Comment from thatguynamedmark
Date: January 31, 2008, 7:15 pm

I’d like to comment on the last statement, “Smart consumers get more than one quote and compare them, but rates change daily so get all your quotes at the same time to have a fair comparison.” As was mentioned in the previous article on “How to Wreck Your Credit Rating Faster than Bush’s Approval Rating”, multiple inquiries in a short period of time will also negatively impact your credit score. FICO says that inquiries done for a mortgage in a short period of time only count as one. As someone who writes software trying to analyze the real reason a FICO score is what it is, I can tell you that that’s just not true. Excessive inquiries are a big hit on your credit report.

One other thing to mention, and please feel free to tell me not to do this again because I’m promoting my company, is that most mortgage brokers have the ability to run your credit report through special software that quickly analyzes it and shows potential score improvements. This is different than shipping you off to a credit repair agency that can cost thousands. It only costs around $20 for a report but a free preview is always given. The report will give you a detailed plan of action that you can follow to get your score up. The credit score is the *one* thing that you have the power to change when applying for a mortgage. If you can increase your credit score, you can qualify for more loans at better rates.

Mark
http://www.creditscoremap.com

Pingback from NewsnStars.com » Blog Archive » Confessions of a Mortgage Broker
Date: January 31, 2008, 7:32 pm

[…] based in Southern California. Find out how mortgage brokers screw you and how you can fight back!read more | digg […]

Comment from hungarian33
Date: January 31, 2008, 7:39 pm

I actually saw the same article, but with extra comments, one pretty funny, http://opentopix.com/topic/business/confessions-of-a-mortgage-broker-how-they-lie

Comment from WriterWriter
Date: January 31, 2008, 10:36 pm

Well, thanks for that man! All your clients now know you’re dupicious and not to be trusted. I welcome your client base to contact me. I guarantee honesty and truth and my legislative board makes sure I mean that.

In Canada, where we are polite and HONEST, we are regulated so that we cannot screw our clients over. And, as we’re Canadian, we don’t do that anyway.

Each province in Canada - and the three territores - have real estate boards that manage the licensing and legislation of mortgage and real estate agents.

We are paid by the lenders, not by the clients, with the exception of very specific instances. If the client is paying us a fee, WHY they’re doing so is explained in full and they are REQUIRED to speak to a lawyer about that fee: this is called Independent Legal Advice (ILA).

Instead of soaking clients we can’t work with or don’t like, we do the honourable thing and pass them to a competant agent whose personality is more suited to that client.

The US system is custom made for screwing over its client base. See the SUB PRIME CRASH for a recent example.

For you Canadians reading this, rest assured that our industry is appropriately legislated and our mortgage agents properly trained and overseen. Except for rare and very short term instances, we do not see the fraud and blatant mistreatment of clients that the US market ‘enjoys.’ In fact, when an agent is dishonest in our industry, they lose their license AND the details of their case are posted on a public site for all to see and review.

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Date: February 1, 2008, 12:23 am

[…] you really need to arm yourself with the ways to protect yourself against such fraud.  Check out the article for yourself and be a better informed, more aware consumer of mortgage broker services. « […]

Comment from Bill Nickerson
Date: February 1, 2008, 4:30 am

Extremely disappointed with the article. It truly showed the author’s understanding of the mortgage world. It does not matter if it is Broker or a Lender when it comes to these fees. This so called “loan officer” is the example of why this country is in the situation to begin with.
A mortgage broker, by law, is not allowed to pad fees. If the appraisal cost $300, that is exactly what the broker is allowed to charge. A bank or lender on the other hand does and will pad fees. You will see that $15 credit report being charged on HUD for $50. No matter who the person is providing a mortgage, that person should always, ALWAYS, provide the cost of settlement up front. Not only do I and my staff do this, but we will sign the Good Faith Estimate as more of a guarantee. The last thing we want is a closing to go wrong, which is the last impression the client will get and sets the future relationship.
Pricing or Profit of a mortgage. Yesterday’s pricing was this, the 30 year fixed rate was at 6.00% paying 1.7% to the originating company, which would be 1.7% of the loan amount. (This could be to a Bank, Lender or a Broker). Oh yeah, don’t forget, REAL ESTATE brokers make 5-6% or the purchase price for all there hard work! IF the rate was 5.875%, it was paying 1.176%. So yes, you do make more by charging a higher rate, BUT, small and local banks yesterday were charging 6.125% for the same rate. The difference, by law, they do not have to disclose the amount of money they are making on the HUD-1 Settlement.
I understand your article, but you need more facts of how the entire lending world and how it works. The example you have chosen, I have seen that person in the banking, lending and broker world and should be sent to jail!

