Is it time for more regulation for mortgage banks?

Question

I think the federal government needs to start coming down with stricter regulations for mortgage banks. I think they are playing too many games with tricky lending practices, all in hopes of getting business. Too many people out there are going to get really screwed as rates go up. :pissed:

Too many 100% loans, variable loans, and so on. Do the banks not fear massive foreclosures?

Do you think they need more regulation??

Too many 100% loans, variable loans, and so on.  Do the banks not fear massive foreclosures?

Do you think they need more regulation??

N/A N/A · Answer

:protest:    :groovy:

My protest against more regulations.  Loan packages are already at record levels.  With some lenders shoving more than 125 pages of material at the borrower for them to sign and read during the closing.  The really important parts of mortgage paperwork, actual mortgage, mortgage note, any riders to the mortgage, equal only about 30 pages of material.  The rest of the pages included in a mortgage signing have to do with disclosure.

Most lenders, brokers and realtors have learned how to gloss over these disclosures to their own benefit and not the benefit of the client.  They learned to do this because of the difficulty in explaining how these disclosures actually help the consumer.  After 20 years in the business it is still hard to explain something like APR to a client. Especially when I know that it can be manipulated to make it look better than it really is.

Client education is a real need but most clients will not take the time to become educated.  They want answers fast and they want the answers they think they should get and not the truth.  And in true sales fashion a lot of mortgage brokers, realtors, title company folks, appraisers and bankers give them what they want to hear and gloss over the rest.  Close the deal get the fee and then say well you signed it!

Not the best way to do business but it happens everyday.  When a customer calls in and asks about interest rate I know that this is not a real client.  This is someone interested only in what they think is best.  As professionals we all know that sometimes a higher interest rate can be a better deal.  It is all situational.  And lenders who quote rates immediately spend more time fighting for a 1/8 of a point than they do in making sure the mortgage product is right for the client.

As Realtors and Mortgage Professionals we provide more financial information for more people than any other group.  Yet many of us don't take into account the whole situation.  When dealing with experienced investors we make promises that are unrealistic.  Lenders make deals that are not in the best interest.

We all need to take our time on deals and not try to out run the next guy.

Real Estate can make you very wealthy.  But it is not a get rich quick scheme regardless of how many people view it and sell it.

Snapper

N/A N/A · Answer

:violin: With all due respect, your post is somewhat strange.  Sounds like you are complaining that there are too many mortgage products to choose from.  I say, the more the better.  No two borrowers have the exact same needs.  I have been a mortgage broker for over 20 years.  There is enough regulation from big brother.  You can only hurt the consumer when you give the government the power to control their choices or even take away choices that could help them.  Please, lets keep the government limited, and not limit the free choices we have as consumers!  When you want the government to take care of you ...you lose your freedom. :protest:

Account Closed · Answer

Sorry if I missed this or it is off topic.

One thing that might actually benefit the mortgage broker industry is national licensing so that a lender and a broker can offer financing in any state. Everyone broker trained to the same standard and no need to have a state license.

Maybe wishful thinking.

John Corey :roll:

Mike Mitchell · Answer

The government's role in our lives is not to fix everything.  If people make poor choices then they are punished in the pocketbook.  Let's not shed a tear for the banks or the borrowers.  We've all got to wise up on this one.  The situation will correct itself.
Mike Mitchell, Lubbock, TX
INCREASE CAPITAL
 :violin:

John Harris · Answer

Well said.

N/A N/A · Answer

When you think about mortgages you must remember there are only 3 real basic types.  Fixed Rate, Adjustable Rate, Home Equity (which come in the form of traditional or HELOC).

Each of these three has so many variations that lenders cannot keep up.  There are over 65,000 combinations of these various loan programs being offered on the market today according to the NAMB.

Each variation was developed to meet specific consumer and lender needs. Consumer needs a loan, Lender needs to make a profit.  It is a balancing act.  A good mortgage broker will help the consumer to plan what they are doing beyond just next week.

I use a decision engine when helping my clients decide what is best in their situation.  It is a set of questions designed to find out what their goals are and their tolerance for risk.  Many people find the mortgage process distasteful and never want to go thru it more than once.  Others are more aggressive and use their mortgages as investments and manage them that way.

I have both types of clients.  The one thing that ties them all together is finding out what they want to accomplish long term and then helping them apply all the assets they have to achieving those goals.

I lose a number of potential deals because people don't want to go thru the process with me.  Recently many of those who went away are now returning with real problems and asking for my help now.  Tough situation.  Many want help but few actually listen to those who can truly help.

Snapper

Lynn Z · Answer

good points made; I believe consumers do need education and I think they need better information.  ARMS would be a good example of how  one would need a PHD in finance to understand what's happening with indexes and margins.  ARMS were PUSHED by lenders --- I think we can all agree to that and now the government is going to require that lenders make sure the buyer can make the increased ARM payment?  Sounds like they got exactly what they wanted.   Lots of loans.  And the consumer -- they're refinancing like crazy to push back the reality of those very high payments on their ARM's .   Doesn't seem fair...but it is continuing business for lenders...refinancing that is.

N/A N/A · Answer

When loan brokers commit outright fraud they get a handslap.  When Countrywide and Ameriquest were punished, it did not phase them at all.  Longbeach is up to its ears with fraudulent loans.   Longbeach has been sued by the United states government and as long as they claim they won't do it again, everything is rosy.

In one case Longbeach through one of their brokers actually increased a homeowners income  from 3500 to over 7,000 so that he could qualify for the loan on his own because the wife's name had been used in an earlier loan application that had been pulled.   The wife and husband have since split up and he can't pay the loan.  He was under the impression that his wife was still responsible for the loan but No.  she is only on the deed. When he started looking he requested an explanation of how in the world he could have qualified by himself.

When they sent his oritinal 1003 it had been changed, name forged on the document stating a $7,324.00 monthly income just for him.
He can't afford the house by himself.  Ther is little equity left after a refinance where the loan officer received  over $12,000 in junk fees. The homeowner got about  $5,000.  this homeowner is in deep trouble and there is no where to go for him but foreclosure.

There is dirt going on in the loan industry that needs to be cleaned up.

Maybe no more regulations but enforce the regulations that are on the books. More than a handslap maybe a little jail time.  Let them drink coffee with the Enron group.

Lynn Z · Answer

that's horrible.  Alot of the problem of misstating income etc. seems to have appeared when lenders started taking applications by phone instead of in person.    When the closing comes around and the real loan application that they filled out appears you have to be focusing in to notice the income is inflated and different than what you gave over the phone.    what's  the homeowner to do....say "there's an error in the application"?   After all, they read out the correct information on the phone. 
and never saw a final copy until closing.

another pet peeve of mine is lender's ordering appraisals of investment property and not specifying that a licensed appraiser must do the investment property appraisal.  you disturb up your tenants, usually with little notice, and then find out the "supervising appraiser" must come through again because the first  appraiser was an apprasier "in training".   That's happened to me three times over the past six years.  You almost have to question their credentials before you let them in the door--all this going on when you're hoping for a decent appraisal on the house you're selling.

Lynn Z · Answer

I wish banker/lenders loved investors with history of successful rehabs more...but they don't.  They still want 20% down (not a bad idea of course) and will pull the purse strings for any monies being loaned for rehabbing.  There's still only 1 or 2 lenders that specifically will semi "court" investors as a niche of their business.  They still love homeowners and homeowners buying "new" -- what they perceive as low risk.