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Good Faith Estimates - Warnings to be aware of !!!

Good Faith Estimates

major pet peeves

I have two major pet peeves when it comes to Good Faith Estimates. And for those that know me, I am a stickler when it comes too these 2 issues.

For those loan officers that give a borrower a rate, fees, and a payment over the phone or in a brief e-mail, yet they don't send them the actual good faith estimate. Warning - (this is just my opinion) If a loan officer pre-qualifies you and tells you your rate and total costs, they should be sending you a good faith estimate at that time. Okay, so they are busy, but there is no reason why you shouldn't receive one in less than 24 hours.

Pet peeve # 2 - those good faith estimates that aren't complete. Missing specific 3rd party fees or fees that are low-balled, to make their overall numbers look better.

targeting the correct money needed for a good faith estimate

Let's break down my pet peeves.....

Good faith estimates that aren't complete or accurate. I can't stress this enough. I almost lost a deal yesterday because of this. The borrowers first called me on June 23rd and they basically stopped dealing with their previous loan officer that was recommended by their current realtor. The realtor advised them to get a hold of his loan officer again, because he felt my rate and costs were a tad higher. Sure, the realtor shared my GFE with his loan officer. So the loan officer cut his rate by 1/8 of a percent and chopped the points by $1,000.

In any case, the total costs were about $7,000 less than mine, which is impossible, just because of the $1,000. After reviewing the good faith estimate from this loan officer, I found 4 critical mistakes. What did I find?

In the state of New Jersey, taxes are paid every 3 months. But you always want to escrow 4 months, because the buyer always ends up reimbursing a month or two back to the seller. This is a difference of $708.
The loan officer never had the borrower paying the homeowners insurance, which is suppose to appear on line 903. In any real estate transaction, the mortgage company is going to want the homeowners insurance paid upfront for 1 year. It doesn't matter if you pay for it prior to closing or at closing, but it has to shown on the good faith estimate. This is a $900 difference.
In New Jersey, you usually have to have a property survey done. Depending on what part of NJ, the price could range from $350 to $750. In this case, $650.
Lastly, we know that the settlement date is set for September 10th, 2009. Because of this, you have to be charged 20 days of interest. The interest per diem, what you pay daily, is $45.32 a day. This other loan officer had 15 days on the good faith estimate. Most of us put 15 days down when we give out a good faith estimate, when not knowing a settlement date. Well, there is a settlement date now. This appears on line 901 and the cost difference is $226.60.

Overall, this might seem like a small amount. But when you add up these charges, it comes to a total of $2,484.60. That difference alone could make many borrowers choose the loan officer or mortgage company over another. Even though this borrower liked me more for many different reasons, this was stuck in their heads and added doubt about going with me. But wait, there is more.

I still couldn't understand why this loan officer was still about $7,000 lower, after missing $2,500 in fees. This loan officer had a seller credit of $9,000 on the new good faith estimate. I always ask any borrower if they are getting a seller concession. They were on a previous property, but this loan officer never took this out. And they obviously never asked or reviewed the agreement of sale. Even though I asked them this question, I still had her e-mail me the contract of sale so I could verify this myself. Yes, people make mistakes, but this is a $9,000 mistake.

The overall picture on this scenario? You are talking about $11,500 in total costs. That is a lot of money for anyone to overcome, especially when this borrower had already in their mind, when shopping for homes, what they wanted to spend out of pocket.

Warning :

If you have to beg your loan officer or ask more than a few times for a good faith estimate in a 2 or 3 day period, I say don't walk, but run and find someone else. I can't be more serious than this. Sure, I might tell a borrower, "hey, give me until tomorrow", but if the loan officer doesn't offer up a good faith estimate? Small red flag. If you have to keep asking for one, major red flag. Just my opinion, but think about it. How can a loan officer give you a rate, a payment, and your total costs.... but take forever in getting it to you in writing. FYI..... they already have it in the system and it should take more than a few minutes to e-mail it or fax it to you.

In regards to missing costs or a good faith estimate that isn't accurate? Just a no-no.... It really isn't rocket science to make sure that you have the same costs listed on each and every good faith estimate for each borrower every time. Again, yes, people make mistakes, but this is more than a mistake. This is our job to be accurate and. It doesn't take me more than a few minutes to review this information twice, before I send it to my clients.