Bill Nickerson
President
Emerson Lending Company
I have been in Mortgage Lending for 20 years, I have worked for the large bank, broker and lender. If prepared properly, the broker will obtain the best financing options compared to the others.

Comment from Joe Consumer
Date: February 1, 2008, 2:00 pm

Mr. Nickerson,

Do I understand you correctly.

You could have given a client 5.875% for a 30 year fixed, and earned a rebate of 1.176%
But instead you let them pay 6.00% so you could make an extra half point (1.7%)?

Now you want me to praise you because somebody else would have ripped the guy off worse?

Pingback from links for 2008-02-02 « Simply… A User
Date: February 1, 2008, 4:31 pm

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Comment from hudsongirl
Date: February 1, 2008, 6:13 pm

Great article with good advice. Thanks for writing it, Joe.

To thatguynamedmark: You don’t have to get a credit report to get a quote or Good Faith Estimate (GFE). So you won’t impact your credit score.

I got three GFEs by calling brokers and lenders on the phone. I told them that I have good credit, told them the amount of the loan I wanted, and they faxed or emailed me the GFEs.

I talked to 7 loan officers and brokers and only three would send me GFEs. That was okay because I didn’t want to do business with anyone who wouldn’t give me a GFE.

I was able to negotiate some of the padded fees and I decided on one loan officer to work with.

I’m a first-time home buyer and I did some research. I bought some books at Amazon.com and the smart people said what Joe says; be smart and get quotes, look for and negotiate padded fees, don’t piss off people, and follow your instinct.

Comment from gilbertdenizard
Date: February 2, 2008, 8:23 am

Bill,

I greatly appreciate your comments. I agree that the author of this story has no understanding about how the industry works. You always here talk about brokers charging junk fees and it gets frustrating to deal with customers who think I should work for free.

I take time to educate my clients on all phases of the mortgage process. I tell them that if they are not 100% comfortable with the loan that I will not close it. I don’t want them to have any fears when the process is complete.

I tell all of my clients that they should have no fear shopping my offer around. I let them know that if they speak to an originator who tries to scare them by saying additional inquiries will drop their score, that the person doesn’t know what they are talking and not to deal with them.

WHILE IT’S TRUE THAT MULTIPLE CREDIT CARD INQUIRIES WILL AFFECT A CREDIT SCORE, IF YOU HAVE MULTIPLE INQUIRIES FOR EITHER A CAR LOAN OR A MORTGAGE, AS LONG AS THEY ARE ALL WITHIN 45 DAYS OF ONE ANOTHER, THEY ARE TREATED AS JUST ONE INQUIRY. ANY DIFFERENCE IN SCORES IS BECAUSE AN ACCOUNT THE BORROWER HAS UPDATED ITS REPORTING.

Hudson girl, while it’s good that you were able to get a GFE without providing your credit score, if when the originator pulls your credit, it’s worse than expected, the terms of your loan will change. If you want to get an accurate quote, it is best to be honest about your current situation and to provide as much information as possible up front.

I have 13 years of experience in the industry. I have worked during all parts of the real estate market cycle and I would be glad to answer any questions you have if you wish to contact me directly.

Just like in any industry, not everyone is knowledgeable or competent. I highly suggest that you do take some time to find a good mortgage specialist to work with to avoid the pitfalls you are all worried about.

