Good Faith Estimates Explained - Changes for the WORST - Detailed changes - Part 2 of 2

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

Important facts about the New Good Faith Estimate

 

The Main Negatives : The New Good Faith Estimate does not show :

  • the total monthly payment. It only shows the principal, the taxes, and if mortgage insurance required.
  • the total costs for the entire mortgage. It just shows your total estimated settlement charges, that doesn't include the down payment.
  • a signature & date spot. Yes, this form is suppose to be given to you within 3 business days of applying for a mortgage.  Read about the 6 trigger points that define the mortgage application. Yes, there are methods of tracking if the GFE (Good Faith Estimate) was sent to you. But in reality, there is no clear proof since you are not required to sign this form. Meaning that there can be ways around the fact if your received it or not.
  • a break down of all lender costs. It just shows the total, in Box A. The title of Box A reads as, "Your adjusted Origination Charges". I will further explain this in detail below.

 


Please read Part 1 before you proceed to get a clear idea of what I am explaining and why :

Good Faith Estimates Explained - FHA Loan Good Faith Estimates - Understanding the whole process - Part 1 of 2

 

 

 

Break down of Box A for the Good Faith Estimates

 

It's been argued by some that you can't throw junk fees into the Good Faith Estimate last minute. That statement is correct, because you can only make certain changes on the New GFE.  These are called "changed circumstances", which I will talk about later. But one fact that is misleading is the part that some loan officers state that the borrower can clearly see what the total of the lender charges are in Box A.  I want to explain on how this might still hurt the borrower, if not explained properly.

 

 

Box A with Points and NO lender closing costs - Example # 1

good faith estimate & box A with points & no lender fees

 

 

 

 

 

 

 

My main focus is on Box A.   It states, "your adjusted origination charges". In this case, the $2,488.71 are just points and no other lender charges, such as commitment fee, processing fee, or warehouse fee.

 

 

 

Box A with Points and lender closing costs - Example # 2

good faith estimate & box A with points & lender fees

 

 

 

 

 

 

In this scenario, Box A has points and lender fees. The problem is that you don't truly know what your total points are and that they do not appear on the New Good Faith Estimate. If you clearly are given a Itemization Fee Sheet or a 2010 Itemization Sheet, you would be able to see the break down. The unfortunate part of this is the fact that all the forms mentioned, the Good Faith Estimate, the Itemization Fee Sheet, or the 2010 Itemization Sheet don't require a signature and a date. Sorry, but a sneaky loan officer could hide this from you. And you wpn't see the true charges until you actually go to settlement, because they will be broken down on the HUD settlement statement by numbers.  The same exact numbers that were located on the Old Good Faith Estimate

 

 

 

Detailed Box that would only show such items on the Itemization Fee Worksheet

itemized costs from the good faith estimate

 

 

As you can see with this form, this is a snap shot of the Itemized Fee Worksheet. You can see the total origination fee which is $3,288.71 and this matches Box A in example #2.

But as you can see, the break down shows you the other charges that Box A in example 1 doesn't show.  Why do I think this is critical? I have 2 main reasons.

 

 

 

 

 

 

Jeff Belonger’s 2 Main Reasons

 

1. This would be based on a $200,000 mortgage. I charge the borrower 2 points that would be equaled to $4,000 and no lender fees, so my Box A would say $4,000. Yet my competition is charging 0 points and $3,500 in lender fees and their Box A total was $3,500. You would think that this lender is cheaper by $500, right?  Incorrect.  Why?  You would need to speak to your tax accountant, but my reasoning would be because you can write off a percentage of your points, but you can't write off any of your lender fees. 

So simple math says that if the borrower is in the 28% tax bracket, they would be able to write off $1,120 of my total points.  Now, this is strictly for purchases. When it comes to refinancing, this is stretched out over the term of the loan, or for how long that they have the loan. Again, you need to speak to a tax accountant or CPA.

Overall, if I was charging $4,000, but the borrower gets to write off $1,120, my net expense to the borrower is $2,880.  This technically means that I am $620 better than the other lender. Yes, the argument could be made that I would initially be $500 more out of pocket to the borrower. But this can be reviewed several different ways. I just wanted to show that the total of Box A is not your best proof of which loan could be cheaper for the borrower.

 

2.  I have done a few experiments with borrowers recently to prove my point on this 2nd part. As I mentioned, the borrower does not see the total break down on the New GFE, aka the New Good Faith Estimate. I have sent out all disclosures to the borrowers and at first, didn't go over the actual break down which is listed on the Itemization form. I would then ask them if there were any questions and they would say no. I then would say, let me go over your break down anyhow. My point is that many people just look at the totals and not the separate charges.  And just for the fact that the loan officer could get away without even disclosing the Itemization sheet upfront because it does not require a signature and a date. How would a borrower know unless they were properly educated about the procedures and such.

