I'm a mortgage broker and I have to say you are way off.  That is if you work with a reputable mortgage broker you are giving your buyer choice.  What I mean by that a mortgage broker has more options for your buyer than a bank.  Mortgage brokers like any other industry including the real estate community has its bad apples.  I agree with those that say get rid of those that are doing bad business but commend those that are doing good business.  Dont just put everyone into one category.  Us that do good business do put our customers first.  We rely on referrals from our customers just as you do.   You can tell who the bad brokers were because they arent in business any more. 

Miriam,

 Just read your blog. Interesting. As a Mortgage Loan Originator and small business owner I need to point out to you that what Mortgage Brokers are providing is a service.

 If you go to a local bank, you gain access to it's 5-20 different loan programs. We as brokers arrange loans with 5-45 different lenders. Each one of those lenders have 5-20 different loan programs. So you are gaining access to many more programs. Additionally, the rates that we provide are typically .125- .25% better then what you can get from a local bank. We also have private investors who lend their own money on their own terms.

 We have the experience and contacts to get the deal closed and funded.

 Now here is the biggest part of my company's  customer service, I answer my phones seven days a week up until 9 PM! It is not a big deal to answer a question by telephone or email. If I am out of my office I forward my calls to my cell. This is where my niche is. I have heard time and time again from referral partners how great it is to have someone answer their phones or return calls. Also, good or bad you will get the truth without any "glossing over" of the problems or issues.

 Mortgage Brokers did not create the loan programs that are shunned now a days. Wall Street and  Hedge Funds did.

I have worked for a Bank, Broker and Banker/Broker

The Banker/Broker is the best of both word in order to offer the consumer the most choices. Think of an independant insurance agent who can offer all products.

The problems we have had this past year came from the mortgage banks offering the exotic products.  The "Greedy Mortgage Broker" Can only sell products he has offered to him.

Unfortunaly the days of the Brokers may be numbered to the detiment of all consumers

If you have not seen this website check it out.  www.ml-implode and you can see the carnage of the past two years.  Look up to see if you can find your favorite lenders of the past to see it they are still in business.  I would hate to see the day of only one or two Mortgage Lenders.

You are so misinformed. Either that or you have a strange agenda. Will you delete this post or let it stay? I have been a real estate AND mortgage broker for 30 years.  You obviously have NO CLUE as to what happened in the mortgage world. You are blaming brokers and some lenders for fraud?  You are saying fraud brought down the mortgage world?  You think Countrywide is a bad player or maybe the only bad player in the market? Who do YOU recommend---Wells Fargo? Maybe Bof A who owns Countrywide now?

Do you realize, Miriam, that brokers didnt make the loan programs? Guess who made them, gave them to brokers, accepted them when brought it from brokers, and pushed them through their own retail directly to the public?  Guessed yet? THE LENDERS and MORTGAGE BANKERS. We brokers didnt make the programs. Yet several months ago the President of the bankers association came out on a television fincial program and told people not to use brokers. He said borrowers should use only FDIC insured banks!! Do you see the folly in that? FDIC has nothing to do with it, number one. Second is THE BANKS MADE THE PROGRAMS! Again, the banks accepted the programs , closed them and owned them. We were the middle people. Ive not been able to get any reporter of substance to bring up these points.

Was there fraud in the industry? Sure. Is their fraud in the REAL ESTATE INDUSTRY? You bet your rear. Ive seen it for 30 years. Is there fraud in shoe sales? food packing? furniture manufacturing? Anything involving humans has fraud. The public, due to a completely ignorant (and again some with an agenda or being backerd by the powerful banks) press, has no clue about this 'perfect storm'. It had to happen. We all knew it would. I bet YOU had no problems selling homes to people as the prices went up, did you? Did you ever take a client and say 'Hey, that house was $375,000 only 6 months ago, now the comps are $450,000 becasue of reckless buying, I refuse to sell it to you? Pot calling kettle black, my dear.

We mortgage brokers made the banks what they are now. We brought them to power. We provided a a huge base of future clients. All thewy needed was a faster, cheaper way to get more, and the internet finally gave that. As we sent in loans, the banks lost retail. Sure they made money from wholesale but retail was better. The banks WANT RETAIL BACK. They are backing the destruction of brokering. Sound like a conspiracy? Dont discount what I am saying because I used that word.

Only a FEW times in my 30 year history could any of my customers have received a better deal at a bank or big Countrywide type retail center.  Now who is left for us to send wholesale loans? Wells Fargo. BofA (Countrywide) TB & W. Only a few others.  Over 90% of brokers are gone from many states.

The bulk of the reason for the collapse wasnt fraud. It was GREED. It was stupidity. Everyone in the industry rode it til the end, including YOU.

So sit there and cut down mortgage brokers. You are ignorant. The public will be the losers. With only a few choices left, they will be captive.  By the way, Ive posted you blog on major mortgage chat web sites. Lets see what others think. 

Miriam, you are out to lunch, just fell off the turnip truck and can't see the forest for the trees!  I heartily agree with 1st Metropolitan Mortgage and Gary H (and anyone else who expressed a similar opinion).  While it's true that a few rotten mortgage brokers spoiled the barrel (as if there aren't rotten real estate agents, too), they're still the best way to go (in my opinion) in terms of being able to get the job done.

Make no mistake:  the ONLY reason Chase and other big lenders are turning from mortgage brokers is MARKET SHARE.  They want it all.  Heaven help us when they get it.  

I would like to say say ditto to what Brian, Frank and our friend from 1st Metropolitan wrote above.

As of tomorrow I stop using Real Estate agents. FSBO only from now on. Lady you are so off base you don't know your head from your ass. Typical agent.

Larry (1st Metropolitan Mortgage) hit it dead on!! I was also a past Realtor with Re/Max before becoming a Branch Manager of a brokerage firm. Ethics are not synonymous with any industry. You either have them or you don't! There was plenty of blame to go around. It's about time you get off your high horse.

Just wait for the first law suit from one of your clients that says ' As a professional Realtor, you should have known that my house wouldn't be worth as much as I paid for it ' Just wait it's coming!!! Everyone wants to point fingers and when I read dribble like this I know who the professionals in our industry really are! I think I see it.......yes......politics are in your future Miriam!! You'll make a fine Senator!

First of all, shame on you! We're all real estate professionals and we should be working together for the good of the consumer!!!

Yes, you should use a mortgage broker!  I'm glad to see there is a lot of agreement with this in the posts.

Wouldn't you rather see your money go to your local economy than the big monopolized banks?  I know I always shop local.

I am a mortgage broker that works out of a real estate office and the service that I provide far exceeds the service that clients get at the retail banks. 

Wells Fargo took 2 months to get a deal closed.  Another large, local lender, 3 months! 

Mortgage brokers do not collect an hourly wage, we work strictly on commission and I think that is the reason why the service that brokers provide is superior.  Darn right I'm working in the best interest of my client.  I provide the best rate and program for my client and I'm willing to go the extra mile to get the deal done.

When a consumer goes to the bank, they get the banks product and the banks product only.  Then where do they go if there's a glitch in the deal or an unreasonable underwriter having a bad day?

Again, shame on you!  Taking an article that was published in the newspaper and trying to use it for your own benefit.

I hope you got the attention that you so desperately sought.

I love the line that mortgage brokers work for themselves, not for you... are you sure you don't want to edit that?

Who do you work for, Miriam? 

At whose pleasure do you serve?

As a mortgage broker, I take offense to your prejudical bashing and would suggest that you look at your own industry as well.  In the MB business, there are scoundrals... in the Real Estate Broker/Agent business there are scoundrals as well.

I'd suggest you putting up the shutters on your glass house.

I used a real estate agent for the first time when I sold my home last year. 

My agent was the best!  However, other realtors who brought their clients into my home were not very professional.

During at least two showings, items were broken in my home and not a note left regarding the damage.

After preparing my home to show when each request came in, I was not happy when a realtor did not even leave a card or bother calling when they or their clients could not make it.

I was so upset that my realtor and I mutually ended the listing contract early and I showed the home on my own from that point on.

Do I still work with realtors?  You bet I do because I know they're not all disrespectful of others property and many ARE kind, considerate, and professional.

If I run across a client who could use services in your area, rest assured, they will not be referred to you.

It's a small world and perhaps you should post a comment and try to redeem yourself NOW.

I forgot to add that in California the real estate license is a mortgage license. We have a fiduciary responsibility by default. Im understand that some other states have new laws creating a fiduciary. The funny thing is we provide a product. We give features and explanations and the customer decides what to take. Do you FULLY understand the ridiculous, dangerous and unfair potential of fiduciary? 

We have laws to protect the public. At the risk of looking like I want to insulate myself from MORAL and ETHICAL responsibility, which I do not, YOU as real estate agents shouldnt want a fiduciary either but thats the meat for another discussion. Point is we have fraud laws.  The Assoc of Mortgage Brokers has a code of ethics too---not just the real estate assoc.  We are being assaulted with new rules and regulation from an ignorant (There is that word again) government. One of the latest total screwups by the government is the issue of who orders an appraisal. Now we brokers cant order them. They will be ordered by the lender we and the borrowers have chosen. Why? To end all that terrible and prevalent broker/appraiser fraud! To cut the contact. How incredibly stupid. How unfair for the customers. The lender ordering the appraisals from ITS list? And the government wants to cut direct relationships? Not only that but funding time will go way up. When we are on the job making sure YOUR DEALS CLOSE, we can stay on top things with the different services. If some overloaded bank employee is at the helm, thats probably not going to happen.  This industry is a mess and its going to get worse. If brokers all die out you WILL see the day when you wish we hadnt.

This has got to be one of the most asinine statements I have ever read.

There are bad apples in every profession. To pigeon hole mortgage brokers like this is very unfair. 98% of the ones I worked with were ethical and honest and did what was best for their client.

Did the thought ever cross your mind Miriam that a reltor is nothing but a glorified taxi driver that feels that entitles them to 3% of the loan proceeds??

Miriam,

I'm a mortgage broker and to be honest I find it sad that feel you need to bash the very people that secure financing for your clients.  Your ego is clouding your judgment and to be honest I have never met a real estate agent that was worth more than a taxi service to the nearest house for sale.  It's too bad it costs them 3% for the ride. 

Mortgage Brokers so have many more options and leeway the the retail banks.  Miriam it's the banking lobbyist that are trying to get legislation pasted to make us disappear.  If you think that the options are slowly disappearing now just wait till your only source of financing are form the big banks.

J Phillip. She blogged her opinion about the NY Times article. I am not shooting the messenger for the NYT article. I am shooting the messenger for her generaliztion she made about mortgage brokers.  She made the comment that brokers are not bound to work in the best interest of the borrower. HER COMMENT!! Not the NYT.

If you put your opinion on a public forum and cannot handle the heat best not to say anything at all.

"Thanks J. Philip.  I suspect there is some anger out there as this industry is changing.  Is this point spread diclosed up front? "

You bet your sweet bippy this is disclosed UP FRONT....have you heard of the Good Faith Estimate????!!!!!??????

By the way, bank's don't even disclose it....what do you make of that?

I find your responses hollow. You give some back peddle but dont really acknowledge how inaccurate your post was. I would have said something like 'Gee, I really was terribly off base with that---I had no idea what I was talking about and I apologize'. You know, something a little humble. Also, This hasnt been a simple restructuring or fine tuning, its been a TOTAL WIPEOUT. Everything is connected to housing.

Darin: When the market dissolves and people flock out of it, those who survive are the BEST and the WORST. The market got rid of a lot of seat warming players who could make $30,000 a pop off doing stated income option arms on 3 million dollar homes in San Francisco, and a lot of Amerisave type low QC telemarketers but unfortunately the WORST know how to keep on keeping on but again thats with ALL professions. Even some of our (shush, dont say this out loud) GOVERNMENT OFFICIALS are crooked. Hard to believe, eh?

Dude---  http://www.pmi-us.com/

I beg to differ with you about the availability of mortgage insurance in general. For the last 6 months many programs have not even been fundable because NO MI companies were backing anything. Some went out of business. 

Miriam I tried not to get into the 'Which profession does more work' debate but cant refrain. I am a licensed r.e. broker in CA and OR. I am a mortgage broker in both. Ive done a LOT of both. Ive seen good and bad in both. In general, mortgage brokers must do MANY TIMES the work and have MANY MANY MANY times the knowledge. There is no disputing that.  

