Good Faith Estimates - Knowing & Understanding the Power of the paper!!!

Also, get Good Faith Estimates from the lenders in the same time frame.  Rates change from day to day and even from a.m. to p.m.

This is very good.  

Agents should learn how to read these docs too.  Oh boy, I guess I'll hear about that.

Jeff,

Good information as usual.   Thanks. 

Jeff - Timely that you write this.  I had a gentlemen contact me yesterday who is buying a home for $315,000 and putting 20% down.  He showed me the GFE he got from another lender that didn't have the escrow reserve or transfer tax in there.  Those were just the major blunders.  Its bottom line had him coming to the table with $5,600 to close.  What?  Ugh... misleading, indeed.

Jeff and Jason...timely indeed.  You're awesome wtih this stuff.  It's important.  I know that the TIL changes every day depending on the date of the month you close.  The Attorney General is investigating the bait and switch companies in Illinois.  Your information is timely and so on!  Good stuff dude.

I had a similar situation, Jason, where the borrower got a gfe from another lender with a bunch of holes where standard costs/fees should have been.  But the real kicker was when I found out the borrower had two short sales last year.  I asked if she had mentioned this to the other lender before getting the gfe, which she said she had and the other lender still gave the borrower a gfe and a pre-approval!  SERIOUSLY!

Needless to say, I educated this person on the reality of her situation.  It's lenders like that other lender that give the rest of us a bad name.

Question to Donna here:  don't short sales show up on the credit report?  So, whether the borrower discloses or not, lender is aware of it anyway and can assess their risk level. 

Valuable information for the buyers out in the market today.

Whether you can define APR or not, good faith estimate comparisons are a great definer of real rates. Thanks as always to your blog post. I look forward to them.

Jeff, EXCELLENT blog!   Misleading, incomplete or just plain bogus GFEs hurt the consumer and our industry.  Good job.

Like Lenn said, we as realtors should be able to read these as well.  Comparing the lender fees. I like this post a lot. Ton of info. that's helpful to our buyers.

Funny Lenn, that was quite the Hornest's nest you stirred up talking about us (REALTORS) doing the first part of OUR JOB when working with buyers. Anyway, Thanks Jeff for pointing a great pointers, especially when working with first time homebuyers. They have no idea of these things you just pointed out. 

Jeff,

The "Good Faith" with out the "Truth in Lending" is useless!

I'm not a fan of the "Truth in Lending,"but with out it you can not besure that you are comparing apples to apples!

I'm also concerned about your example. Is your market truly only 1.000 point for origination, or are you also including your fees in the "discount points?" This is common but wrong!

The lack of garbage fees in the 800 section says this is a bank, Those fees that a broker might include because of differences in disclosure requirements don't necessarily add cost, the consumer needs to look at the total lenders charges not including estimated pre-paids for the same loan, between lenders. The number of line iteams is of no relevance!

Estimated pre-paids will at the closing turn out the same, their value on the "GF" is in estimating how much they'll cost at closing and in judging the Loan Originators integrity. Are they showing you low estimates to make you think their program is less expensive.

None of this would stop me from showing this or giving a printed copy of this to consumers!

Bill

Jeff,

Fantastic information.  I also used to tell borrowers when they were confused about RESPA figures vs. their Good Faith Estimates to make sure to save their Good Faith to compare.

I wish you would write a post on y lenders get their figures so late to the title companies for closing....maybe another post:-)

Thanks for this!  I was just telling my client about GFEs last week.  I thought it was a compliance issue as well for lenders. 

Jeff: Thanks for the post! I appreciate it. In my state, it's a law that the GFE must be generated within 3 days of pulling credit. I know not everyone adheres to that but, you're right, it's not that difficult to kick out a good faith estimate within a few hours. the LO's that don't give all kinds of excuses; the biggest one being they don't want to be shopped. In my case, I really don't care. We should all run our business transparently. If the customer asks for something give it to them. We may not get their loan but at least we've been up front. And sometimes we get those back when the competition messes up! Thanks again.

Short sales do NOT show up on a credit report. There is no vehicle to post them there. That is why they are so much better than a foreclosure.

Jeff - This is a great post. I am going to bookmark it and have it ready for clients to read in the future! I think I will also re-blog! Great job!

Hey everyone... thanks for the comments... I will be back to reply to everyone....

@CHRISTIANNE ....  I am semi confused.  What do short sales not showing up on the credit report have to do with a good faith estimate. Just curious....  And thanks for that polite compliment...

Wonderful post!! Thanks for the information. Yes, everything in writing is the only way to go.

Lenn, dont kid  yourself, you can read these!  :)  Oh, and yes, you will now officially catch some crap for your comments....remember my motto, I dont mind, cuz you dont matter!  LOL (not you, just the people that would give you a REAL hard time! :)

Jeff, you know it is ironic....We just have to keep blogging!  You were/are right...There are blogs on AR that hardly get read, that have the MOST IMPORTANT information of all!  But, a person can post a picture of a deer eating at someones birdfeeder, and it has 4000 views, and 200 comments!  LOL..

