Category Archives: Mortgage

Different Types of Mortgages

A guide to 15 different types of mortgages on offer in the UK. From Standard Variable Rate mortgages to more unconventional mortgages such as Current account and self certification mortgages

1. Standard Variable Mortgage

The most common type of mortgage. Mortgage payments depend on the lenders SVR. This is usually influenced by the Bank of England Base Rate.

2. Fixed Rate Mortgage

A mortgage with a period of 2-4 years where the interest rate on mortgage payments is fixed. There may be a slight premium for security, but it avoids interest payments becoming un affordable.

3. Capped Mortgage

This is like a fixed rate mortgage. It states a maximum interest rate but it can fall under some circumstances.

4. Self Certification Mortgage

A mortgage where there is not any need to prove your income through published accounts. Often taken by self employed.

5. Repayment Mortgage

A mortgage where you pay both, interest on the loan and capital repayments. Most mortgages are repayment mortgages. It means at the end of your mortgage term you will have paid off your mortgage debt.

6. Interest Only Mortgage

Mortgage where you only pay interest on loan and do not repay any capital. This requires a separate investment plan to be able to pay off the mortgage capital at the end of the mortgage term

7. Investment Mortgage.

A type of interest only mortgage but where taking out a mortgage also involves taking out a complementary investment plan to be able to pay off the mortgage debt.

8. Endowment Mortgages

Similar to an investment mortgage. There were many problems with endowment mortgages in the UK because often the investment failed to be sufficient to pay off debt.

9. Base Rate Tracker Mortgage

Similar to a standard variable rate mortgage. This is a mortgage where the interest rate is fixed to a certain discount compared to the Bank of England Base Rate

10. 100% and 125% mortgages

Usually it is necessary to pay a deposit of upto 10% of the house price. However with rising house prices many lenders are now offering a mortgage for the full amount. In some cases lender offer more than 100% to enable spending on the house itself.

11. Joint Mortgage

A Joint mortgage involves buying a house with others to increase the chance of getting a mortgage. Also known as co buying mortgages.

12. Adverse Credit Mortgages

Help for people looking for mortgages with bad credit ratings

13. The Never Ending Mortgage

A new and quite small type of mortgage where there is no necessity to pay off the mortgage at all. Instead you can pass your mortgage onto your children.

14. Reverse Mortgage

This is where you can receive income from the value of your house in return for the lender receiving an increasing share of the value of your house.

15. Buy to Let Mortgages

This involves getting a mortgage to buy a house with the specific intention of renting it out. These mortgage are more dependent upon the state of the Housing market

16. Offset / Current Account Mortgage

This is when your mortgage is combined with your current account at a bank or building society. If you have savings in your current account these are automatically used to reduce the mortgage capital you owe and therefore lower the level of mortgage interest payments.

Types Of Mortgages Available

In Canada there are two types of mortgages available to residential borrowers, one being a conventional mortgage and the other is a high-ratio mortgage. Within both types of mortgages there are two sub-types, which are either open or closed mortgages.

To clarify the various options one can be presented with when shopping for a mortgage this article is divided into two parts;

Part one deals with the difference between a conventional mortgage and a high-ratio mortgage and part two deals with the different sub-types of mortgages available within the two types. However, these are fairly generic explanations – just as there are many different lending institutions, so there are almost as many different varieties of mortgages available. This is another good reason to consult a mortgage broker. Depending on your situation, one type of mortgage may be better for your circumstance than another.

CONVENTIONAL MORTGAGE:

If you have at least 20% of the purchase price (or appraised value if this is lower than the purchase price) as a down payment, you can apply for a conventional mortgage.
Some lenders may require either CMHC, Genworth or AIG insurance as well because of the property’s location or type, even though you have 20% or more equity.

LOAN TO LENDING:

to 65% 0.50%

65.1 to 75% 0.65%

75.1 to 80% 1.00%

80.1 to 85% 1.75%

85.1 to 90% 2.00%

90.1 to 95% 2.90%

95.1 to 100% 3.10%

Please note: Insurance premiums are higher when the amortization is greater than 25 years or if there is more than one advance. This usually happens if you are building your house or having it built for you. Check with your Mortgage Broker to learn what the applicable premiums will be.

The insurance premium is calculated by multiplying the mortgage amount needed by the applicable percentage.

For example:

If the purchase price is $112,000 and the required mortgage is $100,000. You divide 100,000 by 112,000. This equals 89.29%.

Looking at the above chart – the premium is 2.00% when the lending ratio is 89.29%.
The next step is to multiply the mortgage amount by the insurance premium. Using our example this means $100,000 X 2.00% = $2,000. Your actual mortgage loan will therefore be $102,000.

CMHC’s 5% DOWNPAYMENT PROGRAM was originally for first-time homeowners, but was expanded in May 1998 and is now available to all purchasers (principal residence only) who meet the normal requirements. Furthermore, borrowers can now even borrow up to 100% of their purchase price under new CMHC’s Flex Down Insurance Program.

CMHC may set maximum purchase prices under these programs depending on the city so check with your Mortgage Broker to learn what the price limits are in your area.

If the property is a duplex (and you are buying both sides), with one side being owner occupied, the minimum down payment is 5.0%.

Mortgage brokers and lenders must verify that the borrower has the 5% down payment and 1.5% of the purchase price to cover closing costs. The only exception to the 1.5% is when the purchaser qualifies for an exemption of the Land Transfer Tax (Ont.) or Property Transfer Tax (B.C.), or similar provincial tax exemption. In these cases the mortgage broker or lender must ensure that there are sufficient funds available to cover all remaining closing costs.

OPEN MORTGAGES:

An open mortgage allows you to pay off part or the entire mortgage at any time without penalties. Open mortgages usually have short terms of six months or one year. The interest rates are higher than those for closed mortgages with similar terms.

VARIABLE RATE MORTGAGES / ARM (ADJUSTABLE RATE MORTGAGES):

At the start of a variable rate mortgage, the lender will calculate a mortgage payment that includes principal & interest. For the term of the mortgage your payments usually do not change. However, as the prime rate changes so will your mortgage rate.
If interest rates are dropping, less of each payment will go toward interest and more will go toward principal. If interest rates rise, more of your payment will be interest and less money will be reducing your principal.

Some of these mortgages are completely open (you can pay off all or part of your mortgage at any time without penalties). Others that offer a ‘prime minus’ interest rate (e.g. prime – 0.375%) may charge a penalty.

The interest rate on most variable rate mortgages is compounded monthly.

CAPPED RATE MORTGAGES:

These are variable rate mortgages that the lending institution has rate ‘capped’. In other words, the rate will fluctuate with prime, but the institution guarantees that you will not pay more than a certain interest rate, set by them.

These mortgages often have a penalty for early ‘payment in full’ and are often not portable.

CLOSED MORTGAGES / FIXED RATE MORTGAGES:

The expression ‘closed mortgage’ originates from the 1980’s when this type of mortgage was literally ‘closed’. You contracted to the lender to make your payments for the term chosen, you could not pay anything additional, nor could you pay off the entire amount for any reason except the sale of your property.

These days, there are many ways to pay down your mortgage principal quicker, though the name ‘closed’ mortgage still remains. See pre-payment options for ways to pay off your mortgage quicker.

Fixed rate mortgages are the most popular type of mortgage. You benefit from the security of locking in your mortgage interest rate, for lengths of time ranging from 3 months up to 25 years. The rates are slightly lower than for an open mortgage for the same term.

If you think interest rates could rise, you may want to choose a longer term, such as a 5 or 10 year term. If you think that rates are going lower, you may want to gamble on a shorter length of time. Discuss this with your Mortgage Broker.

The major lending institutions have different pre-payment options allowed under their contracts. These options allow you to pay off your mortgage faster. It is also possible to pay off most closed mortgages prior to the end of the term or pay down a portion of the balance owing. However, lenders charge penalties for doing so.

Please note that some lending institutions will not give any pre-payment options. It is wise to find out what options are available before entering into any mortgage contract.

CONVERTIBLE MORTGAGE:

These are fixed rate mortgages for terms of 6 months or 1 year. Not all lending institutions offer convertible mortgages. With a convertible rate mortgage you can lock into a longer term during the current term of your mortgage without penalty – but only with the same lender. For example, if after a couple of months you hear that interest rates are going to increase, you may change to a longer term mortgage such as the 5 year term.

REVERSE MORTGAGE:

CHIP – Canadian Home Income Plan is the name of the company providing reverse mortgages in Canada.

A reverse mortgage allows homeowners to convert equity in their homes into cash, without selling the property or having to make monthly payments.

To qualify, homeowners must be at least 62 years old, have significant equity in their property and live in B.C. or Ontario.

The amount that can be borrowed depends on the homeowner’s age. Reverse mortgages are for between 10% and 40% of the appraised value of the home. The older the homeowners, the more they can borrow.

The homeowner retains ownership and possession of the house. The lending company registers a reverse mortgage against the property. At death, or when the house is sold, the loan and the accrued interest must be repaid.

The biggest disadvantage to reverse mortgages, is that the interest keeps building on the amount of money borrowed (hence the maximum 40% loan). This means that if you borrow $50,000 this year and your interest bill is $5,000, next year your interest will be charged on $55,000 and so on. The longer the loan is in place, the greater the interest bill that has to be paid.

It is possible that when the house is sold, 100% of the proceeds from the sale may be required to pay off a loan.

If the homeowner dies the estate will have to pay off the loan and the accrued interest. This may wipe out any inheritance for the homeowner’s heirs.

Finding the Right Mortgage

In each state there are thousands of mortgage brokers. How do you know which one to choose so that you will end up at the closing table on time with the interest rate, loan terms and fees promised to you? Here are some tips and data that hopefully will give you the information and tools needed to find the right mortgage broker, how to work with them and to help minimize the risks before you get to the closing table.

First let’s eliminate some of the ways borrowers typically choose a mortgage broker. This may just remove most of the problems before they occur.

How Not to Shop for a Mortgage

As a lot of people do, you could go to the Internet and call the first few mortgage brokers that pop up, check the local Sunday Real Estate Section to see who has the best rate, or call someone from out of the Yellow Pages. However these should be defined as ways NOT to shop for a mortgage:

Searching On-Line

Most every mortgage broker is listed on the Internet. While it is a great resource, it is not the best way to shop for a mortgage. It may be obvious to some, but just because a mortgage broker’s Web site shows up high on search engine listings does not mean they have the lowest rates or have the best service or are even reputable. High search engine rankings do not speak to these factors, but rather to the fact that the webmaster who built the Web site probably spent hundreds of hours building and fine-tuning their site to show up on the Internet listings when you type in certain mortgage “keywords”. Search engines do not rank listings by the quality or reputation of a broker but more by the amount of other similar Web sites that link to that Web site, the amount of visitors it receives, how much the broker may have paid to be listed there and many other factors.

