bank like Chase or WaMu.
Our best experiences have been with mortgage BANKERS. In today's market it is wise to get referrals from people that have closed loans with the loan (not just the company) officer before you commit to one person and/or company.
The detail of the commission paid to the loan officer is not usually on the closing statement.
I am a Dallas realtor and Dallas home mortgage loan officer notify me if I can assist