Mortgage Philosophy, Your Mortgage File

Should I Omit Information? Is that Fraud?

Is it Fraud

Is it Fraud

A discussion on ethics grew heated between several staff members a short while ago.

 

Ethics are subject to the scenario in which they apply.  Omitting pertinent information from a loan file is considered fraud, but what if you are omitting information to help make the process smoother for the borrower.

Example: A borrower has a few overdraft charges on his bank statement. It’s clear from other accounts that he has the ability to save money and this appears like a simple mistake.

Overdraft charges, however, are considered a red flag to an underwriter. Questions crop up:

Does this potential borrower have the capacity to budget for a mortgage payment?

Do they mismanage money?

Will this affect their ability to make timely payments?

His loan is otherwise flawless.

Do you omit the bank statement and ask his bank to prepare a verification of deposit (which only shows the current and average balance)?

In this case, you would be omitting any evidence of an overdraft.  You won’t have to bother the borrower and the underwriters won’t ask questions.

Do you address the overdrafts upfront but asking the borrower to explain them?

As intrusive as this is, you are also lending them a lot of money.  Shouldn’t they be asked about the overdraft and required to explain it?

In life, don’t we all judge these situations on the margin?  What are the risks?   Is it to great? Will it be construed as fraud? Is it harmful?

photo credit: JD Hancock via photopin cc

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How It Works, Mortgage Philosophy, Your Mortgage File

A Good Loan Officer

Recently, I was asked to evaluate the qualities of a successful loan officer. The timing could not be better. I had just read an article about pain borrowers experienced during the mortgage process.

Loan officers catch flack when things go wrong. And why shouldn’t they? He is the face of the transaction and deserves to bear the burden when things go wrong. When ‘closing-in-thirty’ turns into sixty, when the appraisal comes in low or when interest rate jumps, the loan officer takes the verbal beating.

Boiled down, the best thing a loan officer can do is set the right expectations. This is a paradox because he might be afraid to tell the whole truth else you’ll stomp over to the competition.

I know!

I’ve been that loan officer and I have the bruises to prove it.

It doesn’t end that way if it starts out right. You can take a part in that if you know what to look for.

Ready?

–knuckle crack–

Let’s begin with some words

  • Pushy
  • Vague
  • Promises
  • Chatterbox

Now – let’s tear it down:

PUSHY! “This rate is the best you’ll ever see”. “We need to secure money for the appraisal, let’s get started now”. “You need to sign this so we can get things started”. You feel more rushed than the last time you opted to self checkout in Walmart.

Stop! A loan officer is an adviser, not a used car salesperson (sorry, no euphemisms here). You need someone who will take it slow, work out the details. This is a HUGE transaction and it deserves patience and respect. It’s a relationship, not a one night stand (yeah, went there)

VAGUE! You know things were unclear in the beginning, but now you have a pen in your hand and things are still gray. The dotted line stares up at you and a zillion questions bounce around your head.

Stop! A loan officer is teacher. She will take your hand and guide you gently through a maze of foreign terms, complicated disclosures and options. You know she cares because she’s patient, repeats without hesitation, and spends time explaining. She WANTS you to understand. This is a BIG deal!

PROMISES! “This loan is no problem”.  “We won’t need anything else from you”. “We’ll get you closed in twenty days”.

Stop! A good loan officer is a coach. Without scaring you, she will outline a plan of events and what you can expect to encounter. She will also know that issues might come up. Heck, she might even ask for patience because this process is complex, time consuming and arduous   But,she’s your advocate and will work with you. Yes, you might need to provide additional documents, have patience, and need to vent. She’ll communicate and explain and together you’ll get through it.

CHATTERBOX! Yeah, you know what I’m talking about. The loan officer that won’t stop talking. He is more interested in sharing his life and you struggle to laugh at those lame jokes. Maybe if you just sign the application he’ll shut up.

Stop! A loan officer is as good as your counselor. She listens to your needs, works with your situation and helps find solutions. She wants to know about you! How else can she fit you into the right product. You should be the one talking!

Let’s end with some words:

  • Adviser
  • Teacher
  • Coach
  • Counselor

Next time you’re sitting in front of a loan officer, measure him!

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Mortgage Philosophy, Your Mortgage File

Bank or Borrower . . . . or?

Our economy continues to stumble through a storm of uncertainty and hesitation, unable to take a confident step in any direction. We can trace the tailings back to the mortgage crisis which began a crescendo in 2008, climaxed in 2010, and now, what we hope is the diminuendo going into 2014.  I’ve been in the industry for over ten years and I’ve watched and read as the media attempted to find a scapegoat. Since personal accountability flew out the window years ago, let’s blame the cold, heartless banks, right?  After all, they were just in it for the buck and obviously willing to screw the poor, unfortunate American out of a home.

Really? You think a bank wants a foreclosure? Do you know how much that costs them?! Check it out here.

So while the borrower is busy blaming the bank, and the bank is busy dealing with the hemorrhaging associated with the foreclosure trauma, the real culprit is busy baking up that red herring they love so much.

In this NY Times article we get a glimpse into the events that started it all. In 1999, the Clinton administration pressured Fannie Mae and Freddie Mac to loosen the belt on lending in an effort to accommodate minorities and low income consumers. This idea –regardless of best intentions– had unintended consequence and the reality was far opposite the plan

The payment for this government debacle will cost our country billions, if not trillions in the long term. Since no one feels responsible we have been shrugging off the financial burden of this catastrophe in every way imaginable: TARP, Government MBS Program, no budget, etc. The bill is due, and if we fail as a country to handle it as adults, it will be handled for us.  The latter, as I’ve discovered in my life, is not as pleasant as when you willfully resolve the problem yourself.

Good luck, America.

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