 Ill bet that many experienced real estate people could chime in here with stories about brokers and their available programs saving transactions that wouldnt have flown with the local bank or were actually turned down by the local bank.  When real estate people only have BofA and several others from which to choose, they will dream of the good old days. Turn times will suck. Personal handling will be non existent. Problem solving aint gonna happen either.  I just did a three week gig as a temporary underwriter in the re subordination dept of a major bank/mortgage lender.

I had files come in that had Realtors handwritten pleas on the front such as PLEASE hurry, the rate lock expires in 15 days, or PLEASE hurry, the buyer is living out of a U-haul. This was two weeks ago.  You know what I saw when I opened those files? Dates that went clear back to November! I was just getting them in MONTHS after they were sent for re-subordination underwriting. Why? No competition. Too much business now handled by this huge bank.  What else turned my stomach? I saw loans that were taken at rates that were not locked, lockable, or on transactions that had no chance of closing in time to keep those rates, yet the retail loan officers kept taking them. Kept throwing mud on the wall to see what stuck. Big banks retail agents are ether salary or part commission. With few brokers around they have a captive public, as I said in another post to this miserable thread. We have to make things work fast or we dont get paid and no one refers any more biz.

Real estate people have told me that they only recommend big local banks. They like the white pillar institutions. They know things will 'get done' there.  BULLSHIT is all I can say.

I wont post here again and will end by saying that the general public has almost zero knowledge about what just happened to the credit market. I have calmed down and am willing to believe that you simply do not have the experience base to know about our part of this industry. We need each other, though to a lesser degree than before.  Lets all salvage whats left of this shattered industry and figure out how to survive. I contacted the NAR several yeaers ago about a problem we loan industry people were having and they almost shoved a cross and garlic in my face. They said we would rock their boat and they didnt want to help us fight anything.

Yes, we disclose the point spread, UP FRONT on the Good Faith Estimate, as we are required to do BY LAW.

Mortgage brokers get paid "yield spread premium" and any points and fees that they charge up front.  These fees and YSP are all disclosed on the Good Faith Estimate.

Bankers get paid yield spread premium too, only they don't have to disclose it because they're a BANK.  In addition to the yield spread and any miscellaneous fees that they charge, they also get a SRP or "service release premium" on each and every loan that is sold on the secondary market.  That fee is not disclosed either.

And yes, we do explain options to a borrower.  For example, we explain that the rate is 5.00 percent and there are NO points being paid, your fees are listed here on the GFE.

Client says 5.00 is too high?  OK, here's another option Mr. and Mrs. Borrower.  You can pay 1.5 points up front and get a rate of 4.5%.  It's YOUR choice, which option do you choose?

Honestly, all that borrowers hear is rate, rate, rate.  They are overwhelmed, as they should be, with all the jargon and many simply don't want to KNOW the details of the largest transaction they'll probably have in their life....it's true.

Just the same way that I don't want to know the details of how a mechanic is going to fix the brakes on my car.....get to the bottom line, make sure my auto is safe, and let me get on with my life.

The biggest thing is that a client, no matter what business you're in, "TRUSTS" you to be the expert in your field!!!!!  I, for one, EARN that trust.

Oh good Lord. I said I woudnt post again but this has become a different animal. Lets get into YSP, POC, rebate, whatever you want to call it.  This is one of the biggest areas of misconception in our industry. It has caused so many problems. Its been used as a weapon by banks against brokers. Its been used by ambulance chasing lawyers against brokers. Its the biggest mountain ever made from what should have been the smallest mole hill we have.

Its better if you see a lenders rate sheet to understand this so Im going to SUPER oversimplify the pricing. We wont get into the secondary markets, volume obligations, any of that.

Lets suppose that a lender is getting its money from somewhere. Suppose that it gets it at 5% and needs 1% profit to stay afloat. (Again, lets not talk servicing, selling, anything but a few straight numbers) That means it must loan the money out at 6%to make its 1% profit. On a rate sheet that shows as a PAR rate. It has no point cost and no rebate. If a mortgage broker wants to make a point they will show the borrower 6% at one point.

Now suppose the borrower wants 5.5% instead of 6%. There goes the profit or yield. The lender computes its up front fee to get that yield back to the 1% profit based on factors such as how long people have historically kept the loans before paying them off, what the loss ratios have been , etc. Lets say to give the 5.5% they CHARGE a fee of 1.5 points, also called 'discount points'.  Its a gamble but on average brings their anticipated profit back to what they need to survive.

Now lets head the other way. As the rate GOES UP from par, the lender gambles on receiving future profits and will pay up fron a REBATE or YSP  Consider this: (Again, figures made up for ease of the lesson)

5.5% costs 1.5 points

6,0% is PAR

6.5% gives a REBATE of 1.5 points.

The broker wanted to make 1 point so how does he/she price it to the borrower? At 5.5 he has to charge 2.5. Thats 1.5 to the lender and 1 to the broker.  At 6% he charges 1 total. Thats the 1 for himself and nothing to the lender. At 6.5 they have 1.5 in rebate money to play with. He can make the 1 percent and give the extra half to the borrower to help pay costs. Lets say the customer doesnt want to add to the loan amount for costs and also doesnt have any spare money to put into it. You raise the rate and use the larger rebate to pay the costs. Yes the payments are higher but you work all that out considering how long they will keep the loan and other factors.

Remember rates come in 1/8 increments and each has a different cost. If I want 1 point, I can charge it and give the par rate, I can raise the rate  and take a 1 point rebate so there are no points to the borrower, OR i can do both, giving a rate in between that has a 1/2 pt rebate and charge the borrower 1/2 point.

All FULLY DISCLOSED AND DECIDED BY THE BORROWER before we do anything. If I decide what the transaction is worth to me and we agree to THAT TOTAL FEE p front, there will never be any 'bait and switch' for extra profit. There will not be any placing of a borrower into the wrong program because it has more profit. This is the way all brokers should do it. YSP isnt evil---its a GREAT TOOL and saves a lot of money for people. Im sure some purists are cringing over my explanations simplicity but thats OK.

Now the stupid part. Its the law that we have to disclose it. BANKS DO NOT!! Why? Lobby. They are powerful and connected. We are not. There are people in the media with their own agendas. They create controversy just to look good. To look like they are a white knight protecting the poor public. Jack Guttenburg (spelling?) is one of those. He had articles about how anyone using rebate was a scoundrel. He then pushed his 'up front mortgage brokeers' club (for a fee) when almost all of us are up front anyway because ITS THE LAW!

Banks get away without having to disclose. It gives them an unfair advantage over us, which is what they want. People, the answer to many of your questions is LENDERS WANT RETAIL BACK. Repeat that 100 times. They do not want brokers to have the share we built up to.

The CEO of Countrywide, Angel Mozilo, was on TV several years ago and stated that mortgage brokers were just an irritant in the middle of the process. This from a jackass who had his millions because of brokered business.

There have been disclosure laws for years. The problem is not enough people to enforce the laws. Now we have the Fed breathing fire and becoming the huge white knight, making new and or changing existing laws regarding lending. They do NOT know what they are talking about. They do not know what they are doing. You take many of our regulations and try to read them. Just try to comply. A book on one part may be 4 inches thick and that 1/2 inch of the rule and 3.5 inches of attorney opinions on interpreting it.  Its a nightmare and only going to get worse. Take A.P.R. We have to be very accurate either high or low, and except for stock fixed programs we are totally incapable of compliance on many programs. Only the lender who has that program in their computers can do it. The Fed law is that only lenders provide it yet many states including Oregon demand thte brokers to do it. They force us into breaking the law. A.P.R. is problematic in other ways. One shouldnt rely on that figure. Bottom line is whatsd the rate, and how many dollars does this transaction cost. Simple.

The poor poor public raped over by mortgage brokers. Hundreds of thousand of people who sat down with title people who go over every document. All those people who didnt know what they were getting into because the PREDATORY lenders and/or broker screwed them over. HORSE PUCKY. Most knew they couldnt qualify when doing stated programs. Most knew they had an ARM and that it would adjust. Most knew everything Predatory Lending. There was hardly any such thing.

Shut up Vinewatcher.

Well that added a lot to this discussion Vine watcher. Not very relevant. Im not sure if I should applaud you or wonder if you have another agenda. As we have all agreed, there are bad apples in every barrel. That wont change until humans evolve a couple million more years, Im guessing.

This is the hijacking of her topic and we should stay on track. The mutual understanding of our two sectors of this industry is what matters for all our benefit (and the publics) Thats why I calmed down and am willing to discuss any questions about the mortgage world without yielding to my initial flabbergastation, lol.

Miriam,

I came across this blog today from the mortgage grape vine. I used to be active here when I was doing real estate and haven't been back in some time so please bear with me.

I understand the philosophy of "don't shoot the messenger" but I get the distinct feeling from your original post your intent was not as benign as you are making it out. I believe spreading mis-informed, ill conceived, gotcha headline grabs is not a good way of spreading the love around to the people that essentialy built this industry.

While I'm on my high horse I'll go ahead and spread my curriculum vitae as well. I was published in by October Research on a few occassions essentially predicting this real estate collapse. My family has been in title insurance for 3 generations and hold both realtors and mortgage brokers with the same disdain. I have held a title insurance license, Real Estate sales license and a mortgage originator's licens. I have personally been in real estate sales and closing before I could drive a car.

With that being said, I hope you look upon the replies here with a clear mind and keen eye to much of the nuances of why this all happened. As some other posters said, brokers didn't create the problem. Everyone did with greed. From your beloved big banks setting up the programs, to brokers pimping them to realtors begging to get their no money down client closed. We all share the blame.

Your endorsement of the article

"Some of the best advice about what to do and how to do it is in this article from the New York Times yesterday, to read more, here."

Shows me you are part of the reason for this downfall. The reason being is that you do not either have the capacity or the willingness to grasp the big picture. I have always approached my job as trying to be a master of my trade. You have non chalantly spewed this information as fact wether it be overt or not. Some people may say Re/Max agents are the most hated in the industry due to their ability to undercut what most large firms charge for a listing fee. Mortgage Brokers are much the same. The products are more vast than you could possibly comprehend, the rates, terms, stips, timelines, marketing is not a once in a career lesson, it changes every single day, sometimes they change by the hour. 

Out of every loan I did for Realtors, not one of them asked me, "Did you get my client the best deal?"

They all asked the same question, "Is my client qualified for this price?"

I suggest you take a break from the editorials and try to become a master of your trade. Having walked in your shoes, (being a licensed realtor) I could slice the opinion realtors of this industry in half with 2 paragraphs.

Miriam,

My issue is your poorly framed argument; because I don't have a legal definition as a fiduciary, I'm then considered to be less than acceptable, in your opinion.

You're being used by a banking cartel that wants to eliminate you and me (with the govt's help).  I know your neighbors are failed (and gov't subsidized) investment bankers (you live in Scarsdale) and you have to "talk the talk" but let's be real.  Supporting this cabal is a criminal conspiracy against the consumer.

Most REALTORs don't understand this because they actually believe that NAR is not a trade union but i'll lay it our straight for you:

Anytime you, as an industry participant, support or endorse regulations or gov't action, that limits a consumer's choice, like you did in this article, you're stealing from the consumer.  If you want to be associated with the Rotarian Socialists who protect mediocrity rather than performance, so be it.  As you do this though,  I, as a free market, consumer-centric mortgage professional, will expose you for the protectionist fraud that you are.

PS:  You're only argument is to say "Brian's crazy"

Sorry,  the above was me

PSS:  I hope you actually intend to engage me in intelligent discourse; I've been waiting to have this discussion for about six months, now.

PSSS:  As a point of disclosure, I'm a mortgage banker (but I deplore what the industry is doing to mortgage brokers; you're article is, what I consider to be, the ultimate in professional ignorance)

I am absolutely disagree with you. It is very wrong oneself trying to distinguish one group with another group who is selling/marketing the alike service. My belief is that if a person is bad, he/she is bad no matter what kind of designation or hat he/she is wearing.

