Over the last year, I’ve posted several times on using an attorney – rather than a real estate agent — to purchase a home. As discussed in those posts, one of the biggest challenges in doing so is getting access to the properties that you may be interested in purchasing.

I am currently working with a couple looking to purchase their first home together. The did their homework — they searched the listings on the web and looked at numerous properties before deciding to make an offer. I asked them about their experience and if they had any difficulty. They told me that they actually looked at perhaps 10 homes (as opposed to the “drive-by”), and in only one instance did they have any trouble. In that case, they got the old “that’s not my job” reply from the listing agent when they called to schedule a viewing. In every other instance, the listing agent either met them at the property or, in several cases involving new listings, allowed my clients to attend a brokers’ opening (at my clients’ request).

So, if you’re thinking of going this route and saving some money in the process, it appears that listing agents are coming around to at least tolerating this approach. A 90% success rate seems pretty good. I guess the times, they really are a-changin’…

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Buying without an Agent — the Epilogue

• Buying without an agent
• Using an agent to buy a house? That is soooo 20th century…
• Buyer’s remorse
• Buying without an Agent: How to get that 3%
• The Commission-Based Fee Structure: it’s Bad for Buyers

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied with a minimum credit score of 720, “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 30 day lock with no prepayment penalties on any of the rates quoted below.   

30 Year Fixed @ 1 Pt:  6.250% (APR 6.410%)  improved by 0.125% to rate. 

30 Year Fixed with 10 Year Interest Only @ 1 Pt:  6.500% (APR 6.648%) unchanged

15 Year Fixed @ 1 Pt: 5.625% (APR 5.880%) improved by 0.25% to rate. 

5/1 ARM - LIBOR @ 1 Pt:  6.000%  (APR 7.200%)  worse by 0.125% 

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.  NOTE: The Conforming-Jumbo loan limit will be reduced to $522,100 effective January 1, 2009.

30 Year Fixed @ 1 Pt: 6.250% (APR 6.499%) improved 0.125%.

30 Year Fixed with 10 Year Interest Only @ 1 Pt:  6.750% (APR 6.896%) unchanged

5/1 ARM @ 1 Pt: 6.125% (APR 7.243%) unchanged

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 @ 1 Pt: 7.500% (APR 7.656%) improved 0.25% to rate. 

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 @ 1 Pt: 6.375% (APR 7.158%) improved 0.125% to rate.   :)

FHA-Jumbo. Pricing based on loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  NOTE:  The FHA Jumbo loan limit will be reduced to $522,100 effective January 1, 2009.

30 Year Fixed @ 1 Pt: 6.375% (APR 7.133%) improved 0.125% to rate. 

VA.  Pricing based on credit scores of 620 or better based on loan amounts up to $417,000.   VA loan amounts over $417,000 are also available.  Contact your local Mortgage Professional for more information.

30 Year Fixed @ 1 Pt:  6.375% (APR 6.%) improved 0.125% to rate. 

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, August 29, 2008 at 1:00 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.   To see live rate quotes for various scenarios, check out my Twitter.

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Friday’s Mortgage Interest Rate Update

• Mortgage Rates on a Friday Afternoon
• Friday’s Rates
• Friday’s Rates
• Friday’s Rates
• Friday Rates

Land - Old Value $376,000  - New Value $510,000 - UP 35%

Bldg. - Old Value $167,000 - New Value $254,000 - UP 52%

Nope, no major remodel.  No permits pulled for improvements that I know of except maybe fixing a shower in the basement.

According to Zillow there’s been a drop of about 3.5% in value in 98033 during the same period. 

Clearly a 40% PLUS increase in value is not about appreciation.  Since I am from the Era of Respecting Authority, I think the County has a really, really good reason for what just happened, and i think they are correct.  I want to know what that reason is, of course.  But my guess is that they know what they are doing, and they will give me a valid explanation.

Now…let’s talk about Seller Disclosure for a minute.

If you are buying a property, be sure to ASK the seller if he has his new assessment for 2009.  No, I’ve never seen seller’s disclosing that.  There is no place on the Seller Disclosure Form or MLS Input Sheet to disclose that.  I don’t think a reasonable annual increase needs to be disclosed necessarily.

But if based on opening my mail this morning, I have learned that the taxes are going to increase by 40.6%, don’t you think I SHOULD disclose that?  Most sellers would feel disadvantaged because “no one else is doing that”.  My home has been on market for about 25 days saying the taxes are $4,805.  While what I received in the mail says nothing about a change in the tax amount to be charged, given what it does say it looks like that $4,805 is going to be $6,755 in 2009.