THis is VERY important info, as you stated!  If nothing more, it "dares to compare"...and I am confident the seasoned veterans like yourself and others on there will win in the end!   I just lost a customer while I was on vacation, not because of ME, but because the Lender they went to first, had $200.00 less in closing costs.  My rate by the way, was .25% LESS!  ON a 200k loan, it was a MUCH better deal!  Moral of the story, they are going to get screwed and there is nothing I can do about it, but move on to the next loan! 

"stupid is, as stupid does"....biggest problem is that EVEN IF YOU ARE RIGHT, they wont come back...because NOW they are ashamed...or embarrased...or whatever!  Today, I am not back 3 hours, and i have 2 new loans to replace it! 

Good faith estimates have forever told the "true hollywood story"...but, it is the information that the LENDER HAS LEFT OFF that is critical! 

Nice job...Darin

Hi Jeff -- Great advice for buyers.  What is line 824?

Knowledge is power in the real estate world especially understanding the "Good Faith Estimate". Regards,

Great article and followup!!

Good faith estimates can be manipulated...like anything else...with unscrupulous lenders.

Most lenders are very very good and some are great...and just like every industry...some are snakes.

If anyone in the real estate industry does not understand this blog...I strongly urge you to get educated asap.  You might be saving your clients tens of thousands of dollars by knowing the GFE and TIL guidelines and laws for your state or province.

Mike

Informative, Jeff.  Thank you.

Jeff - this is probably the best definition of a GFE and how to interpret it that I have seen.

Too many LOs still either avoid it, or make excuses because for some reason they dont want to go through its creation, but either way, I always ask my buyers if they got the GFE when they talked to their mortgage contact.

... I would say less than 50% actually were given the GFE when they got their pre-app.

Very informative and well presented post JB ...

Cheers !

Sheldon

Good post......our lenders are good about this and only once in awhile has it been a problem.  I think good agetns always ask to make sure they receieved on.  And I agree...if they have to beg or even ask or remind them about it......they could be asking for big problems down the road.

Good faith and a truth in lending do a lot for comparing different lenders.   Good luck

That is valuable information for buyers.  Thank you for posting!  I recently worked with a buyer who was planning to use a major lender and they wouldn't give her a good faith estimate.  The loan officer told her they would mail it to her in a few days.  Needless to say, she's not using them for her financing.  We always have to do what is right for our clients and helping them choose appropriate financing is a must.

This is super!  I have always advised my clients to get a GFE from every lender they talk to and to always watch the FEES!  It has saved some of them thousands of dollars!  Great post!

Jeff, can you guest post this on my Ann Arbor Real Estate Blog?

I can copy it with your permission, this is excellent.

Jeff - Let me clarify your confusion.  In my last post, I commented that someone that I had talked to the other day told me that she had been pre-approved with another lender and that the lender gave her a gfe.  After looking at the gfe that the lender gave her, I noticed that the gfe was rather thin on the estimate part, which kind of throws the whole concept of "good faith" kind of out the window.  Furthermore, after attempting to pre-approve her, I discovered that the woman had two short sales in December 2008.  Pre-approved?  SERIOUSLY?

BTW Christianne: it did show up on her credit report.  While it did not show up as a public record like a foreclosure does and her credit score only dropped about 100 points instead of the 200+ that a foreclosure does, it does show up as a mortgage that was settled for less than the balance which equals short sale.

Thank you, thank you, thank you! This is a pet peeve of mine. If a mortgage broker or mortgage lender is too lazy to provide a Good Faith Estimate when it's requested, there's a good chance that that's the kind of service you're going to receive for the entire time period in which they're working for you!

LENN....  I can't believe you made that statement, that realtors should learn how to read these GFE's... LOL  <teasing>  I would partially agree...  but not for an agent to get too detailed. I have lost a few deals because a realtor told a client that I was charging too many points. But the ironic thing was that I wasn't charging any lender fees. And in many of these cases, it was because the realtor just didn't know me and want to either deal with someone local or steer that person to their lender. And in many cases, the borrower lost out anyhow.  Overall, there are a lot of ways that you can look at these, but in my opinion, you need to add up the total lender charges plus points and look at the rate. But again, many loan officers give rates out there that they know will change, depending if the buyer found a house or not...  thanks

TOM... . thanks for the compliment and for stopping by.

JASON S. .....  I know I briefly mentioned it, but I think that is even a bigger issue than those that give rates that aren't real. I see more and more loan officers showing half the escrows needed and this is sooooo bad & wrong.  And timely?  Yes, because I have seen this happen more this year than in my last 3 years all together. Thanks for the feedback.

LARRY..... I think many of us wil agree that this post is timely. But in regards to the TIL, I really don't sell this, no matter the daily interest or items left off the APR.  Hence why I say the GFE is the best tool in comparing. Because the number of days for your daily interest appear on the GFE, in which you can compare those apples to apples... again, why I don't care for the TIL... I will always sell against that, because it's almost never accurate. Just my opinion on that.  thanks for your input.