Once I had a customer call me and say “You must be reputable as you showed up #1 in Google.” Yes, I am reputable, and I do like to think we offer very good service and low rates, but that is not why my broker was listed at the top. (Number one out of over 275,000 listings for the term “atlanta mortgage”.) It was because the webmaster spent hundreds of hours building and fine tuning all of the pages within the site to show up with high rankings.

There are many Web sites that list mortgage company’s rates on-line. I don’t put too much stock in sites that list these company’s rates online. Typically mortgage brokers pay to be listed on those sties and some are “affiliate” sites. Which means they are charged a fee when the visitor goes to the link that was clicked on. To find out if you are on an “affiliate” site, click on the link it takes you to and examine the web address. If it has a code at the end of the domain name, such as “http://www.anybroker.com/source=2519” it is generally an affiliate. There is nothing wrong or illegal about this, just realize some of the sites may be biased by the companies that pay or give an incentive to be listed on their site.

Another tip is not to waste time in clicking on sponsored links. On Google they are listed in the right column, (and recently at the top of every page in a shaded box) while AOL’s links are lightly colored boxes at the top and bottom of the page and on Yahoo they are listed in the column on the right side and at the bottom of the page in a colored box. As they name implies they are “sponsored” links which means to be listed the broker has paid to be there.

Be aware that if you complete a form on a mortgage Web site concerning wanting more information prepared to be flooded with calls or emails from mortgage brokers wanting your business. There are a lot of Web sites that are only “lead” sites. They get your information and then sell that information to mortgage brokers across the nation. Only submit information on the Web site of the mortgage broker that you know you will be working with.

The bottom line is the Internet is a great way to find out more about a mortgage broker that you are considering using but it may not be the best way to find one you can trust.

Choosing a Mortgage Broker Based Solely On Rate
The interest rate obtained on a mortgage is one of the most important factors of a loan, but it is not everything. There can be over 30 separate closing fees that can factor into the total cost of obtaining a mortgage loan.

Don’t be fooled by brokers advertising that they have the lowest rates. Most mortgage brokers and lenders have about the same rate on comparable programs on any particular day. They may quote them with or without Loan Origination fees and/or Discount Points, which makes it even more confusing. When selecting a mortgage broker the interest rate is an important factor but let’s take it a step further to get a better picture of the total cost to you.

Sometimes when a prospective client calls me asking “What’s your rate?” I ask them what they would like 6%, 5% or even 4%. The fees to obtain such a low rate may be exorbitant, but we offer it. So again, rate isn’t everything. It is the total cost that the borrower ends up paying that makes the difference.

You have probably seen mortgage brokers advertise rates at 1%. Do you really believe that 1% money is available? The answer is No. This is what the monthly payment is based. Don’t be deceived by just rate.

The Liar’s Rate Sheet

Another way some borrowers shop for a mortgage broker is by comparing rates in the Sunday Real Estate section of their local newspaper. In the industry this is referred to as the “Liar’s Rate Sheet”. Here is how it works. Mid-week the mortgage companies forward rates and APR (Annual Percentage Rate) to the newspaper for the different loan programs. They may quote the actual rate for that day or they may be quoting what they think it will be on Monday. All mortgage companies know you can’t call them until the first business day of the week so they may hedge the rate a little to get the phone to ring on Monday. I am not suggesting that all or even a majority of the mortgage companies that list their rates in the newspaper do this. Most mortgage brokers and loan officers that I have met over the last 20 years are honest and ethical. But this is a very competitive business and there is a lot of money to be made on every loan.

Another flaw in the Liar’s Rate Sheet is in the APR’s that are listed. A simple definition of APR is, the true cost of the loan including certain designated closing costs. There are some loan officers that do not know how to calculate APR correctly. So do not base your decision on choosing a mortgage broker solely on the APR quoted.

Here is a sample of 10 recent rates and APR’s quotes in a major metropolitan newspaper by local lenders and mortgage brokers: (These are based on $175,000 loan amount with 20% down payment, 30 year fixed rate loan.)

Note Rate APR Origination Fee Discount Points

5.875% 6.050% 0 1.90

6.000% 6.103% 0 0

6.125% 6.603% 1.00 .13

6.125% 6.270% 0.16 0

6.250% 6.122% 0 0

6.250% 6.305% 0 0

6.250% 6.425% 0 0

6.250% 6.624% 0 1.00

6.375% 6.289% 0 .75

6.375% 6.470% 0 00

If you were trying to make a decision as to what mortgage broker you may want to contact based upon the note rate (interest rate) or the APR you would not only be terribly confused, you would also be misled. The only way you can accurately compare rates and fees among mortgage brokers is with an accurate and complete Good Faith Estimate and complete Truth in Lending forms.

It is also important to remember that many, if not all of the mortgage companies and brokers listed typically pay to be listed there each week.

If you want a partial list of mortgage brokers in your city use the Sunday paper for that reason. Utilizing the phone book or Internet will give you a bigger list. If you want a full list go to your state’s Web site that lists all licensed mortgage brokers in your state.

Where to Start

When you are looking for any type of professional service person, accountant, dentist, etc, who do you turn to? People typically ask the opinion of someone they trust, be it family, friends, neighbors, co-workers, attorney, accountant or other professionals. The referral method can also be used to help find a mortgage broker.

Make a list of 10 people (who have a mortgage) and ask the name of the broker they worked with. Be sure and get the name of the person they worked with. Keep in mind that service between one broker or loan officer and another can vary widely so you will want to contact that specific person, not just anyone in that broker. Also be sure to ask if they were happy with the rate and service they received.

Collect at least three names of loan officers or brokers or maybe even up to seven or eight. Why so many? Because it may have been a few months or years since your referral source last used this individual and it is possible that they have moved to a different company or even changed careers. In addition, not every mortgage broker is going to want to work with you concerning items that we are discussing. Also list any broker or loan officer that you have used in the past and were happy with.

A wise business man once told me. “Know who you are dealing with”. Now that you have a preliminary list of names let’s try to find out a little more about whom you are dealing with. To help with this I have put together two simple approaches:

1. Background checks

2. Making contact (Parts A and B).

Step 1 – Simple Background Checks

Don’t worry, there is no need to hire a private investigator or do any “dumpster diving” to gain secret information. I do, however, suggest that you do a little investigative work. It should only take about 30 minutes and it will not cost you anything. In fact, it may save you a bundle of money and stress later in the process.

Visit the government Web site for the state in which the mortgage broker is located that you are researching. Locate the page that has a list of mortgage brokers or lenders. If the company you are researching is not listed they may be listed under a different name. Also you may be able to search by the individual or loan officer’s name.

If they are listed on the State’s Web site, it may also list how long the broker has been licensed (you should do business with them only if they have been in business for a minimum of two years), how many loans they have closed in the previous year, how many employees they have, and if they have had any consumer complaints made against them, administrative fines levied or regulatory orders (such as “cease and desist” orders) placed on them, any of their employees or broker. Be sure to search under the individual broker or loan officer’s name, keeping in mind that some states do not license loan officers so that person may not be listed. Checking with the Better Business Bureau may give you some additional information but in my experience most mortgage brokers and lenders are not members of the BBB.

Find their Web site and read about them. Do they post their rates and update them daily? Do they offer informative articles or information? Read their bio’s, Mission Statement and Privacy Policy to try to get a sense of what they are about, what they stand for and their vision of how they conduct their business. In addition, look for membership in professional associations, awards, etc. If they do not have a Web site I would not deal with them.

Check to see if they are a member of the National Association of Mortgage Brokers. http://www.namb.org. I highly recommend working only with a broker or loan officer that has such designation because it shows a higher degree of professionalism and dedication to the industry.

Another organization to check with is the Association of Professional Mortgage Women. http://www.napmw.org Members of this association are made up of individuals in all aspects of the mortgage industry, however, you typically will not find many brokers or loan officers as members. This is a great resource for finding mortgage professionals in affiliated services in the mortgage industry such as title insurance brokers, appraisers, closing brokers and real estate attorneys.

There are also local mortgage associations that are not affiliated with a national association and I would still give credit to the broker or loan officer for being a part of a group that offers ongoing education and sets goals of ethical standards to their members.

Look on the company Web site to see if they are a member of any of these mortgage organizations or other trade associations. However, keep in mind that just because you see one or all of these logos or references on their Web site, does not mean that the person you are working with holds the designation or is a member of that association.

Here is a recap of information to research as you are narrowing down your top candidates:

o Broker or Lender?

o State Web site for complaints?

o How long in business?

o BBB complaints?

o Has a Web site?

o Rates are posted daily?

o Member of any national or local mortgage association?

o Professional designations?

STEP 2 – MAKING CONTACT

The next step is to contact the mortgage broker or loan officer to whom you were referred.

Part A – Approaching the Broker

If you were referred to a specific loan officer try to stay with that person. If you just have a broker name or if the individual you were referred to is no longer there and you still wish to check out the broker, ask for the broker or manager of the company and not just any loan officer who gets the phone. While this may not always be possible or practical, unlike a loan officer, the broker does not have to split the income with anyone else. In a larger broker the broker may not be able to give your loan the full attention it needs. But always start with the broker or manager and work down.

Many years back I received a phone call from a gentleman stating he was looking for a mortgage broker to “establish a business relationship with.” That struck me as a professional way to do business. I ended up doing a couple of transactions with him and felt we had a good working relationship. He approached me as a professional and I treated him as such. The point is, when you contact the person you are considering working with, let them know you are looking for a mortgage broker to establish a business relationship with.

Here is a suggest way to start the conversation:

“My name is _________ I am shopping for a mortgage and am calling a few brokers that have been recommended to me to see who I would like to establish a business relationship with. I was recommended to you by __________.

Do you have a few minutes to speak?

Great, I have just a few questions:

If they agree to speak to you, briefly lay out what you are doing, including if you are looking for financing for a purchase or refinance and the loan amount. In addition, mention your credit scores or credit history, the percentage of down payment. Then ask, if they offer the type of financing you need. If the person starts to offer rates, terms etc. politely let him know that you are not shopping for the rate and program now, rather you just want to get some basic information.

Ask if they are a broker or lender. If you are speaking with a loan officer then ask if the broker is a broker or lender. If they are a lender, try to politely end the conversation or tell them you need to work with a broker. (I recommend only using a mortgage brokerage broker, not a mortgage lender for your transaction.

Another good question to ask is how long they have been in business. (If speaking with a loan officer – how long they have been with this broker as well as how long they have been in the mortgage business.) I suggest you work with someone that has been in the mortgage business for at least two years.

It is important not to commit to a meeting on the phone or let them send you a Good Faith Estimate. The most important information is if they are a broker or lender, how long they have been in the business and maybe if they offer the type of financing you are looking for.

