Home : Blogs : BallenIsles, Mirasol, Old Marsh, PGA Nat Marc Blasi : Palm Beach Real Estate and Loans - Marc Blasi

State of Florida Cracking Down on Mortgage Fraud! YES!

I got today's FAR Early Bird news and the Title of the first article really grabbed my attention:

"Crist Signs Bill to Curtail Mortgage Fraud"

- Let me tell you something, after the last BS GFE I looked at today, it's about time.

Recently (2005) - not only did Florida rank #1 in the nation for mortgage fraud, it was so bad that it was actually DOUBLE the national average.

Yesterday Governor Crist signed in a law (taking effect 11/2007) which:

"The new law makes the mortgage lending process more transparent," says Trey Goldman, FAR legislative counsel. "It also impacts buyers, sellers and real estate licensees who may be trying to commit mortgage fraud."

We are all acutely aware - or should be - of the amount of BS that takes place in the Mortgage Industry. Of course, not everyone is guilty of it, but way too many are.

Two of the changes that the new law mandates are:

Mortgage Brokers must disclose how much the Lender is paying them in writing. Yup - the YSP is going to have to be disclosed in writing - no more waiting for the Borrower to be surprised at closing. Excellent change - the more transparency the better!
Also, if there are any changes in the loan's terms, the Customer must be notified no later than 3 business days before closing. Another good idea.
To read more, click here.

Now - the more up-front and ethical amongst us have been doing this anyway - it's nice to see it becoming a Law. It certainly protects the Clients, levels the playing field and will help to drive out the people who just can't seem to do the right thing.

More Government control is not always a good thing - but in the case of all the fraud going on it's time to stop the offenders and get them out of the Industry.

Posted by BallenIsles, Mirasol, Old Marsh, PGA Nat Marc Blasi on 06/20/2007 04:52 PM

Comments (50)

activerain, florida, mortgages, legal issues

This post has been included in Florida Information

50 Comments on State of Florida Cracking Down on Mortgage Fraud! YES!

JUN

2007

A good step in the right direction to prevent mortgage fraud. It would also be nice to see investigations of suspected mortgage fraud be expedited. Wherever you look there seem to have been a variety of different schemes going on that no one is being held accountable for.

Mark

This will benefit the overall transparency of the process even if it doesn't constitute actual fraud. At least you won't hear escrow officers say to the borrower in regards to the YSP: "Ohh that's just something paid outside of closing, it's between the lender and your mortgage company, so don't worry about it". I have found that when you are clear with your client about the fees involved, the wide majority of them appreciate it and most importantly understand that you have to make a living too. I think the mortgage industry has been fabricating this "veil of confusion" and placed it over the borrower's eyes to make them think the fee structure and the process is very complex. It is actually much simpler and if you explain it to your client they will feel more involved in the process as opposed to brushed off by some general expression.

Silvia-

Absolutely - I don't know what the backlog of cases looks like, but I'm pretty sure that it is huge!

The level of scamming is a disgrace.

Hi Erion-

The more transparent the better - and the people that complain about it should give a serious thought as to why they feel that way.

I've certainly heard that line that you mentioned - a true BS classic!

You have the right idea - explain everything, keep the client involved - everything is much better that way.

Outstanding! Our industry needs a good house cleaning!

Rey-

It's a shame it's taken so long, but at least it's finally going to start!

You sound so happy, Marc! I feel the need to say Congratulations!

So, "Congratulations!" :o)

Sarah-

If I was able to cheer you up......!

Seriously- this DOES make me very happy.

And all this time, we have already been in compliance with this new law. i can't wait for the convention next month to see how empty the aisles will be. :)

JUN

2007

Some buyers don't understand english.

Jason-

Good point! Feels good, doesn't it?

I hadn't even thought about the convention - with all those companies closing (for whatever reason) it will probably be pretty thin there.

Cheryl-

Too true - the stress of buying a new home is enough without any surprises.

Mitchell-

I'm a little confused by your comment..... please clarify it.

Language should NEVER be a barrier - in my office alone we have English, Spanish, German, Italian and Finnish- speaking people.

It is a professionals' responsibility to make totally sure that the Customer understands everything about the process.

Marc - Something needs to be done about some of these so called "lenders" out there taking buyers money. Especially the ones that have horrible credit and promise them "in writing" that they are pre-approved and then it gets to the wire and never fails they can't fund them or they want to just totally shove it up there tushie in outrageous fees. MAKES ME NUT'S. I reported to Dot.com lenders to the banking commission this week.

