A Mortgage Broker is not a Lender May 7, 2008
At the beginning of every law, there’s a preamble and then a set of definitions. Many of you know this: A mortgage broker is not a lender.
A lender is defined by federal law, RESPA, as an entity that makes loans. This means the entity has the money to fund the loans.
Brokers, by definition do not loan their own money. Instead, they’re middlemen who go out and find the mortgage money. The entity funding the loan is the “lender.” This definition comes to us via RESPA. Nothing has changed here, and I predict state law will mirror federal law.
In terms of state law, and in particular, SB 6471, it should now be made crystal clear to the consumer that a MORTGAGE BROKER IS NOT A LENDER.
Okay, fine. We got it. However, there’s one small problem. As I addressed in my four part series on the differences between a banker, broker, consumer finance company, and a credit union within the realm of licensed mortgage brokers we have a hybrid. A “correspondent lender” is an entity currently licensed as a broker, but they have their own warehouse line of credit with a bank. They can fund their own loans, and they can also broker out to other lenders, if they so choose.
Most correspondent shops are very well run, with onsite underwriting, training, auditing, and compliance departments. Currently, many hold a mortgage broker license. Some of these entities are exempt from holding a mortgage broker license because DFI has granted them an exemption certificate because they have direct Fannie Mae/Freddie Mac approval. Unfortunately, these companies with the exemption certificate, (DFI estimates that we have about 300 brokers with exemption certificates,) have been largely unsupervised at the state level. Senate Bill 6471 was supposed to close this loophole and bring all exempt brokers under the Consumer Loan Act.
Many correspondent lenders also broker loans in addition to closing them with their own warehouse line of credit. This leaves the correspondent lenders with a dilemma. Correspondent lenders have the option now of holding two state licenses, or just one. They can keep their license under the Mortgage Broker Practices Act and they also now must operate with a Consumer Loan license, or they can decide to just hold the consumer loan license.
This change affects only correspondent lenders.
Pure mortgage brokers, entities that ONLY broker ALL their loans, are not affected by SB 6471.
Correspondent lenders are mad as hell and many showed up at today’s meeting to express their shock and awe at having to pay an assessment to the state at .000180271% of their annual volume. Depending on the breakdown of correspondent-funded loans v. brokered loans, estimates provided by the correspondents at today’s meeting range from an additional $20,000 to $60,000 per year in fees that the correspondent lender will have to pay to the state of Washington each year.
Existing consumer loan lenders already pay this assessment. Realize though, that many consumer loan lenders loan money at much higher interest rates and charge much higher fees than traditional mortgage companies. Correspondent lenders argue that these higher fees will be passed on to the consumer. One lender present testified that he plans on adding this fee on to the consumer’s fee schedule on the Good Faith Estimate, calling it a “State Tax.” Guys: I’m pretty sure that you cannot honestly present a fee imposed on you, as a “tax.”
Correspondent lenders are also mad as hell for another reason: They must now swim in the same pool with Consumer Loan Companies…..those who we do not speak of. Those bastards that mortgage brokers look down upon. If there’s a hierarchy, it looks like this:
Banks look down on
Mortgage Banks
Who are seen as “less than” because most don’t carry bank deposits. Mortgage Banks look down on:
Correspondent lenders
Who are seen as baby mortgage banks, not fully grown up and ready to play hardball.
Correspondents are always looking down on:
Mortgage Brokers,
Who sneer in disgust as throw up a little in their mouths when they think of:
Consumer loan lenders
Who are seen as nothing more than pawn shops, payday lenders, and one step above the mafia.
Consumer loan lenders have been originating mortgage loans for quite some time. Ameriquest, Household Finance, Paramount Equity, American Equity, are all names of lenders licensed under the Consumer Loan Act who originate mortgage loans.
Now correspondent lenders and consumer loan lenders are swimming in the same pool. Correspondents must take care not to drink the water the CL lenders have peed in and avoid their floating turds.
And now they BOTH have a new punching bag: Brokers have now been classified as the pond scum, right? Wrong.
Because there’s a problem with this new hierchy.
Instead…….BROKERS actually take a step UP above correspondents, because brokers have stricter licensing requirements under the Mortgage Broker Practices Act.
So the hierarchy now looks like this
Banks
Mortgage Banks (what’s left of them)
BROKERS
Correspondents and consumer loan lenders
This is all about ego and money.