FYI... It doesn't matter if the loan is a FHA loan, a Conventional loan, a USDA loan, or a VA loan. The costs will never be exact, but they should be targeted close enough. Please keep this in mind.

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Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 08/12/2009 02:15 PM

Comments (33)

Good Faith Estimates in the Mortgage / Finance Channel

good faith estimates

Originally posted at: FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware: Good Faith Estimates - Warnings to be aware of !!!

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33 Comments on Good Faith Estimates - Warnings to be aware of !!!

AUG

Jeff, this is one of my pet peeves also. When a buyer client uses a mortgage lender that I am not familiar with I always call that lender to ask for a copy of the buyers good faith estimate. If it's incomplete I sit down with the buyer client and point out areas that I believe should have been filled in.

Thankfully this happens rarely. But when it does happen I become a protective Momma Bear for my clients and sit down with them...

Jeff,

It's been my policy that if you take a signed 1003 or pull credit you must issue a Good Faith and Truth in Lending or an Adverse Action Report I've been through more than twenty audits both State and C of C with out a single problem.

My staff and I always issued three sets. One showing the lowest rate and one showing the lowest cost. Then one in the middle or one we recommended, if our recommendation was not the lowest cost. Consumers have choices! We charged the same on all three the difference being who pays for the loan.

If you have to begg, run!

Take the Good Faith with you to closing or now the disclosure before closing, it's line numbers are the same as on the HUD-1 so you can easily compare them!

Keep up the good post!

Bill

KRIS.... . hey momma bear... ;o) Seriously, I couldn't agree more, hence why I try and write about this every 3 months now. It just irks the hell out of me when I am fighting for a deal, just because of the costs, and the good faith sheet is not even remotely close to what it should be. Either the loan officer is just dumb,... or, they know what they are doing and will blame the higher costs later, because they can say... hey, it's a 3rd party cost. I just ESTIMATE, hence why it's called a good faith estimate. lol thanks for your feedback.

WILLIAM aka BILL.... . regardless of a policy or not, which is good to have... but when someone wants to know a rate, payment, and costs... and especially more so when you issue a pre-qualification letter or a pre-approval letter, there should be no reason why you shouldn't be given a copy of the good faith estimate. And worse, if you have to keep asking for one??? Rut Row....

In regards to showing comparisons... I would bet many don't do this... because it takes time.. but I usually do, especially depending on the borrowers goals. In regards to this client, I have given 6 different good faith estimates, because they really want to try and get the costs down. I showed 4 kinds with a fixed rate and 1 with a 3/1 arm and 1 with a 5/1 arm. And yes, take this GFE with you to closing and compare. With the new laws now and even more so in 2010, this really shouldn't be necessary though. Thanks for your input and for stopping by.

Jeff - Good Faith Estimates are our friends and enemies in this business. I've lost quite a few deals because I would go over a Good Faith Estimate and explain why there is a difference between mine and others. It never fails when a mortgage guy/gal does not quote Title Insurance correctly or does not include enough reserves. My favorite is when they place the 'Application fee' off to the side so the amount is not included in the bottom line. Talk about being a liar in the industry. Good information and excellent warnings.

Jeff, Another great post and I hear your concerns regarding consumers comparing closings costs. Like you I have seen too many cases where another lender under quotes Third Party Fees or items that are not Lender Controlled. ( The taxes and Interest pro rations you mention in your post) I assume that you deal with the clients that get a quote from you in order to keep another lender honest. We offer the best quote, then they take it to the other lender who reduces their rate or fees. I shake my head as you do that borrowers stick with the lender that originally had less desirable terms and only became competitive when they were faced with loosing the transaction. To me this is rewarding someone that planned on overcharging them. Just makes me shake my head. Your post also makes me wonder if the Realtor preferred the other lender because of an AfBA.

Do you believe that the proposed GFE that lumps the Lenders Fee's (800 Range on the GFE) will be a tool that buyers will really look at when comparing quotes from different lenders?

As a real estate investor, I have felt burned several timeswhen I go to closing to discover that fees are much different than presented in the good faith. Many of the fees you look had to have been known up front. Sometimes, I have to believe that this is done deliberately knowing that most people won't back out when on the day of signing.

