Just out of curiosity, do realtors have to be licensed in every state, but mortgage brokers do not?

Kevin, every state has their own rules.

Bill Roberts

Interesting Bill, I never thought of it like that. The system doesn't work well when you have a mortage broker who has an adverserial releationship with the client who doesn't even realize this, they probably think the broker is  looking out for their client and not themselves.................this stinks  

How sad, but in Southern California it happens all the time unfortunately. We do need to get everyone who is not a direct lender licensed by the DRE and get a decent training program for them as well.

 I remember when I was doing home loans everyone in my office was selling those pay option arms, just because they paid 3 points to the broker. I never sold one since I knew that borrowers would get into trouble. Now everyone who sold those loans are having to deal with unhappy clients who are in foreclosure and there is nothing they can do. How sad.

Michael, How right you are. It stinks to high heaven. It's time to change the system.

Bill Roberts

Charles, You are right of course. DRE licensing would cure a lot of ills. Maybe a little higher standards for the DRE license wouldn't hurt either. Thanks for chiming in.

Bill Roberts

Bill, doesn't the bill that was just passed call for more regulation in regards to licensing? Anyone that is dealing with a person's finances should have a fiduciary duty.

This is a sad story.  I dispute that the home owner's age is relevant.  It could have and has happened to many of all ages. 

This scenario is why we're in the trouble we're in. 

And the lenders want to tell me to mind my own business and not be interested in my buyers' loans. 

Not likely.

Excellent article.  This describes the abuse of this home owner so that anyone could understand.  Why not put this in Localism for CA??

Mario, I'll believe that the problem has been fixed when I see the actual law that says so.

Bill Roberts

Darn Bill, This guy certainly raped this poor lady. Why oh why don't folks take the time to at least understand what they are signing and how much it is going to cost them? A license is NOT going to make a dishonest person honest. Just look how many unscrupulous real estate people there are. Don't get me wrong I'm all for licensing. At least it does give the consumer some authority to complain to. The thing with this deal is the LO probably didn't do anything that is illegal. The consumer needs to be educated.

Well done Bill. How come you get all the features? :)

Lenn, Thank you very much. I am a Realtor and a mortgage broker. I look out for my clients. I think we all must do that. I advocate more real estate brokers becoming mortgage brokers and keep the transaction in-house just so that this kind of thing doesn't happen, but if it does the borrower will have recourse.

I did post it to Localism for my county (San Diego).

Bill Roberts

Sadly, Bill, there are a lot of "predatory" types here who are licensed.  I do not know that they re qualified.  It seems that character cannot be determined for a license as it is too subjective!  Thank you for your thoughts!

BB, You're right, there was nothing illegal about what he did, just unscrupulous. Plus the borrower has no recourse. If a DRE licensee had done this they would have done something wrong and would have been subject to disciplinary action . Plus she could have sued him for damages. A DRE license would have made all the difference in the world.

Thanks for commenting.

Bill Roberts

Sarah, As I mentioned to BB and others the license may not change the person but it gives legal protection to the client. Thanks for commenting.

Bill Roberts

Bill - It is no consolation, but I hope there is a special place for these people come judgement day.  I wonder if a case could be made for a kind of discrimination based upon age and ethnic background.  I doubt it, but it seems worth investigating.

NO it is not typical, but it is what the media wants you to believe is.......

your line  "When the lender pays the broker YSP they protect that payment by charging a prepayment penalty. This woman has a three year prepayment penalty on this loan."  is very misleading and to be frank wrong.  I make YSP and 98% of my loans have no PPP.  I would say 100% but there are the few "sub prime"loans that I do that have them.  Why are they subprime?  Well bankruptcy in the last 24 months makes you a subprime loan.

another comment "advocate more real estate brokers becoming mortgage brokers and keep the transaction in-house just so that this kind of thing doesn't happen, but if it does the borrower will have recourse."  My question is how many points do you make when you "double dip"

 Option Arms suck and they should not be sold to anyone that doesn't have a clue about how things work

Yes this loan officer probably did "rip her off"

Sorry if you think LICENSING would have stop this loan, although it may have stop this loan officer from getting in the profession

I don't see how being licensed would make the mortgage person any more liable for the borrowers position. The borrower signed the docs and evidently did not read them. Why should the mortgage person be responsible if the client ends up not being able to afford the loan a year later. People on general need to be responsible for the decisions that they make. This would be no different than a car dealer selling a high priced vehicle and 6 to 12 months later the buyer realizes that they can't afford the vehicle any more and now they owe more than the vehicle is worth. Why would the car dealer be responsible?

I am no way saying that what the mortgage person did was ethical, but from what was said he did not commit and laws or violate any regulations to finance the borrower. In all reality if he only made $12,000.00 he cut himself short because most lenders allow a broker/LO to make up to 5% of the loan amount which on a loan amount of $344,000.00 would equal $17,200.00, and if he followed Fannie Mae Guidelines he could have made ALOT more.

I personaly did not do very many options arm loans because I saw many people would get into a bad situation, BUT those few that I did do were pushed on the borrower by the real estate agent telling them they could afford the house with that type of lower payment, so the clients came to me wanting that type of loan.

I see on a regular basis how mortgage people are so terrible for marking these and I had NUMEROUS realtors recommending these to their clients so that they could sell a home which was priced higher than the customer should be buying. Who should be liable here ... the mnortgage person for financing what the client requested or the realtor for pushing this product on the client so that they could get the sale?

Sean Allen

Debbie, thank you for your kind words. This one got away with it, but if we're smart we won't let a whole new group get away with it next time.

Bill Roberts

Let's do something about this travesty. Let's get rid of unlicensed, unqualified loan officers. Let's replace them with fully qualified brokers that have a fiduciary duty to their clients and let's offer the borrowers the protection of AGENCY.

Oh, yes...let's.  May I set the rules for licensing, Bill? 

Joe, You seem awfully upset by this. Did it touch a nerve? The license may not prevent this kind of practice but it does give a means of redress (at least here in California) and a good chance that he would never do it again.

As for your comments on prepayment penalties and YSP, I can't believe you said that. I looked at your profile. You've been in the business long enough to know the relationship between ppp and ysp.

Thank you for your thoughts.

Bill Roberts

Nope no nerve,

YSP does not equal PPP.  I do way to many conventional and FHA loans.  PPP equals sub prime and alt a.