Clearly there’s more to this story than meets the eye.  If anyone knows a reason why the assessment would go up 52% on my house and 35% on my land this year…I’d love to hear it.

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52% Appreciation in Kirkland This Year???

• Attack of the Killer Assessments
• Golf Balls
• The Great Rent vs. Own Debate
• The ROOF - Things you should know
• Beginning the Home Buying Process - Part 2

I know it is a challenging market, especially in the outer lying areas outside of Seattle/Bellevue proper and cash flow is tough, but I’m growing VERY tired of LO’s giving broker credits and agents giving up commissions earned for “challenged” borrowers who obviously have a history of financial mistakes.

I say this in the similar tone and voice of Al Pacino in his famous scene in Scent of a Woman:

I know people want transactions to close, but sometimes consumers need to face the consequences of their own decisions.   Loan officers and agents sometimes need to say, “you know what?….enough is enough.  I’m not dipping into my livelihood to bail you out.  Dig yourself out of your own hole.

Don’t blame us for your prior agent selling you an overpriced home.  Don’t blame me as a loan officer for your garbage loan sold to you by a prior mortgage broker.”

If the Bubbleheads want to trash me because I’m part of the real estate industry, so be it.   But, this is the stuff that goes on behind the scenes that agents and loan officers GET NO CREDIT FOR AND SHOULD.

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Some agents and loan officers need to just say, “No.”

• Appreciate those behind the scenes
• Does it matter who you list with, who you close with or who your loan officer is?
• Mortgage Rates on a Summer Day & Adverse Market Pricing
• Who is to Blame for the Subprime Meltdown?
• If your loan ain’t vanilla, you may be in for a rocky road.

A woman holding a microphone saying it’s maybe not a good time to buy. (perhaps a media facsimile)

A perky young woman who said that wasn’t true and she found out it was a good time to buy at “RightTimeToBuy.Org” and had just made her first home purchase.

Then the garden guy popped his head in “sisco?” and told everyone to go to RightTimeToBuy.Org

Who is behind this site?  It’s made to look very generic like a Public Service Announcement of some kind.  But who paid for the commercial on TV? 

“RightTimetoBuy.org is a free resource to educate, encourage and empower people who are thinking about buying a home. We don’t sell any financial or real estate products or services, all information is free and we don’t accept payment from anyone to be mentioned on our site.  We accept information from a variety of credible sources.”  I love that last line.  I see no links to SeattleBubble.com

Then it lists a bunch of real estate companies, a testimonial about a RE/MAX agent and something to do with a homebuilders association.  If this is backed by people who do “sell…financial or real estate products or services”, or is an advertising site for that purpose, is it OK to make it look like it isn’t a biased site?

If anyone else sees this commercial or knows anything about this site, can you give me your take on it?  I’d appreciate it.

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RightTimetoBuy.Org

• Why FSBO without putting it in the MLS?
• How about those SEO tweaks?
• laughing through the pain
• Buyer Beware - New Construction Sites
• NARdi Gras Blogging

I thought this would be a good opportunity to go over how to determine what your new mortgage payment may be in the event you have an adjustable rate mortgage.  This does not only apply to borrowers with subprime mortgages–this is for anyone with an adjustable rate.  

First, drag out your Note for your mortgage.  

In your Note, you will find the following information that you will need in order to determine what your payment may be once your mortgage adjusts:

• Index/Indice — this is what your rate is based on.  Most common are LIBOR, Treasury, MTA, etc.   It can vary so you need to determine this.  The index is a variable and not a fixed figure.
• Margin — the margin is added to the index to determine what your new rate will be.
• CAPS — caps limit how much your rate can adjust at the first adjustment, every adjustment following and provides a lifetime limit on how high or low the rate can adjust.
• Start Date — when you started paying your mortgage.
• Fixed period term — is your ARM fixed for 2, 3, 5… years (etc).
• Amortization – Does your mortgage offer an interest only feature?  Do you have negative amortization? 

If your mortgage is set to adjust within the next 6 months, I especially recommend that you go through the following exercise.   I’ve been sending letters to my clients with adjustables that are set to adjust with this information:

Start Date:  May 1, 2003

Start Interest Rate:  4.125%

CAPS (first/after first/lifetime):  5/2/5 (Lifetime CAP: 9.125%)

Margin/Index:  2.75%/1 Year LIBOR - 3.16 as of June 1, 2008 (currently 3.22)

Start loan amount:  $131,500

Fixed Period:  60 Months

First Adjustment Date:  June 1, 2008 and adjusting annually on June 1 for the remaining life of the loan.