AUG

Jeff - We share two common pet peeves.

I was referred a client who already had a GFE in hand, but I still wanted her to call one of my preferred lenders. When she had both GFE's in hand she told me her lender was less, she then sent me both GFE's and her lender lowballed the third party fees and my lender over estimated them. There was about a $2,000 difference between the actual "lender" fees and guess who was charging more?

I always sit down with my clients to review their GFE with them, I don't care how many homes they've bought.

Great Post!

I will ask, and have never really received a clear cut answer on this, but isn't the relationship between the borrower and lender private? Regardless of where the referral came from? Aren't their finances and personal information protected? Helping out is one thing, but what if the agent isn't really versed on the 'lending' side of things, and only looks at the bottom line??? I just think we should all be responsible for our own job, and start holding the consumer a tad bit responsible in this whole mess. Read your documents, if you don't understand, ask questions. But ask the appropriate people.....Agents, how many times do you call the mortgage person to discuss your contract before you present it? I'd suspect very rarely. Why should this be done with the GFE?

(sorry for the rant. woke up on the wrong side of the bed albeit 2 hours early also.)

JOHN.... .yes, they can be our worse enemy if we do the good faith estimate correctly. But that is the risk that I am willing to take. And if I can discredit the other lender because of this, I usually end up with the client... usually, not always. Some just believe in what they see and hear no matter what. thanks for the compliment.

TIM.... . I am not always concerned about giving a good quote and then having someone undercut me by a slight fraction of a percentage. I explain the lock-in and float process and explain that sometimes what is on the GFE is a low ball offer. Sad, but so true. And then I ask the borrower, did your loan officer explain the lock-in and or float down options? 9 out of 10 times, no, the other loan officer didn't. Again, another red flag and as I mentioned to John above, another way to discredit that loan officer. Education is so key... and thanks for the polite compliments.

CHARLES..... . well, that should have never happened. There is a law that says that the lender must give you a new good faith estimate when fees have changed on the lenders side. They didn't re-disclose and they could have been in big trouble. You could have stopped the settlements.. NOW... there is a new law that it has to be re-disclosed 3 days prior to settlement if the fees have changed 1/8 of a percent or more, plus or minus. But again, they were suppose to re-disclose and if that lender was afraid of complaints, being reported to the state and banking commission... you could have called that office and they would have had to reimburse you.

MICHELLE..... . your client never called me.... lol... Seriously, this happens. But you talked about the lender low balling the 3rd party fees and also that there was a $2,000 difference between lender fees? Are you saying that the other loan officer was off by more than $2,000 in 3rd party fees? Just trying to do the math. In regards to a realtor sitting down and reviewing the GFE... I sometimes have a problem with this, because some programs have major pricing hits or just pricing hits, that a realtor just won't usually know about. Just my food for thought. Just as my example above, my one clients credit score was around a 639, which there is a slight pricing penalty, which doesn't appear on the actual good faith estimate. And thanks for the compliment.

UNKNOWN.... - comment # 8 - . rants are fine, I write a few rants a month myself... yes, it is private, but not the good faith estimate. The borrower can give that GFE to anyone and in many cases, the realtor seems to get involved. I agree and disagree with that part. As a realtor, I would be most concern that my borrower didn't get a good faith estimate. But reviewing it? Please read my comment above to Michelle.

Overall... not saying all realtors, but some realtors like to steer that borrower to their loan officer... there are many reasons to as why. Some good, some bad... trying to figure this out, can make you pull your hair out. I do agree about the borrower reading their documents and if you don't have questions, ask, ask, ask. And I do agree with the basics of your rant... thanks

Quick story... I actually got an e-mail on Facebook from a borrower in Florida last night, telling me how this loan officer promised this rate and points. Now, a week later, after trying to get a hold of him, everything is much higher. He is blaming it on the matrix, that it just changed. This is such a lie, because this is a conventional deal and this matrix was instituted and updated over a year ago. The pricing hits are from Fannie Mae, not the lender. The lender has t pass these pricing hits to the borrower, unless they want to make no profit on the loan. What's sad is that she contacted me and I was honest with her. She still wants to go into this guys office and talk to him about this.... still wanting to work with this guy. What ticks me off,... she complained about him not calling back for 5 days, after a few e-mails and phone calls... and now this? This is what really ticks me off. Thanks for you rant and comment. ;o)

Jeff,

Excellent post, and yes, worth a re-post often. I always recommend my clients get GFE's from those lenders they are "shopping" with, and to make sure they are using the same amount for taxes and insurance on each GFE, and explain to them about escrow amounts. Then have them compare the amounts and ask the questions if there are any. Often, how the lender answers the questions will help my clients make their decisions on which lender to use.