Sincerely,

Gilbert Denizard
Mortgage Specialist
Fairway Independent Mortgage Corp.

Comment from j martinez
Date: February 2, 2008, 7:16 pm

Well said Gilbert. I have worked as a loan processor for approximately 8 years now and also trained loan officer when the market was still good. It pains me to see the so-called “mortgage crisis” being blamed on brokers (which I feel this article is basically doing). The fact of the matter is that the investors on Wall Street had far more to do with our current economic situation and problems in the housing market than the brokers. Sure, like in any industry there are unscrupulous people looking to screw over people for a quick buck. Informing the populous that a loan officer receiving rebate is tantamount to a “kick back” or that you should shop your loan without allowing a loan officer the ability to examine your credit is ABSOLUTELY RIDICULOUS. Most of us (especially those still employed in the industry) are honest and hard working people. I am accustom to working long hours (70 to 90 hour weeks ususally). Recently, I have found myself working harder and longer for less and less everyday. In the 20 some odd years the brokerage I work for has been in business, we have never had to buy a loan back. I have always steered my loan officers to be upfront and honest with our clients. I would never teach a loan officer how to do their job if I didn’t explicitly know how to do mine. Why do you feel you are qualified to inform the general public how a loan officer should do their job? Why people feel a loan officer should do their job for free is beyond me. But what the hell do I know, it’s not like I have done this practically everyday of my life over the last decade.

Comment from Unsecured Personal Loans
Date: February 5, 2008, 10:01 am

As a participant in the loan business myself, I am saddened to see this news, but I don’t think it is uncommon. Consumers are widely abused in many industries and where there is lots of money involved, and mortgages are no exception.

It is kind of funny to see all the mortgage brokers commenting. Of course they disparage info that makes their industry look bad, but I do think the article is pretty accurate.

Comment from lotides
Date: February 6, 2008, 10:50 pm

This is really pathetic. Not all Mortgage Brokers are sleazy, but your article doesn’t really account for that does it? Without some of these fees the people putting your loan together wouldn’t get a penny. Do you work for free? My dad is a Mortgage Broker. He has been for more than 40 years. He works long days — having to account for customers who need to communicate early in the morning to those who can only talk late at night. He spends hours trying to help his customer the best loan for their situation, filling out endless amounts of paperwork, coordinating between people, processors and banks. Sometimes people change their mind about getting a loan before it gets finalized and he doesn’t get a penny for all those hours of hard work. It’s a thankless job. So honestly — fuck you, asshole.

Comment from Joe Consumer
Date: February 7, 2008, 6:13 pm

lotides,

If mortgage brokers worked for a flat fee, or got paid by the hour and had a fiduciary responsibility clients they would not need to work for free or be sleazy. Would you accept a lawyer profited by from manipulating a deal or an accountant that modified his advice for kick backs? Of course not!

No one is suggesting that mortgage brokers should work for free, but deceiving people is not a fair way to get paid either.

We are just arming joe consumer with the knowledge to level the playing field.

PS Most jobs are thankless, what’s your point?

Comment from CogentBroker
Date: February 8, 2008, 4:48 pm

As a broker it always disappoints me to hear about guys like Jack in this business. Unfortunately there are Jacks in every business. Now that the mortgage business has slowed down I hope that transactional guys like that will not survive and those of us building trustworthy relationships with our clients will remain.

The problems listed are not problems with brokers as a group. They are problems of moral hazard that can occur everywhere. I’ve lost deals because I would not cross a line to trick someone, and I suggest that there are consumers (not all of them) out there who refused to listen to sound advice and went with the deal that was too good to be true.

Coming up with additional ways to restrict broker compensation, in my opinion, is not a realistic solution and only stifles competition. You would effectively drive brokers away from this business and leave consumers with fewer options. Banks are the alternative to brokers, but you get fewer choices with individual banks because they will only sell you what they have to offer while a broker can source the best deals from multiple wholesale sources. Some banks would probably love to see brokers close up so they can make even bigger margins.

