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Mortgage Broker vs. Bank Loan Officer - Which one should you choose? August 2, 2010

""If you don't run your own life, somebody else will."....John Atkinson

Mortgage Broker vs. Bank Loan Officer

When you're looking for a mortgage loan, you may work with a loan officer who generally works for a bank, or you may choose to work with a mortgage banker or mortgage broker. People often confuse these three loan providers even though they will get you the same results: a new home loan.

It is important to understand the difference between these three types of jobs so you know what to expect from them during the mortgage application process. Not all Bankers can act as Brokers and not all Brokers can act as Bankers.

As an employee of a bank, a loan officer is a representative of that lending institution and works to sell mortgages and other bank products for their employer. They may have a wide variety of loans types to draw from, but all products originate from that one specific lender.

When you deal with a bank, you are STUCK with ONLY their products even if there is something better for you out there. Historically, a broker could choose between several competing banks. They still can, but due to recent disclosure requirement changes, each time a broker changes the investor for you, the application disclosure process must start over adding days to closing times.

A Mortgage Banker is required to take at least 20 hours of classroom training and pass not one, but two comprehensive tests (for the Todd Croy 3-tests including South Carolina and Deanna is also licensed in VA = 4-tests) to ensure that they know and understand the mortgage loan products, programs, State and Federal Disclosure laws and most importantly how to ethically counsel Mortgage Borrowers. These tests must be completed and a background check completed BEFORE they are issued a license allowing them to work with you. In addition 8-hours of Continuing Education is required each year for each state.

Did you know that a bank loan officer is only required to be "Registered" with the State? It's true...No training, No testing, No licensing requirements, No Continuing Education, just registered. Many who cannot past the testing requirements to be a mortgage banker are moving to national banks for this very reason.

When you deal with The Valeo-Croy team of Cunningham and Company you get the best of both worlds. We work behind the scenes to get multiple investors to compete for your loan. This, coupled with State of the Art Technology allows us to deliver favorable results with great rates with an on-time closing.

All our best for the upcoming week.

@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team - (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.
This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply. Date: 8/2/2010
 


FHA Rules to Change - Still the best 1st time buyer loan August 9, 2010

"Trust your own instinct. Your mistakes might as well be your own, instead of someone else's." ~ Billy Wilder

Beginning September 7th there will be a new schedule for FHA mortgage insurance premiums made after that date. In basic terms, the upfront premium will decline from 2.25 percent to 1.0 percent and the annual fee will increase from .55 to as much as .90 percent.

All of this raises a question: If the FHA expects to raise an additional $300 million per month with the new program — and it does — are borrower costs rising by $300 million? The answer has to be yes, but the increase may be a lot less per loan than most people anticipate.

Here’s why: To understand what’s going on let’s imagine that you get a $200,000 fixed-rate FHA loan. Let’s also say that the loan lasts seven years — which, as it happens, is a typical loan term before an FHA mortgage is paid off, refinanced or erased as part of a home sale. The loan is a 30-year mortgage at 5 percent.

Under the old schedule there would be a 2.25% fee up front — that’s $4,500 that must be paid in cash or added to the loan amount. Over a period of seven years the loan balance goes from $200,000 to $179,871. In other words, the average amount outstanding over seven years is $189,935. With a mortgage insurance premium of .55 percent per year, it means the total cost for the annual mortgage insurance premium, the MIP, is $7,312. Add the up-front fee and the annual fee over seven years and the total cost for FHA loan insurance under the current system will be $11,812.

Under the schedule for loans made on September 7th and thereafter, the up-front fee for the same loan will be $2,000. The annual MIP, .90 percent, will be $11,966 or a total for FHA financing of $13,966.

What his means for borrowers and to you:

FHA will still be the most affordable solution for first time buyers. Even though the payment on a $200,000 FHA loan would be higher than a traditional 95% Fannie or Freddie loan (@ 5% the payment would be $38.71 higher) the down payment dollars required would be $3108 less and the cash-on-cash payback on this difference in payment is 80 months.

FHA loans have changed their pricing model to a risk based pricing model like Fannie Mae and Freddie Mac already, a person with a 620 FICO score will have a higher rate than a 740 FICO score borrower. FHA will still lend to those with 620 scores when others will not.