Part B – The Interview

Once you have narrowed down your list of potential mortgage brokers that you may want to deal with, it is time for the interview.

Start by calling them back and let them know you may be interested in working with them and you would like to get more information. I always suggest that you meet face-to-face at their office to get a feel for them and their broker. If you can’t meet with them at their office you can do it over the phone. Be prepared with your list of questions listed below, as they may want to do the interview immediately.

When you speak with them, again mention what type of loan you will need, (purchase or refinance, conventional, construction, investment, etc.) and be prepared to go into some detail about your financial situation, including employment status, credit history, down payment amount and the source of it and a rough idea of your financial assets. Do not let them start taking an application on you. You are there to interview them, not the other way around.

Do not give out your social security number during this interview. There is no need to do this yet as you are not going to decide on what broker to deal with until you have interviewed everyone on your list.

Questions to Ask the Mortgage Broker
Here is a list of suggested questions to ask the broker or loan officer.

Application Questions

o Will I get a signed Good Faith Estimate?

o Will you guarantee your estimate of closing costs? If not all at least yours?

o Who will pay for any extra charges that are over and above your Good Faith Estimate?

o Will you update the Good Faith Estimate as we move through the process?

o Is there an extra cost if I do not set up an escrow account (commonly called waiving escrows) providing the loan program allows that to be done?

o If my credit score affects the interest rate and/or program is it possible that you will help me raise my score to obtain a better rate and program?

o Does your credit reporting system offer a Credit Score Analyzer so we can work on raising my score?

o What is your approximate closing ratio for loan applications taken?

Service Questions

o Do you have in-house or contract processing? (If you are scoring these answers then in-house processing gets an extra point.)

o Will it be okay if I speak directly with your loan processor?

o How often can I expect to be updated on the progress of my loan?

o (If purchasing). My contract has a date to get approved for financing Can you make that deadline?

o What will you provide me to give to the seller to satisfy that stipulation?

o Will I get a copy of the appraisal, title commitment, and credit report? Note: Some, but not all states require the mortgage broker to give you a copy of the credit report that they have pulled. If they are not allowed to give you a copy they must at least give you a form that shows the credit scores on your report.

o Do you utilize Automated Underwriting?

oMay I pick my own title or closing broker or attorney?

o Will I have a Preliminary Closing Statement 24 hours prior to the closing so that my attorney and I have time to review it?

o Will you be present at the closing?

Fee Questions

o Do you charge an application fee? (Be aware that some brokers charge a non-refundable up-front loan application fee. Is the fee applied towards the appraisal and credit report? Ask if you will receive a refund of the unused portion).

o What is your typical Loan Origination fee on a loan of this size?

oI s there a separate broker fee? If so, how much is it?

o What is your processing fee?

o Is there an admin fee or any other fees that will be paid directly to you?

o Will you refund any overage on the credit report or courier fees?

Note: Do not mention the word or imply that there are any junk fees. It may be construed as offensive to a broker or loan officer. Be specific when addressing the fees or charges.

Rate Questions

o Do you have a rate float down policy?

o What if I lock a rate and the rate goes down? Will you lower the rate?

Privacy Questions

o How will you secure my private financial information?

o Do you have a written information and privacy plan?

Note: The Gramm-Leach-Bliley (GLB) Act requires financial institutions to ensure the security and confidentiality of all personal information collected from potential customers and to have a written policy and plan in place that all employees must abide by. Ask for a copy of their privacy policy (If they don’t have one, you may not want to give this broker all your personal and financial information, including data needed for someone to steal your identity).

Miscellaneous Questions

o How long have you been in the business?

o About how many lenders are you approved with?

o What professional associations are you a member of?

o Do you have any professional designations?

o Tell me about your broker and why I should choose you to handle my loan transaction?

Loan Program Question

If you are unsure or if you would like more input ask: What loan program would you suggest?

Cost Estimate Question

Would you mind preparing a Good Faith Estimate and Truth in Lending statement?

Broker Questioning Opportunity

Do you have any questions of me?

When the interview is complete, thank them for their time and let them know that you will get back with them. If at this point you feel comfortable with working with this broker or loan officer you may ask that he forward a Good Faith Estimate and Truth in Lending to you so you can review these forms and estimates.

EVALUATING THE BROKER

After your interview you may want to ask yourself some other questions to help determine or grade the mortgage broker regarding how you think they will handle your loan.

Consider these points:

Did the mortgage broker have any questions for you?

Did you feel he wanted to know more about your overall financial goals and how this mortgage fits with those goals?

Take time to evaluate which broker you wish to work with. Do not make a commitment to anyone until you have reviewed the Good Faith Estimate and Truth in Lending disclosures closely.
When you do receive the Good Faith Estimate, and hopefully, the Truth in lending statement, it should look professional and be complete have accurate dates and other information disclosed.

Hopefully, after you have done all of your homework you will be able to find a broker you feel comfortable with and that you believe will give you honest and ethical service.

Mortgage Licensing Update

The activity in the states continues to rise. Numerous states are considering legislation to curb the foreclosure crisis. Nothing of course can stop it at this point, but the states seem to feel that increased regulation of mortgage companies will at least help the situation. Mortgage Licensing is one of the hotly debated topics in the states. Consumer groups feel that there should be increased licensing, education, and bonding requirements for the mortgage companies and their employees. Many people think that too many requirements may increase the difficulty of a borrower to find the right loan for the right price as mortgage companies have to spend more money to comply with these requirements. Let’s take a look at the recent regulatory activity as it relates to mortgage licensing.

Washington Mortgage Lender Licensing

Washington has changed their requirements for mortgage lenders. Many will now need to be licensed under the Consumer Loan License. What activities can a licensed mortgage broker engage in under the Mortgage Broker Practices Act (MBPA) without triggering the license requirements of the Consumer Loan Act (CLA)? As a licensed mortgage broker you may act in these capacities:

Broker – assisting borrowers, or holding yourself out as able to assist borrowers, in obtaining a residential mortgage loan. Loans close in the name of the lender.

Table Fund – “Table-funding” means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. The mortgage broker originates the loan and closes the loan in its own name with funds provided contemporaneously by a lender to whom the closed loan is assigned. WAC 208-660-006.

Non-delegated Correspondent – You close loans in your name with funds provided by a lender through a line of credit. The lender provides the underwriting criteria the borrower must meet and makes the final underwriting decision.

Masachussetts Loan Originator Licensing

WHO IS REQUIRED TO HAVE A MORTGAGE LOAN ORIGINATOR LICENSE?

Any natural person who: (a) is employed by or associated with one (1) and not more than 1 mortgage lender or mortgage broker licensee regulated by the Division; and (b) negotiates, solicits, arranges, provides or accepts residential mortgage loan applications on real property located in Massachusetts, or assists consumers in completing such applications.
Sole proprietors licensed as mortgage brokers or mortgage lenders by the Division, as well as owners, officers and directors or entities licensed as mortgage lenders or mortgage brokers, are required to be licensed as mortgage loan originators in Massachusetts if they meet the definition above.

WHEN CAN AN INDIVIDUAL APPLY FOR A MORTAGE LOAN ORIGINATOR LICENSE?

LOAN ORIGINATORS WHO WERE WORKING FOR A LICENSED MORTGAGE LENDER OR MORTGAGE BROKER PRIOR TO NOVEMBER 30, 2007:

Applications must be submitted to Massachusetts through NMLS before May 28, 2008. The requirement for applicants to have completed a residential mortgage lending course does not apply to any individual who was working for a licensed Mortgage Lender or Mortgage Broker prior to November 30, 2007. Individuals who have changed employers since November 30th are also not required to complete a course prior to becoming licensed. Please note that any individual who meets these dates of employment standards and who does not file a license application with the Division of Banks prior to May 28th must complete a residential mortgage lending course prior to becoming licensed.

LOAN ORIGINATORS WHO FIRST BEGAN WORKING FOR A LICENSED MORTGAGE LENDER OR MORTGAGE BROKER AFTER NOVEMBER 29, 2007:

Applications must be submitted to Massachusetts through NMLS before July 1, 2008. Prior to becoming licensed, all applicants must complete a residential mortgage lending course that has been approved by the Division of Banks. However, applicants may submit their application filings to Massachusetts through NMLS prior to completing a course. Individuals who are presently working as loan originators may continue to operate after June 30th only if they have submitted a mortgage loan originator license application to Massachusetts through NMLS. Beginning July 1st, any individual who does not have a license application pending with the Division of Banks may not continue to originate loans in Massachusetts. Any individual who submits an application before July 1st will have until August 31, 2008 to complete a residential mortgage lending course. If such an applicant fails to complete a course prior to September 1, 2008, his/her mortgage loan originator license application will be terminated.

For information regarding the educational requirements for Mortgage Loan Originator license applicants, please see Regulatory Bulletin 5.1-105. The Division of Banks currently accepting applications for the approval of Mortgage Loan Originator educational courses.

Oklahoma Amends the Education Requirements for Mortgage Brokers and Mortgage Loan Originators

Effective November 1, 2008, new applicants for a mortgage broker license in Oklahoma will be required to have completed 20 hours of approved education during the three years immediately preceding the date of application, and new applicants for a mortgage loan originator license will be required to have completed 16 hours of approved education during the three years immediately preceding the date of application.

Tennessee Amends Mortgage Licensing Requirements

Effective January 2009, applicants for a license as a mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator will be required to complete an educational training course. Criminal background checks will also be required for mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator applicants, and for registered mortgage loan originators seeking to continue registration.

Minnesota Adds Commercial Loans to Definition of Residential Loans

Effective August 1, 2008, the definition of “residential mortgage loan” under the Residential Mortgage Originator and Servicer Licensing Act (the “Act”) will expand to include commercial loans secured by 1-4 family residential real estate. The bill also expands the definition of “residential real estate” to include non-owner-occupied property, and extends certain record-retention requirements from 26 to 60 months.

Colorado Adopts Emergency Rule Making Initial and Continuing Education Mandatory for Mortgage Brokers

Effective January 1, 2009 all mortgage broker applicants must complete the 40 hours of licensing education and pass the two-part exam prior to applying for a mortgage broker license.

All mortgage brokers who currently maintain a Colorado mortgage broker’s license must complete 40 hours of licensing education and pass the two-part licensing exam by January 1, 2009.

Illinois Anti-Predatory Lending Database Registration for Mortgage Brokers and Loan Officers

On May 15, Illinois began registration of mortgage brokers and loan officers on the Anti-Predatory Lending Database. The Anti-Predatory Lending Database Program, pursuant to Public Act 95-0691, will become operational on July 1, 2008. In order to record any mortgage against Cook County property, a Certificate of Compliance or Certificate of Exemption must be attached to the mortgage. Property located outside of Cook County is not subject to the act. A mortgage broker or loan originator that takes a loan application will be required to enter certain information into the database. The database will first determine whether the property is exempt. If it is not exempt, the database will then determine if it will be necessary for the borrower(s) to obtain counseling. If counseling is not required, the loan may proceed to closing. If counseling is required, the borrower(s) will be notified and given a list of all participating counseling agencies. The act aims to reduce predatory lending practices by assisting the borrower in understanding the terms and conditions of the loan for which he or she has applied. The act does not prohibit any type of loan.