At least in Colorado

Sean, I wouldn't do business with you. Too bad, because I might have before this. You can't see that the mortgage broker took advantage of an old lady with a language problem? He took her out of one bad loan and put her in another and it cost her $23,000.00 for the insult.

And his fee of $12,000 was exorbitant. He should have done the re-fi for $5,000-$7,000. NO MAS! aND HE SHOULD HAVE PUT HER IN A FIXED CONFORMING.

Bill Roberts

Brian, I've been trying for months to get some sort of agreement with you on licensing. I know you prefer some sort of federal licensing along the lines of securities licenses. I prefer the DRE model. Can we find a solution?

Bill Roberts

The Pay Option ARM is/was a great loan for the "right" person.  If you are a self employed person who makes your money in different cycles other than monthly, they are great.  If you are using them for short term financing, they are great.  If you have the financial accumen and assets to manage the loan, they are great.  If you are a cone jockey at the local Dairy Queen wanting to get into a $350,000 housew/no down payment, they are a recipe for disaster.  In short, they're not so great. 

Let's face it, most Loan Originators don't fully understand Pay Option ARM's.  So how is it that they can clearly illustrate it to their clients.  I think the major problem with these loans is that the lenders made them so attractive to the LO's in the form of YSP, that they just jumped on it w/o knowing what they were doing.  In the frenzy a lot of people got reckless.  Lenders.  LO's. Borrowers.  There is no one person to put the blame on.  Greed ruled the day.

That being said, when Option ARMs come back into vogue (which they will) should the LO's be required to obtain certificaton to sell them?  For that matter should there be federal standardized licensing and continuing education for all LO's, Bankers and Brokers on all loans?  This would be a significant undertaking.  One that would require a lot of cooperation from the Federal and local governments.  Would it be worthwhile?  I think so.  Maybe I'm off base, but there are systems in place like this for Financial Planners, Life Insurance Agents, Realtors, etc.  Why not the mortgage origination industry?

Just thoughts.  All the best,

Rob

Rob, I can't find anything to quibble with in your comments. I agree as a mortgage planning tool neg am products are great. You should be able to borrow money out of your house and invest it for a higher rate of return. That's great.

But in this case, that wasn't the case. She was sold an inappropriate loan at a very high cost. At a time when she could have been put into a good loan product.

Thanks for commenting. Let's see if we can't come up with a "licensing" solution before one is imposed on us.

Bill Roberts

Sooooo Bill,

What you are saying is that mortgage people should limit themselves at 1.5% to 2% max in our revenue while real estate agents regulary charge 5% to 7%? Why should we make any less in our trade than you do in yours. It is a free market society. We are here to make a living just like you. All fees are required to be disclosed to the client on the GFE so that they can openly see what we are being paid. If they don't want to pay it, they can negotiate down or go somewhere else to be financed. If the client is not comfortable doing business in English then they should seek someone out who speaks their language so that they can better understand the process. The borrower obviously chose to do business with the mortgage person, why is it his responsiblity if she didn't understand.

I am very fair and honest with our clients and tell them the full story on the financing program and any consequences. I will even turn down client who I believe have no business getting a mortgage but I know we could close the loan if we took it. But I will also say that I'm not cheap and I will rarely do a loan for less than 3 pts regardless of the loan amount and I make sure the client knows what my fees are up front.

Sean Allen
The Mortgage Professionals

Sean, You can charge whatever you want. I am a loan broker. I generally charge 1 to 1 1/2 points on a loan, either as loan origination fee or YSP or a combination to add up to that amount.

The reason that the mortgage broker should charge less is because it is less work than selling a house with a lot less liability. I would guess that after you take the 1003 you hand the whole file over to your loan processor. She does most of the work. And then you charge the borrower for her services separately.

If you price the loan and submit the loan, that is probably all you do. That's worth 3 points? Give me a break.

Bill Roberts

yea right..... less work ...waaaaaaa. Wake up and smell the roses. Both jobs entail alot of work. And yes, I have a processor and her fee is $600.00. Don't like it ... don't refer.

You might want to dismount that Great White horse you think you are on.

Sean Allen

Bill- Congrats on your feature. There are these types and they should be hung out to dry just for what they do. I don't think licensing has anything to do with it. Here in Florida  you have to be licensed to be mortgage broker or loan officer. And it does not by any means stop this type of behavior. Katerina

Bill you are right on, I spoke with a client that was in the last leg of a refi somewhere withing the last couple years and it was the same scenario but with more fees.  He was lowering the monthly payment in the short term and burying these people in the long term all while keeping a tidy sum of $20k in fees.  I hooked these people up with a reputable lender and cut their fees by over 75%.  something needs to be done to protect our industry and our public from scum like these.

Take care!

RJH

amen to licensing mortgage brokers, lets get home inspectors on the same program.

Solution, Bill?  Sure, let's get a license for lenders.  One that bears relevance to our industry.  You're promoting a real estate sales license for financial advisers.

Haven't we learned from these past five years that our licensing in California is inept?   Why promote the very license that got us into this mess?

We can do so much better, don't you think?

Katerina, Thank you. The license won't stop this kind of thing but it will give the client more rights (at least here in California) and that's not bad.

Bill Roberts

This particular broker operated under a DOC Consumer Finance Lending license. A company license that is more akin to registration than actual licensing. No individual licensing is required under the Department of Corporations CFL license.

Bill, that's an inaccurate statement.  A CFL license requires:

a- background check

b- financial responsibility test (including a credit report)

c- net worth requirement

d- bond for financial guarantee

A DRE broker's license requires (a) only. 

Bill,

Mortgage Planning is a dicey subject!  While I consider myself a Mortgage Planner, I'm very cautious in how I advertise and explain it.  So thank you for your comments on the subject, they are valid!

Regarding the Borrower, she got hosed due to a lack of regulation on the product, lack of understanding of the product, lack of understanding of the loan process (pre-pay penalties on both loans, etc.), and a greedy $#%*! loan officer.  While we weren't in the room when the LO explained the deal, these facts indicate that the borrower was taken advantage of.  If that's the case, shame on the LO.  The upside is, if that's how they make a living, they won't be doing it in the mortgage industry much longer.  Most predatory loans are gone!

Sorry to belabor my point.  I wanted to clarify my position on the original question! 

Many thanks and all the best,

Rob

Robert, Good for you. Some LOs think it's all right to charge whatever they can. Just check out the comments here.