This is not a subprime loan.  Many subprime loans have much higher CAPS and margins.   This is a classic 5/1 LIBOR ARM.   This home owner has not refinanced nor do they need to.  Their rate is attractive compared to current market. 

Based on their estimated balance (assuming they did not pay additional towards principal over the last 5 years) of approx. $118,500; their rate for the next 12 months will be 6.00%.  (Index from when the mortgage reset: 3.16 plus the margin of 2.75 = 5.91.  This is rounded up to the nearest 0.125%).   6.00% is a pretty good rate for not having to pay closing costs to refinance as long as you can tolerate the annual adjustments (which may work in your favor or not).   Their pricipal and interest payment will be approx. $763.50. (balance at adjustment/projected interest rate/remaining term of 25 years).

On June 2009, the highest this rate can be is 8% since there is a 2% annual cap.  The lowest the rate can be is 4%.  The most the rate can change on the anniversary of the change date is up or down 2% from the current rate.  It can never go beyond the lifetime cap of 5% plus the Note rate (9.125%) and it can never be lower than the margin of 2.75%.

How will your ARM treat you?  It all depends on the term of your Note and what the Index is when it adjusts.   This reset I’ve reviewed here is prettier than most–especially compared to subprime.   With FHA and Conforming Jumbo loan limits being reduced at the end of this year, I would consider meeting with your Mortgage Professional sooner rather than later if your ARM has you feeling itchy.

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Reviewing Your Adjustable Rate Mortgage

• Friday’s Rates
• I am a Mortgage Dispenser
• Friday’s Rates: 30 Year returns to the Mid to Low 5’s
• Mortgage Rates for Friday: ARMs and Jumbo’s MUCH Lower!
• How Well Do You Know Your Mortgage?

Inventory is getting pretty darned flat.  For condos the number of properties for sale hasn’t changed much since May.  3rd week of August - 4,082, July 3,958, June 4,049, May 3,953.  Pretty much flat for four months in a row.

I’m not even going to talk about pending sales as there is so much junk stuck in there and not closing.  For now I’m not counting anything until it actually closes.

King County Condos

2004 - 1Q - 1,694 - $188, 2Q 2,636 - $199, 3Q 2,540 - $196, 4Q 2,176 - $195

2005 - 1Q - 2,066 - $198, 2Q 2,925 - $209, 3Q 2,769 - $226, 4Q 2,266 - $224

2006 - 1Q - 1,956 - $242, 2Q 2.748 - $252, 3Q 2,737 - $269, 4Q 2,217 - $278

2007 - 1Q - 2,042 - $295, 2Q 2,862 - $302, 3Q 2,676 - $311, 4Q 1,618 - $294

2008 - 1Q - 1,258 - $299, 2Q 1,535 - $287, 3Q to date 685 - $274

Residential properties seem to be holding on to value a little better than condos, but still showing more weakness now than they have since late last year.  MPPSF is only down 5% - 6% from the peak of $230 to current numbers of $217, and we may not see much of a change in those numbers by the end of the 3rd quarter.

Inventory in the single family markets has flattened out a bit, but only in the last 30 days or so.  Some of that is being caused by people renting instead of selling or pulling their properties off market to wait for next Spring.

Residential King county

2004 - 1Q 5,650 - $152, 2Q 9,237 - $160, 3Q 8.737 - $163, 4Q 7,467 - $165

2005 - 1Q 6,402 - $173, 2Q 9,093 - $185, 3Q 9,131 - $192, 4Q 7,301 - $195

2006 - 1Q 5,596 - $201, 2Q 8,248 - $214, 3Q 7,771 - $216, 4Q 6,204 - $217

2007 - 1Q 5,304 - $222, 2Q 7,393 - $230, 3Q 7,944 - $229, 4Q 4,301 - $221

2008 - 1Q 3,640 - $219, 2Q 4,676 - $220, 3Q to date 2,366 - $217

Stats not compiled or published by NWMLS. (Required disclosure)

As is true most years, the prices will start to be better for buyers from now through year end.  In the hot markets of the past few years, that only meant that appreciation would slow down.  But this year and last year, the prices just kept getting better and better…for buyers that is.  If you can wait a year or two, I think prices will be even lower.  But if you plan to buy in the next 6-9 months…the next 3 may be better than waiting just a few months longer.