Correspondents: It’s now time to get busy figuring out how to separate yourself from your competition. In today’s meeting, over and over again, correspondents told the mortgage broker commission that they bring a great deal of service enhancements OVER pure brokers to the consumer. If that is so, then correspondents should not have a problem in the free market. If this is not the case, if correspondents do not bring added value, then the state legislature has called your bluff. Personally, I believe correspondents DO bring value to consumers.
I can think of at least five different ways to market this change to consumers in a positive way to gain market share. This is nothing but business at it’s finest. Government intervenes, and businesses must find a way to survive and grow. Correspondents will survive this change.
Most memorable moment:
After testimony from a correspondent who reamed consumer loan companies and called them “loan sharks,” Consumer Services Director Deb Bortner stood up, waved her hands in the air and reminded the audience that there are many, many fine consumer loan lenders licensed in WA state and one of them happens to be sitting right there in the room….on the Mortgage Broker Commission. Don Burton from Evergreen Home Loans smiled. John Porter from Mortgage Masters asked, “So Don, tell us the down sides of being regulated under the Consumer Loan Act.” Don said, ‘Well, I can’t think of any.”
DFI’s goal is to have definitions and a preliminary set of rules out for us to review by May 16th.
Sphere: Related ContentWhen it’s good to know a “wiseguy”
If you’ve ever watched a show like the Sopranos you know that there is a term out there called wiseguy that has a potentially dangerous undertone. Well, yesterday, for one of my new listings I was thrilled to know a wiseguy, or rather a Wise Locksmith, Chris Weissman.
While driving from Renton to Bellevue’s Bridle Trails neighborhood, to show this listing, I get a phone call from another agent who has shown up to view it with a client. He’s having trouble with the door and wants to know if I am aware of any problems or special way of handling the lock to make it turn. “No, I haven’t had any problem with the lock before and neither have the other agents that have viewed the house already”, I tell him.
Come to find out, after calling one of the sellers, there is a way from the inside of the house to turn a little switch that would lock the home from the interior and it would make it so the master lock wouldn’t work. Not good. *Note to sellers - always let your agent know about quirky things like this so we can stop it from happening in the first place.* Not only was I losing this viewing but the pending showing I was about to do would possibly be lost too. On top of it, I lost one other possible buyer showing when yet another agent came by while we were working on getting the problem fixed. My inner MacGyver kicked in. I wasn’t about to do some fancy trick with a paper clip but I could quickly sort out a possible way to solve the problem.
And here is where my wiseguy comes in. Chris is actually a former client of mine. He and his girlfriend, Maridee, sold a condo and purchased a home through me about 18 months ago. I learned at that time that he was a locksmith and I’ve referred him to several clients since that time, with very good results I will say. So, Chris gets a call from my partner, Michael, to see if he can help and he’s on top of it immediately coming over from the Seattle area during rush hour and actually making it within about a 20-30 minute time frame. I was thrilled. One of the great things about working with various people and different types of contractors day in and day out is that when you need something fast - most of these wonderful folks will drop everything to come help you.
His first instinct was to try various methods and tricks he’s learned throughout the years to find special ways of opening locks. Unfortunately that didn’t work. The second attempt through the garage didn’t work but mostly because it is on an electric opener, so then he had to tear off the existing door handle and replace it with a new lock. I’ll say that it’s a little disturbing to see how easily some of this stuff can be taken off a property - although Chris did say that since he does this all the time he makes it look easy. He just hates having to destroy stuff. He didn’t damage the door though and that’s all good.
It ended up that the buyers that wanted to see the house at my scheduled showing ended up coming back (I rang their cell) and we had a successful viewing. One of the other agents is planning to come back too but I likely won’t know if that 3rd agent comes back. Either way, the house is accessible again and all is well that ends well. Since the clients aren’t looking at offers till next Wednesday we should be set but I’ve got Chris on speed dial now, just in case….
Sphere: Related ContentJust got the news! Another Grandchild on the Way! May 6, 2008
My daughter Jacquie just called, the middle child, she and Peter are going to have a baby! This will be my second grandchild. See Jacquie below at the 7 Eleven at Denny and 5th.
