This is the required course needed during 2012 to renew an expired LO License

LATE CE 8 Hr SAFE Comprehensive NMLS Approved Course Number 2716 (approved in all 50 states)
LATE CE 1 Hr WA State Law CE NMLS Approved Course Number 2715
 
Course Description:
4 Hours Federal Law
2 Hours Ethics, Consumer Protection, Fraud, Fair Housing
2 Hours Non-Traditional Lending
1 Hour WA State Law
In this course we will review the Federal Reserve Board’s rules on loan originator compensation prohibitions and the Dodd-Frank Reform Act including the new Consumer Financial Protection Bureau, LO compensation limits coming under Dodd-Frank, and definitions of non-standard loans, high risk loans, and qualified residential mortgages (QRMs).  In addition we will:

Learn why overages and yield spread premiums have been deemed unfair
Become aware of how unethical business practices can result in legal consequences
Understand the new “duty of care” required by loan originators
Learn about the most recent HUD Fair Housing proposed protected class

Schedule of upcoming classes
End of Course Evaluations

“Because the participants were far more experienced than me, I learned a great deal.”
“Very informative about the upcoming law changes. Loved the ethics case studies.”
“Kept my interest for the whole 8 hours. Good case studies, which I enjoyed the most because they tie the federal law changes together with the reasons WHY we have the new laws.”
“Case studies are an added benefit.”
“Fantastic, interactive class. Loved learning more about the FRB and Dodd Frank Act.  The coming changes are crazy and our industry has to get our head wrapped around them ASAP. Glad I came to class.”
“Excellent discussion/lecture mix with group time and case studies showing us real court cases that resulted in our new laws.”
“Jillayne is excellent in explaining the issues and keeping participants on track/on topic.”
 .

Here’s the follow up from some of the questions and discussions from class today.

Here’s a recent blog post on those Cash Call radio ad
Interesting that Cash Call is in trouble with the AG’s office in California. Read more here.

I mentioned these movies during the course of both days:

There Will Be Blood
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Charlie Wilson’s War
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The Kite Runner
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An Education
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Red Dragon

DAY 2

Here’s a fantastic interview between Jon Stewart and Elizabeth Warren, the head of the new CFPB.

We talked a bit about the CSBS and the AAMR. Here’s the announcement regarding their published guidelines on non-traditional loans.

Here’s HUD’s FAQ booklet on RESPA. If I were a test writer, this would be a fantastic source for possible test questions.

And then we have the story about Fidelity Title paying a 4.5 million dollar RESPA fine to HUD yesterday.

Here’s the story about the ECOA violations at Cornerstone Home Lending….this story mentions the mortgage insurance cmpany involved.  Here’s the HUD Memo on the Fair Housing violation.

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexepensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  Instead the reason for their radio ad is to motivate radio listeners to pick up the phone and call. 

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their loan originators a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state and if they did have an office here, why aren’t you working with a local person? 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan something or other. Ask to speak with a licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis.  A part time salesperson’s time and energy are split between many competing interests and self interest will typically win out every time. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several million dollars this year, pay a very small percentage of their profits in fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.

8 Hr SAFE Comprehensive NMLS Approved Course Number 2146

In this course we will review the Federal Reserve Board’s rules on loan originator compensation prohibitions and the Dodd-Frank Reform Act including the new Consumer Financial Protection Bureau, LO compensation limits coming under Dodd-Frank, and definitions of non-standard loans, high risk loans, and qualified residential mortgages (QRMs).  In addition we will:

Learn why overages and yield spread premiums have been deemed unfair
Become aware of how unethical business practices can result in legal consequences
Understand the new “duty of care” required by loan originators
Learn about the most recent HUD Fair Housing proposed protected class

Schedule of upcoming classes

Here are links to some of the topics we covered today.

Here’s that great NPR radio segment called “The Giant Pool of Money.”

More on Pay Option ARMs.

Barry was right; Kant did live in the 1700s.

Here’s the story about the Russian orphan who was sent back to the orphanage.

Here’s more info about the Sea King Co Assoc of Realtors Young Professionals Network.

Here’s reading material on AAMR (American Assoc of Mortgage Regulators) and their Guidelines on non-traditional lending.

DAY 2 Federal Law Review/Exam Prep

We heard a story about a bank offering a RESPA violation-type kickback to a builder.  Anonymous whistleblower complaints can be sent to:

Jim Siwek with the Seattle HUD Office of the Inspector General’s office.

There was a question on when the VA Funding Fee is waived. Here’s the answer.

There was a question about escrow reserve account tolerances under RESPA.  I didn’t find the answer here, in HUDs FAQ on the new RESPA changes…but I do see the answer here….$50.

We had a chat about professionals v. non-professionals v. emerging professionals (LOs are classified as an emerging profession.) Here’s an article I wrote on this subject back in 2007.

There was a question about how long derogatory information such as late payments stay on a person’s credit history. The answer is here.

There were many different requests for reading material so here it goes:

There was a request to read about the history of Fannie Mae.

Someone asked for more reading material on the Red Flags Rules. The best source on that topic is the Federal Trade Commission’s website.

Here’s some reading material on the Do-Not-Call Registry and the Telemarketing, Consumer Fraud and Abuse Prevention Act

Here’s more reading material on the three normative moral theories.

Anna asked for the CSBS Guidelines for Non-Traditional Mortages.

Dear Jillayne, I read your article because I am trying to determine when the loan originator compensation limits will go into effect and what I’m going to do if this acutally happens. As an LO for 10 years, I take great pride in being a member of the lending industry and in my opinion, I have provided an invaluable service to my customers over that period.  I will also admit to having earned the ocassional “overage” in a transaction.  I did not price my loans to make overage, however if the par price paid less than 1% (as often happened because of the rate sheet) I felt I was entitled to do it.

I do take issue with you on the amount of work that an LO does to earn their compensation, a competent LO not only takes the 1003 loan application, I take an appropriate amount of time on the front end of the transaction to thoroughly explain the loan process. I tell customers exactly what they can anticipate.  I then take a complete application and discuss what documentation will be required and why. I spend at least 2 hours reviewing every disclosure, state and federal, that they are signing.  I then collect all documentation, prepare the loan package, sort the package to a stacking order, order title, order appraisal, register the loan and submit to processing.  I get the conditions which I discuss with the processor, and then collect the conditions and submit for final approval.
 