Connecticut Eliminates Secondary Lenders and Brokers Act

Effective July 1, 2008, new legislation essentially does away with the Secondary Mortgage Lenders, Brokers and Originators Act by consolidating all regulation of mortgage lenders and brokers under one act. The bond amount for lender and broker licensees will also increase and the mortgage license application procedures and requirements will be modified.

Iowa Amends Code Chapters Administered By Division of Banking

Effective January 1, 2009, new legislation establishes initial education and examination requirements for persons subject to registration under the Mortgage Bankers and Brokers Act. Effective July 1, 2008 the required surety bond amounts will increase and the annual license and registration expiration dates will change from June 30 to December 31 for mortgage banker and broker licensees.

Mortgage Licensing Update

States are finally starting to finish off their attempts to legislate the housing problem. There are still many proposed foreclosure rescue plans in the state and federal legislatures, but most state licensing bills have been either passed or voted against. There is still some talk of a federal licensing requirement for mortgage companies if the state has not complied with the federal governments minimum requirements. There is also a lot of discussion about FHA Reform, which could affect FHA Licensing, and RESPA and GSE Reform. Be ready for some major changes. Their still appears to be more to happen before the end of this congressional session.

NMLS Transition Deadlines (Nationwide Mortgage Licensing System) Very important! See transition deadlines for NMLS transitions starting July 1.

HUD Reminds Lenders of FHA Rules for Dealing with Mortgage Brokers HUD recently issued a mortgagee letter reminding lenders of various payment and service restrictions when dealing with non-FHA-approved mortgage brokers for forward mortgage. The letter states that although a borrower may engage a non FHA-approved mortgage broker for counseling services, loan origination services may not be performed by the broker and the FHA-approved mortgagee may not compensate the broker for the counseling services. Such a payment would violate RESPA’s prohibition on duplicative fees and may even be considered an illegal referral fee. To the extent a borrower receives counseling from a non-FHA-approved mortgage broker, the services must constitute “meaningful counseling” and the fees must be paid from the borrower’s own available assets and disclosed on the HUD-1. In addition, a copy of the service contract must be included in the loan file submitted for insurance endorsement. See Mortgagee Letter 08-17.

Maryland New Surety Bond and Net Worth Requirements

There are two new provisions of law governing Maryland mortgage lender licensees (“Licensees”) that went into effect June 1, 2008. The first is an amendment to Md. Code Ann., Fin. Inst. (“FI”) § 11-508 which increases the amount of the surety bond, letter of credit or trust account required to be maintained by Licensees. The second is a new minimum net worth requirement that must be maintained by Licensees which is codified at FI § 11-508.1.

Surety Bond, Letter of Credit, or Trust Account

The new required surety bond, letter of credit, or trust account amounts are as follows:

$50,000 Bond, etc: Required where the aggregate principal amount of mortgage loans is $3,000,000 or less for the preceding twelve (12) months;

$100,000 Bond, etc: Required where the aggregate principal amount of mortgage loans is more than $3,000,000 but not more than $10,000,000 for the preceding (12) months;

$150,000 Bond, etc: Required where the aggregate principal amount of mortgage loans is more than $10,000,000 for the preceding twelve (12) months;

$750,000 Bond, etc: Required blanket surety bond when an applicant files five (5) or more original or renewal applications at the same time and chooses to submit a blanket bond.

Under Maryland law, surety bond, letter of credit, trust account amounts are based on the volume of the Licensee’s mortgage business for the preceding twelve (12) months.

  • Effective June 1, 2008, the new surety bond, letter of credit, or trust account requirements apply to each applicant for a new license or for the renewal of a license. These new requirements apply to applicants for original and branch location licenses. Any addition of a new branch location to an existing blanket bond will require the blanket bond to be increased to the new $750,000 bond amount or the option to post an individual bond for the new branch in the new amount required by law.

Minimum Net Worth

Another new provision of law requires Licensees to meet and maintain a specified minimum net worth. A summary of the required amounts are as follows:

$25,000 Minimum Net Worth: No lending activity;

$25,000 Minimum Net Worth: Not more than $1,000,000 in lending secured by residential real property for the preceding 12 months;

$50,000 Minimum Net Worth: More than $1,000,000 but not more than $5,000,000 in lending secured by residential real property for the preceding 12 months;

$100,000 Minimum Net Worth: More than $5,000,000 in lending secured by residential real property for the preceding 12 months.

The foregoing minimum net worth requirements take effect June 1, 2008. An additional net worth requirement of $250,000 where a licensee has engaged in more than $10,000,000 in lending secured by residential real property for the preceding 12 months will take effect January 1, 2009.

Please review Chapters 7 and 8 of the 2008 Laws of Maryland (codified at FI § 11-508.1) for important additional information regarding the new net worth requirements, including rules governing the use of lines of credit by Licensees that lend money to satisfy up to 75% of their minimum net worth requirements.

This office will require proof from Licensees that they meet the minimum net worth at the time of application for a new or renewal license and at the time of a compliance examination.

Alaska Finally Adopts Mortgage Lending Licensing Regulations The much-awaited regulations implementing Alaska’s Mortgage Lending Regulation Act have finally been adopted. The regulations implement new licensing and registration requirements for persons engaged in mortgage lending activities, requiring that any non-exempt person acting as a mortgage lender must be licensed and any non-exempt person acting as a small mortgage lender be registered with the state. The regulation also includes application, competency testing, and continuing education requirements on licensees and registrants. Other obligations imposed by the regulations include annual reporting, record-keeping, and supervision requirements. The regulations also enumerate a number of practices that are considered unfair or deceptive advertising or mortgage lending practices, and provide for disciplinary action taken by the Department. Finally, the regulations provide for the establishment and operation of an originator surety fund. The new regulations become effective on July 1.

If you are already operating as a mortgage lender, mortgage broker, or originator, you do not have to be licensed under the AMLRA until March 1, 2009. This means that if you are operating as a mortgage lender, mortgage broker, or originator in AK on June 30, 2008, you are not required to be licensed until March 1, 2009. The Division of Corporations, Business, and Professional Licensing will consider a person to be operating in AK on June 30, 2008, if the person is engaging in business as a mortgage lender, mortgage broker, or originator pursuant to a current AK business license issued for that purpose. For example, if an AK business license has been issued to a mortgage company prior to June 30, 2008, that would indicate the company was doing business prior to July 1, 2008. If you enter the mortgage business as a lender, broker, or originator in AK after June 30, 2008, you are subject to the AMLRA that takes effect on July 1, 2008.

Some highlights of the new law are: All mortgage brokers or lenders that make or provide mortgage loans to AK residents shall be required to obtain a license. This includes all companies that operate on the internet or provide remote lending from another state by mail, or telephone. All mortgage originators will be required to pass a background investigation and a competency test prior to providing service to AK residents. All mortgage originators will be required to complete 24 hours of continuing education every biennial licensing period. All mortgage originators will be required to pay into a surety fund. The fund will be used to compensate consumers for losses they may incur due to unethical or illegal behavior on the part of an originator. The division will conduct examinations of licensed entities on a three-year cycle, or sooner if a complaint is made by a consumer. Under the AMLRA, mortgage lenders and mortgage brokers must obtain a “mortgage license” and individual originators must obtain an “originator license.” An individual who is the principal owner or legally authorized manager of the applicant may apply for a dual license as a mortgage licensee and the single designated originator for the mortgage licensee.

Massachusetts Adopts Regulations for New Mortgage Loan Originator Law The Massachusetts Division of Banks recently adopted implementing regulations to establish procedures and requirements for licensing under its new mortgage loan originator law. Under the new regulations, loan originator applicants are required to submit documentation of their financial responsibility, character and fitness and proof of completion of pre-licensing coursework. In addition, under the new regulations, a loan originator must disclose his/her mortgage loan originator license number in writing to all potential borrowers and residential mortgage loan applicants at the time a fee is paid or when a mortgage loan application is accepted. The implementing regulations became effective on May 30, 2008.

All individuals currently working as loan originators for a Massachusetts licensed Mortgage Lender or Mortgage Broker must submit a Mortgage Loan Originator license application filing to Massachusetts through the NMLS before Monday, June 30th at 11pm, in order to continue to operate in the capacity of a loan originator. Please note that all individuals who meet the definition in M.G.L. c. 255F, section 1 must be licensed. Control persons, owners, executive officers and directors of licensed mortgage lenders or mortgage brokers must also obtain licensure as mortgage loan originators, if they meet the definition. Prior to becoming licensed, applicants must complete a residential mortgage lending course that has been approved by the Division of Banks. However, individuals may submit their application filings to Massachusetts through NMLS prior to completing a course. Individuals who submit an application before July 1st will have until August 31, 2008 to complete a residential mortgage lending course. If such an individual fails to complete a course prior to September 1, 2008, his/her mortgage loan originator license application will be terminated.

Please be advised that the effective licensing date of mortgage loan originators is July 1, 2008. Mortgage lender and mortgage broker licensees may not employ or retain any mortgage loan originator on and after July 1st unless the individual has an application pending with or approved by the Division of Banks.

Connecticut House Bill 5577 Becomes Effective July 1, 2008 Increases the bond requirements for lenders and brokers from $40,000 to $80,000 starting on August 1, 2009Moves up the effective date of the National Mortgage Licensing System provisions of PA 07-156 and changes the name of the system to the Nationwide Mortgage Licensing System (“NMLS”).

The bill converts existing “first” and “second” mortgage professional licenses to the combined license on July 1, 2008. The bill requires those licensed on that date to transition to the NMLS before October 1, 2008. All filings must be submitted exclusively through the system starting on July 1, 2008. (Initial applications submitted on the system between October 1 and December 31, 2008 cannot be approved before January 1, 2009.) Changes the expiration date for licenses and designates licensing fees. Under PA 07-156, starting October 1, 2008, all licenses must expire on December 31st of the year following issuance and all licensees must pay the required licensing and processing fee to the national system. For lender and broker licenses that expire on September 30, 2008, the bill extends the expiration to December 31, 2008. Starting on July 1, 2008, lender and broker licenses must expire at the close of business on December 31st of the year in which they are approved, unless the license is renewed. However, licenses approved after November 1st expire on December 31st of the following year. The bill requires a renewal application to be filed between November 1st and December 31st of the year in which the license expires, provided a licensee may file a renewal application by March 1st of the following year together with a late fee of $100. Any filing by that date with the fee is deemed timely and sufficient.