Mortgage Broker Commission Meeting Tomorrow
There’s a Washington State Mortgage Broker Commission meeting tomorrow, May 7th at the Renton Community Center to discuss the impact of State Senate Bill 6471. This legislation ammends the Consumer Loan Act and Mortgage Broker Practices Act requiring all lenders to become licensed under the Consumer Loan Act (except those licensed under RCW 63.14)
This change in the state law was put in place to close a loophole. Some mortgage brokers were issued an exemption certificate by their regulator, DFI, because they had received approval as a Fannie Mae/Freddie Mac direct lender. Though still subject to the MBPA, these lenders, an estimated 300, were operating with no state regulatory oversight. This loophole is now closed.
Mortgage brokers are complaining loudly that this change will cost their firm lots of money. I would like to see the raw numbers on their estimates.
I will be attending tomorrow’s meeting, and if I can catch a wifi signal, I will blog live.
This does not appear to be a “closed” meeting since DFI is indicating that the room capacity is 100. I received no notice about this meeting, which is odd, since DFI is always very good about notifying all of us via their listserve.
Time: 1:00 PM
Location: Renton Community Center
Address: 1715 Maple Valley Highway, Renton 98057
Driving Directions
Sunday Night Stats on Monday Morning May 5, 2008
Did you ever work so hard in a week, that you just needed to lay down for 20 minutes after dinner and didn’t wake up until the next morning!? Sure you did. It happens to all of us. Well, that’s what happened to me last night after my Open House in Bryant and after inputting a new listing in Redmond. Just took a nap and never woke up until 6:00 a.m this morning.
In this business the days sometimes just keep running together one after the other and you forget when you last had a day off, or a haircut, or your nails done. You just keep working day after day until the job is done, and the time frame just keeps switching from this “right now” to the next “right now”.
There is no “have a nice weekend” in real estate. There is no “what’s your schedule like” in real estate. On any given day the phone rings and sets a chain of events into motion that has no end until the work is done. And when your clients have small children, you really roll up your sleeves and pitch in until the house is ready for market. I have 4 sets of clients with children, all getting their houses ready for market, and 2 of the 4 moving to new houses nearby. The work is back-breaking, but very satisfying when the job is done and the home is photo ready and Open House ready and Broker’s Open ready, and then you do the photos and the Open Houses and the Broker’s Opens, and it just keeps going until the house is sold.
Everyone wants a list of what an agent does. Truth is we do whatever it takes to achieve the objective. Everyone working all at the same time, owners of the homes and agents alike, all working toward the common goal of getting everything just so and on market.
Whether it’s a home built in 1910 in Bryant:
Or a newer townhome in Redmond:
Perfection is the expectation of buyers. So you just keep working till you get it as perfect as you can. And the poor Moms who live there with their small children, have the undaunting task of trying to keep it that way day after day. Getting the kids ready for school and leaving the house in perfect order for showings, is no easy feat.
So this Mother’s Day I ask that you all give honor to the Mom’s with homes on market…and the Mom’s like me who turn into everyone’s Mom when helping them get the job done.
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And now for Sunday Night Stats on Monday Morning. I won’t be doing the April month end stats until next week, as there will be many month end closings posted during this week. So let’s just do the normal weekly stuff.
I expect if I’m this busy getting properties on market, two on and at least three to go over the next few weeks, that every agent is busy prepping homes to get them on market. So inventory should be rising even more in the next 30 days.
King County Residential:
For Sale: 9,372 at a million or less - DOM 53 - MPPSF $225.58 and 1,591 over $1M - DOM 68 - MPPSF $371 Total Residential King County homes on market this morning 10,963. That is 135 more than last week, after netting out those that went into escrow from those that came on market this week.
In Escrow: 2,750 - DOM 45 - MPPSF $212, that’s 81 less than last week due to month end closings with MPPSF dropping from $214 to $212. That reflects a drop in asking prices, not sold prices. Expectation is the sold prices of those 2,750 will be less than the $212 MPPSF asking prices. Though some did sell for over asking price with multiple offers, the median will likely be more like $210 or so.
Closed YTD: 5,109. That’s 463 more than last week with DOM of 51 days and MPPSF of $220 for the year to date which is up a buck for closed sales.
Given the median days on market for In Escrow is going down, the price issue of down to $212 MPPSF for those in escrow, is likely due to increased competition and homes coming on market being more realistically priced to sell. At least for the ones that are actually selling and going into escrow.