Paying a due to an association to proudly announcing that oneself is a member of an association or taking multiple licensing in order to sell/market a service DO NOT equivalent to there is any highly ethnical standard guarantee. The ethnical standard comes from onself's belief and standard.

Therefore in the market, you can easily find there are a lot of scams who are even a Phd, and helding a lot of designations because they want people to believe them "I AM NOT A SCAM, GIVE ME YOUR MONEY"....Actually those highly educated people is more dangerous to the society than anyone else; like Madoff or Stanford, I believe they both study a $99 ethical code class, but if they are bad, they will be alway bad no matter what kind of license, title, education, designation or family they are born with....

I am now feeling bad for jumping all over Miriam. Its possible to become locked into a certain track and not be aware of things around you. You can be doing an brilliant job at your track without having to know other tracks so Im not putting down her ability as a real estate broker. I suppose many have fallen into the media crapstorm about the dirty, cheating predatory brokers. Its hard not to be a sheep and fall for all this press unless you do know the scoop on the other track.

Miriam, if you ever want to know the truth about anything mortgage related, email me. Iman opinionated grouch but VERY fair and Ive seen it all for 30 years.  My 'partial' apology for coming at you but me dear---you hit us below the belt and we (mortgage brokers) have had SO much of that lately.  Marvin at iwantamortgage dot com

To be fair, you mortgage brokers who keep talking about the real estate people big commissions must remember that 6% or thereabouts is often split between 4 people and there are office bills to pay just like we have. Id say real estate offices have much more cost per deal than we do.  What a fourth person gets is often about or less than a mortgage broker makes except in high priced areas. That takes us to another topic of MORALS. I do the same amount of work on a 125K loan that I do on a 750L loan. Should I charge the same 1 percent (or whatever you charge) on each loan? Did I deserve $7,500 for what works out to about 5 total clock hors spent on a loan?  If I charge them 25K and they were happy---would that be wrong?  Some of the real estate fees I see charged on the high end properties almost make me blanch. I do a graduated fee on large values. We have to stay in business but we must be fair. What is fair?

So take fees out of this threads discussion. Its about our moral compass and business ethic.  Its about being unfairly blamed for the whole putrid, stinking mess we are all in now.

Its about being unfairly blamed for the whole putrid, stinking mess we are all in now.

I noticed that nobody wants to blame the irresponsible borrowers.

If a mortgage broker wrote something like this about real estate agents, all hell would break loose on ActiveRain.

...and that's the problem wth ActiveRain; you have a celebration of the mediocre here.  Productive originators and real estate agents don't have time for this crap.

Mortgage Brokers "NEVER" underwrite a loan, Mortgage Brokers package the loan and send it to the "Lender" (i.e. Countrywide, Bank of America, CitiMortgage, etc).  The "Lender" is who underwrites the loan.  To put a bad rap on the "Mortgage Broker" is just plain WRONG.  The "Lender" is the one who has the final say if the loan will be approved.  It is truely unfortunate that everyone can't see what is right in front of them!

Miriam,

Your comments are highly offensi. Although I now work in the Real estate industry full time, I worked for a mortgage broker for 4 yrs. prior to being RECRUITED by my REALTOR partners.

Even to this day I monitor the finance market so I can fully educate my clients. Are there crooked mortgage brokers? Of course there are...just like there are crooked realtors, politicians, etc....But when I worked for a broker, I most CERTAINLY had my clients best interests at heart. Hell I even told an attorney wanting to refi a $1.5 million dollar loan that it made NO SENSE for him to do so...and you know what , her went to someone else!

When you walk into a Bank of America (or Wells for that matter) are you able to see what I see?  I see a bank charging WAY more for a 30 yr fixed loan than I could get at a wholesale level if I were still doing loans. Unless you have woked both sides, I think your opinion is highly one-sided and unsupported. Get your facts first BEFORE spouting your venom. You and others like you are part of the problem and not the solution.

Micki

Miriam, you were ignorant when you posted this.  I hope you've received a little education here.

Another little tip for your "shoppers".....it is possible for them to shop themselves right out of a loan.  If they're shopping, they should disclose this up front to minimize the damage.

Borrower goes to Shop A, Shop A pulls their credit, and after speaking with the applicant about what a great rate is being offered today, they mutually agree to lock the loan.

Borrower then goes to Shop B the next day and goes through the same process.  Shop B has a better interest rate and perhaps some additional fees charged in conjunction with that great lower rate.

I don't care what anyone says, all of these credit pulls DO negatively affect the borrowers scores, and ultimately their pricing.  Pricing = Rate

Brokers AND banks often sell the loans on the secondary market to the SAME investors.

Investor says to Shop B that they've already registered this applicant and the loan has been locked in!  So sorry, they cannot be locked into the lower rate!

Oh yes, we're very well made aware of the borrower's doings during the process.

Heaven fobid if it's an FHA loan and has been registered in FHA heaven, then their hands are really going to be tied.

A better option for an applicant is to call maybe 3 lenders and disclose up front that they are shopping.  Many borrowers are very savvy today and know their credit scores.

They can say "I've got a 760 credit score, I'm going to put 10% down, can you please tell me what your rate is today, calculate my total payment on this property, and forward a good faith estimate?

Once the applicant has 3 GFE's in front of them, that's the time that they should be comparing rates and fees and making a decision based upon that information.

Also, they should go with someone that they feel comfortable with.

I'm sure you've heard of "Caveat Emptor".  It is ultimately the borrower's responsibility to look out for themselves.

I have a property that I am selling in Northern Michigan.

Perhaps someone could help me.

The sale price is $265,000 on a home recently appraised at $305,000. The median sale price in this vacation area has only been $40,000. The realtor is charging me a 6% fee. 

I don't understand why he is charging $16,000 when his usual fee is only $2400 to plug into internet sites and put a sign out. He willl not disclose to me the cost and detail of his expenses so I know where my $16,000 will go?

Should I go with CENTURY 21 since I know that name from TV ? Thank you.

Thanks for the reply Miriam.

The person from Century 21 told me not to bother with these small independant RE agents. She said they were predatory and will charge 5% or 6% when Century 21 will only charge me 3% and promises results like I saw on TV if I list with them. The small in town agent tried to convince me that he may have a possible buyer in Florida. I think that was just a ploy like the Century 21 person said and that the media warned me about.

I am just going to list with Century 21. Thanks for your help.    

Since you like NY Times articles:

"The 6 Percent Solution: Skip Real Estate Agents"

"(Note, however, that agents don't always push for the best price. Steven D. Levitt, co-author of "Freakonomics," and Chad Syverson, both University of Chicago economists, found that real estate agents have an incentive to persuade their clients to sell their houses too cheaply and too quickly because a few thousand dollars more in price won't yield them a significantly higher commission.)"

Link: http://www.nytimes.com/2005/09/17/business/17realtor.ready.html

I am neither a Realtor nor Mortgage Broker. As an economist (You deleted my last post but that is ok) can I ask how You as a Professional  Real Estate Agent since 2003 did not see this Real Estate Market collapse coming? I have searched your entire blog back to its incarnation and cannot find one post/note from you citing the market has peaked and buyers would be better waiting for prices to contract. Can you please cite where you a as professional noted such?

Way to try and extricate yourself, Miriam. I had hopes for you and as I posted above, actually felt sorry that you were jumped on but see that you only try to make it look as though people didnt understand your true intention.  If it comes from your mouth (typing fingers) its done. It looks like you said you were misinformed to try for a sympathy exoneration but thats a poor apology.

 You said: "Real estate agent have already been beat up on this point, it wasn't enough for us to simply say that we are honest and ethical either."  You didnt think about that before doing exactly the same thing to us?

 Maureen, you said "I am amazed by how the mortgage brokers  jumped all over Miriam and  I have not read a lot of the long comments. It's like reading a "REALTORS®"post that a bunch of "cRaZy"bubble bloggers descended on a few years back.

Good for you Maureen. First---read all the comments for possible enlightenment. Thanks very much for your view of our profession. We are crazies. Why dont you spread that around your town and see how many good, honest mortgage people are offended? I should start a post in a real estate forum that has the same misinformation and tone as this blog. I'll post it as a mortgage broker and not mention my real estate brokers license. What do you bet the enraged response number greatly exceeds the ones here?

For the most part this has become counter productive. If I hadnt caught it and posted the link on mortgage boards it would have been even more incorrect, inflammatory garbage heaped upon mortgage professionals.  Your topic could have been fiduciary relationships, and could have been a very interesting subject. It could have asked instead of accusing, and differences could have been compared. All would have learned and you, Miriam, wouldnt have harmed people undeserving of more bad publicity.

I am truly finished here and have to go figure out new ways of pushing people into loans to benefit only myself with as little legal responsibility as possible. Thats what we do when we have no state or fed set fiduciary, right?

Miriam: Your generalization about MORTGAGE BROKERS unfortunately is an all too common opinion of that group, you need to understand that as a group these days unfortunately motivated purely by their own income, they have the primary need to focus first on their own pay not necessarily the customer's needs. It's a backward cock-eyed way of operating, but most of them are none the less that way. If you can work with those few that do not operate like the majority of the crowd (fraud/greed/me first), then they play a very important role in our industry! That handful of individuals are the ones we seek out everyday, where I am employed!

Unlike previous times, unfortunately MOST of them were brought up in a sales-commission system, a payroll business plan that became popularized after the 1998 industry correction, resulting in very very little industry training and education by their early employers (who themselves were driven by commissions as well). So the offspring, today's mortgage brokers and their LO's, have a narrow view on the right and proper way to conduct their business - they incorrectly think it is a commissioned sales job" - when it's actually an ethical customer service function. When you add on top of that, their own national association (NAMB) pushes NO Fiducary duty onto them, resists any legal proposals to make such a 'duty' law, etc. - then I'm sure you can see ... too many of them are stuck in this endless cycle of ME ME ME first.

Before I Founded Secret! University, I was a portfolio lender and mortgage banker myself who worked with many thousands of mortgage brokers for four decades, so I know that animal ... as I look to the renewal of our industry later this year, I can only hope the good ones will stay around, while the bad actors 'run for the hills' at an ever growing faster rate than they have been the last couple of years.

www.secretuniversity.com

Well now I have to look indecisive and somewhat unbalanced by coming back after posting twice that Im through, but since you personally ask me, here are my thoughts on fiduciary.

First, you have modified your original writings and I read that you will be deleating some posts. That wont help people follow this if they were not here from the beginning.

Miriam, most lenders (those who have survived)  pulled out of wholesale because they could work retail better than in past years and they WANT ALL THE RETAIL BACK. I say that in caps because its so true.

Second, Maureen said: "am amazed by how the mortgage brokers  jumped all over Miriam and  I have not read a lot of the long comments. It's like reading a "REALTORS®"post that a bunch of "cRaZy"bubble bloggers descended on a few years back."

Its like ----that a bunch of cRaZy bubble bloggers descended on? It sounds pretty clear that its a direct comparison. She might have added that the similarity was that of post volume or of passion but added that she wasnt calling us cRaZy folk. I dont think you need to try and defend her. It was clear.  I hate to look stupid but I saw NO ONE 'pretending there is no issue'. I have to go back up but dont remember a vicious attack but thats splitting hairs.

No one has tried to say this isnt an issue. You didnt bring it up that way! Come on! The slant was negative and that not having a fiduciary was more of the 'problem' with mortgage brokers. I hardly think that all these posts from clearly intelligent people could have made the same mistake you say I made.

You screwed up. Who knows what you actually feel and what your true intention was but its delivery was derogatory toward us just like most of the media coverage has been. I did stick to the subjects. (plural)  The article, the way it sounded, and how you are handling this entire thing.

I dont want to keep a debate going on that. Whats done is done. Now about FIDUCIARY.

First you must know that no one on this earth is more consumer oriented than I, sometimes to my own financial harm. I have over 100,000 posts on multiple real estate and mortgage forums. Anyone who has read mine know that I should be working with Ralph Nader instead of doing this, LOL.

I am 100% for consumer protection and Ive been damned hard on the real estate and mortgage professions. That said, I do NOT want a fiduciary relationship and YOU SHOULDNT EITHER!

 Consider the next link and then quotes from various sites:

http://www.paragonwealth.com/about_paragon/fiduciary_advisor.php  This is a company also saying that one should do business with a company that takes a fisuciary responsibility. Read both left and right sides.