It is a pet peeve of mine as well, to have GFE's from different lenders on the same type of loan, but a large disparity between them. These are just estimates, but you are right, if the lender is able to give all the information over the phone, they have the GFE in the system (I used to be a loan processor).

Thanks for a great post!

Hi Jeff...Thanks for the great advice.

Jerry Gray CRB,CRS,GRI / Prudential Carolinas Realty / Winston Salem, NC

Jeff: Thank you. I believe it's in our best interest to send a GFE as soon as possible after checking credit and doing a pre-approval. I find my clients like that. In fact, one prospect commented that is was the easiest to read Good Faith Estimate she had ever seen. I find if loan officers are reluctant to send an estimate, it's because they're afraid they'll get shopped. I heard that excuse earlier this year. To that I say b.s. If we're so worried about losing a deal over rates and fees we're in the wrong business. We charge what we charge and should stand behind that! Take care.

I've had the same problem. Customers look at the fees and wonder why the difference when Joe lender is lower. I've never had a problem reviewing and comparing the two and when you match apples to apples - I'm usually the same or lower. Usually the other lender "forgets or underestimates" third party fees or don't fully disclose everything. I tell them that "It doesn't matter WHO is paying the fees, we still have to disclose them, even if they are being paid "outside" of closing or by the seller.

Another issues it the rate on the GFE. My favorite is "so and so are offering this". That could be - if you are putting 20% down and have a 720 beacon, however, YOU don't qualify for that rate. The rates can and sometimes do change day to day and I have to remind them that this is an ESTIMATE of TODAY'S cost and the rate will not be confirmed until YOU LOCK the rate. The lock term will change the rate, some lenders aways present GFE with a 30 day lock. I try to adjust the lock term when giving the GFE to what is being purchased and what kind of loan we are getting. Even then, that doesn't always work when your working with bank owned properties. I've had seller delays that lasted 3 months even when the buyer had all info in on day one.

My customers appreciate the extra time I spend giving them the "true reality" and I've taken loans from other lenders the day before closing due to low ball estimates. I feel this is such a major purchase and it's are job to educate the consumer as mortgage originators. This job is about trust and integrity and I want my customers to keep referring business to me vs bad mouthing me all over town.

It bothers me that I would have to tell my clients that they need to get a GFE from the lender. Isnt that required anyways? Sorry, it's my morning rant.

Jeff, will the new GFE solve some of these problems? One of the things customers find most difficult is working out what they going to be paying. I have seen numerous buyers when on the listing side at settlement shocked by the fees and even the monthly payment. it is not always the agent's fault they sometimes tell me that they begged their client ton use a local company but they insisted on using xyz from the internet.

At one settlement they could not even find who to deal with as the loan had been sold three times before settlement? That I found hard to believe but was assured it was true.

Yeap, It's the law, and those who don't follow it....are now fading away...let's hear about something good...isn't this what this site is about...referrals.....?

Let's move forward!

Meet You all at the TOP!

Larua Q.

Often times the process if so confusing people just look at the bottom line and not the numbers that go into getting to the bottom line.

VALERIE.... . yes, comparing the 3rd party charges is crucial, especially the escrows. And I think you hit a nail on the head... I agree 110%, that the borrowers decisions are sometimes based on the answers given to their questions by the loan officer. I try to get this into the borrowers head also. Just because someone was nice, isn't always the best reason to use that person. How did they answer your question and did you have to chase them down for days just to get an answer. thanks for your feedback and for the compliment.

JERRY...... . my pleasure and thanks for stopping by.