The Benefits of Using an Independent Mortgage

Types of mortgage advice

So what are the different types of mortgage advice and where would you expect to find them?

Non-advice

This type of mortgage broker offers the least consumer protection, they will simply ask a set of questions to narrow the customers requirements and thus filtering the number of mortgages available. They then present the customer with a small list of possible mortgages for the consumer to choose one appropriate. The consumer protection here is based on the script of questions the broker asks. The script is a process determined prior to the consumer appointment, and is impersonal. Therefore specific personal circumstances are unlikely to be assessed. It also assumes that the customers answers are factually correct and the final choice is made solely by the consumer. Although no advice is offered these brokers do handle the arranging of the mortgage on the consumers behalf, and therefore dealing with all the chasing and removing stress from the process.

Where would you expect non-advised brokers to exist?

Well believe it or not many non-advised brokers are within the high street banks and building societies.

Advice-only

This type of services is where a mortgage adviser uses their knowledge and skills to provide the most suitable mortgage to suit a consumers personal circumstances. This will involve a full fact finding interview, affordability assessment, discussion on the consumers future plans and aspirations, all of which provide key facts on a consumers requirements, and therefore a means for the adviser to identify suitable products. The adviser will not however, handle the arranging of the mortgage, and therefore the consumer would need to deal directly with the bank or buildings society to arrange the mortgage.

Where would you expect advice-only advisers to exist?

These advisers generally do not exist alone this is often a service provided through the ‘Independent Mortgage Adviser’ type below. And often comes about when the most suitable mortgage is only offered direct through high street (i.e. not through mortgage advisers/brokers). The adviser would therefore offer an advice-only option to the client and often charge a fee for this service. Although the client must deal directly with the bank or building society their mortgage adviser often provides support to the consumer.

Tied mortgage advisers

Tied mortgage advisers come in two forms ‘only offering mortgages from one lender or its own mortgages’ or multi-tied ‘only offer mortgages from a limited number of lenders’. This clearly limits the number of mortgage products available to match a consumers personal circumstances and in a lot of cases they may not be able to offer the most suitable mortgage product and therefore advice may result in the best mortgage they can offer, being woefully inadequate.

Where would you expect tied mortgage advisers?

High street branches. A consumer calls into their local building society branch and their in house mortgage adviser can only offer mortgage products from that building society. Consumer choice and mortgage product suitability are considerably reduced. Whats more, high street branches often offer low mortgage rates/fees as a loss leader (marketing term to bring in business) and then try to sell their tied insurance products which are often also woefully inadequate and expensive.

Whole of market advice By far the best coverage these advisers can offer mortgages from all the UK mortgage lenders (having mortgage adviser/broker routes). The vast amount of mortgages available through these advisers is likely to cover the individual circumstances of a consumer. Whole of market mortgage advisers offer advice through conducting a full fact finding interview, affordability assessment, discussion on the consumers future plans and aspirations and then can arrange the mortgage through the lender thus alleviating the stress which comes when purchasing a house.

Where would you expect whole of market advisers?

These advisers are usually separate firms often found in the yellow pages or through the internet they are sometimes linked to estate agents. On an initial meeting mortgage advisers should declare if they are whole of market and this will be disclosed in the ‘Initial Disclosure Document’ they provide you. If you are not sure if an adviser is whole of market then ask them.

Independent whole of market mortgage adviser

Finally this type of adviser has the ultimate scope of the mortgage market, not only can they offer mortgage advice from the whole of market (lenders with mortgage adviser routes) but can also offer an advice only process if they identify a high street direct deal is more suitable. The ‘Independent’ statement indicates that the adviser must offer the consumer a fee based service if required. This means that rather than the adviser taking commission as payment for the mortgage advice, the consumer can opt for paying a broker fee and any commission is rebated to the consumer. The benefit of the fee based service is the consumer knows the adviser will not be swayed by higher commission mortgage products when selecting a suitable mortgage, however these days this is highly unlikely as the mortgage adviser must prove to the regulator why a particular mortgage is most suitable. Some occasions where the commission is quite considerable this would mean the consumer could receive more money than the broker fee paid and therefore would be better off taking the fee based approach.

Where would you expect to find Independent Whole of Market Advisers?

Like the author of this document Independent Mortgage Advisers are usually separate firms often found on the high street, yellow pages or through the internet and they are sometimes linked to estate agents. On an initial meeting an independent mortgage adviser would declare that they are whole of market and that they offer a fee based approach if required and this will be disclosed in the ‘Initial Disclosure Document’ they provide you. If you are not sure if an adviser is independent and/or whole of market then ask them.

What do independent whole of market mortgage advisers do for consumers?

The benefits of opting for an independent whole of market mortgage adviser include but are not limited to the following: –

  • Treat customers fairly.
  • Take time to gain key factual details of the consumers personal circumstances and aspirations.
  • Support and inform the consumer from initial enquiry right through to completion and beyond.
  • Provide an informed view on the housing market in general (price negotiation, leasehold issues etc).
  • Provide a individually tailored service specific to the customers needs, not a faceless “one size suits all” (non-advised) service.
  • Advise consumers to thing about their long-term interests as well as the short-medium term thus minimising risks.
  • Work for the consumer – estate agents, lenders and insurance providers have a different agenda.
  • Explain the features and benefits of different mortgage and protection options.
  • Free to act based on conscience and fairness as not usually directly targeted on specific areas.
  • Protect consumers data and privacy.
  • Provide general support during what is acknowledged to be one of the most stressful events in life.
  • Provide a knowledgeable “Ally” in what can be a very worrying process.
  • Provide proficient, impartial, examination of mortgage products.
  • Identify when specific lending criteria restricts consumers personal circumstances.
  • Expert guidance in complex scenarios (shared ownership/shared equity, right-to-buy, adverse credit).
  • Identify the potential lender in unusual situations, thus avoiding the need for multiple credit checks.
  • Select the best protection providers for consumers with health issues or unusual insurance histories.
  • Choose the most appropriate products, from the whole of market for each aspect of a consumers mortgage and protection needs, and thus increasing their ability to afford their commitments, even when things go wrong.
  • Highlight unusual exclusions on protection and general insurance products.
  • Ensure the provision of appropriate and customized protection products.
  • Quickly find an alternative lender if declined without wasting the consumers time.
  • Can arrange property insurance in ample time to be ready for exchange of contracts on purchases.
  • Encourage competition and innovation from lenders.
  • Assist in calculating affordability, ensuring that consumers can afford their mortgage and protection commitments, along with their other commitments.
  • Perform data input/entry for the consumer, reducing errors, omissions and most importantly non-disclosure.
  • Take responsibility for the advice and recommendation provided, thus increasing consumer protection.
  • Protect the consumer from corporate sales tactics used by some lenders and estate agency chains.
  • Understanding the urgency of some transactions and “go the extra mile” to meet deadlines.
  • Collate, verify and supply documentation for the lender, thus reducing delays in processing and expedite the process for the consumer.
  • Liaise with third parties in the transaction, tracking progress and any developments updating consumers throughout.
  • Use past knowledge and awareness to predict problems and resolve them in advance.
  • Act as advocate for the consumer during the application process.
  • Explain the mortgage offer and assist in fulfilling the offer conditions.
  • Can find appropriate lenders and insurers for unusual properties ( thatched roof, flying freehold flats etc).
  • Protect consumers from aggressive third-party marketing.
  • Often personally available outside of normal working hours to answer questions or resolve issues.
  • Care about consumers and provide an ongoing long-term service, often several generations of the same family.

A Review For SC Criminal Attorneys, Lawyers & Law Firms

Mortgage fraud is problem that has reached epidemic proportions in the United States (US) in general and in South Carolina (SC) in particular. The white collar practitioner should be aware that mortgage fraud is generally investigated by the United States Federal Bureau of Investigation (FBI), although other agencies routinely assist the FBI and/or take the lead in investigating a case. Some of the other federal agencies which investigate mortgage fraud crimes for criminal prosecution include, but are not limited to, the Internal Revenue Service-Criminal Investigative Division (IRS-CID), United States Postal Inspection Service (USPIS), U.S. Secret Service (USSS), U.S. Immigration and Customs Enforcement (ICE), U.S. Department of Housing and Urban Development-Office of the Inspector General (HUD-OIG), Federal Deposit Insurance Corporation-Office of the Inspector General (FDIC-OIG), the Department of Veterans Affairs-Office of the Inspector General (DVA-OIG) and U.S. Bankruptcy Trustees.

The FBI works extensively with the Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau of the United States Department of the Treasury, created in 1990, that collects and analyzes information about financial transactions in order to fight financial crimes, including mortgage fraud, money laundering and terrorist financing. The FinCEN network is a means of bringing people and information together to combat complex criminal financial transactions such as mortgage fraud and money laundering by implementing information sharing among law enforcement agencies and its other partners in the regulatory and financial communities. South Carolina lawyers can keep abreast of mortgage fraud developments by visiting the respective websites of the FBI and FinCEN.

In South Carolina, mortgage fraud is generally prosecuted by federal prosecutors. The United States Attorney’s Office (USAO) and the U.S. Department of Justice’s (DOJ) Criminal Fraud Section handle the criminal prosecutions of mortgage fraud cases. The USAO in South Carolina has about 50 prosecutors in the state, and has offices in Charleston, Columbia, Florence, and Greenville. In the investigation stage, a person with possible knowledge or involvement in a mortgage fraud may be considered a witness, subject or target of the investigation. A subject is generally a person the prosecutor believes may have committed a mortgage fraud crime, whereas a target is a person the prosecutor believes has committed a crime such as mortgage fraud and the prosecutor has substantial evidence to support a criminal prosecution. Criminal prosecutions of mortgage fraud felony cases are usually initiated through the federal grand jury process. A federal grand jury consists of between 16 and 23 grand jurors who are presented evidence of alleged criminal activity by the federal prosecutors with the aid of law enforcement agents, usually FBI special agents. At least 12 members of the grand jury must vote in favor of an indictment charging mortgage fraud. South Carolina criminal defense lawyers are not allowed entry into the grand jury at any time, and prosecutors rarely fail to obtain an indictment after presentment of their case to the grand jury.

Often targets of a mortgage fraud prosecution are invited by the prosecution to avail themselves of the grand jury process and to testify in front of the grand jury. Generally, a South Carolina criminal defense attorney should not allow a named target of a federal criminal mortgage fraud investigation to testify before the grand jury. Subjects and witnesses in a mortgage fraud prosecution are often subpoenaed by the prosecutors to testify before the grand jury. A criminal defense attorney should likewise generally advise a witness or subject to not testify if any part of the testimony would possibly incriminate the client. With respect to a federal mortgage fraud investigation, when a citizen receives a target letter, subject letter, or a subpoena to testify before the grand jury, or is contacted in person by a law enforcement officer such as an FBI special agent, a South Carolina criminal lawyer who is experienced in federal prosecutions should be consulted immediately. One of the biggest mistakes a mortgage fraud target, subject or witness can make is to testify before the grand jury or speak to criminal investigators prior to consulting with a criminal defense attorney. The 5th Amendment to the Constitution allows any person, including a target, subject or witness in a mortgage fraud prosecution, to not incriminate himself or herself. Interestingly, there is no 5th Amendment protection for a corporation. Obviously, if a defendant has been indicted or arrested for a federal mortgage fraud crime in South Carolina, an experienced SC mortgage fraud lawyer should be consulted immediately.

