LENDER GFE

LENDER GFE PAGE ONE

LENDER GFE PAGE TWO

BANK CORRESPONDENT GFE (prepared same as if lender)

MORTGAGE BROKER GFE

OK, now let's remember this is a closed transaction. I'm using it to get a real life scenario into a GFE but I haven't completed a sales comparison or lock info.

I've added notes where there is ZERO tolerance for differences if there are no unforeseen changes. I have also made note that the lender and the mortgage broker have been relieved of the 10% tolerance burden in the quoting of third party fees because neither the lender or the mortgage broker gave the consumer our name. It was the real estate agent who suggested using our office. No affiliation exists between the real estate agent and our office.

reviewing two definitions while I work....

THESE ARE TWO DEFINITIONS TAKEN FROM THE PROPOSED RESPA RULES:

Mortgage broker means a person (not
an employee of a lender) or entity that
renders origination services in a table
funded or intermediary transaction. A
loan correspondent approved under 24
CFR 202.8 for Federal Housing
Administration programs is a mortgage
broker for purposes of this part.

Origination service means any service
involved in the creation of a mortgage
loan, including but not limited to the
taking of loan applications, loan
processing, and the underwriting and
funding of loans, and the processing and
administrative services required to
perform these functions.

Follow me now in my train of thought. I am very interested in your comments as to whether I am coming up with the correct conclusions.

I have three transactions before me which have been originated by three different types of entities. They are:

• a licensed mortgage broker
• a local bank selling a transaction servicing released - The bank has the ability to service, however, it is clear in this transaction that they are performing delegated underwriting and have no intention of retaining this loan. It is clearly being sold immediately, however the bank is funding the closing not the lender.
• a lender

My main concern at this point in my thinking is NOT the first or the third transactions. They are clearly mortgage broker and lender. It's the second transaction that has me wondering whether or not this local bank should be completing the GFE as a mortgage broker.

The lender is NOT tablefunding. The bank is clearly funding the closing, however, the bank, in my mind, is acting as an intermediary. Though they have the ability to retain the loan, I would argue that they would NOT originate the product for portfolio or take market risk. These loans are being sold under a correspondent program. There is no definition in the RESPA Proposed Rules for the word "intermediary" as it is used in the definition of a mortgage broker. [I THINK WE NEED A DEFINITION. THIS WILL BE INCLUDED IN MY COMMENTS. MAYBE YOU SHOULD INCLUDE IT IN YOUR COMMENTS.]

Other thoughts popped into my mind as I read these two definitions. Read carefully the definition of loan origination services. If a non-employee performs these tasks, even as an exclusive agent of the lender, the non-employee becomes a mortgage broker. Am I right?

My guess is that the intention of HUD is to use these two definitions to direct the preparation of the GFE. If that is the case and a lender uses non-employees to meet with the consumer in their home and sign loan application documents, would that trigger the need for a lender to follow mortgage broker rules for a GFE? If a lender uses contract underwriters, would that trigger some kind of mortgage broker rule? I'm confused here. [I THINK WE NEED CLARIFICATION. THIS WILL BE INCLUDED IN MY COMMENTS. MAYBE YOU SHOULD INCLUDE IT IN YOUR COMMENTS.]

My way of thinking this stuff through at this point is NOT to talk about what is fair. At this stage in the rule making process I am accepting that the intention of HUD is set and that we are in the "clean up the words" phase and also, the "point to unintended logistical problems" phase. In my experience, comments directed to those ends will have the most impact in the final rulemaking process.

So, with that in mind, I don't see the point in writing comments that attempt to stop or delay the process, though I support freedom of speech. We're years into this rule, years, and so wholesale change isn't likely. I'd much rather write comments that have a shot at making a difference. Make sense? Work on tweaks that help. Be part of the positive team.

Shortly, I will post three RESPA proposed GFE samples

using three closings we are performing today. Interestingly, one transaction is a mortgage broker, one transaction is a local bank who is selling servicing released, and one is a top five lender. I’m going to use the data from the HUD to complete the GFEs so we can see how the deals would have looked to consumers. I am not equalizing the deals. They are three unique transactions and I will use real data with no personal info.

STAY TUNED.

1031 exchange and vacation homes - there's news!

1031 Corp. is reporting that the IRS has published new guidelines. Here's a blurb:

We always told investors and their advisors that while section 1031 did not define what qualified as an investment property, section 280A does. Taxpayers were not permitted to use the property for personal use more than 14 days of the year or 10% the number of days rented, whichever is greater. I am sure many vacation home owners didn't like our response to this question and found another qualified intermediary who would facilitate the exchange anyway. Some taxpayers converted a vacation home into a rental for one "season" and the more cautious waited even one year and then completed an exchange.

interested the the Yield Spread Premium debate?

or......don't have a clue what I am talking about?