Thanks for sharing... have a great day

Marc... this is awesome, because just 2 weeks ago or so a loan officer made me aware that brokers didn't have to disclose YSP until closing. But most of all, send out a new GFE with changes. Here in NJ, this is mandatory, in regards to the GFE and if changes are made. Only about 15% of my business is done in Florida, but this is great news. Makes my playing field more level. But it still won't curb those that bait and switch.

jeff belonger

I read something along these lines yesterday in a news release. Charlie needs to crack the whip on insurance too. The state of Florida needs reform everywhere!

Desiree-

Keep reporting the bad ones!

I know what you mean - they say (or vaguely write) that some one is pre-approved just to get the deal and then go into panic mode hoping they can fix the credit or get some Lender, somewhere to take the deal.

Really rotten way to do business.

Hi Jeff-

That is currently true about the YSP, but the honest companies already disclose it well before closing - it's just good business.

I know the new rules won't stop the liars, but hopefully it will curb their actions.

We just have to keep pushing for level and transparent.

Marc.... one thing that is different is that I am a banker. I don't disclose anyhow. But in reality, YSP should not matter at ALL. As long as you can compare two honest good faith estimates, the YSP doesn't come into play at all, at least that it shouldn't. Check out this post and read closer to the middle of this post. This is where I talk about YSP. There is some good discussion in here. An Honest GFE - What to look for.

jeff belonger

Jeff,

I believe that David works for a correspondent lender. It looks like the new law only applies to mortgage brokerage businesses. This is not entirely a fair law, as David and other brokers/loan officers working for correspondent lenders are not subject to this law and still are not required to disclose YSP.

Jason... I left a link to a comment I made about YSP.. In reality, YSP should not make or break a deal, no matter how you slice and dice it. Why? It's just my opinion. But I will copy what I wrote... but take a look at the link that I left.. here it is again. There is some good discussion in here.

An Honest GFE - What to look for.

Shawn,,.... I have to refrain from letting all of my what I want to say to roll of my tongue in regards to YSP. I did a post on YSP on myspace and what a mistake. I won't do that again or even on AR. Why? Not only would we confuse the hell out of the consumer, but so many loan officers are confused on this.... and actually try to use it as a selling piece to the client.

Let me try and break down YSP really quickly in layman's terms. If my total closing costs and rate are lower than your rate and or closing costs, then who cares what my YSP is. You are confusing the client. You are being a sales person, not a financial consultant. If your client wants a great deal, then put the whole package together without sounding like you are throwing in the whitewalls with the car.

Here... Me : 6.875% 30 yr fixed with $5,000 in total fees. You : 7% 30 yr fixed rate with $5,300 in total fees.

My YSP : 1.5% Your YSP : 1.25%

Summary : even though I am making more money on the loan, my deal is better than yours. So... why must people keep talking about YSP? Justifying? Maybe because their deal might be worse? Just another way to confuse the borrower? Besides, as a banker, I don't have to disclose it. Is this bad? NO and my client is still getting a better deal.

Anyhow.... yes, that was the short version.... lol

Larry..... can you believe the client believing the other lender, even though they are lying? Why do I say this? The consumer is suppose to believe that we are all honest and upstanding. We know that this is not reality. But if I sold the other client on the fact that you are lying to sell them that I am better and not lying..... but that I am lying, then what? It's a vicious and ruthless circle. I just educate the client and ask them more questions than the average person. I am genuine and sincere in what I do.... and if you must sell yourself as being the cheapest, you aren't. Even if you did offer the best rate with no fees. Did you take the time to fulling educate that client and to make sure they were getting the best program with the best advice. NO.... it's impossible to be both and not take up your time. I consider it a service that they are paying for.

Again, just my opinion.....

jeff belonger

Jason and Jeff-

I feel a hijack coming on!

JK - I really don't mind, the more the merrier.....

IMHO, the YSP should be disclosed and not at the last minute at the closing table.

Regardless of how someone wants to spin it, the amount of the YSP DOES have an effect on the Client - because if YSP is being made a lower rate could have been charged.

I'm not saying that we should work for free - I'm saying that we shouldn't hide things.

Jeff,

I won't disagree that YSP is a not deal killer. Knightlines has always disclosed YSP to the borrowers. We have yet to loose a deal because of YSP. I believe that is because we are honest and upfront about what we charge and give the client the option on how we will collect that fee (upfront, YSP, or a combination of both).

What bugs me is that the state thinks the problem of mortgage fraud comes from mortgage brokerage businesses. MBBs are just a part of the problem. Correspondent lenders is another part. If you are going to require MBBs to disclose YSP, then CLs operating in the capacity of a MBB (IE not funding the loan in their own name with their own LOC) must also be required to disclose YSP. Because the law only mentions MBBs and talks about it limiting mortgage fraud, this could lead consumers to think that fraud happens with MBBs not CLs.