PAUL..... . bingo... my assumption to why many loan officers either don't volunteer a good faith estimate or that they delay the good faith estimate, is because they are afraid to be shopped. And whoops.. if I delayed it, not it's a few days later, that borrower isn't shopping correctly. If you shop as a borrower, you should gather all the good faith estimates on the same day. There is a reason for this... prices can change daily and in some cases, 2 to 3 times a day. Thanks for your input and feedback.

TINA..... . I just don't know how a loan officer can forget charges.. yes, people make mistakes... but either they are just idiots or know what they are doing, hence why they leave certain fees out. A great example is the survey fee, depending on what state you are in and if it's needed.

Another great example that you bring up, is the fico scores and down payments. I write about this about every 3 months and I am due. Here is my last blog on that, in regards to your comment...

FHA loans vs Conventional loans - Knowing the true comparisons

Overall, yes, trust and integrity... but this is not always easy to know and or find in a person. Many people can fake this... sad and scary. Thanks for your feedback and input.

LOREENA.... . only required when an application is taken. And it doesn't have to be given until up to 3 days after application. But in all honesty, you can't take a full application and have all disclosures signed the same day, without the borrower at least signing the good faith estimate. And in many cases, the loan officer doesn't offer a copy, even though the borrower could ask for one. They are usually nervous and rushed, that they, the borrower, forgets. Some loan officers use this to their advantage so they don't get shopped.

Now, it doesn't matter if I did an application, or pulled credit, or none of the above. If I go over figures with a borrower, just rate, fees, and down payment... I still send them that good faith estimate. That is just me... some loan officers will do this... some won't... and some say they won't until that borrower does an application with them. But in all honesty, how does a client even review these costs and rates, so they can get a good feel if this will work for them. I have seen some loan officers just e-mail the borrower the break down of the total costs... in sections. I hate this and think it's wrong. Because that loan officer always leaves out some details.. I have seen this before, because I have had previous clients forward me these e-mails... this is very sad also. thanks for the rant, because as you can see, this gets under my skin. thanks

Jeff, important post. What makes accurate GFE's so important - and potentially disasterous - is the new regulation (HOEPA, I believe) that requires a new disclosure and "waiting period" if the GFE/TIL provided at closing varies by more than .125% APR from the initial disclosure. The waiting period is 3 days BUT many lenders are delaying closing by 4 - 6 days if this happens!

NICK & TRUDY.... . yes and no... and I will be writing about this over the weekend. Here is why I say now... under the new law that went into effect on July 30th, we are now suppose to re-disclose 3 days prior to settlement, if anything changed + or - 1/8 of a point in APR. That is not much room at all. So 99.9% of the time, all lenders will be re-disclosing 3 days prior to settlement. In reality, it's 4 days before the closing date. So, you could still have a loan officer bait and switch on the good faith estimate, and you wouldn't know until 3 days prior to settlement. And because there are so many excuses that you could use, to state why things have changed, it won't give the borrower much time to react, in my opinion. At least there won't be any surprises at the settlement table.

Now, the scary part... keep in mind that there was a law out there that you had to re-diclose if there where ever any changes, but as long as it was re-diclosed the day prior.... but many lenders never did this nor did the gov't follow up and review this or regulate this. So what will make them follow up on this? Just hoping that they keep more lenders or loan officers honest? Sure, it will work some, but they can't police all at once. But if they find out that this wasn't done, the lender is then ordered to send back any fees over the regular/first good faith, back to the client. But again, this only happens if that file is audited.

In regards to your example... I find that extremely hard to believe, that it was sold 3 times before it went to the closing table. If I had to put my finger on that one and assume, that loan officer was lying big time. In regards to the internet companies... I guess you could put me into the classification of an internet loan officer. About 80% of my borrowers in the last 2 years have all come from finding me on the internet. Out of those, I might meet 1% of them. And out of the 80%, about 85% of them are from out of state, ranging from CT, to NY, to MD, to VA, to Florida. I even have a real estate office in Florida now, that I am their preferred lender. So, the internet is not always a bad thing. I know you aren't saying this, but many think this and think local people will always be honest. And this is not the case. I took a deal from a loan officer that was referred by their realtor and who was actually 10 minutes away from the borrower. But he lied about some things, and was higher on his fees. I took that deal and closed it in 12 days, just to make the settlement date. thanks and hope all is well.