 

 

 

One excellent feature : 

summary of your loan

 

I do love this feature, because it explains to you if you have a fixed rate or an adjustable rate.  It also tells you if you have any pre-payment penalty or a balloon payment.  If HUD would just put this on the old Good Faith Estimate, I would love it then.

 

 

 

One Last Thing - CHANGED CIRCUMSTANCES –

changed circumstances

 

Overall, it's a little more detailed in this, but I wanted people to beaware of this and to be careful on how some loan officers or lenders that might try to pull a fast one over you. Sure, they could be caught and fined, but some will take the risk on this. They have done it in the past.

 

 

 

Summary :  HUD's intentions were to express to all borrowers to shop and shop effectively.  I think that is awesome. But I have my opinions about that and how they have gone about this. I have spoken to about 15 different well respected loan officers and each one, including myself, think that they did a horrible job on the new Good Faith Estimate.  I have shown a few reasons why and there are a few more that I could talk about at a later time. But they were briefly explained in the beginning.  The average consumer just needs to speak to a trusted loan officer who will take the time to educated them on all details and not just rate and points.

 

 

 

The Series on the New Good Faith Estimates for 2010

 

 

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Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 10 times:

Re-Blogged By Re-Blogged At
  1. Marzena Melby 03/12/2010 04:24 AM
  2. Gabe Sanders 03/12/2010 04:52 AM
  3. Broker Nick 03/12/2010 07:02 AM
  4. Melissa Schwartz 03/13/2010 12:46 AM
  5. Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional 03/13/2010 05:55 AM
  6. Joseph J. Chang 03/13/2010 12:57 PM
  7. Lane Bailey 03/13/2010 01:21 PM
  8. Roland Woodworth 03/13/2010 03:57 PM
  9. Ann Allen Hoover 03/15/2010 08:24 AM
  10. Dagny Eason 03/22/2010 09:38 AM
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Rainmaker
293,003
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA

Jeff

Cari in comment number two almost made me fall off my chair.

With all the hoopla, fanfair, and countless months of meeting and rewrites that HUD conducted to come up with this, and for the HUD Secretary to make that comment.

Would love to read that article she was talking about.

HUD has no clue what it's like to be working in the trenches.

Thanks for the post

Mar 13, 2010 04:52 AM #35
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Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

I have to agree with the comments about government consulting with people actually in the business prior to making such changes -

Mar 13, 2010 05:51 AM #36
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

PAM.. comment # 30... .  I think I will plead the 5th on that comment. 

 

CAROL... .  I am not sure that it should have been mandatory training. Look, I know realtors and management wants everyone to know what is going on. But by having mandatory training, what are you telling the realtors?  In my opinion?  Hey realtors, get to know this, you might be asked questions.. or, get to know this so you can help your borrowers out. For whatever the reason, do you yourself honestly think that you should learn the new good faith estimate?  And if you answered yes, please tell me in your own words to why you think this should take place and or be mandatory.

Now, I just asked the questions for input... nothing to say who is right and or wrong. You stated this... "However, having a good understanding of the mortgage process is essential in providing quality service to my clients."

Okay, understanding the process... but if a borrower were to ask you a question about the process?  What would you say then? I guess the problem that I am having with all of this is for the fact that I don't answer real estate questions.  In my opinion, understanding the mortgage process, that one should take a loan application, is different than knowing how the good faith estimate works.  ... and then trying to explain it to the borrower. And yes, realtors will take this upon themselves to talk to the borrower about this. Hence why I am semi opposed to these mandatory classes for realtors. What are we then telling the realtor?  That it's open duck season? Again, just my thoughts...

 

GARY.... . thanks for bringing this up.  I think this is more serious than what so many realize... people are clamping down to where almost any advice other than a licensed loan originator can be against the law.. at least in several states.  And I think this will spread like wild fire soon.  Overall.. I know your thoughts on this... but sorry realtors, there shouldn't be much that you should be advising on when it comes to mortgages. As the first example that Richard game, I think that is as far as it should go.

Thor Funding aka WAYNE.... . Cari is pretty much spot on with her comment. This new GFE was to help borrowers shop better.... but it will be harder in my opinion and in many cases tough to shop correctly unless you take an application. Many loan officers prior to this probably aren't showing the correct documents to even have a chance to shop. Here is the article that Cari is talking about. I have not had the chance to read this as of yet.  Article with Steven's comments.