The Loan Officer must have a fiduciary duty to the borrower. Without it gouging will go on. Also they will "sell" inappropriate products.

It cannot be buyer beware when most borrowers don't have a clue about mortgages.

Bill Roberts

Michael, Thanks for commenting.

Bill Roberts

Brian, In answer to your question, YES we can do better. I'm for upgrading DRE requirements and standards. But the DRE license process is good and so is the disciplinary procedures.

As for your CFL license requirements, what about testing? What about individual licenses? What good is a background check on the "front man" and none on the actual originators?

Bill Roberts

Working with, and teaching, many first time homebuyers, I am partial to CONSUMER EDUCATION. I am licensed in California and in Oregon, but my personal ETHICS dictate much more than either licensing agency requires. Continuing education requirements in both states are insufficient for newcomers to the mortgage business.

The free market theory vs. the unsophisticated borrower adds another layer. I attend my borrower's closing appointments whenever possible in the event they need questions answered. Every escrow officer has gone through and pointed out any YSP (aways matching the original GFE) and hit the highlights of th  program for the borrowers. I can only think there are many hands this woman's loan went through.

EDUCATE - the consumer AND the licensee...DISCLOSE the program particulars and terms...have an independent 3rd party REVIEW TERMS AT CLOSING. Won't eliminate all the sharks in the waters but will hopefully nip more of these cases in the bud. 

Thanks for bringing this topic to the table, Bill.

so if i read your comments correctly, you are making average 1.25 on the loan and what 3 on being the buyer agent and 3 on the seller agent for 7.25?  do you disclouse this to the buyer?  maybe you only work with buyers so you are only making 4.25%.

and please tell me about the laws in Cali, and especially about PPP.  Personally according to my experience and you looked at my profile.  I find your comments way off base.  Please educate me and show me the facts and the lenders guidelines

and less work than selling a house  ......  what are you smoking?

both sides have a lot of work. the fact that you double dip makes it less work

Rob, thanks again. I understood your position from the start. We are in harmony on most of these issues.

Bill Roberts

Karen, I agree that CE is inadequate. In fact it is a joke. I think education needs to be college level classroom instruction. And consumer education is woefully inadequate or not available at all.

But expecting escrow officers to "police" the activities of unscrupulous Loan Officers isn't going to fly. Just because the GFE closely resembles tke final HUD doesn't mean it was the right product or fairly priced.

It seems that your "standards" are very commendable. If everybody acted as you as you do we wouldn't be having this discussion.

Thank you for contributing.

Bill Roberts

That is indeed a sad scenario you describe. Even sadder is she is not the only one who has a situation such as this.

Bob & Carolin, All we can do is work toward higher standards and licensing. Maybe that will cure the problem.

Thanks for chiming in.

Bill Roberts

Brian, In answer to your question, YES we can do better. I'm for upgrading DRE requirements and standards. But the DRE license process is good and so is the disciplinary procedures.

So is the barbers' license, Bill but it still bears little relevance to lending.  A barbers license tests knowledge of haircutting while a DRE license tests knowledge of real estate brokerage.

How about we try another avenue?  Do you think it is better or worse that we teach originators more about financial planning than real estate sales?   Bill, we are SO far behind states like Arizona in lending expertise because of the DRE license.  I know this because I'm licensed (and practice) in both states.

Bill, I've heard several horror stories like this, but I never got a detailed explanation.  Thanks for spelling out how the broker was able to make so much money on the deal.  I feel sorry for the people involved.  Maybe they should contact the local papers, though I note that the broker (real estate and loans) who was walked out in handcuffs here in Santa Clara County still has a spotless record according to the DRE public search.  He may still be an NAR and C.A.R. member, too, despite all the clamour about REALTOR ethics.  I'm with you on the need for licensing, but we also need to make the R stand for something.

Another solution might be to require low to moderately qualified borrowers to attend borrower education or counseling. I agree that there need to be higher industry standards. As far as who has more work to do in closing a sale, speaking from experience, the processor generally does most of the work. Work that the agent, the loan officer, the appraiser, escrow and title, and the notary, should do. Every LO and RE agent out there should hug their respective processors. Without them, none of your deals would close.

How about we start an internet campaign to seriously address this topic and get something passed?

my opinion is to restrict LO to get no more than 1 point for their service, lenders to restrict rebates to LO perhaps this would control this type of scenario.  I am sad for the current system. I am sad on behalf of those borrowers in difficult situation with negative amortization loans.  thanks to all for sharing your thoughts, opinions and ways to find a solution.  greetings to all.

I agree what a nightmare, I worked as a real estate paralegal and then a loan processor and the first mortgage company I worked for were awful. They were only interested in THEM and what POINTS they could charge. Clients were getting ripped off and when I worked there (which was for a short period of time) I would help the clients out as much as possible and fight for every loan to make sure NO ONE got ripped off. Needless to say I was not liked too much but at least I slept at night.

Like anything else consumers need to be educated and shop around and not just accept the first "deal" they get.

Phyllis Pafumi

It's too bad so many people don't understand how to take care of their clients.  Just because I can do something doesn't make it right.  Consumers also have got to get better educated about the process...

I don't know what action the homw owner would have here but it seems that she SHOULD have an action.  I don't think she was defrauded, but is there any case for her to make?  People have recourse if they buy a "lemon" from the car dealer why not the loan officer?

I love your call to action Bill, very nice!  I think the market is naturally weeding out the bad but an agency agreement between for a mortgage would probably show more loyalty on the broker's part.

I don't know how people like that can live with themselves. It will not last forever. They will pay for it in the end.

Brian, You think that a real estate license is only a license to "sell" real estate? Real Estate Brokers in California have broad powers in real estate transactions, including the "right" to hold escrow, draft agreements, arrange financing, and give advice. They are in essense financial professionals specializing in real estate.

Your low regard for real estate brokers hinders our discussion.

Because of what a real estate broker is (in California) I advocate better training and higher entry standards for licensees. Now, whatever training you see as necessary would be helpful to this discussion. I agree that a curriculum similar to what is required of a financial planner might be good.

I appreciate your participation here.

Bill Roberts

That's a crime and unfortunately we see it everywhere.  Mortgage brokers were not required to be licensed in Maryland until the past year and it's about time.  From what I understand, they have criminal background checks as part of the licensing requirements.  Mortgage brokers, Realtors, anyone involved in the housing purchase, should be held to a higher standard and should be more regulated I think.  I think anyone who is playing by the rules and looking out for the best interest of the consumer would welcome this!