LAURA.... . well, it's been part of a law before the new law, and many did not follow this before, that it had to be re-disclosed if there were any changes. And you stated, let's move on and hear something good. Hey, I am all about positive feedback and news, but I also love to educate and in many cases, it can't be done without using examples from the past that are negative. thanks for stopping by.

GENE.... . I agree and I blame this on the loan officer. I always go over line by line... and explain if they shop, what they need to focus on. I go into details on that with this blog... Good Faith Esimates - Know how to read them thanks

As always ...good points and always following through with what YOU do for the consumer. It's a given...but some just don't give and we have to ASK.

I definitely have a rant on this matter and none of you LO's are gonna like it.

The mortgage business is a corrupt, bait and switch business. And given the dollars involved in the crime, this should be an outrage to consumers. The crooks sometimes get flushed out, but usually only when the buyer is represented. But still too often, because there are big bucks at stake, the buyer takes the low ball-er's bait.

This bait and switch tactic proliferates the business! And it's gone on for many, many years, now. I know because I was a LO for many years - 13 years ago and before. Not a damn thing has changed as far as this crime is concerned!

But often it's less obvious than the example you've offered: The LO shaves a point off his quote. The buyer applies. The LO advises rates will probably go lower so the buyer floats the market. (That buyer just missed out on the best deal he'll ever see from that LO!)

Next, on a random day the buyer asks the LO about the market. It improved, in fact, but the LO says "You should go ahead and lock now, I think we've hit bottom...but I could be wrong!" And, guess what, the LO hasn't been quoting his very best rate anyway now because he's gotcha!! And what's more, now the LO might gamble a day or two (lock the customer-float the market) and get even more overage. That part, the gambling, is fair play I guess, but not when it's on the heals of bad advice!

That's the problem, and I'm betting there's not a one of you LOs that haven't engaged in some similar tactic. Any LO will tell you there ain't much in it if all you can make is a cut of the LO fee. The market churns up and down a lot and only a consumer with perfect knowledge would know whether it's time to lock or not; and so the LO always has a cover...Who knew?

What a screwed, Screwed, SCREWED up industry. The mortgage lender is the only settlement service provider that doesn't have to disclose how much is being charged for the service. The culture is "get what you can get." The public perception is they are getting good advice...but will not a fox eat a hen? It just ain't right.

Hi Jeff, terrific post as usual. I find when buyers are looking at financing their eyes tend to glaze over. Not surprising how so many get rushed into a deal without fully understanding the details. Well done !

Jeff great post. If I don't read any other mortgage posts I always read & re-read yours. I also have the same pet peeves but I would add another: No loan officer showing up at closing. It doesn't happen often but I have been at closings where the buyer (1st timer) has had a loan question because there was a difference between her GFE and the one at the table or P&I payment change.

In one case both the paralegal & I tried to figure out why the difference (taxes, fees, math error, ??) and when we couldn't we reached out to the loan officer (priority voice mail x3) and get a response of "don't know why; call my assistant at the office & talk to her". Assistant says the buyer knows and she signed the in house copy; okay, she says no she didn't so fax a copy to the closing office so we can resolve this issue. After 1 1/2 hours anxiously waiting & kids getting antsy (closing was at 2PM), the buyer decides to go ahead and close anyway & discuss w/ mortgage broker later. By the way, the fax copy was recieved at the office around 5:15 PM and didn't have a legible signature. Kept a copy for my file & sent original fax to her. This whole issue could have been speedily resolved if the LO had shown up ready to handle her issues. The LO called me back later in the evening to see how it went & said he had not planned to be there as he had other commitments. I show up to all closings & if I can't I send one of my associate brokers w/ my working file/notes just in case something comes up (I'm a true believer in Murphy's Law).

But wait, there is more... (Billy Mays voice here) .... you're really getting screwed and here is the reason why! LOL. Your correct in your post, I don't think that I've ever seen a buyer actually take both estimates and examine them line by line and ask why one is significantly lower. I thought that there were new rules about this so buyers would also get a good estimate of all costs.

Hi Jeff, thanks for another fine blog! Yes, these Good Faith Estimates are very important. I do like to see them filled out completely. thanks again

WENDY.... , The New act and disclosure act is part of something that was started a year ago. It's now called the MDIA - Mortgage Disclosure Improvement Act. This is all part of the recovery and reinvestment act of 2009. I will be writing about this in the next few days. But yes, this will throw a crimp in many closings, unless the lender gets everyone on the same page. Again, I will be writing about this.

