It's the No. 1 complaint that real estate agents make about the home mortgage lending process. And it bugs their home buyer clients as well: The failure of settlement or escrow officials to provide a copy of the final settlement sheet before the closing.

In a new nationwide survey of real estate agents, 50 percent said their biggest gripe was the absence of HUD-1 closing documents for review a day ahead of the settlement. The HUD-1 is the form that lists settlement charges. Real estate agents told pollsters that although "required by government regulations," settlement sheets rarely arrive in advance, thereby denying home buyers an opportunity to see an itemized list of all their charges and fees.

"I have yet to see a HUD statement prior to a client's closing," one agent said, according to the survey. "It would be nice for [home buyers] to have it in hand at least two days prior to closing, if for no other reason than to let them know what funds they need [for] settlement."

Another complained that when buyers go to closing with no advance copy of the HUD-1, even if requested, "closing costs are different from the original quote given to the buyer -- sometimes by over $1,000."

The study was sponsored by a lending industry newsletter, Inside Mortgage Finance, and conducted by market researchers Campbell Communications and Geosegment Systems Inc. A statistically representative sample of 1,780 real estate agents participated in the polling; the survey has a 3 percent margin of error.

Tom Popik, a principal of Geosegment Systems, said the findings are "really rather shocking."

He said, "In what other major consumer purchase do you [not] get information about the final costs and fees until the last minute? How often do people buy a car and not be told the final, bottom-line costs ahead of time?"

The survey also focuses attention on when closing agents must provide a copy of the HUD-1 settlement sheet -- if indeed ever, under current federal rules. Here are the facts:

Although real estate agents and consumers may believe that federal rules guarantee them the right to see the final closing numbers a day ahead of settlement, that's not completely accurate. Washington lawyer Phillip L. Schulman of Kirkpatrick & Lockhart Nicholson Graham LLP, an expert on federal real estate regulations, said in an interview that the law requires a closing agent to provide a borrower the HUD-1 figures one business day in advance only "if the borrower requests" such a review. Equally important, said Schulman, the closing agent is only required to "provide whatever figures [the agent] actually has received up until that time" from other parties involved in the transaction.

"The fact is that some of these numbers come in very late in the process," just hours or even minutes before the scheduled settlement, Schulman said.

Another widely misunderstood point: The federal agency that regulates real estate settlement procedures has no enforcement powers when closing agents fail to provide advance copies of the HUD-1 to consumers who request them.

Ivy Jackson, who heads the Department of Housing and Urban Development's investigation unit on settlement complaints, said that "we simply do not have the authority" under current federal law to penalize any firm that ignores consumers' requests to review settlement information in advance.

Richard Fritz, a lawyer and title agent with Paragon Title & Escrow Co. of Bethesda, said one reason HUD-1 sheets often are not completed 24 hours in advance is that "we often have to wait for the borrower's lender to come through" with key information about fees and detailed closing instructions.

Sometimes other parties delay sending information needed for the HUD-1, such as local government agencies (property tax information), condominium or home owner associations (annual fees that affect escrow numbers), and even the home buyer's real estate agent (sales contract details).

"We are always willing to let borrowers see whatever we have received" 24 hours in advance, Fritz said. "But what we obviously can't show them is what we haven't received" -- which may be substantial.

Fritz said his firm soon will allow all parties to a transaction to inspect files online through a password-enabled, secure Web site. Meanwhile, HUD is expected to unveil regulatory proposals soon that would require settlement documents to closely track upfront "good faith estimates." Under current rules, final closing numbers can be far off the mark from the upfront estimates, a loophole that sometimes allows unethical loan officers to pull in mortgage shoppers with lowballed quotes on fees.

Under HUD's forthcoming proposals, good faith estimates on settlement charges would be required to come with a lot more good faith -- if not ironclad guarantees.

It is the loan officers ethical duty to go over the settlement statement with their borrower prior to closing so there are no surprises.

We usually get it about 1-2 hours prior to closing. Every once in a while it'll be to us 4-5 hours prior but NEVER a day or two. This is one of the glitches in the process that nobody seems to have a reason for... it's "just the way it is".

""I have yet to see a HUD statement prior to a client's closing," one agent said, according to the survey. "It would be nice for [home buyers] to have it in hand at least two days prior to closing, if for no other reason than to let them know what funds they need [for] settlement."
"

Wow... I have yet to NOT see a HUD statement in advance. Well, I did once have a nightmare lender that a buyer insisted on using, and she was shocked at the closing table (despite my predictions of her fees which were dead on.)
---A

We can estimate a lot, but the final, official document comes from the closing attorney. Often, the attorney doesn't get the closing package until the day of closing. So, everything we look at prior is still an estimate.

Several times I have had to wait until the hour before closing to call customers, sitting at the bank, waiting for me to tell them how much to make the certified check out for! Then we meet 15 minutes before to go through the HUD. For the delay there are always excuses too. Last time the lender blamed the customer for not providing a receipt for a large deposit but the customer said if he was told the week before he would have brought it sooner. He was a first time homebuyer so had no clue and was irritated that they were pointing the finger at him for the delay. I trusted the lender to ask the right questions. At the final hour it is usually lack of communication. Someone not receiving vital information.

As a new agent, this brings up a question for mortgage brokers: Why is there not more communication at the first meeting with the borrower about the process? It seems to me that mortgage brokers assume that everyone understands the process and what will be needed. Now that I understand the process better, I will be educating the borrower(s), but I still think the mortgage broker should be doing it as well.

For instance, they should tell the borrowers what will be expected in terms of reserves, seasoned funds, and not to make any major purchases before recording!!!!

I don't have much experience, but in every one of my transactions (business and personal) to date, there has been some kind of drama at the end that appears could have been avoided by either more communication or more information provided earlier.

I can only assume that perhaps mortgage brokers have no leverage with their lenders and the lenders jerk them around at the end? Just a wild guess - but when the lenders won't return phone calls or the "underwriter" is "thinking" and can't be rushed, what can be done? It seems like the lenders don't have much concern for closing dates and what might happen if the loan does not close on time (in terms of being out-of-contract). Where is the accountabilty of the lenders?

Clearly this guy has never been to a hospital. That's the only racket I know where you agree to pay their charges and you don't know what the cost is until AFTER it's all over. At least with buying a car or a house you know the total cost before you comit to the transaction, with a hospital stay you go in and they send you a bill afterward.

I have two local lenders that actually get the final closing figures in time for title to get me the HUD1 on average 1-2 days before close. They are the only ones as they do not initially sell their loans. They are a dream to work with and can get me to a closing table in less than 10 days.
Sometimes the smaller local guys offer the best service.

It is not the realtors place to go over the HUD with the borrower as this would be the mortgage brokers responsibility. As mortgage brokers we handle the financial aspect of the transaction, settlement statement included.

It sounds to me like the majority of you have not chosen your loan officers wisely.

In their defense AZ, sometimes agents don't get to choose who the lender is. On that note, I just want to say that I just typed this very detailed reply, lost connection, and lost the entire post. I AM SO MAD! I will repost it but right now, I need to walk away from this darn computer!!!

You're somewat right. I think I can speak for all realtors when I say we like to review the HUD well enough in advance in case there is a problem with our commission. I've had that happen many times.