DONNE..... I understand why Christianne mentioned short sales now. But overall, yes, there are many loan officers and lenders that give us good ones a bad name. And in my opinion, it seems to be worse this year than even from last year or the year before. Wondering if it's because so many are still doing bad, that they need to grab onto anything.  thanks

MARZENA... . the credit report can be evil, if we loan officers don't ask the appropriate questions. And even then, sometimes if the borrower doesn't fill us in or leaves something out, it could screw things up. But I find this to be rare. It's usually the little things that are missed or not asked. thanks

PAT..... . thanks, I would hope so. I love educating others and if I had time, I would write a good faith estimate blog twice a month. This is probably the biggest area where clients would shop incorrectly, because they put too much faith into what they see/read, when it comes to a good faith estimate. Many have told me that the loan officer would have to honor what they put on paper... rut row... Not true what so ever... Buyer Beware then...  thanks

I notice that Mr. Belonger didn't even mention Yield Spread Premium--which should rightly (and always) be credited to the borrower. Whazzup wid dat, Mr. Belonger?

To consumers reading Mr. Belonger's explanation of a Good Faith Estimate, be sure to hire yourself an Upfront Mortgage Broker, whose usual and customary practice is to credit the borrower with Yield Spread Premium, if any.  You can Google for "Upfront Mortgage Broker" or for The Mortgage Professor (Jack Guttentag)'s article titled, "How Do I Find an Ethical Mortgage Broker."

Sorry everyone for skipping over you, but I must address the person above. Before I start, I already have an idea who you are and it can be traced very easily.

CAITLYN COYLE -  not sure if you are an Active Rain member, because it's rare to get a consumer to comment...  You bring up a good point, but one that can be easily defused and confuse others, because of how you probably sell it. I have heard many sell YSP against others and it's sad.... I'll write a whole blog later about Yield Spread Premiums & SRP's, which are service release premiums. Wondering why you didn't mention this also. 

But getting back to the Upfront Mortgage Broker and your issue about not mentioning YSP's. Here is the logic behind this. You are just now adding confusion to something that can already be turned into a complex issue. Just as someone would say that you need to compare APR's also. Why?  Because they can be manipulated and that is hard to tell. And about Jack Guttentag, I know him well, because I follow his stuff.

Example... Jeff Belonger the loan officer-  if my rate was 4.875% and my total points and lender fees were $2,000, yet my hidden YSP was paying me back 1 pts.

Now, we speak to Caitlyn Coyle, aka, the Upfront Mortgage Broker -  You are offering 5.00% and your total fees with points are $2,000. And you share with the client that you are making .875 pts.

Gee, okay, I am making .125 pts more and my rate is an 1/8 percent less than the Upfront Mortgage Broker. Which client has the better deal?

Here is my issue with your statement.  It's just another name, another designation, that you can hide behind. It doesn't mean that you actually know what you are doing. It's an ethical stance to a certain degree. Just something else to wield in front of the borrower, confusing them even more now, because you have to prove yourself with YSP... something that many don't understand.

Here is the ironic thing... yes, I am a banker and I don't have to disclose YSP.  But I have beaten out many Upfront Mortgage Brokers in the last 4 years. My clients actually still received a better deal than they did from the so-called upfront mortgage broker.

Overall, again, it's just another designation that some hide behind, yet many that have this designation still don't know how to do a mortgage or fill out a GFE. So what's your point? And I know this because I compete against them and see their GFE's.  In several cases, their escrow amounts are way off, cutting the total cost down, to make it look better. Or, they just didn't know. You take your pick.

Anyhoo... I will leave your comment up here, because I find it out of place, because you are trying to sell confusion and the topic was strictly showing total fees and rates. The bottom line, if my deal is better than yours, why should it matter what I make. There is a price with mine and that's called service, knowledge, and on-time closings.  I can give you 2 clients names that shopped me against some upfront mortgage brokers, in which a few failed to close at what they promised, and a few others that I beat out. So I don't fully understand the point that you didn't make, because all you did was try to make me look bad. And if I looked bad, it was because I left this long comment, because you have no clue what you are talking about. You apparently have your own definitions to your argument. The YSP is not always credited back to the borrower. Unless you are telling me that you do your loans for free. 

Example.. if the total profit on the loan is $2,000... and I have a loan amount of $200,000... and at 5.5%, it's paying me back 1 pt... and I am not charging the client any points and no lender fees, that means I would make $2,000.  But, if we do it your way, and give back the FULL YSP, that means myself and my company make ZERO.   Can you explain that one and the statement that you made?

Everyone reading the comment by Caitlyn and my response, I hate to assume, but it's obvious in most cases what the person's real intentions are. YSP my friends will confuse many. If my rate and total lender costs are less than those that call themselves upfront mortgage brokers, then why the argument. In my opinion, this is just another sad/bad example of misinformation and someone trying to bring someone down.  thanks  PS... here is another reason why this comment can hurt others.  No two borrowers are the same.  And please read Bill's comment below, Willaim Archambault.

I am sure that consumers reading this article will seek out a spammer like Classless Caitlyn to do their mortgage.

LOL

Mr. Belonger, I am not a mortgage broker, but I've used the services of an Upfront Mortgage Broker, and I highly recommend it.

Very good information indeed. A must read for potential home buyers and even realtors. I really enjoyed reading this one. Great post.

Jeff,

Good response about the YSP!

The first thing I noticed was your fee at 1% origination. YSP was forced on the mortgage brokers to confuse the public, "up front brokerage" is an attempt by some brokers to confuse the public even more!

It's the total out of pocket cost for any given loan that matters! Every thing else is smoke and mirrors!