Frank, Thank you for weighing in on this subject. As for your example of an arrest in Santa Clara County not showing up on DRE records, it will upon conviction.

The Realtor issue is one for another post. There are many issues there in fact.

Bill Roberts

gee what a surprise. Someone during the housing boom took advantage of a consumer to make a fast commission. I LOVE this new market. It is allowing true professionals such as yourself rise to the top and start building long term relationships from helping the consumer, not hurting the consumer

Bill ~  I am all for the client being protected.  I just wish that there was a way for this industry to be pro-active rather than reactive.  Most often to protect a consumer, we need to be stopping the bad loan before it occurs,  love reading the discussion...

Kerry, Do you propose sending the buyers to college for a four-year degree or are you suggesting something along the lines of traffic safety school? Already there is mandatory counselling/education for reverse mortgages and first time home buyer grant programs. Do these work? Or are they merely perceived as something that has to be "gotten through" so that they can do what they wanted in the first place? I think consumer education is a much bigger task than you anticipate. And is it really necessary? Should you have to go to Law School before you can hire a lawyer?

Thank you for your participation.

Bill Roberts

Lupe, I disagree with you on mandatory restrictions on LO earnings. I think these people need to rein in their own appetites. And real estate agents need to take a more proactive position regarding the fees their buyers are charged.

Thank you for commenting.

Bill Roberts

It's pricks like that LO that make things rough for the rest of us. 

Bob Mitchell

ValueList Real Estate Services, Inc. 

Bill,

Have your client call WaMu and see if she can get a modification.  I did that with a borrower in a similiar situation with the same lender and guess what?  They did the modification. 

Good luck!

Washington Mutural gummed up my sale horribly, it nearly killed my sale.

Against my advice, my buyer client went with WaMu instead of a local lending institution.  The sale was wrought with problems stemming from my seller client.

121 days later my sale closed with a local lender.  WaMu, at the 12th hour would not underwrite the loan after prequalifying my buyer.  Fortunately my buyer wanted this home very much.

WaMu,  I have a file on them full of complaints to show future buyer clients who are tempted to go with those ----n dot.com'ers! 

Phyllis, Loan pricing is a matter of personal values and market conditions. When an LO thinks he is "the only game in town," only his conscience will moderate his greed.

Josette, Yes, LEGAL and RIGHT are not synonyms.

Ben, Far buyers have recourse for lemons because states have adopted "Lemon Laws." No such law exists for mortgages.

Renee, Agency is a "legal" protection for the clients.

Robert, It has already lasted too long.

David & Lisa, We need higher standards, licensing, and fiduciary duty.

Sean, Every "slow" market cleans house so to speak, but as soon as things "heat up" they all come back.

Sarah, How right you are.

Thank you all for helping with the disussion.

Bill Roberts

Bob, Tsk! tsk!

Richard, Thank you.

Vivienne, WaMu is the lender, but this was done by a broker not WaMu.

Bill Roberts

Kerry, I really don't think that consumer counseling is the answer. Better Loan Officers is the answer. If the LO was better trained, licensed, had fiduciary duty to the borrower, acted as the borrower's agent not merely a merchant, and had something to lose if he screwed up or unfairly treated someone, then maybe we would see better loans, more fairly priced.

Bill Roberts

Bill.  If this were the only example of this kind of transaction it would be a different story.  Way too much of this, in your industry and mine.

Bill, Thanks for commenting. It is time for a change.

Bill Roberts

I completely agree ... there was a great article in the Wall Street Journal with a very similar case.  But more importantly is the need to rid the industry of the under qualified and unlicensed ... what do we need to do?

Allen, I think that first we all need to get on the same page. Hopefully a forum like this will facillitate that. Then we need to take action. Some have suggested a national group adopt standards that can be imposed (either willingly or unwillingly) on the membership. Maybe something like a CFP (Certified Financial Planner) or other such group. Then we need to get the states to "recognize" our authority.

You want to help?

Bill Roberts

We are talking about licenses for Mortgage lenders but we do have the companies that prey on the uninformed and the borrower may not understand what they are signing they trust us. If we have the publics trust we need to protect it. I agree the fees and charges on a loan can have me wondering how they explained it to the buyer or if they told them at all. Thanks for the post and if we don't take care of this the we will have more government oversight.

Terry, Thank you for commenting. We need to take care of this now.

Bill Roberts

As long as we don't send the government to the rescue... I would welcome some tweaks t the current system.

Licensing for brokers here is a joke. They spread 3 hours of info over 15+ hours. All ethics and regulations. NOTHING about how to be a good loan officer.

i think we need a little more regulation in the lending industry like the realtors need.

Tom, There is no substitute for good comprehensive training. Why government agencies choose to require "worthless" training is a mystery to me. Higher standards and better education is a must.

Bill Roberts

Trevor, Thank you for commenting.

Bill Roberts

I just got a link to this story and had to read it.  Certainly I'm not going to defend all brokers as honest upstanding citizens looking out for their customers best interest.  I will say we have one side of the story here.  No one takes out a Payment Option ARM loan to make the full payment, you take them out to use your money more wisely, or save on the money you have to pay each month.  Without the brokers side of the story you should not state that he acted solely in his best interest.  It isn't uncommon with Pay Option ARMS, to have buyers remorse or buyers amnesia, even with the best loan officers.

Certainly everyone in this business need more training, brokers and agents alike.  Training would not stop this loan from happening.  The compensation on this loan is well within the lines of Connecticut's limits of 5% of the loan amount (2points and 2 points YSP), and 1/2 the national limit of 8%.  It upsets me when someone decides that brokers deserve a certain amount of money, since they only had to do "x".  Well, should I say agents deserve a certain figure because they only did "x", is that fair?  No, that is not right either.  I take a risk on every loan my company does, that the customer pays their first payment.  If they don't I have to buy that loan.  It happens to good people and bad that they can't make their first payment.  Do you want to write a check for $344,000 because a nice lady lost her job, after someone told you you can only make 1% on the loan?  You would be out of business pretty quickly.  We all work hard and deserve the fee's we get. 

I have a question for you.  If you suggest we have an agency relationship, and fiduciary responsibility to our customers, that is good.  I like the idea, now you push the idea of wealth building, and mortgage planning.  If I am looking out for my customer first, i then should only sell them the loan that builds their wealth fastest, helps them reach their goals quickest, and with the most assets?  If that is the case I would never suggest a 30 year fixed rate loan, the most expensive loan on the market, a Payment Option ARM would be the first loan I would talk about.  And let them build their wealth.  What do you think?