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King County Condos:
For Sale: 3,784 - that’s 10 more on a net basis than last week. DOM 57 - MPPSF $323 (about the same)
In Escrow: 900 - that’s 46 less than last week due to month end closings - DOM up from 43 to 48 - MPPSF up from $303 to $305. Remember those are asking prices, not sold prices.
Sold YTD: 1,675 up 158 over last week - DOM 48 - MPPSF $288 - that is DOWN from $290 last week and EQUAL to the MPPSF of 2007 all months combined. Given most of last year was strong, condos just now reaching MPPSF of all of last year is a pretty strong statistic for condos. You would think all of this year would be equal to the last 5 months of 2007. But they are still running high relative to 2007 compared to the single family home market, but starting to dip on a YOY basis, which is to be expected.
Amazing how strong the condo market is. I suspect new construction and condo conversions are giving resale condos a run for their money and strong competition. That is keeping the MPPSF up, though for resale…not necessarily so.
That’s it for Stats this week. When I do month end stats for end of April YOY next week, we’ll break down some of the areas like “within 2 miles of Microsoft” and certain Zip Codes from weak ones to strong ones. So if you are hoping to see a break down of a given area, it’s time to get your requests in for next week.
One of our agents listed a property at $350,000 in Tacoma three weeks ago and has had NOT ONE showing since it was listed. My listing in Bryant listed at $529,950 had 6 showings in the first two days + more than 20 people at the first Open House yesterday. So there is a lot of difference in activity from one area to the next.
Getting the property ready for market, and good photos, have become critically important. No more stick the sign up “as-is” and wait for offer…
Sphere: Related ContentFriday’s Rates May 2, 2008
Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). The conforming rate quote below is based on owner occupied, “full doc” purchase with a sales price of $500,000 and a loan amount of $400,000. This scenario includes reserves (taxes & insurance) not being waived. Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below.
30 Year Fixed: 5.750% (APR 5.902%)
30 Year Fixed with 10 Year Interest Only: 6.125% (APR 6.267%)
15 Year Fixed: 5.375% (APR 5.627%)
5/1 ARM - LIBOR: 5.375% (APR 6.945%)
5/1 ARM with 10 Year Interest Only - LIBOR: 5.500% (APR 7.035%)
Conforming-Jumbo Rates. Pricing is based on the same criteria above except where the loan amount is $417,001 - $567,500 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $650,000 and a $520,000 loan amount.
30 Year Fixed: 6.125% (APR 6.373%)
30 Year Fixed with 10 Year Interest Only: 6.625% (APR 6.813%)
JUMBO (Non-Conforming) Rates. Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down). The specific scenario used to price the rates below is a sales price of $850,000 with a loan amount of $680,000.
30 Year Fixed: 7.500% (APR 7.758%)
FHA. Pricing based on credit score of 620 or better and loan amounts up to $362,790 for FHA in King, Snohomish and Pierce Counties.
30 Year Fixed: 6.000% (APR 6.782%).
FHA-Jumbo. Pricing based on loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.
30 Year Fixed: 6.250% (APR 7.030%)
VA. Pricing based on credit scores of 620 or better based on loan amounts up to $417,000.
30 Year Fixed: 6.25% (APR 6.572%)
Prime Rate (what HELOCs are based on): 5.000%
This is just a small sample available of rates and products. Rates are as of Friday, May 2, 2008 at 2:30 p.m. and may change at any time. Available programs may change at anytime as well. This is not a guarantee nor is it a commitment of interest rate. For your personal rate quote for your Washington State property, please contact your local Mortgage Professional.
Sphere: Related ContentFree Flushes?
Our development company has been a certified Built Green builder for several years, and we’re always trying to find economically feasible ways to add “green” features to our new construction. “Economically feasible” to me means that while we’re willing to pay more to build in a more sustainable fashion, we’d like to be able to recover most of those extra costs in higher resale prices, or shorter market times.
So when I read about a “greywater recycling” unit, I thought we should try it. Here’s our first installation, in a stand-along townhome in Crown Hill — North Ballard:
This octopus-looking thing takes water from our two showers (the black pipe) and puts it into this 50 gallon tank. There is a water supply that fills the tank if the level gets too low. The city inspector scratched his head at this — first time he’d seen it — as did our plumber. But now that we’ve gone through it once, hopefully the next ones will be easier to install.