BARBARA... comment # 36 ... .  well, the gov't apparently did consult with some people prior to these changes. The problem with all of this is... who did they consult with?  lol  thanks

 

Mar 13, 2010 06:35 AM #37
Rainmaker
287,572
Barb Van Stensel
Chicago, IL

I had an offer with a GFE attached to it as my sellers were asked to pay for closing costs.  I have never seen anything as wild as this new GFE and so, I reached out to you for info.  It's not my job to analyze these but when the seller is asked to pay for closing costs and I am seeing close to $3K just for underwriting, doc prep, and review ... that seems a little wild.  I just want someone I can trust in the lending field to help my sellers understand and from the response I got from the lender, the fees were way out of whack and it had nothing to do with the rate, etc. 

I believe when a Realtor has a team of professionals, that they should let them do their jobs.  When I see a contract with a GFE flying at me for seller paid closing costs and I can't understand, that's where the professionals like you come into place.

We asked for a revised GFE that matches my lenders GFE or they can pay the difference or work with my lender/servicing partner.  The buyer has options, even to walk away.

BTW, thanks for your help!

Mar 13, 2010 06:44 AM #38
Rainmaker
661,949
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Nice post today thanks for getting it out to us...

Patricia/Seacoast NH

Mar 13, 2010 06:47 AM #39
Rainer
8,217
Craig Smith
Chase - Port Washington, NY

Jeff- I understand the new GFE was established to protect the consumer. Do you think the new GFE is any easier for the consumer to understand than the old one?

Mar 13, 2010 08:20 AM #40
Rainmaker
28,401
Colleen Craig
Southern California Mortgage Professional - Santa Clarita, CA
Socal Mortgage Pro

Richard,

You asked if mentioning a USDA program (If and when it's available) to a client is ok.  I would say absolutely.  You have knowledge that the area or property would fit a certain program and defer back to their loan originator.  If their loan originator is unfamiliar or does not offer it (which hopefully won't be the case now that the SAFE act is getting rid of those peeps) - then I believe you WOULD be doing your client a great service by sending them to someone who is and hopefully the client would qualify for the program.

 

Pam,  I'm assuming you are talking about...... them letting REALTORS and people actually in the business day to day designing their forms and the mortgage officers designing their own?  Not realtors designing mortgage forms.....lol

Trust me when I say I could've easily tweaked a CALYX POINT GFE and made it uniform to all  on one form EASILY understood by everyone.....I would LOVE to know who actually designed this rediculous...more confusing to the client crap!

Mar 13, 2010 10:18 AM #41
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

BARB.... .  well, curious question. You said that you saw $3,000 in fees for such items as underwriting, doc prep, and review. Curious.. where did you see this?  This would not appear on the new good faith estimate.  You would have to be given a form called the Itemization Fee Worksheet or something that resembles the old GFE.  But yes, I would say anything over $500 to $1,000 is a lot of money.  But then again, those are very close to normal fees because of the cost of doing mortgages.  But it all comes down to if there are points being charged or not also.  On another note, I hope Larry can help out some.  thanks for your feedback.

PATRICIA.... . my pleasure and thanks for the compliment.. and for stopping by.

CRAIG... . here is how I look at it... yes, the New GFE is easier because it is condensed.  You have Box A and B.. and the total.  People can see the total, but as I pointed out, you don't know 100% what you are paying for in Box A, because there is no break down on the new GFE for this box.  For Box B, those fees are separated...  but from what I know and see, only a small portion of the New GFE is good.. and that was the part that I pointed out above.  "the summary of the loan" section is a good thing...  thanks

 

COLLEEN.... .  I agree also, that I have no problem with a realtor mentioning certain programs, especially if they know that they are used often in their local market area. What I dislike is when a realtor tells a borrower which loan is better than the other.  They have no right, when they don't know anything and everything about a client.  I already have problems when loan officers direct a borrower away from a specific loan program, just because they aren't familiar with it or that they don't offer that program. I have had this happen to at least 5 borrowers in the past, that I know of. Hell, once I had a female client with 10% down, who spent 3 months of active duty in Iraq, who was told she was better off going with a conventional mortgage.  And this was told to her by 2 different loan officers.... and I had to prove it to her with good faith estimate comparisons.  I found out one of the lenders didn't even do VA loans.  But both told this borrower that they did the numbers... but never showed her the comparisons.  My whole point to this?  I just had a realtor tell a borrower of mine that they were better off with a FHA mortgage, than the USDA loan that I am giving them. Realtors should NEVER give that kind of advice.  thanks for your feedback.

 

Mar 13, 2010 11:04 AM #42
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Virginia Hepp - Mesquite NV REALTOR
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Hi Jeff, thanks for explaining it - apparently not everyone in the lending world understands it - I really don't see where it is helping buyers.

I have a buyer whose escrow on a foreclosure property was supposed to close on March 5, USDA loan, Chase Bank.

Chase approved it, USDA approved it, the loan is now spinning around in Chase Bank's new Compliance department - somebody is not sure about something on the GFE.

Meantime, my buyers will be charged $50 per diem late fee.

