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Good Faith Estimate - with or without credit report?

A client of mine is about to sign a contract to purchase a spec home. Nothing unusual here. The builder requires the client to use one of their three lenders to receive a large 'incentive discount'. The lenders are not 'in house', ie the builder doesn't make any additional monies from the loan. They are large, reputable lenders that I have dealt with before. I told my client to get Good Faith Estimates (GFE's) from all three, but to NOT have them all run his credit. Have them assume his credit is excellent. Why have a bunch of credit inquiries right before purchasing a home?

Guess what? The first two lenders had no issues with this. Provided standard GFEs with all the bells and whistles. The third lender refuses to provide anything in writing without running my client's credit! He's adamant about this as well!

Now, I have had many clients get GFE's without submitting to a credit report up front. I have gotten many GFEs for my investment properties in the past. NO CREDIT REPORT NEEDED for said GFEs. How else can we/our clients shop around and compare the products that different lenders have without all the details? Here, we have a lender (very large bank) who refuses to provide the GFE without running credit....

Is this common? Are there lots of lenders out there like this? If so, I sure haven't encountered too many of them....

Posted by Kaushik Sirkar on 01/17/2007 08:28 PM

Comments (12)

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12 Comments on Good Faith Estimate - with or without credit report?

JAN

2007

The third lender refuses to provide anything in writing without running my client's credit!

The third lender is actually correct. It is impossible to furnish an accurate GFE without determining a credit analysis. The first two (and the ones you've obtained in the past) are actually perpetuating inaccurate information and the "game" in the mortgage business.

Kaushik: you shouldn't be shopping loans but shopping loan originators. Try asking the mortgage companies to negotiate a flat fee for providing mortgage services if you want to shop price. If they're direct lenders, they'll balk or claim "non-disclosure of YSP" as their cloak. Have your client get a GFE from your preferred mortgage broker with a reasonable mortgage brokerage fee (about $3-4000) and then ask the direct lenders to match it.

You'll be VERY surprised.

Very interesting Brian. Saw is it accurate to say that 90+ % of folks in the mortgage business perpetuate this 'game'?? Do only a reputable few not do this??

Kaushik, at the risk of sounding like I am disagreeing Brain, because I don't think I am, but I will take a different approach to this.

Based on you statement that you stated "Have them assume his credit is excellent." then I would do a GFI, but I would tell your client that if his credit isn't excellent, then the fees on the GFI could change, because I might have use a different loan program. In other words my fees would be accurate as long as he is telling me the truth. Hopefully this is what the first two Lenders told him.

On the other hand, what is the problem with all three running his credit??? It will be bundled into just one hit as long as all three are running it within 10 days. So why guess at the fees when he could have a GFI that is not based on his assumption that he has "excellent" credit.

That's what I was looking for, George.

I never give quotes based on "assumptions" because those assumptions never pan out. Also, it's too east to finagle those quotes (after all, I never knew...the borrower missed a payment on his JC Penney card in 2002; that's why the quote is no good)

Brian, glad I could help clarify that.

JAN

2007

Brian + George - thanks a bunch. The ONLY reason I haven't had him run his credit with all the lenders - I'm waiting for the contract to be accepted (we actually put in an offer). One accepted, you are 100% right, we'll run all three. But until then, I didn't want him running his credit in the case the offer wasn't accepted and we didn't find another house for well over 10 days....

I always appreciate input from mortgage gurus such as yourself! :)

Kaushik, just a little more information that might help you out. The Credit Report is good for 90 days, and I don't know about everyone else, but with me, I do not have to run the credit again if there is more than 45 days left on the credit report at the time that I submit the application, and if the closing is going to happen within the remaining period that the Credit Report is good for.

I can't do loans where you are, but I would think that other lenders would be similar to me.

JAN

2007

Another good bit of information from George. Many lenders are taking brokers' credit reports now instead of re-running credit. I think after 8-9 years, they are actually understanding the needs of the consumers.

Brain, thank you for that information. We do not accept anyone else’s Credit Report at this time, and I am not aware of anyone else here in Connecticut that does. It does not make any sense to me to not run one, because if there is anything that needs to be address on the report, the other Credit Company is not going to work with me to help the Borrower clean it up. I do not charge for Credit Reports until we actually have a loan, and then it is a charge at the Closing. So there isn't any advantage to not let me run a report, unless we are right at lets say 620 and it is more than 10 since the last Credit Report was run, and running it again would be a new hit now. Also if the report by the other Lender was run by a Credit Company that I do not do business with, I will not have the ID number and Password to link it to DU and get an Approved/Eligible based on Underwriting criteria and Credit.

Maybe Brian, George and Jeff Belonger should get together and form some type of a national super-lender's consortium...you guys have tons and tons of information!

JAN

2007

Kaushik,

9 out of 10 times, I will send out a GFE to my borrowers without even running credit. I always tell them that everything is subject to change and rates can flucuate if by chance thier credit score is not what the told me. That is why it is important to get all of the facts up front and understand exactly what situation is best going to work for them. There have been numerous of times where customers think that my GFE is way too high and know they can get a much better deal with a broker who for the most part is full of it. Then all of a sudden, they rush back to me because either they did not qualify for the program or it was going to cost them an arm and a leg. Bottom line, you need to get a feel for your borrower and that indicates exactly what to do for them.

Aaron Brown

Direct Lender

North Scottdale Branch

Aaron - See, this is what I am used to. A GFE with assumptions and an understanding that the GFE is subject to change if the borrower wasn't 100% accurate with his/her information. I hadn't previously run into someone who was adamant about running credit first. Se la vie!

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