The Mortgage Porter

Hang On...It's Going to be a Bumpy Ride

This week, we’re in for a bumpy ride with mortgage interest rates.   Fueling the fire are several important economic indicators which will begin to hit us on Wednesday and continue through Friday.   

On Wednesday, not only does the FOMC (the Fed) meet, we also have several news releases including the Gross Domestic Product (GPD) and the Chicago PMI (the Business Barometer).   The drama continues on Thursday with the Core PCE (Personal Consumption Expenditure).   We finish Friday with the big daddy…the Jobs Report. 

These factors  help predict inflationary and economic trends and typically have a high impact on mortgage interest rates. 

I just read an excellent blog on The Mortgage Report, by fellow CMPS, Dan Green.  To find our why you should lock before Friday’s job report, click here…

My Interview with Jillayne Schlicke of Ethical Lending Foundation

Jillayne and I go way back and recently have been reacquainted when we both became “Active Contributors” on Rain City Guide.  I have really enjoyed reading and responding to her blogs.  I am also quite interested in her company, Ethical Lending Foundation, which is very timely for the mortgage industry in light of new licensing laws and continuing education requirements.

Q: What prompted you to create Ethical Lending Foundation?

My business partner, Dr. Kevin Boileau and I do work in the area of applied professional ethics. Any profession that has to be licensed also has a code of ethics with mandatory training. An example is the Nat'l Assoc of Realtors Code of Ethics. Every four years, all Realtors nationwide must complete an ethics class. We write codes of ethics and have read hundreds of codes from all different industries. We have been writing and publishing articles in trade journals for many years now about the current codes of ethics available through The Nat'l Assoc of Mortgage Brokers, Mortgage Bankers Association of America, and the Nat'l Assoc of Professional Mortgage Women. We approached WAMB and NAPMW and offered to re-write their code. NAPMW declined and WAMB wanted us to do our work for free.

When the Department of Financial Institutions changed the Washington State law mandating all education course providers go through a professional organization, we decided to form a new professional organization with the absolute highest ethical standards, much higher than NAMB, MBAA, and NAPMW, and open up membership to all lending workers: loan officers from banks, loan originators from brokers, and so forth.

The biggest change we offer consumers is that members of our organization subscribe to put the client's interest above their own interests. This prescribes "fiduciary duties" and elevates the status of our members to that of a "Professional."

The basic definition of Professional as a noun (and not as an adjective, as in "Jillayne is answering these questions in a professional manner") is as follows:

A Professional is someone who:

Has specialized knowledge in his or her subject area
Completes a minimum level of education
Is tested for competency
Is licensed
Maintains that license with mandatory continuing ed
Subscribes to a code of ethics with sanctions for violations
Owes fiduciary duties to clients

The easiest examples to see how this works is a doctor or a lawyer. The nice benefit for lenders who rise to the level of being a Professional is that you get to charge more for your services. Paralegals are another example. There was a group of legal secretaries who figured out that they were doing a whole bunch of legal work, and they didn't have a law degree. They got together and formed a professional organization and now they get to charge a whole lot more money for their services.

In any narrative history of any profession, we will always see movement towards requiring MORE education, testing, higher ethical standards, more prescribed duties, as compared to any movement towards requiring LESS of these things.

I'm more of a DO-er instead of a talker. Dr. Boileau and I grew bored with all the talk about higher standards and decided to DO something about it. We have received favorable responses coming from all across the U.S.

Q: Sometimes your blog posts target mortgage brokers. What's up with that?