Mar 13, 2010 01:12 PM #43
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Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Great write up.  Of course... it seems like there are a buncvh of people writing forms that don't really know what they are doing...  Is it me?

Mar 13, 2010 01:20 PM #44
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Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
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I think all the new forms have issues.  I don't think they thought the forms all the way through.  

Mar 13, 2010 01:59 PM #45
Rainmaker
427,364
Leslie Ebersole
Swanepoel T3 Group - Saint Charles, IL
I help brokers build businesses they love.

Jeff your level of contempt for Realtors is palpable. Did you have a bad experience or two? Do you not have a group of trusted and reliable Realtors who you work with? Client service in financial and real estate services is a highly collaborative process where cross-education is necessary and desirable to achieve the highest level of customer service. Chinese walls are rapidly being dismantled by the virtually viral dissemination of information on the Internet. If you feel you need to protect your territory by being the one and only dispenser of accurate information, you're moving down the right path. But frankly you sound like the Realtors a few years ago who insisted that buyers and sellers not get their own education and information off the Internet.

Mar 13, 2010 02:27 PM #46
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

VIRGINIA... .  it can in some ways, bit overall, it will hurt buyers in my opinion.  And as in your case, it is delaying a settlement.  But it the ducks were all in a row, it should only be delayed for a day. I wonder if there is something wrong.  I think the MDIA law/act was good enough. But no, they had to take it a step further.  I guess time will tell to see if there will be any changes for the good and not what it is now. thanks and good luck with that closing.

LANE.... . you aren't the only one that thinks that. You wonder if they just flip for it, heads or tails, so many times.  And thanks for the compliment.

RUSS.... .  well, you think they would be smart enough to do this, but I guess not. At least have some of us in the deep trenches review these forms. Those that sit on capital hill and have no clue, should not be guessing at this.  thanks

 

Mar 13, 2010 03:55 PM #47
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Roland Woodworth
Q Realty - Clarksville, TN
Q Realty - Power In Real Estate

Thanks for the update Jeff. Always look forward to all the great information you post for us

Mar 13, 2010 03:55 PM #48
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

LESLIE... . sorry that I am so blunt and direct. .. yes, I do have some realtors that I work closely with, and those same realtors just say..."speak to jeff"... even some loan officers that I know of, that send me deals in states that they aren't licensed in, say the same.  In my opinion, I think your thought process of how this should all work would be for those people that can handle different jobs within the organization.  Yes, I do believe in the team concept....  but when it comes to mortgages, you refer all questions to that trusted loan officer. Even if someone taught you, as the realtor, what the GFE is all about, you should still not give any advice to the borrower.  Sorry, I take this very seriously... and yes, I have had some bad experiences. I know realtors have had bad experiences with loan officers also... but let me share a few with you.. it's very simple.

I had a realtor a few weeks ago tell a client of mine that FHA loans were better than USDA loans, after I sent her a pre-qual letter saying that these buyers were pre-qualified for a USDA loan.  She then went a step further to say that her loan officer agreed with her and stated the same thing. 2 problems with that.  First off, the realtor should have not made that statement, no matter what kind of experiences that she had with USDA loans.  Just because she had an opinion or maybe had a few bad experiences with them in the past, doesn't make her an expert and for the fact that she should be giving that kind of advice. Secondly, the loan officer?  Sorry, but he should be shot for giving an answer like that, when he had never even spoken to these buyers.

I had a borrower that called me about a month ago, who had some collection accounts, one of which was for $10,000.  These borrowers told me that they were qualified by another loan officer and that they didn't have to pay this account off by settlement.. I started to ask them about this one large collection account and said that this will not happen, because of their lack of credit and because of a few other reasons.  I then proceeded to get to the bottom of this and said... so the loan officer actually told you not to pay this off?  She said..."no, the realtor said it should not be a problem and not to worry about it, that they had a good reason for it.,"  Rut row...  they never spoke to the loan officer about this one collection account... but that the realtor said it should not be a problem, because they had spoken to the loan officer themselves. Sorry... but the realtor should have never stepped in. Well, you know what.. they still never closed as of yet.  The lender came back saying that this collection account had to be paid off.

I have a lot more examples.  Here is the problem that I see....  many realtors are very nice people and just want to help.  But when it comes to the financing questions, even if they know the answers, they should refer to the loan officer, no matter what. Sorry if that sounds harsh... but when I am asked a real estate question, I tell the borrower to go speak with their realtor.  If they tell me that the realtor doesn't know or that they have a bad feeling, etc, etc.. I tell them to speak to a real estate attorney, or that agents broker, or to find another agent.

You made this statement... "If you feel you need to protect your territory by being the one and only dispenser of accurate information, you're moving down the right path. But frankly you sound like the Realtors a few years ago who insisted that buyers and sellers not get their own education and information off the Internet."