SALLY.... . Yes, it comes down to what you do for your borrower. And I truly thank you for the polite compliment and for the kind words. thanks

RETIRED LOAN ORIGINATOR.... . I read your whole rant and don't mind it at all. The problem that I have with your rant is that you have assumed and suggested that ALL loan officers do this and or think this. And that my friend, you are wrong on. Here are some of your statements.,....

"The mortgage business is a corrupt, bait and switch business." - yes, there are some major issues and problems within the mortgage industry. But not the whole business... you are making a blind statement.. you are making a general statement. Are you saying the whole business, all 100% of it, with everyone in it, is corrupt?

"But still too often, because there are big bucks at stake, the buyer takes the low ball-er's bait." - and no, the buyer doesn't always take the low-ball offer. Not when you have a professional loan officer that has ethics and & integrity, who educates their borrowers. My example above goes against your statement. The loan officer was lower than myself both in fees and rate. They still chose me.

"This bait and switch tactic proliferates the business! And it's gone on for many, many years, now. I know because I was a LO for many years" - question then, did you EVER bait and switch at least one client. Give them a lower offer, even if it was by $100 or an 1/8 of a percent in rate, because you knew they weren't locking in right away, and that you could use this to your advantage?

Your next statement... "Next, on a random day the buyer asks the LO about the market. It improved, in fact, but the LO says "You should go ahead and lock now, I think we've hit bottom...but I could be wrong!" And, guess what, the LO hasn't been quoting his very best rate anyway now because he's gotcha!!" -

I agree with that statement 110%... but how can you say it's a bad deal, just because they did this? Okay, let's do this... what do you classify a good deal or a great deal? Please define this for me and maybe I could give you more credit for your comments.

"Any LO will tell you there ain't much in it if all you can make is a cut of the LO fee. The market churns up and down a lot and only a consumer with perfect knowledge would know whether it's time to lock or not; and so the LO always has a cover...Who knew?" - okay, define ain't much, and define a cut of the l.o. fee. This is the part that ticks me off, coming from anyone. How do you define great deal, good deal, and fair deal for the borrower. If I make $3,000 on a borrower, am I consider a crook? That I was maybe $1,000 more than 10 other loan officers... but that I have the better knowledge, that I gave great advise, showed short cuts in getting a better deal, showed different programs and or varied rates with payments, was very available, returned phone calls and e-mails in a very timely manor, and that I educated and have integrity? Would love to hear your answer on that long question.

Your last statement? Kind of goes back to my last question to you, before I answer that question. Thanks for your input.

BILL.... . I agree, that many get rushed into deals by the loan officer, because the more the borrower knows and understands, the more deadlier that borrower becomes. And some loan officers don't want this for many reasons. In many cases, because it could question their rates, fees, and or profit. Or figure out that something might be wrong. Here is a great example of a previous client of mine, on what happened with their previous loan officer that flat out lied to them. Please read : FHA origination fee and how my loan officer lied to me about the definition.... and thanks for that polite compliment..

Jeff - I completely understand your point about Realtors going over GFE's. My clients typically don't choose a lender until we find a property, THEN we get a GFE from all the lenders based on that property. This way the buyer can make an educated decision, not a decision based on a hypothetical scenario and they have the GFE for the property they're purchasing.

It's very rare a client understands which fees the lender has control over and which ones they don't. It's almost like a glaze occurs over their eyes when a bunch of numbers are put in front of them. I solely review the lender fees with them, typically there will be questions and we go to the lender for the answer.

I'm not a lender, I'm a Realtor working with a lender trying to make it a smooth process for the buyer. I don't care if my buyer chooses their lender or one of my preferred lenders, as long as they are getting the best deal. I've actually met some really good lenders through some of my buyers.

