RESPA Changes and the New Good Faith Estimate

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I have been a Mortgage Broker for over 15 years and it continually amazes me at how ignorant people can be. I pride myself in sitting with my clients and over explaining to them the product they are getting. I explain every aspect right down to the most minute detail. I ask question after question to make sure they know and re-ask questions to confirm they know! In Florida where I work we have full disclosure of YSP already, yet banks and credit unions and direct lenders do not have to reveal all their income from the mortgage loan. I recently signed up with Wachovia Bank Wholesale and they offer Option Arms. They actually push them over many other types of loans. The Option Arm is not a bad product but you have to be careful who you talk to it about. It is not for the average borrower. This product has been abused and there's no denying that. As a Broker I take great pride in the number of people I have helped get into and afford their very first home and many thousands of others move up to bigger homes. I have kept track of the loans I've closed over the years and have had only 1 that actually went into foreclosure and that was because the borrower was arrested for drugs. I am proud of the work I do and the Profession I am in. To those of you that write here complaining, my question is were is the personal responsibility? Where is the part where you take responsibility for your own actions instead of blaming someone else. Did anyone hold a gun on you and make you sign those documents? Did you not read the loan documents? Where in this transaction do you take any responsibility for your own actions? The latest craze is YSP disclosure, well we disclose it in Florida and still do a very good business. Banks and Credit Unions don't, yet what a lot of people get caught up in is GREED! The ole' something for nothing thing. I am going to get this loan and it's not going to cost me anything!!!! What in the world is wrong with you??? Are you just plain STUPID??? What have you ever found in business to be free??? There are cost involved and someone is going to pay them. It never ceases to astound me how irresponsible and down right dumb some people can be and then the very first thing they want to do is point the finger at someone else and blame them. WAKE UP PEOPLE THIS IS THE FREE ENTERPRISE SYSTEM, IF YOU DON'T LIKE IT RENT!!!!!!!!!!!!!!!!!!!!!!!!!!

Above Posted By: Joe | Wed, 2 Apr 2008 08:14:19 EST

This is in reponse to Daisy. Daisy, the only way to get the loan you just described (No fee's aside from application and appraisal) is to take a significantly higher interest rate than you actually qualify for. I started my career as a mortgage banker (retail) with one of the largest lenders in the country (before they folded), and I can tell you that what you're saying is based on naivety. You see, the only way to make money in this industry, lender or MB, is to charge costs up front, or provide a much higher interest rate than your customer actually qualifies for, in order to compensate for the 3rd party fees. For instance, you can take a "no closing cost loan" at 7.5% or you can pay 5-6 thousand dollars and get the interest rate that you actually qualify for, say 5.5%. Let's do the math, on a $200,000.00 loan at 5.5% for a 30 yr fixed rate mortgage, your payment is $1,135.58 (principle and interest), @ 7.5% that payment is $1,398.43, a difference of $262.85 per month. Take $262.85 X 360 months (amount of month in a 30 year term) and you'll see how you'll save $94,626.00 over the life of the loan by paying that 5-6 thousand dollars up front. Congratulations, if anyone actually listened to your nonsense, you just cost them 88-90 thousand dollars over the life of the loan. "No Closing Cost" mortgages are the new adjustable rate, rip-off, let's pull the wool over our borrowers eyes, type of loan out there. If you deal with a direct lender, be prepared to be SOLD only the products they have at much higher prices, regardless of whether or not the loan is ideal for your situation. Deal with a broker (Do your homework, contact the better business bureau, etc) and you have a dedicated professional who is going to get you the RIGHT LOAN for your situation and explain , in detail, things like paying costs up front vs. taking the higher rate with no costs and let you make an educated decision from there. The rule of thumb is that you pay the costs up front if you're staying long term or take a higher rate if you'll be moving (upgrading, downsizing, job relocation, etc.) within 2-3 years.

