With so many of you considering new employment, or who have recently accepted a new position somewhere - this seemed like a good topic to cover ... What’s your job position worth (as others read your resume they surely do have an opinion, what about your opinion?) – what do you contribute to the overall process of turning a stranger into a funded residential mortgage loan transaction? OK, so let’s run through one, start to finish:
Customer visits Google and searches the term … mortgage refi, bill consolidation, mortgage broker, or home loan, etc. and up comes 'Millions' of results, they close their eyes, point & click the link to where you happen to work, and study the website. During that review they're able to determine you do the type of loan which they’re looking for (rate & term refi w/cash out), so they complete your on-line application and away we go!
Their first contact with anybody is probably a Loan Officer, who learns the customer is a regular ordinary average one; not somebody that wants an Exotic kind of loan, but a simple full doc 30/30 cash-out refi. The credit report gets pulled and they discuss its contents, customer receives a ‘quote’ (an important customer service/help-desk function) – and the application & credit report is handled off to the processor, who will process/verify etc. and guide the package through the pipeline.
Over the next several days, she will order an independent field appraisal of the subject property, collect the additional necessary paperwork directly from the customer, open escrow (in a non-lawyer State, or via an attorney in those backward (early 20th Century East coast 'lawyer States'), all along verifying everything is genuine, as well as confirming the developing package will meet the standards of the lender/underwriter program (extremely vital job duties).
The escrow company personnel (or attorney if necessary) open up the title order, requesting a preliminary title report from the title insurance company and they send off for known mortgage lien ‘pay-off’ beneficiary statement(s), request and collect a loss payable endorsement on existing property hazard insurance, and otherwise get prepared to schedule a closing/signing of the customer documents (fast paced and detailed activities oversights are not permitted).
After preliminary title report, demand pay-off’s’ of mortgage lien(s) or others, real property appraisal, and all the final pieces of paper needed from the customer are received and everything is verified and analyzed by the processor (inside a presser cooker environment with an egg-timer on her now) – the transaction is presented to the lender/underwriter for approval.
Once received by the wholesale lender funding source, the underwriting department (account mgr/processors) re-confirms that all the pieces of paper are genuine and 'what they purport to be', that they are sufficient, and then makes the determination if the transaction exceeds the minimum standards of acceptability, approve the transaction by advising the mortgage broker company, and get the signing documents prepared for delivery to escrow for signing/closing (all highly stressful duties - errors are not acceptable - easy to lose your job).
As we move into the home stretch, the signing docs are shipped out to escrow (or attorney), the customer is scheduled to visit the escrow office for document execution (or if necessary a mobile closer/notary meets them at Starbucks, Denny’s, or sets up a signing on the hood of their pick-up truck somewhere out in the countryside). Docs arrive at escrow (the clock's ticking), who now puts these pieces of paper all in order, get’s everything signed and notarized properly, and returns back to the wholesaler/lender (except for the mortgage or deed of trust), awaiting a 'fed wire' of the loan amount (all has to happen same day). Once received, they get the deed or mortgage recorded with the proper County Recorder in the same County where the subject property is located, close their file with the HUD-1 balancing, and distribute the funds as directed by the wholesaler/lender.
Of course this fairy tale closing isn’t what really happens, there are always multiple crises that happen along the way because too many people have to touch the transaction, and they make mistakes all the time. As you can see there’s plenty of room for multiple train-wrecks with each closing; and there normally are!
Now as to cost/worth value (excluding all the possible problems that could have come up – this article would be 25,000+ words longer if I detailed all of them too): First, making the website credible and marketing it on the internet and elsewhere to attract customers, cost (in time & money) at least $X,000 per loan, the LO spent about 20 minutes of his/her time (LO and owner/operator have predetermined what that’s worth and is paid after closing) the processor probably spent 60 minutes or so (typically the customer paid fee at closing is $300 for processing), credit report $15 (whether closes or cancels), appraisal fee $300 (several hours work/travel time non-refundable if loan doesn’t close) and both must be uncompromisingly reliable. Two-way doc courier fee $50, escrow fee (180+ minutes spent at warp-speed) usually $350 (only if loan closes), in attorney State – attorney fee $500+ (non-refundable if doesn’t close), preliminary title report (if loan cancels no charge unless done by a lawyer in an attorney State), mobile notary/signer/closer $125 (easily one or two hours works/travel time), lender/wholesale funding source (90+ minutes) is paid out of future customer paid interest and only after closing ... so ... are you overpaid or underpaid?
Drop in Home Values May Accelerate
House prices fell by 2.2% from September to October and prices are off by 18% over the previous 12 months, according to Standard & Poor's/Case-Shiller housing price index that tracks existing home sales in 20 major metropolitan areas. "The bear market continues with home prices back to their March 2004 levels," said David Blitzer, chairman of S&P's index committee. Since the peak in house prices in mid-2006, the 20-city HPI is down 23.4% as of October 30. Over the previous 12 months, 14 of the 20 cities are reporting price declines in excess of 10%. Even Seattle and Portland are reporting annual rates of decline of 10.5% and 10.2% respectively. IHS Global Insight economist Patrick Newport expects house price declines will accelerate over the next few months. "Although prices are near equilibrium in many cities, they are likely to undershoot the equilibrium price on the way down-just as they overshot on the way up-because the number of homes on the market remains high," Mr. Newport said.
HUD/RESPA Says Section 8 Applies!
 Loan Modifications are subject to RESPA's Section 8 Anti-Kick Back Rule.The California Department of Real Estate (DRE) reminds us, they have been advised by the Department of Housing and Urban Development (HUD) that referral fees paid or received in a loan modification transaction would constitute a violation of the Real Estate Settlement Procedures Act (RESPA).
This arena is quickly filling up with all sorts of 'tricksters' and many of the bad apples that (thankfully) fled the mortgage origination side recently ... Be Careful and keep your distance!
GSE Deal with NY AG: LOs Cannot Order Appraisals
Fannie Mae and Freddie Mac, along with their regulator, have reached an agreement with New York Attorney General Andrew Cuomo on reforms that ban loan officers from ordering appraisals. The agreement also bans mortgage brokers from ordering appraisals. Struck back in March, the original agreement between the GSEs and the New York AG banned the use of in-house appraisers by mortgage lenders and the use of subsidiary appraisal firms. Fannie Mae said the new appraisal policies begin May 1. The GSE plans to issue guidance to its lenders on January 7. "The Federal Housing Finance Agency supports this effort by the enterprises to strengthen the appraisal process against the possibility of improper influence and coercion," said FHFA director James Lockhart. AG Cuomo said the revised appraisal rules eliminate systemic conflicts of interest. "Erecting and enforcing meaningful firewalls between appraisers and lenders, and forcing Fannie and Freddie to stop working with unscrupulous lenders and brokers, are key steps in cleaning up the mortgage industry and avoiding another crisis like this in the future." Learn more on this HERE
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