The idea that people who join the club "whose usual and customary practice is to credit the borrower with Yield Spread Premium, if any"  is just so much testosterone laced bovine droppings. You only charged 1 point out of the consumers pocket, but the market rate for your services is 2 points means you did credit the borrower!

You'll find no greater supporter of disclosure and mortgage brokers than me, but Broker or Banker it doesn't matter if 4.875% fixed for 30 years cost the consumer $2,000 at one office and $3,000 at another the former is better!

The only protection the consumer has is the personal integerty of his loan originator!

Bill

@CAITLYN ...  comment #'s 33 & 36.  In my opinion then, here is the problem with your comment. It's one-sided and opinionated without knowing any other facts. You are assuming. I am glad you had a great experience. But here is my problem then.

Yeild Spread Premium. - You were apparently sold on this. But how do you know you still got a good deal?  I could actually give you a good, realisitc list. Here is one of the best examples that I can give you.

Example :  I have a client currently that is with a Upfront Mortgage Broker who needs to help their son buy a home while at college. They have been advised to buy it as a second home. Depending on the area, this is semi illegal, but that is not my point here. Second homes are more expensive because they require a larger downpayment now, because of mortgage insurance issues. Secondly, this person has a 673 credit score, which is a lot higher than the average... BUT, on a conventional loan, there is a major penalty. SO even though this loan officer, UMB person, is giving a good rate and the yield spread crap, the rate is high, at 5.5% because of the program. I showed them how to do it legally with a FHA mortgage, as a non-occupant co-borrower.  I was able to give them a rate of 5.0% and they could put as little as 3.5% down, instead of the 20% down that they had to with the other program.

My point?  Just because you have a title or a desigantion, doesn't mean you are still good for the borrower. It doesn't mean that you are the cheapest or the best. I know of many loan officers that became upfront mortgage brokers, just because the name should get you more business, because of what it stands for. If you read what I wrote, I stated, sometimes the best rate is not always the best for you. And here is my point in case.

Overall, I took offense to your comment, especially know coming from a consumer, because it was just one experience, and you are telling everyone to seek upfront mortgage brokers, which could lead many borrowers down the wrong path. Again, just my opinion, but of 16 years in this business. Secondly, you don't truly understand yeild spread premium.  A very good loan officer uses this YSP for many reasons, depending on the situation. If you get a moment, please read this... I want the same deal that my friend got .  This is another reason why I think your comment is not the best for all to see.

In any case, I do appreciate your feedback. But if you read your first comment and the opening sentence, it was in an attacking manor. And coming from a consumer, in my opinion, is even worse. Because it is from someone that had 1 experience, as opposed to a professional in this industry that has 1,000 of examples. I get phone calls and e-mails weekly from people that use the services of so many types of loan officers, but the end result, they don't close. Many broken promises. I just think your reference to the yeild spread alone, assume that you know what it's all about and telling me that I didn't mention this, is a deadly comment in itself. But I didn't delete it for several reasons. Most of which I hope I explained.  thanks

CAITLYN....  here is an excellent comment from Bill Archambault, who has been in mortgages & real estate since the early 70's.   - Please read - Bill's comment - 

I am pointing out Bill's comment to you, because not everyone reads the other comments. I am very passionate in what I do and sometimes it takes me longer in comment to state or express my point. Bill did it very well and in fewer words.  thanks

Why would you NOT credit YSP?  It's extra income you get to keep if you don't apply it to the borrower's bottom line.  Extra income that the borrower pays for in the form of a higher interest rate that throws off the YSP.  It's not really fair that mortgage BANKERS aren't required to disclose above par pricing, but that's the way it is.  If you hire a mortgage broker, you get full disclosure if the broker decides to give it to you upfront.

CAITLYN... you still don't fully understand the whole issue behind YSP and bankers vs brokers. Please go back to my example to you above. If my deal on paper is better than a broker's deal, which in this case, I used you as the example... then who cares about the YSP. Again, you are adding confusion to the whole mess, a mess that many loan officers use to their benefit when they have no clue to what they are selling.  I can see you want let this go now, because it seems to be that you are an expert on this subject. You don't even originate mortgages, yet you can give sound advice? 

Example.. you need a doctor to perform Open Heart surgery on a loved one. Are you going to listen to me, a loan officer, just because I had open heart surgery done to me.. and because it was explained to my by my doctor, who I trusted?  That is ludicrous in my opinion. And you might deny this, but that is what you are implying essentially.  I need to get back to work, because you will state whatever you want, and you are seriously adding confusion. You are one of the ones that scream transparency, yet that is not the true definition of transparency. Please go read about it. I have written about this before also. And I will have many bankers & brokers that know their business well, disagree with you 110%. And these are individuals that have been doing this for 12 plus years. You on the other hand have had 1 loan done with an upfront mortgage banker, yet you know it all. thanks

OK, I had to jump in here as the topic seemed to have moved to YSP disclosure and how Upfront Mortgage Brokers credit YSP and others do not.

First off, I used to be a member of the Upfront Mortgage Brokers Association, which was formed when it broke off from Jack Guttentag's website as he pursued Upfront Mortgage Lenders via his site as well.  There was a question about whether he was paid off by Amerisave to do so, but that is a different story.  While I still practice exactly what the UMBA offers, I am no longer a member of that organization for various reasons, which I will not get into, rather just stick to the concept.