I love mortgage brokers! But sometimes they get myopic and aren't able to see that even though they are operating their business with a high degree of professionalism and ethics, that not everyone else in their industry is doing this. When consumers hear the word "predatory lending" to them, that means anyone in lending: banker, broker, credit union, consumer finance company. We all know that P-lending can take place at any institution. Consumers have become less trustworthy of all lenders, because they don't really understand the difference between how institutions are regulated. The broker community likes to point the finger outward at banks or at consumers for being un-educated. A better action plan would be to figure out how to differentiate brokers so much that they are the institutions with the absolute highest ethical standards and offer the best choice for consumer trust. This is the change I would like to help influence.  Sometimes that means taking a bold stand and using radical, satiric references in order to get the attention of industry workers who normally just go on about their day thinking that someone else will solve the world's problems. It will be all of us, slowly working
together every day.


Q: How has blogging impacted your career?

Oh, I'm not sure blogging has impacted my career. It's too early in the advent of this medium to really have any meaningful data. Ask me this question again in six months. I can speculate on how it might impact what I do for the industry.

I think of blogging as another form of education. When online learning hit the world, I was unimpressed. It started out as correspondence classes put on a computer. Very boring. I remember finishing what was suppose to be a 3 hour class on Fair Housing in 19 minutes. Then we saw the online learning world add graphics and mini quizzes which made us pay more attention, but online learning is still kind-of one-dimensional. I think blogging might have a future in online education.

Q: What do you do for fun?

I play adult co-ed indoor soccer which provides a healthy aggressive outlet for all my energy. I also go to school at Antioch U in Seattle. I'm almost done with my Masters degree in Psych and I'm studying the relationship between business ethics, philosophy, and moral psychology. I have always been fascinated by the question "why do people do what they do?" I have two active daughters so I'm always running around having fun with them. Kids are avid tech sponges. My younger daughter walked up to a cell phone on display at the Sprint store and took my picture. And I'm the techie in the family! I think if we just simply watch what our kids are doing with communication devices and media, we will see how blogging will impact business in the years to come. In some elementary schools, they are already using blogging as a learning tool.

If you would like to learn more about Ethicial Lending Foundation, please contact Jillayne.  Jillayne, thank you for being my first blog interview!

Before You Go to Your Signing Appointment

1.  Bring a cashier's check.  A good lender will do everything in their power to provide escrow with instructions in a timely manner so that they can, in turn, give you the dollar amount required as soon as possible.  Sometimes, you may only get a day or two of notice before escrow contacts you with this information.   The reason this can occur so late in the process is because all the loan documents have to be prepared by the lender and are then delivered to the escrow company with our instructions.   The escrow company then creates a HUD-1 Settlement Statement which determines exactly how much funds you need to bring to closing.    When you are told the amount, you need to obtain a cashier's check payable to the escrow company and bring it with you to the closing appointment.   A personal check is a no-no.  NOTE:  If you are considering wiring funds to the escrow company, please contact them in advance to discuss this process.

2.  Bring a copy of your Good Faith Estimate.   You will want to compare it to the Estimated HUD-1 Settlement Statement that will be presented to you at the signing.   Hopefully, the Escrow Officer has provided your Loan Originator a copy of the HUD in advance for them to review it prior to your appointment.   

3.  Bring your current driver's license.  The notary must see them for proof you are you!  Some may require two forms of identity.

4.  Bring anything else that the escrow company or lender request.  Sometimes the lender may need you to bring follow up documentation to closing (such as originals, paystubs, etc.). 

5.  Bring directions to the escrow company.   Be sure to get specific directions to the escrow company from the escrow company (or visit www.mapquest.com).  Please be on time.  Escrow companies are often very busy and generally on time.

6.  Plan on your signing taking approximately 45 - 60 minutes.  If you would like to have more time to read your documents, or to have an attorney review them for you, ask your lender in advance so they can accommodate having a copy of your loan documents available to you in advance.   Your loan package is about an inch of paper.   If you want to read it word for word, you should get a copy beforehand.   

7.   Sign your documents as your names appear.   Sign your name within the County's required borders for recordings.  This avoids last minute corrections or delays in your closing.   You may want to do some hand exercises before signing (just teasing—well, kind of).

If you have questions regarding your loan documents or program, please call your Loan Originator.  Don't be shy!   The signer may not be familiar with your specific loan program.