The HUD isn't necessarily all mortgage related either. I like to review the inspectors fees (if they are getting paid at closing), any moneies credited back to the buyer/seller, money escrowed for repairs etc. So, yes, the bulk of it should be gone over by the LO but the realtor has a vested interest in it too.

Futhermore, I have noticed LOTS of junk fees on a HUD by the mtg broker & have had to get on the phone during a closing and argue with the mtg company because the fees are higher than the buyer expected.

"Futhermore, I have noticed LOTS of junk fees on a HUD by the mtg broker & have had to get on the phone during a closing and argue with the mtg company because the fees are higher than the buyer expected."


Not your place. We do not scrutinize your commission and what you may consider a "junk fee" is more than likely valid. 99.9% of the HUD is Mortgage related.

Just out of curiosity, what do you as a non-mortgage professional consider "junk fees?"

I consider it a junk fee if it wasn't disclosed prior to closing. I never see these with the banks, ie/ Bank of America, Homebanc, etc. but almost always see it when a loan is handled through a mortgage broker. Like Tanya, we get on the phone immediately with the lender and 99% of the time we see $100s and recently even over $1K waived(sometimes that is at the closing table because the HUD has to be sent directly to the closing due to cutting it too close). These extra fees just mysteriously appear at the very end.

BTW, AZLender, I'd like to believe we can work together. We need each other and we need to support each other. And, I may be wrong here but, I think Lenders need us more than we need them. We send MANY people to lenders, we've only had one referral back our way.

There is a complete lack of professionalism in the mortgage broker industry. There is no excuse to change lender fee's at the closing table other than to jam the buyer. The ever present "it's stuck in under writing" is a bunch of bull. I've never had any issues when a buyer deals directly with a bank but every MB/LO has had problem after problem.

As for what's junk fees, AZLender, if a bank doesn't charge it brokers shouldn't either. If you forgot to add it to the GFE or if it's some fee your funding source charges thats not on the GFE that's junk. And padding appraisal, credit report, flood certs, etc.. are purely junk.

I recently represented a seller. Buyer went FHA. LO threw a whole bunch of fees onto the seller's side because they are not allowed to charge a buyer those fees under FHA. Now, these were not the "customary" closing costs that a seller will pick up for an FHA buyer but obvious "junk" fees that the LO was trying to collect from the seller. These were not fees required by the lender. These were fees the LO's company were trying to recoup because a buyer is not allowed to pay them (with good reason).

If they were legit fees , as you say it is 99.9% of the time, then why did he waive almost $400 in fees at the closing table?? A LO cannot arbitrarily add costs to the seller because the buyer is not allowed to pay them.

When I'm selling a property, I usually request a HUD from the title company the day after they request my information. They always tell me the same thing: we don't have all the info yet. So I tell them to send me what they do have, and I'll fill in the blanks. So far, they are always willing to do so. It's all in how you train your title company.

Wrong! Yes it is my place to go over the hud. I do it before every closing. I have found numerous errors on the HUD-1; commission, fees, taxes, pay-offs, all kinds of things, one even had the wrong purchase price. This is definitely part of my duties as an agent to see the transaction through until closing. I have also found questionable fees added by the lender that were not disclosed in the beginning. I request a settlement statement at least a day or two in advance (don't always get it). Takes an average of three times here to get one right. Yes, it is my place.

I give this hand-out to all my borrowers and agents' colleagues to give to their clients no matter if I'm the one handling their financing or not. SUPPORT YOUR AGENTS!

Most Common Last Minute Deal Breakers And How To Avoid Them

Until we cross the finish line, it is vital to keep your financial situation stable throughout the loan process. Many new homebuyers make the mistake of rushing out to buy things to fill their home with as soon as the seller accepts their purchase offer and the lender pre-approves their loan. But there are still a few major hurdles to overcome before the funding of your loan happens and the keys are handed out. Here are some things to avoid during the home buying or refinancing process to assure that your transaction goes as smoothly as possible:


1) Don't make an expensive purchase.
It may be tempting to order that new sofa for your soon-to-be living room, but its best to avoid making major purchases like furniture, cars, appliances, electronic equipment, jewelry, or vacations until after the closing. Financing that furniture with a store credit card or even one of your own credit cards could jeopardize your credit worthiness during the time it means the most. Using cash to purchase big items can also create a problem because many banks take into consideration your cash reserve when approving your mortgage.

#2 Don't apply for new credit cards. Inquiries may drop your credit score and can have an adverse effect on the interest rate, especially if the lender pulls your credit a few days before the closing. They are known to do that a lot as a last minute quality control check. Please keep that in mind and safeguard your credit score at all costs.

#3. Don't get a new job.
Lenders like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan - especially if you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concern and affect your application...sometimes even turning an approved loan application into a denied one. Some lenders will verify your employment a second time a few days before closing to make sure that your employment situation hasn't changed, so please refrain from jumping ships, or telling your boss what you really think of him or her during that time. Even if it takes every ounce of energy to bite your tongue...please please please do it. (You may be laughing right now but it happens more than you think.)

#4 Don't switch banks or move money around.
As your lender reviews your loan package, you will likely be asked to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account - even if its just to consolidate funds - could make it difficult for the lender to document your funds.

#5 Don't disregard your lenders requirements.
You may have been pre-approved for the loan but our work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, W2s and other paperwork. We need your cooperation to provide the lender with all the documents required as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home.

#6 Don't stop making your monthly mortgage and credit cards' payments.
This is critical especially when you are in the process of refinancing your current home and we can't stress this one enough. Missing a mortgage payment can break the deal or result in a much higher interest rate than originally anticipated. So please keep making your payment as usual until your loan closes.

#7 Avoid going out of town on vacation while your loan is being processed.
If you must go out of town for a business trip or a family emergency, please let us know ahead of time so we can make the necessary arrangements with your lender.

Avoiding making these simple mistakes will ensure a smooth process, and a faster close. If you have any questions or concerns, do not hesitate to contact us. We appreciate your cooperation for you are as much a part of this team as we are.

Your Real Estate TEAM

LO's name and contact info.
Agent's name and contact info.

I'm working on "Comprehensive solutions to agents' biggest financing issues, challenges, and frustrations." and that includes HUD-1 issues.


To beat a flawed system, we've got to have a system!...oh yeah and that entails LOs and agents working together as a team. I hope it's not a problem.

Wow--Can't believe that so many people get huds right before closing.I usually see mine 2-3 days before closing and sometimes longer. I always review them and while I don't go over the lenders fees with my client I do look for what I consider out of the ordinary fees. My area uses title companies for closing so no attorney involved:)

Awesome, Alea. Is it okay to use?

Sure changeagent. I posted this list to help new agents who lack solid LO/ Agent relationships. Any good LO would go over this list amongst many other things during the consultation with the borrowers. My rule is: cover your bases. The points on this list are very important so even if the LO the borrowers is working with is good and covered them, it doesn't hurt to drive the point accross one more time. Besides it will show that you are on top of things.

Wrong! Yes it is my place to go over the hud. I do it before every closing. I have found numerous errors on the HUD-1; commission, fees, taxes, pay-offs, all kinds of things, one even had the wrong purchase price. This is definitely part of my duties as an agent to see the transaction through until closing. I have also found questionable fees added by the lender that were not disclosed in the beginning. I request a settlement statement at least a day or two in advance (don't always get it). Takes an average of three times here to get one right. Yes, it is my place.


