Brad Lynch

Builders have been a big problem over the years with dangling incentives for potential buyers to use their affiliated mortgage company. Nothing was more aggravating than to lose a loan after I have been working with a buyer for months, because some builder claims to be giving some sort of incentive to use thier affiliated mortgage company. We all know what was going on behind the scenes within the mortgage industry. I have been saying for years that builders need more regulation. Looks like it finally happened.


Ken Harney made note of some changes to come, and said the following.

One of the less-discussed provisions of the Department of Housing and Urban Development's controversial rule on mortgage fees and disclosures is expected to profoundly change lenders' relationships with builders next year.
The rule, which HUD finalized last month after years of revisions, stops, and starts, will overhaul how the Real Estate Settlement Procedures Act is enforced.
Most of the debate about the 86-page rule has focused on the standardized good-faith estimate lenders will have to start providing mortgage applicants in 2010. The industry is expected to spend millions next year preparing for that part of the rule.
Several other provisions will take effect Jan. 16. What many observers called the most significant one would bar builders from offering homebuyers discounts that require them to use an affiliated mortgage, title, or settlement company. The ban will remove a competitive advantage for the joint ventures many builders have with lenders like Wells Fargo & Co., JPMorgan Chase & Co., and Countrywide Financial Corp., now a unit of Bank of America Corp. Some observers said the rule could spell the end of such partnerships.
Also on Jan. 16, lenders will be allowed to charge borrowers the average fee for certain types of settlement services purchased on their behalf, rather than the actual fee the lender paid the service provider. Some consumer advocates said this provision could help lenders skirt other consumer protection laws.
One thing that is clear: a good deal of compliance work lies ahead. "The industry has been digesting this huge, complicated, massive rule, and we're only now coming to the stage of implementation," said Sue Johnson, the president of the Real Estate Services Providers Council Inc.
Mitchel Kider, a managing member at Weiner Brodsky Sidman Kider PC, said builder-affiliated mortgage entities "worked off the synergy that exists" because discounts and incentives are available. "What this rule does is make it difficult from a business perspective to run your operation. It changes the business model of affiliations."
Brian Levy, a senior vice president and general counsel at the $1.5 billion-asset Guaranty Bank in Milwaukee, whose Shelter Mortgage Co. LLC has partnerships with builders, said, "We're going to see less production from that source and lower revenue."
It will be hard to gauge how much of the drop will come from the rule and how much will come from the recession and housing slump, Mr. Levy said. (In October, the most recent month for which data is available, sales of new homes dropped 5.3% from September and 40% from a year earlier, to an annual rate of 433,000, according to the Census Bureau.)
After mid-January, Mr. Levy said, lenders will monitor capture rates - how much of a builder's business their joint ventures get - to measure the rule's effect.
Gina Harris, the president of Builder's Affiliated Mortgage Services, a Tampa correspondent lender, said she expects to gain more business after being shut out from competing for the business of home builders that had ventures with mortgage companies.
"The joint ventures with builders may not be as profitable anymore, and they may decide that they don't want to have them," she said. "And that's probably going to be a decision that the large mortgage companies doing the joint ventures are going to have to make."
Lenders that have mortgage officers working at builders' offices may continue to work with the builders but probably will bring their loan officers in-house as part of their retail staff, Ms. Harris said.
David Stevens, a former executive at Wells and Freddie Mac and now the president and chief operating officer of the Chantilly, Va., real estate brokerage Long & Foster Cos., said the real estate law does not prohibit companies from offering "a bona fide discount," but it must be one that any competitor could match. The problem is when "the only way you get the discount to the home is to use the affiliated business."
At the peak of the housing market, builders typically told customers that they could get $10,000 of upgrades or a bigger lot if they used a mortgage or title company affiliated with the builder, he said. "They basically cross-subsidized it" with revenue from the affiliate.
William Renner, the director of single-family finance at the National Association of Home Builders, said some builder-affiliated mortgage companies may still maintain "fairly high capture rates" next year, because not all builders offered incentives in exchange for using a certain service. But he conceded that the builders with affiliated mortgage companies "would in many cases have to change their marketing agreements."
Debora Blume, a spokeswoman for Wells' home mortgage unit, said many of the builders that have ventures with the lender "do not offer financing incentives, which have actually been a recent phenomenon."
Builders form such ventures because they "want to feel confident their customers are connected with a strong, stable mortgage provider able to make sure deals close on time and meet customers' expectations," Ms. Blume said. "And customers want the convenience of one-stop shopping with mortgage, title, and insurance services under one roof."
The right to charge an average fee at closing for things like credit reports, appraisals, and recordings is meant to make it easier for lenders to adhere to the three-page good-faith estimate they will have to provide beginning in 2010. Under the rule, actual charges at the closing table will not be allowed to exceed 10% of the estimate.
(Lenders currently must provide some sort of good-faith estimate to applicants, but there is no standard form for doing so. Many lenders use a one-page document. Charges at closing can vary widely from the estimate, creating the potential for unpleasant surprises for consumers and making it harder for them to compare loan offers.)
Rebecca Borne, a policy counsel at the Center for Responsible Lending, said settlement fees "are used to calculate the finance charge under the Truth-in-Lending Act and to determine if a loan has 'high-cost' loan status, which often subjects it to more protective standards under federal and many state laws."
Allowing lenders to charge average fees creates the danger that the triggers under those laws will be hit less frequently, Ms. Borne said.
The rule forbids the use of average charges for fees that are based on the loan amount or property value, such as transfer taxes, daily interest, reserves, escrow, and insurance.
Though full Respa reform implementation is more than a year off, some lenders are anticipating the impact of the expanded good-faith estimate, which will include details about whether the interest rate can change, the existence of prepayment penalties, and total closing costs.
The new disclosures "are all going to require extensive systems work, and you have to completely reprogram your settlement systems and up-front disclosure systems, which will affect lenders, third-party service providers, and settlement companies," Mr. Stevens said. "There are definitely costs involved."
Mr. Levy said wholesale lenders are concerned about shouldering the liability of a binding good-faith estimate submitted by mortgage brokers.
Often a borrower will change the details of a loan "as they're headed towards closing" - switching from a fixed rate to an adjustable one, for example, he said.
Whether lenders will be held to their original estimate in such cases is unclear, Mr. Levy said. "Almost every loan on average has a change where it needs to be locked in a second time, and that's normal for a loan to be changed, so would you run the risk that your original GFE is wrong? Will regulators be looking at GFEs and hold ... [lenders] accountable on a compliance issue?"

