HUD RESPA Questions and Answers.

No matter what type of employment you have in the mortgage business - a loan officer, a branch manager, a mortgage processor a little know document published by HUD in April 2010 is a must read for any mortgage professional interested in navigating the complex GFE disclosure rules.

The document answers a lot of questions that come up in every day origination and disclosure.
How should you disclose seller paid items?
How should you disclose a no cost loan?
How to re-disclose a rate lock?
When does a LO have to provide a list of providers?
What happens if the LO does not provide a list of providers?
How does the section of the GFE correspond to the HUD-1?

The answers might surprise you.  

Here is link to the full Q&A RESPA document published by HUD.
HUD RESPA Q&A

I hope you find this information useful - If you would like information about a branch opportunity please visit my website http://www.netoriginator.com

Should you join a national mortgage branch company for FHA?

Should you join a national mortgage branch company for FHA?

Instead of joining a net branch company to originate FHA loan wouldn't it be better to get your own company approved by HUD to originate FHA loans?

In most cases the answer is no.

Let's look at some of the costs associated with any mortgage company getting a HUD approval.

Broker - If your company is a mortgage broker and you want to originate FHA loans you need to be approved as a non-supervised loan correspondent (I know the way different groups in our industry use the same term to mean completely different things is confusing and frustrating).

The minimum net worth is $63,000 plus $25,000 for each branch office (up to $250,000). At least 20% must be in liquid assets at all times.

This requirement is not a deal killer for many companies. But to prove your company's net worth you must provide audited financials. This can run from $2,000 to $5,000 and take months to complete.

Then there is the HUD process. Once you have obtained the required financials it can take 6 months or longer for the application to be processed. I have talked to companies that have had their application in for over 8 months without any action.

If you want to be approved as a lender (non-supervised mortgagee in HUD speak) the net worth requirement jumps to $250,000 with a 20% liquid net worth. Renewal can bump the net worth requirement to $1,000,000 depending on the company's production volume.

For a small independent mortgage company these requirements can be a burden to maintain.

After you clear the net worth hurdle you have the HUD compliance requirements to meet. This is a lot more than reviewing closed files to make sure that the signatures, dates, and terms are correct.

Although some companies use a third party compliance review company for this process and they only do the minimum required by HUD for the process they are setting themselves up for some real financial pain down the road. HUD usually requires 10% - 20% review. That means that companies that only review the minimum are leaving 80% to 90% of their files in the unknown category when they ask the question how compliant is our company.

When you become a branch of a national company they take care of these issues. The parent company is responsible for the net worth requirements and they are responsible for the compliance requirements.

For most branch managers their income relies on their personal loan production. If they have to spend the majority of their time on the non-production activities that small independent owners must focus on they are losing revenue. When you are not originating you are not making money.

Nothing is free. A branch has to bear some of the cost for these services but instead of one or two offices bearing all of the costs they are spread out through out the entire branch network. Each branch has far less cost for these services than they would if they were operating as a small independent company.
With a net branch mortgage company the branch managers can spend their time on the activities that generate income.

I hope you found this information helpful.

I always welcome comments and subscribers!

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Which is Better - Net Branch Mortgage Broker or Net Branch Mortgage Lender?

Broker vs. Lender - If you are considering joining a net branch company one of the biggest decisions you face is the lender vs. broker decision.

In the past the ability to be both a broker and a lender was a valid option. Today although most companies still promote the available option to be broker or lender - in today's reality that is not an option that is really available to you.

Why?

Because of a little rule that HUD has in place for FHA loans.

The HUD rule says your company has to either broker 100% or lend 100% on FHA loans. You company cannot "cherry pick" by allowing you to close some FHA loans as a lender and allow you to broker the loans they do not like.

Since the majority of loans closing are now FHA - the HUD rule is pretty much the rule of the day.

So with this in mind - which is better for a net branch opportunity - Broker or lender?

Here are the pluses and minuses.