Right, this is why we as mortgage brokers go over and sign off on the HUD to ensure there are no discrepencies in HOI impounds, R/E tax impounds, interim interest, payoffs, aggregate adjustments and of course our fees.

Now, if you have brokers padding fees, any increase in the amount of any fee NOT DISCLOSED on the GFE has to be redisclosed and signed off on by the borrower in the form of whats called a "Final GFE". The lender WILL NOT accept a broker demand over and above what has been disclosed and signed off on by the borrower.

I understand you want to see this through to closing, however the problem I have with this is lack of common knowledge in a field you know nothing or at best very little about. ie: mortgage financing, which is blatently obvious by some of the responses I have seen.

If they were legit fees , as you say it is 99.9% of the time, then why did he waive almost $400 in fees at the closing table?? A LO cannot arbitrarily add costs to the seller because the buyer is not allowed to pay them.

Re-read that post. You got confused. I said 99.9% of what is on the HUD is mortgage related.

I use a couple things similar to what Alea had posted:

What NOT to Do After You Apply for a Mortgage


You finally found the house of your dreams. You made a bid, had it accepted by the seller, and went through the mortgage application process. It looks like you'll qualify. The closing is only weeks away, and you’re feeling pretty good.

It's smooth sailing from here, right? Probably. However, more than one buyer has had the wind knocked out of his sails at some point in a real estate transaction by the mis-steps described below. If at all possible, steer clear of the following "NO-NOs" until AFTER you have gone to settlement.

• Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money down—well, why not just do it? Answer: because you will change what the mortgage industry calls your "debt-to-income ratios" (the relationship of your income to your debt).

• Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, "What if it’s a BETTER job, for MORE money, in a DIFFERENT field?" Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing.

• Do not pack too soon. Well, go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other important paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van.

• Do not lease a new car. This should go under the general heading of "no new debt." It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your "debt-to-income ratios" and may cause you not to qualify for your mortgage.

In short, do nothing that negatively impacts your ability to qualify for your mortgage loan, or initiates a new round of paperwork. If you have any doubts about doing something that may affect your ability to qualify for your mortgage loan, please consult your loan provider before you do it.

These suggestions are merely that—suggestions. No one is saying, flat out, that bad things will necessarily follow if you do any of the above. They are offered as cautions. Many buyers seem to view the mortgage application procedure as a static action, a snap shot of their financial lives at a given moment in time. It’s not. It’s an on-going process that takes into account everything you do right up until the day of closing.


While it's true that potential lenders don't want to see that you've used up all your current credit lines, that doesn't mean that having a lot of available credit doesn't hurt you when
Lenders consider the five Cs of credit: character, capacity, collateral, capital and conditions in making loan decisions. Untapped lines of credit influence the lender's opinion of your capacity to repay the new loan.

Lenders use more than just your credit score when deciding to approve your loan, especially in mortgage lending. Large, untapped credit lines can't be considered a non-factor in computing a credit score or in making a lending decision.

Responsible use of credit can mitigate the impact of large open lines on your credit score. Fair Isaac & Company offers different perspectives on how credit lines can impact your credit score, as shown below:

Tips for Raising Your Score

Don't open a number of new credit cards that you don't need, just to increase your available credit. This approach could backfire and actually lower your score.

Whether or not you are showing a balance on certain types of accounts.

In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all. On the other hand, closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score.

Credit scores consider five main kinds of credit information. Listed from most important to least important, these are:

Payment history. (About 35 percent of the score is based on your payment history.)
Amount owed. (About 30 percent of the score is based on the amounts owed.)
Length of credit history. (About 15 percent of the score is based on length of credit history.)
New credit. (About 10 percent of the score is based on the amount of new credit.)
Types of credit in use. (About 10 percent of the score is based on the types of credit in use.)

Lenders look beyond the applicant's credit score when deciding to extend credit.
applying for another loan.

'BTW, AZLender, I'd like to believe we can work together. We need each other and we need to support each other. And, I may be wrong here but, I think Lenders need us more than we need them. We send MANY people to lenders, we've only had one referral back our way. by Tim and Susan

I agree we should be able to work together. This is one area where it gets a little sketchy. We don't like our toes being stepped on. Granted I will give you the fact there are a few bad apples out there, however this is one of the reasons I personally do not enjoy working with certain realtors.

I don't particularly believe we need you. I do very well without realtors as I target the FSBO market and receive my fair share of leads and referrals.

Hmmm... mind if I share this little tidbit of info with the dozens of LO's that contact me on a weekly basis? If we are not needed then why do they spend so much time and money trying to get us to call them? And, why are you even troubling yourself to be here on our forum?

I think you protest too much.

Well, I'm sure they may need you. As for me this is Purely entertainment.

I'm the guy who likes to smack the hornets nest....

Oh, a troll. I understand now.

Nope...I prefer smart ass. You're gettin' there, just a little slow.

and I'll bet the feeling is mutual.

Dang, didn't even use the KY on that one! kinda hurt! LOL! Aren't you just a bucket of sunshine!

All I'm sayin', is typically the HUD should be gone over in detail prior to closing by the loan officer with our clients. For those of you who get your HUD's a few hours before closing should really rethink your choice of a mortgage professional. Docs should be at the title company at least 2 days prior to closing to allow time for any necessary changes. Especially if it's a dry funding.

As far as TargetRE statement.....well, guess he lives by the motto ignorance is bliss, because anyone with half a brain would know banks do not fall under the same disclosure guidelines as brokers and tend to be at least 1/2 point higher rate with higher costs and fees, with the exception of HELOC's and Construction loans. Just look at the APR. For those of you who do not understand how APR is calculated, it takes into consideration all the PFC's.

LO’s don’t sign the HUD 1. I do at closing and it is my responsibility to make sure the figures and charges are correct. Some brokers here used to do the closing themselves and maybe some still do, to save their clients money.

Peak,
Are you telling me that your people who close aren`t actual attorney`s?

Buyers or Sellers rarely have attorneys in my area as the closing is done by the title company settlement agent.

AZLender,
Who are you kidding? I always go over the settlement statement with my clients. This includes the mortgage fees and the title fees and any other fees being paid out. This also includes making sure the Realtor fees are correct.

Same here.
Matter of fact, because there were not many attorneys here in the territories/state years ago, realtors were authorized to practice limited law. Thats why agents got the authorization to practice law, to a very small degree, but probably more than in other states.

Since when did the realtor handle the financing? BTW, I sign off on the HUD 1 prior to finalization.

AZ, you have given me a renewed determination to learn the mortgage industry more in depth. I think I will add loan officer to my list of goals for '06, right up there with becoming a licensed Real Estate Appraiser, Title Examiner/Abstractor, loan closing agent and learning Spanish. The way that I see it, the more that I know how to do, the more valuable I am to my clients, and the more money I can save them. I love people who undervalue what I do, and consequently feel as though they don't need me. That just makes me go out and learn what it is they do, so then we can see who needs whom. BTW, I usually have the last laugh, and am the last one standing when the dust settles. I expect that this situaton will be no different. Oh, and to answer your last question, "When does the REALTOR handle the financing?", the answer is anytime the mortgage broker drops the ball and in my experience, that is most of the time!

Have you ever heard of RESPA?
"When does the REALTOR handle the financing?", the answer is anytime the mortgage broker drops the ball and in my experience, that is most of the time!"
Your not licensed to do so. How is that possible?