First things first.. I don't know everything and I am not perfect....  I feel I need to protect the mortgage territory, all things about mortgages. I deal with this stuff every day. Realtors can't do both their job and the job of the loan officer.  Why do you think they are going to a national licensing requirement, and that most states are even having each loan officer take their own tests also.  Why do you think realtors have continuing education? 

Overall... sorry... but a realtor should do their job and a loan officer should focus on mortgages. I might sound like I am full of myself and that I have appointed myself as the Mortgage Guru... I am far from it, but I do know my stuff. Again, I don't know it all... but I do think that I know more than many... and if this ticks realtors off, on how I have commented against some realtors, well, at least I am giving accurate information based on dealing with this daily.  Don't get me wrong, I do believe in the team concept.  But I don't want realtors giving mortgage advice... I think it's that simple.  And so many realtors have given the wrong advice and or opinion in the past. And it's harder than ever before.. so they should continue? 

As far as your last statement...  that I sound like the realtors from a few years ago, that people should not get their information from the internetlol   I get over 80% of my clients from the internet, in the last 4 years. More than ever before because people do see knowledgeable professionals online.  What scares me is the bad information that is found online.  And yes, I know... I am a part of a group of 7 other loan officers, from different states, that we have about 120+ years of collective experience in mortgages.  That is close to an average of 15 years per person.   My point to this?  We have a 1 hour conference call once a week and talk about stuff like this.  We are seeing more and more realtors give bad advice in regards to mortgages and or refer bad loan officers.  These thoughts and or opinions are not just from myself, but from many other professional loan officers that have been around the block.

One more thing Leslie... I feel the same way about many loan officers also... so it's just not realtors. I might sound like I am on my high horse.. and maybe I am... but I take a lot of pride in what I do and making sure I give out very accurate information. I consider myself to be extremely knowledgable, that I am very creative, a problem solver, passionate in what I do... that I tell the client upfront what should be told and not what I think they want to hear, that I communicate very quickly and easily... and yes, that I am just tired of some realtors that try and handle the job of a loan officer.

As you stated, collaborative process where cross-education is necessary, in order to achieve the highest level of customer service.  Leslie... that was dandy 5 years ago... but it's even more complicated now than ever before. And unless the realtor does mortgages daily, to see so many different kinds of examples.. that realtor should just turn to the borrower and say..."I could give you an idea, but you are best talking to your loan officer."  And Leslie... if you don't think the loan officer gave the right answer, you just say, why not speak to mine or to another one. Would you go to a heart surgeon when needing brain surgery?  Just because they are a doctor?   Hey, I never expect everyone to ever agree with me.. and I know this is long... and maybe not politically correct... but that is another point. I don't pretend to be a politician. I just shoot straight from the hip and I will tend to ruffle some feathers.  I will say it again... in my opinion, my firm belief, realtors... no matter what, should not be giving advice and or opinions in regards to mortgages, if a borrower asks them for help.  You might be a great person, one who loves to help.  It's bad enough when a loan officer screws up a mortgage. But are you telling me that you want to take that chance yourself?... in giving some bad information?  Here is another one...  I had a realtor tell a borrower something based on what they heard from a loan officer... and it was 110% wrong, incorrect.  So now what... you told a borrower something, that you thought was correct, because you trusted a loan officer?  It happens... why even take that risk. We are talking about one of the biggest investments in a person's lifetime.  There needs to be a line that should not be crossed, no matter how nice you might be.  read some of the other comments from a few other loan officers. I don't seem to be the only one that thinks this way.

In any case, I do thank you for your input and feedback. I will say this... I will not get a long with everyone... not everyone will like me. Some thing I am stand offish...  a know-it-all...  all I can say is that I do know my stuff.  I am proud to say this and take pride in it. But I do not know it all.. and if I don't, I know who to ask and when.  thanks  PS... I am not going to go back and read this over again... it's late. So if some of this is not written well, I apoligize in advance. thanks

 

Mar 13, 2010 03:56 PM #49
Rainmaker
225,508
Tim Bradford
Cleveland, OH
NMLS 250013

Jeff,  Just wanted to pop back in to say following this post has been quite interesting. 

I believe in your post you said that you use discount points instead of Origination Fees, underwriting, processing and other misc charges to allow borrowers the opportunity to gain the tax advantage of discount points.  I do like that idea or technique.  My understanding is that Discount Points are only tax deductable when used to buy down an interest rate provided they are used for that purpose.  The other fees (Origination, Processing and Underwriting) do not qualify as the deduction.  Have your buyers had any issues with their tax preparers?