After signing your documents, escrow sends the original required documents to the title company who, after reviewing, delivers them to the County.   With our company, the funding department also reviews the loan documents and verifies all conditions are met. 

At this point, the lender coordinates with the escrow company to release the funds and to record the documents on the scheduled day for closing.   Typically either the escrow company or your real estate agent will contact you once your transaction has recorded.

Hello World, I’m 510-LO-32047

Yep.  This afternoon, I finally received my Loan Originator License.   I guess I can stop checking the DFI site to see if I’m official.   So, now I’m trying to update my websites, blog sites, business card, letterhead, all of my letter templates…it’s a bit of work and hopefully worth it.

The next step, in order for me to retain my new bright and shiny license will be to pass the exam that is suppose to be available later this year. 

This is part of the reason I wish we just had ID cards, certificates or maybe a badge to wear.   What’s going to happen to the poor loan originators who do not pass the exam (we get 3 attempts at $125 a test and then have to wait two weeks before taking another test for another $125) and have spent their time and money over the last few months updating all of their marketing just to have the number revoked?  

I know, “play me a fiddle”…there’s not a lot of sympathy for any loan originator these days.   I’m sorry, this number displayed on everything that we have our name to just doesn’t sit well with me.    And bottom line, it will still be up to the consumer to verify that the license is active.  Having the license number plastered everywhere does not guarantee a Loan Originator is a legit mortgage broker.

Enough grumbling for tonight!

Week in Review on Rain City Guide

I am an Active Contributor on Seattle’s Rain City Guide blog.   This site is packed full of information about real estate, homes, our local area, finance as well as industry and blogging tips and great interviews with fellow professionals.    Here are a few  recent post that may be of interest to you, the consumer.

• Your Private Information Is For Sale.  I have mentioned this before on The Mortgage Porter and I feel it’s worth reposting.   Credit bureaus are reselling your information when you have your credit report pulled. 

• Who's Client Is It Anyway is a post from Eileen Tefft regarding what can happen with site agents when a buyer looks at new constuction.

• Reba Haas posted the article: Copper thefts on the rise - a new threat to vacant homes for sale or rent.

• Don’t miss Dustin Luther’s 10 Great Interview Questions for Agents.

• Too Close to Home is another post by yours truly about borrowers trying to buy investment property as owner occupied to get a better interest rate.

• Buyer’s Remorse by real estate attorney Craig Blackmon addresses when a buyer may need the help of legal council.

• Last, but certainly not least…Agent FIRED! – Lender Fraud by Ardell DellaLoggia and all 84 post that follow is an absolute must read.

As I said...there are many other great post...these are just a few of the highlights!

Check out my new Bling Bling

I’ve been getting my blog on, baby.  Join me for a quick tour of The Mortgage Porter.

On the first grey column, under my photo (my husband affectionately calls “the head” because it’s so close up) and favorite links, you’ll notice my Meebo.  This is an instant message tool you can use to, well…instant message me.   Questions, comments…if I’m on line, feel free to Meebo-me. 

The other feature I would like to bring your attention to is on the right column towards the bottom.  There are several different options for subscribing to The Mortgage Porter.   Probably the easiest would be entering your email address into the subscribe box.   You will not be spammed (you know how much I detest spam) and you will only receive email updates when I create a new blog.   No new post, no email update.   

And our brief tour of The Mortgage Porter is now concluding.  Thank you.

Suggestion Box

FEED ME, Seymour!   I know this is probably a total blog no-no.   But here goes...   I am asking for your ideas on what I should blog about related to mortgage, hume buying, financial planning, real estate...you get the idea.

I'm suffering from blogger-block, which I'm sure will pass.  In the meantime, I thought I'd reach out to you for your input.

A picture is worth 1000 words...or 2000 faces?

