Franklin Financial Group Blog

Congress is presently in discussion of the financial regulatory reform bill. The National Association of Mortgage Brokers is tirelessly working to have some of the language amended. Primarily to both protect the mortgage brokerage industry as well as consumers' choices and rights.

There was a reason that not too long ago mortgage brokers originated the majority of loans in the United States. The reason was simply because mortgage brokers obviously provided the service of obtaining a mortgage that Americans preferred as opposed to going directly to a bank or lending institution. The reasons Americans preferred brokers are many, but the facts are unarguable. So it stands to reason that an industry that a majority of Americans chose to use should be protected.

Relating to consumers' choices and rights, the Bill if unamended, would remove a person's choice of how to pay certain costs to obtain a mortgage. Removing the choice by itself is completely wrong, but the outcome, which will certainly be higher costs to consumers is further argument that there's a problem in the current verbiage. What gives political figures the right to make independent choices for consumers? The answer clearly is they do not have that right and should not write something into law giving it to them.

Regulatory reform clearly needs to be addressed, but not at the expense of mortgage brokers and originators who were the chosen majority by consumers as the preferred provider of mortgage services. More importantly, reform should not result in further harm and damage to the American people.

Feel free to contact my office for further information, or contact your members of Congress to request they truly look out for the consumers' best interests!

Below is a grassroots effort by the National Association of Mortgage Brokers meant to protect small business mortgage professionals and ultimately consumers. As a mortgage broker I urge you to read the talking points and contact your own Members of Congress in order to let your voices be heard. Pay particular attention to the comments on Consumer Choice on Financing Costs and the 3% Safe Harbor and Risk Retention.

For some time now, my company has been receiving phone calls from people confusing my mortgage brokerage company located in Cincinnati, Ohio with a company of apparently the same name, located in Florida, that claims to assist in loan modifications. By the time folks call my company they are frustrated and cannot seem to get in contact with anyone at the other company, not related to mine.

Recently after receiving one such call, I decided to do some research to find out more about this other company. What I found out (by performing a search on Google for Franklin Financial Group) was that a company whose initials are TFA apparently changed their name and moved locations, for reasons unknown to me, however I have my suspicions. Unfortunately for me and my company, the name they chose to advertise is the same as my company's. The type of bad press this company is getting is nothing I want to be associated with my company's name.

So this message is meant to set the record straight that my company has no affiliation with any other Franklin Financial Group. My company does not offer loan modification services, nor does it offer credit repair services (my research turned up similar company names that offered these services as well). We offer professional mortgage brokerage services and are licensed to originate residential mortgage loans in Ohio, Kentucky and Florida. If you visit the Better Business Bureau, my company is an Accredited Business with an A+ rating, and with ZERO complaints reporting.

I recently read an article mentioning that some lenders are actually considering expansion of their wholesale channel (the channel that deals with mortgage brokers.) Over the last few years we have seen many lenders pulling out of the wholesale arena. While many were putting the blame for the "Mortgage Meltdown" on mortgage brokers, one lending executive was noted as saying mortgage brokers didn't create the products that went bad, but rather sold what they were given to sell. We all know there is plenty of blame to go around, and that ethics played a large role in what has happened.

The fact is that there are far fewer mortgage brokers around than say three years ago. I read a statistic that mortgage brokers working in wholesale arena account for around 13% of all loans funded in the U.S., as compared to 33% just three years ago. That is a staggering reduction! If you are able to read between the lines, you can be sure that the majority of the mortgage brokers left today are perceived as "the cream of the crop: hard working, professional and with decades of experience." (Source: Origination News, March 2010.Volume 19,No.6)

Personally I remember when first joining this industry, my early loan disclosure packages with borrowers were maybe ten pages in length. Today, my disclosure packages average around twenty-six pages in length. As time has progressed, the powers-that-be have increased what I as a mortgage broker have to disclose to my borrowers, which I have no problem with. While customers sometimes get lost in the shuffle over the amount of papers they have to review and sign, at least there is complete transparency regarding fees, costs, and details of the loan. In every course I have ever attended within my industry, the ideology has always been expressed that if there is ever any question at all about whether or not something could be confusing or misleading, protect the borrower (and yourself) and disclose and/or explain it in writing.

Mortgage brokers offer lenders a profitable channel to obtain originated loans because lenders don't have to pay our expenses to receive those loans (as they do their in-house staff.) We also offer our customers service that simply is unmatched by our counterparts. We as mortgage brokers are typically available outside of normal business hours and on weekends. We now have to pass a National and some State specific exams to maintain a license. We have to undergo criminal background checks and fingerprinting, and our individual credit reports are to be reviewed and could effect whether or not we maintain our licenses. We are held responsible for accuracy of fees quoted to our borrowers, and have to pay for any unallowed tolerances regarding those fees. Also, with many of the lenders we originate through, we have to agree to buy back loans if we are found to have committed loan fraud. I am not complaining about these forms of regulation and responsibility, but rather am explaining that if we have to go through all of this, there can only be one reason we stick around. That reason is because we love what we do, and we are very good at it!