Above Posted By: The Broker | Mon, 31 Mar 2008 08:02:40 EST

Sharon, banks do not charge YSP they charge SRP which is exactly the same thing with regard to a percentage to dollar conversion. I am in the same boat as Harry and this will not affect me in the least. I do haet this rhetoric though, people talking about things that they just do not understand. I feel sorry for all of you people who took deals that sounded "too good to be true" that ended up being "too good to be true", you should've trusted your instinct though and done some research... After all this is one of the biggest investments if not the biggest investment of your life. You just cannot blame everyone for a few bad people... In my opinion it is the banks that are at fault for sending their fleets of AE's out to try to sell brokers into providing products like Option ARM's and other junk. They are the ones who made and approved the loans and you people complaining are the ones who wanted them. As for "bait and switch", my loans are the exact opposite, I usually overestimate on the third party fees so that I have a buffer. As an example I closed a refinance yesterday, I estimated rougly $8,200.00 (high taxes in the area/ my fee was $1,200) in fees. When the HUD came in the final settlement charges were roughly $6,800.00 or $1,400.00 less than quoted. She left my office (in house notary) a very happy camper and said that she will send me business. I know that this is not a place to advertise and I am not trying to do so, however I recently wrote an article that is located at lakecitymtg.net entitled "It's all about performance... Not all brokers are bad!" which really outlines some of the reasons that we are in the mess that we are. I read your most recent post Daisy and it just sounds like you made a bad decision by not checking up on the credentials of the person you worked with and now you want to blast anyone with a similiar occupation. In the past 4 years the mortgage company that I work for (3 - 5 person shop) has closed 475 mortgage loans. We just got our numbers from the banking department 2 days ago and are waiting for our grade. Out of 475 loans 1 has defaulted and 2 are at risk of default for late payment. If you look at the years in which we have originated the majority of mortgages since the opening of this company (compared to what was being pushed back then) and take another close look at those number, I'd say that they are pretty good! Also, I would say that those numbers speak volumes about the ethical lending practices of this firm, myself, and I'm sure many other brokers out there who are being accused by people like Daisy (who don't know anything about this business and should take some of the responsibility herself for signing such a poor quality loan). Anyway, if you are a consumer and you are presented with a mortgage that sounds too good to be true, read the fine print, do your research, and if you are really savvy get a referral from a trusted professional in the area who has had dealings with the professional they are referring you too. If you have been had by a dirty broker, You should've done your homework.

Above Posted By: Christopher Ohlsen | Thu, 27 Mar 2008 10:13:32 EST

I SO agree with Daisy and have dealt with many lenders for many mortgages and re fi's thru the years. I used MB's in years past, but the last 2 years found their 'end + loa fees plus other fees they might get in there', now paid by the buyer, were exorbitant, out of bounds, in part the reason for meltdowns in the mortgage 'arena'. Comments like 'we have volume lenders, a wide variety of investors', showed us (with an 800 cr score and 70%LTV on our home) a great 'low risk, but got absolutely NO good and certainly no better offers by MB's and all those 'private investors' (as tho they're waiting in the bushes to make a better offer of low interest and closing fees', they aren't!). The MB pay and fees paid by the buyer are part of the crisis and has occurred as the 'fees' to finance or re fi a mortgage have added tens of thousands to the 'balance' sheet when one goes to sell a property. refi itself takes years to 'recoup' those fees, no help there but maybe a slightly lower payment. Don't move though. The balance sheet has ballooned again. The mortgage balance increased by many thousands are part of the reason the valuations differ so dramatically from what we thought we owed! Now electronic eval's are easing OUT those appraisers who 'held the magic wand' before. Another mess of 'do this or we won't call you again' games. The purchase of a new home is a LOT of work, a very emotional experience and I can't think of anything in my life I wanted more once I set my sites on the home 'we had to have'. Twice, using a mortgage broker, I cancelled out at the last minute over 'nonsense' not shown or disclosed til virtually the 'day of closing, hours before'. (Two different states, btw) and went on to get what I call 'A clean deal mortgage'. I paid up front for application, once, for an appraisal but only the amounts of interest pr diem to the former and new lender was billed on the hud 1 at closing with the stated fees above. I ended the mortgage a short amount away from what I had intended it to be. ING Direct gave terrific rates, a clean deal, a promise of 'no hidden OR disclosed huge/fees at closing', am currently doing a refi w/them on two properties and the same is the case. NO points, (couldn't get THAT from any MB's great volume of investors) no loan orig fees to an MB, the lowest rate out there after going thru brokers(5.25%), large lenders (as though large is the best, it's NOT) and came out paying no points, or origination fees to a MB, low standard costs, disclosed and true as stated. I DO feel so bad for so many who have gotten into trouble with their mortgages and home evaluations. I've never found a bank willing to take the risks that MB's seem to dig up, as they will jump thru fiery hoops to 'get it done' or make no sale. Banks seem to look for a reason NOT to make the loan. I know but for good luck, good timing and watching those (and all our) dollars closely, (not trusting someone else to watch them and advise me WHY this is going to be a good deal when it's not) we too could be in the soup with all we've put in, lost over 'paying fees' which in our case over the years I total up to exceed $150,000 IF we'd paid a MB each purchase plus fees plus points, as today, move up or refi. Whew! I'll sure say this folks, with all due respect, MY grandfather never was up against the 'smoothies' out there now. Building trust with me isn't done by saying 'full disclosure, no hidden fees'~we have many, many contacts to choose from and then billing over ten to fifteen thousand in fees to give someone OUR money for the loan privilege! I think that's what 'interest payment's' are for. I will only pay once for the loan, not twice plus someone elses 'wages'. Words are meaningless. What matters is what's on that bottom line. I've twice used ING Direct. It's so far, best I've found out there, even in these horrid troubled times in finance. No, I don't work for them, just am a satisfied consumer. I do know other factors emerge for many suffering through this debacle of 'look the other way Government, with no oversight' and becoming an 'employer' paying others wages! Mortgages can't get paid if folks jobs are sent overseas (with bonuses from Congress for doing it!) and what jobs are there pay less than a living wage plus no benefits, often no full time jobs available, either. I hope a new administration will help in ways to 'limit' fees billed for mortgages as well as bringing jobs back to America and once again, value the workers. Sorry to ramble but what matters is the bottom line when the mortgage is 'billed out' at closing. It's a confusing situation for the average Joe, so one has to do one's homework, a LOT of it. Use your own trusty calculator and take the time to sit down and go over and over the numbers, to come out as you can afford them to be. Enjoy this site, just my take on things that might help. Mel