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Sunday Night Stats - King County

• Seattle Real Estate - Sunday Night Stats
• Sunday Night Stats - King County
• Sunday Night Stats
• Days On Market and a few other things
• Sunday Night Stats - Prices Down

I decided to track homebuyer activity to see how many buyers who have been looking at homes for the last 30 days or so, have purchased one.  The little blue box on the doors of homes for sale tells us which agents have shown the property.  If you take that agent’s code number and plug it into the MLS, you can tell if that agent is involved in a pending or closed transaction in the same period of time. It’s not an exact science, but let’s see what we can find out.  As usual, I’m doing this in real time by tracking the agents as I write the post.

I pulled the records of 6 of my listings and the 56 showings by 48 agents they have had in the last 30 days or so.  34 of those 48 buyers have bought nothing. 2 bought my listings.  12 bought other properties (see below).  One of my listings in escrow during the same timeframe was purchased by the neighbor, so that pending transaction had no agent showing.  I’m not counting the times I showed the property myself or people who came through during an Open House.

Agent #1 showed the property 3 X in 2 days.  If you take the code # of the agent and plug it into the system, you will see that two days later that agent opened an escrow on a property that cost $250,000 more on a similar house nearby.

From that we can assume that the buyer of Agent #1 was weighing the choice of buying a fixer or spending $250,000 more for a similar home assessed for only $25,000 more.  It’s not unusual for someone to want a home that needs no work.  But spending $250,000 more to get one, is not all that common.  Especially one that doesn’t have more bedrooms or more bathrooms or much more square footage and is not in a better location.

Agent #3 showed the property twice and then the buyer purchased a newer townhome on the Eastside instead of a fixer single family home in Seattle.  This buyer spent $100,000 less.

Agent #5’s buyer bought my listing in Rivertrail in Redmond.

Agent #16’s buyer bought the house behind my listing in Seattle on a 2,800 sf lot vs. a 5,000 sf lot, listed for $6,000 less.  The price differential could have been $20,000 at the time.  I have to check the date of the showing vs. the date of the price change and the date the home behind it went into escrow.

Agent #19’s buyer bought a single family home in Downtown Kirkland vs. a townhome in Redmond for almost double the price.  (This one is more likely a different buyer with the same agent. Most of the agents listed as their buyer buying “Nothing” are agents who sold nothing at all, so it’s easier to be almost positive.  Though those 34 buyers could have bought something with a different agent, that’s not likely given the short timeframe tracked.

Agent #21s buyer went further south and bought a single family home instead of a condo for about $20,000 more.

Agent #22s buyer bought an “income qualified affordable ARCH” condo.  $20,000 more for twice the size and 1 additional bedroom.

Agent #24s. buyer bought a new townhome instead of an older craftsman that needed updating.

Agent #25s buyer spent $100,000 more and bought a house that needed less work.

Agent @26s buyer bought a condo in Capitol Hill vs. a fixer home in Green Lake.

Agent #28s buyer bought a newer home further away from Microsoft for $25,000 more (Newcastle)

Agent #36s buyer bought a new townhome (instead of an older SFH) further north in Seattle for $100,000 less.

Agent #37s buyer went to Shoreline vs. Green Lake and spent $100,000 less for a house that needed less or no work.

Agent #40s buyer bought my listing in Bellevue.

While I don’t intend to replace OBEO as “the expert in buyer behavior”, being able to track what buyers are actually doing, is a useful tool. This ability is only recent, as NWMLS just added the “selling agent” code ID to the data entered when registering a pending or closed sale.  It was the first (and only) thing I complained about back in 2004, and the change took place in June or July of 2008.  Many could not see the need to post the Buyer Agent info when recording a sale.

This feature offers an enormous advantage to our seller clients, who can now track via their listing agent, what the buyer did or didn’t do after seeing their home.

For listing agents, just write down the LAG# (agent code) of agents who show your listings.  Then you can track to see if they are putting anything at all into escrow…or not.  By seeing what the buyer chooses, you can determine if you need a price change, or if you need to make some condition improvements to your current listings.  There’s not much you can do if people don’t want a fixer and choose a new townhome instead. So before reducing the price based simply on time on market, assess the actual situation as carefully as possible.

Interesting side issues:

1)  Three of the agents are no longer agents at all, so I can no longer track them.  Showed my listing and then quit the business altogether

One of the agents’ buyers bought a Downtown Condo that had been on market for 4 1/2 months with no price reductions. Knowing WHY buyers are not choosing the property, by tracking their movements, can help owners decide whether you need to wait it out at the same price, or reduce the price.