What UMBs do is to set their rates and fees at the beginning of the transaction, making sure the client knows the full costs associated with the loan and then stick to those costs (aka guarantee them) all the way to closing.  They then offer to utilize YSP (via a higher rate than the par rate) to help the borrower cover the amount of the disclosed costs at the borrower's option.  If YSP, or even borrower deposits, exceed the agreed upon costs, the excess is refunded to the borrower.  That is essentially it in a nutshell.  Many, if not most, respectable mortgage professionals do this process anyway.

Now, as Bill mentioned, the out of pocket costs and the rate received are the bottom lines as to which is the better deal.  If both a UMB and another mortgage professional offer the same rate, but the final out of pocket expenses of the UMB are higher than that of the other mortgage professional, the other mortgage professional is offering the better deal, simply put.

I hope this helps clarify what a UMB actually does and the fact it is not necessarily better to go with one.  Instead you should seek a reputable mortgage professional, whether UMB or not, that offers a similar process and has the best deal.

So true Bill, Jeff and Robert.

The entire issue of YSP/SRP is meant to confuse. Pushed by the deep pocketed Bank lobby to try and paint the brokerage side as unfair. Banks make a profit as well or they wouldn't lend. Can anyone truly convince themselves that because the bank doesn't have to report its profit they must be cheaper? Just look at the new GFE we will all be using come 01/01/10 and this point is made obvious (btw-HUD did just commit to staying the course with the new GFE. I'm surprised no one has blogged that).

Regarding the argument in question about Upfront brokers, the only ones I've run across are small shops or 1 person operations that simply don't have the volume to compete. They commit to charging say $2000 to do your loan and credit any unused YSP to the borrower. However because I'm part of a 20 year old, reputable and respected local lender that gets preferred rates from my sources I can usually blow them away. Customers, don't lose sight of the ball- it's how much the deal costs you, not how much your lender is making, that counts. As has already been said, if the rate, fees and points are better, then the deal is better.

...but let's not even get started on service. I just got a call from another buyer who was taking a "better" deal at Wells Fargo again. Turns out they can't close in time, didn't lock in her rate, and her "better" deal is about to cost her substantially more then promised.

"The only protection the consumer has is the personal integrity of his loan originator!

Bill"

How very true!

Gerry Suarez, Jr.

Your FHA Loan Pro!

Jeff, you should know better than to dance with drunken monkeys. Have you not been listening? (wink wink) First of all I just beat Wells Fargo AND Quicken Loans on an FHA streamline refinance. I beat them on closing costs, loan amount and interest rate. I did it as a broker, not a lender, and I put the YSP in my pocket. The funny thing is the moron operator/order taker at Quicken told the borrower I would lie to her and she would end up paying more at the closing table - that, however, was the lie. She paid less at the closing table, lowered her payments even more than either of those two companies offered her, paid a lower interest rate and I made less profit than I would have had I acted as the direct lender (which I could offer a better rate on this one as a broker so I did). So the anti-YSP crowd and all of that ilk are always wrong, will always be wrong, and there's nothing you can do to save them. They are blind by choice not by lack of knowing. As both lender and broker I fully understand the power of being able to hide my SRP and being required, by federal law, to fully disclose my YSP.

SHOULD BANKERS ALWAYS GIVE THEIR SRP TO THE BORROWER? Can YSP be abused? Hard to abuse something the client sees in black and white and agree to at the closing table. NO BROKER HAS EVER APPROVED THEIR OWN RATE, PERIOD. No lender has ever exposed their full income to the borrower. So it's the truth, people like you and I, against the less than 1/10th of a percent of some blind, arrogant, haters. But then again, I'm old and have way too much experience pleasing borrowers, getting referrals, supporting Intelligent Thought, running a business, providing for employees, paying thousands of dollars a year in licensing fees, etc., to play this stupid game that harms the borrower.

Upfront my a$$. Nobody is more upfront than me - NOBODY. That's just another gimmick.

Sheesh, it took me a half hour to format the text. These people act like bankers don't make money on the interest rate. When they believe such nonsense they are fooling only themselves. They act like bankers don't set rates to make profit/commission. Let the dog sleep. Apologies for hijacking your blog.

GREAT JOB KEN!  Geez, you would think this is YOUR blog!  Just kidding!


You know team, there are just people in this world that will never get it!

It would not surprise me if this Catilyn person, or any others like her, are selling SOMETHING ELSE TOO! Like, Noveau Rich, AMWAY, or some other pyramid scam!  SORRY, if I offend anyone...no, not really!  You talk about wanting to be UPFRONT...I dont think brokers could BE MORE upfront than they are being today!

Jeff, I actually lost a deal while in Tennessee, to a lender (uh hum...)  ...that is charging the customer 200 less in closing costs...due to a lender credit!  I got a copy of the good faith estimate, and it doesnt have the escrow correct, doesnt have the funder fees on it...and I am wondering what else will come up later..SADLY at that point, it is TOO OOOO LATE, and the customer is on the hook!

With all due respect to everyone on this blog...THere are really three ways to sell loans!