My company has just announced that they are discontinuing payment of all overage effective January 1, 2011.  Regardless of your opinion on overage, it is a significant component of any LO’s income.  While we can debate whether it should or should not be, the fact of the matter is, it is!  The companies are not going to increase my compensation to account for that loss in income, and I find myself having to generate 50 or 75% more sources to find loans.  How would you approach that change in your income?

Dear Entitled to Overage,

We exchanged two emails in which I asked you how many hours you spend, on average per file and I also asked for your average loan amount.  E2O, you said you spend an average of 15 hours originating each loan and your average loan amount is $175,000.  Let’s do the math.  I’m going to estimate that in today’s competitive market, a loan originator would be hard pressed to get away with earning more than a 1 percent loan amount with a 1 percent overage

Let’s pause and quickly educate readers on overage income: This means marking up the wholesale interest rate and selling the consumer a higher interest rate at retail rates. The lender funding the loan, who is very happy that you’ve sold a much higher rate, rewards the loan originator by paying them a percentage of the loan amount at closing.  Mortgage broker LOs disclose ALL their compensation on line 1 of the Good Faith Estimate.  Mortgage banker LOs do not have to disclose this overage income as of today. However, two rules at the federal level will change this come April 1, 2011: The Federal Reserve Board Rule and Dodd-Frank Wall St Reform.  More on LO Compensation limits in a future blog post.

So E2O, I’m going to estimate low. Let’s say you currently feel entitled to make 2 percent of the loan amount as your fee for working 15 hours.  That’s $3500. Let’s divide $3500 by 15 hours.  That comes out to $234 per hour.  Please help me understand how a position that does not require a high school diploma is worth $234/hour?  If a person making this kind of hourly wage works a full, 40 week, that means this same person is grossing $486,720 per year.  No wonder loan origination attracted so many people who were only in it for the money.  LOs could work as little as 10 hours a week and make a comfortable living.

Let’s get back to your question. You’re saying that your company is going to take away your ability to earn the hidden “overage” income immediately and you’d like my advice on how to approach that change in income. 

First of all, I highly doubt that you’re working a full 40 hours per week.  If indeed you were actually working that hard, you’d have more business sources than you’d know what to do with so my first suggestion is to honestly reflect back on how many hours you actually spend working on the job of origination.  Subtract the hours spent going to the gym, talking sports with the guys over coffees or beers, subtract the hours spent on Mortgage Grapevine and the right wing political conspiracy blogs or Huff Po or wherever you’re currently wasting time and look at the bare bones number of hours spent talking with past clients, getting off your butt and into Realtor offices drumming up business.  My first suggestion is to work harder.  Don’t like that? Go find another job in another field that will pay you $233/hour.

Second suggestion: Ask yourself how much you love mortgage lending.  If you’re only in mortgage lending for the money ONLY, then my second suggestion is to leave the industry. That’s right, get out of mortgage lending and go do something that you really love.  Life is short (and life is long. It’s a paradox.)… life is too short to spend it in the mad, mad, mad world of mortgage lending unless you love what you’re doing so much that you wouldn’t dream of spending life any other way. This is the choice in attitude it’s going to take to get you through 2011 and beyond. 

Third suggestion: If indeed you really, truly are worth $233/hour then go ahead and charge that! Charge your clients a 2 percent loan origination fee on line 1 of the Good Faith Estimate and when they shop around and find a lower interest rate and lower loan fee, explain to your clients the reason why you are worth that amount.

Fourth suggestion: Accept that you’re not worth $233 an hour.  Why? Because if you were, you wouldn’t be asking for help.  Banning overage income is going to separate the men from the boys and the women from the girls.  Loan originators: You never were worth $233 an hour as a brand new, unexperienced loan originator.  All it takes to get a license is a 20 hour prelicensing class, passing a background check and a national and state licensing exam, and to not have any felony convictions in the past 7 years. And if an LO wants to work at a depository bank, NONE of that is required!  No loan originator is now or was ever worth $233/hour when they are first licensed.  Maybe an extremely experienced LO with, say, 25 years experience (which means they entered the industry before the subprime lending era) is worth that much.  Why? Because he/she can originate a loan IN LESS THAN 15 HOURS.  That 25 year veteran knows his/her products, knows FHA/VA/USDA, knows the FHA 203K Program which will be highly used as soon as more REOs hit the market. That 25 year veteran has seen the rise and fall of the Savings and Loan crisis, has seen many refi booms, has lived through countless underwriting guideline changes, as lived through the same amount of federal law changes, and has the experience, maturity, and knowledge to help a wide variety of clients.  This loan originator is very valuable.  A brand new LO was never worth $233/hour and one of the big mistakes company owners made was to recruite people through greed to be LOs.

Fifth suggestion: Now that you’ve accepted that no green LO is or was ever worth $233/hour reset your own worth. If it seriously takes you 15 hours to originate a loan, I’d say that you don’t know as much as you think you know (this is very common for LOs who were hired during the subprime era) or you need to learn how to work more efficiently and spend more of your time procuring new clients.  Don’t like Realtors? The majority of LOs who were birthed in subprime boiler rooms despise all Realtors because Realtors tend to hold LOs accountable.  So if you don’t like Realtors and you don’t want to work harder to procure more clients…..

E20, my sixth suggestion is to accept that your value to your company is much less than you think it is. Reset your lifestyle and spending patterns to match your worth to your company and client, or prepare to work harder and smarter in 2011 and beyond.

Readers, re-do the math with different front and back end compensation numbers as well as different loan amounts.  The income LOs have been earning has been way too high….for the amount of time spent per file compared with what it takes to become an LO.  We won’t find banks arguing to keep LO compensation limits high because what the bank doesn’t have to pay an LO the bank can keep for itself. Welcome to mortgage banking. Don’t like it?  Then I suggest you open your own bank or mortgage bank and now you can keep the profits for yourself.

Here’s the follow up from today’s exam prep class.

There was a question about penalties under Section 8 of RESPA:

“Violations of Section 8′s anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.”