So the next time you meet or work with a mortgage broker, understand what they have gone through to be there with you at that moment. It has not been easy, but they have worked hard to maintain their licensing and status. They aren't still around just by luck.

The deadline is approaching for inclusion in the 2010 Homebuyer Tax Credit program. First-time homebuyers may qualify for up to $8,000 and existing homeowners who purchase a new home may qualify for up to $6,500. The deadline is that buyers must enter into a binding contract to purchase a home by April 30th, 2010, and then close on the home by June 30th, 2010. Some limitations apply that could affect qualifying for the program, so check with your tax advisor if you have any concerns about your own personal qualification. Another good resource would be to go to the following IRS webpage: http://www.irs.gov/newsroom/article/0,,id=206293,00.html

The fact that the tax credit exists is not necessarily the only reason someone should purchase a new home. However, if you are in the market to purchase a home this year, the credit gives you some incentive to do so prior to the posted deadlines. The credits the Government is giving you are not required to be repaid and can replenish many costs associated with purchasing a new home such as closing costs, down-payments, appliances, moving fees and upgrades (to name a few.) The credits may also provide funds to set aside money for retirement, children's education, vacations or other future monetary needs.

The Government extended (and increased both the amount and eligibility) of the credit that had previously been set to expire in November of 2009, in order to assist in real estate and mortgage activity. The more homes that sell, the quicker the housing market should recover. So don't miss out on your chance for some FREE MONEY!

Are you aware that the USDA Rural Development loan is one of the last remaining 100% purchase (no money down) loans left? If you are looking to purchase a home that is located in an eligible area, the USDA may possibly allow you to financing the entire purchase price. There are even provisions where you can finance more than the purchase price if the home appraises for higher than you are paying for it. Limitations apply for how much above the price you can borrow, but for example, you may be able to finance some appliances for the property as part of the deal.

The Rural Development loan helps do what its name implies; develop rural areas. Surprisingly, homes located in an eligible area are not necessarily that far away from suburban areas. I am doing one of these loans right now and the property is located only about 15 minutes (driving time) outside of the I-275 loop around Cincinnati. Of course the closer you get to a metropolitan area, the harder it will be to find eligibile locations.

If you are willing to drive a little farther to and from where you will live, this program may be something worth looking into. For more information you may want to visit the USDA Rural Development website: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?NavKey=home@1

With a month and a half behind us from when the 2010 Good Faith Estimate (GFE) went into effect, I have had some experience both presenting the revised forms to borrowers and lenders. There has been some confusion with both parties, but it hasn't been something to halt the loan process (too much that is.)

The borrowers that I have presented and explained the new GFE have seemed to get confused initially with a few charges that must be listed according to the new RESPA guidelines, but once they understand why those items are listed and that they may not be applicable for their loan, they seemed to be okay with the new reporting method.

Lenders I have sent the form to are the ones that still either have some confusion regarding the forms, or more appropriately create additional confusion for brokers like myself, due to the fact that lenders' interpretation of the form can vary, and therefore so can how information is disclosed from one lender to another. The main hold up I've experienced is that until the new GFE is provided to the lender and is completed according to their interpretation, the actual underwriting process of the file can be held up. This can lead to longer processing periods and thus longer time periods from application to closing.

The new form requires additional time and attention both at preparation and deliverance. Accuracy is imperative due to the form protecting the borrower, and if errors are made when preparing the form, the originating company will be the one who compensates the borrower for the errors. This can be overcome by knowing the details of the transaction for the area the property is located. I am bound to provide an estimate of the costs of a loan to my borrowers, which cannot increase (some fees at all, some no more than 10%) by or at closing. To me this is an acceptable practice. I just don't feel we needed three pages to do what we could have done with one. Regardless, we do so there's no use fighting it.

Achieve and overcome. That's all any of us can expect of ourselves. Best wishes.

As of January 1, 2010 the new Good Faith Estimate (GFE) required by RESPA is now in effect. As a consumer you will now receive the new 3-page GFE as opposed to the previous 1-page form. Additionally, due to the requirements of what is required on the new GFE and how that information is disclosed to consumers, the form will probably be issues at least twice during every loan process. Additionally, there will probably be two additional forms sent to borrowers reflecting Shoppable Service Providers and an Acknowledgment of the final 3-page GFE.

What this means is more information being provided to consumers which can become confusing. If you are a consumer applying for a mortgage after January 1, 2010, make sure you consult with your mortgage professional regarding the new form and how to best understand it. The revised GFE was designed with the intent to provide more accurate closing cost charges for mortgages to borrowers. While the intent is sound, it is my experience that when you triple the amount of pages for one disclosure, often the result is "overload" to someone who does not review these disclosures on a daily basis. Since the form was revised with the consumers' best interests in mind, it is you as the consumer who needs to provide feedback of your personal experience with the new form, and any others you will receive, when obtaining a mortgage loan. Feedback should be sent to your local elected official. If you would like to find your local elected officials, please visit the following site, which will point you in the right direction: http://capwiz.com/namb/dbq/officials/

Wishing everyone a prosperous 2010!