P.S. The $2,000 was in lender fees

AUG

Well, this is defineitly an interesting blog. I agree with most of what the retired loan officer said, except when you said that all loan officers are like this. I have always tried tosend my clients to my own loan officers because I felt that i could trust them to a certain degree. But, finally, it was not enough and I became the loan officer myself. Now, since I hav a fuduciary duty to my real estate client, I have to give them the best deal possible on the loan and do full disclosure to them. If they are already hooked up with a lender they want to use, I go over the good faith estimate and explain it to them better then I ever could have as only a real estate agent.

Jeff - My reply

Corrupt is not too harsh a word, in my view, to define the culture of the loan origination business. And by culture I mean the practices and beliefs of the operatives that have defined what is ok and what is not. You did not totally defend the examples of the practices that, I believe, reflect this culture. On the contrary, in your response you seem to acknowledge them. That was honest, but it also means you are complicit. You have embraced the culture.

I wonder how many Realtors or consumers would agree with you that shaving a little off your quote is ok when the circumstances are that the prospect in not in a position to take advantage of it anyway. (No, you didn't say that directly...but I took your question to me "did you EVER bait and switch at least one client...etc " to be rhetorical.) Taken together with your complaint against the low ball-ers, you appear to argue that it is the DEGREE to which a loan originator is being dishonest that is of concern.

"I agree with that statement 110%... but how can you say it's a bad deal, just because they did this? " - Surely you don't agree! Man- o -man! Are you saying that if the final outcome was good, the tactic is justified? What about the just-as-likely outcome that you screwed your customer out of thousands of dollars!? Maybe you should re-read the example. Oh, I see, I wasn't clear that the LO didn't tell the customer about the most recent price improvement and in fact his advice was motivated by the opportunity to lock in overage.

"Would love to hear your answer on that long question." - My answer is YES and NO to your implied question "Am I not entitled to more?". YES because you did such a great job. NO because you took your reward without being upfront about it and allowing the customer to decide your gratuity. NO, because if you were the most incompetent LO in the business you would have taken the reward.

AUG

As a buyer's attorney I review the Good Faith Estimate (GFE) prior to my clients executing the contract of sale. The GFE, being a federal 1 size fits all form, does not give a realistic estimate of the closing costs in NY. Mortgage officers rarely calculate title insurance properly. They generally underestimate recording charges. They generally underestimate miscellaneous charges for items like muncipal, bankruptcy and Patriot Act searches. They rarely include the cost of a survey. Some include 1 day of per diem interest, most 15 days, and small percentage include 30 days. Most mortgage officers default to 6 months tax escrows and ignore that there are pre-paid taxes that will be refunded to the seller. They forget to include a recording charge for POA on a condo purchase. The list goes on.

Some mortgage officers want to see my GFE after I have advised my clients that their closing costs are $2,000 to $5,000 higher than the GFE. These mortgage officers want to know what the range for certain expenses are so they can prepare a more accurate GFE. Other mortgage officers could care less and take the attitude they don't have to disclose that expense (i.e. their responsiblity is done if they disclose a mortgage title premium because, after all, fee title insurance is optional).

There seems to me numerous interpretations on what has to be included on a GFE. Am I wrong in my opinion that mortgage officers better start including every possible expense on the GFE? I am going to fax my marked up GFE's to the mortgage officer with a copy cc'd to my clients and their Realtor. Put these costs on record so if there is a problem scheduling the closing I can tell my client I disclosed the more accurate costs to your mortgage officer and if the closing is delayed it is not my fault.

When the new HUD-1 goes into effect next year this will be more important than ever. I do not look forward to preparing the HUD when teh GFE has a recording charge estimate of $200 when the actual recording charges are $375.

A number of years ago I had a buyer get 4 GFE's from different lenders. There was about a $4,000 spread between the high and low GFE's. She was going with the mortgage officer who had the lowest closing costs. I had her fax me the 4 GFEs and I reviewed each one. When I was done there was less than a $1,000 spread between the high and low GFE. The difference being mostly due to differences in mortgage application fees, appraisals and doc prep or title review fees. I convinced her not to deal with the low balling mortgage officers because if they were lowing balling her to get in the door they would continue to lie to her. She ended up applying with the mortgage officer who had the most accurate GFE (which was all well and good as this mortgage officer was local and had a great reputation for service).

SEP

Jeff,

Just another reason why Washington is all over the mortgage industry for being transparent. Unfortunately they think a 1000 page bill will solve the problem!

thanks for the post.

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