Here is the subject on Active Rain http://activerain.com/blogsview/14496/Do-Lenders-Have-a-Fiduciary-Responsibility-to-a-Borrower

See this http://en.wikipedia.org/wiki/Fiduciary_duty

"Fiduciary responsibility requires consideration of the social,environmental, political and cultural effects of investments, both positive and negative, over the short- and long-term as a fundamental part of the investment process. This is not screening, nor is it a moral or ethical issue, per se. It is a financial issue, one that identifies risks and opportunities not captured by conventional financial analysis. Anything less than this comprehensive view does not meet the needs of beneficiaries, or the demands of fiduciary responsibility."

Listen, we provide a product. We are already subject to disclosure laws! Tight laws. There have always been fraud laws. Do you realize how you open yourself up to undeserved damage if acting as a fiduciary?

What if a borrower comes in and asks for a straight 30 year fixed, wants to pay 1 point out of pocket, approves my price and the loan closes. He then finds out that 15 year loans are less interest and that he could have had that. Did I initially take him by the hand, show him every type of loan product on earth and then do math to give him all available options? (I usually try to do just that but if told NO then of course they are the consumer)  What if he took a 15 year loan but is in an unstable industry?Maybe a new car salesperson?  6 months later he is laid off or his commissions are less and he is having troubles. The 15 year payment is too high. Should I have been a job counselor and made him aware that he could have less income in the future so taking a higher rat on the 30 but having smaller payments was a better thing to do? How LIABLE do we have to be? I said before that you go into Safeway and buy a loaf of bread, does a Safeway employee have to disclose to you all they know about the bread companies? Their health dept ratings, their amount of fat and sugar? Does the employee take a medical history then determine which bread has the most fiber if thats what the consumer needs? Can Safeway be SUED if that doesnt happen?

I remember a lawsuit in San Diego CA years ago. A real estate office was deemed liable for conditions it COULD NOT HAVE REASONABLY KNOWN. We all went nuts scrambling for better E&O and wondering what would happen to all of us if that really held. I think part of the land slid, or something like that. How liable are you supposed to be? If we mortgage brokers must DISCLOSE everything including our profit, there is no problem with 'putting people into loans that benefit us financially' instead of then best for the borrower. We do not make the loan product. We cant know EVERY type of loan from every lender out there. What if I only have ONE source for my mortgages? I can only do M&T Bank, lets say. Am I breaking a fiduciary because I couldnt send them to BofA who was running a low rate special at tat time? We provide a product. Safeway provides a product. YOU show homes to people. Should you act as an investment counselor ala Dean Whitter, etc. to determine the very best type,price,location etc property for the buyer? If they fall in love with a house, can qualify for it and buy it, should you be sued if the commission on it was 3% when some other houses offered only 2% to the selling office? Yeah, the SELLER is paying for it on paper but they buyer is paying for it in the price. Thats the old chicken or egg argument though.

We have enough laws to well cover our industry and protect the consumer. We may need some added disclosure in the mortgage world to clarify a few problem areas but most everything cited as a 'fiduciary responsibility' we already have covered. Being a fiduciary is, IMHO, a potential bad thing for real estate and mortgage brokers.

Speaking of fees, lets say real estate salespeople are looking through the MLS and come acrossd two identical homes on the same street except one has a read oak tree and the buyers love red oak trees. It just so happens that the read oak house offers 3% and the other offers 1.5. Prices are different by exactly the 1.5% becasue the sellers only have to pay that so they reduced the price for a better chance to sell. You are the one choosing what they see. AWhat happens if you only show them the red oak home, they buy it then find out they could have purchased the other one? You made MORE money on the read oak house. Did you break a fiduciary? Should you be sued?

What about all the real estate peole who look through the MLS and only show higher commissioned homes. DONT DARE TELL ME IT DOESNT HAPPEN. Isnt that selling for their own gain instead of whats best for the buyer? You have a code of ethics. You have a fidciary responsibility. How in the worled is it ever going to be proven that you sold anything with the sole thought of the higher commission?  It probably cant be but its done all over the country. Infact, Ive been to selling seminars where they tell you to speak to the sellers about placinga higher fee in the MLS for just that reason.

Fiduciary. It has more potential undeserved harm to us than benefit to the consumer, who is already covered by disclosure and general fraud laws.  Its a great tool for people in an industry where some providers have it and some dont. The real estate people ALL have it right? That means it has little competition value but at least you can tell the public you subscribe to it.  A great paint job on an old car.

Am I way off base with this thinking? Any LAWYER reading this care to help me if Im incorrect?

I agree with several others that this posting is a good thing. I do wish it had been prersented differently but you have already expressed that so we can all just get along and really dissect this.

Please excuse the HTML junk that was in my previous post. Not sure how that got in there.

I copied it from my own word document. That is a document that I send to realtors and clients alike. I am a loan originator for a mortgage broker in Austin, TX and make it a point to educate my clients and realtors what our responsibilities are and how we attend to them. I think you really need to sit down and have a good talk with a few good mortgage brokers so you can expand your perspective of how mortgage brokers work and how they benefit clients. As a responsible real estate agent you need to make it paramount to be better informed as to what options are available to your clients rather than make assumptions based on others opinions.

Speaking of Fiduciary Responsibility:

 Again, I will ask this question. Please cite one place on this blog (Since its incarnation) or any publication that you advertise where you Disclosed to a Buyer that buying a home between 2007-2009 (Current) that they were buying a devaluing asset. You speak of fiduciary responsibility allot, but 2 realtors here in Indiana are being sued over this very fact. I would also like you to cite as a Real Estate Professional where you alerted Home Buyers to the impending collapse of the Real Estate Market (As a Real Estate Professional you surely had the economic background to know that the rapid home appeciation was unsustainable). Surely, you did not put your commission first, and have a disclosure about the assets (Homes) you have sold in the last 24 months and how those poor home buyers now have homes worth 10%, 20%. 30% Less than when you sold it to them. I look very forward to those links.

I agree Consumer Protecton and Disclosure are a "goodthing". From my research and consulting bother Brokers & Banks have disclose all fees including YSP (for Brokers on the GFE). Bankers get to omitt SRP from the GFE (Better Lobby Group). Look very forward to those links showing you Disclosed to the Consumer for their Protection Mariam.

Miriam, worry not. Many that have disparaged your post about mortgage brokers have done the very same, in fact much worse, about realtors on other blogs.  Unfortunately you managed to catch the eye of one that has a wee bit too much time on their hands and is the most hypocritical of all.

Miriam,I've been both a Realtor and   mortgage office owner for over 33 ys.No matter HOW much BOTH sides opt/or are regulated to inform the consumer...there is often a level of  consumer stupid which can't be overcome.To pretend that it is ONLY mortgage brokers who NEED to have yet ANOTHER federal regulation on the table is...well...there just are NO words which are acceptable on an open forum.We all know that consumers for the most part read NOTHING given to them by either their Realtor or their Mortgage Broker.They're operating on "trust" or how they "feel" about the person on the other side of the table.It's up to US(both Realtors and Mortgage Brokers) to monitor ourselves and each other when dealing with the public...but how often does that happen?If you align yourself with the people who do the job and tell the truth..not just the people who solicit your office or bring gifts....but the people who TELL you when you're wrong or when the buyer is beyond their safety net......THEN you've got an alliance which is useful and offers some protection to a consumer.Find several of those types of Mortgage Brokers to add to your referral partners and THEN..you've got game.It will still allow you to check information with your other preferred Mortgage Brokers if something just doesn't sound right....but at least the core group that you use will always be made up of people whose goal is the same as yours.

If YOUR goal is to put people in the RIGHT house at the RIGHT price and NOT just to put a deal on the board.

The adage goes, those that have the money, have the power. They make the rules (underwriting guidelines), ultimately choosing when and where to distribute that money, even if it doesn't make common banking sense.
It has been the captive lenders like Citi, BoA, Countrywide, Chase, Wells and everyone else now getting propped up by the gov't that have put the economy in the mess its in, have created the downturn in real estate, and have created the credit "crunch" (if you're going to quote NY Times articles, try this infamous article, about the source of the "crunch", from 1999: http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260)

These lenders, their gov't lobbyists and their dem/rep lovers have all this power, are too big to fail, cause all these problems, yet you still feel brokers are more than a minor source of the problem? Granted, 70% of mortgage origination is via mortgage brokers. Lenders are systematically pushing out brokers from the business because we do make this world go 'round (why did BoA hold onto Countrywide?) This systematic elimination of brokers is your only argument against using brokers at this point, as we are simply soon-to-be-removed agent extensions of what these lenders and gov't officials (not brokers) make available to your buyers for financing.

When was the last time you called your bank for a basic task such as checking on a questionable checking account transaction? Did you enjoy working with $8/hr bank employees (see government employees, as soon as banks are nationalized), or would you rather they were clearing 70% commission? Which loan agent do you think actually cares, and gets your loans closed faster and without problems?

Where does loyalty to captive lenders come from?

Wow, what a huge and overwhelming response.

I've been active in the mortgage origination side of the business for just about 10 years now. I started on the wrong track and eventually pulled myself back from the darkside.

There are, what I perceive to be, 2 sides to the mortgage origination business. Good and Bad. There's really no in between.

First, the good:

The good side will have an individual license number, not just a corporate entity that they work under. They will be insistent upon getting the client to agree to the terms up front. They will have a set title & escrow fee from their go-to title office. They will know about the little things such as notary fees and intangible taxes and they will inform the client of this as well. All information will be on the original good faith estimate sans a SET interest rate (unless pre-locked) as the rate is subject to change day by day, hour by hour. They will be approved with ever portfolio lender that lends in the market. I have banks that I'm approved with that wouldn't even talk to me without a significant amount of money on their books. They know their banks guidelines better than the underwriters in some cases. They will always offer the option of meeting with the client face to face as it's a great way to retain business. Customers like those that they can see. Questions are answered directly, not round-a-bout. In short, you will know when you're working with a "good" broker.

Now, the bad:

The bad side will have no individual license number and hide under the guise of a corporate entity. They will have no working knowlege of economics, finance or even a college degree to accomodate their choice in profession. They will badmouth the other offers insisting the offers aren't real. They won't immediately return calls or emails. They will not want to meet in person. They will have no referrals for you to check on. There's a high probability they will be driving a 30K+ car and living in an apartment (but you'll never see this because they won't want to meet in person). They won't be checking into work before 9am because the hangover will need to wear off. Typically they'll be under the age of 30, but not absolutely. They won't work the caravans to meet REALTORS in the area. They won't be involved in the community. They will underdisclose, not overdisclose, the loan.

I could go on for a week, but these are the main points to focus on when working with a mortgage professional. Broker or banker, you can get good or bad. As a REALTOR, you are doing yourself a huge disservice by not working with a professional mortgage broker. I know in my area alone (Orange County, CA) There are at least 10 portfolio lenders that don't advertise for retail clients. They like making loans, but they don't focus on making home loans. I have 2 banks that will still do stated income loans for the right borrower. I have a bank that will give prime MINUS 1% (2.25% fully indexed) for the right borrower. I have a bank that will disregard credit score (down to 600) and focus on cash flow only. I know that the REALTORS that aren't working with a GOOD broker are outmatched in the marketplace. Working with a single bank leaves you with hammer when you need a saw, or a wrench, or a screwdriver, etc, etc, etc...

In conclusion, there's good, there's bad, but you need to take it upon yourselves to weed out the bad and focus on getting them out of the industry. They're hurting both of us.

Here is the real deal.  Many mortgage brokerages operated under a general license much like what a bank uses.  Their individual loan officers weren't required to be licensed, therefore omitting a considerable amount of personal liability.  In the traditional mortgage brokering world, a broker must oversee his/her licensees just as a real estate broker does.  They have skin in the game and can be held liable for the actions of his licensees.

The sad truth is that the majority of falsification came from stated income loans.  Several if not most of the wholesale reps would instruct the mortgage broker's processors to only state the income needed to qualify.  In other words, it was falsified.  I realize that there were several shops that manufactured FICO's and income.  Those are the minority.

