Top FHA Loan Originators Have Made Academy Mortgage Their Home

For Immediate Release

April 4, 2010

The 2009 Scotsman Guide Top Producer lists were just released. We are proud to announce that Academy Mortgage had three of the top twenty FHA loan originators qualify for the lists.

These are National Industry Rankings!

• Ryan Nelson, Branch Manager, Arizona : FHA volume $56.0 M #4 nationally
• Chad Melin: Branch Manager, Arizona : FHA volume $51.5 M #5 nationally
• Brett Mills: Branch Manager, Utah : FHA volume $37.4 M #14 nationally

What amazing results for Academy’s top producers. I am predicting a greater number of Academy producers will qualify on the 2010 report for two reasons. First is more great producers have joined Academy and second we are one of the best purchase originators in the industry and refinance volume is way down.

Please join me in congratulating these amazing producers and a big thank you to the wonderful operation teams behind them.

If you would like to review the lists, click on this: www.scotsmanguide.com

Sunstreet Mortgage in Mesa AZ

Sunstreet Mortgage, a Tucson-based mortgage banker, has announced the opening of their new office in Mesa AZ.

One of the best loan officers and bloggers that is in the Valley of the Sun, Christoph Schweiger, recently announced that he will be working from this office.

I am happy for Christoph.  I have just recently had the opportunity to meet him while he attended one of the NMLS pre-licensing classes that I was teaching.  Since then we have run into each other in real life and in social media.  His real estate knowledge and life experience help him to be a great loan officer in Mesa AZ.

According to their website, Sunstreet Mortgage in Arizona has 30 loan officers and two in house underwriters for a total of over 200 years of combined mortgage experience. That is an amazing average of a little over 6 years experience for their loan originating staff. They have been licensed as a mortgage banker with the Arizona Department of Financial Institutions since August 2005.

Sunstreet Mortgage boldly proclaims that they offer service that is unparralled in the industry.  This is a strong statement from a company especially considering the high ethical advertising standards of their Branch Manager, Gary Miljour.  He is a strong advocate again online advertising that could be inferred as over-promising and under-delivering and isn’t afraid to share his opinion on real estate and mortgage companies and professionals that “Need a Trophy Case for Their Meaningless Accolades”.

Christoph believes that the most unique aspect of Sunstreet Mortgage in Mesa AZ is “that there is one layer of management and decisions are made fast and locally”.  I look forward to observing his success and I would gladly recommend him to my clients if their are any AZ FHA loan programs that I am not able to do.

It is important to find the right company and loan officer before you get a loan. At Best FHA Lender, we strive to provide the necessary information about getting a loan. With professionals researching loans, you can be sure the information is accurate and helpful. Honesty, professionalism and customer service are our main goals.

FHA make it easy to obtain your goal of home-ownership by offering low interest and low down payment requirements and allowing gift programs. FHA loans also help home buyers with less than perfect credit and allow for non-occupant co-signers.

The New 2010 GFE

I had an awesome Geometry teacher in high school, Pete Hayes at Westwood High School in Mesa, AZ. He was the kind of teacher that earned your respect and inspired you to do as your very best.

One of lessons that he taught has stuck with me for the past 20 years. During his class he described a scenario where a man from Boston flew into Phoenix for one day. It was raining the day that he was in Phoenix. When he flew back to Boston and told everybody that he knew that it rains everyday in Phoenix.

As he predicted, we let him know that the man’s conclusion was laughable. At that point, he taught us that the man had used inductive reasoning and went on to teach us about the two basic kinds of reasoning — inductive and deductive.

Inductive reasoning involves moving from a specific to a general. Many times the person applying inductive reasoning in drawing their general conclusion based on a specific observation.

Deductive reasoning begins with the general and ends with a specific. Arguments using deductive reasoning are typically based on laws, rules or other widely accepted principles.

In the example given by my Geometry teacher, the man used inductive reasoning and draws upon his specific observation (rained in Phoenix while he was there) to reach a general conclusion (it rains everyday in Phoenix).

