Recently I have been surfing Blogs seeing what Real Estate Agents are saying about lenders, and whether or not a Real Estate Agent should be involved in a clients financing. I have read numerous posts about the evil Loan Officers who are stealing money from the borrowers, putting them in "predatory loans," and how the Loan Officers purposely hold up closings to inconvenience the Agents and the Buyers. While I agree with little of what is said on the Agent side, I can see where it is frustrating to not work with a professional Loan Officer, someone who communicates clearly, and delivers above what they promise.
Purchasing a home is the largest financial transaction of a person's life, it is far too important to place into the hands of someone who is not capable of advising them properly and troubleshooting the issues that may arise along the way. You may ask, how does one know if you are dealing with someone that is a professional? The answer is simple, ask a few questions.
There are FOUR QUESTIONS A LENDER MUST BE ABLE TO ANSWER. IF THEY DO NOT KNOW THE ANSWERS TO THESE QUESTIONS, advise your clients to, RUN, NOT WALK, RUN TO A LENDER THAT DOES!
1) On what are mortgage interest rates based?
The correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.
2) What is the next Economic Report or event that could cause interest rate movement?
A professional lender will have this at their fingertips. Email me, ddoerr@sterlingcapital.net, and I can send you a copy of the latest Mortgage Market Guide Daily update. If you would like to be added to my email distribution list, please include "MMG Newsletter" in the subject line.
3) When the Federal Reserve Chairman Bill Bernanke and the Federal Reserve Board "change rates", what does this mean; and what impact does this have on mortgage interest rates?
This answer may surprise you. When the Fed makes a move, they change a rate called the "Fed Funds Rate" or "Discount Rate", the rate at which banks loan each other money. They have an impact on: credit cards, Home Equity Lines of Credit (HELOC), auto loans and such. On the day of a Fed move, Mortgage rates most often will actually move in the opposite direction as the change. This is due to the dynamics within the financial markets in response to inflationary pressures. For more information and explanation, just shoot me an email with your phone number and I will be happy to answer any questions you may have.
4) Does the LO have access to live, real time, mortgage bond quotes?
If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday's newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!
Have your clients be smart, have them ask questions, and get the RIGHT answers!
More than likely, this is one of the largest and most important financial transactions your clients will ever make. They might only purchase a home four or five times in their entire life. I do this every single day. It's their home and their future. It's my profession and my passion. I am ready to work for their best interest as you are
If you would like a Copy of these questions to hand out to your Clients, I can email you a copy in .pdf format so you can print them and hand them out, or email them to your clients to be green!
Motivated, dedicated, mortgage professional seeks honest, driven people to forge lasting business relationships.
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Great information, David. Thank you. Too bad you're in Utah and I'm in Maryland, but the information should be helpful in any market.
David,
Those questions are WAY outside the average consumer's knowledge base. Most consumers do not even know what a "mortgage backed security" is, much less what is "mortgage insurance" or even the simplest question, "what is LTV?" I do not disagree that consumers need to be educated, but how are those questions "if asked" going to benefit a consumer in getting the right mortgage product????
There's a BIG difference between being "professional" and being "knowledgeable." I would dare bet that 95% of originators/ officers/ lenders don't know the answer to those questions - so that makes them "unprofessional?" I disagree.
Doug,
It does have to do with getting the right product, it has everything to do with dealing with someone who takes the time to learn the industry, not your uncle Jim Bob who does loans out of his basement in his spare time. Let me ask you how Jim Bob's client is getting the right product?
If a loan officer cannot answer the questions above, to which I provide the answers for in advanace to the borrower, then how does he or she have the resources to get someone into the right loan. I am positive that more than a few of the issues that we are having in the lending industry right now are because of under educated brokers putting people into loans that they should have never been in the first place. All the regulation in the world can be put into place to help the mortgage industry, but if you do not understand the underlying processes and educate yourself I don't want you to be in my industry.
Also, I don't think you get the point about being a professional. I never said that anyone was being "unprofessional." What I mean by being "a professional" is simply this: Practice your craft, and perfect your ability to perform in the capacity you are assigned.
You can disagree with me all you want, but that is what separates those of us who are trying to learn an industry and create lasting relationships, and those of us who, in my opinion, just passing through.
David,
As a Real Estate Agent, I'm not sure how business operates there, but I have to agree with Doug. Clients are concerned with their rate, what kind of mortgage they're getting, i.e. term - clients don't even know what "discount points" are. If you wanted me to give this to my clients, I would have to disagree. What benefit to the client would it be for their loan officer to go over a bunch of "mumble jumble" about the mortgage industry, when what is really important here are things like explaining their program, prepayment penalty and all terms. The time should be spent making sure they understand what's going on with what concerns them. I feel that most people to include bank loan officers, and places such as Countrywide and Wells Fargo would not even know the answer to those four questions. I personally think that it would be a waste of my clients time to know they were put through a lecture on "mortgage backed securities" and what the next "Economic Report" is going to affect. If they are on a 30 year fixed mortgage at 6.25% with no prepayment penalty, it doesn't matter what the industry does, it will not effect them. However, I do believe that as I stated before, all of the terms to include whether their loan is fixed or adjustable should be fully disclosed and explained so they can truly understand. So can you tell me how the four questions above can determine if a lender is reputable and how that helps accomplish the goals of my clients?
Sound like alot of big words to me. I don't think it actually means anything to the average buyer
Great blog David. You definitely make some good points. There are definitely a lot of uninformed LO's out there that are not up to speed on market conditions. I wouldn't say that would make them a bad loan officer since much like Doug said I don't think many consumers know what the difference is and if you try to throw out some of those terms it would go over their heads. I try to update my clients and give them as much knowledge as I can and what changes could affect their situation. I firmly believe in paying close attention to what is going on because as you said it I wouldn't want my stock broker reading yesterdays paper to give me the stock changes.
Great information David. Lending can certainly be the biggest void in a clients mind during the transaction. Most of them have no clue about anything other than the interest rate and their monthly payment. That's why they need a good reliable lender.