The Mortgage Porter

To "Make a Loan" or Not "Make a Loan": That is the Question

Yesterday I attended the Mortgage Broker's Commission Meeting at Bellevue City Hall.  It was more tame than the one I was at the previous week which focused on the new issues facing Correspondent Lenders becoming licensed under the CLA...I think that's partly because we were under-represented and that many mortgage brokers with warehouse credit lines attended last week's meeting.  Jillayne Schlicke of CE Forward did a great job taking live notes and you can read them here.  This legislation is all based on defining if a mortgage company is "making a loan": mortgage brokers are not--lenders with a credit line are.  DFI and WAMB are working on a more precise definition.

From WAMB President, Dave Erickson:

On April 24 at 11:00 AM, a curve ball was thrown at our industry in the form of an explanation of a change to licensing requirements resulting from the recently-passed Senate Bill 6471.

But unlike most pitches from the mound, where you can study the pitcher and watch the ball as it comes at you, this curve ball came from left field. 

We never saw the windup, because there wasn't one. We never got to swing the bat.  Due to no fault of our own, we took the pitch and Strike One was called.

There will not be a Strike Two.

As of June 14, 2008, Senate Bill 6471 requires that any company who is deemed to be "making loans" in the State of Washington become licensed under the Consumer Loan Act (CLA).

Due to the way the Bill was written, many mortgage brokers are finding themselves falling under the definition of "making loans." The implication of this Bill is that these mortgage brokers and loan originators now licensed under the Mortgage Broker Practices Act must now become licensed under the Consumer Loan Act (CLA)....

Upon receipt of DFI's notification, WAMB scheduled a meeting with DFI officials to explain our concerns and demonstrate how this legislation will harm our industry and consumers.  We explained the implications on mortgage brokers and loan originators and came out of the meeting with several items of agreement:

• WAMB needs a definition on what constitutes "making a loan" for the purpose of keeping as many mortgage brokers and loan originators as possible under the regulatory purview of the Mortgage Broker Practices Act.
• WAMB will work with DFI via the rules process to create or clarify rules about how businesses are regulated under the Consumer Loan Act with the intention of lessening the onerous compliance requirements of the Act.
• WAMB will work with DFI via the rules process to discuss issues including:  bond requirements, annual fee assessments, clarification of fees charged to consumers that may or may not be allowed under the CLA, revisiting the examination component of the CLA which differs from the Mortgage Broker Practices Act and attempt to lessen the burden of compliance to the detriment of our industry and the consumers we serve.

DFI has committed to providing a Policy Statement by Friday, May 16^th regarding the definition of "making a loan" for the purpose of clarifying who must comply with the new law by the June 12 deadline. 

DFI's Policy Statement will also provide guidance regarding which aspects of licensing must be completed by June 12 and what areas may be pushed out until the rules process is completed.

DFI has conveyed to WAMB that they wish to move as quickly as possible via the rules process.  DFI seeks to complete the rules process by November 4 which would provide ample time to formulate a legislative response for the start of the next legislative session, should one be necessary....

Stay tuned. 

This is What Love Looks Like

Every year my son's Great Grandma, better known as Nona, makes me a Rhubarb  Custard Pie.  It's usually after my birthday because she waits until the rhubarb is ready from her garden...and it's worth the wait!  I'm one lucky lady.

Happy Mother's Day

A little song for all of us Moms in honor of Mother's Day this Sunday.

Hat tip to my friend, Lisa Wallace-Baker who shared this with me back in November.

The Mortgage Rates You've Been Waiting For: Conforming-Jumbo under 6!

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:  5.625% (APR 5.776%)

30 Year Fixed with 10 Year Interest Only:  6.000%  (APR 6.140%)

15 Year Fixed: 5.250% (APR 5.500%)

7/1 ARM - LIBOR:  5.375% (APR 6.727%)

5/1 ARM - LIBOR:  4.875% (APR 6.756%)

5/1 ARM with 10 Year Interest Only - LIBOR:  5.125% (APR 6.903%)

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.  (For other conforming-jumbo loan limits in Washington state, click here); specifically priced for a sales price of $650,000 and a $520,000 loan amount.

30 Year Fixed:  5.750% (APR 5.898%) 

30 Year Fixed with 10 Year Interest Only:  6.250% (APR 6.386%)

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:  5.750% (APR 6.527%). 

FHA-Jumbo. Pricing based on loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  For other loan limits in Washington State, click here.

30 Year Fixed: 5.875% (APR 6.649%)

VA.  Pricing based on credit scores of 620 or better based on loan amounts up to $417,000.