Scott, you are not the brightest bulb are you?? It's called sarcasm .....Maybe somebody else will explain it to you.

MDHomes2GO,
It seems you need a lesson on being a professional.Your remarks to me now and in the past indicate how very insecure you truly are! How old are you anyway?

In my experience, few agents know Jack Squat about lending and vice versa.

If there were more of an emphasis by RE companies to educate agents on the details of the loan process, there would be less bad blood between the two sides.

3 months after I got my RE license, I became a loan officer for a small mortgage company (no, it is not against RESPA because I am officially employed by the mortgage company). I have a strong background in finance and saw the opportunity to further educate my RE clients (and make a few extra bucks, too).

My career has shown me that there is incompetence in both fields. I had a LO almost ruin a closing for both of us because she didn't know what she was talking about and she didn't know when to shut up.

The facts remain. LOs think they are the most important person in the transaction. So do agents. With these two factions constantly fighting, do you think the customer actually gets good service from either side? My opinion is generally no.

Agents need to quit pointing the finger at LOs. LOs need to quit pointing the finger at agents. Learn about the other industry. Agents, if you really want to give superior service, become a LO!

Nothing more irritating than an idiot with a big ego. That's my Professional assesment of you Scott. How is that?

MD,
I think the forum realizes now how much of a child you are.
Thanks for proving my point.

Always a heated topic. I just got off the phone with a Realtor who has Wells Fargo as their in house lender (talk about respa issues). I faxed a clear to close mortgage loan commitment to her on Friday for a closing on Monday the 1st. She called to say that my commitment was no good that she would need one from the actual lender (chase). I told her that the commitment that I typed up was all that she would get. After much debate over the semantics sp? of commitment vs. approval. I finally told her that the closing package would be there tomorrow 4 business days and 6 actual days prior to closing, and if that wouldn't suffice I don't know what to tell her. I then asked her if Wells Fargo has ever had a package there that early. I have to say a majority of my transactions are purchase transactions. Most of my relationships with realtors are quite amicable, but as AZ is pointing out the main problem that most realtors are experiencing is due to the lack of finding a qualified and competent mortgage broker at an ethical company. Just as I have a good relationship with many realtors I have for lack of a better word "fired" a few due to their lack of competence. Not actually firing but telling them that I choose not to do business in which they are involved. There are many diamonds in each of our industry, unfortunately there is a lot of incompetence as well. Keep looking and find a seasoned competent mortgage broker. I am convinced that I and many others in my position offer superior rates, service, and costs to my clients than any bank can offer. Most LO's at banks push paper ie. they fill out an application and send it to the myterious back room of processing and underwritinig and hope for the best.

Actually there are no RESPA issues as long as full disclosure is made and no referral fees are paid between the brokerage and the lender. Just correcting this so the true facts are out there.

Sounds like the Realtor has experienced the problem of the lender that is actually loaning the money having additional hoops for the borrower to jump through or is gonna add some last minute fees just before closing that the borrower is not prepared for.

I am sure that most Realtors can match you problem for problem so your "fired" comment goes both ways. But the mortgage broker is not the one at the closing table with the buyers who suddenly find out the fees are higher than expected because the lender decided at the last minute to add some junk fees.

Your local bank comment is not always accurate. I have two local banks that are great as they service all their own loans and excel at customer service and competitive rates.

Not a RESPA issue if Wells Fargo is paying fair market rate for rent & expenses.

Where a RESPA violation would lie is within the potential "steering" of the borrower/client toward the in house lender, non-disclosure of affiliated business arrangement or kickback.

This has been a topic of many round table discussions by federal regulators and state legislators. As it currently stands there is no "generic" blanket solution as RESPA enforcement tends to vary by state, however the grey area which currently lies within regulatory compliance regarding this issue is under the microscope by both HUD and RESPA.

[QUOTE]Originally posted by Paul Oaks:
[QB] Actually there are no RESPA issues as long as full disclosure is made and no referral fees are paid between the brokerage and the lender. Just correcting this so the true facts are out there.
True, however I believe that in due time some light will be shed regarding these arrangements

Sounds like the Realtor has experienced the problem of the lender that is actually loaning the money having additional hoops for the borrower to jump through or is gonna add some last minute fees just before closing that the borrower is not prepared for.

I agree, however lack of communication is a major problem here as well.

I am sure that most Realtors can match you problem for problem so your "fired" comment goes both ways. But the mortgage broker is not the one at the closing table with the buyers who suddenly find out the fees are higher than expected because the lender decided at the last minute to add some junk fees.

I was afraid the fired comment may have added fuel to the fire (pardon the pun). Quite the contrary in Palm Beach County, I attend all my purchase closings in order to review the loan documents with my borrower and answer any questions should they arise. I would say that 5% of the time our mutual clients realtor is not there. Also I am speaking for myself and my company but a fee is NEVER added at the closing

Your local bank comment is not always accurate. I have two local banks that are great as they service all their own loans and excel at customer service and competitive rates.

Good for you Paul because those two banks are definitely the exception to the rule. If they were so good on a larger scale then a majority of the loans originated wouldn't be done by brokers as they are now

BTW the best relationship I have is with a Coldwell Banker agent.

I am currentlly working on getting my CA real estate license and have been following many of the discussions here with great interest!

I have a banking background and have been wondering why there are not more RE agents out there that can also crunch the numbers and help buyers get the mortgage loans they need to purchase their home?!

Can RE agents get the training/licensing to help their buyers obtain a loan or would this be a conflict of interest? How would I go about this if I wanted to do both?

AZLender,
RESPA enforcement is part of HUD as RESPA is just an Act. If you would have bothered to fully read what I said you would have seen that I stated there are zero compliance issues if there is Full Disclosure and no referral fees between the brokerage and the lender.

This is where people get into trouble. Fully Disclose everything you legally can! It will save time and aggrevation when done up front.

You said it, conflict of interest. That's my feeling. It would be great if the agent could be a one stop shop for everything & not have to rely on anybody else.. Get the buyer the mtg, conduct the home inspection, etc but we can't. IMO,agents are better off focusing on real estate & not getting their hands in too many pots. I've heard of agents doing it to make more money but my opinion is, put the time in to your real estate career & the money will come.

I have an agent who is a math teacher by day. She is a wiz with numbers & finance. This a huge benefit when she works with customers.

"AZLender,
RESPA enforcement is part of HUD as RESPA is just an Act. If you would have bothered to fully read what I said you would have seen that I stated there are zero compliance issues if there is Full Disclosure and no referral fees between the brokerage and the lender.

This is where people get into trouble. Fully Disclose everything you legally can! It will save time and aggrevation when done up front." by Paul Oaks


Right.....You left out the part about steering the borrower to the in house lender. I took it upon myself to go more in depth. There is actually a specific division of HUD assigned solely to RESPA regulatory and operational compliance, so no it is not "just an act" per say. Sorry, I assumed you were smart enough to figure out where I was coming from. I won't make that mistake again.

Tanya,
There are many Realtors/Mortgage Brokers out there who do a great job at both. How is it a conflict of interest? Maybe you can fully explain your belief. What are the specific conflicts of interest?