There was a request for more reading material on subprime lending. Our state adopted the AAMR guidelines and we can read about it here and here.

There was a request to read more about the age protections under ECOA.

There was a request to read about FHA 2-1 buydowns.

The three, normative moral theories are virtue/values, duty, and Utilitarianism (also known as consequentialism.) Some of you have had an ethics class from me in the past and you’ll remember these theories from the class.  You can read more about them here.

There was a question about how to calculate an “interest only” mortgage payment.  The easy formula is to just go with per-diem (day) interest:

Per diem interest is calculated as follows: Principal loan amount x rate divided by 365. Now that you have the daily interest you can go backwards and multiply that number by 365. Divide by 12 to get the monthly interest only payment.

and here is your answer from the FBI regarding the penalties and fines for mortgage fraud. You will see this on the exam! copy/paste right from the FBI.

There was a request for a link to HUDs FAQ handbook on RESPA and the changes to the new GFE.  This handbook would make an excellent source of questions if I was a federal regulator writing your test questions.  Granted, some of these Q&As have more to do with escrow and the HUD -1.  Scroll through the handbook as you’re studying, especially if you need help with RESPA.

….and here’s a link to the FTC’s Red Flags Rules.

Here’s the follow up from today’s class:

There was a request for more reading info on “subprime lending.”  Here’s the Interagency Memo on Subprime that will help w/those subprime-type test questions.

I promised more information on appraisal independence rules that will take the place of HVCC.

There was a question about how long a creditor has to retain files. See Section 202.12 of ECOA for th 25 month rule. Remember, state laws may be tougher than federal laws.

Regarding the question about when we can pull a credit report on consumers, see page 13 (F) of the Fair Credit Reporting Act.

Regarding the ability to re-sell information contained in consumer credit reports, see the bottom of page 33 (e) – page 34 of the Fair Credit Reporting Act.

Here are the links and articles we mentioned in class:

Here’s that interview with Elizabeth Warren, the new head of the Consumer Financial Protection Bureau….watch the one where Jon wants to make out with her.

There was some brief discussion about loan modifications. Here’s the new FTC rule on loan mods and short sale negotiators….no test questions on this….yet, but still important for those who do loan mods.

Here’s one 2006 news story on Merit Mortgage that one of our students talked about. But there’s a better story over at the Seattle Times.

Here’s the trailer for the movie 127 Hours.

There is no direct answer to the question “Must I display my LO number if my license is inactive.”  DFI is probably very busy right now processing license renewals.  Once you’ve passed the test and go inactive, go ahead and call DFI and ask for someone in the licensing department and ask for a direct answer.

Questions from the Dec 7th Session:

Here’s a link to all the new WA State rule changes regarding switch advertising. Scroll down to 3(p).There was a question regarding whether the trigger for TILA re-disclosure under the MDIA is .125 or higher or .125001 or higher.  It’s .125 or higher. Here’s the federal register notice for your reading pleasure.

There was a question about when women were able to hold title to real property in the United States. Here’s a nice website that traces the history of women’s property rights.

Here’s more reading material to help you understand the three normative moral theories.

RE Question 14 of the SAFE Act Quiz…the best answer is C.  See section 1504 of the SAFE Mortgage Licensing Act.

Here’s the follow up from today’s class.

There was a request for more information on the Home Owner Equity Protection Act (HOEPA.)

There was a request for a link to the RESPA website.

There was a question about the RESPA required servicing transfer statement.

There was a request for more information on RESPA’s exemption for business loans.

There was a request for information on the Equal Credit Opportunity Act and how ppl who are over age 62 are a protected class and are treated differently under the Act. 

Here are the three normative moral theories, to help you get your ethics test questions correct….if there is no clear statement of the law to guide you.

Thanks for a fun class today and good luck to all of you on your exam(s)!

Thanks for a fun class today. Here are the follow up Q&As:

Here’s more information to read on FHA basics

…and VA basics for those that do not originate FHA/VA loans on a regular basis.

Here’s a link to the three normative moral theories to help you get your ethics test questions correct. (What kind of person do I want to become? What are my duties?  What are the consequences?)

Here’s the recent story about Wells Fargo and their discrimination settlement.

Here’s the story that broke today about a possible (let’s hope not) nationwide foreclosure moratorium.

Here’s a funny interview with the new head of the Consumer Financial Protection Bureau Elizabeth Warren.

Here’s the link to Opt-Out Prescreen. Thanks, Dean!

Also, there was a request after class for the answers to the study material on MDIA (changes to TILA) and the 2009 RESPA quiz. I can definitely grade those take-home quizzes for you if you’d like. Just fax to me at:  425-673-1533…no cover sheet needed, Edmonds line.

Here’s the follow up from today’s class.

There was a request for more information on HOEPA/Section 32 loans. For a brief overview of the loan features that would trigger HOEPA, see page 43 of the main course packet.  You can also visit the FTC website and read to your heart’s content. Remember, HOEPA loans have higher triggers than “high cost” loans which are described in the MDIA packet.

Remember the sad facts I shared with you on how to get all your ethics questions correct?  Then after that there was a request for a brush up on the three normative moral theories. If you’ve taken ANY ethics class from me this will all come back you.

There was a question regarding TILA’s madate that the broker/lender be sure the borrower can repay the loan. Go to this page and scroll down to prohibited acts:

“(4)  Repayment ability.  Extend credit subject to § 226.32 to a consumer based on the value of the consumer’s collateral without regard to the consumer’s repayment ability as of consummation, including the consumer’s current and reasonably expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations.”

I googled the phrase “RESPA marketing agreement” and many links popped up that lead to attorney websites talking about lawsuits all over the place.  Wow. This might make for a good case study for your continuing ed in 2011. 

One student was not sure that the “authorized user” changes were already in effect regarding ppl letting others use their tradelines to bump up your credit score.  Here you go.

There was a question about why ECOA favors ppl who are age 62 and older. Here’s more from the FTC on that topic.

Here’s a link to the Seattle PI’s article on Shawn Portman.  “Feds to Portman: We want our Giant Bag of Money Back.”

Here’s the link to the Neighborhood Watch website where you too can check the FHA deliquency rate of your own firm.