As for transparency.  A mortgage broker is required to show all rebate pricing they receive from the bank.  An entity that uses a warehouse line to fund it's loans is NOT require to show their profit.  We all price from the same model.  Using a mortgage broker ensures that the client SEES how much they are paying for the associated rate.  

Agents would benefit from alligning with a mortgage broker who is a professional in their field.  Case in point:  Rate have moved significantly in the past 4 weeks.  I locked at one lender and when they moved pulled the file and relocked for 1 point less.  If I worked at a bank and the loan was locked, the borrower would have to pay up to .50% fee to relock at the new rate.  In addition, not all lenders honor a FNMA or FHLMC DU approval.  Many have layered guidelines.  A broker has flexibility to find a lender that will fit your specific buyer's needs.

This industry is in such turmoil right now that self regulation is about the only thing we all CAN do.Adding even MORE legislation would be bizarre until things have settled down enough for legislators to even understand WHAT it is they're TRYING to slap laws on.

We have more than enough laws covering real estate transactions and mortgages for us to work with right now.Operative word being WORK with.We don't need ANOTHER useless bunch of laws that are being based on knee jerk reactions to try to PROVE that they are AWARE of the problems and want us to believe that they are trying to help.Let things settle a bit. . .lets work with what we already HAVE for laws and guidelines.Trust me...we HAVE laws already on the books that have been IGNORED during this last housing boom.How about we dust them off and see if we make progress instead of muddying the waters with even MORE laws to cover what is already there?

My suggestion that you surround yourself with persons in the mortgage/banking business whom you TRUST was the point.....while the market fights this out.....we NEED to hold close those we TRUST and help our customers get through safely.

Since I have done both sides of this business for over 30 years I can say with GREAT assurance..MOST buyers are operating on TRUST and have NO idea what kinds of docs we put in front of them.There is no "fix" for that but we can try to make sure that the people they choose to work with..both Realtors and Mortgage Brokers..respect that trust....and operate fairly on their behalf.

Hello Miriam:

I've "lurked" on your blog over the weekend since being alerted to it in a mortgage broker forum. I've found the comments... interesting. But I think your original question is still unanswered. 

I didn't see anything negative in your question nor in the NYT article you referenced. Certainly some of the article's comments and resulting questions are uncomfortable. But the underlying question, why aren't mortgage brokers held to fiduciary agent standards, could be better addressed. 

A cursory examination of the fiduciary agent capacity for a mortgage broker would seem to provide many public benefits. A fiduciary agent is held to the highest standard of care in honesty and disclosure in law. A fiduciary agent must act in the best interests of the client. A fiduciary agent may not profit from his position (unless expressly agreed to by the client), and the law provides a number of remedies in the case of a breach of fiduciary duty. All of these seem good for borrowers, don't they?

The main problem with requiring a broker to act as a fiduciary agent to a borrower is that the broker is already contractually obligated to serve the best interests of the lender. I've re-read my lender agreements, and from my view, they carry many of the elements found in a fiduciary agent relationship. I am required to disclose facts about a borrower to the lender that may not be apparent from supporting documentation, even if disclosure of such facts may harm my borrower.

For example, let's assume I have a well qualified borrower. I have obtained all of the required verifications of income, employment, assets, etc. The underwriter has issued a loan approval. The borrower now informs me that he plans to quit his job a week after closing (let's go so far as to say he has another one lined up, so I "know" he can make the payments). I am contractually obligated to inform the lender of the borrower's oral statement which will likely result in loan denial. In such a case, due to a conflict of interest between the borrower's best interests and the lender's best interests, I must act in the best interests of the lender and as an adversary to the borrower. I cannot act as a fiduciary agent to the borrower.

I am also contractually obligated to make the lender whole in the event of borrower default. This means that I can be compelled to buy back a loan if the borrower misses a payment in the first 6 to 12 months... even if the borrower didn't lie, I obtained all of the required verifications and supporting documentation, and the lender's compliance department found nothing wrong with the file. Even though I have not breached my duty to the lender, since my contract holds me to the "highest standard of care" to the lender, the remedies at law in the case of a breach of fiduciary duty also apply to me in my lender contract.

Further, I am also contractually bound to return certain of my profits to the lender in the event a borrower refinances a loan within the first 6 to 12 months. Return of profit is another remedy at law for breach of fiduciary duty that also applies to me in my lender contract.

Let's look at an example: Let's say a borrower refinances his loan after six months. And let's say the borrower decided on a "no fee" mortgage with me - in other words, he selected a higher rate of interest to use the resulting YSP to cover his closing costs (and my fee). After he refinances, I am now obligated to make the lender whole by returning 100% of the YSP... which means I now lost not only my fee but also all fees I paid to third parties on behalf of the borrower. Since the early refinance creates financial harm to the lender, I must take into consideration a borrower's statement that she intends to refinance early when pricing her loan. Again, I cannot act as a fiduciary agent to the borrower because of my contractual relationship with the lender.

Even the most basic lender-broker contract creates a conflict of interest should a broker be required to act as a fiduciary agent to a borrower. The relation between a lender and borrower is naturally adversarial: the process of underwriting a loan is essentially obtaining third party verification for every statement a borrower makes on his loan application. The mortgage broker, in conducting the transaction, is required by the lender to prove all statements made by the borrower and disclose any fact about a borrower which may be affect the lender's security position in the property. In a nutshell, the broker is the first line of defense against borrower fraud, and in essence, the broker must place the lender's interests ahead of the borrower's.

Fortunately, consumers are protected by many state and Federal laws governing mortgage transactions which make the fiduciary agent duty unnecessary. At minimum, mortgage brokers and bankers must comply with the Equal Credit Opportunity Act, Fair Credit Reporting Act, Fair Housing Act, Real Estate Settlement Practices Act, Fair and Accurate Credit Transactions Act, Graham-Leach-Bliley Act, Truth-in-Lending Act, USA PATRIOT Act, numerous HUD regulations, Fannie Mae and Freddie Mac guidelines, plus various state laws. At application, brokers must provide borrowers with some 20-30 pages of disclosures depending on the type of loan and the state of the subject property.

Unlike mortgage bankers, mortgage brokers must complete a training class (40 hours in Florida), pass an FBI criminal background check, and pass a comprehensive exam. Many states require mortgage brokers to post performance bonds. The National S.A.F.E. Licensing Act, part of the Housing and Economic Recovery Act of 2007, will require loan originators working for banks and lenders to be licensed for the first time.

I think Senator Schumer has the right intentions with the idea of requiring a fiduciary agent role for mortgage brokers, but the application of such a requirement would have many unintended consequences. Most lender-broker contracts would have to be re-written to remove protections for the lender that create a conflict of interest for the borrower. Many lenders would choose to exit broker initiated lending; others would charge borrowers more in fees and/or rates to offset the increased risk for the lender. The end result for consumers would be fewer choices, higher fees, and far less competition.

Just my opinion.

Great summary Deep River.

Mortgage Brokers have been vilified for many years. As stated above, sometimes it is justified and sometimes it isn't. The same is true for Realtors and others. There are always two (or more) sides to any story and quite often where money is involved you can only look at the paperwork.

There are forms for disclosing every aspect of every loan that are provided to the borrower. These are explained first by the loan officer and finally at the closing table. Copies are provided to the borrower(s) for review and they can ask questions at any time. Between RESPA, TILA, ECOA, FCRA, FHA, FACTA, HOEPA and myriad state regulations and disclosures that go beyond the alphabet agencies, including predatory lending laws that most states have in place there is so much paperwork that there should never be an excuse for a literate applicant to complain that they didn't understand. The problems comes when they are rushed through a transaction and then don't do the responsible thing which is reading the paperwork. It's a lot but this is one of the biggest purchases they will ever make and you would think all parties involved would do their utmost to be sure the lights are on in the understanding minds of all of our clients.

As a broker, we have a saying, Buyers are Liars. They conceal things that are relevant to their ability to repay the loan, they over-state or estimate what they are worth, they provide doctored documents occassionally and guess what? Sometimes that is very difficult to detect and overcome. It is furthermore difficult to get an enforcement agency to get involved when you discover someone committing fraud. Don't believe me? Try reporting it and see what comes. They will take the report and you will never hear from them again. Been there, done that.

So, what happens? If there is fraud involved, which is anything that isn't absolutely true, like property value or income/assets/employment/intentions, it falls back on the broker. The Broker contract with the lender requires a buy back for multiple reasons, as Deep River indicated. Since Brokers don't lend, they don't have the lines of credit and deep pockets that lenders do and a couple of deals that go sour because of bad borrowers, or a renegade loan officer, can quickly put them out of business.

It can be a lot of work to originate a loan or it can be a slam dunk pure vanilla easy deal, but it is worthwhile to help someone realize a dream and get them the best terms available while you are at it.

We have always had a moral fiduciary duty to our clients and most of us are ethical and caring.

Ive tried to leave several responses and fiduciary responsibility but they did not post. Is it my computer or do you no longer want to discuss this with me?

Great to see so many familiar names on this blog.

What are ya'll talkin' about?

Tennessee the threads dynamic has changed. Originally in my opinion and obviously the same of many others, it looked like just another 'dont use the bad mortgage brokers' flogging that we have been taking from the ignorant press. Notice I said ignorant and not stupid.

Of course it caused emotional responses. If you take the time to read everything from the top, the thread has been sort of redirected to be an inquiry about fiduciary relationships and whether or not the public is at risk because most states do not require it of mortgage brokers.

"the thread has been sort of redirected to be an inquiry about fiduciary relationships and whether or not the public is at risk because most states do not require it of mortgage brokers."

That is what I understood Miriam to ask from the beginning, Marv. I would have posted earlier, but I was heavily involved this weekend with surfing and getting the boat ready for fishing after tomorrow's blizzard (we'll have a high in Central Florida of just 65 degrees... time to break out the winter coats again).

I think the lending industry in general could do a much better job of informing our real estate colleagues about disclsoure and loan pricing. I simply don't understand the suspicion and sometimes outright animosity between two professions that share a comon goal: helping buyers obtain the best home on the best terms. Considering that a real estate agent's paycheck depends on us to deliver a loan approval, I can understand the deep concern real estate agents have about the lending process.

A question about the appropriateness of a fiduciary agent capacity is excellent.

I'm just sayin'...

Oops, wrong board.  Carry on.

Miriam,maybe I'm misunderstanding but your question about a 1 pg disclosure explaining a mortgage broker's relationship to the bank....we already have that in our origination pkg and I believe EVERY broker has that same form..it's been required for many years.Do I think every client understands it..nope..but they sign it.It's a learning process that most GOOD brokers have dealt with for many years.We spend an enormous amount of time TRYING to explain everything to a new buyer.Some "get it"...most just don't listen.If they think they can trust you.....they're off and running.Realtors and mortgage brokers deal with the same types of problems from opposite sides of the table.It would be nice if we could start to clear away some of the mystique so both sides realize how important they can be to each other and how much better our clients could be prepared if we recognized that we are ON the same team.

There is such a thing as integrity. It relates to what you do when no one is looking. When you do not have a mandated legal fiduciary obligation, then if you have integrity, you should have a moral fiduciary obligation to the people you work with, whoever they are.

The Loan Origination/Broker Agreements address the issue of how we get paid and the client makes choices depending on how low of an upfront cost they want to pay. If they are strapped for money they can choose a slightly higher interest rate and the lender will pay us in Yield Spread Premium. Most loans generate 1-2% total fees and that is usually a mixture of front and back end points.

Thirty six years in lending in SC, last 17 as a mortgage broker. Owned my own shop for the last 13 years. Currently a member of the mortgage broker advisory board for our State regulator. Also helped draft most of the legislation that regulates our industry in this State.

Each time I hear a call for more legislation, regulation, and controls, I see more of our freedoms go for protection, yet the protection is more idea than substance. Each time I have sat on a committee to draft legislation there is a fight. One side wants the other side more regulated and punished because they perceive them as a threat to themselves or someone that has given them money. I have turned in many mortgage brokers over the years for blatant violations of both Federal and State laws. How many were put out of business? Zero. Went to jail? Zero. Had their license suspended? Zero. I have went to State regulators, Federal regulators and even the FBI.

The fiduciary you seem to want would make absolutely no difference in protecting consumers from vile people. Every profession on this earth has it's uneducated, it's greedy, and it's downright crooked people. Bar none. You can't regulate a crook or idiot.