I have put a call into our state's governing agency to see if the law does apply to CLs operating in this manner.

hijacking

Marc.... I'll give you fair warning next time when I hijack your post..... lol

In regards to my example. If you and I am comparing rate and the fees are exactly the same, but my rate is an 1/8% lower than yours, but I am making more o the YSP. My deal is still better than yours. You can't get into the fact that I should lower my rate more, if I am getting more YSP. WHy do I say this? Because profit margin was never mentioned in this whole discussion.

In my opinion, by beating down YSP and that it should be shown is some what misleading the public. For several reasons.

again, profit margin was never mentioned. Hence that we all need to make money.
showing it or not will just confuse the borrower more. Hiding it or not, what should they be comparing? RATE and FEES.

Jason, I will agree though... it doesn't matter if you are a broker, correspondent, or a banker.... anyone can commit fraud. The problem that you have with Florida is that there are politics involved with all of this. Many misconceptions... and just finger pointing. The overall concept is that it doesn't matter what category that you fall under, anyone can commit fraud.

Why are bankers allowed not to show YSP? This is a whole other argument in itself. Brian Brady and I have a different opinion on this. One thing that sticks out is that a banker is taking the most risk, if yoiu think about it. Using their own money. Again.... this is a different debate and just my opinion. I just think this is more of an issue with your state of Florida and what they think about brokers in general.

jeff belonger

Chris-

Sorry- I almost missed you in the middle there.....

I don't think he necessarily needs a whip - a cannon might be a good idea, however.

Marc.... not hijacking again.... lol I just wanted to say Congrats to Desiree.... she must have followed this post. As a Consumer or a Realtor, should you complain? We need to see more of this. Not the state rules and guidelines will ease this kind of crap, but us, as individuals taking a stand. That's how it will correct itself. That's just my opinion though.

Remember, gov't will say and do some things in the eyes of the public, to make themselves look good. But in my opinion, I think they, the gov't, don't push the envelope as they should. It's a money business for the state. The more lenders and brokers out there, the more fees collected between them and the actual loan offciers.

jeff belonger

Marc

What I am saying is that some lenders do not have forms in other languages as it is then the brokers who translate. And says just sign here everything will be ok.

Hey! The State of Florida is finally complying with Federal TILA laws...cool!

Brian.... that's funny. Because what is being discussed in here are your basic laws in lending. I always meant to ask why Florida was different?

Geeze-

I decide to take a few hours off from AR and this is what I return to!.................

Brian-

Imagine that!

Slightly behind the times?

Maaaaaaaaaaaaybe.

It's about time.

What is amazing is the false sense of security the State of Florida provides for mortgage brokers with its licensing; the same happens here in California.

Loan agents throw fits when they are compensated for FHA loans or out of state loans as a W2 employee. They constantly invoke their California Real Estate license as a reason for being paid 1099. That's when we explain, "uh, it's an Arizona loan or it's a HUD loan. The CA DRE has no jurisdiction over those."

Licensing is a stupid idea.

JUN

2007

Hi Brian-

I do think that licencing COULD be good, but since it is currently nothing more then a way for the state to make some extra $ - it really is a

JUN

2007

I don't know hwy i didn't see this sooner, i loved it it's about time...

Thanks

Tom

JUN

2007

Thomas-

We certainly do need to clean things up!

New laws will be great IF they are enforced!

Well, with the changes to our business, i hope out with the old, these people know nothing about mortgages to begin with, let alone laws to abide by.

Thanks for the the post though, really great...

Tom Weiss

JUN

2007

Hello Thomas-

Good points - the tighter they get with the enforcement, the better off everyone will be. There are way too many clueless Brokers and LO's out there right now.

BTW - thanks for the compliment!

JUN

2007

We're moving the right way! Now the task of getting all the sneaky guys to comply! Great post!

JUN

2007

Good Morning Leah-

There are WAY too many of them! The state has got to start enforcing the laws / rules / regulations or nothing will ever change.

Very Nice post Marc! This is always a GREAT idea to give more disclosure to the borrower, hopefully it will weed out some of the crooks!!

JUN

2007

Good Morning Katrina-

I certainly hope so - there are a ton of them to get rid of!

JUL

2007

Marc, I missed this somehow. Great post on a serious topic that is rampant in South Florida. My two cents? I'm sick of the attitude some agents (let's leave the finance guys alone for a while) have about this. They don't think it's wrong to pull a listing and relist if with a higher price to facilitate their little schemes. Hello???

Loved the comments from all the dollar dudes!

Hi Maggie-

You finally made it!

The 'schemes' and the 'schemers' will never completely go away - we just have to try to educate as many people as possible and hopefully that will help.

Marc,

Some of this was a bit "Greek" to me, but I am learning a lot from reading posts on this issue. You can never have too much information. What I have learne--in our state (Cali) mortgage brokers have to report YSP, but banks do not. Hardly seems a level playing field.

Fran