Above Posted By: Mel | Wed, 26 Mar 2008 05:27:57 EST

I want to respond to Daisy's comment above. Daisy, I think that it is a bit absurd that you will not pay a broker fee. I guarantee you that your bank is charging you SRP (on the back end) on any transaction that you may have gotten through them (which will cost you tens of thousands in the long term versus a measally broker fee). And yes, brokers do get the best rates available. The difference is simple, I deal with wholesalers and you do not. If your mechanic fixes your car are you going to pay him? I know that there are quite a few bad apples out there but most of them have been weeded out as they prey on individual's who don't have too many other options (ie the subprime mess). Now that those products are no longer available most of those unscrupulous "phone monkey's" (to borrow the phrase) have been pushed out of business. Now there is A paper and thats about it and even that is becoming harder to write... I don't know of a single bank in my town that can do 100% financing on a purchase transaction (most are capped at 80) but I can. Not every single person in this business lies. I disclose everything up front, every last penny including broker fee and third party fees that have nothing to do with me. I have had many people walk out the door telling me that my competitors are beating me... and I have had many of them come back with a horror story about what happened when they got to the table... The smart ones walked away and came back to me asking "is it too late" and I graciously accept them back into my pipeline and gave them a good honest deal. Different markets attract different personality types. The most recent market attracted a whole lot of A type personalities... The kind of people who are agressive and selfish at all cost. I was here then doing what I am doing now, the only difference between them and me, I can survive in any market because I operate with integrity which I know for a fact is also true about many, many brokers out there. Your statements are ver prejudice and I hope that no one takes what you are saying to heart. Thank you for reading Sincerely, Christopher ohlsen Mortgage Advisor

Above Posted By: Christopher Ohlsen | Thu, 20 Mar 2008 13:58:53 EST

I read with interest most of the comments made by MB's and their 'jargon' not understood by an average reader. The changes I've seen as an ordinary borrower over these last years of 'no oversight' until the collapse, is that 'disclosure' isn't ever right, ever, anyway. The 'good faith estimates' are stated at the bottom as 'not accurate but 'close' in words to that effect, we're still on our own. Now, the problem I have using an MB today is I won't pay the 'broker fees' the bank used to pay for my loan and allow inflated costs to go back to both lender and MB. It isn't possible if one wants a refi or new mortgage without huge added costs, disclosed or not, which is part of the mess. I've done many mortgages, refi's and this mess is now so costly most can't figure what is going on. Many are to blame for the 'greed' factor of 'do what you can get away with' but no one seems to own up to that, yet. We know it, it's worse now than before yet all MB's say the same thing~ 'We're the lowest rates in town' and 'We have many lenders to choose from'. No hiden fees. So? Many lenders still 'split' the ante with the MB's but are so exorbitant as to ruin a deal. Best rates? Not so. I include in the rates, the 'fees' which are absolutely out of bounds and inflated to up the ante of profits, with different words and 'costs' at closing. I find my local banks the most honest and have used them in four transactions with no fees or charges built in. My fees were low all but the application and/or the appraisal fee. I know what I started with owing and what I have when I'm done is a thousand dollars apart, give or take. The 'MB's comments and those lenders advertising' are deceptive. The 'fees' aren't there in the small, local or solid Banks as with the 'big' lenders and especially brokers 'deal's of six, eight, ten thousand and more in additional fees even over 'points', while telling us 'we're the best'. No one is the best in this day and age anymore. The claims by MB's of 'we have many lenders' is falling down, we pay those 'lenders' AND the brokers now. Not me. I'll negotiate til I get the right deal. NAMB seems to have helped in 'other ways' to get that extra money but no other help for the consumer. Still no trust is out there. I have six MB's who all said the same thing and at the end, added fees ranging from $6000 to $15,000, with a straight face, can't make a silk purse out of a sow's ear in finance today. Daisy