The old take on the golden rule that he with the gold makes the rules has never been a more true statement as what is unfolding before us. Those with the gold love to see the little people agrue and debate the validity of their work. And that is the essence of the subject of this blog.

In this blog I have seen good info and uninformed opinion. Of course, the NYT is not much of a source for truth or correct information on complicated matters. They write more opinion than news, which has spread throughout media. It is sad.

However, we should all be very worried as we throw rockas at each other. You call for regulation. Someone will listen and you'll get it. But when the shoes on the other foot, don't expect support from those you have called out as needing more. Regulation increases cost to consumers, costs to business, eliminates freedoms, and increases government control on each of our lives.

The more laws you put on the books, the more that are necessary. Just look at the IRS code.

I'm not one of those "can't we all just get along" people, but you're missing the forrest for the trees. If you do not think that the things we are seeing today is not an orchestrated effort for some to gain more power and wealth, you haven't been paying attention. Mortgage brokers are the small fish and the playing field for us becomes more uneven each year. We get more regulation, yet the big guys don't. I am curious as to why you want a mortgage broker to have a fiduciary duty (which we do in SC) to the customer, but not so for the banks, credit unions, or other lending entities? Seriously?

The problems in the housing sector were not the result of one group or profession. There is plenty of blame to go around. Mortgage brokers are the weak link with the least money, thus the villian. Easy pickin's.

You, my dear, have been played like a cheap fiddle. The discourse here is sent to others. That how I got here. Then an outcry, then the regs. You are free "grass roots" for those with certain objectives.

Passing more regulation and laws will put more and more out of business, particularly small businesses. Good and bad. The current public opinion is built by shills such as the NYT. The more regualtion crowd will soon have all of us as government employees (I would say big banks, but they are one in the same now), even you, if you can fit their regulation's criteria.

The debate here of who's right and who's wrong is irrelevant. It is a shame that debate is now used to kill industries instead of reaching solutions or a better idea.     

Is this another Thorlaw Yank? 

Miriam

Could I interest you in a sweet phone system for your office?

Im going to try this one last time. Ive tried it three times and the posts have not appeared. As a Realtor(c) in Salinas CA years ago, I caught the President of the Board of Realtors(c)in an action that was against the code of ethics and probably broke real estate law. The PRESIDENT. Of course he won, President against newbie. Later he lost his license over other issues. Point is he swore to uphold the code and he was bound by fiduciary.  Wow. Did aliens take over his brain?  The code and the fiduciary did nothing to stop his actions.

I'll say it a last time---you DO NOT WANT FIDUCIARY. Not that you shouldnt do the right thing, be thrifty, cheerful, referent, honest, live by the Golden Rule, etc. Its problematic and opens you up to frivolous lawsuits. It does NOTHING to protect the consumer from those set on committing fraud.

I think this website needs a better way to have a meeting of the minds between any service people in our industry. Mortgage, Real Estate, Escrow, etc. If we had a regular chat type forum where the combined occupations could quiz each other, WOW what a wonderful thing.  To haphazardly find pertinent blogs takes far more time and leaves out many others who would benefit from the discussions.  No attacks, not name calling, just a way for us all to know everything about the biz. To whom do we speak about this? Do you think thats a good idea?

Marvin,

It's Realtor® not Realtor©.

You don't even know the difference between ® and ©.

Idiot.

Miriam,

I agree with you that 20-30 pages of disclosure does not accomplish the task intended by lawmakers and regulators. Disclosure should serve the primary function of properly informing the borrower of his/her rights, the costs of the loan, and the terms of repayment. Many of the disclosure pages inform the borrower of his/her rights but do not aid the borrower in making an informed decision on selecting a lender and type of loan. And you're right - none inform the consumer about the relationship between the lender and the broker.

The two key disclosures, the Good Faith Estimate and the Truth-in-Lending Disclosure, are supposed to inform the borrower on rate, fees, and repayment terms. HUD and other governent agencies have struggled for years with different formulations and structures of these two documents, but consumer tests haven't demonstrated an improvement in choosing the lowest cost loan.

Nevertheless, we finally have a new Good Faith Estimate form to be used starting in January 2010. The new Good Faith Estimate is now three pages and still tested poorly... but it is a step in the right direction of helping borrowers understand fees and repayment terms.

Here is a link to the new GFE: http://www.hud.gov/content/releases/goodfaithestimate.pdf

The real question is not whether a particular disclosure page is useful, but if the sum of the disclosures (1) serves the public interest by properly informing borrowers of loan costs and repayment terms and (2) protects borrowers from potential bad actor originators. In my opinion, our present disclosure process fails on both points.

On the first point, we'll have to see if the new GFE format is an improvement once it is in widespread use. On the second point, since disclosures are prepared by originators, a bad actor will prepare bad disclosures (improperly prepared GFEs are the number 1 problem). The disclosure process itself cannot be expected to deliver the protections against bad actors intended by lawmakers.

On the other hand, properly executed disclosures (ie signed by the borrower(s) and accurate in all respects) cannot be expected to substitute for the "highest standard of care" required by a fiduciary agent duty. The loan originator must patiently counsel borrowers on loan costs and repayment terms as well as inform borrowers of their numerous rights and protections under various Federal and state law. I do not think that a fiduciary agent duty will improve honest originators nor prevent dishonest originators.

The reason is that fiduciary agent duty is not so much of a protection against bad faith on the part of a loan originator as it is basis for determining a standard of remedies in the event of a breach. In other words, fiduciary agent duty cannot stop a bad actor; it can only respond after the breach (and after the damage is done).

To obtain the level of protection envisioned by Sen. Schumer's pursuit of fiduciary agent duty, I think the national S.A.F.E. Licensing Act is a first great step. Better loan originator training and hiring standards would help keep the foxes out of the henhouse. Better oversight of advertising is another factor - there are many originators out there advertising rates/fees unavailable to most of the public, and there are several advisory web sites that provide bad information.

The key to protecting consumers lies in an excellent standard of practice by originators and prevention of bad acts. A fiduciary agent duty won't deliver either - at least not to the same degreee that better originator education, proper licensing for all originators, and better oversight by state boards would deliver.

In my opinion, of course.

HELAM I have been one for years and do know the difference. Its one of those little brain mistakes like spelling mortgage as morgage, which I did have on a new batch of cards once and none of us caught it in proof, lol. Since you are a well known heckler and trouble maker from a mortgage forum and follow me around because you have no ife, I apologize for you to this website. We have no need for your petty. worthless attacks here.  You are an imbarrasment to the mortgage community and I wont respond to you after this.

Miriam,

You're right... despite all of the regulation, the mountain of disclosures, and the individual efforts of the honest originators, the industry still does not deliver the level of protection intended by lawmakers and expected by consumers. New regulation will not, in most cases, remedy the deficiencies.

The S.A.F.E Licensing Act is a good new regulation since it creates a uniform licensing standard among the states and a central database of all originators - banker, lender, broker. Such a database, I believe, will be the cornerstone of delierving effective protection of consumers and oversight of originators in the future. It could also provide a uniform method for accepting consumer complaints. At present, conusmers may initiate complaints with their state licensing departments, HUD, the Federal Trade Commission, and state Attorney Generals. Too many choices, too little action, too little follow up... as the gentleman from South Carolina above explained, it seems complaints fall on deaf ears. A central point of contact would be better.

In theory, background checks should prevent many of the bad actors from obtaining a license. The S.A.F.E. Act will close the loophole that allowed banks and direct lenders to police their own staffs. The other side of the enforcement coin lies with lenders... it would be simple for lenders to verify an active originators license with a central database.

Many folks much smarter than I have wrestled with the problem of consumer education and prevention of fraud. It appears that things may finally be moving in the right direction. It is unfortunate that at present the system relies on a disclosure process that is at best confusing and at worst simple to manipulate by the dishonest.

I'd like to see that central license database become a "record" so to speak of an originator's actions. Maybe even open it up to the public to review past performance and complaints. There are a LOT of issues with those ideas, but without a place to hide, bad actors can't operate.

I am a loan officer and licensed by the State of Tennessee. I recently have a realtor ask my Branch Manager to do something un-ethical. The Borrower hid the fact he had lost his job and when the Lender was pulling credit and verifing employment on the day to close. When talking with the borrower, he stated he had been fire two weeks before. The realtor suggested that someone the borrower knew could just verify he still worked there. WRONG When people are more concerned about money and commissions instead of ethics, we refuse to work with them any more. This would have been fraud. I forgot to mention that the borrower was already living in the seller's residence at the Realtors suggestion to the borrower that it would be closing soon. Much time, effort and expense went into this clients folder correction credit issues and bankruptcy inquiries by the Lender request to approve the loan.

My Branch Manager refused to work for the Realitor or the Borrower because of her ethics. I am proud to work for a company like this. I have found the other mortgage companies do FHA and don't pay employees W-2 as required. I have found other companies have a "desk" for the loan officers, but allow them to work out of there house, another FHA rule not being followed. Yes, there are bad apples in all industries. But not everyone or ever business is bad.

Our purpose as Mortgage Brokers is to the client. We get them the best prices, fees and interest rates depending on who we can get them financed through. Each client is different and each has a different amount of work involved. Lenders are making it very difficult to get borrowers qualified with the new requirements. A borrower just left to go to someone else after we got all her credit issues resolved because "she wasn't sure we could get it done soon enough". Well, she has that right, but was it from someone convincing her that Mortgage Brokers are bad people? Will we collect anything on the work we did? I can so no to that. Will it stop me from trying to help other clients? Diffently not.

What goes around, comes around. And you are nothing if your name and reputation are nothing.

Marvin,

You can't even spell embarrassment correctly. There is a spell checker on this site. I suggest you use it.

Idiot.

Exactly what type of complaint or problem are you wondering about?? The answer will be different depending on the nature of the complaint.

In general, if a client has a complaint they can contact the loan officer first, then the branch manager or corporate headquarters of the company that originated their loan. They would try to reach a solution that is agreeable to all parties. The supervisor/manager might decide that they should assign the loan to a different originator.

Brokers are required to maintain a complaint log that is reviewed upon demand at the whim of the state. If loans are done in multiple states, then during an examination the state examiners might request a list of all complaints received for their jurisdiction.

If they don't get satisfaction from the broker's customer service, the next step is to contact the state governing authority, such and Dept. of Banking or Consumer Affairs. (different in each state). They take the complaint and send it to the broker or lender for a response, to include any documentation on the part of both parties.

The state will review the information received and determine if a breach of any applicable laws or regulations has occurred.

Depending on their findings sanctions or loss of licensure could occur.

Most brokers will fire a loan officer that is non-responsive, abusive, rude, doesn't properly disclose or inform a client.

While we try to maintain a good and professional relationship with realtors there are times that we are constrained from providing the kind of answers that they want.
I have had a realtor for the seller ask about the buyers credit or personal life. Of course this is out of line and a privacy violation. A good broker will not be a party to impertinent questions, but try to tactfully resolve the issue.

Because I intend to be a very active member of this site, I feel compelled to say that I have eye problems and do many things at the same time. My IQ is quite high and I do know how to spell. I will be making spelling and syntax errors and I simply do not care. Dont judge my ideas or points by that.

We are moving into a different subject and its a great one to be discussed. Its always been a dance to satisfy all perties. A real estate person refers a loan to a mortgage person and wants to know whats happening with it. Start thinking about agency. Real estate agents are bound by very strict agency laws. Most mortgage agents (I believe, dont know each state for sure) are not in the same way. We, of course, never represent two parties.

What can we tell you that doesnt violate the privacy of OUR customer? They are also YOUR client, and notice my different description used---client vs customer. What happens if the borrower suddenly loses a job, or the reserves they needed to show in the bank are now gone. Lets say they already have a new job started and the lender requires a first paycheck. Lets say the reserves will, without a doubt, be able to be verified before the agreed closing date but thwey are a lender condition right now. What do you do if the buyer tells you not to disclose any of this because they dont want the seller to be nervous?   These examples can have other problems on their own but I give then as simple scenarios for the question.