Rob,
I hate to be the one that has to break this to you but RESPA is in fact just an Act"The Real Estate Settlement and Procedures Act" to be specific. The enforcement of RESPA is the responsibility of HUD and this is done by the RESPA complaince officers within HUD so yes Rob RESPA is indeed just an Act.

So everyone that has an in house lender is involved in steering? Not likely since if the are no referral fees paid there would be no incentive to "steer" a buyer to an in house lender. I figured you would be quick enough to pickup on that but it appears I was wrong about your congnitive abilities. Next time I will be more plain with you and not just assume you capable of understanding the post. My deepest apologies for over estimating your mental abilities.

Now just to recap this post, the moral of the story is if you fully disclose the relationship between the brokerage and the lender there is no steering as it is the buyers choice on which lender they choose to work with.

The "incentive" to steer a buyer to an in house lender is that you can go kick them in the butt when they don't return your customer's phone calls . You can stand over them when the deal isn't getting closed on time. The "incentive" is accountability. The LO does a crappy job then the LO *hopefully* is out of the real estate office. I don't even want their referrals. I just want them to do a good job so my customer doesn't blame me (because we ALL know it's the agents fault when something goes wrong)

That's great to hear that people are successful doing both, selling a property and financing it! If the realtor discloses that he/she will make an additional profit on the mortgage and that the buyer is welcome to go check on rates from other mortgage companies, where's the problem? If I can sell mortgages with competitive rates, isn't that a win-win situation for both RE agent and client? Doesn't that mean less hassle and fewer parties to deal with in all the required steps towards the closing?

Since I am just getting started in RE, I am wondering about the following: How could I find an RE company that would allow me to do both? Do large RE companies like Prudential, REMAX, etc. allow their agents to sell mortgages as well? Should I specifically address this when I go to interview companies?

Your advice is much appreciated!

"Rob,
I hate to be the one that has to break this to you but RESPA is in fact just an Act"The Real Estate Settlement and Procedures Act" to be specific. The enforcement of RESPA is the responsibility of HUD and this is done by the RESPA complaince officers within HUD so yes Rob RESPA is indeed just an Act." by Paul

Is ya ignent boy?! You just reiterated what I had stated. It is a division within HUD. It is called HUD's RESPA Enforcement Division. Rebecca Holtz is the director.

I agree with you as far as the full disclosure and non steering issues are concerned.

I have also found questionable fees added by the lender that were not disclosed in the beginning. I request a settlement statement at least a day or two in advance (don't always get it). Takes an average of three times here to get one right. Yes, it is my place. [/QB][/QUOTE]

Sometimes, the loan will change direction due to appraisal issues or a change in the clients pertinent info. If the lender changes, so do the fees. I have worked several loans that had to go through 3 lenders before getting through underwriting. Realtors often fail to understand the demands that a busy loan officer faces on a day to day basis. Even the clenest looking loan will have some problems, whether its something with the title report, appraisal, income, credit or a cranky underwriter. As far as junk fees, isn't 6% a little steep?

Yes, most definately find out what the company's position on it is. I know someone who worked for Re/Max & did mortgages also. Now, he had to pay Re/Max to hang his real estate license & a different mortgage broker to hang his mortgage license - so he was paying 2 sets of monthly fees each month.

Hey relitter! Babysittin' and taxi drivin' are demanding these days! Especially with gas prices the way they are. I'm kidding.

They do not see very much of that 6% from what I understand as it is split between the sellers agent and buyers agent and then they have to pay their broker. So they actually end up with squat.

"Referral fees" are illegal. We all know that. "Bonus checks" are not and that is how agents get compensated for referring business to their in-house lenders. The beauty of legal loopholes...yet technically it's still an incentive.

But hey, who am I to judge.

Besides, according to Mortgage Finance, in-house lenders only account for, on average, 9.00% of extra revenues.

So I think there are a lot of agents out there who value service over the extra bonus check. I am not saying that in-house lenders are incompetent; they are just way too busy to give outstanding service to everyone. In-house lenders don't have an easy job, I guarantee you that. Depending on the size of the office, they have a whole lot of agents to please at all times. I give them a lot of props as it is a lot of pressure.

""Bonus checks" are not and that is how agents get compensated for referring business to their in-house lenders." by Alea

It's a violation of Sect. 8. A bonus check would be considered a thing of value. ABA safe harbor exemption would not apply in this instance. I don't have time to go in to why at this time as it is very, very complex and lengthy.

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.

I thought this was true everywhere, but maybe just CO? Here it is our responsibility to prepare the HUD. The closing companies do this as a curtosey for us, but we are still responsible for everything on there. My closing company is great about getting us the HUD quickly after they get numbers from the lender, but getting the numbers from the lenders like pulling teeth-especially when not working drectly with a lender that has a record of getting numbers out early (brokers usually find me the best deals- but at the expense of a stressful closing). I usually just try to show up at closing early to look things over. It is my responsibility to make sure the HUD is correct.

The reason for that statement I made was the financial aspect of the transaction lies with the Mortgage Professional. It doesn't make sense to me why a realtor would try to go over fees they know nothing about. The Mortgage Professional has a responsibility to their client to ensure they understand the fees disclosed on the HUD. I certainly wouldn't want anyone who is not involved in the financial aspect trying to explain the fees to me. You have no idea which lender charges what and it does vary by lender. The few realtors I do deal with know to stay the hell outta my sandbox and we get along fine.

Better read back again Rob. Here was your original post were you referred to HUD and RESPA as seperate entities.
"compliance regarding this issue is under the microscope by both HUD and RESPA."

That was what I said the first time. It was you that made them out to be Seperate entities so it appears you are the "ignet" one.

Nope, you misinterpretated. The fact that RESPA lies under HUD is a gimme.

Give it up Paul, you are talking to a former Regulatory and Operational Corporate Compliance Officer.

relitter,
The problems with your statement are many!

First the Realtor fees are agreed upon up front by the client. Never hidden or suddenly added to with junk fees at the last hour.

Second. If you originally did your work right during pre-approval there should be no changes in the clients pertinent information. This includes counseling them on not going out to buy that new car or doing other things that might make an effect on their credit scores till they close on the house.

Third. If you are changing lenders just days before closing then perhaps your client needs to be aware there are problems.

Fourth. Your busy demands are not our issue. If you are overworked then fix it and don't make excuses for it. You kill me with this one. Do you think you are the only busy person in this transaction. If you cannot handle it then get a better system. LO's like you are the reasons Realtors feel the need to stay involved.

Fifth. If there is a problem then get everyone involved. Do not try to handle it in secret. If a problem is found with title make sure the realtors and you client know about it immediately. In most cases the realtor can help resolve the problem. If there is an appraisal problem then again let everyone know immediately so it can be quickly resolved. Income or credit problems were addressed earlier in second.


Do not make excuses! Communicate with the client and their Realtor makes most problems easier to resolve.

I've met few loan officers who know more than I do about their job- but then again they aren't regulated here.

Quote from our 2005 Real Estate Manual:
“Real estate brokers are required by rules E-4 and E-5 to provide copies of complete and accurate closing statements to buyers and sellers for any transaction in which the broker assists or acts in an agency capacity. The listing broker and any cooperating licensee must carefully review their respective closing statements for accuracy even if they will not conduct the closing. Failure to property review closing documents could result in charges of incompetence or in a breach of the broker’s statutory or fiduciary duty. A licensee who attends the closing must sign the settlement statement and is primarily responsible for providing a property closing statement to the party assisted or represented.”
I'ts not just my opinion; it's my job. It's not your sandbox.