1.  AT PAR, With either a fixed or flat fee up front.   IF THE CUSTOMER HAS MONEY DONT FORGET!!!!

2.  With YSP, and no up front charge...Perfect for people with little money, or closing cost credits.

3.  A combination OF THE FIRST TWO!

That's it!

None are really and truly better than the other IN GENERAL!  THEY ARE ALL CUSTOMER SPECIFIC!

nice job!

Bucky

Jeff, I am a fan of your blog! Could you please keep us updated on the Homebuyer Tax Credit situation? Your blog saved me with my clients who were excited about the "Downpayment Assistance that was gone in a day!" Thank you for your clear information. Holli - Old Republic Title in Long Beach, CA

Mr. Belonger wrote:  you still don't fully understand the whole issue behind YSP and bankers vs brokers. 

I most certainly do understand it--thoroughly.  If you quote 1 point origination, the consumer understandably thinks that's your only compensation.  If you don't credit YSP/SRP, then, in fact, you're receiving MORE than 1 point origination, and the consumer paid for your back end compensation through an above par interest rate.

Even if your end price to the consumer is better than someone who credits YSP/SRP, all that means is that you could've offered your customer an even better price, but you put the back end compensation in your pocket instead.  In other words, you shopped for better terms for your benefit, not your customer's benefit.

The GFE that you embedded in this blog has a space for YSP--which, of course, is shown as POC on the final HUD-1.  What do you say if your customer asks, "What does $1,200 POC mean?" Or do you hope he or she doesn't notice?

I want to apologize to everyone else that I have not responded to yet. But Caitlyn keeps leaving comments that I feel needs to be addressed now and not later. And apparently I am not the only one that feels this way. Those commenting and trying to explain to her the differences, I have great respect for and are some of the better loan officers in this industry.  Again, I will try to get back to everyone else tomorrow.

CAITLYN.... no, you actually don't understand this as you think you do. You are only assuming. Let me try to explain it another way. I will tell people that I am not the cheapest. But I will also be less expensive than the average. What you get from me is honesty, integrity, extremely knowledgeable (someone that will work out many scenarios)... did you read any of my comments, replies to you?  On how I have competed against a few upfront mortgage brokers who was giving the borrower the wrong type of mortgage that was more expensive in program. Meaning, the person buying a home for their son, being told to go the conventional route.  Well, I not only saved them a 1/2 percent, but a huge difference in down payment. If they would have taken your advice, it would have cost them more, even though they "might" have been saving because they went with an upfront mortgage broker.

Did you not read Robert Ashby's comment?  Or a few of the others?  You only know what you know, because it's what you want to believe or because someone told you so... or because it's what you read. Do you know that half the things on the interenet are wrong or incorrect?  That is a reality, and it's obvious that you just want to argue your point. But you are wrong about my pricing and my services.

Lastly, you didn't read my blog. I "stated" that the good faith estimate in my blog was 'just an example'.  It was not comparing to any other lender or upfront mortgage broker. This alone tells me that you actually have no clue on how all of this works. Secondly, as I told you once before, I am a mortgage banker, I don't disclose yield spread. So # 824/825 will always be blank. Again, proving to me that you have no clue in what you are talking about.  Again, you just want to argue this point, because you can see that it gets me upset.

Here is why I get upset so easily. Because I do believe that I am in the top 5% of all loan officers, when it comes to integrity, honesty, being extremely knowledgeable, and one that takes pride in what I do. This is not a job for me, but a profession. Many loan officers can't say that, even Upfront mortgage brokers. Again, read Robert's comment. And I get upset, because it's people like yourself, that will tell others about this, thinking that you are an expert on this topic. You my friend aren't. I will charge less, just like a upfront mortgage broker, but my service is going to be average. You won't get me at night, or on the weekends. I will be slow when it comes to responding, etc, etc.  And I know this for a fact, because as I mentioned, I have dealt with many borrowers in the past, that ended up going with me, just because of these same reasons mentioned. Hey, I am not saying that all upfront mortgage brokers won't give service... this can happen to anyone. And lastly, I never said that you didn't get bad service. You had a very good experience. It's your overall tone and comments that make it sound like we all should be like the upfront mortgage brokers. AGain, go back and read Robert's comments.

All I can say this, I don't think you have or even care, because you only come back to reply to me, and to nobody else. Gee, I wonder what that says?  And I think I have an idea, a very good idea to as why. In any case, I have given you enough attention now, and I have responded to your comments. But this is the last time that I will respond to you, no matter what you say. Because you think you know it all, and you aren't even in this business. I need to get back to others and reply to their comments. So thank you for your comments, but I won't be replying back to you from here on out.  thanks

Mr. Belonger, your blog entry isn't about "honesty, integrity, extremely knowledgeable," it's about the GFE.  What I want to know is, do you disclose back end compensation to your customer, or do you let them think that 1% (or whatever you quote for an origination fee) is the sum total of compensation you're receiving for your honesty, integrity, and extremely knowledgeable representation?