Hey Jon,

Great response on Mr. Roberts Blog.

Sean Allen
The Mortgage Professionals

Licensing may or may not be the answer.  But going Tanya Harding on the lender's knee caps might get the message across.  :)

John, I don't know you or your practices, but I can only guess where you are coming from.

I'm a licensed Real Estate Broker in the State of California. We can act as mortgage brokers with this license. And I do. Fees and commissions are hot button issues for a lot of people in the real estate industry, both sales and finance. Personally, I believe that fees are generally too high. They will be coming down.

As for yor question about mortgage planning, a separation needs to maintained from normal home purchase financing. The two don't mix. As a mortgage professional we advise clients on products based on their circumstances and needs. Option ARMs might be good products for wealth builders and short term holders, but fixed rates at the low rates we've had these past few years are excellent for long-term holders.

As for AGENCY AND FIDUCIARY DUTY, as a result of the type of license I hold I am already subject to that. My clients are my clients, not customers. I look out for their best interest.

Thank you for commenting.

Bill Roberts

Chris, you got me to laugh. Thank you. I knew I could rely on you to lighten things up.

Bill Roberts

Brady, I don't think that legislation has a snowball's chance, but something will be coming along next year that will. YSP will survive because of the reasons you mentioned. Licensing of LOs that work for depository institutions probably won't happen, but everybody else will need some kind of licensing. Whether it will be state or federal remains to be seen.

You weren't signed in when you commented. It made it a little more difficult for me to check your profile. I like your approach to the business, but I realize in FLA you have a choice to be a "regular" agent or a transaction broker only. Which are you?

Thanks for contributing to the conversation.

Bill Roberts

Bill,

Just to get some more clarity on your answer.  You say:

As for yor question about mortgage planning, a separation needs to maintained from normal home purchase financing. The two don't mix. As a mortgage professional we advise clients on products based on their circumstances and needs. Option ARMs might be good products for wealth builders and short term holders, but fixed rates at the low rates we've had these past few years are excellent for long-term holders.

How can you keep a seperation between mortgage planning and normal home purchase financing?  Does that person buying a home deserve less of a plan for their future?  You say it correctly that Option ARMS are great for wealth builders, but then fixed rates like we've hard are great for long term holders.  The true benefits from Option ARMS and Interest Only loans come from the compounding of the monthly savings, something that only comes from "long term".  Should we tell our customers, "hey your buying this house right now, so wait 10 years and come back to me, then we'll really hook you up with a wealth building tool".  A person buying a home deserves a discussion of ALL of their options, just like someone who has owned the home for 10 years.   

Mortgage Planning is Mortgage Planning, a complete conversation with the borrowers about where they are, where they want to be, and what mortgage options are available to get them where they want to be.  That may mean Pay Option ARMS, it might mean a 30 year fixed, it might mean putting less money down and paying off a truck, or it might mean putting 35% down to keep their payment where they need it to be.  Mortgage planning and home purchase financing very much do mix. 

Jon, OK. I concede the point to you. What I was trying to say was that most home buyers just need a home. They can't wisely invest the difference between a fully amortized 30 year fixed and a neg am product. If they could your argument is very valid.

As for compounding the savings on a low start rate loan that's great unless they get into a situation like my client in the story where they can't afford the higher rate or fully amortized higher rate like they are going to get when the neg am reaches its maximum and the loan recasts.

CMG has a great product that combines a first position heloc with a checking account. It's an ARM, but it allows for a greatly accelerated payoff because the daily interest charged is considerably less than what it would have been on a thirty year fixed. But this loan isn't for everybody. Some would actually run the balance up rather than done with this product. It takes discipline not to spend.

Mortgage planning is one thing but good lending practices just might be something else.

Bill Roberts

Thats a lousy deal. I wrote a post a couple of weeks ago about one that makes me sick everytime I think about it. http://activerain.com/blogsview/285307/Loans-Lie-s-and

Michael, I read your post. You are welcome to link it here.

Bill Roberts

Bill

This is truly frightening.  You and I have agreed twice in a single day.  Any number of valid points are raised by this post.  The contentious comments make no sense to me.  Allow me to speak as the voice of a unique experience.

Some years back, I was one of eighteen people indicted as part of mortgage fraud and property flipping scheme.  I was the only licensed title professional named in the indictment.  The others on the list included a real estate broker, a number of mortgage professionals, and an appraiser. 

My sentence was the harshest by far even though I was never accused of making money from the scheme.  The others were.  It all boils down to the role of a fiduciary in a real estate transaction.  I was charged with abusing a position of trust because title agents are fiduciaries in the strict technical sense of the word.  The mortgage professionals walked with minor, insignificant charges.  Many of them were back in the business almost instantly.  Why?  In Maryland, mortgage brokers are not burdened with fiduciary obligations.  They are free to act as mercenaries if they choose.  I could share frightening stories about charges that I've seen on settlement sheets.

It's sad, but true.

Thanks for allowing the link Bill. Many consumers feel the mortgage industry has collapsed simply because a lot of people went out there and got interest only loanS and couldn't make payments or refi when the ARM expired. I really believe the bulk of the damage was done by intentional scammers, conmen, and all out criminal rings that bilked the industry out of billions via fictitious appraisals, leading to inflated loans, and ending in them walking away from a property with huge amounts of cash.

I saw one such mortgage writer do three such loans on homes he bought under other peoples names using their credit. In 6 months he pocketed about 350k. One home burned down, the other two went into forclosure. Despite my turning him into DFI, nothing has ever been done to him and he now writes loans in California. He went to prison briefly for writing bad checks in Las Vegas, but apparently that doesn't prevent him from being in the mortgage business WHILE ON PAROLE!

Organized crime has busted the industry, not innocent consumers getting in over their head. That isn't something new.

Ed, I've gone 'round and 'round with Brian Brady on licensing. I favor a form of licensing like mine where the LO has fiduciary duty to the borrower. As in your case the fiduciary takes the fall. It is where the rubber meets the road. If we want better LOs and better loans we need this. They will either do it right or they will pay the price.

Thank you for telling your story.

Bill Roberts

Michael, We have two types of LOs in California: those that are licensed by the DRE and those that work for CFL lenders where they require no individual license. The unlicensed LOs have got to go.

