I have shown you these guys before – they do a daily podcast
or video blog from our industry, the mortgage and realtor market. This one
shows excerpts of a senior executive with Chase Bank
talking about how well they are doing but how much more needs to happen for the
reform of the housing market. He specifically comments on the demise of the
mortgage broker – that’s me!
Let’s talk about a program or a
policy that was common years ago called a ‘prepayment penalty”. It was a
cost placed on your mortgage saying that if you were to sell or refinance
within a certain amount of time, you would pay the bank six months’ worth of
interest on your loan. It was very common for a subprime
loan to have a prepayment penalty, but really any loan could have had
one. Those penalties have pretty much gone by the wayside; you just
don’t hear about them any more unless you’re refinancing or selling out of a
loan that you’ve had for the last, say, 7 years.
I’m a mortgage broker, he’s a
banker. We do about the exact same thing…we sell loans. The Chase
exec was trying to blame a lot of the housing market problems on mortgage
brokers and because their lobbying group is very large, that is the story that
the government has been hearing. I’m sure you recognize that brokers are going
away. I swear I am probably one of the last brokers in the Metroplex.
This video blog does a great job
of defining a broker. I do not have anything tangible. I do not have
a product. I have nothing but my brand – Frisco Mortgage
Guy – which by the way is trademarked, did you know? But the banks
create the policies. They create the programs and then we, as either bankers or
brokers, go out and sell those programs. It is hard for me to watch and listen
to these comments and watch a group of people try to destroy another group. If
they succeed it will mean that all of the control will be in the hands of
the banks. The question then is whether or not the banking industry has
anything on their minds but their own profits.
Like this story. When one of my
clients began the refinance process, they found that they had a prepayment
penalty on their loan. It was disappointing to learn that neither
their previous broker nor the title company that closed didn’t spell out
the details of what a prepayment penalty meant. Of course, it ultimately
falls on the borrowers to be aware of all of the information in the papers them
sign but the broker and the title company are there to help explain those
papers – both of them dropped the ball.
The other day I got a letter
from Wells Fargo asking me for $1,500 saying that one of my loans that I sold
into Wells had paid off early. Therefore, per my broker agreement, I owe
the bank a certain amount of interest on that loan. What it tells me is
the bank is going to get their money regardless and whether they offer
prepayment penalty to the consumer or a penalty to me, they’re still going to
get their money if the loan doesn’t perform, and perform in their mind is it
has to be active for a number of months, if not years, for them to recoup their
I’ve never had one of these
before. The clients are good friends who had an investment home.
Their tenant asked to buy the property and they just sold it without
realizing that the refinance they had done about six months ago would
cause a problem. I am still working with Wells Fargo to try to find
a way to alleviate the actual penalty. It would be unheard of for me to
put a disclosure in the loan package that stipulated that the loan could not be
paid off within the first six months or two years. But because the
banks are able to do so, if my clients choose to be relocated, to sell, or go
through financial difficulty, well then, I then am going to be paying a price
on every single loan.
But we still think the problem
is the Broker, right?
Thanks for reading.
Geoffrey Davis – the “Frisco Mortgage Guy”!
is the #1 website for all things Top 10 in Dallas – and I am ranked as a Top 10
Honored as one of the Best Mortgage Brokers in Dallas!
for D Magazine, 2011 & 2010. Ranked 24th
in 2010 in the category Largest North Texas Residential Mortgage
Lenders, according to the Dallas Business Journal!