The new MIP and monthly mortgage insurance premiums will guarantee that FHA will be around for the future new home buyers no matter what your credit score.

The Valeo-Croy team provides expertise for all FHA programs including financing of HUD foreclosures and getting FHA approval for condo developments. Please think of us first of your first time home buyer.

When you deal with The Valeo-Croy team of Cunningham and Company you get the best of both worlds. We work behind the scenes to get multiple investors to compete for your loan. This, coupled with State of the Art Technology allows us to deliver favorable results with great rates with an on-time closing.

@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team - (704) 366-7711

Todd Croy - NMLO license #91428

Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply. Date: 8/9/2010


The Right Appraisal Can Make All the Difference - We Have an Advantage August 19, 2010

Rumors about HVCC being repealed have begun to fly around the mortgage industry. The Home Value Code of Conduct law (HVCC) that went into effect has been the center of controversy since it went into effect in May of 2009. The law was part of the sweeping changes to keep appraisals independent from the loan officers’ influence and make sure values provided were real.

While the HVCC was a great idea the law was written so loan officers cannot have any influence on who is given an appraisal. Deanna and I had a group of 12 appraisers we used around the city, those who knew Lake Norman, Plaza Midwood, Myers Park, University/Concord and yet others that knew the South Carolina markets. The issue is the appraiser (often a licensed realtor as well) will know their specialized market better than an appraiser from another part of town much less another town. Comparables that may look the same will have different values in different neighborhoods. You have to know the area when you are assigning values.

For most Realtors I am singing to the choir – they all have horror stories about an appraiser coming from Albemarle to do an appraisal in Ballantyne Country Club and comparables being used close by but from another subdivision ending in a below value appraisal.

The reason for these crazy appraisal assignments are the use of Appraisal Management Companies (AMC’s). When the HVCC law was being passed the large banks in the county created new profit centers called AMC’s where they went out for bid for appraisal services. The appraisers are allowed to list the areas where they want appraisal assignments. So an appraiser living in Kings Mountain, NC can list Lake Norman and Charlotte on the list of appraisal assignments he would like to receive along with Shelby County (this has happened). Since the AMC’s are profit centers they assign the appraisals to the lowest bidders and the AMC then “underwrites” the appraisal and adds a “value added” fee to the appraisal which the customer pays for to get their new bank loan. The result has been appraisals that do not reflect the real value of the property.

At Cunningham and Company we approach things differently, all of our seasoned loan officers gave a list of appraisers to add to our pool of appraisers for the Charlotte (and surrounding market place) – they are paid their full fee and we do not add a “value added fee”. The result is a better appraisal product and a better chance of getting the full value out of your home or your customer’s home.

While foreclosures and short sales have affected values our appraisers are know the areas of town better than the low bid appraisals coming from the AMCs.
Keep this in mind next time you have a customer buying a new home or a refinancing your current mortgage. A great appraisal can make the difference.

 


Close Your Loan Faster with a Mortgage Banker August 23, 2010

Last week, we were informed that many of the large banks are now requiring 60-day locks for purchases and 90-day locks for refinances due to high loan demand. Many of the larger banks are trying to control costs (people) after acquisitions of other legacy lenders Countrywide, Washington Mutual and Great Western that have been bogging down profits in the mortgage business.

As a mortgage banker we can still close a loan in 30-days and recently I closed a purchase loan in 15 days. This is because we have delegated underwriters that are approved to underwrite loans for all the big lenders. Mortgage bankers are different from brokers in that we fund our loans in our name with our money and we also underwrite the loans with our staff. Brokers are hired guns, they collect all the necessary loan information and then submit it to the lending bank for them to underwrite and are subject to the bank turn times just like direct lenders.

Having quick turn times will become even more important when the new NC purchase contract is required to be used. The new contract will have dates that must be met for commitment from the bank; if those dates are not met then your borrower can lose their earnest money even if they cannot qualify for a loan (more on this later).

We can help you even if your client has already begun the process with another lender. We will speed the road to closing and get them in their new home or have your client in their new lower rate after refinancing with predictable results.

Apply for a home loan with us now, its easy to do.  You will have your answer back the next day with real answers from the person who will be doing your loan.  Not a call center. (Hit the refresh button if it does not come up right away.) Print the form to a PDF and email it back to us and you are good to go.