Working on commission is not uncommon. Realtors do it all the time . . . anyone have a problem with Realtors getting paid their percentage? Joe Consumer you said, “Would you accept a lawyer profited by from manipulating a deal or an accountant that modified his advice for kick backs? Of course not!” I don’t know enough about accountants to comment on their compensation, but I do know they can be retained for advice and offer additional services. Many attorneys work on contingency which means they make big dollars or nothing — 30% of a settlement seems like a lot but I believe that’s common practice.

Finally, there seems be a lot of misunderstanding about rebate paid from lenders to brokers and origination charged by brokers. Both can be extremely beneficial to our customers.

Let’s say, for example, a broker needs to generate $3,000 in commission which is reasonable. That would be 0.50 points for a $600,000 loan or 2 points for a $150,000 loan. Assume both are 30-year fixed rates. If both loans take the same amount of work, each would make sense. That $3,000 could be earned as rebate or origination. The rebate scenario would have a higher rate than the origination scenario. Paying the origination and recouping your fee through lower monthly payments over 5 year period would be a good investment if you were sure of keeping the property and loan for a longer term. Choosing the higher rate with no origination would be more beneficial to a consumer who wants the security of a long-term rate but thinks they might sell or refi in less than 5 years.

The bottom line is mortgage lending is not always as simple as it’s made to appear. You should choose to work with someone knowledgeable who has good references. A good broker can save you a lot of money and sleep.

Comment from Joe Consumer
Date: February 9, 2008, 4:09 pm

CogentBroker,

It’s so much nicer to get a thoughtful response like yours, instead of the “fuck you, asshole” posted by lotides.

First of all, $3,000 seems like a steep fee to organize a loan, but if a broker were to say upfront, that’s what we charge, and if you’d like to hire us that is what you’ll pay, nothing more and nothing less - that seems like fair and transparent business. If any rebate were returned to the consumer (or deducted from the fee) this is a reasonable arrangement.

Additionally, a consumer could hire a broker based on either a lower fee, higher levels of service, or a broker who worked with a bigger network of lenders, etc. In any case, the consumer need not fear his broker under this scenario. This seems a more honest model.

Next, I’d like to address you comments on commissions. I think the analogy of a lawyer working on commission is flawed for several reasons:

1. A client need not work with a lawyer on contingency if he doesn’t want to. Virtually all lawyers will work hourly. Contingency cases are only the norm when there is money to be recovered and the client can’t afford to cover the costs up front, or bear the risk. The attorney also bears risk in the transaction, as some contingency cases pay nothing.
2. When a client and a lawyer agree to work on a contingency basis, everybody knows the percentage up front and the client can easily shop the deal.
3. MOST IMPORTANTLY: The Attorney has a fiduciary responsibility to the client and only earns more by getting more for the client. This same basic model is true with a real estate agent. However, since they earn such a small percentage of the transaction, they are really not driven to squeeze every dollar out the way they should (see Freakonomic for a great explanation of this.)

Comment from william gipson
Date: March 1, 2008, 11:12 pm

I was taken for a good ride I assumed a 80-20 loan 100%finance 1st morgage was $150.000 dollars and second was what they call stupid money 46.000 total $202.000 all together I asked for a 30 year fix at 7.0250 on primary loan and at 12% the second loan for 46.000 dollars I was supose to refinance with in 1year after move in. At closing I signed papers because I was told the deal was done and I never checked the papewr work over had no lawyer and they also said we would have to hurry as another closing was following after mine so all I had was sign here and here for 1 hour and then I got the keys and all the closing papers in a folder. I asked if I had 30 year fix ys yes but it was on the 2nd loan at 12% and i had a arm after 2years for the principle loan which is what I never asked or wanted. Then they tell me I can`t refinance because they don`t do 80-20 loans any more and I am ineligable to refinance. WellsFargo sucks and the whole deal was a big screw job I am forced into going chapter 13 or chap7 I can`t get help no where and I haven`t missed NY PAYMENTS AS OF YET.