Sorry. That should be "proper closing statement" not "property closing statement".

LMFAO!! Talk about the blind leading the blind! Okay I'm going to test you. Let me know when you are ready.

Don't worry I will make it very basic.

AZ, regarding the "bonus check" issue, I am not saying that I disagree with you. As a matter of fact, I do agree that it is an incentive; however, it is indeed a loophole. I guarantee that if you were to audit any of these R.E. companies' books, you would have a hard time proving that they were related to compensation for their agents' referrals to their own in-house lenders...even when they are.

I'm curious, where exactly does this loophole lie? Give me a link.

BTW, I'm not tryin' to be an ass, I really am curious.

AZ, I know you're not trying to be an ass. The link is: just ask any R.E. attorneys, like I did. That's who the source is. There are many cracks in the system.

well, having worked side by side with federal regulators, attorneys and state examiners while with Novastar, this is news to me.

"I guarantee that if you were to audit any of these R.E. companies' books, you would have a hard time proving that they were related to compensation for their agents' referrals to their own in-house lenders...even when they are."


May take a while, but I would find it.

How could you prove it if there were no trace of it???

And that is designed to impress me how? Maybe you were not that good at your job hence you now working as a mortgage broker. Your being a former corp compliance officer means squat in the whole scheme of things. Seems like you are the one that needs to give it up. You mispoke and I called you on it. Get past it and stick to Mortgage Broker advice because you know squat about being an agent. You as the mortgage broker are only one little piece in the transaction. Agents are the ones there from start to finish and beyond.

I gather this is incorrect information based on what some are claiming here
RESPA'S statutes explained: consumer protections and prohibited practices

Section 8: kickbacks, fee-splitting, unearned fees

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.

"How could you prove it if there were no trace of it??? by Alea


Alea, there is always a trace. The balance in commission received by the lender even if not required to be disclosed is still obtainable. The record of commissions and where those funds went have a paper trail. Though they may lead in several directions, they still have to be accounted for. Eventually if in fact they do not balance, this will throw up a red flag. If what was paid to the appraiser doesn't balance with what the appraiser received, red flag and so on and so forth. If there was any type of proceed paid to the realtor through the transaction, it would be discovered.

"And that is designed to impress me how? Maybe you were not that good at your job hence you now working as a mortgage broker. Your being a former corp compliance officer means squat in the whole scheme of things. Seems like you are the one that needs to give it up. You mispoke and I called you on it. Get past it and stick to Mortgage Broker advice because you know squat about being an agent. You as the mortgage broker are only one little piece in the transaction. Agents are the ones there from start to finish and beyond."


Paul, now your acting like a little girl. I'm not trying to impress anyone. As a matter of fact Novastar hired me along with 12 other Corporate Officers to help clean up the regulatory issues we were facing at that time. If you may remember we had over 500 branches at one time. We shut down all but 2. As far as your misinterpretation of my conveyance, I shall simplify from now on. As I said I assumed you and anyone else in this field would know RESPA falls under HUD and I was referring to RESPA as a split division within HUD, which it is.

Yes, we as Mortgage Brokers may only be there for one "little" piece of the transaction, however it is the most detailed and important part of the transaction.

"I gather this is incorrect information based on what some are claiming here"

RESPA'S statutes explained: consumer protections and prohibited practices

Section 8: kickbacks, fee-splitting, unearned fees

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service." by realestatefla1


I know, you just have to shake your head.....

AZ, since , by your own admission, mortgage brokers represent only a small part of the transaction, however, as you put it, you are the most detailed and important part, then I expect to see the mortgage broker at each of my closings from now on.

If you were using a good one you would see them at the closing. Since you are rising, I would advise finding a good, competent, ethical broker and the sky's the limit for you

"Legal" (not ethical) compensation from in house lenders to agents explanation:

Agent: Mr. Broker, I just sold the Smith family a home. They ended up using our in-house lender.

Broker: You know, the Smith family told me what an excellent job you did. What is your split?

Agent: 60/40, sir.

Broker: For this transaction, I will instruct the office manager to pay you 65% instead of your normal 60% to show my appreciation for your professional demeanor (wink, wink, nudge, nudge).


If the broker throws in the occasional "bonus" when the in-house lender is not involved, I can see how they would get away with it.

greg4mtgs, thank you for the advice, however, "rising" is a spiritual allusion, not a reference to my time in the business. I will not bore you with my credentials, but, I am not a newbie. Thanks again, though.

I am not surprised that this thread took on the tone that it did. This is not about who's $%*& is bigger. In a purchase transaction both parties can make or break a deal. The bottom line is that there are so many incompetent people or unscupulous people in each of our industries that both sides are fed up with it.

"AZ, since , by your own admission, mortgage brokers represent only a small part of the transaction, however, as you put it, you are the most detailed and important part, then I expect to see the mortgage broker at each of my closings from now on. by rising realtor


I am at every single closing and require my LO's to be there for their closings as well.

Wow! Interesting...

Well...(stretch/yawn)....that's enough for me. You guys take it easy. I have work to do.

That's GREAT AZ, but you have to admit that not everyone operates that way. It sounds like you have an operation that is on the up & up. I'm sure you can agree that not all LO's/Mtg companies are that way. Just as I am not going to defend all real estate agents. There are terrible agents who are highly unethical.

If I have a customer who insists on using their own LO (not one that I have recommended) then yes, I will review the HUD. It IS my responsibility to look out for my customer. I may not know a whole lot about how mortgages work but I can spot fishy stuff when I see it. I usually ask the customer what the fee is for, if it was disclosed, if not then I get on the phone during the closing (on behalf of my customer) so as not to hold up the closing.

I would think you would respect an agent who looks out for their customer & is trying to "out" LO's who give your industry a bad name.

Again there is alot of venting going on. As I said I attend all my closings as well. I can tell you that I have had an agent ask if I was going to actually charge my client a processing fee of $325. (He happened to be my best friend). This was when I worked for someone and had no choice whether to charge it or not. I told her I would gladly refund my companies fee if she would do the same *blank stare from across the table*. My friend interjected and told the realtor. This guy refinanced a loan for me 2 years ago that saved me tons of money and enabled me to buy this house. He can charge me whatever he feels necessary.

BTW it was a cut rate deal, again he was a friend and still I had the realtor trying to justify herself by asking me to reduce a fee.

That is a source of alot of grief in the industry. When someone is getting on average 2% of the purchase price on a transaction looks to me who averages 1 to 1.25% of the loan amount which is typically 20% less and feels the need to tell me to reduce my fees

Wrong Again Rob,
I did not misinterpret anything. It was what you put in black & white. You refered to HUD and RESPA and I believe your exact wording was "this issue is under the microscope by both HUD and RESPA". The key word in that sentence is BOTH!
When you assume you are aware of what you make of yourself?
In case you have not picked up on this there are alot of new agents on this forum. They might assume by your original post that HUD and RESPA are seperate entities which they are not.

That was my point which you were too Dense to catch! Is it plain enough for you now?

Paul....let it go man. You're reachin'.

Rob,
Have you always had the inability to admit when you are mistaken or in error?

Suck it up and be a man. You wrote it admit it and get past it!