Above Posted By: Daisy | Wed, 19 Mar 2008 05:04:10 EST

I've been in the business for 10+ years as a LO and the only problem I see is that this measure will only affect the unscrupulous LOs but again, why is only Brokers who have to disclose the YSP? Banks & Direct Lenders should do the same.

Above Posted By: Memo | Tue, 18 Mar 2008 19:24:47 EST

I have worked with MBs & LOs for many years. MBs/LOs have no respect for anything but YSP. That's why you close the loan for the...YSP. MBs/los worst than lawyers.

Above Posted By: James | Tue, 18 Mar 2008 12:57:30 EST

Obviously, there is much confusion about YSP. I have been in the business 20 years. It is my understanding all Mortgage Brokers and Lenders who do not close the loan in their own name must report YSP. Lenders who close in their own name and warehouse product and all Banks need not disclose YSP. If the new law says that all entities that originate mortgages need to disclose the YSP, then so be it! Now you have a level playing field. At present, that is not the case. It seems to me that all the changes and disclosures in the world will not change the fact that people are generally not equiped to understand lending, the time value of money and personal finance. A mandatory course in our educational system to be completed by the 10th grade would go a long way in protecting the consumer from themselves and from being mislead by unscrupulous purveyors of consumer finance products.

Above Posted By: Tom | Sun, 16 Mar 2008 11:55:05 EST

It use to be that lenders had too big of a lobby to be touched regarding disclosing what the truth was. Builders were right behind them in that regard. Now they are both loosing becasue of their personal greed, as they should be. Now is the time to push and back NAMB to push actual fair lending practices, making so that everyone has to disclose, but it takes the active (if there are still active brokers out there) to push NAMB to do this correctly, and make it the same for everyone. I do not know too many Brokers who have a problem with full disclosure. The ones that did are back selling used cars again, where they should be. The remaining are mostly professionals who actaully want to help homeowners while making a living. Let your state gov know that you are for fair lending practices that are actually honest across the board. Your voice can make the difference.

Above Posted By: Darrell | Sat, 15 Mar 2008 16:58:08 EST

As a broker for mortgages, I have no problem showing YSP (yield Spread) but why not make the banks show theirs as well? Is HUD trying to say that they banks are not making YSP on loans? Lets face the facts, less than 2% of all loans were subprime and of thoses 2%, less than 20% were problems until the banks and finacial institutions started getting gready by creating these false COD's and SIV's as money making tools. If anyone really wanted to get rid of Predatory lending, they would cap all mortgage loans at 3% YSP including the banks. They would also cap all realtorsat 3% and they would not allow builders to mak up the homes to include buy down of rates. Who are we trying to kid here? Everyone including th borrower knew what they were doing...no one expected this type of down fall which keeps getting worse as the CEO's who know nothing about mortgages make the wrong decisions. As someone who has worked for both banks and brokers, someone has to approve the loan before anything can close. I'm sure that there was some fraud out there, but I would say no more than any other industry. There are 2 major ways for banks and large financial companies to make money, mortgages and fees (trading, late chareges, atm and all other BS fees they get to charge you). If you are taking losses on your mortgage backed securities, why would you stop doing loans? Why not tighten up underwriting, raise credit and lower DTI? That would be to easy! Instead, lets freak out and make things worse by not lending money, which forces more homes into foreclosure whcih lowers home values which lowers COD's and SIV's which lowers the stock markets which lowers consumer spending whic in the end gives us the trifecta of recession, stagflation and inflation. Hold on tight, this will lead the US dollar to it's lowest level all because CEO's do not want to admit failure and actually hire someone who knows how to fix this mess. I guss when you have a gloden parachute of 100 million bucks it really does not matter, you can always find another sucker company to hire you! Cash is KING! What did you grand parents do in th great depression? they hid their money in the mattresses and not in the banks.