In recent loan appointments with new clients, I have received comments on the different Blog posts these clients have read of mine. Many times they mentioned that they enjoyed reading them and liked the sparing humor I sprinkle into them on my personal/Business Blog. That is my goal after all. I know reading mortgage "jargon" is not always the most interesting read to everyone else like it is to me. So, that is the twist I throw into it. See what I do for my readers? Goooooooosh! ha ha

In a recent email to my friends outside the mortgage world that I have stayed in touch with through Middle School, High School, and College, we joked around about the recent Shuttle event. (Two of them are brothers that work for BAE Systems and Lockheed Martin...Google those companies and see their purpose and you'll know why we got into an email about such Shuttle talk). I made a mortgage joke that I thought my Blog readers might enjoy. I would like to have just jumped in and wrote this Blog AS IF I was really advertising for a real scenario, but I am consistently surprised at the serious stand so many random Blog readers take on everything they read. So, my preface here is to announce that this is ALL A JOKE!

Home Owners in Frisco and the surrounding Collin County area have received hard evidence through undisclosed sources that life as we know it on Earth will soon change, as reports from the undisclosed source reveals from research and findings recently brought to Earth on the yesterday's return trip from the moon by Shuttle Astronauts. Global warming will soon be termed Global Burning as to it's now realized inevitable affect on our planet, and the demand for underground living has only recently become real in Collin County. Residence have begun cashing out the equity in their homes to afford the cost of digging and moving all personal belongings including pets into their new underground homes. Residence who have invested in rental properties are even finding that they have enough money after cashing out the equity in their investment homes to put sky lights in their Dugomes (term used when you put Homes and Dugouts together)that just pierce the Earth's surface to allow natural light in. (See, I tell all my clients to invest in rentals and nobody listens...no natural light for you in your Dugome)
Before the banks realize what is real in the future and decide to "cashout" on this themselves, please call Brad Lynch for your Dugome moneys today. Disclosure in small writing: you must have at least 40% equity in your home to get exclusive dugome cashout rates.

Picture below of recently found Mars Alien from recent shuttle trip...or maybe it's just a picture of My Little Alien that love pancakes and Carebears.

During the past couple years as loan programs for investor loans began to diminish, numerous investor clients have called a halt to the hustle and bustle of buying new investment homes and cashing out current ones to buy new ones. In the meanwhile, I can just picture them in my head sitting around twiddling their thumbs and because so many of them are high energy people by nature, I figure they have learned to twiddle thumbs at back breaking speeds...if you know exactly the personality that comes with the "get'r done" type I am familiar with. (:

I would like to get involved in a Home Investor Group or Club and understand that there are some spread out through the DFW. If anyone is familiar with an Investor Club/Group/Networking organization, please let me know so I can refer my "thumb twiddlers" there until they figure out what to do next.

Best wishes to all for the Holidays and may God help play a part in it. Lets keep Christ in Christmas.

Here it is, Holiday season. Year after year, the pipeline of business starts to decrease and November and December starts to look hopeless, and then a couple extra procrastinators fall in just in time to have Christmas at their new home. In the meanwhile, I try to use this time to catch up with past clients, current and past Realtor alliances, and most important, find new alliances.

If there is any Realtors in the Dallas or Collin County that have some time on their hands and rather than chalk this time up to "poor market, and know business", or "Holiday time is the black hole time in real estate" atypical thoughts and get out and meet future business partners. I am trying to fill my schedule with appointments for meet and greets at Starbucks and IHOP. (:

!!!!!If you are looking for positive activities that move your business and your Real Estate experience forward, lets chat and bump into eachother on purpose this week. !!!!!!!

Hope all had a great Thanksgiving and God Bless!

As usual, I felt the need to try to squeeze out all the time I could before things started shutting down in our industry before Thanksgiving. As usual, I couldn't really find much to do other than manage my pipeline. I was hoping to network or make some appointments with local realtors to have coffee or do breakfast, and everyone I talked to was wrapping up for the Holiday. Officially, today, me too...I guess.

Everyone have a happy Thanksgiving, enjoy the family and kids, and God bless.

P.S. I was looking for a hunting specific group w/in the Active Rain Channels and couldn't find one. If anyone knows where or how to find one specific to hunters, please share.