I think that’s it!  Thanks for a fun class today…keep studying and schedule your exam NOW.

Day 3
Congrats to Stephanie who passed the national test today!

Here are some links from our conversation this afternoon.

There was a question as to whether or not FINRA is a government agency or independent. Looks like they’re independent BUT I’d argue that this looks like a quasi-governmental agency.

There was a question about whether or not it’s possible to create a list of values that all humans hold in high regard that can cross all cultures.  I read many of these studies in grad school. It’s easiest to just google “universal values survey” and take a look at the scholarly articles or wiki for a quick background.

and here’s an article I wrote about how we define a professional compared to a non-professional.

Granted, some of the lenders on this list are no longer in business such as MILA or were taken over by other banks such as Washington Mutual. Yet 905 is quite a high number and some of the names on the list surprised me. 

To check on the current default rate of your favorite FHA lender, check out the Neighborhood Watch website.

Here’s the follow up from questions that were asked in class and more.

There was a request to take a look at a sample Adverse Action form. Here’s one from the FDIC.

There was a question regarding if a consumer loan company does not hold a mortgage broker license, does that company have to follow the MBPA if the consumer loan company decides to broker a loan? The answer is “no.”

Here’s a link to he article on Paramount Equity that I referenced in class.

There was mention of a CNBC special on Enron.

Geoff mentioned the famous Milgram Experiments.

and just for fun…here’s the links to the YouTube videos:
Swagger Wagon
Geico/Honest Abe 

Thanks for a fun class this week. You all impressed me with your knowledge of ethics during day 3

Remember to send me an email if you want access to the practice exams!

Here’s the follow up from today’s class.

Here’s the link to the Neighborhood Watch website where you too can check the FHA deliquency rate of your own firm.

Here’s that great blog post by Seth Godin about deadlines.

Here’s more about the excellent book Outliers by Malcome Gladwell.

Here’s a link to the NMLS Resource page so you can download and read the MLO Test Candidate Handbook.

…and for Ron, here’s more info about the fantastic book trilogy The Girl with the Dragon Tattoo.  There’s a link to the movie trailer next to the article.

DAY 2

There was a question about when to include/not include a pest inspection charge in the finance charges.  Here’s the answer according to VA.

There was a request for more help in understanding the way different types of mortgages work. Scroll down to the bottom of this page. 

Here’s the story from Seattle Bubble today on the Goldman prediction that Seattle home values will drop by 22%

Here’s more information on the Merkley Amendment limiting loan originator compensation to 3%

Here’s a link to DFI’s WAC Mortgage Broker Rules regarding disclosures required when a borrower parts with money (for example, for a credit report.)

Here’s more info regarding RESPA and builders and possible rule changes

DAY 3

Here more info from HUD regarding adding sexual orientation as one of the protected classes when originating FHA loans:

“WASHINGTON – For the first time in its history, the U.S. Department of Housing and Urban Development (HUD) will require grant applicants seeking HUD funding to comply with state and local anti-discrimination laws that protect lesbian, gay, bi-sexual, and transgender (LGBT) individuals. Today, HUD published a notice detailing the general requirements that will apply to all of the Department’s competitively awarded grant programs for Fiscal Year 2010.

“We‘re using every avenue to shut the door against discrimination,” said HUD Secretary Shaun Donovan. “Today, we take an important step to insist that those who seek federal funding must demonstrate that they are meeting local and state civil rights laws that prohibit discrimination based on sexual orientation or gender identity.”

Traditionally, HUD requires all applicants for competitive grant funding to comply with all applicable federal fair housing and civil rights requirements including those expressed in Fair Housing Act; Title VI of the Civil Rights Act of 1964; Section 504 of the Rehabilitation Act of 1973; and Title II of the Americans with Disabilities Act. Now HUD will further stipulate that applicants and their sub-recipients must comply with state or local laws proscribing housing discrimination based on sexual orientation or gender identity.”

As you can imagine, loan originators everywhere are outraged.

Imagine not being able to earn extra compensation for selling a higher rate loan! Imagine making sure that homeowners can repay their loans! 

Wait a minute. Isn’t that the world we currently live in right now?

The horror we’re leaving behind if this amendment becomes law was the predatory lending frat parties of 2006.  From what I can tell, most (not all) of that is behind us. What are we really losing with the passage of the Merkley-Klobuchar Amendment?

Mortgage brokers have to disclose all yield spread premium earned as fee income on line 1 of the new Good Faith Estimate.  They will not be losing anything new.  It can be argued that mortgage brokers should have lost the ability to earn yield spread premium because it was horribly misused not by “an unsavory few” but by the vast majority of mortgage broker LOs all across the United States.  For the few LOs who had no problems honestly explaining their full compensation, the change to the new GFE was not seamless but certainly not painful.

Brokers might be fearful that consumers will no longer be able to select a “no cost” refinance.  First of all: THERE IS NO SUCH THING AS A NO COST REFI.  There are costs. Instead, the homeowner is selecting to amortize the costs over the term of the loan instead of coming to the table with cash to pay for the cost to refinance into a lower interest rate loan.   The way I interpret the spirt of the amendment, consumers can still elect to use yield spread premium (YSP) as a credit back from the lender, to cover their closing costs….but broker LOs are prohibited from helping themselves to any leftover YSP as compensation.  This is true today and it would still be true under the amendment. 

Mortgage loan originators who work under a consumer loan company license (They say, “I’m a mortgage banker, I’m a correspondent lender”) or LOs who work at a depository bank can still, at least today, earn hidden compensation called “overage” by selling a higher interest rate than what the homeowner could have received.  Think of it as a retail markup. These LOs may or may not choose to show the consumer the wholesale rate sheet.  This is just the same as yield spread premium but consumer loan company and bank LOs do not have to disclose their overage to the consumer.

The Merkley Klo-bu amendment aims right at the practice of earning “overage” and scores a bullseye.

Someone has been educating the Senators about how to create a level playing field and it’s not me. I’m too busy trying to recover from this delightful carpal tunnel surgery on my right wrist.  I wish you could see me try to eat a bowl of Cracklin’ Oat Bran with my left hand. As it is, I shouldn’t be typing this but don’t tell Dr. McCallister.  For me this short blog post IS taking it easy.

