Posts Tagged ‘meltdown’

A New Service Takes Aim at the Real Estate and Mortgage Industry

Some of the best lenders for purchasing commercial property with good credit

Subprime mortgages, almost nonexistent 10 years ago, accounted for more than 10 percent of all new home mortgages in 2004 and kept growing over the next 2 years until the mortgage meltdown; Lewin said of company Mortgage Loan Inspection, LLC. Measures in the mortgage industry had become increasingly dated as banks and other mortgage lenders developed a array of high-cost subprime mortgages for people who would have simply been rejected outright in the past on the basis of poor credit or inadequate income”.
In addition to paying much higher interest rates than ”prime” borrowers did with strong credit, subprime customers were often locked into their high interest mortgages for three to five years and forced to pay an enormous pre-payment penalties if they try to refinance into a more suitable mortgage based on their credit and financial situation.
Lewin said “that part of the gap could be explained by differences in the kinds of mortgages that people used and by differences among mortgage lenders and the commissions paid based on selling consumers higher interest rates”. Loan officers from every lending institution were rewarded directly by the lenders to sell exotic loan programs and higher interest rates to consumers which translated into enormous commissions for loan officers and huge profits for the banks. The plan went well until one day the house of cards came crashing down. It was bound to happen, the hand writing had already been written on the wall and everyone in the industry saw it coming, except for the public.
Corporate greed had taken over the mortgage industry where once stood good common sense underwriting guidelines that were now bring disregarded all in the name of profit. Fast forward to 2011, the government after watching the financial and mortgage meltdown finally stepped in and created an agency whose sole responsibility it is in overseeing the lending industry. They began their quest by completing a major overhaul of the mortgage industry first starting with the documents currently being used. They wanted more transparency with the ability for consumers to be able understand what they are signing before they do. They attempted to create a new set of mortgage disclosures that would be easier and far less confusing to consumers which has now back fired. What was once a form providing a line-by-line description of all the lender fees and closing costs in a mortgage had now become a nightmare for consumers to understand, even the loan officers, and some real estate attorneys. According to HUD, on page 2 box 1 on the newly designed Good Faith Estimate (GFE), all the lender fees were combined together into a single fee and cannot be itemized separately. Consumers today can no longer look over their (GFE) or Truth-and-Lending (TIL) statement and even answer one basic question – how much is the lender charging me in fees? Here is a list of just some of the fees that are grouped together and no longer provided in a line-by-line disclosure to consumers – the origination and broker fee, processing fee, credit report, underwriting fee, lender’s inspection fee, rate-lock fee, tax service fee, flood certification fee, administration fee, express postage fee, etc.. I reviewed the new 3 page GFE and noticed a disturbing detail missing; signature lines, where does a consumer and lender sign on this legal document? The previous GFE version at least had a line on the bottom of page where you could sign.
Mr. Lewin also pointed out to me that HUD’s new attempt making it easier for consumers to understand the fees and costs being charged by their lender has become a guessing game”. He also showed me the new mortgage shopping cart on the bottom of page 3 of the GFE which is supposed to be used by consumers to compare different GFE’s side-by-side with at least 3 different lenders, it’s designed to help consumers when they go out shopping different lenders.
HUD’s concept of taking a copy of the GFE form provided to them by the first lender and using it when comparing offers other lenders seems like sound advice, except for one minor detail. Only one problem, unless you actually apply for a mortgage, the lender does not have to provide you with a copy of a GFE for comparison. I did some calling to both a few local and national banks and found most banks are charging from $50.00 to as much as a $400.00 in a non-refundable upfront fee to get a copy of the GFE. Well that just puts off about 99% of potential borrowers out there without a GFE for shopping comparisons. What are they willing provide you with? A loan scenario worksheet, which really is not worth anything since it doesn’t represent any real guarantee of the costs or fees they are promising or any real value when you decide to compare lenders side-by-side.
The only way I was able to compare offers from 4 different lenders was when I thought I would put Mortgage Loan Inspection to the test. They even surprised me, I wasn’t even interested in getting a mortgage but I wanted to see how their program worked. They answered my questions, told me what I would need to get a mortgage, prepared me for meeting different lenders and even shared a few insider secrets about how the industry operates. They even went as far as performing an in-depth budget analysis showing me how much of a payment I could really afford and still live comfortably. They are the first of their kind company in the nation and hope to spread across the country before mid-April. They opened their doors in Mequon, Wisconsin in late 2007, since then, they have expanded their current operations into 12 States.
The backbone of the company is made up of former Senior Bank Executives with over 30 years in the mortgage industry, Underwriters, and Wholesale Account Representatives. Lewin said, “It doesn’t matter what your educational back ground is, when it comes to getting a mortgage loan, unless you are working in the industry everyday there is no way you would be able to fully understand the information and changes daily that his company provides to consumers. He says they even show consumers how to negotiate with lenders for the lowest interest rate and best terms available, saving their clients hundreds if not thousands of dollars in lender fees, finance charges and closing costs. They charge a low flat fee that is 100% refundable if their client is not able to get financing on their home, this way he said, “There is absolutely no reason or no risk to stop a consumer from using their services.
Lewin said, “The easiest way to describe their service is – “We are like a Home Inspection, but for a Mortgage”.