READ THIS.

This isn't title insurance related, but if you are dealing with a flood insurance

issue, it's good advice. Fidelity National is revising their claim guidelines. Here's a blurb of interest:

The company also urged their customers to take pictures of flood damaged property including a "water line" on the wall to document the flood water level reached in each room of the flooded building to facilitate the claims review process. Clean up and removal of wet floor coverings can begin before the adjuster arrives, as long as floor covering samples in each room and records or photographs of damaged articles removed is saved for inspection by the adjuster. Other damaged property should be retained until viewed by the claims adjuster.

free and clear deed coming out of bankruptcy

Yesterday, I received a panic call from a consumer whose title we insured in 2005. She was refinancing and her mortgage lender was using an attorney to issue the new loan policy. The attorney, rather than calling me himself, told her that we had missed a lien in bankruptcy and that her title was not clear.

I took at quick peek at the title and saw that the deed coming out of the bankruptcy was from the bankruptcy trustee and that it was pursuant to a court order in which the judge had ordered that the property could be sold free and clear of all liens and encumbrances.

I was unable to reach the law office as they weren't answering their phone during business hours. My insured consumer did confirm the number for me.

I explained the situation to my insured consumer and assured her that the attorney simply must not have read the bankruptcy docket or the deed. I immediately e-mailed a copy of the deed to her so she would have something concrete to show the attorney who was so very unavailable.

Sometimes people do make mistakes and miss things. That's human. In this case it appears that the search must have been conducted by someone who was not thorough or perhaps, simply ignorant. Even if he had missed the recital in the deed, I would think that having decided that a lien in bankruptcy was a problem that he would have read the entirety of the bankruptcy docket before contacting and scaring the consumer. Yoi.

query: should victim notify, inform, IRS and lender, straw buyer

If you are a victim of foul play concerning a straw buyer with or without involving mortgage fraud, I would contact the FBI or your state Attorney General's office.

query via e-mail: Could you discuss this on one of your blogs? I keep having sellers calling and asking about putting their property into an LLC and

then selling the LLC in order to avoid the transfer taxes.

Morning. I'm very happy to talk about it but I need to understand it more. Are you saying they want to deed property into a LLC then sell the LLC? It seems to me that the transfer into the LLC would be taxable even if the sale of the LLC itself is not.

This is an interesting topic and I welcome comments. Anybody game?

talk about a wacky easement

I've been trying to get a copy of an access easement for a couple of days. It's for property in Somerset County and the document is too old to show up in their on-line system. All deeds in our abstract refer back to a 1951 deed as describing the actual easement but when we received that deed it only referred to yet another document.

So, this morning I walked into the office and was handed the easement for review. I hadn't had my coffee yet because of the bear fiasco, and I was just trying to get my mentals arms around my morning when I noticed the heading - AVIGATION EASEMENT. What the hey?

I read the document and thought CRYING OUT LOUD, this is an easement for air transport OVER the land specifically for removal of trees. Dear heavens, every deed since 1951 has cited this easement as the right of way to and from the public roadway......and then I brewed my coffee.

Yoi.......double yoi.

query: does a settlement statement have to show title insurance

Yes, a settlement statement must show title insurance if title insurance is being purchased as part of the transaction.

it's tax time

I'm not a tax advisor and so I'll not attempt in any way to provide tax advice. I DO want to mention for the benefit of those who have been through a real estate transaction this year that you should make certain your tax preparer has a copy of the HUD-1 Settlement Statement.

If you can't find it, just call your real estate agent or the attorney or title agent who performed the closing. They'll all have a copy.

If you are a consumer involved in a closing with our office, simply shoot me an e-mail dcipa@tcsclosing.com or a fax 724-238-7830. If you want me to send it directly to your tax preparer, I can. For privacy reasons, I like to get your request in writing. I'll be happy to send a copy by regular mail, e-mail, or fax.

refinance title rate discount calculator

We have this totally terrific PA title rate calculator. If you are a mortgage loan originator in PA, please bookmark it. All the discounts are quoted for refinances - instantly.

I sat and listened to a customer cry in exasperation yesterday

and as she said these words, I thought, "Wow, we are healing indeed." What words do you think she uttered? Well, old mortgage lenders will smile when I say.....


"What more do they want, my burial plot?"

It's in the same vein as "What more do they want, my underwear?"

You see, in the old days, the pre-subprime days of mortgage underwriting for sale in the secondary mortgage market, we heard these exasperated pleas everyday.....


...every damn day, but I never knew how much I might miss those simple words.

With some joy, I comforted my customer by explaining that she was not alone. She had not been singled out for some sort of devious, tortuous, mortgage underwriting fiasco. She was experiencing the normal good old fashioned vetting of an underwriter, who I might add, smelled a rat.