Brokers have been asking for a level playing field. Well the Merkley-Klobuchar amendment creates just that.  Instead of hidden compensation, the way loan originators are paid will transform. We will most likely revert back to a 1 percent loan origination fee.

Here are some new ideas. 

How about we pay loan originators based on customer satisfaction surveys. We’ll call it the Redfin model.  After the transaction is complete, clients would rate a loan originator based on how well they explained the loan program choices and how close the HUD 1 fees matched the initial GFE.  How about we pay loan originators based on the number of hours spent doing origination functions on each loan, and the hourly wage would be set by the employer based on a loan originator’s experience, education, and….loan performance.

That’s another idea. Why not base LO compensation on low default rates? 

Take a look at the national default rate of FHA loans.  You can sort by state, county, company name and so forth.  What the hell is going on at these companies with high FHA default rates?  I’ll bet any of us can find out by simply having a casual water cooler conversation with loan originators at any firm in your city.  Everyone knows which loan originators are scamming the FHA system.  Can we please get rid of these LOs? The only reason they still have a job is because it takes FHA 4 years to hunt them down and between now and then, their bosses can make hundreds of thousands of dollars sending FHA these dog loans and then simply close up shop, pay the fine and move on to another firm. 

The Merkley-can-we-just-drop-the-second-name amendment might just do us all a favor and make it a good business decision for firms to get rid of the people who are sending fradulent, high default loans to FHA.

Now I know we’re going to get some clever LOs to point out that it’s not their fault that a homeowner got laid off or a homeowner decides to walk away from the loan when their 3.5% FHA loan goes negative equity this fall.  Okay fine. I see you two whiny shoulder shrugs and raise you two underwriting screw tightens.  After this amendment passes, underwriting guidelines are going to tighten up fast and lenders will definitely want homebuyers to put more money down.  Both will not give 100 percent assurance that a homebuyer will not default, however, it will be better than the loans we’re currently making. I’m hearing lenders are still making FHA loans where the back end ratio can be 50%.  Today’s FHA loans will not end well.

Loan originators, the best way to assure the future of your industry is to fully disclose ALL compensation to your clients, no matter where you work, and if you can’t justify your compensation, it’s too high so you’d better start re-learning how to create value for your clients or pretty soon you won’t be needed.

A client just called me this week and said a lender called American Interbanc is telling consumers they don’t charge a loan origination fee because they don’t have any loan originators.  I sent then an email requesting to interview someone from American Interbanc but so far they’re being shy.  Well I hope any regulator reading this schedules them for an audit real soon because someone is doing the job described in the SAFE Act as “loan origination” and if they want to slough off the work to their unlicensed processors, well then this is one company to watch. We should watch to see if this is a business model for the future or if it’s a business model that we’ll be reading about in a State Consent Order or HUD Audit. 

I happen to believe loan originators are valuable.  The most valuable LOs I meet today are the ones who have already learned how to clearly communicate their value to their clients.  The Merkley amendment has a good chance at passing.  LOs: Imagine a world where your compensation is much lower than it is today. Many will leave the industry. Many will stay and do more loans for the other’s clients.  You will have to work harder for your compensation but the ones who will choose to stay already love the industry so much it doesn’t feel like work.

Here are the follow up Q&As from Day 1:

There was a question about if LOs in Oklahoma are required to take a course on Oklahoma State law. On the right hand side of this link, click on “state specific edu” to view the PDF. No other courses are needed for OK LOs but you WILL have to pass an OK state specific TEST.

Here’s a link to the NMLS website to view the test content outline for your OK state exam.

Here’s the link to the OK Statute.  MANY of your state law questions are going to come right from this page.”clic

There was a question about whether or not loan originators in OK owe fiduciary duties to their clients.

We were wondering about the word “professional” and the prefix “profess” which reminds us of professor, and the suffix “sion” which reminds us of “confession” or even “compassion.”

Here’s the dictionary.com definition of the word professor:
Origin:
1350–1400; ME < ML pr?fessor  one who has taken the vows of a religious order, L: a public lecturer, equiv. to pr?- pro-¹ + -fet-,  comb. form of fat?r?  to acknowledge, declare + -tor -tor, with tt  > ss

Here’s the definition of the word professional:
Origin:
1740–50 professional
early 15c., of religious orders; 1747 of careers (especially of the skilled or learned trades from c.1793); see profession. Meaning “one who does X for a living” is from 1798; opposed to amateur  from 1851. The noun is recorded from 1811.

The suffix “sion” comes from the word Zion.
Zi·on (z?’?n)  
n.

The historic land of Israel as a symbol of the Jewish people.

 A place or religious community regarded as sacredly devoted to God.

An idealized, harmonious community; utopia.

[Middle English Sion , from Old English, from Late Latin Si?n , from Greek Sei?n , from Hebrew ?iyyôn ; see ?wy ²  in Semitic roots.]

VERY interesting to see that sion could mean “an idealized community” because we often view people who hold professional status as something to admire; doctors, lawyers, and so forth, because of all their advanced knowledge and education. THANK YOU for asking this question. A highly detailed question that taught me something.

Here’s a link to the Neighborhood Watch website where you can check the status of FHA loan delinquencies.

Here’s the follow up from Day 2 of our 3 day class.

Some folks asked for information regarding how a short sale, foreclosure, or bankruptcy affects a person’s credit score.

Here’s Ken Harney’s article on credit scores. And here’s Ardell’s blog post as a follow up. She has a nice visual graph for those of us who think in pictures.

Here’s a link to the FBI website with the story about mortgage fraud we discussed during Day 1:

“Leader of $47 Million Mortgage Fraud Scheme Sentenced to Prison
Mortgage Fraud Scheme Used Web of Companies and False Loan Documents“

More tomorrow….

Day 3

Here is the article I wrote regarding Paramount Equity’s Consent Order.

Here’s the article I wrote regarding the FCIC and how I believe they’re interviewing the wrong people.

Someone asked if I had ever been to a foreclosure/trustee sale auction. Well, actually I filmed an auction here in Bellevue recently.

Here’s the link to Neighborhood Watch, where you, too can check your company’s FHA default rate. Follow the link that says “early warnings.”