If the man has used deductive reasoning, he probably would have come to a different conclusion. If he had noted the predominant desert vegetation in Phoenix he could have reasoned that they result from an arid climate. Therefore, even though it was raining the day that he was there, by rule an arid climate typically experience less than 10 inches of rainfall a year and as such, it does not rain everyday in Phoenix.

Although inductive reasoning can allow a person to reach a probably outcome, it does not require it to be right. In fact, as in the example above, conclusions drawn by use of inductive reasoning can result in overgeneralizations.

Inductive Reasoning in Mortgage Lending

I’ve found that a great number of the problems that exist in the mortgage industry are a result of the use of inductive reasoning. These problems have often resulting in harm to the public. HUD, through the enforcement of RESPA and the new GFE, looks to reduce this public exposure as much as possible.

Sometimes HUD needs to protect the public from itself. Consider the following conclusions that a homebuyer might make as a result of using inductive reasoning:

• Since that is the mortgage loan officer that my real estate agent referred to me, she must be experienced and trustworthy.
• My loan officer told me that based on my loan application I qualify for an FHA loan at 5.25%. That must be the best program and rate that I can obtain.
• The listing agent on the house that I want to submit an offer on recommends that I use XYZ Title Company. I guess they’re as good as any.
• I’ve signed the GFE so now I’m bound to it.
• At closing: My closing costs are $600 higher than what my loan officer quoted me. This must be typical … I’m stuck.

So, What’s the Point of the New 2010 GFE?

At the beginning of 2010, the new GFE was put into effect. This was done to help RESPA fulfill one of its main purposes – to help consumers become better shoppers for settlement services. The new GFE goes a long way to help “protect the public from itself” by forcing them to NOT draw general conclusions from their observations (inductive reasoning) and actually apply rules and regulations (deductive reasoning).

At the top of page 1 it has a section that says Shopping for Your Loan and says:

“Only you can shop for the best loan for you. Compare this GFE with other loan offers, so you can find the best loan.”

It goes on to provide an entire related section on page 3 called the Shopping Chart. The shopping cart instructs the borrower to

“Use this chart to compare GFEs from different loan originators … By comparing loan offers, you can shop for the best loan.

Further, the new GFE provides detailed information that attempts to ensure that the borrower has a clear understanding of rules and regulations guiding the lending process. Here are some examples:

“The interest rate for this GFE is available through _____.”

“This estimate for all other settlement charges is available through _____.”

“Can your interest rate rise? Y or N”

“These charges are for other services that are required to complete your settlement. We can identify providers of these services or you can shop for them yourself.”

“These charges cannot increase at settlement”

“The total of these charges can increase up to 10% at settlement

Title services and lender’s title insurance (if we select them or you use companies we identify)”

Finally, notice that the new GFE does not have a signature line for the borrower. HUD doesn’t want the borrower to sign it so that they don’t think they are bound to it.

I have heard a number of loan officers complaining that “the new GFE is too confusing” or saying things like “leave it to HUD to make a one-page disclosure into a three-page document … that sure helps”. Get over it! The new GFE was not designed for you, it was designed for the borrower.

Note that all of the language in the new GFE is written in a form that is directly speaking to the consumer.

The new GFE is attempting to help protect the consumer from the dishonest loan officers that are still out there …

and from themselves.

By providing clear explanations of the guiding rules and regulations as well as precise instructions that counsel borrowers to compare loan programs, the new 2010 GFE makes a strong attempt to guide the borrower to use deductive reasoning as opposed to inductive reasoning when obtaining financing.

Are you a loan officer wandering around out there wondering why it takes so long to close a loan?

Are you a Realtors frustrated at how long it takes to close a loan?

Are you doing real estate investing and wondering what programs are actually done in-house?

Are you someone who is trying to get a home loan and feeling frustrated with how long it takes to get a loan closed?

I feel your pain.

I have been working in the mortgage business for about 6 or 7 years now and it was always amazing to me how long things took to get done. It seemed that every little step was another hurry up and wait step in the miles-long process of getting a loan done.

But I am happy to report that it isn’t that way everywhere.