"I believe your exact wording was "this issue is under the microscope by both HUD and RESPA". by Paul


Right, did you read my prior post about RESPA's Enforcement Division headed by it's Director Rebecca Holtz? Does this not show you there are in fact split divisions within HUD? I'm trying to figure out how I can dumb this down a little more for you, but I can't seem to go down to your intellectual level. Maybe if I worded it "both HUD and RESPA's Enforcent Division"? Does that help you out Paul?

Rob,
Are you really that dumb? There are numerous divisions within HUD each having their own Directors. The fact that the RESPA division has its own director does not change the fact that that division is still only a part of HUD and has the same ultimate superior, the Secretary of Housing and Urban Developement.
RESPA violations are investigated by the RESPA Division of HUD not by both HUD and the RESPA Division. RESPA's Enforcement Division is still only a part of HUD....That should be plain enough for even you whose intelligence seems to be just below Moron on the scale.

Split entites under the same umbrella, Paul. Write that down.

"RESPA's Enforcement Division is still only a part of HUD' by Paul

That was my point moron! Good Lord! Did you ride the short bus Paul? Are you on the pot?

Rob,
Do not give up your day job cause you will not make it as a comic.
Actually it was my point and you appear to have finally gotten it! I was wrong to call you a moron because that appears to have been to high for you. I believe Imbecile would have been more accurate.

Let's let this thread go back to the original topic.
Rob,
If you want to continue this I would be happy to do so in private messages.

Ok you two, it is obvious that you will not come to a civil agreement but come on! is the cussing and name calling really necessary????
I know that all your respective buttons have been pushed to the max on this one but enough already!

Alea,
You are 100% correct and I will take this opportunity to apologize to you and everyone else who were not a party to this disagreement.

Thank you. You know Paul, this industry is like a dysfunctional family and it is very frightening and frustrating to see real estate and mortgage professionals constantly being at each other's throat. This forum is viewed by so many people and not just by industry professionals, sellers and buyers too! Let's face it, acting this way make all of us look bad. How are the folks out there supposed to respect our professions and industry when we can't even act civil toward one another. Not only that but what kind of message is this sending to new agents looking for support and advice from the most experienced ones?
I know everyone is free to express their opinions but I wish this lender/agent war would just stop because it is making everyone's job a lot more difficult and really there is no reason for it.

Paul,

I am going to suck it up and offer an official apology for the way I reacted to you. It was very unprofessional and I got caught up in the moment. This business is something I am very passionate about, it is my life. I do respect your knowledge and opinions and have learned from some of your posts. With that being said, I am sorry and mean no disrespect.

BTW, I am funny...

WAAAAYYYY back in this thread I saw the work "steering" being tossed around with regard to agents/brokers sending clients to specific mortgage brokers.

Maybe I'm just getting old, but isn't "steering", as it applies to agents, about steering clients toward certain housing/neighborhoods?.....What does it have to do with an agent referring clients to various service providers?......including, but not limited to mortgage brokers, surveyors, inspectors, contractors, etc.

---
Back to the very start of the thread, the only time that I see a HUD-1 more than about 2 hours before closing is when it's a cash or owner-finance deal.

---
With regard to kick-backs or illegal referral fees. If an agent is doing his/her job well then they have no use for this type of thing. All I need a LO to do is get it done....on time. Make the client happy and you've made me happy. A happy client with a smooth closing will give me all the referrals I need; I can't imagine how desparate an agent would be to risk their license (livlihood) for a few bucks.

---
One last point: In a rural area such as mine, it is considered rude for the LO not to attend the closing. It is unheard of for an agent not to attend their own closing (or at least sending another agent to "cover" for them).

Apologies for the long post......any clarification on the "steering" issue/definition (as it applies to licensees) is appreciated.

HUD has particular concern that steering a customer to a
particular lender, which is prohibited under Section 8 of RESPA, could be
disguised as compensation for counseling-type activities.

I am a Mortgage broker. I agree with you that there is a problem in the system. Attorneys are the ones who are giving us the final hud and they cannot do that until docs are sent. The docs are sent the day of closing sometimes hours before. I can tell you that I try to get an amount from the lender so the borrowers know how much to bring, however that number is still an estimate. I have always kept good communications with both the Agents and the borrowers so through out the process everyone is on the same page. I work with over 700 lenders and sometime I can get docs sent a day before but still I cant get the attorneys to do a final Hud a day before because the days worth or interest will throw the numbers off. That will just cause more problems and make it even more stressful. For what its worth.... I am not a fan of the process either.

east tex. I used to do local business only. Now that I am nationwide, I dont attend the closings because I cant. However, I AM AWARE OF WHEN THE CLOSING IS AND I WILL CALL MY BORROWERS PRIOR AND AFTERWARDS. I hope that wouldnt be considered rude.

The fastest growing white-collar crime in the United States is not downloading unauthorized music on the Internet or buying pirated software. According to the FBI, the fastest growing white-collar crime in the United States is mortgage fraud. Our industry of mortgage origination, a business we have grown and nurtured over the last two decades into a position of influence in almost 70 percent of the transactions out there, is hip-deep in semi-organized crime. The FBI figures say mortgage fraud losses are in excess of $1 billion, up from under half that a year ago. Others contend these figures aren't remotely accurate, that mortgage fraud is a far bigger problem than the hopelessly underestimated FBI figures lead one to believe. Likewise, those others offer a definition of mortgage fraud that many if not most originators would reject. It's time to look closely at both, since they represent cause and effect, as well as the future of the industry.

well said Scott.

I noticed that too, and I think you are right. If I remember correctly, I think the term is "tying"--as it is illegal to tie one transaction with another, as if you use a certain broker, you have to use a certain mortgage officer, insurance, etc. Correct me if I am wrong, as I am getting old too.

No, you are right KY. As I had mentioned before HUD has particular concern that steering a customer to a particular lender, which is prohibited under Section 8 of RESPA, could be disguised as compensation for counseling-type activities.

The true definition of "steering," in the context of real estate, is exactly the one you mentioned East Texas Realtor.

"Steering" as mentioned in regards to mortgage lenders was used most likely as a synonym for "influncing" a borrower to use a specific lender i.e. in-house lender.

As Realestatefla1 pointed out, mortgage Fraud is a major epidemic in this country. However,it is worth mentioning that according to the FBI's definition of mortgage fraud, any stated loans where the borrower's income is "inflated" fall into that category as well. In the world of mortgage lending, stated loans are also known as "liars' loans," meaning that wholesale lenders, banks...know that the income stated on the 1003 most likely has been indeed "inflated" yet, I have yet to see "stated loans" being turned down. Any underwriter will tell you that as long as the stated income is reasonable for the profession (i.e if someone is a janitor and the stated income says that the borrower's monthly income is $15,000...guess what, that's a major red flag and most likely won't fly) then it's ok...as long as the borrower has the ability to repay the loan. Unfortunately, there are LOs who will "inflate" a borrower's income to the maximum "reasonable" number to get the loan approved but doing so is not always in the borrower's best interest in the long run. This is where accountability in regards to making sure we, LOs, give the borrowers a payment THEY CAN AFFORD comes into play. Unfortunately, many LOs don't care about the long-term financial well-being of their borrowers and just want to get the deal closed to get the paycheck. I'll go even further by saying that sometimes borrowers have no idea that their income has been indeed inflated.
So mortgage fraud is very broad and the problem lies deep in the system at times.
If you look closely at this forum, there have been many scenerios presented that could fall into the mortgage & real estate fraud category. Straw buyers are a major issue as well. Non owner occupied properties passed as owner occupied properties, the list goes on and on....
Sometimes agents have no way of knowing that they are involved in a fraud situation until the LO unravels the issue. It's happened to me. An agent referred a buyer to me and as it turned out he was a straw buyer for a real estate investor. What the investor did not know is that his straw buyer had a BK on his report and when that detail came to the surface, the whole thing exploded. Could I have done the deal if I had wanted to? Sure, I could have made it work. Was getting the deal done at the risk of losing our licenses worth it to us? Needless to say, we both wished them luck and walked away from the whole thing.
Don't forget that when a lender calls "foul", both the agent and the LO are held liable for fraud.

