long term care
With over 5 years experience as a mortgage loan officer, I have originated well over 3000 mortgage loans. The mortgage industry was initially constructed to be a resource to would-be borrowers who did not fit into the very stringent criteria of their local banks. The average home loan borrower would not have qualified for the most basic of home loans at their local bank due to the "3 C's criteria" (Credit, Collateral, and Capability) requiring every borrower to have a 780 credit score or better, provide proof of assets in the amount of six times the amount the new monthly mortgage payment (including property taxes and hazard insurance), as well as have an unblemished credit report (no delinquencies, regardless of amount). With these standards, only a small percentage of the American population qualified for home financing, hence the need for alternative sources of financing that are sensitive to the differences in creditworthiness across the country. Furthermore, with interest rates being at all-time lows, homeowners began to trade in their higher mortgage interest rates and re-finance their mortgage for much more financial savvy ones. This phenomenon, known as the "re-fi boom", sparked a whole nation of homeowners to consider their interest rate and to see if there were more sound interest rates available. There was no fathomable way that local banks could handle this response, and thus the mortgage broker industry grew in stature and reputation for being a refuge for the moderate to poor credit customer. Now that you know the original intent of the mortgage broker, you can begin to understand how its eventual demise threatened and continues to threaten our financial stability. This article will give you the heads up on exactly what goes on behind the scenes and between phone calls.Here are 5 things you need to know before you go to closing.1. Where did they get my information? I don't know how many times I have been asked this question by prospective borrowers who are either contacted by through "cold-calling" (or the process of making lots of random phone calls in the hopes of getting a few positive responses), or by those who received "customized loan offers" guaranteeing them a certain mortgage payment or interest rate. Well, here is the answer that everyone is waiting for: The three major credit bureaus (Experian, Equifax, and TransUnion) sell borrowers' credit information to financial institutions with the express purpose of understanding who would qualify for what type of mortgage. Furthermore, when a borrower has his credit checked by one financial institution, that information becomes a matter of public record and can be purchased by other financial institutions. This is how an individual can apply for one credit card and then magically receive five more offers in the next two weeks, or how an individual can apply for a mortgage loan and then be bombarded with calls from ten other mortgage brokers offering a "second opinion." You should know that your information is being sold to all that inquire so that they can know what you qualify for and what you don't qualify for. Under this premise, many mortgage brokers will still send out knowingly unattainable figures just to get prospective borrowers to call back.2. The initial phone call. Whether you call into the mortgage broker from an advertisement you received or you get the traditional 6pm-while-I'm-eating-dinner interruptive phone call, you should know that it is all calculated. Everything that is done by a mortgage broker and loan officer is calculated to get a response. From the initial mailing that you receive in the mail all the way up to that initial phone call, this person is sizing you up. The mailing: This is a generic number based on what's available to the most creditworthy individuals in the country. Then they drop the interest rate just a little bit to make it more tantalizing for you. Once you call in, you may have to use a "promotional code" that is on your advertisement. Don't worry, that just helps them with tracking their advertising dollars...it doesn't approve you or give you any other additional benefits. Once you are connected with a loan officer, the first thing that goes through their mind is: "How desperate is this person, and how much can I make off of them?" So be prepared to answer plenty of invasive questions about your financial state, the level of your desperation and the urgency of how quickly you need to move. The more urgent, the more money the loan officer will try to make. If, however, you are called by a mortgage loan officer at 6pm, don't get upset. Loan officers are trained to call at the most opportune time by which prospective borrowers will be at home. Let's talk about that phone call for a second. This call to a prospective borrower is all about trying to get information so that the loan officer can make a determination of how hard or how easy this prospective loan will be. If the loan will be more trouble than its worth, or if there isn't enough equity in the loan for the loan officer to make money, the loan officer will most likely tell you that there is nothing that they can do for you. However, if you are a "whale" (a borrower with either a low credit score and tons of equity OR have a moderate credit score but have a really high first mortgage), the loan officer will search and shop the loan for every available option to meet your needs. The initial fact-finding mission ends when the loan officer has you committed to work with him or her. You will hear terms like "Don't let anyone else pull your credit", or "I can go ahead and send out loan documents to you". These statements, though they sound binding, are not a commitment to do business with any particular mortgage broker. Feel free to continue to find the best mortgage for you.3. The loan application documents. Here is where the rubber meets the proverbial road. Here is where you want to keep your eyes and ears open. On the initial phone call, the eager loan officer wants to get loan application documents to you as soon as possible so that you feel a connection and a commitment to that broker. Here is where trust is the most important. At the end of the initial phone call, the loan officer may quote you some rates, payments, fees, and other important information. Write those numbers down and refer to them when you receive the loan application documents. These documents, which must be sent no later than three days from the time of verbal application will contain a lot of disclosures, facts, figures, and most importantly fees. Please look over these documents closely. Don't be afraid to contact your loan officer and go over these numbers with him or her on the phone. Here is what the loan officer is thinking: " I hope he/she just signs them and sends them back." In fact, latent within those