What about qualifying? Most real estate people and sellers want to know the people are qualified before accepting an offer. Many real estate people want to know the client is qualified BEFORE they show homes. How do we do that What satisfies all parties yet doesnt violate privacy and/or potentially harm the buyer?  For example, using a standard 30 year rate of the day, the buyer qualifies for $309,000. They want to go make offers in a price range of $386,250 to as low as possible for what they desire. (Assuming an 80% loan to value loan.) You show a home prived at $399,000 and have the prequal letter that the seller and sellers agent requires before acceptance. The buyer wants to OFFER $360,000. The buyer is in a hurry for a variety of reasons and wants to make that deal NOW. The mortgage broker isnt available to be called to re-write a prequal based on $360,000

How do you give a blanket statement qualification letter with no loan amount limit? Who would take it? Now you have a borrower who wants to offer 360K and a letter saying they can afford 386K.  That will probably change the outcome of the sellers answer. There are other issues that need to be ironed out before our two sides of this industry can work together without misunderstandings or broken relationships.  Im not saying I have no solutions to the above problems. This is to make people think and come with their own. Is this area regulated? Do you know?

Again, a real estate/mortgage Q&A forum would be a great idea for this site.

"My IQ is quite high and I do know how to spell" - By Marvin

You must be high.

Idiot!

Some of these replies make little or no sense.

What's crappenin?!

"If you give a letter for $360,000 and the buyer can afford $400,000 ---- is that ethical?"

An excellent question. In my view, the pre-qualification letter should back up the amount of the offer, but should also aid the buyer's agent in negotiation. I provide the buyer's agent with at least two pre-qualification letters - one for the maximum amount for which the borrower qualifies, the other for whatever lesser amount the buyer's agent requires for price negotiation. It is simple to provide updated pre-qualification letters to the buyer's agent as needed.

Of course, all borrowers should be carefully counseled on budgeting - including education about the expenses of home ownership beyond the mortgage payment.

It should also be noted that pre-qualification letters are at best educated guesses whether provided by a bank's loan originator or a broker. Only an underwriter has the authority to issue an approval (or pre-approval) and to commit the lender to making the loan.

A good pre-qualification letter requires that the originator have in hand every document from the borrower that will be required by the lender. Income, assets, employment verification(s), rent history, etc must be analyzed just as an underwriter would in order to prepare a proper pre-qualification that meets the lender's guidelines. Pre-qualifications based upon a credit report and oral statements form a borrower are insufficient. I've seen pre-quals issued by loan originators of large, well respected lenders that aren't worth the paper they are written on simply becuase the loan originator failed to take the simple step of analying the borrower's supporting documentation.

Better still is a formal pre-approval issued by an underwriter. With a Pre-Approval in hand, a buyer and her buyer's agent can shop and negotiate with a much greater degree of confidence... and of course the seller and listing agent can be confident that the buyer can execute the transaction.

Thanks, Miriam. You have mail on your Active Rain account.

I must confess....HELAM knows more about the mortgage industry than I.

OK, I now see that this website allows anyone to place any name they wish without having to register. Now the HELAM character is posing as me and duplicating my name. As this unbalanced person has caused trouble for many in another forum, and now dirties your blog and this website. I will not be posting on this one from here on. Its the only way yor blog can retain sanity and credibility. My public apology to all of you. I have turned the persons name over to Active Rain as a violation of their TOS. I only hope they can see the ISP info when these are posted and determine which posts here are mine and which are fraud.

Activerain needs to modify this site. A screen name should not be allowed to post without registering. Not having been on this site for long, I wonder if this sort of thing happens much to other people? My contact phone is 503-620-1758 You can google my full name and find it in hundreds of places to prove this, should anyone want to know that this post is me.

I will finish by agreeing with Deep River, that to really be qualified the borrower should be run through an actual lender. Now then---what do you offer as proof? The underwriting sheet from the lender? Its has personal information about the buyer. How many of you mortgage people have seen a prequalification letter from a lender? I called my Wells rep and another wholesale lenders rep tonight and they siad the will issue to the broker an approval, an approval with conditions or a denial but to the broker and its not in the form of an informational letter. So how does one prove that a buyer is qualified without stepping over the line on giving personal information? PreQuals from a broker are mostly useless. I have done thousands of loan and worked with all those borrowers and I cant give you an ironclad prequal without placing a borrower through an automated engine or having it underwritten.  Again, what can I show the other side as proof? And again, for what amount does it show them qualified? With most lenders you CANT submit a purchase application without a property! You cant go around getting full approvals on buyers without a targeted property and a contract. Why? It used to be done and it left the lenders files full of dead files when people didnt find a house, found some other lender, etc. It was a waste of time.

Deep River, of course it should back the offer by read one of my scenarios above. What if it cant at the time? I think my point about a prequal letter being used AGAINST a buyer is very valid. Almost everytime Ive explained this to a selling agent before an offer, they appreciated it and wanted me to provid as neutral an approval as possible with no targeted price.  I have a way of handling each of my questions posed. Im not asking them to be taught, Im placing them here for your thought process and discussion. Thats it for me, my heckler won unless active rain can change their format. Marvin.

I agree. Marvin, that the standard lender commitment can't be shared due to private information. I'm usually able to obtain a separate cover letter from the smaller lenders; otherwise my letter indicating a pre-approval is in hand must suffice. A Pre-Approval letter will contain several conditions - at minimum acceptable appraisal, executed purchase contract, and title commitment.

Most of the time, I relied on an AUS approval when I had all the supporting docs in hand. An AUS approval is often "close enough" assuming the AUS conditions on the borrower's side can be cleared with the docs in hand and I could be certain that manual UW wasn't required. Manual UWs should always be sent for an underwriting pre-approval - at least in an ideal world.

One strange item is that is has been easier to obatin a pre-approval from the wholesale side as a broker than when I worked as a retail LO for a large Mid-West bank. I could usually gain an approval in half the time as a broker as well... perhaps because a retail LO may not be involved in ordering inspections, ordering verifications, or anything else beyond writing up the 1003 and gathering client docs. It was an extremely frustrating process to field client and Realtor questions on progress since every question had to be passed on to the processing center for an answer.

It's been a few months since I've had to obtain a pre-approval... but I can imagine right now that getting one done, especially for third party originators, must be challenging due to the overwhelming underwriting backlog with many lenders.

As a side note, I can attest to Marvin's statements about his cyber-stalker. Too bad this individual migrated form the mortgage board to Active Rain. Very disrupting.

Is this another Thorlaw yank?

Some definitions:

The abbreviations "DO", "LP" and "DO" refer to automated underwriting software (aka "AUS")

Fannie Mae and Freddie Mac intoduced automated underwriting programs in the late 90s to help lenders quickly determine eligibility of loans for delivery to Fannie or Freddie. In 2000, both Fannie and Freddie converted their AUS systems to web based applications, which greatly integrated the process of origination, underwriting eligibility decisioning, and delivery of loans to Fannie and Freddie.

DO = Desktop Originator. DO started as an origination platform used by loan originators that integrates with Fannie's automated underwriting system. Now it shares many of the features of DU.

DU = Desktop Underwriter. This is Fannie Mae's automated underwriting software

LP = Loan Prospector. This is Freddie Mac's automated underwriting software.

In a nutshell, an AUS provides a prelimary underwriting decision for a particular loan based upon a copy of the borrower(s)' credit report(s) and data input by the originator. Assuming the data input by the originator is correct, eligibility of a borrower for a Fannie or Freddie baced loan takes just seconds.

The system generates a report (commonly known as "findings") that summarizes the characteristics of the loan, assigns a risk category, and provides a list of supporting documentation that must be supplied with the loan file when the lender sells the loan to Fannie or Freddie.

FHA, USRDA, and VA loans are underwritten with a special version of DU or LP, such as FHA TotalScorecard.

From a broker's point of view, a positive risk rating from DU or LP means that any lender accepting the loan package will be able to resell rather than hold it in portfolio... assuming the data entered by the loan originator is correct.

From a lender's point of view, underwriting time is greatly simplified since the underwriter need only verify the accuracy of the input data and review the supporting documentation of the findings report.

From a secondary market point of view, the AUS systems help "commoditize" loan files, making them easy to sell to other financial institutions or to Fannie/Freddie.

HOWEVER: An initial AUS finding derived by a loan originator depnds upon ACCURATE input of client data according to Fannie Mae and Freddie Mac guidelines. In many cases, poor training of loan originators, failure to collect all required documentation from borrowers, or failure to carefully review the findings report results in erroneous determinations of a borrower's eligibility.

Miriam you took my post to be a personal assault? You offend so easily. You even jumped the gun on poor Darin, forcing him to almost beg forgiveness. And I notice you are leaving the posts from another individual who is attacking one of the mortgage brokers who didnt receive your post well. Is that intentional as payback? Do you have the guts to leave this post? You must be in here every 5 minutes to do damage control.

You will probably be offended by this but it must be asked. You have been in busines for over ten years but do not know what DO, DU and LP are? Have all of your sales been owner carry parcels of raw land?  Do you take zero interest in whats happening with your clients loans? Was it this lack of knowledge about the mortgage end of things that led you to believe the article and back it up with vehemence?

Miriam please dont  put words in my mouth. I do think borrower research is a good thing. I try to help my buyers research mortgage agents and programs as much as I can without stepping over the bounds. I cant choose for them and I wont recommend only one. Liability is too high. We had an unrelated loan agent renting desk space in our office and ended that on the legal departments advice. We were not made to use the person but it seemed clear that he expected business. There was an advantage of having someone there at hand for questions and quick applications but not many of us actually used him except for troublesome transactions. Most of my people used Bank America, Countrywide and Wells Fargo. You keep talking about Countrywide but I dont understand why. My clients closing with them have never had any problems. After a loan is funded and recorded, nothing about it can be changed, correct? Countrywide is still in business.

Ive seen many opposed to fiduciary here and a few for it.  While it probably gives my buyers and sellers a comfortable feeling to know I am covered under such rules, we can all agree that it wont stop fraud. I dont know what the laws are regarding mortgage people and fiduciary. My husband is an underwriter with a large bank but was a broker for 16 years. When your  subject first appeared, he just shook his head and walked away. Please now help me out with something. You said the subject at hand is transparency and fiduciary? How do those tie together into one subject? Do you think that a broker wont properly disclose without being a fiduciary? Im a bit lost here, really. Should we ask any broker if they are and refuse to do business with them if they are not? What do you do?

"Transparency and fiduciary go hand in hand - the consumer needs to be informed.  I think that some brokers won't disclose without fiduciary.  Some will.   There is no recourse if they don't disclose because the consumer will not know until it is too late."

This is the heart of the problems facing mortgage brokers. Consumers have a misunderstanding of where a broker's loyalties lie. "Too late" is also "Very costly".

Simplifying greatly, the difference between a bank loan originator and an independent loan originator, in the mind of the consumer, is that the bank loan originator is an employee of the bank, while the independent loan originator is an agent hired by the consumer. The bank employee must be "convinced" to make the loan, while an independent loan originator is paid to do the "convincing".

The relationship between a bank and a borrower is perceived by the consumer to be adversarial when compared to the relationship between a borrower and his hired broker. This difference in perception creates the opportunity for unscrupulous mortgage brokers to take advantage of consumers. How many times have you Realtors gone with a client to closing to discover the loan terms presented to your client bear little resemblance to the terms originally disclosed? Once is too often; but I'll wager that most of you have many such stories to relate, and that it rarely happened with a bank.

The variance in consumer perception between a bank employee and an independent broker is where consumer protection must be improved. Consumers must know that a broker is contractually obligated to her lenders to work in the lenders' best interest, but a broker is obligated to a borrower only from commercial interest - the desire to earn repeat business and referrals. While many brokers work diligently to build a good reputation, it is possible to be a very profitable broker with little repeat business and few referrals. Thus the commercial interest motivation alone is insufficient consumer protection.

The simple solution appears to be better disclosure. Unfortunately, I do not believe another page of disclosure will do the job no matter how plainly written. The sheer volume of disclosure now required of all loan originators is mind numbing. Few consumers are willing to carefully read the amount of information provided them at application and fewer still have the skills to indentify deception.

The bank for whom I once worked handed out a 64 page book with disclosures on every loan product inside... in the interest of uniformity and print economy. Want to know how much fun that was to read? Just curl up with a copy of the IRS's 1040 instructions... but put on a lot of coffee.