Bill Roberts

I think you must have two kinds of mortgage brokers also. I sent an email to the Broker whose license he currently works under, as well as his PRISON MUG SHOT and he disregarded it. I know it's simply because the crook is a loan generating machine and could get a dog a mortgage loan; so he makes the broker money, therefore he keeps him. I even explained that the guy was under investigation by the DFI. If we don't get the crooks out of the business we will all perish.

Michael, How do you know where he works?

Bill Roberts

His name is unique, so I googled it. He had placed an add on craigslist.com (a den of thieves) seeking an underwriter for a 2 million dollar home in California. Then he popped up on a message board for Cali Brokers (he is not a broker), and his email address was there; he posted an email address to reach him at that had a lenders name incorporated into it.

I then searched that business name, and it was a fairly new mortgage company with a yet to be completed web site. I then gleaned the brokers name from the site and googled that, which lead me again to craigslist.com. The broker had placed an seeking loan officers and promising them low fee's (which is likely how they met). I emailed the broker via that email as well as the one on his web site.

Michael, You are quite the detective. If you think that this guy is a problem you should file a complaint with the State of California Department of Corporations. Their website will have a mean of filing the complaint. Good luck.

Bill Roberts

Thank you, I was interviewed for two hours by a reporter for the PI here in Seattle regarding this same man recently and she said I should have been a detective! I just like to have answers to my questions, so I find them. I intend to do all I can (however little) to stop the people that are ruining lives, and destroying our industry.

Please email any info you have on any agency I could forward my information to regarding this individual. I assure you, in the few months he's been there, he's found dozens of victims. Its the only way he knows how to do business.

Michael, Try starting here.

BillRoberts

Bill,

Thanks for going through the effort of "finding" me... I noticed after I sent the response that I was not properly linked / signed in.

As for Florida and my approach... I generally have agreements with my listing clients that I works as a Single Agent with the option to transfer to a Transaction Broker.

This affords me and the client the best opportunity, because often I reduce the commission a little if I procure the buyer. This is motivation to myself, and seen by the client as a motivator for me to work hard to sell the property myself.

I hope your right.... and this bill sees adequite revision or lack of support.

Have a wonderful day!

Brady, Thanks for coming back. I'm really concerned that we need to preserve AGENCY in our business. Some Florida brokers take refuge behind the TRANSACTION BROKER status, where clients become customers like in a store. I think that this is a disservice to our clients and it opens the door to abuse.

I glad to see that you at least start out as their agent. Is dual agency not allowed? Here in California we can be agents for both the buyer and seller. It can be difficult at times but I think it is well worth the effort.

Bill Roberts

Would HR3915 have any effect on this?  Don't get mad, I don't know much about it, just curious.

Alayna, The chances of that becoming law is somewhere between slim and none.

Bill Roberts

How do some people sleep at night?

Hopefully like a baby--wake up every hour or two and CRY!

Mary Ellen, As evidenced by some of the comments here, some LOs have no problem with taking advantage of the elderly or those that are not proficient in English.

Bill Roberts

Michael, I had to delete your copy of the email because it had a name and phone number in it.

Bill Roberts

I received this email today; it's a pretty good example of how dishonesty has consumed the mortgage industry.

________________________

I have PRIVATE MONEY to lend, only for CREATIVE FINANCING.

I will bring the down payment to closing, get my down payment assistance back at closing plus my fees 5-15%.

 I ONLY DO DOWN PAYMENT ASSISTANCE. THANKS. (I TRAVEL USA AND CANADA)

_______________________

Michael, He won't have too much success with this scam because most lenders want verification of funds and some want seasoning of funds.

Bill Roberts

People have been skirting the VOD for ages, but the seasoning is a bit harder.

Michael, In California both the escrow and the title company must verify the funds. Some lenders also verify funds directly.

Bill Roberts

It's been my experience though, that 99% of crooked loans use private attorneys for closing, or a sham escrow company. One such escrow company here in Washington has been closed for fraud once before, only to re-open under a new name in the same location with a different crooked lawyer handling escrow.

I recently spoke with an agent that had a home listed at 1.5 million and was then offered 2.3 million, with no competing offers. The buyer wanted to use a particular escrow company we had never heard of, and expected to pocket 700k at closing. When ask for my opinion, I said run.

They refused to sell under those conditions because of the potential for mortgage fraud claims, and received threatening phone calls later. Crooks will always find a way Bill, they can make more money on a single fraudulent loan than they can robbing a bank.

Michael, Maybe you should work on getting better laws in place in Washington State. I'm not going to say it couldn't happen here but our escrow and title companies are tightly regulated and bonded.

Bill Roberts

As are ours Bill, the loophole is simply that you can use a private attorney for those services, and the attorney is not required to be a licensed escrow officer. I believe a Real Estate Broker can also do the closing as long as they don't charge for it.

I'm quite sure there's no shortage of mortgage fraud in California, as I mentioned previously, I know of a loan officer in Sacramento currenlty on parole for ID Theft, Theft by Check, Kidnapping, and quite a few other things, and I assure you he is doing crooked loans left and right. So there may be some loose regulation there as well.

I am very saddened and disappointed to see the tone this blog has taken. Before anything can change, all of us needs to take a look in the mirror and not point fingers at other people and/or other states regulations for the mess the industry is in. I thought there was really useful and creative dialog being shared between AR members, when the blog first started. I no longer see creative ideas, but a lot of finger pointing and name calling. That's a real shame.

Kerry, I think you may be reading between the lines a bit. I didn't take any offense to what Bill said and I certainly meant none in my response. Factually, all States do indeed need rules, laws, and regulations tightened to get this mess under control. As a Realtor, I have to be licensed, and free of felony convictions for at least 10 years before being granted a license. Only recently are lenders required to be licensed, and if they work for a bank, they are not. One can literally process loan from a jail cell and its perfectly legal.

It's sad the person I spoke of is working as a lender in California, it's even sadder that he was a VP of a mortgage company in Washington while not only on Parole, but with warrants for his arrest for abscounding parole. There is simply zero oversight when it comes to the person writing your loan. I'm not finger pointing at anyone, Bills a great guy and if my tone sounded accusatory, I do apologize.

Michael, I apologize. I wasn't referring to your comments alone. It just seems to me the tone is changing. I agree 100% whole heartedly that something needs to change. We are an overstuffed barrel of apples and too many of those apples are less than desireable.