There was a question as to whether or not a borrower can pay an appraiser directly v. a borrower paying an HVCC company directly. See question 52 of the Fannie Mae FAQ PDF on HVCC:
“Q52. Are borrowers precluded from providing payment for an appraisal to an AMC?

A: The Code does not prohibit a borrower from providing payment to an AMC; however, the borrower may not pay the appraiser directly for an appraisal.”

Remember: Not all loans are sold to Fannie/Freddie and in that case, HVCC might not apply to those loans.

…and please don’t fall for the media hype regarding rates rising. Take a look at another point of view over at Seattle Bubble.

Here’s the follow up Q&As from today

 Here is the updated Credit Suisse chart.

There was a question as to whether or not a church can gift the funds for closing on an FHA loan. Here is a link to the HUD manual….

“An outright gift of the cash investment is acceptable if the donor is…

•the borrower’s relative
•the borrower’s employer or labor union
•a charitable organization
•a governmental agency or public entity that has a program providing home ownership assistance to
?low- and moderate-income families
?first-time homebuyers, or
?a close friend with a clearly defined and documented interest in the borrower.”
 Overall 17% of FHA Loans are currently delinquent. That statistic is horrifying. This will not end well.

Here is the interactive map from the New York Times I mentioned. Looks like 30% of the loans originated in Yakima County were subprime. 

and….check out the proposed HUD Rule that was just released today.  Here’s the PDF.  See page 3, number (8)  “(8) Establishing a means by which residential mortgage loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer;”

Didn’t I just say today that this is where we are headed? This moves LOs more on the path toward professionals with fiduciary duties owed to their clients and further away from a retail sales role. We should all carefully watch the debate/comments on this proposed rule.

UPDATE 1

Here’s a link to the FDIC website showing a description of pre-paid finance charges in paragraph 18 (B). I did not see the chart Brandon referred to in class. Brandon if it’s easy to get a hold of that link again, please post it in the comment box. Thank you!

Here is a link to the page where HUD posts updates to the FAQ document regarding all the new RESPA changes (including GFE FAQs). Ooooo, notice that HUD has also updated the “Settlement Costs” Booklet. At the bottom of this same page is a link to submit your comments to HUD.  Now’s your chance to have your voice heard…..who will submit a comment from today’s class?  Hmmm.

Here is a link to an article written by Brian Brady, a mortgage pro located in Calif and a fellow blogger. Brian’s article about the new GFE really jumped out at me.  He says we can use the new GFE to gain clients. Give it a read. 

See you in the morning!

Day 1 follow up:

Here’s the link to the Neighborhood Watch website where you can check on the status of a company’s FHA delinquencies. Follow the link that says “Early Warnings.”

There was a question about the use of the word “firm” in the WA State law Escrow Registration Act. Here’s the link to the definitions section.  See number (7). I can only infer that the meaning has to do with a company’s “doing business as” name, which would be the name of their “firm.”

Here is a link to the NMLS website where they have information on the criminal background checks.

And there were three questions about having to re-take the state exam if you previously took the exam but let your license lapse. I have put an email in to DFI to get an official answer on that one, since the question kept coming up.

and finally, regarding the requirement to disclose the owner’s title insurance policy charge on your GFE, this is from Page 12 of the new FAQ PDF from HUD:

Q: Are charges to the seller listed on the GFE?
A: RESPA requires that only the borrower receive a GFE. The GFE is defined as an estimate of settlement charges a borrower is likely to incur in connection with the settlement. Charges that typically would not be charged to the borrower, but would be charged to another party—such as the seller—do not have to be included on the GFE. If the borrower typically would incur charges for title services and lender’s and owner’s title insurance, the GFE instructions make it clear that those charges are required to be listed regardless of whether, for example, the contract requires the seller to pay for the service. If there is a question about whether the borrower or seller is to pay for a particular settlement service, the charge for that service should be disclosed on the GFE.

Emphasis mine.

Day 2 follow up:

Question from Cathy: Are LOs required to give consumers a list of providers? 
Answer: Found on page 12 of the recent updated HUD FAQs for the new GFE:

GFE – Written list of providers
1) Q: When do loan originators have to provide the borrower with a written list of identified providers?
A: When a loan originator permits a borrower to shop for third-party settlement services, the loan originator must provide the borrower with a written list of settlement services providers at the time of the GFE, on a separate sheet of paper.
2) Q: Does the borrower have to select a settlement service provider from the loan originator‘s written list of settlement service providers?
A: No. If the loan originator permits a borrower to shop for a settlement service provider, the borrower may choose a qualified provider that is not on the originator‘s written list.

You can download the HUD FAQ PDF here.  Ooo, you can also take a look at the new HUD “Settlement Costs Booklet” from this same page. Remember new/newer LOs have a homework assignment to read the Settlement Costs booklet but I will bet that Robert, Ed, Matt, Jenni, Luke, Cathy and Brad will also download and read this. Why? Because these guys are highly attentive to detail.  Follow their lead and read the booklet that you’ll be giving to your customers.  You don’t have to read it tonight, but if I were you, I’d skim-read this before taking the exam.

Next up: What’s deductible? Here’s a link to the IRS website with the answer.  See the link that says “points.” You may have to scroll down a bit after clicking.  Whoa. That answer was so complex, there’s no way (unless my name is Brad) that I’d tackle trying to explain that one.  But maybe I’m just tired.  What would you do?

There was a question: “Is there a difference between simple referral and a referral?”  I see nothing deliniating a difference between the two in the definitions section of the statute.

Joe wanted more reading material (because we know Joe is a big fan of reading) about defaults.  Here are some great articles I found:

Option ARM Recast/Reset Update but what about prime loans? Here you go:

We should also check on the re-default rate of loan mods and the HAMP program. 

Here’s the latest report from TransUnion showing delinquencies over 10%.

Jumbos aren’t doing all that well either.

Dare we check FHA? WTF? Does this report say what I think it says about FHA deliquencies? Quoting CR, “This will not end well.”

Get some sleep and I’ll see you at 9AM!

Day 3 follow up

There was a request for me to send a list of all the Class B Felonies in WA State.  Here you go.