Lender: Pluses

• Close in your company name


• No disclosure of YSP


• Status of telling client you area lender


• Ability to work with in-house underwriters

Lender: Minuses

• Greater risk to company


• Must usually go through company underwriter not end investors


• Experienced FHA underwriters are very hard to find and keep


• Company warehouse limits can restrict or stop funding at end of month


• Limited investor options

Broker: Pluses

• Can use many different investors


• Work directly with investor


• direct wholesale pricing

Broker: Minuses

• Must disclose YSP


• Some states restrict mortgage broker fees


• Junk fees from investors can be a little higher


• Wholesale investors are exiting the business

As you can see there is not a clear cut winner in this comparison.

You have to do your homework. You have to ask a lot of questions before you make a decision.

As a mortgage net branch manager your decision should be a careful one.

If you are talking to a company that does not want to take the time to discuss this important issue it should be an indicator that you have not found the right company to work with.

I try to present information about net branch opportunities in an impartial way. The main objective of this section of the site is to give facts about the net branch industry in general.

If you would like to know about the opportunity I can provide please contact me by clicking here.

Net Branch - Mortgage Broker -Mortgage Lender - FHA Net Branch

Growing your net branch business

Growing your net branch business.

Should you hire more loan officers or is there a better way?

After becoming branch managers many successful loan officers try to duplicate themselves by hiring more loan officers. It is a logical step. But is it the right step?

The internal conversation usually goes something like this: “If I can hire 3 loan officers and make an override on their loan production, I can use that income to pay overhead and I can keep more of the origination income from my personal production.”

Sometimes this does work out as planned but many times branch managers find that managing loan officers takes up so much of their time that their personal production suffers. Helping with someone else’s clients, troubleshooting operations problems, trying to help with underwriting and other investor loan problems all take away from the managers personal productivity.

Then there is the successful loan officer that the branch manager mentored through the learning process only to have the producing originator leave to open their own branch office. Instead of being able to reap the rewards for mentoring a loan officer the branch manager now has created another competitor.

Is there an alternative?

I think we have lot to learn from successful Real Estate Agents. When an agent wants to increase their business many times they hire an assistant. The assistant helps with the non income producing tasks that come with more business. There is more follow up, more appointment setting, more calls and emails to make sure business is moving forward. By delegating these tasks to an assistant the agent has more time for core activities that generate income.

There are a number of benefits to hiring an assistant instead of hiring more loan officers.

An assistant’s focus is on you and your business not on growing their business.

An assistant’s income is fixed. It is either hourly or weekly you are not splitting fees.

The cost to benefit ratio is a good one. If an assistant can help you increase your productivity by 40% how much is that to you in net income?

An assistants work can have a synergistic effect on your production. synergy = “The interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects.”

In plain English that means that more than one person focused on that same goals can produce higher results.

Hiring an assistant instead of hiring more loan officers could be a better answer.

If you find this information helpful please let me know. I always welcome suggestions, comments and new subscribers.
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Mortgage Net Branch Opportunity

Mortgage net branch refinance opportunity

The LIBOR INDEX is rising... Refinance opportunity for net branch



the LIBOR rate has really spiked upward in recently.

What is the LIBOR and why is something your clients should be concerned about?



From a report on Bloomberg this week..
"The overnight Libor rate in U.S. dollars soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The one-week rate rose by more than a percentage point, to 3.88 percent from 2.49 percent on Monday, and the one-month rate increased to 2.75 percent from 2.5 percent."

LIBOR is short for London Bank Inter Offered Rate. It is a rate index that is set by the British Bankers' Association.

Created in the mid 80's the index became widely used in the mid to late 90's in the US mortgage markets as the preferred index for adjustable mortgages. Most subprime and about 40% of conforming adjustable rate loans are based on a LIBOR index.

The LIBOR is set by the British Bankers' Association so these loan rates cannot be controlled by the FED.

If the LIBOR's recent increases continue this means that the adjustable rate mortgage payments that are tied to the LIBOR could more than double.

In recent years the LIBOR rate has been a safe place for borrowers looking for the lowest payment.

Most LIBOR based loans are tied to the 6-month index. This means that the rate is a rolling 6 month average. So will a short term spike cause rates to jump? No. But an ongoing increase will.

If you have past clients in a LIBOR rate keep a very close watch on the monthly rate.

This would be a great opportunity to make contact with these clients and make them aware of the possibility and to alert them that they should not wait for the rate to spike before they have an exit strategy.
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Please visit me there to subscribe or comment.

Thanks,

Lee W.