An important practice tip for South Carolina attorneys representing clients who have decided to testify before the grand jury is to accompany the client to the grand jury court room. While not allowed in the grand jury proceeding itself, the attorney can wait just outside of the court room and the client is allowed to consult with the attorney for any question which is posed to the client by prosecutors or grand jurors. This is an effective way to help minimize any potential damaging statements by the client, and a great way to learn the focus of the prosecutor’s case. This approach makes it much easier to gain insights from the client as to the questions asked during the grand jury proceeding as opposed to debriefing the client after a sometimes long and grueling question and answer session which can last for hours.

South Carolina white collar criminal attorneys need to be aware of the types of mortgage fraud that are prevalent in the state in order to effectively identify and represent clients who are involved in mortgage fraud activities. Consumers need to be aware of the variations of mortgage fraud so that they do not unwittingly become a part of a scheme to defraud a bank or federally backed lending institution. Federal mortgage fraud crimes in South Carolina are punishable by up to 30 years imprisonment in federal prison or $1,000,000 fine, or both. It is unlawful and fraudulent for a person to make a false statement regarding his or her income, assets, debt, or matters of identification, or to willfully overvalue any land or property, in a loan or credit application for the purpose of influencing in any way the action of a federally backed financial institution.

Some of the applicable federal criminal statutes which may be charged in mortgage fraud indictments include, but are not limited to, the following:

• 18 U.S.C. § 1001 – Statements or entries generally
• 18 U.S.C. § 1010 – HUD and Federal Housing Administration Transactions
• 18 U.S.C. § 1014 – Loan and credit applications generally
• 18 U.S.C. § 1028 – Fraud and related activity in connection with identification documents
• 18 U.S.C. § 1341 – Frauds and swindles by Mail
• 18 U.S.C. § 1342 – Fictitious name or address
• 18 U.S.C. § 1343 – Fraud by wire
• 18 U.S.C. § 1344 – Bank Fraud
• 18 U.S.C. § 2 – Aiding and Abetting
• 18 U.S.C. § 371 – Conspiracy
• 42 U.S.C. § 408(a) – False Social Security Number

While states experiencing the highest number of mortgage fraud cases are California, Florida, Georgia, Illinois, Indiana, Michigan, New York, Ohio, Texas, Utah, Arizona, Colorado, Maryland, Minnesota, Missouri, Nevada, North Carolina, Tennessee, and Virginia, the state of South Carolina has seen a huge rise in the number of mortgage fraud cases being prosecuted by the USAO, DOJ and FBI.

In South Carolina, a disproportionate number of mortgage fraud cases have occurred in the coastal region. Some of the South Carolina counties with high concentrations of mortgage fraud or bank fraud cases include Horry County, Florence County, Georgetown County, Charleston County, Berkeley County, Dorchester County, Beaufort County, Colleton County and Jasper County. Some of the South Carolina cities with high concentrations of mortgage fraud or bank fraud cases include Little River, North Myrtle Beach, Myrtle Beach, Murrells Inlet, Georgetown, Awendaw, Mt. Pleasant, Charleston, North Charleston, James Island, Isle of Palms, Sullivan’s Island, Folly Beach, Kiawah Island, Hollywood, Ravenel, Beaufort, Bluffton and Hilton Head Island. The reason for the increased number of mortgage fraud and bank fraud criminal prosecutions in these areas is because large number of condominium, condotels, townhouse and similar real estate projects which proliferated in these areas. These real estate developments were popular in areas close to the waterfront and bank lenders were willing to loan money at a furious pace due to a perceived enormous demand.

There are a wide variety of schemes, artifices and conspiracies to perpetrate mortgage frauds and band frauds with which the South Carolina white collar criminal defense lawyer and consumers must be familiar. Typical mortgage fraud schemes or conspiracies that have occurred in South Carolina and elsewhere throughout the United States include the following:

Air Loans. The air loan mortgage fraud scheme is a loan obtained on a nonexistent property or for a nonexistent borrower. Professional scam artists often work together to create a fake borrower and a fake chain of title on a nonexistent property. They then obtain a title and property insurance binder to present to the bank. The scam artists often set up fake phone banks and mailboxes in order to create fake employment verifications and W-2s, home addresses and borrower telephone numbers. They may establish accounts for payments, and maintain custodial accounts for escrows. Phone banks are used to impersonate an employer, an appraiser, a credit agency, a law firm, an accountant, etc…, for bank verification purposes. The air loan scam artists obtain the loan proceeds and no property is ever bought or sold, and the bank is left with an unpaid loan that never had any collateral.

Appraisal fraud. Appraisal fraud is often an integral part of most mortgage fraud scams and occurs when a dishonest appraiser fraudulently appraises a property by inflating its value. In most cases, after the seller receives the closing proceeds, he will pay a kickback to the appraiser as a quid pro quo for the fake appraisal. In most cases, the borrower doesn’t make any loan payments and the house or property goes into foreclosure.

Equity Skimming. In an equity skimming mortgage fraud scheme, an investor often uses a straw buyer, false income documents, and false credit reports to obtain a mortgage loan in the straw buyer’s name. After the closing, the straw buyer signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments, and rents the property until foreclosure takes place several months later. Equity skimming also occurs when a scam artist purchases a residential property whose owner is in default on his mortgage and/or his real estate taxes, and then diverts rental income from the property for personal gain and does not apply this rental income toward mortgage payments, the payment of taxes and other property-related expenses.

Flipping. A flipping scheme occurs when the seller intentionally misrepresents the value of a property in order to induce a buyer’s purchase. Flipping mortgage fraud schemes usually involve a fraudulent appraisal and a grossly inflated sales price.

Foreclosure schemes. Foreclosure scheme scam artists prey on people with mounting financial problems that that place them in danger of losing their home. Homeowners in the early stages of foreclosure may be contacted by a fraudster who represents to the homeowner that he can get rid of his debt and save his house for an upfront fee, which the scam artist takes and then disappears. In a similar foreclosure scheme, Homeowners are approached by a scam artist who offers to help them refinance the loan. The homeowners are fraudulently induced to sign so-called “refinance” documents only to later find out that they actually transferred title to the house to the fraudster and then face eviction.

Nominee Loans/Straw buyers. One of the most frequent types of mortgage fraud occurs when a “straw buyer” is used to hide the identity of the true borrower who would not qualify for the mortgage. The straw buyer or nominee buyer generally has good credit. The scam artist usually fills out the loan application for the straw buyer, and falsifies the income and net worth of the straw buyer in order to qualify for the loan. These fraud scams were popularized with the advent of the “stated income” loans which did not require a borrower to prove his true income and net worth – the bank just believed the income and net worth that was “stated” on the loan application. Straw buyers are often duped into thinking that they’re investing in real estate that will be rented out, with the rental payments paying the mortgage, and are sometime paid a nominal fee outside of closing. In most case, no payments are made and the lender forecloses on the loan. Sometimes straw buyers are actually in on the scam and are getting a cut of the proceeds.

Silent Second. In the silent second mortgage fraud scheme, the buyer borrows the down payment for the purchase of the property from the seller through the execution of a second mortgage which is not disclosed to the lending bank. The lending bank is fraudulently led to believe that the borrower has invested his own money for the down payment, when in fact, it is borrowed. The second mortgage is generally not recorded to further conceal its status from the primary lending bank.

A mortgage fraud is usually reported to the FBI by the financial institution upon which the fraud has been committed. Pursuant to the Bank Secrecy Act of 1970 (BSA), a bank must file a Suspicious Activity Report (SAR) with FinCEN if a customer’s actions indicate that the customer is laundering money or otherwise violating a federal criminal law such as committing mortgage fraud. See 31 C.F.R. § 103.18(a). A bank is required to file a SAR no later than 30 calendar days after the date of initial detection by the bank of facts that may constitute a basis for filing a SAR, unless no suspect was initially identified on the date of the detection, in which case the bank has up to 60 days to file the SAR. See 31 C.F.R. § 103.18(b). Once FinCEN has analyzed the information contained in the SAR, if a criminal activity is found to have occurred, then the case is turned over to the FBI and the DOJ or AUSO for investigation and prosecution. The rise in FBI SARs reports involving mortgage fraud went from approximately 2,000 in 1996 to over 25,000 in 2005. Of those 2005 SARs reports, 20,000 of involved borrower fraud, approximately 7,000 involved broker fraud, and approximately 2,000 involved appraiser fraud.

The FBI has identified a number of indicators of mortgage fraud of which the South Carolina criminal white collar lawyer needs to be aware. These include inflated appraisals or the exclusive use of one appraiser, increased commissions or bonuses for brokers and appraisers, bonuses paid (outside or at settlement) for fee-based services, higher than customary fees, falsifications on loan applications, explanations to buyers on how to falsify the mortgage application, requests for borrowers to sign a blank loan application, fake supporting loan documentation, requests to sign blank employee forms, bank forms or other forms, purchase loans which are disguised as refinance loans, investors who are guaranteed a re-purchase of the property, investors who are paid a fixed percentage to sell or flip a property, and when multiple “Holding Companies” are used to increase property values.

One of the first and biggest South Carolina mortgage fraud prosecutions occurred in the Charleston Division in the 1990’s. It involved nominee borrowers and straw loans made by Citadel Federal Saving and Loan. Over 10 straw purchasers were enticed into the real estate loans by getting paid fees for signing up for the loans. They did not put up any of their own money as part of the deal and when the loans went sour the bank was left with properties that were upside down, that is, the real estate was worth less the the amount of the loan. Some bank insiders were part of the scheme and got convicted for their respective roles.

The range of defendants that a SC criminal lawyer will represent in a typical mortgage fraud case may include straw borrowers or nominee borrowers, real estate agents, developers, appraisers, mortgage brokers, and sometimes even closing attorneys and bankers. Bankers often get involved in mortgage fraud scams because they are receiving kickbacks from the borrowers or are paid bonuses for the volume of loans made and thus ignore proper banking loan requirements and protocols in order to make more money. Close scrutiny should be given to bank loan applications, appraisals, HUD-1 closing statements, borrower’s W-2 and tax returns when analyzing a potential mortgage fraud case for a potential client.

