Senate Bill 342 passed both houses and was signed by the govenor back in the spring of 2009.  It requires all state licensed loan originators to obtain a license by July 31st 2010.  Only federally charted depository employees, credit unions, and the Farm Credit Administration are exempt.

That day is fast approaching.

I think it is a good thing.  As one of only a few instructors approved to teach loan originators their required pre-licensing courses, I have seen many a loan originator recently that definitely needs the education.  I had one of my former students call me yesterday because she failed both the federal and state exams.  Now, that may look bad upon me as an instructor, until you hear that everyone passed all my classes with at least a 75%.  That's all you have to get on the federal & state exams, also.

Anyway, this poor loan originator has been working in the industry for 5 years and he doesn't even know how to pre-qualify somebody with a calculator.  His comment to me after I discovered this was "the computer does it for you."  Well, I gotta tell ya, After 22 years, I can pre-qualify somebody on my cell phone while driving, eating, and listening to the radio.  This kind of loan officer is just the kind that this law was meant to weed out.  Nothing personal.  I like him as a person.  He just shouldn't be advising consumers on the biggest purchase of their life.

Senate Bill 342 consists of 3 different laws in one.  Part A is the Home Loan Protection Act, which , among other things, makes negative amortization and stated income loans illegal.  Part B is the Mortgage Loan Company Act, which, among other things, sets the minimum amount of surety bond a company must have based on their volume.  It also sets the minimum requirements for branch managers.  Part C is the Loan Officer Licensing Act. 

The Loan Originator Licensing Act establishes that Loan Originators must have good credit, no felony convictions in the last 7 years, never a felony conviction for fraud, pass an FBI background check with fingerprints, register with the National Mortgage Licensing System to obtain a Unique Identifier Number, and pass both a state and federal exam with at least a 75%.

The good news for consumers is that the loan officer who really worked full time as a car hop will not be in the business any more simply due to the fact that most originators (not companies) will have to shell out apprx $1500 apiece just for the education, unique identifier number, tests, (and pass them) and fingerprints.

The good news for those of us who do enough volume to stay in the business is that the level of professionalism in our industry will rise.

The good news for Realtors is that you can probably bet that if your borrowers don't go with your preferred lender, the other loan officer probably knows what they are doing. :)

In their infinite wisdom, HUD decided that it would be better for consumers (buyers) if they knew the TOTAL cost of the transaction instead of just what THEIR closing costs were.  Not a bad idea in theory.  The PRACTICE has become a problem, though.

Pre January 1, 2010, loan originators would show buyers a Good Faith Estimate with the buyer's closing costs, prepaids, and down payment.  That would give them the TOTAL they would need to get into the house.  The 2009 GFE also showed their TOTAL monthly payment.

Unbelievably, the 2010 GFE has neither of those numbers on it.  Can you believe it?  The 2010 GFE does not show the total payment.  What were they thinking?  It also does not show how much the buyer needs to get into the house.  Again, what were they thinking?

Now it is the responsiblity of the loan originataor to add up ALL the closing costs on the GFE, even if the SELLER is paying them.  What good does that do?

I would assume that the THEORY is that IF the seller is paying 6 points to get you into the house that you are INDIRECTLY paying more for the house.  Probably true, but how often does that happen?  1 out of 1,000?  Not very often in my market.

HUD should have at least come out with another required addendum to the GFE that shows the buyer what the seller is paying.  They didn't. So, we had to come up with our own. 

It works well, but there is mega-responsibility & liability on the loan originator.

We now must goto the 2010 GFE & put in ALL the closing costs (seller paid as well) and then total the seller paid one's and subtract those to show the buyers TOTAL move in costs on our company form.  This is just more work for the loan originator, PLUS more liability.  If we get the SELLER's closing costs wrong, and under disclose, we OWE the difference to the buyer, EVEN if the seller is paying those costs!!  Is that stupid, or what?  Loan Originators have never had to deal with sellers costs.  We dont deal with sellers.  That is what Realtors are for.

Since January 1st, we have had to correctly estimate all the title company closing costs to the penny, or be liable if we underestimate by 10% or more.  So, we now carry around the Owners Title Policy charts issued byt the title company & have to put that number on the new 2010 GFE.  Let me say that in the Albuquerque market that the seller typically pays for the Owners title insurance policy, the title company's escrow settlement fee, the title binder, the survey, the appraisal, the special assessment search fee, the flood cert, and the tax service fee.

It has been interesting, to say the least.  Can you tell I'm not happy about it.

Oh well, more responsibilities, more liabilities.  After 2 months I am used to it by now, but I don't like it.  I have it down, but I don't like it.