All our best for the upcoming week.

@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team - (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings

The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply. Date: 8/23/2010
 


New Credit Before Closing Could Kill Your Loan Approval August 30, 2010

We have been saying for years for customers to not open new credit during the mortgage process. This becomes even more important as we move forward in time. I wanted to clarify the new quality initiative after this past Sunday’s article in the observer. The article stated that credit does not need to be re-pulled and this is true; however, all lenders are moving to credit monitoring services and if significant changes are made to a client’s credit profile a new report will have to be pulled. The reason is spelled out below. Bottom-line do not let your client open new credit until the loan is funded. This applies to even Jumbo borrowers with excellent credit, income and assets – there is a good chance any new credit will delay closing.
 

Fannie Mae's "Loan Quality Initiative"

It's called the Loan Quality Initiative. In an attempt to minimize "bad loans", Fannie Mae has told lenders to take more responsibility for their files, and has put them on the hook if loans go bad. 
The Loan Quality Initiative is Fannie Mae's response to surging foreclosures. The program shifts the onus of mortgage guideline compliance away from the government-backed group and to the individual banks responsible for making loans.

There is, however, one major consumer hurdle. And it's a doozy.

Beware the 11th-Hour Credit Score Re-pull

In the new LQI environment, Fannie Mae has lenders that an applicant's credit profile did not change while the loan was in underwriting. If the profile did change and the lender "misses" it, Fannie Mae can then refuse to purchase the loan for securitization, burdening the bank with loan on its books (and possibly a loss).

Therefore, it behooves banks to take each mortgage applicant's credit report in hand, and do a complete re-pull just prior to closing -- just to make sure nothing changed.
Banks wants Fannie Mae to buy their loans so they're looking at the re-pulled reports for evidence of any of the following events that might have occurred while the loan was in underwriting:
 
Did the applicant apply for new credit cards?

Did the applicant run up existing cards?

Did the applicant finance an automobile, or other major purchase?

If the updated credit report doesn't match the original credit report, the mortgage is subject to a complete re-underwrite and a possible loan turndown.

The 3 Things An Underwriter Will Scrutinize

When banks re-pull credit just prior to closing, there are 3 things for which an underwriter is looking, and specific actions the bank will take.

What the bank will do:
Recalculate debt-to-income ratios using your "new" minimum payment due figures. If the DTI exceeds Fannie Mae's maximum threshold, the loan will be denied.

What you should do about it:
Don't run up credit cards prior to closing -- even for layaway items. Consider paying more than the minimum due, just in case.
 
What the bank will do: Use your new credit score to assess loan-level pricing adjustments or outright denials for when scores fall below Fannie Mae's minimum credit score requirement.

What you should do about it:
Follow the basic rules of keeping your credit score high -- pay your bills, don't let things go into collection, and don't look for new credit unless necessary. myFICO.com has a terrific series on credit scoring you can review.
 
What the bank will do: Look at the Credit Inquiry section of your credit report to look for "non-disclosed liabilities". If items are found, the bank will ask for supporting documentation on the inquiry, and will use the information to re-underwrite your mortgage.

What you should do about it:
Don't go looking for new credit until after your loan is funded. Period. Now re-read that first sentence, please, to help it sink it.

And remember -- this is all happening after your loan has reached "final approval" status.

Loan Approvals will not be final until they are final.

Fannie Mae started its Loan Quality Initiative is to improve its loan pool's performance. Better loan quality can help keep conforming mortgage rates down and reducing taxpayer burden from foreclosures simultaneously. That's two big wins.
Unfortunately, the LQI will also lead to additional mortgage turndowns and a lot of busted closings.

Be extra careful with credit between your application date and your closing date, therefore. If you must buy something big, think about paying cash. Anything that goes on a card can be used as grounds for revoking an approval; even if your loan is cleared-to-close.
 
Make sure to let your buyer know about these new rules – they need to know not to buy items with new credit or run-up existing credit lines until after closing.

All our best for the upcoming week.
@ The Valeo-Croy Team, we are here for you.

The Valeo-Croy Team -  (704) 366-7711

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421


Accessible | Program Expertise | On-Time Closings                              

 
The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.

This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for Cunningham and Company to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply.   Date: 8/30/2010