It might be possible to completely reform the disclosure process to place greater emphasis on the most important disclosures: Good Faith Estimate, Truth-in-Lending disclosure, and the state Fee Agreement. In that case, a relationship disclosure would stand out form the crowd. The rest of the stuff could be consolidated into a guide book like the Fed's Consumer Guide to Mortgage Settlement Costs (which must also be issued at application on purchase loans and Gov't insured loans).

I agree with the argument that disclosure must be improved and given better teeth. I don't think a fiduciary agent duty will provide the protections intended by lawmakers, but I believe that there is a viable solution.

I just re-read my post above (and sadly found a couple of spelling errors I missed), and realize that it gives the impression that I think a broker should not be better obligated to serve borrowers' interests.

I was trying to keep my points short. But I also hope it is clear that I am in favor of a greater degree of consumer care for all loan originators, not only by acting in good faith but also in the capacities of proper counseling and education.

Miriam IT WAS ON TOPIC. If you wont post what I write but comment to it---how fair is that? Your topic is transparency and fiduciary, correct?  If you control and delete anything but what you want to hear, what kind of discussion is this?  You just said you do not agree with my position. So you delete me? Wow what a way to discuss things. Since I have been saving each and every submission to this blog, the only way it can be seen as fair to anyone is if I post my own blog with everything that was here.  You and I dont get along because I posted you in the mortgage boards that started the little uprising against your post ---Oh Lord this is OFF TOPIC---

I have given several long comments about your 'fiduciary = transparency position. It doesnt seem like the majority of poster here agree with you . If you exercise your POWER and cut them all out like you do me, this entire thing is a farce.   Do I have to act like an insane person and repost this every minute for the next week or will you leave it. Just how fair are you, Miriam?

Fiduciary doesnt equal transparency. DISCLOSURE does. We have all the disclosures we need. We need enforcement and we need CONSUMER EDUCATION. Look at the Calif DRE website and see all the violations. Every one of those came from an agent who was under fiduciary law.

Im still having a problem understanding your use of 'transparency' anyway, not trying to be argumentative.  Are you just talking about how we are paid? Who has ever done a loan and not known how the mortgage broker is paid? The only possible scenario to support that is when a broker might not disclose rebate (illegal) and the borrower misses it on the HUD-1 where it legally must be shown. Mortgage BANKERS, being classed as lenders for this rule, need not show the rebates. The banks/lenders do not have to. How fair is that to brokers who send to wholesale outlets? Why this inequity? Power. Lobby. Competition. The banks want the busioness back. We are casualties of lender/banker war and I predict our demise. That will not be good for anyone.

Miriam IT WAS ON TOPIC. If you wont post what I write but comment to it---how fair is that? Your topic is transparency and fiduciary, correct?  If you control and delete anything but what you want to hear, what kind of discussion is this?  You just said you do not agree with my position. So you delete me? Wow what a way to discuss things. Since I have been saving each and every submission to this blog, the only way it can be seen as fair to anyone is if I post my own blog with everything that was here.  You and I dont get along because I posted you in the mortgage boards that started the little uprising against your post ---Oh Lord this is OFF TOPIC---

I have given several long comments about your 'fiduciary = transparency position. It doesnt seem like the majority of poster here agree with you . If you exercise your POWER and cut them all out like you do me, this entire thing is a farce.   Do I have to act like an insane person and repost this every minute for the next week or will you leave it. Just how fair are you, Miriam?

Fiduciary doesnt equal transparency. DISCLOSURE does. We have all the disclosures we need. We need enforcement and we need CONSUMER EDUCATION. Look at the Calif DRE website and see all the violations. Every one of those came from an agent who was under fiduciary law.

Im still having a problem understanding your use of 'transparency' anyway, not trying to be argumentative.  Are you just talking about how we are paid? Who has ever done a loan and not known how the mortgage broker is paid? The only possible scenario to support that is when a broker might not disclose rebate (illegal) and the borrower misses it on the HUD-1 where it legally must be shown. Mortgage BANKERS, being classed as lenders for this rule, need not show the rebates. The banks/lenders do not have to. How fair is that to brokers who send to wholesale outlets? Why this inequity? Power. Lobby. Competition. The banks want the busioness back. We are casualties of lender/banker war and I predict our demise. That will not be good for anyone.

.....and you wonder why Marvin switched to this new forum. Less than one week and the guy is beyond annoying.

Marvin got PWND!

Yeah well Im not going to run from you stupid stalker any more here. You were an immature 'no-life' on the mortgage forum and now you can be here too. As long as the site author allows unregistered posters then you will still be able to follow me around like little doggies. You are probably from one of the companies I helped shut down for fraud. All I can do is again apologize to Miriam and whoever else has to wade through your drivel. As Miriam said to another, as long as you can do this without posting who you are, its easy to talk trash. Go ahead and play with yourselves here. I hope you realize that this makes people in our profession look bad. I know you are in the mortgage industry so for the industries sake why dont you grow the hell up and stop it.

Fine. If you wont allow this sort of unrelated posting then please erase those who heckle me? Thats up to you. I will not address it any more as you request.

Lets stay on topic for the good and understanding of all parties.  Who pays us? To whom do we owe loyalty or legal responsibility and is that tied into who pays us? This was also a debate within the real estate world. The seller is paying the fee but really its in the price. How can you have a buyers broker when the fee comes from the listing? We had to have all that worked out.  The lender pays the MB in some cases with rebate but really the borrower is paying it with increased interest rate. Sometime both in the same transaction. On the HUD-1 (final reconciliation or closing statement showing all debits/credits, for those of you who dont know) the rebates are considered P.O.C. or Paid Outside Closing, and many times are placed in a spot that is not evident to the customers. Many escrow/signing companies will point that out to borrowers but is it their responsibility to do so? I have seen mortgage people (only a FEW) give the escrow person hell for showing that to borrowers and then telling them the rate would be lower if it were not there!  Was that causing unnecessary trouble or was it super consumer protection? My customers go to signing and already know whats on the HUD, all the fees, what they are and where they will show.  I have never had a single signing problem.

So again, its disclosure and we are already covered with many rules and regulations. I believe we need a little more work on policy regarding pricing. Customers need to know exactly how the lender pricing works, be able to choose their own rate/final fee, rebate or both, and then we would have almost zero problems. Consumer knowledge is they ket. I would gladly accept a new disclosure explaing the lender pricing becasue Ive always done that anyway.

Interesting note is that NET BRANCHES who have warehouse lines and are classed as lenders use the fact that they dont disclose rebates as a recruiting tool! 'Hey agents---you dont have to show rebate! You look like you are doing it for little or nothing!.'

That stinks. It stinks for consumers and it makes it hard for brokers to compete but thats the whole point. Ill repeat myself again that lenders want the retail back. Lenders are powerful. Brokers are not. Most laws favor banks and many new laws are simply coffin nails to brokers.  This may seem off topic to you but its not. You speak of transparency and profit. This explains most of who is paying and the mechanics of it.

Lets back WAYYY up on this. Though I am too protective of consumers for my own good, I do not believe rebates should be disclosed by anyone. Some say we shouldnt have to because the banks dont but thats just a matter of unfair competition. Auto dealers receive end of year volume incentives. Rebates, if you will. Do they have to contact every buyer and disclose how much they made? Do they have to tell the buyer up front exactly what the profit will be after all their costs? Does a McDonalds have to tell you the actual material and labor cost on each hamburger? NO.

Rebates never should have been a question or problem. The borrower needs to know only TWO things. The base rate and the total dollars cost for the deal. They dont need A.P.R. which Ive addressed as a nightmare anyway. They dont need to know anything about the rebates unless a broker wants to use some of those fees to help pay closing costs. I guess the broker could show them as being paid by him/her and really look like an angel but Id call that bad Karma.

Transparency and fiduciary. We must be transparent with fees. Its the law. Fiduciary has NOTHING to do with it. We dont want fiduciary and neither do you. Ive said this about 5 times and you may not agree with me but you have not given opposing argument for fiduciary unless I missed it. Not being adversarial with that statement, honestly. I have been told by different lawyers, including two who own real estate and mortgage combination offices, that mortgage people do not want fiduciary. I have been advised to call borrowers CUSTOMERS and not clients. I gave examples why.

So I think we have mostly addressed fiduciary, transparency, who is paid, how they are paid, discloures and the fact the we HAVE disclosures to cover everything now, etc. Unless someone can show me errors in my thinking, which I would be glad to modify if I am incorrect, that should just about do it here for me. What does anyone think of everything Ive said in this thread?

  In many cases that NY Times editorial sums up what many mortgage brokers practice. As a veteran mortgage broker for nealy 21 years in CA, I've rarely put the interests of the borrower first when it comes to the rate on the loan. The higher the rate, the bigger my paycheck. Same holds true for the Realtors that I work with. The more expensive the home, the bigger the Realtor's paycheck.

  I figure that I'll probably never see the same borrower again, so I don't really worry about the rate or fees that I charge on their loan. Most refinance their mortgage anyway, so make the most that you can from the get go.

Mirim,

I just wanted to say thank you for this story.  I am a consumer and stumbled across this and you couldn't be more spot on.

I was taken advantage by a mortgage broker that ruined my credit by approving me for a loan that I really couldn't afford all the while saying I would be ok.  My home went into foreclosure last year and has ruined my credit so bad I couldn't rent a cardboard box.

These scammers need to be exposed!

  I would say the above poster (Steve Tillman) either let himself get taken advantage of, or else didn't crunch his own numbers to see whether or not he could afford the mortgage payment. Mortgage brokers don't ruin credit, BORROWERS ruin credit by not paying their bills on time.

  If you couldn't afford the payment in the first place, why did you go ahead with the loan when you knew darn well what your monthly income was and what your monthly payment would be Steve? Not trying to sound too harsh or kick someone when thery're down, but only the borrower really knows what he/she can really afford to pay each month.

  When you finance your life on credit, be prepared for the potholes in the road up ahead.

Garrett

Garret...

  Well said! Looks like you also closed the chapter on this topic. Borrowers need to take personal responsibilty for their decisions.

Paul H. you are either a shill here to make trouble or you are the worst type of trash in the industry.  I can just shake my head and be glad Im not you.

Steve Tillman the same may go for you. A shill or you are stupid. The broker approved you for a loan that you knew you couldnt afford yet you signed the mounds of papers and disclosures? All because the broker told you it would be OK/ How! Did the broker tell you an angel would be sent to make it all better? That you would be receiving a tremendous raise? That the home would sell for $250,000 more than you paid no matter what the economy? Just how did this brokers TWIST YOUR ARM and force you to take such a bad loan? You and thousands like you do anything they can to get into that American dream but when it becomes a nightmare you turn like ninnies and blame it on the evil brokers who hypnotized or tortured you into signing. You make me sick.

Miriam you had me going there for a moment before I recognized that you were being facetious. I can only respond to you in two very different ways.

Number 1, I hear you and thats my point. Thats how the media paints this whole thing.

Number 2, What you said was not a joke and you believe it, which means from the beginning you really are very down on the mortgage industry and thats from ignorance. 

You come into my office and want a $500,000 home. I tell you that you need to make $6500 a month to qualify and you mention that the newspaper has ads for loans that do not require showing income to qualify. You tell me that you have a lot of income streams such as lawn mowing, day car for dogs, a part time night job at UPS, etc and that you play with taxes. Now, you KNOW how much it takes to qualify because I told you. You want the home anyway. I tell you everything about the laon. All is totally disclosed as law requires. You go to signing and they take your through every single paper requiring many, many signatures. YOU KNOW whats going on. You would be brain dead not to. Stats show that you are probably upper middle class, well educated and in some type of technical or management field.

But when you lose your job, the rate goes up 'as ou knew could happen' the property value goes dow or any combination of those, its the brokers fault? The consumer is not at fault? Do you hear yourself? Define 'predatory lending'. Look through the web and find definitions. Its a stupid term.

I oh so hope you were just being funny and I wasted my breath on number 2.

What happend to this place? It was so lively. Without Marvin it's just not the same.

Who is this Marvin character?

I need a compsearch on a co-brokered loan.

There is a shadow inventory of homes out there.

Now where did I put my tinfoil hat?