Okay...it's official!  I've lost my marbles to blogging.  I was touring blogs on Active Rain (a real estate blogging site) and stumbled across this on a blog site by Kristal Kraft, an amazing Realtor and Blogger from Denver.   I could not be left out of this party...and if you have a blog that was established before January 1, 2007 with your photo on it, you too can be a part of...

2000 Bloggers 2000 Bloggers

PS:  Click on any photo to be connected to the blog that belongs to the face. 

Don't Miss the Boat...or the Explorer West Auction!

Explorer West will be holding their 7^th annual dinner and auction on the evening of March 17^th at the Jerry Brockey Student Center at South Seattle Community College. 

This year’s theme is “All Aboard the S.S. Explorer West!”  I can’t even imagine what the talented folks at Explorer West are dreaming up for this adventure.  Last year, the auction's theme evolved around Paris.   When you entered the room, you were greeted by a 30 foot tall Eifel Tower (including the light show) and felt as though you had stepped into a street side bistro.    I’ve gone to several school auctions in my lifetime, this one amazed me.

It’s not too late to advertise in their auction catalog…ads must be submitted by February 1, 2007.    And the school is still procuring items for the auction as well.  If you would like to attend this event and/or promote your business to a southwest  Seattle area school and do a good deed…here’s your chance!

Preapproval Letters Defined

The preapproval letter is a tool typically drafted by a loan originator to be used by a buyer’s real estate agent when presenting an offer on a property.   The letter may be in the form of a certificate or be an actual letter on the lender’s letterhead.   The preapproval letter is intended to assure the seller and the listing agent that the buyer has been buyer has been approved by the lender and therefore accepting an offer from this buyer, there should ideally not be any financing issues with the buyer.

 

When I prepare a preapproval letter, it usually contains the following (depending on the program):

• Effective date.
• The borrower’s names (who is approved for financing).
• The sales price and loan amounts they are approved for.
• The type of financing is confirmed (ex. Conventional, FHA, etc.)
• Credit has been reviewed.
• Employment and income has been confirmed.
• Down payment and closing cost have been verified.
• Any closing costs that are being requested to be paid for from the seller.
• Any item the preapproval is subject to (such as satisfactory appraisal, title, complete purchase and sale agreement, etc.).

If these items have not been actually verified with proper documentation, then a buyer has been prequalified—not preapproved.  BIG DIFFERENCE.  Being prequalified essentially means that a verbal interview has been conducted without providing all of the necessary supporting documents (pay stubs, W2s, bank statements—again, depending on the type documentation required for the specific loan “full doc” to “no doc”).  In addition, a Good Faith Estimate does not constitute a preapproval, it does detail the proposed loan scenario.

 

The preapproval letter does not contain private information such as a buyer’s credit score or their additional assets.   It is a sales tool for the buyer’s agent and if there are multiple offers presented on a home, having a strong preapproval letter is an advantage.   This is one reason why it is crucial for buyers to become preapproved before they begin shopping for their next home.   Many listings agents will not even consider an offer unless the buyer has been preapproved.    

 

 

The preapproval letter is generally effective for 90 days a specific amount of days, typically when most lenders consider the credit report “expired”.   Updating a preapproval letter is simply re-running the credit and possibly obtaining most recent income and asset documentation (paystubs and bank statements).    On occasion, the buyer’s agent may request a revised preapproval letter if they are presenting an offer on a home that is priced for less than what the buyer is approved for and if they are asking for closing costs.   

 

 

Real estate agents may also consider who the preapproval letter is from, and they may contact the lender to confirm the buyer is indeed prepproved and not just prequalified.   Many agents will tell you that the preapproval letter is only worth the paper it’s printed on.   This is also why it’s very important to be selective with lender you work with…it could possibly impact whether or not your offer is accepted on your next home.

 

If you're considering purchasing a home located anywhere in Washington state and need a preapproval letter, I'm happy to help you!

 

EDITORS NOTE:  This post has been updated since credit reports are no longer "valid" for 90 days with most lenders.