documents are plenty of mind-numbing disclosures and inflated figures which don't exactly match what you agreed to over the phone, a little extra "junk fee" for this, and a little extra for that. In fact, the documents you have in front of you may look nothing like what you thought you were getting. Here is our first appearance of a move called "the bait and switch". The Bait and Switch is a sales maneuver that is used in most sales environments. This is where the loan officer "hooks" you with attractive numbers that are exciting on the phone, but when you actually SEE the figures, they are all switched to something different. This move can be executed at anytime during the loan process, but usually makes its first appearance at the presentation of the loan application documents. Some of the instances where you may see adjusted numbers (and the loan officer's response) are: The Loan Amount ("Sir/Madam, I know you only owe ____, but I put a little cushion in there just in case your payoffs come back high. If the payoff is lower, we can lower the loan amount."), The Interest Rate ("Well, Sir/Madam, interest rates adjust everyday and there is just no way to predict what the rate will be. I got you the best rate I could."). The Mortgage Payment ("Well, I know we talked about giving you this payment, but this is still a good payment. Instead of saving _____, you are still saving ____."), The Good Faith Estimate ("Sir, I don't know exactly what that fee is, but it's a standard fee charged on all loans. It's non-negotiable and it's paid directly to _____."), Cash Back at Closing ("I know we talked about getting you this much cash back, but we have to pay off this debt in order to qualify you for the loan.")Again, don't be afraid to get direct answers to your direct questions. It's your money. Every extra fee here, or higher interest rate there is basically more money that you will have to pay in the long run. Don't just accept what the mortgage broker or loan officer is giving you. If you don't get what you want, know that there are plenty of other mortgage brokers that want your business. Just because this company was first, doesn't always mean it's the best. Don't be afraid to shop around to make sure you are getting the best deal possible. Here's a little inside information: Loan officers hate being shopped around. As a matter of fact, two things will happen once you tell a loan officer you are looking at other companies. The loan officer will either try to discredit you for wanting to get another opinion and the other companies as not having the resources to do what their company can do for you, OR they will beat whatever legitimate offer given in order to keep your business. Either way, both options give you what you want which is the truth. 4 The loan process. This process is one in which borrowers will either stay with the first mortgage broker who originated their loan, or they will seek out an additional company or two to do business with. This is the most tedious part of the whole experience. You have reluctantly signed and sent back the loan documents with your concerns that the loan officer promise to address upon receiving the loan documents. Now you're hooked (or so the loan officer would like you to think). At this point, you have probably scheduled an appraisal of your home that the loan officer wants you to pay for (so he or she is not stuck with the cost if the loan goes sour) and have made arrangements to send all of your financial information (pay stubs, W-2s, 1099's, tax returns, bank statements, asset statements, etc). Now you think, "It shouldn't be much longer now." Honestly, the loan underwriting process only takes between 24 and 96 hours to get an approval or denial once the loan package is sent in (based on type of lender and type of loan). The loan process should work like this (and the appropriate time line): Appraisal (24-48 hours), Title Search and Commitment (24-72 hours), Loan Submission (24-96 hours), Clearing of Conditions (24-48 hours). Therefore, the loan officer knows very quickly if your loan has been approved or declined. If after a week, the loan officer says that he or she doesn't know the status of your loan, the loan officer most probably is shopping your loan to multiple lenders due to an issue with the loan. Instead of being upfront about the true status of your loan, most loan officers don't want to risk losing your business and will tell you that they are just waiting to hear back from the lender with statements such as "I just talked to the underwriter, and he is working on it right now" or "I just called and the underwriter is not in the office right now", or "I don't know what's taking them so long. Let me call them." These statements are sure signs that the loan is being shopped to new lenders because there was a problem with the original structuring of the loan. This shopping and sending to multiple lenders means that each lender has to pull their own credit report. So depending on how many lenders this loan was submitted to, your credit can be pulled 4 or 5 times on a single loan. Every time your credit report is obtained, your credit score is affected. Think about what four or five credit inquiries does to your score. What it tells the credit bureau is that you were unsuccessful in obtaining credit with one lender and now are looking for additional options. It indicates that you may not be a creditworthy individual and causes your score to drop. Once you do finally hear back from the loan officer regarding your conditional loan approval or denial, the next phase is the Clearing of Conditions (or things that the lender needs in order issue a final loan approval). These conditions range from needing proof of certain assets, clarification of payment of certain debts, reconciliation of certain accounts, title issues, or any sort of concerns on the appraised value of the home. These conditions need to be completely satisfied before the lender can issue a final approval and the loan is cleared to close ("CTC"). During this time, you may encounter some difficulties contacting your loan officer for status updates. This could mean that the loan officer is attempting to clear all the conditions, OR it could mean that the loan officer is stuck with a loan that he or she cannot get done. If the first reason is true, don't worry. Your loan officer will get back to you in a timely manner with the status of conditions. If the second reason is the case, buckle up because it is going to be a bumpy ride. As tough a talker most loan officers may sound on the phone, they really are pretty cowardly. Everyone has seen scenes in sales movies in which the receptionist is directed by the skittish salesman to "tell them I'm not here." It's essentially the same in this scenario as well. Let's be honest, a loan officer is required to be in the