Here is the link to the NMLS Resource Page where you may download and review the SAFE Mortgage Licensing Act.

and Ed had a question regarding the words “non-institutional investor” that appear on page 4 of your Day 3, State Law course packet. Those words are not listed in the defintions section of that RCW. Without knowing DFI’s intent, we are left to take a lay person’s guess that it may mean an individual investor that’s not tied to corporation.  For a precise answer Ed, I suggest contacting DFI direct.

Thank you for the memorable 3 days!

Here’s the follow up from Day 1:

Ken Harney’s column regarding LOs using worksheets to provide a pre-GFE in order to attempt to escape quoting fixed costs on the new GFE.

Link to the Neighborhood Watch website where we can check on the FHA default rate of various companies.  And a related story from the Seattle Times.

Stephen Colbert: Honor Bound.

and this late breaking news tonight about FHA raising standards and raising the mortgage insurance premium.  We should expect continued, gradual tightening at FHA.  It should come as no surprise when standards tighten again during 2010.

Day 2
Different ways of holding title.

There was a question left over from Day 1 regarding the dollar amount of the fidelity bond needed for escrow companies in WA State on the escrow quiz. Confirming the answer, as noted in the quiz is $200,000. Here is the link.

And while we’re on the subject of links, here’s the page we talked about on the NAMF website providing the links to all the laws.  All the NAMF exam prep info will eventually move to this new domain.  And who wants access to the existing practice exams for free before they go away and transition to the new platform? When you’re ready, email me and I’ll send you the logon info.

As a result of this policy, individuals in the community were denied equal access to credit, capital, banking services and loan products; and made housing unavailable on a prohibited basis, a clear violation of Fair Housing law. Loan officers repeatedly told shoppers, “We don’t do row houses.” In some cases Novastar and Bell refused loans where the borrowers had more than adequate credit scores, income, financial stability and even low LTV ratios.

When Bell joined with Novastar it was given a Company Program Manual  listing Unacceptable Property Types. Row houses were not listed. Bell also secured an exclusive warehouse credit line from Novastar, agreeing that Novastar would fund all of Bell’s loans. At the time, Bell had several unclosed Baltimore row house loans, which Novastar refused to fund, and warned that using another warehouse line to close those loans would be a violation of their exclusive warehouse agreement. Bell assigned the loans to another lender for a fee. Bell and its staff continued to refuse loan applications on row houses in Baltimore even after being informed that this was a violation of Fair Housing laws.

Plaintiffs sought injunctive relief as well as money damages, cease and desist orders, attorney’s fees, and enjoining Defendants to modify their lending practices to comport with the law.   
The N.C.R.C. and N.A.A.C.P. in their COMPLAINT claimed the following:

I. Defendants policies and practices violated the provisions of the Home Mortgage Disclosure Act by redlining: refusing to grant credit in a community or neighborhood. Their actions have had a disproportionately adverse effect on African Americans and other people of color compared with Caucasian applicants by virtue of denying the financing of the type of property chosen for security purposes. This contributed to the economic destruction of a Baltimore neighborhood, depreciation of property values, higher foreclosure rates, street crime and the creation of housing ghettos.
II. Defendants policies and practices violated The Civil Rights Act of 1964, which prohibits racial discrimination in the formation and issuance of contracts, and intentional interference to pursue and hold real property. Defendants through their willful conduct contributed to racial hatred, and denied African Americans the right to own property.
III. Defendants policies and practices violated the provisions of The Equal Credit Opportunity Act which prohibits a creditor from discouraging an applicant from making application for credit by refusing to consider the security property offered.
IV. Defendants policies and practices, through the disparate impact theory,  a provision of The Fair Housing Act and other legislation by imposing different requirements or conditions on a loan on the basis of elements other than credit, the result of which was racial discrimination.

Before the trial was held, Bell asked the judge for summary judgment,  claiming it was only following the dictates of its “exclusive source of warehousing and funding.” Its agreement required that all loans must be sold to Novastar thus it had no other choice. At trial Novastar raised an unusually large number of issues with respect to the wording of the law, citing numerous cases and questioning the interpretation and meaning of whether or not the law applied to this case.

The lenders denied the accusations and set out these AFFIRMATIVE DEFENSES

I. Type of property. Independent appraisals show that row house properties in Baltimore are in a transitional state. Many are being converted to commercial or mixed-use enterprises. This, not lack of financing, has resulted in value depreciation. Our Company Program Manual at ¶5.3 Unacceptable Property Types reads: Commercial use or a mix of commercial and residential properties. Clearly, many row houses in Baltimore are “mixed use”, as most appraisals point out. This violates our written policy, which was not drawn frivolously. Empirical evidence we have provided demonstrates that losses on this property type exceed those of other type of dwellings. As further evidence of excessive risk, private mortgage insurers have refused to insure loans on row houses.

II. Intentional Interference. We have shown that there are other mortgage lenders in Baltimore and elsewhere that offer financing to row house buyers.  We fail to see how our actions prohibit borrowers from shopping the mortgage market for other sources willing to accept this type of security. Our Company Program Manual at ¶2.3 Regulatory Compliance reads: We comply with all federal and state regulatory requirements in granting mortgage loans. We have provided the court with a recent pipeline and portfolio report showing that a large number of our borrowers are African American and other minorities and the security properties are located in a variety of neighborhoods, towns, and rural areas  . We fail to see how our conduct in these cases intentionally interfered with these borrowers right to contract for the property desired.

III. Discouraging Applicants. We have shown a number of examples where national mortgage lenders regularly publish U. S. Postal zip codes showing geographic areas in which they will not grant credit.   These typically are areas where lending experience has shown that unreasonable business risks have been found through empirical evidence. We ask the court: How does this differ from avoiding row housing? We believe we should have the same right to define when, to whom, and where we will grant credit without the interference of government and claim this right specifically in this case. We deny discouraging borrowers from applying for credit because in every case cited we informed the borrower of our willingness to finance real property in many other locations.