(If I replied to everyone, I'd be on this blog all day and all night.  I'm really only interested in what you, the blog author, do when you quote a rate that bears back end compensation.  Do you insert it in the appropriate space on the GFE?)  (Y/N)

CAITLYN... I lied, I said I wasn't going to reply.  But this is the last time. Go back and read what I wrote. You are out of line now,because you want to read what you want to hear. Let me make it easy for you. I don't have to disclose it, do you understand that?  I am a banker.  I thought you knew it all and understood all of this. And you keep talking about points, 1 pt. This was an EXAMPLE..  besides, you are all over the internet, arguing with many authors, just to disagree.  End of story and that's it. For any other answers, please read my comments. I wrote enough to tell you the real deal, but you again want to ignore much of this. I don't have time for this anymore. thank you.

Mr. Belonger wrote:  I don't have to disclose it, do you understand that?  I am a banker. 

How convenient.  All the more reason why consumers are better served by the services of a broker.  A broker willing to be completely transparent about his/her compensation.  A broker shopping for the consumer, not for him/herself.

Just my opinion, of course.

<insert laughter>

Mr. Belonger, it's OK with me if you don't want to disclose total compensation from all sources.  The consumer knows the realtor's compensation, escrow/title's compensation, appraiser's compensation, etc., but if you don't want to disclose--even if you don't have to--EVERYTHING you make, who am I to tell you that you should?

Jeff - I told Lisa Hill and I will tell you... thank you - I was just trying to explain to a buyer the importance of a good faith estimate... and now I have this to forward to her... thanks

I would like to add my two cents to this exchange about YSP. In my view,  if a
borrower retains a loan originator with access to multiple loan sources to act as his agent in shopping
the market, in exchange for a fee agreed-upon in advance, that fee includes any
YSP collected by the broker originator, who has a duty to report what it is. That is the UMB
 model. If a borrower does his own shopping, and knows how to avoid all the
 pitfalls involved in developing comparable price data, YSP is irrelevant.
 
Nonetheless, I believe YSP should be disclosed, for two reasons. The first is
 that not many borrowers are sufficiently effective shoppers as to make YSP is irrelevant to them. The
 second is that the cost of disclosing YSP to those who don't need it is small,  whereas the cost of not disclosing it to the larger group who do need it to protect themselves against being over-charged by their "agent" is large."

The argument is applicable to both brokers and corresondent lenders, though not to portdfolio lenders who have no YSP.

I see that Mr. Belonger deleted my post wherein I excerpted his "explanation" that the reason he doesn't disclose above par (rebate) pricing is because, as a mortgage banker, he's not required to disclose.  That's fine, if that's the way he wants to do business, but it's disingenuous of him to explain and then delete a post referencing that explanation.

Just my opinion, of course.

JOE.... .  I would totally agree with that statement, as I mentioned in this blog and many times over. Yes, there will be many that will disagree with me. But I think it's the best way to compare true apples to apples.  thanks

BILL... . thanks for that polite compliment. I just can't stand incomplete and bogus good faith estimates. I know you wouldn't either, but this will never change.  All we can do is just educate others on one of the most important issues, in my opinion.  thanks

JIMMY.... yes, Lenn makes a great point, I wouldn't expect the realtor to know it all, but just to have a good idea. The problem with that though, is that if you don't know the program and or the pricing hits...  such as on a conventional loan with 20% down and credit scores of 635... there will be a 3 point hit for this. Most realtors aren't going to know this. And you might give the borrower the wrong opinion and or advice then.  Just food for thought. thanks

SCOTT..... yes, Lenn did stir up a hornet's nest.. I truly agree that first time homebuyers don't usually know how to read these. But how can it be easy when many loan officers don't even give you a copy... or that they give you a bogus GFE.  In any case, thanks for the comment.

WILLIAM aka Bill.... .   I would disagree, that the good faith estimate is useless with out the truth in lending disclosure. You can manipulate the TIL, the truth and lending disclosure. The days of interest... you can leave out certain items... etc, etc.  It's not hard to look at the rate and fees. Besides, you have mortgage insurance in the TIL and it's based on 30 years.  How many people keep their mortgage for 30 yrs?  Just food for thought.

In regards to my example.. as I stated, it's just an example and it's not about my market. Besides, I do loans all up and down the east coast. Many people are doing zero point loans. To me, it comes down to my clients goals and what would make sense.

Overall, I agree, it doesn't stop loan officers from showing you the cheapest GFE, and then change it on the borrower. AT the end of your comment... thanks for the feedback, I appreciate that.

REBECCA.... . it's good to hear people that agree with this.  :o)  Seriously, I just love educating, even though some of this is my opinion. In regards to your question, yes, I will do a blog on that. Many might not like it or agree with it though... thanks

CARLA.... . it can be a compliance issue, depending on what you have done and the stage in which you are at with the lender. And yes, this topic seems to be very timely for so many.  thanks

Mr. Belonger wrote:  Seriously, I just love educating, even though some of this is my opinion. 

If one really loves educating, one ought, in my opinion, to educate how loan originators can offer no points/no cost/no fee loans through rebate pricing.   Educating includes information about precisely what rebate pricing (YSP/SRP) is, how the consumer ultimately pays for a no points/no cost/no fee loan, how the disclosure of rebate pricing differs for mortgage bankers such as yourself (hooray for the mortgage bankers' highly paid lobbyists, eh?) and mortgage brokers who're required by state law to disclose total compensation from all sources.  Instead of demurring about undisclosed rebate pricing so as not to "confuse" the consumer, full and well-articulated disclosure and an explanation of total compensation from all sources ensures that a consumer can make fully informed choices about interest rates and fees.  Fully educating the consumer includes disclosure of 1% origination fee AND 1% on the back end, does it not?  That's what I call an education!