office more often than not, so if you are told every time you call that "Sorry, he/she is not in right now", that is a lie. The loan officer is in the office, but he or she is just thinking of what to say that will buy them more time, and not cause you go elsewhere. If you cannot get in touch with the loan officer directly, the next course of action is to speak with the manager or team leader. This course of action not only gets you the results you want, but puts a little pressure on the loan officer and brings a level of accountability to your loan process. No team leader or manager worth his or her salt will risk losing thousands of dollars in commissions to protect a loan officer. Get to the bottom of things. The next issue that you need to understand is that loan fraud is a high possibility during this time as well. Because we are talking about hundreds of thousands of dollars here. Why let the truth get in the way of a good mortgage. This is thought of many loan officers (Note: there are many good loan officers out there that do a great job everyday and don't commit fraudulent practices) that if a borrower is not as creditworthy as they need to be, that the loan officer needs to make up the difference by increasing a borrower's assets, eliminating mortgage delinquencies, or adjusting title liens and judgments. Because we live in an age of technology, it is very easy to create the documentation that's needed to get the loan approved and closed. Beware of these shady practices, because if your name and credit is attached, you can held just as liable for any wrongdoing as the loan officer and mortgage broker.5. The loan closing. There are a few things you need to know about your loan closing. The first concept you need to understand is "The End of The Month." This recurring concept is a staple in any sales-based occupation in which salesmen are measured ,and by all accounts, paid based on their performance before a certain date. This date in the mortgage business is either the physical end of the month (30th or 31st) or on the 15th of the month. You should know this information because loan officers will make a huge push to close before or on that date, regardless if the borrower is completely satisfied. The loan officer who is trying to get you to close your loan in a hurry at the end of the month will offer a placating excuse such as "You know you have 3 days of rescission, so we can change anything you don't like during this time." What that same loan officer doesn't tell you is that you can opt out of your loan, but in order to change any of the major details of the loan (interest rate, loan amount, payment, cash out, etc), that loan will have to be re-underwritten to access any additional risk to the lender. That would be basically mean that you would submit your loan again, get an additional approval, and clear conditions again. It does not mean that you can close your loan and then change everything around in the 3 day rescission period.You should know that you have all the power in this transaction. Many times a loan officer will push the customer to close at this time of night, or at a remote location, or without proper notice just so the loan will close and the loan officer can meet a certain goal. Those goals should have nothing to do with your complete satisfaction. What most borrowers don't know is that they have a right to review the final loan numbers in the form of a HUD-1 Settlement Statement a full 24 hours prior to closing. No mortgage broker or loan officer wants you to sit and analyze the HUD for 24 hours for fear of recognizing the second appearance of the tactic I mentioned earlier called the Bait and Switch. These are the final numbers and you should be completely satisfied with them before you go to closing. As a loan officer, I cannot tell you how many times I've sweated it out after sending a borrower a final HUD wishing that they would just glance at it and assume it's all the same information we spoke about. The loan officer is hoping that by showing you the "updated" numbers as late as possible, that you will just figure how much time you've already spent on the loan and the expense of starting the whole process over and you will just sign the documents. That's what every single loan officer is thinking.."Just sign." Don't be that naive. Take the extra time. Remember, it's ultimately your money. Once at the closing table, a good local loan officer will be at the table with you in order to explain the documents you are signing and how they affect you. Most mortgage brokers are nationwide or at least multi-state and cannot be at the loan closing. In those cases, a notary will be sent from the title company as a representative to close your loan. Keep in mind, this person does not know anything about mortgages. They are a contracted individual with a notary stamp. A good loan officer will have his cell phone on throughout the closing to contact in case any issues arise. If your loan officer does not make himself available for the closing, that is a sign that something is wrong with your loan and he is just assuming you will sign the documents anyway. Always make sure you can reach someone at the mortgage broker who can answer any questions you have. Let everyone know upfront that if the numbers aren't what you discussed that you are not going to sign. Again, this is your money. This is your loan. Do not be pressured into signing something that will affect you for the long term. If you are not completely comfortable...don't sign. Once your loan is closed, your loan officer should contact you to make sure you don't have any additional questions about your loan. Unfortunately, there are many loan officers that start the process of avoidance of their borrowers until right before or after the rescission period. This is because they know that the loan was shady and they are thinking "out of sight, out of mind." Look over the loan documents that you get as a copy. I know that there are a lot of documents, but look over the documents carefully to assure yourself that you got the right loan type, interest rate, loan amount, mortgage payment, debts paid, escrow account, cash back, etc. If it is not what you bargained for, contact your loan officer. If that is not successful, contact the manager or team lead. If that doesn't work, then sign and fax in your right to cancel to the title company. You may still end up doing business with that mortgage broker or maybe you even find another company to assist you, but at least you are not stuck with a mortgage that you are not comfortable with. Live to fight another day.




posted to History by teraawesome, 691 days ago
 (  0  )  

Who Voted for this Story

Advertisements
DREAMIT


Find quality Textile Buyers, Garment Buyers on reputable Importers Directory

Login
Username:

Password:

Remember:
Inbox