IV. Racial Discrimination. Refusing to accept real property offered as security for a loan is not against the law. The decision to lower lending risk profiles and elect not to finance row houses is racially neutral – it is not directed toward any race –- it is directed toward real property and therefore cannot be found racially discriminatory.  As an example of our neutral policy we refer to our Company Program Manual, at ¶6.2 Minimum Value Requirements. There is no minimum value requirement for Citizens and Resident Aliens with our company because we long recognized that this is discriminatory by its very nature.  (Non-resident aliens and piggybacks are limited to $75,000 because of secondary market considerations not internal company policy). We have provided the court with example after example of lending companies that have loan minimums whose adverse and disparate effect is directly similar to the case at hand. We will make mortgage loans other companies refuse because we understand the need for making capital available in large or small amounts – a racially neutral policy. We contend that minimum loan amounts are also discriminatory but counsel can find no case in the court’s jurisdiction where lenders have been challenged under civil rights statutes.

Trial Notes
Mentioned in this suit is the fact that lenders have been sued by several cities using two theories of “Public Nuisance” In City of Cleveland v. Deutsche Bank Trust Company, et al. Common Pleas. January 10, 2008. The city claimed that lenders were the cause of high foreclosure rates, blocks of unoccupied residences that were more expensive to police and protect against fire damage and empty blocks of neighborhoods decreases property values and loss of revenue

Notes on the defenses raised:

I. Defendants provided audited internal data showing greater-than-average losses on row houses, together with an article from the Baltimore Sun newspaper, which reported that some units in Baltimore’s row houses were being used as boarding houses and even Bed & Breakfast Inns, in violation of the zoning laws. Zoning violations are often considered a default in mortgage lending.

II. The pipeline and application data used were taken from published HMDA reports, and the Mortgage Bankers Association provided data on the number of foreclosures and average losses to member companies in the same geographic region.

III. Copies of advertisements and loan program brochures of other lenders provided information on zip code lending restrictions. It was and is a common practice. Plaintiffs did not refute it.

IV. The disparate theory holds that when an action has a disproportionate effect on some group (racial, ethnic, etc.) it can be challenged as illegal discrimination even if there was no discriminatory intent.

The question is whether someone who does not engage in racial discrimination can violate the federal Fair Housing Act. The claimant need not prove that individuals were treated differently because of their race. Instead, it is enough to show that a neutral practice has a disproportionate effect – that is, a disparate impact – on some racial group.

However, the theory is difficult to apply. Suppose a landlord refuses to rent to people who are unemployed, and it turns out that this excludes a higher percentage of whites than Asians. A white would-be renter could sue. It would not matter that the reason for the landlord’s policy was race neutral and had nothing to do with hostility to whites. He would be liable, unless he could show some “necessity” for the policy. This would hinge on whether he could convince a judge or jury that the economic reasons for preferring the rent to the gainfully employed were in some way essential.

__________
Questions.

Did Novastar engage in racial discrimination?
Is it possible for a company that does not engage in racial discrimination to still be found in violation of Fair Housing laws?
If yes, how so? If no, why not?
Here is a link to the Fair Housing Laws for your review.

Here’s the follow up Q&As from our class last week:

Here’s the Neighborhood Watch website where you can see the WA State (well, actually all 50 states) list of the lenders and brokers with the highest default rates on FHA loans.

More concerning news on FHA’s capitalization problems. We should all be prepared for, and be an advocate for higher downpayment requirements, higher MIPs, and tighter UW guidelines next year.  There’s no good reason for taxpayers to have to bailout this trainwreck.  The MIP fund has always been self-supporting. 

There was a conversation going on at one of the tables regarding how the subprime meltdown is really “nobody’s fault.” I mentioned I wrote an article on this theme in 2007. Here it is: “What the Space Shuttle Challenger Disaster Can Teach us About the Current Mortgage Lending Crisis.”

Here’s the Credit Suisse graph showing the coming recasts of Pay Option ARM loans through 2012.

Here’s the story about HUD possibly adding sexual orientation as one of the protected classes. They’ll start with renters and move on from there.

New favorite TV show: Lie To Me.

You Tube Channel for JSchlicke showing a recent foreclosure auction taking place at Factoria.

Rural Development (USDA) Maps for WA State.

The article I wrote on Paramount Equity’s Consent Order. Is a similar business decision like this ethically justifiable?

Regarding the appeal of HVCC, I found HR-3044 which just calls for an 18 month moratorium. It’s in committee. I wouldn’t hold my breath.

I think that’s it! Thank you so much for coming to class and remember to renew your license!

Thanks for a thoroughly enjoyable class today and all your kind words in the evals.  Here’s the follow up:

Q: Where can I find out what interest rate the Fed will use so I can figure out if I have a high cost loan?
Here’s some insight from a great article by Blank Rome:

“…the measuring stick is the “average prime offer rate,” which is defined in the Final Rule as an annual percentage rate derived from average interest rates, points and other loan pricing terms that are currently offered to consumers by a representative sample of lenders for mortgage transactions that have low-risk pricing characteristics.At least initially, the Fed will use information derived from Freddie Mac’s Primary Mortgage Market Survey (“PMMS”), but may eventually develop its own tables. The average prime offer rate for both fixed and adjustable rate loans will be published in a table and updated at least weekly.
A loan is considered higher-priced if its APR exceeds the applicable average prime offer rate by 1.5 percentage points or more for first lien loans and 3.5 percentage points or more for junior lien loans.Unlike the HOEPA APR test, which compares the loan’s APR to the applicable Treasury security yield as of the 15th day of the month immediately preceding the month in which the application is received, the Final Rule requires that the loan’s APR be measured against the applicable average prime offer rate “as of the date the interest rate is set.” The Official Staff Commentary clarifies that if a loan’s rate is initially set at one level but then changed prior to closing, a lender must use the last date the interest rate is set before closing.”

Remember, there’s a “general business day” definition which we use when sending out our EARLY disclosures and there’s a “precise business day” definition which we will use when counting the days after we’ve had to re-disclose prior to signing. See page 8 of this MBAA PDF.   The MBAA is correct. The industry deserves an answer from the FRB on this conflict.

I’ve emailed Sam a PDF copy of the MDIA color coded matrix.

Here is a list of WA State Housing Counseling Agencies

Here is more info on sociopaths.

and finally, Cookie Monster wanted to know why a “lady” was chosen to represent “justice”

See you next year for exam prep!