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Date: March 3, 2008, 2:20 pm

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Comment from AG
Date: March 5, 2008, 8:29 am

Interesting article and comments. Here is another one I’ve wondered about a bit and that is the role of lawyers who represent both you AND the mortgage broker. Our lawyer did this when we bought our first house and it has always made me wonder what sort of conflict of interest existed in that arrangement. We were more fixated on the intracities of buying the property than the details of the mortgage. We ended up with a great loan and our experience with our mortgage broker was pretty good, but after the fact, I’ve long wondered about what relationship existed between our lawyer and the mortgage company.

Thanks.

Comment from Been Behind the Hud
Date: March 5, 2008, 10:04 am

All well and good - But watch your title company, friends. They can be dishonest too. I worked for a VERY unscrupulous title company. It doesn’t matter that changing things on the HUD is illegal - they did it. Forging buyer’s authorization forms? They did it. Charging for title insurance that was never actually purchased? They did it. Just because you watch your broker, doesn’t mean your escrow company doesn’t need some watching, too.

Comment from L. Harley
Date: April 10, 2008, 7:26 am

Maybe someone can help me with these questions. Approx. 4 months ago, I found a condo in NJ that I wanted. I contacted three mortgage lenders all within about 30 days. Getting the loan from all three was positive, especially one that was handpicked by the builder who could close a non-warrantable structure (no comps in the area - condo has only 3 units, very unconventional). After selecting the lender who could “absolutely” close this kind of structure, as stated by the builder, it seems now that they cannot do so. This transaction have gone as far as the lender appraising the propertya few weeks ago, securing a grant for me given by the State of NJ, etc. Now it is 4 months later and I have to find another lender. How will this affect my credit score since the 45 day period for multiple inquiries counting as 1 inquiry is now gone. Will my credit score drop with another inquiry from yet another bank? My scores are high to low 688 - 759. And, which score do mortgage lenders chose - the highest, the lowest or the median of all 3. Please answer asap as I am waiting to send my application to this new bank. Thanks for all your help.

Comment from Bill Nickerson
Date: May 9, 2008, 3:15 pm

Bottom Line: Always get a second opinion and always get a Good Faith Estimate of Closings Costs upfront. These are FREE, and if someone is telling you diferently, move on to the next source. Get a referral from a local reputable attoreny or real estate broker that is succesful. Consumers need to do there homework as well. There is a group of us that believe in full disclosure upfront and will not have the cutomers sign anything until they fully understand the costs associates with purchasing or refinancing a home. I am sorry to the consumers that get taken in this industry and I know with the new legislations, many brokers, loan officers will be gone. In Massachusetts, LO’s are to register witht the national mortage registry and pay a fee of $745. Although this won’t fix the problem, it will weed out a hefty bunch of the sleazy brokers. Many states are following this lead and making it tougher for these idiots to stay in business.

Joe, you are like many of the Newspapers that just want to sell copy. I am sure you could write a story about anything and find the bad side of it. Try educating the consumers with facts and point them in the right direction. There are good Brokers, Lenders and Banks out there. Buyer Beware, there are Bad Brokers, Lenders and Banks as well.

Bill Nickerson

Comment from Rich Hirsch
Date: July 22, 2008, 12:14 pm

Wow, I read the article and many of the responses. My first thought was that the techniques mentioned to rip off the client have never even crossed my mind.

I entered this business because in previous businesses I never felt as though I was helping anyone. My job is to help not hurt! I love my job, I like and respect my clients, and at the end of the day I’m proud of the work i do. Even in this very difficult lending environment my thought is to work harder, be smarter, and provide exceptional customer service, not to devise new ways to rip off the client.

I look at each loan as the begining of a family tree. If I provide a competitive rate, low costs, and provide exceptional service I’ll reap the rewards of referrals and a growing family tree.

I’m personally embarassed by the article and will continue to conduct myself professionally and work for and in the best interest of my clients………and i have the references and referrals to prove it.