Academy Mortgage in Mesa can get your loan closed in ten days and they back it up with their ten day close guarantee.

What does it take to get a loan closed in 10 days?

• You must first start with a clean loan application. This means that everything must be in the file such as supporting income documentation, bank statements, tax returns, etc.
• You must have in-house processing that sits close to the loan officer.
• You must have in-house underwriting that sits close to the processor.
• You must have the ability to draw closing documents in house – usually a full time closer.

And last but not least, you must have an operations management team that is dedicated to an abnormally high level of customer service.

Don’t have all of these where you currently work?

You probably don’t stand a chance at getting a loan closed in 10 days and it is my personal mission to alert your customer that they don’t have to wait on your slow turn times and that there are better options available.

So if your management team isn’t dedicated to the high level of customer service, this is my formal invitation to join us.

But only if you are up to the task.

Closing loans this fast ain’t easy you know.

Still need more proof?

See you soon.

On February 3, 1960, British Prime Minister Harold Macmillan addressed the South African Parliament in Cape Town. Prior to the address, he had spent a month in the British-controlled territories in Africa to assess the struggle for black nationalism in Africa and the independence movement across the continent. In his address he indicated that there was a shift in the current political climate and implied that Great Britain intended to grant independence to most of its African territories. He stated:

“The wind of change is blowing through this continent. Whether we like it or not, this growth of national consciousness is a political fact”.

Since that time, the phrase “wind of change” has been used to indicate a shift in a political climate. In an earlier blog post today, I used this phrase in reference to the current political atmosphere enveloping the mortgage industry. Many still hope there is a possibility to assert self-regulation and, in doing so, stave off a heavier wave of government regulation. I personally feel that this would be ideal, but I don’t believe that it will be possible.

I make that statement considering the fact that there is a widespread belief that the current financial crisis stemmed from a failure to regulate the financial services industry — especially the mortgage industry. As such, strong reforms to financial services regulation are an appealing proposition to many policymakers. Regulatory reforms born in this political climate, such as the proposed Consumer Financial Protection Agency, have in turn caused the Fed to feel pressure to defend its position as a strong regulator.  Congress is currently pressuring the Federal Reserve to address abuses in mortgage lending. The Fed believes that the average consumer is unprepared to negotiate with a mortgage loan originator. Because of the complexity of how mortgage loan originators are compensated, the Fed believes that disclosures alone will not adequately protect consumers.

Consumer advocates and regulators believe that the historical lack of regulation regarding loan originator compensation have created opportunities for unscrupulous loan officers and loan brokers to take unfair advantage of consumers. Market conditions, including marketing methods for mortgage loans, lack of transparency in loan pricing and the complexity of the mortgage origination process create an environment where abuses can occur. As such many feel that the loan originators’ responsibility to the customer has been compromised by these conditions.

Perceived Abuses That Stem From Loan Originator Compensation Practices:

Overages:

• A lender offers its originators the option to quote an interest rate that at an above-par price for a loan wherein the originator may collect a larger commission as a result of closing the loan at the higher interest rate but with no financial benefit to the consumer.
• Consumer advocates have been very critical of overages. The perception is that overages are simply an invitation for a loan officer, trusted by the borrower to provide all loan options available, to simply take advantage of the borrower. The borrower does not know that the loan officer is not offering the best rate his employer has to offer. The loan officer is simply saddling the consumer with a higher-rate loan in exchange for a larger commission.

Yield Spread Premiums (YSP):

• YSP is the amount wholesale lenders pay mortgage brokers upon closing a loan with an interest rate above the par pricing. Critics of the mortgage industry believe that brokers must use YSP effectively to benefit consumers, offering the broker more flexibility in reducing out of pocket settlement costs. Otherwise, the originator can benefit at the expense of the consumer.
• Consumer advocates and regulators perceive YSP as a method for the broker to disguise additional compensation paid by the borrower. They believe the average borrower is not sufficiently experienced or informed to understand how the broker is compensated.