Mr. Belonger, why do you keep deleting my posts when I bring up such matters?  Have I not been utterly circumspect in doing so?  Of course "it's good to hear from people who agree with this."  It's always more comfortable to hear from people who agree with us but that's not always how education occurs.

Don't like the truth laid bare, do you, Mr. Belonger?  Cheater!

Jeff, thanks for a very informative post. As to the person who tried to hijack...well, let them go write their own post and see if it can get any attention on its own merit. 

More than once, I have had to ask lenders - especially some at new construction - for a GFE for my buyers. And they stall! Which makes me even more determined to get one. I won't let them off the hook until they comply. Don't know what would happen to a buyer without representation, but I'm guessing they wouldn't end up with as competitive a loan. If a lender won't give you a GFE, definitely Run, Run, Run!

Sharon

Certainly good advice Jeff. I do not know of too many people that like financial surprises!

Jeff,

I don't like the "T in L" the numbers are always a distortion of any thing the consumer will experience.

On the other hand, the "T in L" is the only place wherev the terms of the loan are discribed! I said: "with out it you can not be sure that you are comparing apples to apples!"  Comparing the cost of a 30 year fixed rate loan to one that "balloons" or is only fixed for a short time often happens if you don't receive both forms.

In reading the comments it seems that the opponents disdain for YSP/SRP/GROSS-PROFIT, extends to the very consumers they claim to protect! The fiscal best interest of the consumer seem to be irrelevant to claim "I'm better than they are, because I say so!"

Bill

Why is disagreeing with someone's method of doing business--that is, not disclosing rebate pricing--considered "hijacking?"

Mr. Belonger, you're funny.  You claim to be an advocate for the borrower, but since you don't credit rebate, you shop for the highest Yield Spread Premium for yourself.  You state on the GFE that your compensation (origination fee) is 1% (or whatever), yet you get kickbacks from the investor--as much as another point, I'll wager. Then you hide behind, "As a mortgage banker, I'm not required to disclose...and so I don't!" and you apparently sleep well at night nonetheless.  Unless you're willing to disclose total compensation from all sources, I suggest you not hold yourself out as the final arbiter of what is or isn't an honest Good Faith Estimate.  I exposed you, and you don't like it, so now you're deleting all my posts.  Cheater!

Jeff,  Your post was terrific.  I'm a fan of your posts and the valuable information that you provide to borrowers and to Realtors.  I'm bookmarking this.  Thanks.

I see things from the signing table perspective.  It seems most of those commenting here believe that the GFE is always provided prior to closing.  I actually find that to be humorous.  Of the over 6,000 signings that I have conducted personally, the vast majority had borrowers signing the GFE while at the closing table-usually having been faxed to escrow just prior to the loan document signing and moments before any such signing takes place.  Only on a very rare occassion has the borrower admitted to having seen the GFE prior to that time.  Further, any resemblance between the GFE and the most current Estimated Closing Statement is purely coincidental.  Remember, the GFE is Mtg Broker/Lender produced using "Ball-park" numbers.  The Estimated Closing Statement is produced by Escrow having researched, updated and confirmed those numbers.  The faces of "sticker-shock" I have seen are many.  While the faces of the fully informed borrower have been few.

My goal is to have a GFE within $100 of the HUD1 final numbers. I almost always get that accurate unless the Hazard Insurance is off by a bunch.... and I do mean a bunch, because I usually guess high on that.

In my career, I have never had a surprise closing number. Except when the seller realtor inserted a $200 rekey fee on one of my FTHBs AFTER final HUD approval. No coincidences here!!!

There is nothing 'ball-park' about my fees either........ They are 100% dead-on accurate. Now, inflated courier fees from title companies or some ridiculously high recording fee sometimes catches me off guard. But not my fees. Not the prepaid interest, not the taxes.

I do agree with Shannon that a lot of loan officers do not know how to prepare a GFE nor do they take the time to be accurate.

Have I been guilty of sending out a 'quick & dirty' GFE for rough numbers? Yes, I have!! Typically this is when the borrower is still shopping for homes and not under contract.

I'm in 100% agreement with Tom - My estimates are usually within a couple $100 dollars. My fees as a mortgage company are ALWAYS accurate.

Shannon....I'm shocked to hear what you say.  If that's the case, then you must have atrocious lenders in your community.  I mean just atrocious.  I would say that this wouldn't apply here in Illinois.  These lenders who are so off would be villified.  I'm off almost always, but it's intentional.  I OVER QUOTE so that the buyer is tickled when they come in with less.  The biggest reason is that Illinois offers tax credits from the seller vastly in excess of the months that the lender is collecting.  I quote a tax credit enough to wash the up front escrow being collected.  Needless to say, I had the issues you talk about twice in my first year in lending....never again.  If you serve, serve for the victory.  BOrrowers who need to count every penny to get into home, I'll drill down to the penny.  Needless to say......if lenders are good, they'll be accurate and work for the benefit to their clients.