There has been so much bad publicity regarding the real estate and lending industries. Did you happen to catch Boston Legal last night? I wish I could have written down the "speech" that was made to a lenders attorney about their position in a pending trial. It was brilliant.

Just throwing this out there, but it seems to me that maybe the same media that is spreading the bad news could also be used to find good news. Maybe a change campaign needs to take place spearheaded by lenders and real estate professionals. We're already out there in the news, why not use that to our advantage?

I did watch Boston Legal last night, which is funny since it's about the second time I've ever seen it. It was odd since the claim was that an attorney got into a loan that he didn't understand; but it does appear they were attempting to shed light on the issue.

Hundreds of millions have been stolen by full blown fraudulent loans. The general public believes its all caused by people wanting interest only loans they couldn't afford. Although theres no shortage of such loans, no one ever speaks of the theft of millions in funding by organized crime and the intentional abandonment of homes after the buyer pockets a bundle at closing.

On an episode of the Soprano's they demonstrated a straw mortgage scam and how millions can be stolen.

Kerry, I'm glad you came back. My whole issue is better qualified Loan Officers. Fraud is something that is always going to be with us. All we can about crooks is find them and prosecute them. But unqualified, unlicensed LOs can do an awful lot of damage to people. They need to be stopped.

Bill Roberts

Many times I've had bartenders and waitresses hand me their cards as loan officers. I recently read a post on zillow where a fellow was being critical of the fact that one need only graduate high school and take a two week course to be a real estate agent. Truth is, those aren't requirements for being a loan officer; for that, you need nothing but a pen and paper.

Michael, I am a real estate broker. I qualified for my license because I have a degree in finance. My license allows me to be a mortgage broker. I resent unlicensed, unqualified LOs. I would prefer that all LOs in California have a real estate license. I choose this model for licensing because real estate agents are  fiduciaries and must act as the agent of the borrower.

And while we are at it we can tighten up the requirements to get a real estate license.

Bill Roberts

I agree with you Bill. Oddly enough, although they now require licensing for loan officers, it's not required if they work at a bank. I find that amusing. Mortgage company's don't have to do back ground checks either.

Bill, I agree with you on many of the things you've written.  Someone who is going to originate a loan for a borrower should have to do more than have a heart beat.  I love the comment that said you could process loans from a jail cell.  The sad thing is that it likely is possible in many states.  Some states do check out those who are going to originate loans more than others.  A national standard would be a great move, and that should include all those who originate loans, brokers, lenders and federally chartered bank emomployees.  Everyone should live up to the same standard.

To originate here in CT (that is for a broker or lender, not be the broker or lender which is more invovled) your company must register you to be a loan officer.  You must provide detailed information on your background, including misdemeanors and felonies both charged and convicted, if any governmental agency taken action or refused you a license, ever been a defendant in connection with granting or arranging loans.  If you have you have to explain why and outline your rehabilitation.  You can see the registration form here.  Not everyone gets approved, as you can see from this link .  I'm saying CT. is not a blank check state.  Certainly more could be done as here we have no direct education requirement to get a broker or lender license but we do have a requirement for 3 years experience (which a lot of us have gone to the school of hard knocks to get, both LO's and Realtors alike nationwide).  While not required by the state, you won't work for me without passing a background check.

What I challenge is the statement that becoming real estate agents as well will make things better, and your comment of working with both a buyer and a seller at the same time, you said "Here in California we can be agents for both the buyer and seller. It can be difficult at times but I think it is well worth the effort".  Both of these actions I think while maybe good intentioned I think are contrary to what is in the clients best interest.  There must be a reason that FHA frowns on the practice of being LO and Realtor on a deal.  It requires at least an Affiliated Business Arrangement disclosure. That in and of itself is enough to tell me it is crossing a boundary.  To work with both buyer and seller in a transaction it is just plain not possible to be both parties "agent" or "fiduciary".  You can not look after both parties best interest.  At minimum it is the buyers desire to pay the least, and sellers desire to get the most.  How can you do both?  You can't. 

Both of our industries are full of part-timers.  There is nothing wrong with a bartender by night doing loans by day, or a teacher or fireman selling real estate when they are not working.  We need to focus on the one job we do in a transaction, helping a buyer or a seller buy or sell their house, or a borrower get a loan.  Either is hard enough to do well on their own, you can't do both well and that is in no one's interest.  Nationwide standards that keep those with a history of showing they can't be trusted, and requiring a decent amount of useful and applicable eduction would be a move in the right direction for us all, LO's and Realtors alike.  We need better disclosures regarding the terms for a loan, not more pieces of paper, but ones that better explain the terms of a loan.  

Jon. I wrote a post some time back Are You Ready To Serve "Happy Meals®"?

I would be interested in your take.

In a large brokerage (at least here in California) if one agent lists a property and another agent in the same brokerage sells the property, you have a case of dual agency. It happens all the time and I can't see any reason that it shouldn't happen. As for negotiations, the principals do that. The dual agent cannot favor one over the other.

As the new model develops, supermarket type operations are just going to be more efficient. They will deliver more service at lower cost. Buyers are going to want to get everything in the same place.

I am both a Realtor and a mortgage broker. I am a fiduciary. I am an agent of my client. Bring on the new business model. I am educated. I am experienced. I am ready.

Bill,

I read your post about Happy Meal's and disagree with you.

Yes, the real estate business is going through change.   The internet has opened up the field on the information about what homes are available, even what loans are available.  Sure I would rather drive my mouse than my car to look at 200 houses to find the 10 that I like.  But the MLS is a small portion of what makes a property sell, it is why discount shops don't own the world, and it is why Realtors who do more than data entry into the MLS are successful.

I can pick out my next home by looking at it.  I know what color I want, I know what features it need to have, I can see that.  Great, but now I don't want to go down to Stop & Shop and have some $8 a hour part time clerk write up an offer on that house and guide me through the most important transaction in my life.  I want a professional who can negotiate for me, who can point out the pitfalls to this or that action.  Who helps me to schedule the closing for the date I want.

What is different to me is that John and Jane Doe have shunned the internet and the like for their mortgages.  They prefer the person to come sit at their kitchen table and help them with their loan.  They can't look at the loans on the internet and find the right one, the all look the same, except the rate, and that says a mortgage is a commodity, which it isn't.  How can they tell one will help them pay for their kids college education?   Should they take a 15 year, or a 30 year?  But wait this 5/1 ARM has a great rate, but my income is going to decline in a few years when we start having kids and my wife plans to stay at home, right about the same time the rate starts adjusting...  That is where the mortgage professional comes it.  You can see the house, touch the house, you can't do the same with a mortgage.  