In fact, I would wager that most loan officers dont have it down yet.  I know alot of Realtors dont.

So, I will have a RESPA Changes Boot Camp next week for my top 15 Realtors to help guide them through this.  It also helps me to repeat it over & over.

This is what happens when you let people who are NOT in your business write rules for you.  Lesson learned.  Get involved in your local political action committee so this wont happen to you. 

Until next time.

Wes Moore

NMLS #2015189

Searching for an Albuquerque Home Loan?  Read what one of my referral partners recently wote before you make your decision.  :)

I got a call last week from a Realtor friend asking my advice.  He represented a seller who was under contract and whom had agreed to pay UP TO 2 points at closing plus other closing costs (DOC PREP, UNDERWRITING REVIEW, PROCESSING) to the buyer's mortgage broker.

The transaction was set to close last week, the buyers loan was approved, a Good Faith Estimate had been provided to buyer, and the mortgage broker had sent the file to a lender who had in turn sent a Good Faith Estimate and loan documents to the title company for closing.

The Good Faith Estimate had only 1 point on it.  The title company worked up the HUD-1 and sent a copy to all.  The seller was going to net only $100, but they were happy to get out from under the payment & get their home sold.

All was well until the mortgage broker saw the HUD-1 and realized they had only figured 3% down payment for the buyer instead of 3.50% (it has only been 10 months since this went into effect) AND more importantly they had only put down 1 POINT in cost to the seller.  This was an hour prior to closing.

So, the mortgage broker immediately stopped the closing, called the lender and yelled at them for sending the loan package to the title company, called the title company and yelled at them for preparing the HUD-1 and disclosing it to everyone.

The mortgage broker then prepared a new Good Faith Estimate showing 2 POINTS plus regular Doc Prep and Undewriting fees from the Lender PLUS an $850 PROCESSING fee to the broker.  So now, at the 11th hour, they RAISED their fees by $2700 (1 extra point on a $270k loan).

Now the seller needs an extra $2700 they don't have in order to close. 

In a situation like this, Federal Law states that the buyer must be redisclosed to an must sign a new Good Faith Estimate at least 72 hours PRIOR to closing.

Remember, though, that the buyer doesn't care what the mortgage broker does because the SELLER had agreed topay all closing costs.  So, I am GUESSING that the mortgage broker produced a new Good Faith Estimate & had the buyer BACK DATE it so they could get around the 72 hour timetable.

Being in the business, I am GUESSING that the mortgage broker realized that they were leaving money on the table & they were bound and determined to get it.  Even though they had locked the buyer in at only 1 point, the seller was willing to pay 2, so why let them off the hook? They don't care about the seller.  It's not THEIR client.

Anyway, the seller was able to get some money from a relative, the listing agent reduced their commission, and the title company and mortgage broker all pitched in to make the transaction close.  But, I don't think anyone was happy.

Several things should have happened here that didn't.  (1) the listing agent should have requested a Good Faith Estimate from the mortgage broker & used it to prepare a NET OUT for the seller PRIOR to the seller signing a purchase agreement.  The listing agent then should attempt to make the mortgage broker HOLD to these fees.  (the mortgage broker will have to do this starting January 1st in the U.S.).  (2) The mortgage broker should have held to their original Good Faith Estimate (3) the seller should have had a back up plan-just in case (4) the selling agent should have had to disclose to all parties up front that the mortgage broker was RELATED to the selling agent!!

Smell a little fishy yet?

This was an FHA transaction, no less.

I advised the listing agent to complain to (a) the local Realtor association, (2) the Financial Institutions Division, and (3) the NM Real Estate Commission.

Even though mortgage brokers typically have no contact with SELLERS of properties, and the FID usually just takes complaints from buyers (the mortgage broker's PRINCIPAL), this is clearly a case where the actions of a mortgage broker have hurt a member of the public (the SELLER) and they should not get away with it.

The moral of the story is: LISTING AGENTS must make sure the buyers agent refers the buyer to a reputable loan officer.   No longer can you just ASSUME this kind of thing won't happen.  I am truly ashamed that these kind of people exist in my industry.

Good morning.  As some of you may know, because of Senate Bill 342 that was passed in the 2009 legislative session, loan originators now must be licensed in the state of New Mexico.  One of the requirements to become licensed is 20 hours of initial education in the mortgage industry.  I received my certification to teach these classes to loan originators just yesterday & am excited about it.

I have taught many classes to Realtors & Escrow officers over the last 21 years but this will be my first foray into teaching my peers.  It should be fun.  First classes wil be in January & I will keep you posted.