This rat, unfortunately was the unknowing mortgage originator, who hoping to help, had proffered counsel that clouded the circumstances just enough to raise the hackles of the underwriter.

What is so crazy is that mortgage originators of say, 15 years ago might have known to not even try to lie. They knew the fear of quality control audits, but the current crop is still finding it's normal underwriting footing and still the first instinct was to lie.

This kills me but I understand it. These young mortgage processors and originators have grown up as unsupervised children who are now having to pay attention in class and somehow find table manners. It's not an easy task but they are the transition generation. Those that come after will be trained - or replaced by robots. I hope for training and humans who think and care and get paid.

So, for the benefit of the mortgage loan originator reading this post, embrace the truth and document it. The truth, as explained by my tearful customer, was not so bad and could have been documented so much more easily than the trail of gift lies you are now building. I counseled my tearful customer to write a letter and lay out the truth and provide specific documentation and let it rest with the underwriter to decide. As an old style underwriter, even a strict underwriter, I would find the truth of this case understandable and so much more easy to sign off on than the simple and unnecessary lies being coached by the originator.

Managers, take the hands of your charges and lead them to honesty, please.

what are lender's rights if the spouse doesn't sign a mortgage

The lender must determine whether or not the signature of the spouse is required to validate the mortgage lien. If the lien is imperfect without the signature, the lender should decline the loan.

If the transaction has already closed and you, as lender, find that your lien is imperfect because the spouse did not sign the mortgage, I hope you have a loan policy.

query: why does the title company request a payoff

The title company requests a mortgage payoff letter so that they are certain is hasn't been tampered with.

A sloppy title agent will allow accept a payoff letter from an interested party who may be motivated to commit fraud. What happens if the payoff amount has been altered and the closing is over and the payoff is short? The title company has an instant claim and loss if they cannot recover damages form the seller.

A prudent title agent will always order their own letter or at the very least contact the mortgage lender and validate the data contained in the payoff letter in hand.

query: can the title insurance company foreclose on my house

Unless the title insurance company has a mortgage lien against your house - which is highly unlikely - they would not be the party to foreclose on your house.

It's the mortgage lender who would foreclose, whoever owns the note you signed promising to repay the money that was loaned to you.

query: is outsourcing title insurance illegal

That's an interesting question. As a reminder, I am not an attorney and this is my opinion as a title agent and one who has been in the real estate industry for over 30 years.

I do not think outsourcing core services of title insurance is illegal in and of itself. The possible illegalities reside in issues like duplicative effort and whether or not settlement service providers are truly performing the core services for which they are being paid.

Outsourcing is a bone of contention in our industry for two reasons.

Outsourcing is part of the structure that supports sham title agencies. Underwriters use outsourcing to keep their costs down so they can provide cheap or free services to agents who are unwilling or incapable of performing core services in a title insurance transaction.

In addition, outsourcing, especially when the work is outsourced to a remote location, guts the expert examination which traditonally was the core of a title insurance purchase and reduces the title insurance coverage to the level of a casualty product.

Let's compare it to a medical examination and surgery. In the US, we have a regulatory structure and litigous atmosphere which has raised the costs of care beyond what some are willing or able to pay. A terrific alternative has been made available in India. Consumers of medical services can travel to India and obtain treatment that is top notch and the cost is less than they would have incurred in the US. In that case, it's not really outsourcing, but I'm trying to use an example of a consumer reaping a benefit from the use of expert services from a remote location.

Now, let's say instead of going to the medical expert in India, the consumer used an on-line system like WebMD to diagnose their illness or maybe sent a blood or stool sample to a remote service and received a diagnosis that came with an insurance policy which said medical expenses would be paid if they missed something. You'd think that consumer was crazy because they most certainly should have seen an expert medical professional in person, right?

This is the medical equivalent of title insurance policies which do not include expert examination. Consumers have a hard time understanding what title examiners do, but we are diagnosing the condition of title. We're looking for problems. Finding and curing problems before the insurance is issued is what we are being paid to do. The actual policy is just a safety net in case someone made a mistake. It doesn't replace the examination.

I hope this helps with understanding the issue. I am taking a guess that the query might be a search for the truth. I respect that those who are performing the outsourced services are doing what they have been contracted to do. I wish you well. If you'd like to comment and have a dialogue I would welcome the opportunity.

Bloomberg reporting the FHA gift program survives...for now

Here's a blurb:

A second federal court Wednesday told the Bush administration it has to continue a down payment assistance program for more than 100,000 low- and middle-income homebuyers.

The Department of Housing and Urban Development violated federal law in adopting a rule last October that banned the program, the U.S. District Court for the District of Columbia said Wednesday.