I want to respond to some of your individual comments below.

It's all about money. Theirs and ours. - Having read some of your posts, this is a common thread, and I've got to say not one I hear a lot in my part of the world.  Why so worried?

And the source of a lot of this money is in the form of a mortgage.  A seller pays 5-7% on average to sell their home.  About 2% is normal for a mortgage (this is inclusive on YSP and lender or broker points).  And on prime or A paper deals it can often be lower.  No killing in my book, and kind of lopsided opposite of what you said.

Mortgage brokers are calling themselves Mortgage Planners these days. They want our clients to utilize their mortgage to improve themselves financially. I'm all for this. - Glad we agree on this.  With the proper knowledge and tools a mortgage can build wealth in addition to financing a person's home.

But they want ALL the business. They don't want Realtors® acting as mortgage brokers.  - You are half right.  I don't want all the business, but I also don't want Realtors being LO's or vice versa.  You are not going to find to many LO's or Realtors dying to do both parts of a transaction.  They know what their job is.  Look at the successful Realtors.  I don't know any who whip out a 1003 right after the write up the purchase contract.

Under California law real estate brokers can act as mortgage brokers, but lenders licensed under Department of Corporations statutes (CFL) cannot act as real estate agents. You see the problem? They (CFL) see us as a threat. - I think this is the real issue for you.  California has two standards for their LO's.  There needs to be one, and a name, phone number and check to the state should not be enough to originate loans.  Here in CT. being a Realtor and LO are two different things, and there are no "JV" levels for either.  You are or you are not.

The debate rages over who is better qualified to make these mortgage loans, individually licensed real estate agents or unlicensed CFL loan officers.  - Not sure who is more "qualified" here, but I don't think either.  Realtors learn how to sell houses, not do loans. and the unlicensed CFL agent likely have no formal training in the business at all.  So not sure which is better "nothing applicable" or "nothing at all"  This comment is not meant to offend or be directed at any CFL loan officer who is skilled, experienced, and does a good job and I am sure there are many even if Bill would likely disagree with me on that.

Case the readers haven't picked up on my opinion yet, I'm for Realtors and LO's doing their individual jobs only.

Too many times real estate agents have found themselves "stymied" by the actions of a lender that just didn't "get it" or was even "hostile" to the real estate agent.  This is a two way street.  Realtors and LO's far to often assume the other is a _______ (you fill in the blank with your favorite insult of the day).  I'm guilty like the guy next to me, and you are as well from having put it in your post.  I'm not thinking of money though, I'm wishing that agent might be so nice as to call me back (after 3 or more days of calling and waiting) or fax me the contract they have promised for a week now that they haven't yet which is holding up the appraisal and is why they can't get the commitment they keep calling for.  I couldn't care less what a Realtor makes, I just want the loan to close.  You could make 25 cents, or 2 million, get me the contract, please.  What I do ask is that you do your job and let me do mine, and that includes negotiating my fee, or picking a loan product for a customer.   I don't sell houses and you don't sell money, keep it that way, please.  (So ends any hostile comments :)  )  We need to work together.

LOs see the amount of commission that real estate agents get and a certain amount of jealousy develops. In the worst cases the LO either charges an exorbitant fee (hidden from direct view by YSP (rebate) that may not necessarily have to be disclosed, or he "kills" the deal by omission or co-mission. - This seems to contradict your previous comment that everyone is eyeing the LO's check as the honey pot.  Is it the LO or the Realtor who make the "killing"?   As a broker here in Connecticut I have to list all fee's earned by me, including YSP to the customer.  The customer and I again will discuss what I'm going to make, and you can talk with them about what you are going to charge to sell their house.  Let them be the judge of what is exorbitant for either of us.  I will be less expensive than the national companies or I'll suggest that they go there to get the loan.

The major financial advisory firms are in the mortgage business. They too can enter the real estate business quite easily.  Ask them State Farm agent about his rates yep, they aren't competitive, or the Merrill Lynch rep about his mortgages.  (They were so smart they bought First Franklin.)  "Here let me get you the number"  No I want the guy to sit at my kitchen table and help me.  If I need to do it all, why is it handled by a call center?  Corporate Profits not the greedy LO you mentioned.  So if I take this a step further, if this were to become reality someone is going to be a loan officer, Realtor, and financial adviser, do they also install siding on weekends, and transmission repair at nights?  Where do we draw the line?   No large corporation is going to make a move that strays from their core business right now in the real estate business.  Companies like H&R Block followed this alleged gravy train in mortgages and just closed Option One. GMAC is closing Real Estate offices.

Heck maybe after the loan closes to celebrate I'll take everyone to Ron's Steakhouse and we'll have Happy Meals, I mean I just got like 42 points in yield spread that I didn't tell anyone about right?. 

Now, I gotta point out one thing thats not quite true on average:

You said: And the source of a lot of this money is in the form of a mortgage.  A seller pays 5-7% on average to sell their home.  About 2% is normal for a mortgage (this is inclusive on YSP and lender or broker points).  And on prime or A paper deals it can often be lower.  No killing in my book, and kind of lopsided opposite of what you said.

I say: It's rare that I don't see my client STUCK with a huge PRE-PAY PENALTY that on average is about $10,000 on top of the loan fee's they pay for the new loan. There's many many-a-time when the client didn't realize they had a monster pre-pay penalty and had to take their home off the market until it expired. Also, most loan agents are getting 2% on the front, and 2% on the all-to-secret backside (which as you know, jacks-up the interest rate). Of course, proving that is impossible, but many a lender has bragged about it to me. It's real, and it's most always there. Maybe not with you, but in the big picture, you know it is.

Michael,  I'm not sure what homes sell for around your neck of the woods but conforming conventional loans, those offered by Fannie Mae and Freddie Mac, usually what is offered for loan amounts below $417,000, do not have pre-payment penalties.  If you are working where the loan may be over $417,000, or where the borrower may not be documention of income or assets, or have damaged credit.  Those are the loans which might have pre-payment penalties (this would include the famed Option ARM loans, which almost always has a  pre-pay). 

If they do have a pre-pay, shame on the LO for not explaining it, and shame on the borrower for not knowing it af