What Makes a Good Mortgage Broker- Part I

By Jack Guttentag

The Mortgage Professor

In the past 10 years, I have written almost 50 articles on different mortgage broker topics, but none of them addressed the most basic topic of all: What makes a good broker?

Perhaps it took 10 years before I was ready to confront this question, along with its obvious corollary: How do you know a good broker when you see one?

Loan officers who are employed by a single lender operate very much like brokers, except they provide the programs of only one lender. Most of what I say below applies as much to them as to brokers.

Good brokers are selected by borrowers, rather than the reverse. Poor brokers must constantly solicit, whereas good brokers enjoy referrals from previous customers, Realtors, and others. It is not the case that good brokers never solicit, but the odds are in the borrower's favor if the borrower does the selection.

One acid test of a good broker is whether the broker will tell a client that a contemplated refinance is not in his interest. The broker who has a constant source of referrals is much more likely to do this than one who purchased your name and address from a leads broker.

A good rule: Do not respond to solicitations.

Good brokers are financial planners: Mortgages should fit properly into a household's overall financial situation and goals, which often involves challenging questions. Here is an abbreviated list of some important ones:

• What is the best type of mortgage for this borrower?

• How much should the borrower put down?

• Should the borrower pay points or receive rebates?

• Should the borrower raising cash take a second mortgage, or do a "cash-out" refinance?

• Should the borrower putting less than 20 percent down buy mortgage insurance, take lender-pay insurance at a higher rate, or take a piggyback second mortgage?

• Will it pay the borrower to refinance?

• Should the borrower consolidate other debts in a refinance? • Should the borrower use available cash to pay down debt, pay points, or make a larger down payment?

There is no single conclusive test of a broker's skills as a financial planner, but there are clues in how the broker responds to your questions regarding one or more of these or similar issues.

• A good sign: The broker indicates what the answer to your questions depends on, e.g., whether you should pay points depends heavily on how long you expect to have the mortgage.

• An even better sign: The broker indicates a specific analytical tool he will use to answer the question, such as a specific calculator or spreadsheet.

• A bad sign: The broker gives you an answer right off the bat.

• Good brokers are good listeners: Every borrower brings a unique package of needs, capacities, and preferences to the table. Unless the broker extracts this information at an early interview, the risk is high that the broker's recommendations will not fit. The shrewd borrower can tell a lot about the broker from that interview.

• A good sign: Before offering any opinions, the broker quizzes you about your financial status and plans.

• A bad sign: The broker pretends to know what mortgage type you need, or the answer to any other issue that may be vexing you, without having first learned anything about you.

Good brokers will act in your interest in dealing with the lender and third parties. They will guarantee the lender fees first presented to you in the Good Faith Estimate, preventing any fee escalation. And they will seek out the best possible prices for third-party charges, such as title insurance. Some brokers have special arrangements to pass on discounts to their clients, while others select providers who give brokers the best Christmas presents.

• Ask if the broker guarantees that lender fees won't be higher at closing.

• Ask if title charges are competitive, and how the broker knows this.

• Ask if the broker guarantees that third-party fees won't be higher at closing.

A good broker operates transparently: The broker who keeps you in the dark is the one most likely to sacrifice your interests for his pay day.

• Ask what the total fee will be, including any payments received by the lender, and if this will be put in writing.

• Ask if you can get a copy of the rate-lock statement as soon as it has been received from the lender.

HighBeam Research

HighBeam Research

From: New Appraisal Rules Backfire in Down Market by Jack Guttentag
Source: The Washington Post, 8/1/2009.
Via: HighBeam™ Research
Copyright 2009 The Washington Post

Send a Christmas card to: A Recovering American Soldier

A BubbleTweet From @mortgageangel

When doing your Christmas cards this year, take one and send it to this address: A Recovering American Soldier c/o Walter Reed Army Medical Center 6900 Georgia Avenue NW; Washington, D.C. 20307. If we pass this on, think of how many cards these wonderful special people would get.

Clusterstock Chart of the Day: Black Friday Weekend Shopping

Yesterday's overwhelming response to the 2 Year T-Note Auction

www.mikenormaneconomics.org posted a link for the CNBC post below.  Reason being because Mike called it exactly like this. Late last year as the Fed began handing the bail-outs to the banks he told us (blog readers) to watch for increased demand for treasuries. He also said it would be the financial institutions at the forefront of these rallies and why -
"The money to by government securities comes from governement spending.  Where else would it come from?" 
One very important thing to note as you watch this:  Rick Santelli thinks that because the banks are buying the securities they will have less money to lend but THIS IS NOT TRUE!  Bail out money was given to the banks in order to meet reserve requirements.









Banks are NEVER lending constrained EVER.  Ask any one whose ever worked in a loan funding department and they'll tell you that a loan creates a new deposit that comes from directly from the Federal Reserve not from the holder of the note.

Labor's Days Past

America's Labor Day may be summer's last hurrah, but labor's days past were no picnic. A few generations ago, American working men and women (and often children, too) struggled just to get weekends off--let alone a long one. A few generations ago, people died when labor struggled. Example: the Pullman railway strike of 1894.

"I Owe My Soul to the Company Store"
Just south of Chicago, the town of Pullman was literally owned by George M. Pullman, manufacturer of the Pullman sleeping car used by railroads. Company brochures painted the town as a workers' paradise, "where all that is ugly and discordant and demoralizing is eliminated, and all that inspires to self-respect is generously provided."
In reality, the company town was just that, run by and for the company as a moneymaking venture. One worker said, "We are born in a Pullman house, fed from the Pullman shop, taught in the Pullman school, catechized in the Pullman church, and when we die we shall be buried in the Pullman cemetery and go to the Pullman hell."

"There Is Nothing to Arbitrate"
When depression struck America in 1893, Pullman slashed wages 25 percent, without reducing rents at company houses or prices at the company store. Some 5,000 workers and their families sank deep into the company's debt.
Finally, in May 1894, the workers went on strike. Pullman closed the plant and rebuffed all requests for arbitration. "There is nothing to arbitrate," he said. Stymied, the union called for a boycott of Pullman cars. Beginning June 26, switchmen refused to attach Pullman cars to trains. When railway officials fired the men, trainmen everywhere walked off the job. Railroad traffic across the country ceased.
Railway officials turned to the federal government for help, and got it in spades. The U.S. attorney general, a former railway lawyer, convinced the federal courts to issue a sweeping injunction against all strike activity, arguing that the strikers had formed an illegal conspiracy in restraint of trade under the Sherman Anti-Trust Act, a law passed, ironically, to combat big business. On July 4, 1894, federal troops descended on Chicago to enforce the injunction.

Out of "Pullman Hell"
In the powder-keg atmosphere that followed, soldiers shot into crowds trying to stop trains, and mobs set hundreds of freight cars alight. The strike collapsed. More ominously for workers, though, companies learned to use injunctions from business-friendly courts as a weapon against labor. One injunction threatened to arrest anyone "inducing or attempting to induce.any person or persons to abandon the employment of...railway companies."
Yet even as the Pullman strike crumbled, the political winds began to shift. In fact, a federal commission called to investigate the incident blamed the government "for not adequately controlling monopoly and corporations, and for failing to reasonably protect the rights of labor." A new, Progressive era was born out of labor's pains.
Eventually, victories would come: the 8-hour workday, the 5-day workweek, improved working conditions, child labor laws, collective bargaining rights--even a national Labor Day, approved by Congress the same year as the Pullman strike.
--By Michael Himick

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