Another issue I wanted to chime in about is the realtors involvement in the mortgage process and pricing.  I have seen too many Realtors and Sellers object to reasonable requests for Closing Cost assistance by reducing it, instead of just countering with a higher sales price.  I have also seen some Realtors steer buyers to their inhouse(affiliated) lender by saying XYZ lenders closing costs are too high or the Realtors inhouse lender would save the borrower money with lower closing costs.  In fact, provided the Closing costs are reasonable for the Rate quoted to the borrower, steer the borrower to a higher rate on the loan is not always in the buyers best interest.  I suspect you know what I mean and have seen cases where the price difference is .50 Points for a .25% rate difference.  You and I know that Closing Costs and the Rate of Interest on a loan need to go hand in hand.   Looking solely at one is not in a buyers best interest. 

Mar 14, 2010 12:56 AM #50
Rainmaker
287,572
Barb Van Stensel
Chicago, IL

Jeff, this is your post, but Tim has a point on upping the price for closing costs.  Yet, I have this home where Mom was a senior, basically lived off of tea bags and crackers because money was tight.  She made it through the depression where food was cut back to survive.  Today's market doesn't have the same resolutions as utilities and real estate taxes, medical are out of this world.  to have an unrealistic offer come in where there are all new mechanicals, new windows, new kitchen, but the electrical needs to be updated and the estate will pay for that but then the buyer asks for 200 Amps when the home has more then enough power with 100 Amps in this small two bedroom brick ranch. 

The only time I get involved is when I hear the story that Mom made sacrifices and then someone waltzes in with a low ball offer on a house that just went on the market, that is on an oversized lot, well maintained, with the exception of electric, and then wants the sun, the moon and the stars.  The closing costs were high with points.  I represent my clients interests and my team of professionals protects my clients interests.  I, as the listing agent, will always reach out to a mortgage professional, like Jeff, who can direct me or help me.  We are countering a revised GFE under the VA program, same rate, same terms, minus some wild junk fees. 

On another file, I saw 3 points (not discount), a rate that 1.5% higher then the marketplace for the worst credit score and yes, I jumped in and had a professional mortgage person call the buyer's agent and explain to them that these fees are high and out of place, once the mortgage person recognized that someone was taking that buyer for a ride. 

A good Realtor will step in because we are tired of the overpricing that some unprofessional mortgage people who are doing this on the side, are taking advantage of their friends or consumers.  It will only lead to more problems down the road.  I believe all of us are tired of it.  That is why and while I know it takes the time of someone on my team of professionals to try to get this consumer protected, I hope the people on my team don't walk away and get tired because of some of these issues.  I believe a good many want to be fair in our practice and business and a good many of us want to protect the consumer.  And yes, there are Realtors who don't have a team of professionals and start talking about .25 or .50 differential on the rate when at times the service is much better, the hair doesn't gray as fast, the time spent is much less and more selling can be done as a direct result of hiring a lender who is worth their weight in CLOSED.

Sorry for the interruption but this is a great post, Jeff!

Mar 14, 2010 04:11 AM #52
Ambassador
749,223
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

ROLAND... . my pleasure and thanks for those kind compliments.

 

 

TIM.... .  I actually have used both origination fees and discount points over fees such as underwriting, processing, doc prep fees, etc, etc.  Origination fees are points and can be written off. But now, with the new HUD changes of last year, all points are origination fees. So all my FHA loans will be Origination fees and all Conventional loans will be discount points. In either case, a percentage of them can be written off on tax returns.

As far as your statement about such discount points can only be written off if they bought down the rate?  I have never heard of that one and never heard of anyone having a problem with this.  Besides, how would one know if the discount points paid bought down such rate? Think about it... how could one tell?  In my opinion, the only one that would know would be the loan officer, because you have the pricing sheet in hand. How could anyone tell if it was pure profit or that it bought the rate down.

In regards to your other issue, about realtors when they chime in and tell the borrower that the other lender was expensive and such. Yes, I hate this also.  First off, I tell many, I will not be the cheapest... but they will get excellent service, a good deal, not the best, and someone that is knowledgeable and who will tell them everything upfront and educate them about the process. Besides, I won't be expensive either.  Sure, if someone looks like they are way over-charging... but again, how does one know all of the time?  With credit score hits, on some loans, LTV pricing hits, and in some cases, some times pricing hits on high debt-to-income ratios.  In many case, I just think it's a poor excuse for the realtor to just get the borrower with their loan officer. And who is to say that they are any better, just because they said so. I could have this argument all day.