The 2010 RESPA changes to the Good Faith Estimate (GFE) are certainly a bit confusing at first, and that is to someone in the lending industry. I can't imagine what they will be like for the consumers. After multiple training sessions regarding the changes, I now understand how to make the new GFE a part of my business. Certain fees on the form, once provided to a borrower, cannot change at all (zero tolerance) and some can change slightly (ten percent tolerance) between disclosure and closing or settlement. Additionally some fees must be listed on the GFE that may not end up being paid for by the borrowers at closing, but due to being included will certainly at first look make borrowers feel as if if their closing costs are higher even though they may not.

Another change to the form is that fees that have been itemized on the present GFE will now be consolidated into "blocks" of fees as totals. Personally I feel that itemizing is less confusing and shows more detail, but apparently the powers that be felt otherwise.

If borrowers "float" a rate (don't lock it in) at first, they will be provided on GFE, then when they lock their rate they will be provided another final GFE. Certain fees on the initial and final GFE cannot change no matter what. I do like this part of the changes as it allows borrowers to obtain their figures initially and then see the final numbers as they relate to certain interest rate. I think this is better and full disclosure, however I don't feel that the new 3-page GFE is necessary to do this when it could have been done with the old 1-page GFE. I have asked this question before, but what happened to the Paperwork Reduction Act passed by the same Government now requiring three times the paper for one specific form, generated often multiple times for each borrower on a mortgage loan transaction?

Change is not always easy and the RESPA changes for 2010 are certainly at first not going to be. As a matter of fact, in order for everyone in the lending transaction to make sure they are RESPA compliant, additional time per transaction should be expected to be required. As a result, mortgage loans that could were being closed in about 30 days may now take at least 45 to 60 days (or longer). If you are a seller, buyer, realtor or mortgage industry professional, be ready to be more patient and understanding as these changes begin to happen.

Consumers are the ones who are focused on being protected by these new changes. If you are a consumer and have questions or concerns about the new RESPA changes, please visit the following website:  http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm. Here you can find further information and be able to contact HUD should you wish to.

The subject of this email is meant to be humorous, and is not necessarily what I believe. Having said that, I used the title to lead into an issue I will now discuss. As mentioned in a previous blog, and one of the most talked about issues in the mortgage industry right now, HUD has new RESPA changes going into effect as of January 1, 2010. One of the most talked about (and confusing) changes is how fees related to the mortgage transaction will be listed on the new Good Faith Estimate. Mortgage Brokers who can both charge fees to a borrower up-front, and receive compensation by the lender in the form of a yield spread premium, must divulge the total amount of their compensation, whether it is paid by the borrower or the lender, or both. How it will be viewed is entirely new and without explanation can lead a borrower working with a mortgage broker to believe they are paying much more in fees than they actually are when compared to working directly with a lender or banker. The problem is lenders and mortgage bankers also receive compensation that is very similar to a broker's yield spread premium, but lenders and bankers do not have to disclose the amounts to borrowers. This disparity has been going on for a long time, and personally (yes I am biased) believe how the brokers disclose is actually much more open and honest to borrowers. As a borrower you can make the determination on your own, but I cannot see how a borrower would disagree with me.

Anyways, in regards to the new Good Faith Estimate, I met with one of the lenders I originate loans through to discuss how things would work after January 1, 2010. They had just come from a meeting to discuss the disclosure of fees, and were not yet given instruction on how the changes would be handled on broker-originated loans. They did not seem to understand how brokers must disclose the yield spread premiums, and as a result were questioning whether or not the premiums would be allowed. I went on to explain how we as brokers will be required to disclose it and that it is acceptable and allowed. As a broker the lenders I am set up with have all provided webinars and education/training (some of them on multiple occasions) so that we can better understand the changes and be ready to apply them when required.

Mortgage brokers must learn a multitude of programs and different ways of doing loans with regard to using various lenders. Brokers therefore are being provided more training and guidance than a lender might provide to its internal origination staff. Think about it, if each of lender provides the brokers they are set up with multiple training sessions on the changes, the amount of information brokers have access to by far exceeds that available to one company's internal staff. Personally I have access to over 20 lenders, so if each of them gave me just one training session, I have 20 times to review the changes. The new changes have only been known for about 2 months, so I doubt there is a practical way for one lender or banker to provide training 20 times to its origination staff in 2 months.

So to answer my question if mortgage brokers are better than lenders or mortgage bankers, I would have to say at times yes, and at times no. There are many qualified individuals on both sides, so there really is no way to definitively say one way or the other. From a total disclosure standpoint, when working with a mortgage broker, you as the borrower will continue to see the total picture in regards to what you are "paying for". If you work with a lender or mortgage banker, there is still going to be something you are "paying for" that will continue to be hidden from you. This does not seem like a level playing field, but that is life is it not?