Above Posted By: Brian | Sat, 15 Mar 2008 12:41:01 EST

"One feature of The Good Faith Estimate is not going to make lenders and brokers happy. It would require that lender payments to mortgage brokers (often called Yield Spread Premiums) be disclosed." Brokers and lenders already have to disclose YSP, so this is nothing new! BANKS, Mortgage Banker/direct lenders, on the other hand, don't have to disclose this. The playing field is so uneven right now, that lawmakers are making it easier for banks to rip people off! Don't believe me, ask your bank to see a rate sheet. 'We can't show you that' is the standard reply. I wonder why? Hmmmm

Above Posted By: Terence | Sat, 15 Mar 2008 09:40:07 EST

Can someone please explain to me for the first time ever: 1) Why is a mortgage broker the only business someone has to disclose their total revenue? What about car financing etc. etc? 2) How is it fair that a broker must disclose YSP but a bank or retail mortgage co does not? How? How?

Above Posted By: Troy Rian | Fri, 14 Mar 2008 19:54:52 EST

As a broker. All of these GFE proposals are on my GFE now with explanation of all fees and who they go to and why. I relate to each client that the bank pays me for choosing them to service their account and the rationality of choosing one particular lender over the other. In other word what is it in for them. I think banks should do the same... as I have seen some very shady practices in that area. I am a firm believer is underpromise and overdeliver - in my opinion more folks should walk away from closings that don't live up to what they were proposed.

Above Posted By: Mel | Fri, 14 Mar 2008 18:57:18 EST

Will there be changes to RESPA as it relates to builder lenders and the incentives they offer buyers to use their mortgage company. I have always believed this was a gross violation of RESPA but it continues. Anyone in the business knows that the consumer never receives the best rate when using an in-house/builder lender.

Above Posted By: Mark | Fri, 14 Mar 2008 14:51:25 EST

Why would disclosing YSP make brokers and lenders unhappy? That's the way it has always been done. What I don't understand is that If a broker and a banker each sell the same rate, The broker has to disclose their rebate but the banker does not have to.

Above Posted By: JB | Fri, 14 Mar 2008 14:50:16 EST

YSP or yield spread premiums according to RESPA must be reflected on the Good Faith Estimate (GFE). GFE's must be given to the applicant three business days from date of loan origination. That is required of Mortgage Broker orginated loans. As for mortgage bankers/ lenders, they will not like the new reg that would include them. Get your facts straight. So much disinformation.

Above Posted By: Don | Fri, 14 Mar 2008 14:35:23 EST

My mortgage GFE and HUD-1 costs are always within a few dollars. I have problems with HOA fees, Insurance and Title Company fees. I never know these fees when revieiwing with the client and I hope that this is also addressed. In Colorado, listing agents choose the title company and the HOA fees -especially transfer fees - are usually not made avaialble to buyers until after a contract is written. However, I usually have to explain the additional fees.

Above Posted By: Peter | Fri, 14 Mar 2008 14:18:38 EST

Finally, a measure that will actually help consumers. Unfortunately, the average home buyer dosent read anything related to the home purchase, especially loan docs. Even though loan terms are adequately disclosed, you have to actually read them. This reform will make no doubt that the comsumer was informed, even if it has to be read to them word-for-word. I guess its sorta like having your Miranda Rights read to you!

Above Posted By: Steve RE/MAX | Fri, 14 Mar 2008 14:03:36 EST

My question is on the YSP. Why is this now a problem? I thought all mortgage brokers and LO's had to reveal YSP on the HUD currently? It is my understanding that only bankers and the bank employees do not need to reveal YSP. Am I incorrect in my understanding?

Above Posted By: SHARON | Fri, 14 Mar 2008 13:08:19 EST

I am a Mortgage Broker and these changes will not affect me in the least, I already have full disclosure for a while now. What bothers me the most is that everyone still thinks that the "Poor Borrower" is going to read everything they sign. What I mean is simply our client will not go ahead with the loan process unless there is a certain amount of Trust. The Establishment really needs look at the real problem, the Loan Officer. We are often compared to used car salesmen. No, I will not agree that this will solve any problems. Further more the more documents that are required, the less will be realized. If there is a belief that the comsumer is being charged too much in finance charges, lower the Max Fees or better yet why not just remove our comission all together. NONSENSE.

Above Posted By: harry | Fri, 14 Mar 2008 12:57:11 EST

HUD Introduces New Good Faith Estimate and Proposes Other Changes to RESPA

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