The program lets nonprofit groups such as AmeriDream Inc. and Nehemiah Corp. of America fund down payments on Federal Housing Administration loans, and be reimbursed by the home sellers. On Monday, the U.S. District Court in Sacramento, Calif., also struck down the rule. Both courts sent it back to HUD to be reassessed.

query: chance of mortgage approval with manual underwriting

Thank you for the query because it's fascinating.

If the appraisal supports the value and you demonstrate the willingness and the ability to repay the loan, I'd say your chances are good.

query: easy system to get title policies from title companies

I hope you won't think I'm rude, but LOL.

Seriously. you are raising a major issue. If you are working with a responsible company, you'll get the policy, pronto. If not, well no system is going to substitute for a plain old good work ethic.

UPDATE - Thought about this last night. If you are a lender, the simplest method for getting policies is to instruct title insurers to issue ALTA short form loan policies which are delivered with your closing package - no need to wait for recorded docs.

The problem we've seen with lenders who instruct us to issue the short form is that their post closing delivery folks don't seem to know or understand that method. We send the policies with the docs and then get follow up letters saying we never sent the policy. We even put the policy on the top with a big notice, highlighted, that says THIS IS YOUR TITLE POLICY. My guess is that those positions are manned by clerks who haven't a clue about title policies.

;)

query: how to sue title company

Hire an attorney, preferably one familiar with title insurance and real estate law.

reverse mortgages - sometimes you just want to cry

If you or a loved one are considering a reverse mortgage, please read this article.

You should know that the subprime predators, those who are still in the industry and not in jail or sent packing, have moved into the reverse mortgage business. I noticed the trend almost immediately when subprime programs were being shut down, lead generation companies and seminar companies all shifted their interest into reverse. I also noticed a sudden increase in discussion by notary signing agents teaching each other how to close reverse mortgages.

As an industry insider, I know that notary signing agents mainly serviced subprime type of lending so if they were moving into reverse mortgage closings I took that as confirmation of my original concerns.

Boy, who could find a more vulnerable group of people than the elderly. It's not that older individuals are unintelligent, it's that they come form a different era when crooks were more easily noticed. It's one thing to see a shady character and cross the street, it's another thing to see a company on the TV with very fancy commercials and recognize them as crooks.

The elderly are also sometimes lonely and if a nice person comes to visit, well their guard just might be down.

I'm particularly upset that the crooks have moved into reverse mortgages because I like the product. I have been following the evolution of reverse mortgages for many years and the version that HUD has out their now, available through reputable mortgage lenders like Wells Fargo Bank, NA, is wonderful.

My advice is that you work with a reputable bank rather than a mortgage company. I also suggest that you do NOT allow the mortgage lender to invest ANY of the loan proceeds for you.

You are the master of your money. Using the equity in our home to assist in cash flow after retirement is what I may do later in life. I like the program that much, but as Ronald Reagan said, trust, but verify. Work with reputable companies and keep your eyes wide open.

query: does seller get a copy of the HUD-1 statement

Yes. Each party should have a fully executed copy of the HUD-1.

do do do do de dum de do.....

Just whistling and hoping Radical Readers don't notice that I'm over here answering Apella's meme tag when I said I SHOULD be finishing my writing assignments. I am rationalizing this because Apella's tag has been put off this week, too, due to end of the month volume and so, let me get this out there for FUN and ENJOYMENT, then back to work. Okay?

Apella, my friend, this is HARD! Alright.......seven things, interesting details about myself.....

1. My mom is Jewish. My dad was German and his family liked Hitler. I grew up in a loving livingroom listening to relatives arguing all sides of those issues. I think my cells still argue with each other.
2. I smoke Backwoods cigars and read by the woods every evening, weather permitting.
3. I have an office kitty and a home kitty. Office kitty is TCStorm and home kitty is Cloe. Office kitty sneezes little kitty boogers on the windows and sheds hair everywhere but I love her and clean without regret.
4. As a teenager, I was abducted at knifepoint and taken to a remote cabin where I avoided harm and rape by using advice I read in Cosmo.
5. I believe in reincarnation.
6. I miss horses.
7. I'm attracted to the color orange.

Now to tag 7 people who have Active Rain blogs and outside blogs and who haven't already been tagged? Jeez.....I have no way of knowing who has been tagged. I'm not good at this stuff, but I'll give it a shot.

Ed Rybczynski Title-opoly
Dave Wirsching Clearing Title
Alex Yvonnou Detroit Notary
Todd Carpenter Lenderama
Mark Pilatowski myClosingSpace.com
Frank Llosa FranklyRealty.com
Rhonda Porter The Mortgage Porter

Hope they don't kill me or anything. heh heh.....all in good fun. ;)