Hence why it is so important to work with people who share the same core values and ethics as ourselves.

As for AZ I've always been a big fan of yours. There is no doubt that you are very passionate about our profession and industry and I have a lot of respect for anyone who is, and yes that includes Paul Oaks too . In addition, it is obvious that we can all learn a lot from one another: agents and LOs repectively.

Many of us (agents and LO) are very well aware of the flaws of our system...and those of us who care enough to identify them are the ones with the ability to make the system better for everyone.

Awwww...you're sweet Alea. Thank you!

I agree mostly. I have had numerous realtors place impossible and unnecessary deadlines, freak out over little things and put my clients into a panic. i have also had them illegally steer my client to their in house lenders. I now make it a point to warn all my "needs home" clients to be wary of realtors who may try to illegally steer them to a lender of their choice. I let them know about the RESPA laws and illegal kickbacks and how it's important to play by the rules etc... You would be surprised how many realtors break the code of ethics. Now, it's 5 pm and I am out of here....

You are absolutely wrong. There have been dozens of court rulings to the contrary...

[QUOTE]Originally posted by East Texas Realtor:
[QB] WAAAAYYYY back in this thread I saw the work "steering" being tossed around with regard to agents/brokers sending clients to specific mortgage brokers.

Maybe I'm just getting old, but isn't "steering", as it applies to agents, about steering clients toward certain housing/neighborhoods?.....What does it have to do with an agent referring clients to various service providers.

My apologies. I used the term in the context of Realtors "steering" clients to their in house LO's for illegal kickbacks. I see now after a quick google search that many realtors also have a penchant for racial discrimination as well. Again, I apologize.

So exactly what constitutes illegal steering????? Please give us your definition.

If I refer my favorite in house lender to a client would that be illegal steering in your book?


We have an in house lender who does a terrific job getting clients financed and to the table. We the agents get NOTHING for recommending our lender other than someone that will return our calls and keeps us informed if there are any problems.
I also recommend to local banks to my A credit buyers as they offer great rates and excellent customer service.
I hav a totally different lender for commercial products and about 20 hard money lender I use.

I am sure that when you define illegal steering to your potential customers the definition is very broad..........

I always ask my buyers if they have been pre-approved yet. If not then I require them to get that pre-approval before showing them homes. If the buyer has been working with a lender who has not gotten them pre-approved at that point then there will usually be issues with that lender later!

BTW: Deadlines are normally not impossible or unnecessary and in most cases legally required. Just because you feel a deadline is impossible does not make it true. Realtors do not as a rule freak out over little things if there is proper communication....

"So exactly what constitutes illegal steering????? Please give us your definition."

Paul,

This is HUD's definition. The way HUD sees it is the borrower should be the one choosing the financing. For the following reasons released by HUD via this memo:

HUD has particular concern that steering a customer to a particular lender, which is prohibited under Section 8 of RESPA, could be disguised as compensation for counseling-type activities.

AZLending you are so mislead & misinformed. You scare me due to the fact that Real Estate Brokers from Oregon read this forum and one may listen to you and then loose their license -

Keep in mind that not all States are the same but you need to understand something; as a Real Estate Broker I have a fiduatuary responsibility to my client. That includes understanding and going over the HUD-1 with my client. To ASSUME that it only applies to you as a Lender is pure doodie. If I as a Broker consistantly sends Buyers to a Lender that consistantly charges higher fees and/or pads it with “junk fees” that would be a very good way to loose my license!
I consistantly send Buyers to a Lender that is very competative & fair on his fees and do not pad them. I have heard “No you cannot do that” which is also bull. No Broker in Oregon lost their license for it. The Attorney for the Real Estate Agency has said time and time again that a Broker will NEVER loose their license for sending a Buyer to a “Honest & Ethical Lender and if you have a Lender who is fair and honest then you HAD BETTER BE sending your Buyers to them. It is when YOU DON’T that you will loose your license”.

For you to say it is not our place to go over the HUD-1 confirms my prior opinion.
To say that Lenders don’t need Real Estate Brokers confirms my prior opinion.

You may not think so but a Lender and Real Estate Broker / Agent go hand in hand. It is like a marriage and if one is rotten it will not last.

So do you not use or work with Real Estate Brokers / Agents because they call you on your padding of the ‘Junk Fees” or is it the “Bate & Switch” of the interest rate?

I go to EVERYONE of my closings with my client. I can count on one hand how many lenders I know that do the same and those are the ones I work with and send my Buyers to.

I don’t think people understand how may lenders commit “Fraud” to “Get the deal done” and if their “Boss” is pushing them to “Just get the deal done” then that Loan Officer might think about going to a more reputable company unless they like the idea of the Government paying for their “New 10 X 10 Residence”.

How many homeowners are loosing their homes due to Unethical Lenders convincing Buyers that an Adjustable Rate Mortgage is what they want because they can buy their “Dream House” and they will have low payments only to find out two years later that they can’t refinance because they don’t qualify on a fixed rate and the adjustable was for only two years and their income had not increased. (I just got off the phone with one who responded to my letter regarding his pending foreclosure). More than likely, that Buyer should not have purchased that home to begin with BUT because of the “Creative Lender Practices” he will more than likely loose the house. The loan officer doesn’t care - He collected his fee (thousands and thousands) a long time ago and has moved on to his next victim -

Rob,
I know what HUD says but I was more curious what relitters slanted definition is. If he has lots of Realtors and agents telling their clients not to use him then I feel there are other issues with this lender.
I already stated that we the agents get NOTHING in the way of compensation for referring the in house lender. Nor do I recieve any compensation for referring any other lender that I recommend.
No Compensation=No Steering

For clarification a Hard Money lender can pay referrals as their loans are not subject to Section 8 or Federally Regulated.

"For clarification a Hard Money lender can pay referrals as their loans are not subject to Section 8 or Federally Regulated. by Paul


Interesting, I did not know that.

"Keep in mind that not all States are the same but you need to understand something; as a Real Estate Broker I have a fiduatuary responsibility to my client. That includes understanding and going over the HUD-1 with my client. To ASSUME that it only applies to you as a Lender is pure doodie. If I as a Broker consistantly sends Buyers to a Lender that consistantly charges higher fees and/or pads it with “junk fees” that would be a very good way to loose my license!" by 24 Salem 7


I totally agree with you in that aspect. I am not a proponent of padded or inflated fees either, however I have had experiences where valid fees were scrutinized by the realtor even though the borrower was fully aware. That is where my gripe lies. You have no idea which lender charges what and how much as it varies by wholesaler.