One last thing to argue my last two sentences...   I was referred to a borrower from a realtor on AR, who knew that I closed a few loans for another realtor on here.  She had told me that she uses two other loan officers and has been using them for the last 2 years... that they are great with pricing and get loans closed. Hey, that is great... every realtor should love that and every client should be happy, right?  Well, I was the 3rd loan officer of hers to speak to these borrowers.  This borrower liked me because I was always there, available, and educated him on some issues. He didn't feel comfortable with one loan officer and the other one?  He was literally 1/4% higher in rate and about $1,000 more on a 30 yr fixed rate. It was with a national lender, Wells Fargo. But the borrower wanted me to quote him on a 5/1 arm also.  I found out that this other lender, who I beat on a 30 yur fixed, was literally 3/8% lower than me on the 5/1 arm. I said no way...  so I waited 2 days after the quote and called the client back... told him that he could call me up until 9 pm on Sunday night.  He called me at 7 pm and we spoke for an hour.  The funny thing... this borrower was never explained on how a 5/1 arm worked... the index, the margin, what it would be as the worse case in 5 years, etc, etc.  I also went over his goals based on a 5 yr...  this person thought he could refinance in less than 5 yrs to get rid of the monthly mortgage insurance, if he had 20% or more equity. I said not on a FHA mortgage, which is what he was doing.  He said why not?  I explained to him why, which the other loan officer never talked to him about.

My whole point, I took the time to get in depth with this borrowers goals, what his plans were and why a 5/1 arm.. and to go over some possible financing programs in the next 5 years. He said he learned so much to make an educated decision. Yet he stayed with the current loan officer because his rate was so much better. I knew that he was slightly baiting this guy, because this guy wanted the 5/1, because his payment was $150 less a month. But he had not locked in.. gee, I wonder why.  Well, for 4 days in a row, rates got lower... I was now 1/8% higher and the other loan officer never lowered his rate on the 5/1 arm.. and the borrower didn't want to fill out another application.  I lost... but I lost because the loan officer played the market and it turned in his favor. Yet this borrower was never fully educated. This is the problem that I have with realtors, thinking that their person or persons are the best, all based on rates and that loans closed. Here is a great example that service stopped at the rate...

 

 

BARB.... . I understand where you are coming from... and please read my comment to Tim above.  Please start with the part that says... In regards to your other issue   ... I think I even talked about a lot of what you had mentioned.  I know realtors want to protect their borrowers in many cases... but I think in several cases, assumptions are made, even on the loan officers part, just based on some facts. And sorry, but some clients files take a lot of work, on top of myself always being available and such... and that kind of file does not demand a flat fee or a low cost loan. So many services try and sell flat fee services, even with mortgages. All rates and such are low balled based on this. Hence why I will be a tad higher to cover what I mentioned above. I need to start a little high and then I work my way down. I would rather be higher at first and then be lower. Too many start low to get the deal and in many cases, many will end up higher. Sure, you have some that are just ridiculously high to begin with. I understand this. I just got a client from one of my blogs about 2 weeks ago, who was getting 5.5% and was being charged 1.5 pts and a $4,000 commitment fee. Yes, that just sounds way to high. But loan amounts need to be known in order to make that judgment call, because all lenders have a profit margin. This was on a 400k loan... so yes, this was extremely high. I was able to give her 5.0% with 1 pt and no fees.  She basically saved $6,000 with me and got a rate 1/2% lower.  In any case, I just think realtors need to be careful when jumping into a file and assuming that the other loan officer is charging too much.  Just my opinion based on past experiences.. thanks for your input and thanks for the polite compliments.  I am glad I was able to help.  thanks

 

Mar 14, 2010 06:09 AM #53
Rainmaker
225,508
Tim Bradford
Cleveland, OH
NMLS 250013

Barb,  I believe my post struck a nerve with you.  That was not my intent.  First let me say that I do believe that there are some unprofessional mortgage loan officers that overcharge consumers as well as unprofessional realtors that refer buyers to them.  Based upon you posts here, I do not believe for even one second that you fall into that catigory.  In your post, you started with me saying "up the sales price" instead of "Reducing Closing Costs Assistance". Fundamentally, I believe the Listing Agents responsibility is to get the BEST NET OFFER for your seller.   If you cross the line on interfere with the Buyers Agent, I believe you would be crossing a line that many others would object.  I would support a discussion with the Buyers Agent with regard to the amount of Closing Cost Assistance being requested to determine what would be in the best interest of getting a offer accepted.  That I believe is the goal of everyone. 

Too many times, I have heard of a seller is objecting to the assistance requested because "WHEN THEY PURCHASED THE HOME NO ONE ASSISTED THEM".   Again, I believe the BEST NET OFFER for everyone is the goal.   In your comment about my comments, you mention LOW BALL OFFER.   That, in my opinion should be your concern.   The amount of assistance requested should be the concern of the Buyers Agent and a discussion with them might be appropriate before your seller counters the offer. 

Perhaps your comment put a bug in my craw as much as mine did yours.  Thinking of cases where realtors have encouraged the buyer to take a higher rate because the realtor "DID NOT BELIEVE" points should be paid.  I am not talking about 2 or 3 points, I am talking about the buyer paying one point to receive a .50% better rate on the loan or the half point for a .25% better rate.   The math on this is just over a two year break even. 