Tomorrow, the Federal Reserve Board is closing its commenting period on Closed-end Mortgages [R-1366], a proposed amendment that designed to revise Closed-end mortgage disclosures to, among other things, prevent mortgage loan originators from “steering” consumers to more expensive loans that are “not in their interest in order to increase the mortgage broker’s or loan officer’s compensation”. It would prohibit payments to a mortgage broker or a loan officer that are based on the loan’s interest rate or other terms.

As a result, a loan originator would be able to receive compensation from either the creditor or the borrower — but not both. In other words, a broker would have to choose between accepting compensation from the lender or the borrower. This could have dramatic impact on how lenders are forced to establish compensation for brokers.

The Federal Reserve board will announce within the next 90 days if the amendment will be enacted. This proposed amendment could have a greater impact than any other regulation in the mortgage industry in the past number of years. The proposed changes could have various unintended negative consequences such as follows:

• Loan originators serving high balance markets, e.g., Paradise Valley, AZ, will suffer significant compensation losses. As a result, many honest loan officers will be forced to exit the business.
• Flat-fee commissions may tend to favor large lenders with strong branding in competing for loan officers.
• Loan officers may be less quality conscious and try to push loans through the system resulting in an increased burden on and cost of underwriting and quality control.
• Borrowers whose loans require more up-front loan originator time – such as lower income first-time homebuyers may have a harder time finding a loan officer willing to work with them.
• Lenders will be exposed to greater financial adversity during down markets.
• Lower income, low loan balance borrowers could suffer a significant negative impact regarding loan pricing and the service they get from loan originators.

Hopefully, the Federal Reserve will consider the deep potential negative impact of their proposed changes and will make prudent decisions that will not cause more harm than the problems that they were originally trying to fix.

Recently there has been a larger push for self-regulation within the mortgage industry. On January 10 – 12th, the first “Mortgage Revolution” will take place in Atlanta. When explaining why there is a need for a mortgage revolution, their site site explains,

Because we’re not happy with the way things have been…. and it is up to us to make a change.

We’re tired of the media painting all originators as crooks, we’re done with unprofessional and unethical loan officers playing bait-n-switch with our clients and making us all look like liars.

We’re on a mission to prove that transparency can exist in the lending world.

The purpose of the Mortgage Revolution is to create “a grass-roots movement of real loan officers joining forces for the future of our industry.” It is good to see that there are many that care for the mortgage industry. This is especially important because if we do not find a way to self-regulate, the government will do it for us. However, I’m afraid that the wind of change is already blowing in that direction with the current political climate. Although I wish it was, I’m not sure that our industry is currently equipped for self-regulation.

Teaching the NMLS courses on federal regulations and ethics here in Arizona has been an eye-opening experience for me. There is a great divide between the perspective of the advocacy groups and that of most mortgage professionals — especially when considering the need for financial (compensation and YSP) disclosure. This is why we are seeing the dramatic revisions to RESPA (new GFE) and TILA (potential flat-fee compensation).

The biggest problem revolves around the fact that mortgage lending is an extremely fragmented industry. We are regulated by multiple agencies on the federal and state level and there is a history of inter-agency contention and competition for control and staying-power. We are employed by large national banks, independent bankERs, or mortgage brokers who compete against each other for market share and typically do not share common goals. We do not have strong professional organizations (compared to REALTORS or CPA’s for example) that support and lead us. Lastly, the historically low barrier to entry into our profession has allowed for the in-and-outflow of individuals who simply do not belong in a position that requires a high level of professional care.

Ideally, we could self-regulate and our industry could operate under a strict code of ethics that sustains current regulation and is controlled by the application of judicial precedent.

Personally, I like the Code of Ethics that is pledged by the National Association of Mortgage Brokers that includes:

• Honesty and Integrity
• Professional Conduct
• Honesty in Advertising
• Confidentiality
• Compliance with Law and
• Disclosure of Financial Interest

In order for our industry to self-regulate and adhere to a code of ethics, we have to break the barriers between federally chartered banks, mortgage bankers and mortgage brokers. I hope the grass-roots efforts at the Mortgage Revolution can lay a proper foundation.