You can see the level of “grey” water in the picture, at about the 20 gallon level. This water is pumped back into the toilets to use for flushing. Flushing constitutes nearly 40% of domestic water usage, so in theory, this will reduce your water (and sewer) bills considerably. And it’s just “light grey” shower water, which if you avoid shaving, toothbrushing, and any other debris-generating activities (not to get too graphic), should be 98% pure domestic water and a little bit of ivory soap and shampoo. The feedback that I’ve seen from consumers is that they don’t notice that they’re flushing with anything different than normal “clean” water. So when you do flush, it’s with water that would have gone down the drain after its first use, but you’re giving it a second life.
The cost, all in, is about $4500 (it would be much more expensive to plumb into an existing house). This particular townhome is about 1750′, and is priced at $450,000 — not priced any higher than it would have been without this system, but our hope is that this is a feature that will set this unit apart from the competition. We wouldn’t be able to justify this in a $300,000 townhome (not just b/c of the price point, but the $300k unit wouldn’t have enough physical garage space to fit the tank), but we’re putting them into about a dozen other units right now in Seattle.
There are lots of green things that just can’t work in our spec houses — $40,000 solar arrays, for one. But this system gives a lot of bang for the buck, and I think our buyers will really like it.
Sphere: Related Content
RCG Flashback to gHomes May 1, 2008
Links from the Video:
Sphere: Related Content“It’s Microsoft’s World, Kid…
That was the line in CSI: NY last night, where Microsoft’s Photosynth was used to reconstruct the events prior to and during a crime at a high school prom. They loaded up all of the photos taken on every student’s cell phone ( a big box of them). Then they used Photosynth to timeline the victim and suspects whereabouts in the moments before the Guidance Counselor was slain. One of my clients worked on this program, so I was “tuned in” last night.
Rather than my trying to explain what Microsoft Live Labs Photosynth is, for those who didn’t see the show last night, here’s a video that Robert Scoble put up when Photosynth was the hit of the O’Reilly Web 2.0 Summit in the Fall of 2006. Here’s another great and even better video called Nasa meets Photosynth.
Another description from Wikipedia: “from Microsoft Live Labs and the University of Washington that analyzes digital photographs to build a three-dimensional point cloud of a photographed object.[1] Pattern recognition components compare portions of images to create points, which are then compared to convert the image into a model.”
The program last night and the Nasa meets Photosynth video give some great examples of how this technology can be used. In the comments someone noted that he might be able to ”watch his child grow up” by using this technolgy, and someone else referenced a marriage of Flickr and Photosynth for multiple purposes.
As a side note, I am one of those people who didn’t like Bill Gates too much, until I saw him “honored” in the eyes of a friend from India. Watching my friend speak from the standpoint of “anything is possible”, I realized what a huge role model Mr. Gates is for so many young people with dreams. When I see young people striving to become great in their own right, every single day, spurned by the idea that “everyone can be great…just like Bill Gates”, I bless Mr. Gates for his ripple effect.
Someone bought me an Apple computer…I refused to use it for six months and then gave it back. On the other hand, they are going to have to pry my iPhone from my cold dead hands…until Microsoft comes out with a replacement product 
May Day Seattle Neighborhood Round Up
It’s May Day today in Seattle and hopefully we are now finally into Spring and warmer weather. To celebrate the return (not to mention the return of the Neighborhood Round Up after its unscheduled winter hibernation) are a few Seattle Neighborhood Blog postings on Spring….
Happy May Day Seattle!
Alki marks the time for Tulips at Pike Place Market, and Ballard Avenue marks an earlier, colder Tulip!
Over on Broadway Seattle the warmer weather is bringing fresh produce…another kind of “produce” is noted on Capitol Hill Seattle.
Arbor Day festivities last weekend in Issaquah Undressed. Market fresh produce is coming in May to SammaMishmash .
Kirkland Weblog and the False Spring Day on April 12th, and Spring brings color, blooms and babies on Queen Anne: All About the Neighborhood.
Spring brought more than flowers to Lake City Blog…Tweedy and Popp! And lastly, a different “sign” of the Rites of Spring in West Seattle Blog.
Thank goodness Spring is finally warming up!
Sphere: Related Contentolder posts »