Federal judges who impose sentences for mortgage fraud normally rely upon the United States Sentencing Guidelines, which are now advisory as a result of the U.S. v. Booker case, when determining a sentence. A federal court calculates a particular guideline range by assessing a defendant’s criminal history, the applicable base offense level, and the amount of the actual or intended loss. Section 2B1.1 of the USSG sets forth a loss table which increases the base offense level according to the amount of money involved in the mortgage fraud. Generally, the more money which is lost in a mortgage fraud scam, the greater the sentence the defendant receives. In some cases, a defendant may be subjected to sentencing enhancements which means the defendant receives a greater sentence. A defendant may receive an enhancement for the role in the offense if the court determines that the defendant was an organizer, supervisor, or a recruiter, or used a sophisticated means to facilitate a crime, abused a position a trust, or targeted a vulnerable victim such as a disabled or elderly person. However, federal judges now have wide latitude for imposing a sentence because they must consider the broad statutory factors set forth in 18 U.S.C. 3553(a)which include the nature and circumstances of the offense and the history and characteristics of the defendant, the need for the sentence imposed to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense, the need to afford adequate deterrence to criminal conduct, the need to protect the public from further crimes of the defendant, the need to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner, the kinds of sentences available, the sentence recommended by the Sentencing Guidelines and any applicable guidelines or policy statement therein, the need to avoid sentence disparities, and the need for restitution.

There are some important strategic decisions which need to be made for the defendant who has been charged or indicted for mortgage fraud. The defendant and his lawyer should seriously consider the consequences of pleading guilty if he has in fact committed the crime. A mortgage fraud defendant can receive up to a 3 level downward departure for pleading guilty. A criminal lawyer representing a mortgage fraud defendant can also file a motion for a downward departure and/or a motion for a variance and argue factors to the court in support of an additional decrease in a defendant’s sentence. The mortgage fraud defendant’s criminal attorney should closely scrutinize the circumstances of the case and the defendant’s background and criminal history in order to help minimize the amount of time to be served. A valuable tip for an attorney representing a criminal mortgage fraud defendant in South Carolina is to consider mitigating factors such as disparate sentences, 5K departures for cooperation, aberrant behavior, property values, family ties, extraordinary rehabilitation, diminished mental capacity, extraordinary restitution should be considered as possible justifications for a lesser sentence.

A white collar criminal defense attorney in South Carolina must have an understanding of the basics of the mortgage fraud in order to adequately represent clients who have been charged or indicted with mortgage fraud violations. Recognizing the difference between the status of being a target, subject or witness can have important consequences in how a case is handled. A white collar bank fraud or mortgage fraud criminal conviction can have life altering consequences for those defendants convicted of the same. A defendant who is charged or indicted with the federal crime of mortgage fraud should consult with a SC criminal lawyer who is knowledgeable about the different types of these scams, how the scams are carried out, the law enforcement investigatory process, the grand jury process, substantive law regarding mortgage fraud, the applicable federal sentencing guidelines and approaches available to minimize a defendant’s potential sentence.

Tips For Locking in the Best Home Mortgage

Tip #1: Always Shop For Home Mortgage Rates

Don’t blindly accept a Realtor or Builder referral to apply for a Home Mortgage through their preferred lender. Many times they will say, “We work closely with this guy and he gets the job done”. Translation: “We play golf together and he buys the beer”. Remember, the Realtor won’t be paying the bill each month for the next 30 years, you will.

Mortgage Loan Officers that work off of a referral network of Realtors and Builders don’t have to have competitive Home Mortgage Rates because they have a steady stream of “Drones” (people who are referred to them and don’t shop) calling them. Shop around, get the lowest cost Home Mortgage Rate, then if you are inclined, approach the “preferred” Loan Officer you were referred to and ask him to match the quote.

If you apply for a Home Mortgage through a preferred lender without shopping, you will pay hundreds or even thousands of dollars in additional costs.

Tip #2: Call For Home Mortgage Quotes After 11:00 a.m. Eastern Time

Mortgage Rates change each day and sometimes midday. The previous day’s rates typically expire by 8:30 a.m. the next morning. Generally, Home Mortgage Rates are published each day by 11:00 a.m. Eastern time. This varies from lender to lender. To make sure you are getting Home Mortgage Rates from the current day and not a mixture of rates from the previous day from some lenders and the current rates from other lenders, always do your rate shopping after 11:00 a.m. Eastern time.

Get all your quotes after 11:00 a.m. Eastern time.

Sometimes Home Mortgage Rates change midday due to a volatile bond market. When this happens, some Home Mortgage Lenders will adjust the Discount Points for their rates in accordance with the new bond prices and publish new Home Mortgage Rates for that day. Other Lenders may continue to honor their morning rates.

Tip#3: Always Tell The Mortgage Loan Officer You Are Prepared To Apply For A Loan NOW

If you are buying a home, tell the Home Mortgage Loan Officer you are Rate shopping and you have a “ratified contract” to purchase a house. Tell him you intend to make a decision and Lock-In a rate on that day, but you have to check a few other lenders. If he asks you how his rates compare to the others, tell him he’s the first person you’ve called. If you are refinancing, tell the Home Mortgage Loan Officer you are ready to apply for a Refinance Home Mortgage today. If you don’t tell him that, he may provide a fake Home Mortgage Rate quote.

Loan Officers know you will probably talk to another lender with lower Home Mortgage Rates and the only way he can be sure for you to call him back is to give you a fake quote that appears to be the lowest. He’s expecting you will rate shop for several days and figures you will call him back in a day or two because he provided a low, bogus rate quote. Also, since Home Mortgage Rates change daily and are subject to change at any time, he’s not concerned about giving you a fake quote.

How will you compare quotes if you don’t know which quotes are real and which are part of a bait and switch plan? The only way to ensure getting real quotes is to box in the Home Mortgage Loan Officers by making them think you are ready to Lock-In a Home Mortgage Rate immediately.

Tip#4: Ask For The Total Points And The Total Fees

When you call a Mortgage Lender, ask for the “Total Points” (Discount Points, Loan Origination Fee, Broker Points) for each Home Mortgage Rate. Some lenders will only quote the Discount Points and deliberately leave out the Loan Origination Fee. You won’t find out about the 1.00 Point Loan Origination Fee until you apply for the Home Mortgage. By that time, the Loan Officer figures you will just accept it because he’s got your application and pulled your credit report. In addition, Mortgage Brokers often neglect to mention their Broker Fee.

Some lenders do not charge a Loan Origination Fee.

When you are quoted the Total Points, specifically ask them if there is an additional Loan Origination Fee or Broker Fee being charged. You truly have to nail this down when you talk to a Home Mortgage Loan Officer.

Also, ask for a list of ALL other fees that will appear on the Good Faith Estimate that you will be paying to the Lender or Broker. Make sure they include their Credit Report and Appraisal Fees. Some lenders charge one lump sum fee and that includes the Credit Report and Appraisal Fees while other lenders will itemize each fee. Keep it simple and ask for all fees, including the cost of the credit report and appraisal fees.

Don’t get confused by Title Company, Attorney Fees or Escrows. A lender will estimate these on your Good Faith Estimate, but these charges are not related to costs associated with a Mortgage Rate quote. The amount required for your escrow account will not change from lender to lender and Title Company and Attorney Fees are not being charged by the lender. Don’t include them in your comparison.

Tip#5: Always Confirm The Rate Lock Period When Asking For A Rate Quote

If you are buying a home and you need 60 days to close, make sure you specifically request Mortgage Rate quotes with a 60 Day Lock period. Some Home Mortgage Loan Officers will quote rates with 15 Day or 30 Day Lock periods because the Discount Points for shorter lock periods are less than rate locks for longer periods. Quoting a Home Mortgage Rate with a 15 Day lock period obviously gives that Loan Officer an unfair edge. It is also a waste of your time because the quote isn’t real if you can’t settle on your loan within 15 days. Always specify a 60 Day Lock-In if you are buying a home. Ask for 45 Days if you are refinancing, but you may be able to get it done within 30 days if you are very diligent and call your Home Mortgage Loan Officer twice a week for a status of your application.

If your rate lock expires, the lender will re-lock you at the higher of either the original rate or the current rate when you decide to re-lock. That’s a LOSE/LOSE situation for you. Never let your rate lock expire.

Tip#6: Compute The Dollar Cost Of The Points And Add All Fees

After you’ve spent some time talking to a bunch of Mortgage Loan Officers, you will have lots of Rates, Points and Fees on a sheet of paper. You will need to compute the dollar cost of the Points (multiply the mortgage amount X the Total Points expressed as a percent; For example, multiply 400,000 mortgage amount X.625% for.625 Points). Then add the dollar cost of the points to the Total Fees. You can then compare each Home Mortgage Lender’s Total Cost (dollar cost of the points + all lender related fees) for a given rate. That will show you which Home Mortgage Lender has the lowest cost Home Mortgage Rates.

If Mortgage Insurance (not to be confused with mortgage life insurance) is required on a Conventional Home Mortgage, ask for the cost per year expressed as a percent and compare it from lender to lender. Some lenders require different levels of coverage and this will affect your monthly Mortgage Insurance payment. In addition, lenders use several different mortgage insurance companies and they charge different rates for their coverage. The lender will select the mortgage insurance company.

The cost of Mortgage Insurance can vary from lender to lender even though most Home Mortgage Loan Officers will say, “We don’t determine the Mortgage Insurance coverage, Fannie Mae and Freddie Mac do”. Your can just say, “Please humor me and provide the Monthly Mortgage Insurance expressed as a percent”.

You will want to check the quoted percent with what is on your initial application documents and final loan documents to make sure the Monthly Mortgage Insurance payment isn’t higher than what you were quoted. If it is, get it reduced immediately. If they won’t do that, then ask them to reduce your Home Mortgage Rate by.125% and that should cover the difference.

If you are getting a government insured mortgage (FHA or VA), you don’t have to get into a comparison of the FHA MIP or the VA Funding Fee. This is a cost you will be paying, however every lender MUST use the same costs, so there is no reason to attempt to compare these costs from lender to lender.

Tip#7: When You’ve Found The Lowest Cost Rate, Apply and Lock The Rate

While you were looking for houses or thinking about refinancing, you may have shopped around and gotten some quotes from lenders and narrowed down your search to the best 5 Home Mortgage Lenders or Brokers. But when it is time to apply for your Mortgage, make sure you update your quotes for the 5 lowest priced Home Mortgage Lenders. After you identify the Home Mortgage Lender with the lowest cost rate, call and apply for the loan. Tell the Home Mortgage Loan Officer you want to Lock-In your Home Mortgage Rate and apply NOW. If the quote has changed since you updated your quotes a couple of hours before, tell the Loan Officer you want him to honor the previous quote. If he won’t do it, tell him you may call back. Then call the next cheapest Home Mortgage Lender on your list. If that lender tells you the same thing, you can go back to the first lender and proceed with the application process.