Don’t buy into an automatic reverse auction of reducing the price every X days. Track what those buyers are doing, and plan and change your strategy accordingly.  A lower price isn’t going to turn a fixer craftsman into a new townhome.  Sometimes waiting longer for the right buyer IS the answer.  But if people are buying similar homes nearby for less…then a price reduction is in order.

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Tracking Homebuyer Activity

• Zero Commission
• Beginning the Home Buying Process - Part 2
• Redfin - Something to think about.
• Please review the Resale Certificate
• Sunday Night Stats + 1st Quarter YOY

Before I actually looked at the card, I thought, this shouldn’t be too bad. The local real estate market has cooled down a lot in the past year. My appraised value should be flat (maybe even lower). Zillow thinks my house’s value has fallen by about 10% this past year. Cyberhomes thinks it’s fallen by about 9%. Eppraisal & Realtor.com doesn’t give me a historical chart, but their value ranges are realistic.

So I gaze upon my white post card of doom and see the following numbers…

I then think, WTF? Why in the world has my land value gone up nearly 90%? Why is my total property value 10% higher than last year, despite the fact we are in a down market? Is the assessor catching up to the market? Did the assessor really blow it this badly in years past? Is this a work of comedy & horror to rival the cult classic of good garden vegetables gone bad?

So, I call the King County Assessor’s office, and they explain to me that the market sells it as one piece, but the assessor must value the land as if it were vacant. After the land value is determined, they determine the total value of the property. Then the land’s worth is subtracted from the total and the remainder becomes the value of the house. They tell me where to go to view the area report for the Issaquah Highlands if I want find out more about how they determined my property’s value.

I read the report and discover that the base land value of single family home in the Issaquah Highlands is $240,000 and that the appraised land value for Area 75 is about 56.7% higher than it was last year. OK, but it still doesn’t explain why my land value is nearly 90% higher than last year. Unless weeds are considered a land improvement or the definition of a square foot has changed in the past year, I still have no idea how they came up with that figure.

I usually read the Seattle Times, not the Seattle PI, so I didn’t see this coming! However, it’s nice to know, I’m that the only one confused about the crazy assessments this year. I haven’t decided if I’m going to get out my pitchfork and storm the assessor’s office yet, but I do feel the need to understand how they came up with their numbers. I’m sure it doesn’t help that Probably & Statistics for Engineers, wasn’t among the classes at school that improved my GPA when I was going to Cal Poly.

And if any program managers from Zillow are reading this blog post - there has to be a cool new feature idea in this experience somewhere. Your web site is very useful helping me buy or sell a home, but I really have no idea if land values really are what the county says they are. Besides, I pay property taxes on a twice a year basis, but I’ve only sold a home once in the past 10 years. Every time somebody’s assessment changes you could get more site traffic. Why can’t generating a Z-assessment petition be as easy as getting a Z-estimate? Just saying, there’s an opportunity here…

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Attack of the Killer Assessments

• Speaking of Trojan Horses!
• 52% Appreciation in Kirkland This Year???
• Get out and vote
• The Great Rent vs. Own Debate
• Sunday Night Stats - Volume is Stabilizing

More and more spam is popping up in my spam bin advertising loan modification services, offered by loan originators so I decided to call one of these LOs today after sending an email late last night asking for more information and receiving no reply. 

This particular person goes by the title of ”mortgage planner.”  On her website, she advertises a wide variety of mortgage products including the pay option ARM and the hybrid ARM (are those even available anymore?) but there’s nothing on her website about loan modifications. None of the staff bios show any experience in doing loan modifications. Here’s what I found out.  The upfront fee charged to the homeowner is $3500.  But the LO assures me that all the work is handled by attorneys, she says.  The borrower’s up front fee is placed into escrow.  If a request for loan modification is accepted by the lender for loss mitigation (statistics were offered that 93% of loans are being modified) the full fee is due.  If the loan does not get modified, $2,000 is refunded and the remaining $1500 is not.  I asked the LO why a homeowner wouldn’t just work directly with an attorney.  She said that she works with a network of attorneys with a high loan mod approval rate and homeowners are always free to hire their own attorney and not work with her.