As I acknowledged, there are people that will take advantage of buyers and it is not just limited to mortgage professionals.  Too many times, I have given a buyer a GFE that beat the recommended and preferred (or affiliated) lender of the realtor only to have that lender match my GFE and end up with the loan.   In my opinion this would be equivalent to a realtor telling a prospective buyer what they know a seller would accept based upon insider information or said another way allowing buyer "C" the opportunity to have the first right to purchase a property based upon the best offer submitted by five other bidders.  

If, I mis-interrupted your comments my apologies.   

Mar 14, 2010 07:23 AM #54
Rainmaker
287,572
Barb Van Stensel
Chicago, IL

Jeff and Tim:  I believe that mortgage brokers should be paid accordingly.  I have no problems with that and I do not believe whatsoever that you should take a bath to just be nice.  We are in a business and it should be treated as such.

Tim, I didn't mean to slap you.  I have a file right now where I told the buyer's agent that my client just lost her mother.  I told her husband to get the locks changed to secure the house as I would be showing it and things could disappear and then we'd be spending time on who took what, when and why?  Well, her two sisters broke into the property, damaged the hardwood floors, took things that should have waited until after there mother was buried (of all the things) and then she just found out she is loosing her job in three weeks. 

All that being said, the buyer's agent comes out flying with requests for 200 Amp Service versus the 100 Amp service we were having to put in re City Code, etc.  He wanted the hardwood floors refinished.  Then he wants and I repeat wants an obscene amount of money for tax pro-rations when it is a senior citizens exemption, the assessor doesn't have a finished basement, bath or central air on there reports and they went wonkers on me.  Requests up the whazoo and then I am seeing the usual point for $1,000 an appraisal fee for a single family home $450 (reasonable for VA), Processing Fee $895, Underwriting Fee $795, File Review Fee $895, Doc Prep Fee $695. 

This home is on the largest lot of three sizes in this subdivision, newer FA/CA, Hot Water Tank, Kitchen, Windows all around!, basement glass block windows totally replaced.  Typical size home but most homes have dated FA/CA and kitchens.  The mechanics don't lend value, I fully understand being a reviewer for banks when appraisal and review appraisal come in.  That's when I come in.  Bottom is, I needed someone to tell me if I was crazy with those costs.  That is all I needed to know.  The home is one of the better maintained homes on the market. 

My seller did hear me out and I reached out to a professional mortgage person as this situation, as you can see, is a little "touchy" with alot of losses physical and monetarial.  I wanted the file to stand a chance as she thought that it was alot of money.  It is too her and therefore it was to me. 

I just thought that those fees were high.  Maybe that is the norm on VA now.  I didn't know but I wanted my client to know and understand because she went through the roof like a rocket.  Try to bring that one back down to earth.

I want everything to be a win-win.  Maybe I am nutszo for saying that but I just want my sellers to be comfortable and knowledgeable with the decision.  Some may not have questioned but the response I got back from the buyer's agent was that I had no business reaching out to a professional to review these costs.  He told me that essentially the buyer was financing them in the mortgage.  Now, someone explain to me the net on my seller's side is less because she is giving a credit and now it is financed?  Or maybe it is because this agent is rubbing me the wrong way when I told him the situation right out the gate and to work the contract so as to not aggitate. 

All my client could see was how her Mom had struggled and was basically eating and drinking tea and crackers to keep that cute ranch going and a buyer comes out asking for everything including a higher rated electrical service and oh, btw, please refinish the floors the way I want them?  Closing costs was just the topping on the cake.  (I would have said "icing" but she is already frozen with this buyer).  All she wanted to know was if these costs were normal for VA?

I had a loan officer tell one of my clients, that I referred her to, that if she dumped me, she could save on the commission as it was with a builder.  It happens, the good, the bad and the ugly.  I just love having a team of professionals that I can rely upon.  Bottom. 

I do not think it is right for a Realtor to pull a loan that is on the table.  That is disrespectful and unprofessional!  I agree with you "In my opinion this would be equivalent to a realtor telling a prospective buyer what thye know a seller would accept based upon inside information or said another way allowing buyer "C" the opportunity to have the first right to purchase a proeprty based upon the best offer submitted by give other bidders." 

That right there Tim ignites me.  Unprofessionalism and pulling loans, pulling a buyer from an agent because someone can get a referral fee .. never mind the work, the intensity of the fiie nor the time involved.

Oh, btw, I believe in right-offs and Jeff knows how to work things the best that puts his clients needs out there.  I just got a "raise" from one of my clients because of all the additional work involved in the file.  Never had that happen before, but I took it! 

 

Mar 14, 2010 11:24 AM #55
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