Before you provide your application information, make sure the Home Mortgage Loan Officer agrees to provide you with an actual Rate Lock confirmation via email or fax on the same day you apply for your loan. When you receive the Rate Lock confirmation, check it and make sure you are Locked-In for the number of required days (30, 45 or 60), with the correct Loan Type (30 Year Fixed, 15 Year Fixed, etc.), with the correct Total Points quoted. It’s normal for a lender to require you to apply over the phone before they will Lock-In your Home Mortgage Rate.

TIP#8: Never Float The Rate

If the Mortgage Loan Officer thinks you might be inclined to FLOAT your Rate and Points, he may say, “I think the rates are going to be coming down, so you might want to FLOAT”. Remember this, never FLOAT your Home Mortgage Rate. Never. Always Lock-In the Rate and Points. If you FLOAT, and the Discount Points for Home Mortgage Rates drop, you will only realize the benefit of a small part of that drop in the Points, if any at all. The Home Mortgage Loan Officer will keep the rest of the savings as a fat commission.

Here’s how they increase their commission when you FLOAT. Originally, the lender quoted 4.875% with 1.00 Total Point when you applied for your loan. Then 45 days later you called to Lock-In. Keep in mind that over the 45 day period that you were FLOATING, the actual Points for 4.875% dropped to.250 Total Points. So you should have saved.75 Total Points on your 4.875% rate. Right? No! First, you don’t know if his company’s points have dropped or by how much they might have dropped. So, instead of giving you 4.875% for.250 Total Points, the Home Mortgage Loan Officer tells you his rates only dropped a little bit. He says you can Lock-In 4.875% for.75 Total Points. You are happy because it is.25 lower than what it was when you applied for your loan, but the Home Mortgage Loan Officer is ecstatic because he keeps half of the “overage” you paid. That overage is.50 points and he splits this with his company. If the mortgage amount was $400,000, he just earned.25% which is an additional $1,000 commission. That’s not bad for a five minute phone conversation.

If you FLOAT and the Discount Points for Mortgage Rates increase, you will pay for the increase. FLOATING is a LOSE/LOSE proposition for you and a WIN/WIN for the Home Mortgage Loan Officer.

Some companies quote very low rates and attract lots of applications, but they don’t let you Lock-In until 15 Days prior to loan closing. If you apply for a Mortgage through a company with that policy, you will get screwed. When it’s time to Lock-In your Mortgage Rate, you will pay an “overage” that will go straight to the Mortgage Loan Officers pocket. You will either pay more points for the rate you requested at the time of application or you will get a higher rate. Either way, you will get screwed and the Loan Officer will get a fat overage added to his commission.

The Facts About the Mortgage Market in Canada

The facts about the mortgage market in Canada is that in the last forty years, it has undergone substantial changes. Depository institutions account for the majority of the market holding 69 percent of outstanding Canadian residential mortgage debt by the end of-2007. By the end of 2008, CAD 566 billion or 62 percent of the CAD 906 billion outstanding residential mortgage debt in Canada was held by depository institutions. The main reason for the growth in the bank share was due to the 1992 Bank Act changes, which permitted banks to own trust and loan companies that had been dominant players in the market. Prior to 1954, banks were not permitted to make mortgage loans. However gradually from the 1954 Bank Act amendments and thereafter, laws allowed banks an expanding share in the market over time. Yet, until 1992 conventional mortgages value could only be below 10 percent of bank deposits. Mortgage brokers have played a growing role in the market.

A mortgage consumer survey conducted by the Canada Mortgage and Housing Corporation in 2009 revealed that between June of 2008 and June of 2009, a quarter of all mortgage transactions were arranged through mortgage brokers. According to statistics, over 50 percent of the homebuyers accept the first rate their bank offers. This means that the majority are not using a mortgage broker who shops around for the best rate for its client. However, among first-time buyers and young women, a rising number are turning to mortgage brokers. In the last decade, mortgage brokers have seen a surge in business. Ten years ago, they comprised under 10 percent of the mortgage market; today, they comprise 25 percent of the share. Brokers bring personalized service and they can be used to get banks to offer more favourable terms.

There are several reasons for using an accredited independent mortgage broker. They educates you on your options. You get independent, unbiased advice. Unlike a bank employee, that is tied to a bank, an independent mortgage broker offers unbiased advice. As a freelancer, will not favour one lender over another based on anything other than rates. They will negotiate rates with lenders on your behalf and all their services are for free. Provincial laws require education, training and licensing standards for qualified brokers. A competent mortgage broker is licensed and in good standing with the provincial regulator.

The main difference between a mortgage agent and a mortgage broker is that to be a mortgage broker requires at least two years of working experience. The mortgage broker must pass an approved mortgage course. Mortgage agents must be supervised by a mortgage broker. Brokers work for a mortgage brokerage or on their own and bring together prospective borrowers and lenders. They do not administer the mortgage. After the client fills an application using the information contained therein, the brokerage scouts the market for the best mortgage. The mortgage request of the client is tendered through an electronic system to lenders.

A mortgage agent is an individual who carries out mortgage activities for a mortgage brokerage under the supervision of a licensed mortgage broker. The agent can only work for one mortgage brokerage. Under the Mortgage Brokerages, Lenders and Administrators Act you have to be licensed to deal in mortgages to be licensed, unless an exemption is applicable. To be licensed, a mortgage agent has to meet educational requirements. To meet these requirements, approved education courses must be taken. Application for a licence must be within two years of successfully completing the approved education courses. These courses are provided commercially, and tuition fees are set by the provider. The courses use the same curriculum, but different providers may use different formats. All approved courses are followed by a final examination.

The first step for obtaining a mortgage brokerage licence requires passing the mortgage agent education program. Then a mortgage agent licence should be obtained. The mortgage brokerage education course must be completed successfully. Thereafter application can be made for a mortgage broker licence. In the course of this process, the prospective broker should have worked as an agent for a year and worked under a broker.

Brokers and agents do your research and shop around for the best solution. Financing your home through a mortgage brokerage rather than a lending institution can save you both time and money. They work on behalf of their client to find the most suitable product at the best rate. Brokers provide access to virtually every mortgage product available. Consumers expect their own bank will give them the best rate and product. But, the bank does not have access to all the lenders and products available. The bank offers a limited number of mortgages. But, the brokers provide access to over 400 mortgage products on the market. Each of these products have their own distinctive features. They also have access to the new products launching frequently in this dynamic industry. Access to unique products also may only be offered through the mortgage broker.

Renewing and Renegotiating

When you bought your property, you almost certainly signed a mortgage agreement that continues to be in consequence for a specific period, referred to as term. Whenever your mortgage name comes to an end, you need to either pay off your mortgage loan or renew it for the next term. This is a good opportunity in order to reassess what you require in a home loan and to find mortgage choices that greater fit the needs you have today. You might also think concerning breaking a person’s mortgage contract before the concept of an ends, possibly because your own financial predicament has evolved or to use advantage of changes inside the interest prices that are offered from mortgage lenders. This is named renegotiating a person’s mortgage. Knowing what questions to ask can aid the very best mortgage available for you.

If ones mortgage understanding is that has a federally governed financial establishment such being a bank, the lender must supply you with a renewal declaration at very least 21 days before the finish of the existing term. This specific statement have to contain identical type of data that is in your current mortgage arrangement, such as the interest rate, payment regularity, term, along with effective particular date. It might be combined which includes a mortgage repair agreement. In case your lender establishes not to resume your home loan, they will have to notify a person at smallest 21 a short time before the conclusion of a person’s term.

Around four months before the conclusion of the mortgage period, you ought to contact a variety of lenders along with mortgage brokerages to get a new mortgage with the terms and conditions that are perfect for your wants. When that you are negotiating an interest rate, ask your current lender when they can offer you better conditions and terms than with your previous house loan term. Bring an effective approach to finding the mortgage in which best satisfies your wants. Remember that will for most people, the mortgage payment is one of the greatest chunks of their total household budget. Shopping around and discussing with your overall lender can save you money. Alternatively, if people don’t take charge of the practice, your mortgage loan might automatically be renewed for an additional pair term. Which means you may well not get the most beneficial interest costs and problems that you may.

You do not have to renew your mortgage with the exact same lender. You possibly can choose to transfer your home finance loan to a further lender whether or not this offers people terms and conditions that satisfy your desires better. Whenever you refinance your current mortgage with an all new mortgage bank, the fresh lender is going to process your mortgage app as when you are applying for any new mortgage loan. If you chose to switch your mortgage to a different lender, be sure you verify the expenses of switching lenders, like legal charges to sign up the new mortgage, costs to launch the preceding mortgage as well as other administration fees. You can ask if your new mortgage company will pay these expenses. You also have to meet with your lawyer (notary inside Quebec) so that you can sign a mortgage contract and determine your identity.

A large financial company is someone or company that provides mortgage goods of several different lenders. If you want to deal having a mortgage broker, it is critical to observe that the dealer may not automatically check whether your lender typically offer you an improved deal. To make certain that you receive the greatest offer through your current mortgage lender, contact the provider directly. It is your responsibility to check the new offers with the offer through the current loan provider. If you’ve questions with regards to mortgage brokerages, contact your current provincial govt, which oversees them.

While having mortgage term, if you find that your existing mortgage don’t meets your family needs or rates of interest go all the way down, you may choose to renegotiate ones mortgage arrangement? in other words, change the stipulations of your current mortgage. Prior to do, you need to determine whether renegotiating your mortgage is worth the potential costs, or maybe if solutions may superior meet your preferences.

Different brokers offer distinct terms and types of conditions. If you have a closed mortgage, your loan provider may or perhaps may never allow that you break your own mortgage contract. Read a person’s mortgage deal or contact your mortgage mortgage lender to discover. If the lender does allow you to break your mortgage settlement, they may well charge you a penalty and a few fees. Ones financial institution or the revolutionary lender may be willing to help waive and also pay portion or all of these fees if you ask them to achieve this.

If you spend a punishment to break your home finance loan agreement, ones mortgage deal will express how a penalty is actually calculated. It can be generally related to your house loan interest rate and could cost thousands regarding dollars. To uncover how much your charge will often be, read ones mortgage deal or contact your mortgage loan company. Keep at heart that this penalty can modify from every day because it really is based in current marketplace interest charges, the excellent balance eventually left on ones mortgage, as well as amount of their time left about the mortgage expression. However, the particular estimated amount that ones lender will give you should be close to this penalty.You will be able to reduce the number of penalty charges you have to cover by making a lump value prepayment just before renegotiating. Quite a few mortgage arrangements offer prepayment options without the need of penalty. If you’re able to do so, you may want to prepay part of your mortgage before you decide to renegotiate the item. Your penalty would in that case be computed on small balance remaining to pay.