30 Year Fixed:  5.875% (APR 6.188%)

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 9, 2008 at 8:00 a.m. and may change at any time.  Follow me on Twitter to see rates I'm quoting.  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 me.

Washington Correpsondent Lenders are forced to have Consumer Loan License

Today's Mortgage Brokers Commission meeting was attended by many concerned mortgage brokers and correspondent lenders (brokers with warehouse lines of credit) who feel as though they've had a real doozy pulled over them by recent legislation, specifically SB 6471.   Deb Bortner of DFI (bad photo compliments of my Treo) insists that it was not DFI's intentions to rope in the correspondent lenders who are licensed as mortgage brokers to be regulated by the Consumer Loan Act.

Many Washington State correspondent lenders (and we, loan originators who work for a correspondent lender) are feeling very frustrated (to sugar coat it).  A majority of us have abided by the State's licensing laws, paid our dues, passed our background checks and the exam...even if we were not a "true" broker.  We played along and played by the rules.  In an attempt to "capture" a few Correspondents who apparently do not broker (they're direct endorsed lenders, like Mortgage Master, except we will broker a small portion of our loans), who were exempt from the Mortgage Brokers Practice Act, the State decided to deem any mortgage broker with a warehouse line (i.e. Correspondent Lenders) will now be regulated under the Consumer Loan Act.   Correspondent Lenders can retain both licenses and be held liable accountable under both acts, or just maintain their newly required Consumer Loan License.   There's significant expenses for both licenses which I may or may not get into in a future post. 

After Deb Bortner defended DFI's position, she handed the floor over to the audience and here's a few of the comments from "the floor" of brokers that  I found interesting (I'm paraphrasing, since I was not able to write fast enough and I'm not quoting the individual broker):

"This [obtaining a consumer loan license] goes against every value we have in our business.  We can now hire felons, are no longer required to do continue education and the consumer will pay.   What you're doing is STUPID."

"This is a nasty little bill with nasty little consequences."

"We are Correspondent Lenders.  We are different than Mortgage Brokers and we are NOT a Pawn Shop."

"I wish the media was here to see all of these mortgage brokers fighting for the consumer."

"For half of the mortgage industry to have to go through the licensing again is crazy."

"Everyday that goes by is less chance of closing a loan.  We [correspondent lenders] have the ability to draw docs and close loans quicker and more efficiently than true mortgage brokers."

"How many lenders were actually not licensed through the loophole?  It seems the motivation here is more taxes."

"What is DFI going to do with all the extra money?"

Mortgage Brokers and Correspondent Lenders, your next chance to hear what DFI has to say is next week in Bellevue on Tuesday, May 13--however you must RSVP by this Friday, May 9, 2008.  For more information, click here.   As of midnight, June 11, 2008, if you have a warehouse line of credit and you're a mortgage broker or correspondent lender, you need a Consumer Loan License.

Update on Mortgage Broker/Correspondent Lender DFI Meeting

Thanks to Jillayne Schlicke for posting this because I personally didn't receive anyword from DFI (I do receive emails regarding the Mortgage Broker Commission meetings)...this one hits close to home as the company I work for, Mortgage Master, is a Correspondent Lender.   DFI did send an email to the President of our company however NOTHING was on their site when she told me about this.

So this is another shout out to all the mortgage brokers in Washington State, especially those impacted by SB 6471, which in my opinion seems to have been passed this quite conveniently by telling WAMB this would not impact mortgage brokers.   WRONG.  Mortgage brokers who have a warehouse line (correspondent lenders) are going to be dramatically impacted by this law.

Meeting Of The Mortgage Broker Commission To Discuss The Impacts Of SB 6471
May 7, 2008, at 1:00 p.m.
Renton Community Center, Banquet Room (100 max capacity)
1715 Maple Valley Highway
Renton, WA (Driving Directions)

Please attend and pass the word!

How to Apply On-Line for a Mortgage Preapproval

I recently had this excellent question from one my readers who is interested in getting preapproved:

I began filling out the loan application on the web, but stopped once I reached the part about the specific property, as I don't currently have a property in mind.  I believe what I am seeking to do [is] a true preapproval letter.  I did read your post which clarified the difference between prequalification and preapproval.  Is there a way to submit the full-doc information to you electronically to start the process for preapproval?