I asked her how much of the $3500 goes to the attorney and how much of it she gets to keep.  Her response was, “why are you asking me that?” To which I replied, “because if the attorney is doing all the work, then I’m wondering how much of that fee is going to you.”  She said “Well I work with the clients. I put a package together and follow up with the lender.” I said, “but a few minutes ago you mentioned that everything is handled by attorneys.”  Of course at this point the conversation has turned a tad bit adversarial and she starts to probe deeper into my true intentions. My intentions are only to get closer to what’s really going on here. I need to know if this sort of gig is something that is a viable alternative for Realtors to know about when counseling homeowners in financial distress.  My intentions are to be able to help other loan originators evaluate whether receiving a referral fee on a loan modification is going to get them into trouble.  If I were to guess, I’d say that the LO earned $2,000 for a successful loan mod and the remaining $1500 went to the attorney. There are forums out there confirming my guess.

In some states, including Washington State, Mortgage Brokers and their LOs now owe fiduciary duties to consumers.  Fiduciary comes from the Latin word fiducia, meaning “trust.” A fiduciary is a person who has the power and obligation to act for another under circumstances that require complete trust, good faith and honesty. Fiduciaries are obligated to avoid self-dealing and conflicts of interests in which the real or potential benefit to the fiduciary is in conflict with the best interests of his or her client.  All fees earned must be disclosed to the consumer.  The fact that this mortgage planner/LO felt uncomfortable discussing his portion of the $3500 and the actual work performed is a big red flag. 

We must realize that not every homeowner is going to be as aggressive as I am with LOs over the phone.

Consumers reading this blog:
Loan modifications are performed by a lender with no fee to the homeowner.  HUD-approved Housing Counseling Agencies perform loss mitigation/loan modification services for free.  These agencies are supported by our tax dollars. 

I suppose the argument is this: “Well the loan servicing departments are really busy and by paying our $3500 fee, you have a 93% chance of getting your loan modified.”  But doesn’t the homeowner still have that same 93% chance going at it alone or with the help of a housing counselor?

If I had $3500 to spend, then I think I’d rather spend the whole $3500 on legal counsel, instead of just $1500. 

Loan originators, a fee for services rendered is fine, but what are those services being performed? This particular person shows zero experience in loan modifications and admitted to me that the attorneys are doing all the work.  Is “gathering papers together” worth $2,000? A fee earned that is not commesurate with services rendered has been catagorized as an illegal kickback via RESPA’s Section 8. Loan Servicing companies are also subject to the provisions of RESPA.  All lenders are subject to RESPA whether or not the LO owes fiduciary duties to consumers.  Any amount over what’s considered normal and customary for services rendered is considered a junk fee and subject to challenge.  

Sigh. I suppose we need to consider that we’re coming out of a mortgage orgy where LOs actually did just gather together some papers, threw them on the processor’s desk, and picked up a fat paycheck. Why wouldn’t they believe this could be their ticket back to the good old days?

Loan Originators, before you begin earning these referral fees for basically doing jack squat and handing the file over to an attorney, consider what would happen if the homeowner did not feel that he or she was well served. 

Your regulator ends up with a phone call, which turns into an investigation.  Perhaps you’ll end up having to refund all those fees back to the consumer.  It could happen. 

Loan originators, my advice is to refer your financially distressed homeowners to legal counsel and free HUD counselors.  Loan modifications are performed free of charge by lenders. 

WA State residents: Governor Gregoire just appropriated 1.5 million of your tax dollars to housing counseling agencies all across the state that can help WA State residents FOR FREE.

As a fiduciary, is it possible to justify charging anything above zero when you know free services are available for your client?

Okay all you banker types. Help me analyze this trend.  If banks/servicers are offering upwards of $3500 to outsource loss mit/loan mods, that can mean several things. It surely means that a large percentage of these people who are receiving a temporary interest rate freeze on their ARMs will be back in 3 to 5 years with their hand out again, asking for another loan mod; IF they even make it that far.  40% of recent loan mods have already re-defaulted.  Random, desperate loan mods without common sense underwriting means we’re just pushing this whole mess further down the road, delaying the eventual recover until many years into the future.

Apparently one of these companies is coming to town next week to sell this system to a room full of LOs.  They’re charging LOs a pretty hefty set-up and monthly fee to participate in their referral program.  Someone is definitely getting rich quick off of desperate LOs.

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Predatory Upfront Loan Modification Fees

• If You Walk Away, I’ll Walk Away
• Mortgage Brokers and Loan Originators Will Owe Fiduciary Duties to Consumers
• The Housing Crisis is Like Hurricane Katrina
• Homeowners in Foreclosure Should Hire an Attorney
• Licensed to Loan