Mortgage Porter's On-line Application (under Favorite Links) allows you to apply for mortgage preapproval before you have a property address.   This is question is very valid because there is not a formal way to select that the property has not yet been found.  Ideally, home buyers should get preapproved before they make an offer on a home.  Anyhow, where the application asks for a property address, simply enter:

123 TBD St., Your City, WA, Your Zip  (NOTE:  I'm only licensed to help those who need a mortgage in Washington State).

During these historic times in our mortgage industry (and actually, in any time) it's crucial to get preapproved BEFORE you begin to shop for your next home.

I'm really glad that I was emailed this question so I could address it...otherwise, I might not have caught this.   Thanks!

My 22nd Anniversary in the RE Biz

I should stop saying how long I've been around the real estate industry!  On May 1, 1986, a very bright-eyed and naive young Rhonda Christopherson, began my first "real job" at Safeco Title Insurance Company as a doc-puller (we were bought a year later by Chicago Title, where I worked in Unit 5).   

After 14 years in the title industry, I made the move to mortgage and I've been helping Washington families with their Mortgage Planning needs for the past 8 years...the rest is history!

Yes...that is Chuck Knox, that was my hair style in the 80s and yes, I'm wearing yellow Reeboks with Kenny Easley's actual jersey. 

Mortgage Interest Rates

This morning's Job's Report came in slightly better "not as bad" as expected with only 20,000 jobs lost instead of the anticipated 75,000 jobs lost for April.  Mortgage rates continue to be very volatile.  Major lenders are averaging 2 rate changes per day.  Stay tuned with what's going on in the market by subscribing to Mortgage Porter (upper left corner) and Mortgage Porter Twitter for daily updates (click Follow).

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.  (For other conforming-jumbo loan limits in Washington state, click here); 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.  For other loan limits in Washington State, click here.

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%

Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR.  These programs all have the same closing costs so you can see APR is not a valuable tool.   

This is just a small sample available of rates and products.  Rates are as of Friday, May 2, 2008 at 8:30 a.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 me.

What's a Lock Confirmation?

A lock confirmation is a written document that your Mortgage Professional should provide you once your interest rate is locked.   In fact, if you don't receive a Lock Confirmation once you have instructed your loan originator to lock, demand one.  No skirting from the Loan Originator allowed!

Your Lock-In Agreement/Confirmation should include the following information:

• Date the loan was locked
• Borrowers Names
• Property Address
• Loan Amount
• Lock Expiration Date
• Interest Rate
• Origination Fee
• Discount Point
• Whether or not there's a Prepayment Penalty
• ARM information (Margin, Index, Adjustment Caps, Life Cap and if it features a Conversion Option)
• Any lock in fees (including non-refundable) if any.  This generally applies towards locks with longer lock periods.
• Terms of the lock (see below)
• Signature place for borrowers
• Signature of Loan Originator
• Name and Address of Mortgage Company

Why is this so important?  For starters, once you agree to lock in a certain interest rate, a clock begins ticking and counting down towards the lock expiration date.  If you get too close to that date, you may need a lock extension which could have a fee depending on what the pricing is at that time.   

Equally, and possibly more important, you want to make sure that your Loan Originator has in fact locked your mortgage rate.   There are some Loan Originators out there who will say they have locked in your rate when in fact, they have not.  They're gambling the market with hopes of still locking in your rate at what they have told you, but they'll make a little extra on the back end OR the rate you want isn't quite available so they're gambling the market will improve and they'll lock you once that rate appears.   But what if it doesn't?   Having a document that shows that the Loan Originator committed that rate to you may help you should you need to make them honor the rate (you may have to seek their manager or higher).

It's quite possible, especially in this volatile of a market where we are averaging two rate changes per day, that you may give the LO permission to lock in your rate and when they go to do so (even if it's the moment you hang up the phone), the rates may be changing.  A Mortgage Professional will be upfront with you and let you know if this has happened (for better or worse).   An actual Lock-In Agreement/Confirmation should not be provided until the rate is actually locked in. 

Changes to the loan application may also impact the mortgage rate which would then change the lock.  For example:

• Credit score changes during the transaction discovered from a new report may impact the rate for better or worse.
• Changes in loan to value (after the appraisal is received).
• Change in level of documentation for the loan.
• Loan programs being terminated or guidelines tightened.
• Investor pricing changes with less time permitted than what the lock will allow.
• Information on loan application not accurate, misrepresented or changes (such as employment or the Underwriter determines occupancy to be different than stated on application).

Again, a Mortgage Professional will notify you of these changes and how they impact you as soon as they become aware.

Some lenders also offer a Forward Lock Agreement which is different than a confirmation...I'll give you the scoop on a Forward Lock in another post soon.  Stay tuned!